Gujarat Fluorochemicals Limited (FLUOROCHEM) Q4 FY23 Earnings Concall Transcript

Gujarat Fluorochemicals Limited (NSE:FLUOROCHEM) Q4 FY23 Earnings Concall dated May. 05, 2023.

Corporate Participants:

Bir Kapoor — Chief Executive Officer

V.K. Soni — Head of Projects & New Initiatives

Manoj Agrawal — Chief Financial Officer

Analysts:

Archit Joshi — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Harsh Shah — HSBC Mutual funds — Analyst

Sanjesh Jain — ICICI Securities — Analyst

Rohit Nagraj — Centrum Broking — Analyst

Viral Shah — ENAM Holdings — Analyst

Anshul Thakkar — Lalkar Securities — Analyst

Aman Vij — Astute Investment Management — Analyst

Nitesh Dhoot — Prabhudas Lilladher — Analyst

Rohan Gupta — Nuvama — Analyst

Ravi Naredi — Naredi Investments Private Limited — Analyst

Garvit Goyal — Nvest Research — Analyst

Yash Shah — Investec India — Analyst

Rahul Veera — Abakkus Asset Manager LLP — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Gujarat Fluorochemicals Limited Q4 FY ’23 Earnings Conference Call hosted by Batlivala and Karani Securities India Private Limited. [Operator Instructions]

I now hand the conference over to Mr. Archit Joshi from Batlivala & Karani Securities India Pvt. Ltd. Thank you and over to you, sir.

Archit Joshi — Batlivala & Karani Securities India Pvt. Ltd. — Analyst

Thank you. Good evening, everyone, and thank you for joining the 4Q FY ’23 and FY ’23 Earnings Conference Call of the Gujarat Fluorochemicals. I think the Management on behalf of B&K Securities for giving us the opportunity to host this call.

We have with us today are Dr. Bir Kapoor, CEO; Mr. V.K. Soni, Head of Projects and New Initiatives; Mr. Manoj Agarwal, Chief Financial Officer; Mr. Vibhu Agarwal, Head of Investor Relations.

Without further ado, I request Dr. Bir Kapoor to begin with his opening remarks, after which we’ll have the floor open for questions. Thank you, and over to you, sir.

Bir Kapoor — Chief Executive Officer

Thank you, Archit. Good evening, everyone. This is Bir Kapoor. A very warm welcome to all of you on this GFL’s Quarter 4 FY ’23 and FY ’23 annual earnings call. The Company announced its Quarter 4 results at its Board meeting held today. The results, along with the earnings presentation is available on the stock exchange and also on our website. I’ll briefly touch upon the numbers, and then give you an update on the business operations and future outlook.

The Company reported a consolidated revenue of INR5,685 crores for the year ended March ’23, and INR171 crores for the quarter ended March ’23, which is up by 44% and 37% respectively on year-on-year basis. Consolidated EBITDA for the FY ’23 was INR2,047 crores, and for Quarter 4 FY ’23, it was INR529 crores by 71% and 60% respectively on year-on-year basis. The EBITDA margins continue to remain healthy and close to 36% for FY ’23. And for Quarter — FY ’23 as well — Quarter 4 FY ’23 as well.

Consolidated PAT for FY ’23 was INR1,323 crores, and for Quarter 4 FY ’23, this was INR332 crores, up by 71% and 52% respectively on year-on-year basis. ROCE and ROE improved to 34% and 27% for the financial year ’23, and 24.5% and 20.1% for FY ’22 respectively. The net debt-to-equity ratio have reduced to 0.23. It has been an extremely satisfying and rewarding year for us. We are happy with our efforts and the same is showcased in the numbers. We have been investing in capacity building, which has yielded rich dividends for us. In the recent years, our focus has been on new fluoropolymers, where we are adding capacity to almost 1,300 to 1,500 tons by Quarter 1 in the coming financial year.

As with most of the investments, the new capex that we put in, takes almost a year post commercialization to realize the full potential in revenue terms, and these new capacity would give us the optimum revenue by FY ’23, when it will be fully utilized. Similarly, in the battery chemicals capex, what we are putting in now should realize the full revenue after almost a year when it’s commercialized.

This year and the year after, we expect the growth to be fueled by new fluoropolymers. And we are already in the process of commercializing our new growth driver, which is Battery Chemical segment. This should help us maintain the healthy growth for the next few years. We are building this large chemical company from India, which is competing with global giants. And now, primarily focusing on the sunrise industries be it EV, solar, hydrogen, 5G in telecom, semiconductors and energy storage system among others. As we are export-oriented especially in our fluoropolymer segments, the global macro environment plays a major role in our business environment.

Now, let me quickly take you through the performance of each of our business segment for the quarter. To begin with, let me talk about the Bulk Chemicals. This segment has seen a quarter-on-quarter revenue decline of 17%, which is primarily led by the drop in the prices which is in line with our view of the prices to be under pressure due to additional suppliers in the market. The Fluorochemicals segment has done well mainly on account of the refrigerants. Going forward, we expect that refrigerants to be slightly subdued in Quarter 1 FY ’24. And the new fluorochemical plants are gradually ramping up production and expected to contribute to increase revenue in the upcoming quarters.

In the fluoropolymer business, the volumes have remained stable during the quarter. However, the prices have corrected marginally. In addition to the debottlenecking of BDFE capacity, creation of new additional capacity of new fluoropolymers, our own force. We have some planned shutdowns during Quarter 1, and we expect the demand fundamentals for fluoropolymers to be continued to be robust because of growing demand from new and emerging sectors.

