Gujarat Fluorochemicals Limited (FLUOROCHEM) Q2 FY23 Earnings Concall Transcript

Gujarat Fluorochemicals Limited (NSE:FLUOROCHEM) Q2 FY23 Earnings Concall dated Oct. 19, 2022

Corporate Participants:

Vivek Jain — Managing Director

Analysts:

Sanjesh Jain — ICICI Securities — Analyst

Harsh Shah — L&T Mutual Fund — Analyst

Unidentified Speaker —

Rohan Gupta — Edelweiss — Analyst

Aman Vij — Astute Investment Management Private Limited — Analyst

Unidentified Participant — — Analyst

Nitin Agarwal — DAM Capital — Analyst

Vivek Gautam — GS Investment — Analyst

Avadhooot Joshi — Newberry Capitals Pvt. Ltd. — Analyst

Manoj Agarwal — Chief Financial Officer

Anand Jain — Individual Investor — Analyst

Rohit Nagraj — Centrum Broking Limited — Analyst

Dhaval Shah — Girik Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Gujarat Fluorochemicals Q2 FY ’22 earnings conference call hosted by Batlivala and Karani Securities India Private Limited. 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. Archit Joshi from Batlivala Karani Securities India Private Limited. Thank you and over to you.

Operator

Thank you. Good evening, everyone. On behalf of B&K Securities, I welcome you all to the 2Q FY ’23 earnings conference call of Gujrat Fluorochemicals Limited. I would like to thank the management for giving us the opportunity to host this call. From the management we have with us today, Mr. Vivek Jain, Managing Director, Dr. Deepak Kapoor, Chief Executive Officer, Mr. VK Soni, Head of Projects and New Initiatives, Mr. Manoj Agarwal, Chief Financial Officer, and Mr. Vibhu Agarwal, Head-Investor Relations. Without further ado. I would now hand over the floor to Mr. Vivek Jain for his opening remarks, post which we can have the floor open for the Q&A round. Thank you and, over to you sir. Thanks.

Vivek Jain — Managing Director

Thank you, very much B&K Team. On behalf of Gujarat Fluorochemicals Limited, I would like to extend a very warm welcome to all of you. We are happy to inform that Board of Directors of Gujarat Fluorochemicals Limited has in its Board meeting approved the financial results of the company for the quarter and a half year ended 30th September 2022. The financial results we have uploaded on the website of the stock exchanges as well as the website of the company. We have also uploaded the presentation for 2Q FY ’23. I will take you through this presentation. I will take you through the presentation Initially and then we can open the call for any questions that you all might have.

Starting with the financial highlights at the consolidated level for the quarter ended 30th September 2023 on Y-o-Y basis. The consolidated revenue for Q2 FY ’23 was at INR1461 crores, up by 52%. Consolidated EBITDA for Q2 FY ’23 was at INR536 crores up by 81%. EBITDA margin for Q2 FY ’23 were up 37%, on 6 basis points on Y-o-Y basis. Consolidated PAT back for Q2 FY ’23 was INR357 crores, up by 74% on Y-o-Y basis.

If you look-through a detailed overview of the financial performance during the quarter for each of the business verticals in which we operate, in caustic soda the caustic soda revenue for Q2 FY ’23 stood at INR189 crores as, compared to INR102 in Q2 FY ’22, up 85%. Fluromethane’s revenue for Q2 FY ’23 stood at INR80 crores as compared to INR122 in Q2 FY ’22, down by 34%. Refrigerant revenue Q2 FY ’23 stood at INR268 crores, which was at INR92 crores in Q2 FY ’22 up 191%. PTFE Sales for Q2 FY ’23 three we at INR443 crores, as compared to INR360 crores in Q2 FY ’22 up 23%. The new fluoropolymer sales were at INR341, up 87% as compared to INR182 crores in the same quarter previous year that is Q2 FY ’22. The specialty chemical sales is up by 75% from INR65 crores to INR114 crores. Similarly on the ROC and ROE front the ROCE is improved from 24.46% to 36.88% and ROE has improved from 20.1% to 29.05% as compared to FY ’22.

On the debt front company remains virtually debt-free with a net-debt equity ratio at 0.3. The working capital cycle, which got improved significantly during the last quarter, maintained in this quarter also. At the same level of 119 days as, compared to 120 days as on 31st March 2022 to.

On the capex and expansion side the additional capacities commissioned for FKM, PVDF, PFA during the quarter are under stabilization and sales are expected to ramp-up from Q3, FY ’23 onwards. And similarly on the especially the chemical front commissioning of new speciality [Indecipherable] which we are actually original plant in Q2 FY ’23 got spilled over to Q3 FY ’23, these are now commissioned and are expected to gradually ramp-up production in upcoming quarters. We expect with all this company is poised to offer a sustained business growth, with superior financial performance. So that ladies and gentleman is a walk-through the presentation. I would like to open this up for any questions that you might have which will try to answer thank you.

Questions and Answers:

Operator

Thank you, sir. We will now begin the question-and-answer session. [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 Sanjesh Jain from ICICI Securities. Please go-ahead.

Sanjesh Jain — ICICI Securities — Analyst

Yeah, good afternoon sir. Thanks, for taking my question. Couple of them first on the refrigerant gas side. Despite 2Q being a very seasonally weak quarter we see that the revenue growth has been quite strong. I think some of it is R125, but overall we thought that this could be a more of a softer corner. But it looks like it has done phenomenally well. Can you help us understand, what is driving the growth in the refrigerant gas even in the very weak seasonal quarter? Is it the shortage of the product, it is that in seasonally weak quarter, they’re getting slightly better pricing than what it will be in a seasonally stronger quarter. So, what is driving this unusually high-growth in HFC.