Let me now briefly touch upon the future growth drivers. The Fluoropolymer segments should keep providing up the growth momentum. Beyond the current capacity that we are in, we are optimistic on new fluoropolymers like PVDF, PFA, FKM, that are critical for the industry is like EV solar and semicon. In Battery Chemical space, we are looking at the entire bouquet of battery chemicals including electrolyte. We expect to get our electrolyte plant to get commercialized by Quarter 2 of this financial year. And we are working with major battery manufacturers to provide them with electrolyte matching to their requirements.

And this segment is progressing well and as per our plans. We are continuing to look forward and focus on potential long term growth drivers. As communicated earlier, we are progressing well on some of the new development areas like PVM for hydrogen fuel cells and electrolyzers. We expect to build the new business based on these developments in near future. With the growth opportunities before us, we are also strengthening our infrastructure for future growth, including new site for future expansion.

At the end, I would like to emphasize that with emerging sunrise sectors in energy transition space and semicon growth, we see a substantial opportunity for fluoropolymers, Fluoro Materials and Battery Chemicals. We are well prepared in terms of the product portfolio as well as capacity building capability to capture this growth opportunity.

With this, I would like to thank you all and would like to open the floor for question and answers.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] We take the first question is from the line of Mr. Harsh Shah from HSBC Mutual funds. Please go ahead, sir.

Harsh Shah — HSBC Mutual funds — Analyst

Yeah, thank you. Thank you for the opportunity, and congratulations on a great quarter and a strong year-end. First question is on the business mix. If you see our Fluoropolymers division, earlier you used to give the breakup between PTFE evaluated and the new fluoropolymers. As on Q4 FY ’20, it was almost 46% of business and even in this quarter-end, it is 49% of the business. So as a mix, it has not changed a lot, but you mentioned the Fluorochemicals, as the business has grown quite rapidly from almost 18%, 20% percent business next now, almost one-third of the business, the last part of that has to do with ref gas prices shooting up.

So, my first question is, what is the visibility or what is the outlook on ref gas prices for next year, and how, like where do you see the business mix changing for next year.

Bir Kapoor — Chief Executive Officer

Yes, Harsh. Thanks for your question. The way we see it now is that we expect the ref gas prices to remain stable. And demand may appear to be little bit subdued in Q1 FY ’24. However, the prices — we expect to remain stable going forward. So this — so, you are right the revenue is just coming in the vertical of Fluorochemicals is primarily contributed by the ref gas compared to the previous quarters or the year that we’ve seen.

Harsh Shah — HSBC Mutual funds — Analyst

And in terms of next year, 16 — right now, as on Q4, 16 % is bulk chemicals, one-third is fluorochemicals and 50% is fluoropolymers of business, how do you see the business mix shaping up for next year. I mean, it’s okay if it moves here and there because of some pricing, but in general, where do you see the business mix going on?

Bir Kapoor — Chief Executive Officer

Yes, as we — as I said in my opening statement, we are focusing in the coming years, this year and as well as the next year, our growth is going to come from fluoropolymers, primarily due to the investment that we’ve made in this sector. So we expect the fluoropolymer revenue to go up. There is a marginal correction here and there, which we said because of the pricing, which has corrected marginally from its peak position in the earlier quarter. We expect the fluoropolymer segment to grow as we go along.

Harsh Shah — HSBC Mutual funds — Analyst

Understood. And my second question is, can you just help us understand the breakup of your capex for next year? So, how much of capex is going into what capacity, and also the timeline of commissioning of the projects. That will be really helpful.

Bir Kapoor — Chief Executive Officer

We — Harsh, we would — difficult for me to answer the specific question on capacity. However, on the capex, this year, our capex plan is very close to INR1,300 crores — INR1,500 crores in the coming year, out of which we are looking at close to INR1,000 crores in Fluoropolymers and Battery Chemicals space.

The capacities what we’re talking about, I will not comment on that, but these investments will lead to the capacities in new fluoropolymers like FKM, PFA and PVDF. And we expect most of these capacities to come online by Q1 and Q2.

However, the capacity utilization, which will reflect in revenue will take several quarters from there on because it takes — it’s a long cycle of product development and then eventually get the capacity utilized. So we expect to see that in FY ’25, fully utilized.

Harsh Shah — HSBC Mutual funds — Analyst

Sure. And that was very helpful. And just last thing in terms of mar — where do you see margins stabilizing for us going software for full-year FY ’24. If I remove the seasonalities or quarter-to-quarter movement. For full FY ’24, where do you see the margins going from here?

Bir Kapoor — Chief Executive Officer

Harsh, we have always said that our target is to have margins around 30% and we expect it to continue at 30% pus. This is what we look forward to do.

Harsh Shah — HSBC Mutual funds — Analyst

Understood. Thank you very much for answering all the questions, sir. Thank you, and all the very best.

Bir Kapoor — Chief Executive Officer

Thanks, Harsh. Thank you so much.

Operator

Thank you. We take the next question is 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 questions. I have a few of them. First on the ramp up of the new fluoropolymer. I think we added few capacity in Q3 and Q4 and we are planning to add few more capacity over the next few quarters if I understand right from your previous statement. And if I look at the Fluoropolymer revenue growth over last three quarters, it has broadly remained stable. I understand there is some amount of price decline, but how should one build a ramp up and considering the capacity we have added, at the peak, what should be the Fluoropolymer revenue assuming that the prices remain stable at these levels. I know we cannot take a call on prices. So, assuming the prices of remaining where they are today, what will be the peak revenue from the capacity which we have put up and which you’re putting over the next few quarters, all put together, what’s should the revenue be? That’s my first question.

Bir Kapoor — Chief Executive Officer

Thanks, Sanjesh, thanks for question. First of all, it’s difficult to give the number on the revenue because it depends on prices. However, as you said that if I take the the same pricing as it is now, what do we see — where is it going? So, we see it almost — as you said, our growth is going to come from Fluoropolymers, so which is approximately 30% from where we are. So, that’s where we see INR1,000 crore-plus going in Fluoropolymers when these capacity get fully utilized.

Sanjesh Jain — ICICI Securities — Analyst

INR1,000 crores-plus per quarter.

Bir Kapoor — Chief Executive Officer

This is for the annual, I said, not per quarter.

Sanjesh Jain — ICICI Securities — Analyst

No no, you’re already at INR700 crores for the Fluoropolymer as we see it in this quarter, right, INR720-odd crores of Fluoropolymer revenue in this quarter.

Bir Kapoor — Chief Executive Officer

Yes, sorry, I misunderstood, Sanjesh, it’s going to be — from a quarter perspective, it will at least cross INR1,000 crores, INR1,000 crores to INR1,200 crores in Fluoropolymers.

Sanjesh Jain — ICICI Securities — Analyst

Okay, INR1,000 crores to INR1,200 crores of quarterly revenue, we will be able to process with all the capacity which we intend, and this will be visible in the FY ’25, as the ramp up will take the time. That’s the right understanding.

V.K. Soni — Head of Projects & New Initiatives

Sanjesh, also what you should look at it is the current capacity that have today. Today, we are almost at 1,100 tons per month. This will go up to, as we have guided earlier to 1,300 to 1,500 by Q1. There’s further additions happening throughout the year. Accordingly, next year, the ramp up would happen and the revenues will go up. We cannot guide anything further than that. So, you can build up as 1,100 today, going up to 1,300 to 1,500 by Q1, by end of this year, you should be in a ballpark figure of 1,700 to 1,900 tons per month.

Sanjesh Jain — ICICI Securities — Analyst

Fair enough, fair enough.

V.K. Soni — Head of Projects & New Initiatives

For polymers.

Sanjesh Jain — ICICI Securities — Analyst

On the polymer side. And PTFE capacity addition of 3,000 metric tons of the debottlenecking which we were planning, when should that come?

Bir Kapoor — Chief Executive Officer

That’s should come probably by the end of — mid of this year, probably third quarters of this financial year.

Sanjesh Jain — ICICI Securities — Analyst

Okay, the third quarter of this financial year. Do we plan to add more on the PTFE, because 3M opportunity still remains there and…

Bir Kapoor — Chief Executive Officer

What’s happening in 3M, Sanjesh, is that, as you know, they will remain in operation till the end of ’24.

Sanjesh Jain — ICICI Securities — Analyst

Correct.

Bir Kapoor — Chief Executive Officer

Beginning of ’25. So, actual capacity of volumes going out of the market is still almost one and a half years away. So, what our expectation is that although we are seeing some tailwinds in terms of customer approach and product qualification level, but we’ll see its impact on our volume, probably from the beginning of next year.

Sanjesh Jain — ICICI Securities — Analyst

Are we planning to add more capacity in our PTFE to cater that or…

Bir Kapoor — Chief Executive Officer

It depends, Sanjesh. We can always add, but we’ll see how the business progresses. That’s all we can say.

Sanjesh Jain — ICICI Securities — Analyst

Got it. On the Battery Chemicals side, one of your peer has announced a partnership with a Japanese company on making solution. It looks like they’re progressing to add a very large capacity on electrolyte solution. How are we looking at — on the Battery Chemicals business, both from the electrolyte salt, as well as solutions business? How prepaid or we capitalize on this opportunity?

Bir Kapoor — Chief Executive Officer

As I said in my — again, in my opening statement that we are very well poised. In fact, we are very well prepared. Our electrolyte plant would be ready in Q2. And also, we are in the final stages of commissioning of salt plant. So, I think we are very well positioned to capture that. We’ll have our own electrolyte plant and we will be engaging with customers and fulfilling the requirement based on the formulation provided by them.

Sanjesh Jain — ICICI Securities — Analyst

When should we see the revenues coming for Battery Chemicals? Will it be in ’24 or will it be in ’25?

Bir Kapoor — Chief Executive Officer

We expect the revenue mostly to come in ’25, because the qualification time in battery chemicals is very long, Sanjesh. Sometime, it could be almost four to six months because it’s a sector where qualification times are very long. So the full, in terms of, impact on the revenue of Battery Chemicals, I’d probably start seeing it from the next financial year.

Sanjesh Jain — ICICI Securities — Analyst

Two bookkeeping questions last from my side. One on the caustic chloromethane, we had a 17% sequential decline. This — did we have any long term contracts benefit and the full impact of the lower prices we will see in the next quarter. And if you — or you can just help us understand what is the exit month revenue annualized? Do you think there is scope for another INR50 crores kind of a decline from these levels adjusting for the current prices? That’s number 1.

Number two, on the net debt, sequentially, despite as we’re receiving INR650 crores from the related party, net debt seems to be flattish on a y-o-y basis. The working capital, it looks like has again inched up a little bit. We have improved from the back of previous year, but this quarter it again looks like they have inched up. So how should one look at the deleveraging of the balance sheet net debt specifically. These are the two questions.