Vivek Jain — Managing Director

So Sanjesh as you know, the main growth is coming from our R125, where we are largely exporting to the U.S. and we have had orders which were to be executed during this quarter which is what we were able to fully execute so that is the reason why sales were there and I think this is a pattern which will continue in the future quarters also, so maybe there might be a dip for a month, somebody but, you know, otherwise by and large, quarterly performance should be fairly robust. R22, of course, again July, August, and September, sales are still not so much down from a retrieval point-of-view. There is some impact in October, November, December for sure but, July, August, September still is normally good sales for refrigerants.

Sanjesh Jain — ICICI Securities — Analyst

No, but I think R125, now where are we in terms of capacity utilization in terms of production and sales and, do you think this prices in HFC, particularly R125 and R32 are they now stabilizing, going up or have they shown any sign of weakening anytime now.

Vivek Jain — Managing Director

No, I don’t see any signs of weakening. I think they will they stabilize at this level now, you know the prices should remain stable. At this point of time, that is what I can see. I don’t see any substantial upside or downside on these prices.

Sanjesh Jain — ICICI Securities — Analyst

And we thought that the R125 prices went up, partly because of significantly higher-power costs, freight costs, and all those things. And, some of them have already started showing some correction. So are we not seeing some of those benefits getting pass-through or it’s purely the demand-supply which is driving the prices in the R125?

Vivek Jain — Managing Director

See, largely demand-supply but also customers will always negotiate to try and see that you can bring down your prices given the fact that there might be some reduction in some costs like logistic costs et-cetera but go, what you’re seeing is maybe the difference it could be plus or minus a one dollar or dollar and half, not something significantly more than that.

Sanjesh Jain — ICICI Securities — Analyst

Great, Great. Great. Second question on the new fluoropolymer sequentially it was flattish. While we have added capacity, two questions there. Can you help us with what has been the capacity additions in the new fluoropolymer for this quarter? And number two is despite capacity addition, I know we said that you are stabilizing the plant so from Q3 onwards should it start adding materially to the revenue growth?

Vivek Jain — Managing Director

Yes, from Q3 onwards, maybe from 15 November onwards, two new additional reactors which we are commissioning for FKM would start coming in and we should see additional sales happening in December, and from January quarter onwards, I think the full benefit of that capacity expansion will be evident.

Sanjesh Jain — ICICI Securities — Analyst

So what is the capacity we have added in [Speech Overlap].

Vivek Jain — Managing Director

In FKM we are adding 200 tonnes per month additional and in PVDF we are adding another 100 tons per month which will come in-line by maybe about January next year. It will be commissioned in January next year and there is some additional capacities which we are commissioning and PFA for which also the product out will be from January onwards.

Sanjesh Jain — ICICI Securities — Analyst

And have we added anything in the first half?

Vivek Jain — Managing Director

Sorry.

Sanjesh Jain — ICICI Securities — Analyst

In the gone to quarters have we added any capacity in FKM, PVDF and PFA, in Q1 and Q2?

Vivek Jain — Managing Director

We have added capacity of almost about 200 tons in April or so, April-May which [Indecipherable] where you saw the bump-up in the FKM sales happening from the quarter, April — April to the last quarter. Sorry.

Sanjesh Jain — ICICI Securities — Analyst

We were 800 metric when we ended FY ’22, [Speech Overlap]

Vivek Jain — Managing Director

No we were 700 tons Sanjesh when we ended that and we guided that, we’d be 1,500 by end of this year, the addition will keep coming through the year we have added some capacity, today we would be at around say, tough but 900 to a 1000 tons adding another 200 to 300 but by end of this year will be at 1,500 that is how we should look at.

Sanjesh Jain — ICICI Securities — Analyst

Got it, so from 700 we are already at 900 to 1000 and by end of this fiscal year we should be at 1,500 that’s an assumption that you said…

Vivek Jain — Managing Director

Yeah, close to 1,500, give or take by one month here or there because you know there is sometimes always some delay or the other this [Indecipherable] and commissioning so, give or take, one month, I think we should be there. That is what we are targeting.

Sanjesh Jain — ICICI Securities — Analyst

Got it, got it, and how [Speech Overlap]

Vivek Jain — Managing Director

[Speech Overlap] the ramp-up of production and sales from there could happen over the next six months thereafter.

Sanjesh Jain — ICICI Securities — Analyst

No that’s fair, that’s fair we understand that it is [Indecipherable] for stabilization, approval, audit, and all. But on the realization, [Speech Overlap]

Operator

Mr. Jain we would request you to kindly come back-in the queue for follow-up questions.

Sanjesh Jain — ICICI Securities — Analyst

Great, thank you sir thank you for answering all my questions and best of luck.

Vivek Jain — Managing Director

Sure, thank you.

Operator

We have the next question from the line of Harsh Shah from L&T Mutual Fund, please go-ahead.

Harsh Shah — L&T Mutual Fund — Analyst

Thank you and good evening gentlemen. Just two questions from my side, first is on the margin side. So, our margin this quarter also it was very impressive. All the prices were also holding up quite nice. Entering H2 where do you see the margins going to? Will it stabilize at 36% or you think with the ramp-up of further new capacities, there is still some room before we end the year?