Bir Kapoor — Chief Executive Officer

Let me answer, Sanjesh, the first part of your question which is related to the bulk chemicals, caustic, et cetera. As far pricing are concerned, we believe that the pricing is pretty much at the bottom level and don’t expect it to go down further.

We don’t have any long-term contracts, so we do not see any impact in terms of — so, we will probably be following the market, whatever, however it goes, but we do not expect it to go down further.

Coming back to your second question regarding sort of deleveraging the balance sheet and the question on the working capital, I’ll invite Manoj Agrawal to answer that question please.

Manoj Agrawal — Chief Financial Officer

Yeah, hi, Sanjesh. So, on the working capital side, if you remember, we were turning at around 155 days of working capital, which we have brought it down to one 120 days, which has not got inched up to around 8 days, again to 128 days. This is essentially because of lag effect of the inventories which we’re building up for the new capacities and certain debt — new sales in the new regions and new customers. So, that is because of that only.

So, we expect that it will — as the sales pickups from the — all these new new product profile and new customer profile, it will — we’ll be able to contain it again at the same level. Our target remains at a 128 days — 120 days.

Sanjesh Jain — ICICI Securities — Analyst

Got it, got it. One last question. Sorry, I forgot. On the pricing side on the Fluoropolymer, we have seen slight decline. This is more to do with lower demand in the Europe, so the prices are falling down or it’s more of a lower power price and the input costs falling? What has driven the sequential drop in the Fluoropolymer prices?

Bir Kapoor — Chief Executive Officer

The thing is that if you look the history, Fluoropolymers were at the peak, at the very high prices and there some marginal correction that is going on. From the volume perspective, we do not see much of an impact which is again, since there are some regional issues also maybe they here and there. But other than that, we don’t see much of a change.

Sanjesh Jain — ICICI Securities — Analyst

So do you — so, you expect more price from the current level or how is it, because you talked about these prices being very high.

Bir Kapoor — Chief Executive Officer

I — see, there might be a minor correction, but we don’t see a very significant deviation from where they are. And again it depends from product to product. It’s — the Fluoropolymer itself is a very large bouquet and there are polymer which are for very high-end applications and versus polymers which are — it depends on the — but overall, I do not see it changing very much. Maybe a marginal correction going forward, not much.

Sanjesh Jain — ICICI Securities — Analyst

Got it, got it. Thank you, sir, thank you for answering all my questions and best of luck for the coming quarters.

Bir Kapoor — Chief Executive Officer

Thanks, Sanjesh. Thank you.

Sanjesh Jain — ICICI Securities — Analyst

Thanks.

Operator

Thank you sir. We take the next question from the line of Mr. Rohit Nagaraj from Centrum Broking. Please go ahead, sir.

Rohit Nagraj — Centrum Broking — Analyst

[Technical Issues]

Operator

I’m sorry to interrupt, Mr. Nagraj, your voice is breaking up, sir.

Rohit Nagraj — Centrum Broking — Analyst

[Technical Issues]

Operator

Mr. Rohit, your line is breaking up, sir. Are you able to hear me?

Rohit Nagraj — Centrum Broking — Analyst

Yeah, is this better?

Operator

Yes, sir.

Rohit Nagraj — Centrum Broking — Analyst

Yeah. So, my first question is on the guarantees part. So, we have received the advances. How about the guarantees? And a similar aspect from the balance sheet perspective, the other current assets have gone down from about INR1,000 crores to INR600 crores. So, I believe that since we have received the money, probably it would have gone down. So, what are the leftover non-current assets of about INR600 crores? Thank you.

Manoj Agrawal — Chief Financial Officer

Yeah. See, as regard to guarantees — corporate guarantees are concerned, we have already started pulling it down, reducing in long and quarter-on-quarter basis. See, we are well on track and we see that reduction on continuous basis as we go along.

And as regards to quality of guarantees also, it has never got invoked or triggered. So that is one more point you need to note before much worrying about the quantum the corporate guarantees. So that is one.

As regards to your other current assets, there is a bouquet of actually items, number of items. So, that I can tell you afterwards, once we work out separately.

Rohit Nagraj — Centrum Broking — Analyst

Sure, thank you. Sir, second question is on the electrolyte salt and electrolytes. So, based on current capacity and pricing, what is the kind of peak revenue potential that to be envisaged from the electrolyte salts?

Bir Kapoor — Chief Executive Officer

Rohit, again, it’s a sort of difficult to answer, because we already indicated the capacities on the salt earlier, but revenue, because if you look at today, the lithium prices, because the salt prices are linked to lithium prices. And there has been a very significant change and there’s a lot of volatility in salt prices. It’s anywhere from $13 to $45, and it was almost at the peak, $60. So, it’s very large volatility. So, it would be very difficult for me to answer the future revenue expectation from this. It all depends on the lithium prices.

Rohit Nagraj — Centrum Broking — Analyst

Right, sir. Thanks a lot. I’ll come back in the queue. Thank you.

Operator

Thank you very much. We take the next question is from the line of Mr. Viral Shah from ENAM Holdings. Please go ahead.

Viral Shah — ENAM Holdings — Analyst

Thank you for the opportunity. Sir, my question was, if I look at the consolidated cash flow statement, the capital expenditure comes out to INR675 crores, whereas in the presentation, that number is close to INR1,350 crores. So, is this differential of INR675 crores largely the transfer from advances to CWIP for the wind project or is there something else? How should we look at that?

Manoj Agrawal — Chief Financial Officer

When you look at the final computation of the cash flow, it has to be net of capital advances. So any decrease in capital advances has an actual capex. Actual capex outlay is INR1,350 crores, roughly. Net of capital advances, which got reduced because of receipt of refund from Wind, from INR625 crores. So, that is — net is reflected in the cash flow statement.

Viral Shah — ENAM Holdings — Analyst

Okay. So, would it be fair to say that INR675 crores were towards the wind and INR675 crores was towards all of the Fluorochemicals and Fluoropolymers? Is that the right understanding?

Manoj Agrawal — Chief Financial Officer

Correct.

Viral Shah — ENAM Holdings — Analyst

Okay. So, in the coming year, out of this INR1,500 crores of capex that we’ve guided, how much would be towards Wind and how much would be towards the Chemicals business?

Bir Kapoor — Chief Executive Officer

No Wind in this. This is…

Viral Shah — ENAM Holdings — Analyst

So, out of the advances, I meant.

Manoj Agrawal — Chief Financial Officer

No, out of the… see, out of advances which we have — Wind has repaid us around INR675 crores. So, the residual advances which we have already taken in our earlier capex plan. The capex plan, which we have guided for the future financial years is mostly on the Chemical side.

Viral Shah — ENAM Holdings — Analyst

Okay, okay, sure. Yeah. Thank you so much, yeah. Yeah.

Operator

Thank you. We take the next question from the line of Mr. Anshul Thakkar from Lalkar Securities. Please go ahead, sir.

Anshul Thakkar — Lalkar Securities — Analyst

Yeah, hi, sir. Congratulations on another spectacular quarter and finishing off the year so well. Sir, my first question is that the media has recently commented on our path breaking invention in membrane technology, which is expected to reduce the production cost of green hydrogen. This was at the CSMCRI at Bhavnagar. I just wanted to know what role will GFCL, solar and green hydrogen products play in this?

Bir Kapoor — Chief Executive Officer

Yeah. I would request Mr. Soni to answer this. Please, Soni sir.

V.K. Soni — Head of Projects & New Initiatives

See, we have — GSM is working on two type of proton exchange membranes, PEM. One is for electrolyzer, which is a sulfuric acid membrane. And the other one is for fuel cell. So the effort is to reduce the cost of the electrolyzer membrane because that contributes largely to green hydrogen output. So, there, we are working very actively with another Indian institute to develop it.

Anshul Thakkar — Lalkar Securities — Analyst

So, I understand that there has been some transfer of technology for whatever transacted amounts, so does that mean that essentially now this technology belongs to us?

V.K. Soni — Head of Projects & New Initiatives

Actually, we have a transfer of technology from ONGC. And that is on the lab scale. And we are now developing it further on pilot scale and thereafter on prototype commercial scales. And we have the full rights for it.

Anshul Thakkar — Lalkar Securities — Analyst

So, that means, sir, we will be now present in two of the four forms of green hydrogen manufacturing, am I right?

V.K. Soni — Head of Projects & New Initiatives

Which are the four ones you said?

Anshul Thakkar — Lalkar Securities — Analyst

So, I understand, sir, there’s PEM, fuel cell, and there are two other forms of green hydrogen manufacturing, but essentially this particular technology transfer is green hydrogen through fuel cell and as well as we already exist in the PEM.

V.K. Soni — Head of Projects & New Initiatives

No, actually, I’ll explain again. There are only two applications of PEM. One is for electrolyzer for making green hydrogen, and other is for mobility sector for converting the hydrogen into — by using fuel cell for creating electricity. So, we are in both the sectors. In one sector we have tied up with ONGC, the other sector we are developing — developed our own technology.

Anshul Thakkar — Lalkar Securities — Analyst

Got it, sir. Sir, my second question was, particularly for the LiPF6, sir, is it possible to give us some timeline with respect to where we are on the lab trials, where we are on the validation with customers, and I think the out of — commercial output you mentioned that in the introduction.

Bir Kapoor — Chief Executive Officer

Anshul, in Battery Chemicals and Salt, we had stated earlier that we are going to build a fully commercial salt plant, which is at the final stages of commissioning. In fact, the mechanical completion is almost done. So, which we expect — the salt will come out in next few months, essentially by Quarter 2.

And then after that the salt will go for validation and qualification stage. So, we are not going through the lab stage, first of all. We want to — we have gone and decided to go ahead and straight away go for the commercial scale and build up the commercial scale plant, get it qualified and start getting into the mode of supplying it.

So, that has been our approach, and depending upon the qualification period, how it gets ramped up, we will see. But we accept — we expect the commercial sales probably will happen by end — by the third or fourth quarter of this year, essentially.

Anshul Thakkar — Lalkar Securities — Analyst

Alright, that’s very encouraging, sir. And, sir, just a little bit of similar detail maybe on the solar PVDF back panels and the PFA semicon products?

Bir Kapoor — Chief Executive Officer

We had already going to through the sort of the qualification stage on both of them, and in terms of the PVD film which is for the solar, we expect to get our plant again get commissioned by Quarter 2. And then, we will be making a commercial level sheet for this application.

Anything you want to add?

Manoj Agrawal — Chief Financial Officer

PFA is [Indecipherable]

Bir Kapoor — Chief Executive Officer

PFA semicon is, we have already developed the product and it’s again going through the various stages of qualifications.

Anshul Thakkar — Lalkar Securities — Analyst

So, sir, solar, you said Q2 was the current year, right?