Vivek Jain — Managing Director

Trying to speed it is difficult to say but as we have maintained earlier we will — even with our expanded capacities, et-cetera which are coming up we should be able to maintain a margin in excess of 30% that is for sure. That is always have stated even earlier. Even we were at 31, 32. I think our margins will remain upwards of 30%. Whether that will remain at 30 whether it will go down to 35 or go up to 37 is difficult to extrapolate at this point of time.

Harsh Shah — L&T Mutual Fund — Analyst

Okay, Okay, just second question from my side for at least this quarter or this half of the year can you please, help me understand the breakup of our growth between how much of that was volume-driven and, how much of that was value-driven?

Vivek Jain — Managing Director

We don’t have the numbers just now but one… I don’t have the numbers here just but, do you have the numbers?

Unidentified Speaker —

Sir, it is an equal mix of both volumes and…

Vivek Jain — Managing Director

See it is, we have got — we did a number of products so it’s, it’s fair mix of both volume as well as price growth. We have got good prices in bulk chemicals and good growth in the new polymer and polymer business.

Harsh Shah — L&T Mutual Fund — Analyst

Okay, so basically for this first-half we have done revenue growth of almost 60% plus if I’m not wrong. So you think that it is equally divided? Yeah, sorry 50% is our revenue growth for first half. Do you think that is equally divided between volume and value?

Vivek Jain — Managing Director

Yeah, volume and value both. Yeah if you see on a year-on year basis that would not be the right comparison because [Indecipherable] are coming through the year which is like commercializing the first-quarter.

Harsh Shah — L&T Mutual Fund — Analyst

Got it. Exactly — and actually that was the reason why I was asking this question to get a better understanding.

Vivek Jain — Managing Director

Just gone up further and it will continue to go further up.

Harsh Shah — L&T Mutual Fund — Analyst

Understood, Understood. Okay and that is it from my side thank you and all the best.

Operator

Thank you. We have the next question from the line of Rohan Gupta from Edelweiss please go-ahead.

Rohan Gupta — Edelweiss — Analyst

Yeah hi sir, good evening, and thanks for the opportunity. So couple of questions. First is on the ref gases from Q1 to Q2 we have seen a remarkable improvement in revenue from almost INR196 crores to INR268 crores. So it is all-in the ramp-up of volume of R125 or we have also benefits in any sort of price increase and what is the current utilization of R125 including exports?

Vivek Jain — Managing Director

So yes of course there has been a ramp-up of 125 and at this point of time would probably be at about 70%, 75%, 80% percent of capacity utilization.

Rohan Gupta — Edelweiss — Analyst

So it means that there is further room for improvement in revenues from ref gases only by reaching to 100% utilization right?

Vivek Jain — Managing Director

Yes, yes.

Rohan Gupta — Edelweiss — Analyst

And sir is there any possibility given the solid demand environment in our R125 and you have also mentioned the solid demand in export market in the U.S. Do we have any room for further expansion in R125 in a current [Speech Overlap].

Vivek Jain — Managing Director

No, I think we have adequate capacity in R125 to two cater to the demand which we have seen in the next year. There is a certain amount of debottlenecking also which is in-progress. So I think we should be able to meet the demand coming up in the next year.

Rohan Gupta — Edelweiss — Analyst

How much — how much is there scope for increasing capacity by debottlenecking further which we are planning?

Vivek Jain — Managing Director

See it’s difficult for me to, give you a number but maybe about 10% to 15%.

Rohan Gupta — Edelweiss — Analyst

Okay, Okay, and sir in the pricing scenario you see that solid in our R125.

Vivek Jain — Managing Director

It appears to at this point of time. I see no great reasons why the prices will change substantially from here.

Rohan Gupta — Edelweiss — Analyst

And sir do we have also plans to expand our refrigerant gas basket to improve or to cater to some other gas also in blends?

Vivek Jain — Managing Director

So we are — we have taken an investment decision to put up a new facility for making of R32 and equivalent capacity for the hydrochloric acid which is going to be required for manufacturing this. This is likely to be commissioned by end of first-quarter of calendar year ’24.

Rohan Gupta — Edelweiss — Analyst

Q1 CY ’24?

Vivek Jain — Managing Director

Yeah, Q4 ’23 to ’24.

Rohan Gupta — Edelweiss — Analyst

Okay, okay, and sir any idea on the capacity which we are planning to put in our 32 [Phonetic] in the capex?

Vivek Jain — Managing Director

Well, currently we are looking at a capacity of 10,000 tonnes.

Rohan Gupta — Edelweiss — Analyst

With the CapEx of?

Vivek Jain — Managing Director

Maybe capex is something which we are still streamlining the numbers but it should be in the region of about INR125 crores.

Rohan Gupta — Edelweiss — Analyst

And it will be targeting for domestic or export market?

Vivek Jain — Managing Director

Both.

Rohan Gupta — Edelweiss — Analyst

Okay, okay. Sir second question is on fluorospecialty chemicals where we, have seen some Q-on-Q some slight decline so, you had a run-rate of INR119 crore revenue in Q1, this quarter it was INR114. Any particular drop or any delays [Indecipherable] some shipments and how this business vertical is progressing sir?