Bir Kapoor — Chief Executive Officer

Financial year, Q2, yes.

Anshul Thakkar — Lalkar Securities — Analyst

Yes, the current financial year. Great. Great, sir. Thank you so much. All the best and I look forward to the next interaction, sir.

Bir Kapoor — Chief Executive Officer

I’ll add very quickly, Anshul, that with PFA, with the semiconductor qualification happening, we had also — it’s part of our new polymer portfolio where we are adding capacity in PFA as well in this — the next few quarters.

Anshul Thakkar — Lalkar Securities — Analyst

Oh, okay. That’s great to know, sir.

Bir Kapoor — Chief Executive Officer

Thanks.

Anshul Thakkar — Lalkar Securities — Analyst

Great. Thanks.

Bir Kapoor — Chief Executive Officer

Thanks, Anshul.

Operator

Thank you, sir. [Operator Instructions] We take the next question from the line of Mr. Aman Vij from Astute Investment Management. Please go ahead, sir.

Aman Vij — Astute Investment Management — Analyst

Yeah, good afternoon, sir. My first set of question is on the new Fluoropolymer side. So, we have added almost 300 to 400 tons per month capacity in the last one year, but in terms of utilization, I think it’s still lacking, maybe at 60%, 70% utilization only. So, if you can talk about, is there some kind of little slowdown in the last three quarters that we have not ramped up, because we have enough capacity compared to what we are doing. As well as the — the question is also on the PFA semiconductor and PVDF EV. So, when can we see some revenues coming in from these two products? Is this year or next year only, FY ’25?

Bir Kapoor — Chief Executive Officer

Looking back to our Fluoropolymer capacities, again, these out of capacity addition have been in the new fluoropolymers, and as we had stated earlier that the revenue potential of these new capacities will take some time as it gets qualified. Again, the processes, little bit complicated because there are — these are sort of very specific application, where products are developed and qualified by customers and then orders are placed. So, we expect these capacities, probably to get fully utilized by the end of this financial year.

Now coming back to — your second question was related to PVDF. Now, PVDF, you said which application, were you asking about battery application?

Aman Vij — Astute Investment Management — Analyst

Yes, yes, PVDF EV grade as well as PFA semiconductor, when will we see them contributing to our revenue, by which quarter?

Bir Kapoor — Chief Executive Officer

We have products which are developed, and again, we are going through the qualification stage because in PVDF for EV sector also, there are multiple grades. It’s not one single grade. There are different types of PVDF polymer. And we have capability to develop both, we have developed it, and it’s going through the qualification process. Unfortunately, the qualification period is very long. For one cycle, it’s almost six months. That’s the situation.

Aman Vij — Astute Investment Management — Analyst

So, do you expect this to contribute in FY ’24 or FY ’25 only, these two products?

Bir Kapoor — Chief Executive Officer

No, I think the qualification will complete by this financial years in both of these products. In fact, PFA, it might happen much earlier. And PVDF, I think particularly in the EV application, six months, approximately from now, and subsequently ramp up.

Aman Vij — Astute Investment Management — Analyst

My second question is on the — two parts. So, you talked about there will be a shutdown in Q1. So, if you can quantify, is it in PTFE or new fluoropolymer. And is it like 10%, 20% shut down or is it like major capacities won’t be there? And for how many months also, if you can talk about that.

Bir Kapoor — Chief Executive Officer

It’s not a major few months. It’s purely in PTFE because it’s like annual shutdown that we do for TFEs so we just wanted to sort of issue a guidance that there’ll be a TFE shutdown in this…

Aman Vij — Astute Investment Management — Analyst

Okay. And then…

Bir Kapoor — Chief Executive Officer

PTFE only, not new fluoropolymers.

Aman Vij — Astute Investment Management — Analyst

Yeah, yeah. And on refrigerant gas, you’ve talked about a little subdued demand in Q1. So, again, is it like 5%, 10% kind of subdued or is it 20%, 30%, 40% kind of subdued demand.

Bir Kapoor — Chief Executive Officer

Refrigerant gases is a cyclical business, Pawan [Phonetic], and it depends a lot on the weather condition. Looking at — you saw the temperatures in Delhi lately and even all over India. So, I think overall the demand depends a lot on on the weather conditions. So, we expect the demand to be slightly subdued. But it’s difficult for me to — how much, but possibly, I can say 10% maybe. I do not know. This is something difficult for us to estimate. It depends on — moreover the weather conditions.

Aman Vij — Astute Investment Management — Analyst

So, for — you’re talking mostly on domestic front. Export front, the demand is still okay on refrigerants?

Bir Kapoor — Chief Executive Officer

Export front also, it is — demand is going slightly subdued, not significantly, and that’s, I think, is partly going to be seasonal also.

Aman Vij — Astute Investment Management — Analyst

Sure, sir. These were my questions. Thank you.

Operator

Thank you. [Operator Instructions] We’ll take our next question from the line of Mr. Nitesh Dhoot from Prabhudas Lilladher. Please go ahead, sir.

Nitesh Dhoot — Prabhudas Lilladher — Analyst

Hi, team. Thank you for this opportunity. So, my question is that in [Indecipherable] result declared today, they’ve indicated a rapid normalization of PTF prices in battery from last year’s exceptional prices. Also another large global player [Indecipherable] said that prices of PVDF are unable to maintain at the elevated level.

So, [Indecipherable] the size of [Indecipherable] et cetera are price pressures, I presume there would be taking into consideration the various grades and applications of the polymers. However, what I gather is we are not seeing any sharp decline in PVDF prices going forward. So, just wondering if that were to happen, whether our profitability could be lower than what you’re indicating?

I mean, could the 30% margin guidance get challenged, is what my question is.

Bir Kapoor — Chief Executive Officer

See, the thing is that right now, globally, the EV chemicals as well as the PVDF prices are pretty much dependent on the China market. China is today the world’s largest market of battery chemicals and EV batteries. So, China demand has been subdued and there has been a slowdown in EV sales in China, and that essentially have reflected in terms of the overall price situation that you see.

In our case, we are not significantly affected at the moment because our EV capacity in PVDF is expected to come up after the qualification by end of this year and early first quarter next year.

So, coming back to the pricing wheel, we see that this could be a momentary because there’s long value chain and the industry may have — because the EV is on a gross path and it depends on how — which part of the value chain come faster versus later. So, I think this is a maybe a short-term phenomena, which is expected to get picked up as demand improves in — of EV in China and EV capacities come every other places.

Hello?

Nitesh Dhoot — Prabhudas Lilladher — Analyst

Yeah, thank you so much.

Bir Kapoor — Chief Executive Officer

Thanks, Nitesh. Thank you.

Operator

Thank you, sir. We take the next question from the line of Mr. Rohan Gupta from Nuvama. Please go ahead, sir.

Rohan Gupta — Nuvama — Analyst

Hi, sir. Good evening and congratulations on a strong set of numbers. Sir, first is that our understanding is generally what we have seen is that from the product development, then you go to qualification and then you go towards the ramp up phase and finally commercialization, generally the timeline here involved into new qualifications and a product development and ramp up and commercialization finally takes two to three years, and even sometimes they take more. Even, you have seen in your journey also in case of PVDF, it has taken longtime.

However, in case of batteries salt, we’re talking about that we are almost keeping a develop — and we have already probably developed the product, but we are skipping the ramp-up part and directly going for the commercialization. Even from the qualification point of view also, we are talking about the customer qualification will be as small as maybe four to six months, and we are expecting the revenues to ramp up by end of this year after the planned commercialization happening in a — by Q2 or Q3.

What is giving us this confidence that we will be able to ramp up this Battery Chemicals and will be so fast? I mean, given our learning curve what has changed, if you can just give some insights on that, sir?

Bir Kapoor — Chief Executive Officer

Rohan, these applications are different, because if I look at, let’s say, our chloropolymer experience or fluoropolymers, they are very small applications and each volumes — each of these application has a certain volume, limited volume.

In contrast, lithium salt or the batteries is different. It’s a chemical. Once it’s qualified, the requirement for each plant is very large. The customers’ intake is very, very large. If somebody is having a battery capacity, let’s say, of 5 gigawatt-hour, or 2 gigawatt-hour. So, the requirements are very large. So, it’s — overall, it’s a different kind of application, different set of requirements.

For example, the kind of one customer can take certain quantities, say, 5,000 ton of battery chemical, you would not find any customer taking 5,000 ton of very specialized fluoropolymer.

Rohan Gupta — Nuvama — Analyst

So, you are saying that basically the confidence is coming, even if you are able to crack one customer, then from himself, his requirement will be pretty large. Have you got any such kind of indication because you are still in a qualification round only. So, have you been getting the earlier — I mean, initiative in earlier signs of the product getting approved and that’s what that as soon as you commercialize your plant and you will — ramp up the production, is it the case?

Bir Kapoor — Chief Executive Officer

See, the situation, Rohan, is that, yes, we are talking to all the players, but we still do not have a material of sample with us. And obviously, the question of the volumes comes from — once we have the material with us and also it gets qualified.

Our confidence primarily is coming from the growth in this sector. If you look at our capacity, which is very, very small compared to the growth number that we are talking about and either globally or even domestic numbers. So, there is going to be significant growth in this sector. And that’s where our confidence is coming from.

And we are — even after commercialization and full capacity utilization, our volumes and the capacity you are going to be significantly small compared to the overall market potential.

Rohan Gupta — Nuvama — Analyst

Okay. Sir, thank you. Thank you so much.

Operator

Thank you, sir. We take the next question from the line of Mr. Ravi Naredi from Naredi Investments. Please go ahead, sir.

Ravi Naredi — Naredi Investments Private Limited — Analyst

Thank you to give me this opportunity. Sir, can we think this good time for Fluoro industry is going to end as too much new plants and capacity are coming?

Bir Kapoor — Chief Executive Officer

I’m sorry, I did not get your question, Ravi.

Ravi Naredi — Naredi Investments Private Limited — Analyst

I’m saying… can we see…

Bir Kapoor — Chief Executive Officer

Fluoropolymers, fluorochemicals…?

Ravi Naredi — Naredi Investments Private Limited — Analyst

Fluorochemical industry is going to — good time for fluorochemical industry is going to end as too much new plants are coming?

Bir Kapoor — Chief Executive Officer

I don’t think so because if I — as I said earlier, there are entire space of energy transition that we are talking about, whether it’s hydrogen economy, EV, solar cell, fuel cells. Each of these applications has requirement toward fluoro materials. So, I do not see — if you look at the numbers and compare, the projections for the transition is very, very high. We do not see that happening at all.

Ravi Naredi — Naredi Investments Private Limited — Analyst

Okay. And sir, new age vertical — the electric vehicle battery plant are — we are going to install. How much capex we need?

Bir Kapoor — Chief Executive Officer

Hello?