Vivek Jain — Managing Director

So. I think it’s generally been flat in the last two quarters because as you mentioned, the new plants which are supposed to be commissioned there was a delay and generally speaking this year, the monsoons in Gujarat had been very severe. Lot of the projects which are getting implemented have got delayed by one month-to four or five months. So you know, that, unfortunately, has been story across-the-board and you know even till short time back rains were continuing so you know that really has disturbed the implementation schedules for many of our projects. So — so the new plants or the new capacities that were coming up [Phonetic] or which were supposed to have been commissioned in specialty chemical has as we speak just now will come [Indecipherable]. We will see ramp-up of this business from these new plants to happen in the next one, two or three quarters. So the business growth will start — we will see from the specialty chemicals segment from this quarter onwards.

Rohan Gupta — Edelweiss — Analyst

So sir you are saying that it is constrained by capacity not from the demand. There is nothing changed in-demand.

Vivek Jain — Managing Director

No, no, not capacity in you know the capacity of new plants, since you are putting up the new investments which we have put up the plants which are under implementation because of the [Indecipherable] because of the monsoon, there have been delays in commissioning and so those plants which were supposed to have been commissioned in the last quarter are actually getting commissioned now in this month and so we will…

Rohan Gupta — Edelweiss — Analyst

Otherwise, otherwise our capacities, I mean old capacities are fully utilized, that’s what…

Vivek Jain — Managing Director

Yeah, we are by and large fully utilized. But those are for different products, you know these are for different products. You know, the new capacity I am talking about are for different products which are — which are now going to be sort of rolled out.

Rohan Gupta — Edelweiss — Analyst

And sir, have you also witnessed any increased traction in your flurospecialty chemical business given the crisis which we’re seeing in Europe related to energy?

Vivek Jain — Managing Director

Not really, we have not yet seen anything, anything substantial for that reason in the flurospecialty business.

Rohan Gupta — Edelweiss — Analyst

And in fluoropolymer.

Vivek Jain — Managing Director

Fluoropolymer also the demand of course continues to be good but that is yet not been impacted by anything which is happening in Europe. So we — see as I mentioned earlier, we are across diverse geographies. So, what happens is this particular geography is slightly down we have seen that we have the ability to make that up in other geographies. We can push more quantity than other geographies and this has been the case until now. So even if there is some, weakening in-demand in a particular geography, we hope that we will be able to more than overcome it by shifting products to other geographies. So we have a very-very wide variety one — we have the range of products as well as the customers. We have a very diverse portfolio of customers. So for us to sort of shift some quantity from one geography to the other is practically feasible.

Rohan Gupta — Edelweiss — Analyst

Thank you sir I will come back in the queue for a follow-up, thank you.

Operator

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

Aman Vij — Astute Investment Management Private Limited — Analyst

Yeah, [Indecipherable] my first question is on the new edge fluropolymers. So if you can talk about the number of customers we are engaged currently with PVDF battery head and PFA semiconductor grade as well as when can we see some revenues coming from these two new products.

Unidentified Speaker —

So you know both — in all our fluoropolymers, we have multiple customers. So at this point of time for me to give offhand reply on how many customers we have in each segment is going to be difficult but coming to EV-grade battery — as we have mentioned that grades have been developed. Grades have been sent for qualification to certain customer in South Asia and one or two laboratories in India as well as an investor in Europe. So the process of — it is a fairly lengthy process of evaluation — and testing and evaluation which is currently ongoing. We expect that in the January-March quarter we should be getting feedback from some of the customers to whom [Indecipherable] samples have already been sent and we can and the and perhaps start commercial business from — from the second-half of 2023, after the qualifications are over.

Aman Vij — Astute Investment Management Private Limited — Analyst

And for semiconductor grade PSA?

Unidentified Speaker —

Semiconductors, where we have greens [Phonetic] for various applications of PFA, we are again for the semiconductor conductor range our samples have been sent to customers for their approval. We have done our own internal checks and we find that the quality is meeting their requirements. Typically in a situation like this if there is something is — some quality parameter deviation which is noticed by our customers, they point it out to us and that is something which we then work on at our plant to rectify that and send the samples back again so, it’s a big bit of back-and-forth will take place but, I think PFA in the next one to two quarters we should be able to have qualifications for applications in semiconductor also. Just now even for other applications, the demand is very strong in PFA.

Aman Vij — Astute Investment Management Private Limited — Analyst

[Technical Issues] My next question is if you can update us on the solar film plant as well as [Indecipherable].

Vivek Jain — Managing Director

So [Indecipherable] plant under-construction as we have said we are expecting by again first-quarter of the next financial year which is April, May, June the plant should be commissioned and, we’ll be able to send samples across to customers for their approval and once that happens then we can start commercial production. But the plant is under implementation the at this point of time. And so we are hoping that mechanically the plant should be commissioned by February next year.

Aman Vij — Astute Investment Management Private Limited — Analyst

The solar film plant also if you can talk?

Vivek Jain — Managing Director

The solar film facility will be ready by June next year.

Aman Vij — Astute Investment Management Private Limited — Analyst

Sure the final question I have is on the realizations of FKM, PFA and PVDF. If you can talk about the same currently?

Vivek Jain — Managing Director

Well you know the realizations continue at this point of time. We have to see what happens in the next few quarters but you know it is — I mean it’s difficult for me to say at this point of time again what will be the scenario but I think at FKM demand is fairly strong for our products as mentioned we have developed so many grades of PFA now which have been completely qualified by diverse customers in Europe and U.S. and even in Japan, of course also in India. So the demand — the demand continues to be strong. We don’t have too much of an issue on the pricing at this point of time, and PVDF also, the demand is strong and we hope that by the time we commission our second reactor which will happen in January, we will have enough of qualified customers to quickly ramp-up the capacity utilization of that reactor also. Prices, more or less… Sorry.

Aman Vij — Astute Investment Management Private Limited — Analyst

Range if you can give? Yeah, range if you can give. Any range you can give on these three products sir, range for [Indecipherable] prices over the last one quarter?

Vivek Jain — Managing Director

FKM would be say about $28 to $31 or $32, PVDF would be similar range about $30, $28 to $30. PFA would be something like about $33 to $35.

Aman Vij — Astute Investment Management Private Limited — Analyst

Sure, sir, that helps. This is it from my side, thank you.

Operator

Thank you. We have the next question from the line of [Indecipherable] from Invest Research, please go ahead.

Unidentified Participant — — Analyst

Hello, good evening, sir. Am I audible?

Vivek Jain — Managing Director

Yes.

Unidentified Participant — — Analyst

Okay. Sir my first question is for the last five quarters it is great to see there is a continued growth in the top-line and operating profit margins are also consistent. So can you please summarize the key drivers behind the same and how these drivers look like to continue in the medium-term say next one to two years from now? My concern is to ask the question because I simply want to know has our bulk chemicals have been a significant contributor? And in the last two quarters there is a significant growth in R&D as well. So this growth and we know that there has been a delay in caustic soda pricing as well. So can you please explain the future viability of this growth, that we saw in last five quarters?

Vivek Jain — Managing Director

Well in terms of volumes, our growth is going to come up largely from polymers — fluoropolymers which as you know — mainly from the new fluoropolymers and from the battery chemicals which will start commissioning from the first-quarter of the next financial year, from April, May and June. So once — that is where the real growth in the future will come. The other of course is the fluoropolymers — other fluoropolymers will continue to grow because of — you know there are multi uses of different fluoropolymers in the entire EV battery ecosystem. And later on of course in the higher in the electrolyzer and hydrogen fuel ecosystem also.

Unidentified Participant — — Analyst

Okay, good and sir what is our top-line and bottom-line guidance for next two-three years and how operating margins going to shape up for the same-period?

Vivek Jain — Managing Director

I’m sorry I won’t be able to give. You know normally don’t give futuristic guidance.

Unidentified Participant — — Analyst

Yeah, understood. And sir you were talking about R32. Sir what is the size of opportunities and how we are looking at this thing?

Vivek Jain — Managing Director

So I just mentioned that we are putting up a 10,000 ton plant and we hope in the next — after the plant is commissioned in a year or two we should be able to get it to full capacity utilization.

Unidentified Participant — — Analyst

And I think you were mentioning that it will be commissioned by the end of financial year ’23?

Vivek Jain — Managing Director

Yes, ’23 to ’24, yeah by March ’24, yeah.

Unidentified Participant — — Analyst

Okay, understood sir. March ’24 you are saying?

Vivek Jain — Managing Director

Okay, understood. Okay, thank you, sir.

Operator

Thank you. We have the next question from the line of Nitin Agarwal from DAM Capital please go ahead.

Nitin Agarwal — DAM Capital — Analyst

Sir thanks for taking my question. On the new fluropolymer business on a Q-o-Q basis have the volumes — is it fair to assume that volumes have been flat on a Q-o-Q basis in terms of sales?

Vivek Jain — Managing Director

Yes, because the fact that we were not able to commission new capacity in time to be able to build up volumes in the July-September quarter.

Nitin Agarwal — DAM Capital — Analyst

And sir on the capacity that we installed — that you’ve already installed and commissioned up are we operating closer to peak installed capacity — commissioned capacity of the new fluoropolymers?

Vivek Jain — Managing Director

Yeah, by and large above 75% to 80% percent capacity in the last quarter again because since we were in the process of commissioning these new additional capacities in PVDF and FKM there was a shutdown which had to be taken for our backward integration plant which is PVDF plant for hooking up. So that has been done. That shutdown which was necessary for hooking up has been done. So now as soon as these capacities get commissioned in this quarter as, I mentioned a few minutes back and about 200 additional tons from November end — November onwards this year and PVDF from January of next year, we should see these additional volumes kicking in.

Nitin Agarwal — DAM Capital — Analyst

Okay and sir secondly on — in the — there is a ref gas sales component also to include some sales of R142 to the gases also?

Vivek Jain — Managing Director

Sorry.

Nitin Agarwal — DAM Capital — Analyst

With ref gas does it include our R142 gas sales also? Are we doing some of that third-party sales also?

Vivek Jain — Managing Director

No that doesn’t include anything on 142.

Nitin Agarwal — DAM Capital — Analyst

And sir, is there a plan incrementally to do that going forward?

Vivek Jain — Managing Director

See, this is something which we constantly evaluate. We look at both our own internal requirements and internal availability. Our first priority is to ensure that we have enough 142 to be available for our own internal captive consumption which is for FKM as well as PVDF. In both these two areas we are expanding capacities as I’ve just mentioned. So you know after those capacity expansions are over, which will be during this quarter and January next year, we will then have to see what is the quantum of 142 which will be available for surplus for sale outside. And if the prices are good then only we will sell, otherwise we will not sell. Okay, thank you.

Operator

Thank you. Participants are requested to kindly restrict your questions to two per participant. We have the next question from the line of Vivek Gautam from GS Investment please go ahead. Yeah, congratulations on good set of numbers and specifically coming after one quarter after the other. Sir a few question was is the company Inox meant to towing you ahead in extended loans and other things, some positive trigger is happening in that particular wind, energy sector so as to and the IPOs [Phonetic] are coming out, will it help in reducing our old loans and related-party transaction would also come to a full stop.

Vivek Jain — Managing Director

Yeah. I think on this issue I stated a number of times by March, by the end of this financial year, most of the related-party [Phonetic] transactions will be completely dealt with. So — and as you rightly mentioned there is IPO which is coming up in Inox Wind and the promoters have also committed to pump in about INR800 crores into Inox Wind essentially for repaying the loan which has been taken from GFL. So by end of this financial year, the intention is to completely square off all these transactions.

Vivek Gautam — GS Investment — Analyst

And sir what has been the impact of the current Ukraine and Russia war, positive or negative for us, like ports getting impacted, freight costs also coming down, any impact and what is the opportunity size and growth rate in the next two-three four years? Thank you.

Vivek Jain — Managing Director

So to some extent it has helped in caustic soda where you know because of higher energy prices in Europe there is an export demand which has come up so it has helped us in shoring up caustic soda prices. As far as polymers are concerned, at this point of time it’s a bit too early for us to say anything, but as I mentioned even in the U.S. market and the domestic market of course are doing well and also the Japanese market, there is some slowdown which comes up in Europe that slack can be picked-up by the other geographies, at this point of time. Unless of course that you know every, every geography is impacted by the recession or something then, I suppose, I can’t say anything but as it looks like if there is some impact and you know there has been talk about reccesionary concerns in Europe, that hopefully — that impact could be mitigated by growth in our other geographies.

Vivek Gautam — GS Investment — Analyst

And the opportunity size and expected growth rate in the next, few years sir, if you would [Phonetic].

Vivek Jain — Managing Director

So as already mentioned we are expanding our capacities on new fluoropolymers and FKM, PVDF, PFA, et-cetera, so these will provide future growth possibilities and as the EV battery manufacturing commences in India, Europe and U.S., I think that will be a very big opportunity for us to sell our EV battery grade PVDF as well as other fluoropolymers also which are required in the entire battery ecosystem.

Vivek Gautam — GS Investment — Analyst

Okay sir, thank you keep up the good work sir.

Operator

Thank you. We have the next question from the line of Avadhooot from Newberry Capitals please go ahead.

Avadhooot Joshi — Newberry Capitals Pvt. Ltd. — Analyst

Hi, good evening. Thanks for the opportunity. Two questions about PTFE and FKM global supply scenario, have you seen that — have you come across that there is a supply shortage in these two categories because I have come across two documents indicating automotive getting force measures from the suppliers in the Europe region. So how is the supply scenario in these two-floor polymers?

Vivek Jain — Managing Director

There have been some supply constraints in U.S. and Europe for reasons of raw-material disruptions but despite that the fact that — there is not too much in fact there is barely any new capacity which has come up in Europe and U.S. for PTFE and FKM and so the growth which is taking place is the one which is also creating some supply imbalance.

Avadhooot Joshi — Newberry Capitals Pvt. Ltd. — Analyst

So we will be able to capture that supply imbalance if we have that variant at our end, right?

Vivek Jain — Managing Director

Yeah, that’s right, that is why we are investing in additional capex’s.

Avadhooot Joshi — Newberry Capitals Pvt. Ltd. — Analyst

Understood and second question is about cash-flow conversion. I understand that we are going through a capex and the major of the points will be blocked into the inventories but what’s the back-to-CFO conversion that we internally track and at what level we will be able to take it further?

Vivek Jain — Managing Director

Sir, your question is not clear, can you repeat please.

Avadhooot Joshi — Newberry Capitals Pvt. Ltd. — Analyst

Back to CFO conversion at what level are we internally — do we track it internally, and at what level we would like to have it?

Vivek Jain — Managing Director

So see currently we don’t have any specific target on free-cash flow PAT because normally we are in a growth phase and our working capital quantitatively will increase so as the growth increases on the sales front similarly we have got number of capex targets. So we have to see that — so build-on that. Our free-cash flow will be fully utilized in either feeding the own working capital or the capex requirement.

Manoj Agarwal — Chief Financial Officer

So by and large what we are trying to ensure is that all our future growth takes place from our internal generation and not by external debt. And I explained that there is room for us to grow, putting new capex’s we will continue to use our cash generation for that purpose.

Avadhooot Joshi — Newberry Capitals Pvt. Ltd. — Analyst

Understood sir, that’s great to hear. That’s it from my side, thank you.

Operator

Thank you. We have the next question from the line of Anand Jain an Individual Investor please go ahead.

Anand Jain — Individual Investor — Analyst

Congratulations on a great set of numbers sir and thanks for the opportunity. My first question is around two quarters back-in the call you had indicated that we are going to make a few changes which should create — which should actually result in large power cost-savings for us in FY ’24. You did not give more details about that but would you be able to share some details in terms of the quantum of savings that we are looking at — what mechanisms are we going to use to do that?

Vivek Jain — Managing Director

See at this point of time again we are freezing our alternative supply arrangement, so I would not like to talk much about it at this point of time till that is actually done but that is progressing very well, and as I mentioned after maybe about once we have completed that in 18 months’ time we will have that additional power coming in which should be at far more reduced prices than what we are paying at this point of time, ease up to the grid or for our own capital generation.

Anand Jain — Individual Investor — Analyst

So the question is more like, is it like internal heat recovery or is it going to be like…

Vivek Jain — Managing Director

No see we are tying up for additional power through a different source. We will significantly reduce our power costs.

Anand Jain — Individual Investor — Analyst

The second question is in terms of Europe polymer capacity you said that by FY ’23 end we would have 1,500 tonnes of specialty fluoropolymer capacity. How do you think this quantity this will ramp-up by FY ’24?

Vivek Jain — Managing Director

I think it take about 12 months for all this capacity to be completely utilized.

Anand Jain — Individual Investor — Analyst

No, in the sense that new capacity addition by FY ’24 and between FY ’23… [Speech Overlap]

Vivek Jain — Managing Director

[Speech Overlap] new capacity addition may be up to 12 month — I mean it will be a ramp-up process we will and maybe and by the end-of-the financial year, we hope that the entire incremental capacity we’ll be converted into sales.

Anand Jain — Individual Investor — Analyst

No. I mean, creating new capacity in FY ’24 not the ramping up. Ramping-up is very clear that FY ’23 capacities will ramp-up in FY ’24 for, creating new capacities in FY ’24 for specialty fluoropolymer?

Vivek Jain — Managing Director

So we will — most of this new capacity increase is likely to be coming in from two quarters, one is the debottlenecking of the PTFE capacity which is currently on on cards and secondly is additional capacity which we will be putting up for PVDF for use by EV battery manufacturers. So that — so that rare demand is going start coming from beginning of 2025 from January 2025 by which time, we will put up additional capacities during the calendar year ’24 to cope up — to cope with additional demand which will come in from 2025 so that will, there will be additional increase in capacities. There’ll be a debottlenecking which is going to take place in our PTFE plants that will increase further capacities and we will be putting up some additional capacities in PFA.

Anand Jain — Individual Investor — Analyst

And sir what is that additional capacity of [Speech Overlap]

Vivek Jain — Managing Director

[Speech Overlap] PFA, maybe by March ’24.

Anand Jain — Individual Investor — Analyst

So can you just repeat the capacity — additional capacity and in PFA and PVDF that we’re looking to put up in [Speech Overlap]

Vivek Jain — Managing Director

[Speech Overlap] March ’24 we’ll put up additional capacities of PFA. We will put additional [Speech Overlap] sorry.

Anand Jain — Individual Investor — Analyst

The quantum in terms of tonnage like will end-up ’23 with 1500 ton and ’24 what we end-up with?

Vivek Jain — Managing Director

So we by end of by March ’24 we expect to double the capacity of PFA.

Anand Jain — Individual Investor — Analyst

Okay, sir. Like this 1500 will go to 3,000, if I get it right.

Vivek Jain — Managing Director

Yes.

Anand Jain — Individual Investor — Analyst

Okay, so 3,000 tonnes per annum, or per month.

Vivek Jain — Managing Director

No, no it’s not 3,000 it will be about 2,400 tonnes.

Anand Jain — Individual Investor — Analyst

No that is only for PSA, I’m asking overall for all the fluoropolymers.

Vivek Jain — Managing Director

PVDF will be much larger actually PVDF we have to watch and see how the [Indecipherable] the commissioning of new battery capacity is there whether we put up how much reactors we put up in ’24 will be dependent on that, but that is a continuous process. You will keep on putting up additional capacities PVDF. The more you know — as you see demand coming up we’ll keep on putting more reactors because in any case the backward integration piece is all done and since putting up PVDF capacity is modular, in 6 months’ time we can put up a reactor so — so depending upon how the battery manufacturers commission their capacity, we’ll keep on adding more capacity for PVDF.

Anand Jain — Individual Investor — Analyst

Great sir, one last question, if I may squeeze in which is like you know, sir looking at all this and we are currently doing everything in our integrated complex but do you think that we can we are looking to have plans for a much larger capex and in a new complex altogether. Do we have any plans of [Speech Overlap]

Vivek Jain — Managing Director

Yes, yes, we plan to do, whatever the future expansion which will take place will have to be done — a new complex because you know, so we have run-out — we will be the soon running out of [Indecipherable] new complex but so we are already in the process of selecting and finalizing additional land where we will house our capex’s coming up in the future years.

Anand Jain — Individual Investor — Analyst

Great sir thank you and all the best.

Vivek Jain — Managing Director

Thank you.

Operator

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

Rohit Nagraj — Centrum Broking Limited — Analyst

Thanks, sir. My first question is in terms of Q3. So is there any seasonality factor due to Holidays in Europe and U.S. and that might impact some demand for some of the products which are going to that geography? Thank you.

Vivek Jain — Managing Director

Yes, it could. I mean yeah because you know the December month typically in Europe and U.S. is muted so traditionally you know the October-November-December quarters is bit slower than other quarters, but you know the pace of business starts picking-up again, typically from January quarter onwards.

Rohit Nagraj — Centrum Broking Limited — Analyst

Right. Sir second question is in terms of the capex’s. So as I understand earlier we are guided for [Indecipherable] by Q4 — I mean end of 2022, but now it’s got delayed by few months. So across-the-board, the delay is primarily because of the heavy rains in Gujarat and that’s why some of the capex which was there earlier planned for this year has got shifted to next year?

Vivek Jain — Managing Director

Yes. That’s right.

Rohit Nagraj — Centrum Broking Limited — Analyst

Right. And sir just, one last clarification on the wind power project. I understand last quarter we had indicated that 20 MW will be commissioned in Q2. So any progress on that?

Manoj Agarwal — Chief Financial Officer

Yeah, it is already we have sought certain permissions which is underway so we expect in this quarter we’ll have those permissions…

Vivek Jain — Managing Director

So we are trying to put — we have sort of — there has been a change in-plan. We are putting up this additionally this new capacity, we’re talking about in [Indecipherable] because putting it up [Indecipherable] gives us certain advantages both and flexibility of using the power as well as some indirect cost benefits so, so that process of getting it — getting the EOU clearances is on. Again as it so happens there are delays in getting governmental approvals but we hope that shortly we should be able to get that and before the end-of-the year in any case all that will be commissioned.

Rohit Nagraj — Centrum Broking Limited — Analyst

Okay, right sir got it. Thanks a lot for all the answers and best of luck sir.

Vivek Jain — Managing Director

Thank you.

Operator

Thank you. We have the next question from the line of Marshall, an investor please go ahead. This is operator, can you hear us?

Unidentified Participant — — Analyst

Yeah, we can.

Operator

Please go ahead and ask your question.

Unidentified Speaker —

I think Marshall is not there, we can move ahead.

Operator

We have the next question from the line of Dhaval Shah from Girik Capital please go ahead.

Dhaval Shah — Girik Capital — Analyst

Hello. Congratulations on the great numbers and the great visibility of growth moving forward. Sir just one question a couple of quarters back in of the conference call you mentioned about R32 or bigger [Phonetic] commodity kind of product and you know as a company we were not planning to get into, you know the manufacturing side, while now we have announced 10,000 tonnes capacity. So what has changed our thought process towards this product?

Vivek Jain — Managing Director

See Dhaval, we’ve done more extensive study and R32 because it has a very-very low GWP. The longevity of this and the growth and demand across geographies again especially India, across India this is going to be — at this point of time the main substitution for R22. So that’s one and there seems to be a lot of demand in the Middle-East which will be [Indecipherable] R410 which requires both our R32 and R125. And, other than that some of the other geographies also like the U.S. et-cetera they will also continue to use 32 for a longer period of time put simply for this reason that it is a very low GWP and if they have to keep to the GWP targets, it’s easier for them to use more of R32 and curb the use of some other refrigerants where their GWP is higher. So for all these reasons, we see that there is growth potential there and that’s the reason why we have — that it will also help us in — in supporting R125.

Dhaval Shah — Girik Capital — Analyst

Understood, great. And sir, second question is, you mentioned about EBITDA margin visibility. To some participants you said 30% plus so, is my understanding correct, so on a medium-to-long term you feel our company will maintain its margins like 30% EBITDA minimum, that’s what — is my understanding correct.

Vivek Jain — Managing Director

Yes, that what we expect, you know who can predict the future. [Speech Overlap] what happen is something which is not predictable but, we reasonably expect that we should be able to maintain given the portfolio of our products, we reasonably expect that we should be able to maintain this level of margins.

Dhaval Shah — Girik Capital — Analyst

Okay, okay because what has happened is that like [Indecipherable] especially something like ours pre-pandemic and post-pandemic, the margin trajectory has completely changed. And you know as investors it always keeps us guessing where could be the peak margins? So I think this sort of visibility from your side about 30% bigger base will really help us.

Vivek Jain — Managing Director

So yeah, the point — as I mentioned we think that with our portfolio of products and our product range we would expect and you know the margins which are there in our business we would expect that we should be able to keep two 30% EBITDA margin. It’s also not very easy where there are barriers-to-entry into our business and it takes a long-time to build this business, this customer-base, get this qualification so — so we have a reasonable hope that we will be able to maintain this margin and some of our the new expansion is taking place again are in areas where we expect the margins to be better and those are more you know sort of new age kind of industries. So we are hopeful that we will be able to maintain this level of margins.

Dhaval Shah — Girik Capital — Analyst

Okay and sir in terms of our we have a great integration in — across country in different chemicals. Now which would be those key raw-material which might worry you in terms of its availability in terms of for you to give a final product price to your consumer that [Indecipherable] acts as very large…

Vivek Jain — Managing Director

So you know — as you know with our integration that is one of the primary reasons why we are so integrated and why we keep on even the new production should come up we look at integration, is to ensure that we are in control of our raw materials, critical raw materials. And going forward also that will remain so, so there might be periods of time where we are dependent upon outside purchases, but once we are able to sort of build the capacities for those critical raw materials our dependence on outside suppliers keeps on reducing. So this is what we are doing even at this point of time for instance we are putting up a [Indecipherable] plant basically as backward integration for our entire you know [Indecipherable] business. So once that is commissioned you know our dependence upon external supplies reduces.

Dhaval Shah — Girik Capital — Analyst

Okay and sir lithium carbonate [Speech Overlap]

Vivek Jain — Managing Director

[Speech Overlap] on our own or maybe at least a significant part is captively produced so that we are only marginally dependent upon buying from third-parties.

Dhaval Shah — Girik Capital — Analyst

Okay, and we also were in discussions with parties for long-term arrangement of lithium carbonate.

Vivek Jain — Managing Director

Yes.

Dhaval Shah — Girik Capital — Analyst

Yeah, so are we already into it or what is…

Vivek Jain — Managing Director

Yeah, yeah so that process is on, this takes time so the process of tying up is on. There is a very-very strong focus on that and I think in the next few quarters we should be able to tie up some long-term supply sources for lithium. Before our big demand starts coming up we would have tied-up.

Operator

Thank you. That was the last question. I would now like to hand it over to the management for closing comments.

Vivek Jain — Managing Director

Thank you. We would like to thank you all the participants for their interest in the company and we look-forward for their continued participation. Thank you very much, all the participants.

Operator

[Operator Closing Remarks]