Ravi Naredi — Naredi Investments Private Limited — Analyst

This vertical electric vehicle battery plant…

Bir Kapoor — Chief Executive Officer

Yes, yes, yes…

Ravi Naredi — Naredi Investments Private Limited — Analyst

How much capex we need?

Bir Kapoor — Chief Executive Officer

No, for. I cannot answer that question about the batteries, what capex required. But right now, for Battery Chemicals, it depends on what chemical, what capacities go. For the capacity that we have announced, we have already indicated for Fluoropolymers and Batter Chemicals, our capex is going to be close to INR1,000 crores this year.

Ravi Naredi — Naredi Investments Private Limited — Analyst

Thank you. All the best.

Bir Kapoor — Chief Executive Officer

Thanks. Thanks, Ravi.

Operator

Thank you. [Operator Instructions] We take Mr. Garvit Goyal with Nvest Research. Please go ahead, sir.

Garvit Goyal — Nvest Research — Analyst

Hello. Am I audible?

Operator

Yes, sir. Please go ahead.

Garvit Goyal — Nvest Research — Analyst

Yes. So as you mentioned in earlier conversation, if things — majority of our projects are likely to contribute from FY ’25, right? And considering that the plant shutdown in Q1 FY ’24 and some price corrections which likely to remain subdued, so can we assume like FY ’24 likely to be muted or falling from the levels of FY ’23? Like, our base is quite high now as compared to earlier years, sir?

Hello?

Bir Kapoor — Chief Executive Officer

Yeah, I think somewhere, it had been misinterpreted. I think we never said that our FY ’24 is going to be — we have always maintained that our topline is expected to grow by 20%. So, I expect that number as we indicated earlier, for example, these capacities eventually to reflect INR1,000 crores to INR1,200 crores to topline will continue.

Garvit Goyal — Nvest Research — Analyst

No. I was talking about the bottom line perspective. Like…

Bir Kapoor — Chief Executive Officer

Bottom line also, we have been maintaining fairly healthy margin, and we have said that it will probably be around 30%, and which we expect to continue.

Garvit Goyal — Nvest Research — Analyst

Okay, understood. And second thing, sir, do you — if you’re witnessing any kind of lack of demand from lithium ion chemical side? Like. I think in earlier con calls, we were expect to get some of the venues from our battery plants from FY ’24, right?

Bir Kapoor — Chief Executive Officer

As we’ve said earlier that we have indicated that our capacities would come, which is on course, and which we’re expecting it for the salt as well as electrolyte. Our capacities will come on online in — basically in Quarter 2. And then there is a qualification period. So, by the end of this financial year or probably by Quarter 4 we’ve started seen the battery chemicals.

Garvit Goyal — Nvest Research — Analyst

Okay. Means topline and bottom line both still continue to grow in FY ’24 onwards, right?

Bir Kapoor — Chief Executive Officer

Yes.

Garvit Goyal — Nvest Research — Analyst

Okay. That’s it from my side. Thank you.

Bir Kapoor — Chief Executive Officer

Thanks. Thank you.

Operator

Thank you sir. We take the next question from the line of Mr. Yash Shah from Investec. Please go ahead.

Yash Shah — Investec India — Analyst

Hi, sir. Thank you for the opportunity. Sir, my first question was regarding the PFS. We had earlier mentioned that we are going to completely transition by the end of calendar year ’23. So, wanted to understand what is the current status right now. And how many products have been accepted by the customers.

Bir Kapoor — Chief Executive Officer

Yeah, I’ll let Mr. Soni answer that. Soni sir, please. So, regarding the transition from fluorinated polymerization aids to non-fluorinated polymerization aids, we have already converted almost more than 80% of all our fluoropolymers into non-fluorinated polymerization aids. And we expect by end of this financial year, we should be achieving almost complete conversion.

Yash Shah — Investec India — Analyst

Have the products being started accepting — accepted by the customers?

V.K. Soni — Head of Projects & New Initiatives

Yes, already few products, which have been converted have been in the market for several months now.

Yash Shah — Investec India — Analyst

Got it, sir. Sir, my second question was regarding our electrolyte business or Battery Chemicals business. You mentioned earlier that we will ramp up instead of — we will commercialize instead of the lab scale and skip the lab scale part. So, for commercialization, we will require a significant quantity of lithium carbonate. And we had earlier mentioned that we had a tie up with — I’m sorry, we had basically appointed E&Y as a consultant. So, what is the status on that at this point of time? Because we will — as we understand, we will require a significant amount of lithium carbonate. Some light on that, sir.

Bir Kapoor — Chief Executive Officer

So, I think when we talk about the lithium carbonate procurement, there is the short-term versus the long-term. In the short-term, of course, our capacities are not much and our requirements are not much, and we have been already discussing with E&Y and connecting with some of the global suppliers for tie up in the long-term. So that has not yet completely closed, but in terms of short-term, we have — we have the required volumes or the — our local — our short-term requirement has already been tied up. We do not see any issue in that.

Yash Shah — Investec India — Analyst

So, it is safe to assume that the short-term supply will be enough to ramp up your electrolyte salt business, right?

Bir Kapoor — Chief Executive Officer

We do not see that as an issue, yeah, absolutely right.

Yash Shah — Investec India — Analyst

Okay, okay, got it. Sir, last one clarification question from my end. I’m sorry if I missed it earlier, what is the quantum of guarantees left from my Inox Wind?

Bir Kapoor — Chief Executive Officer

Yeah, I’ll let — Manoj, can you answer that? Quantum of guarantees.

Manoj Agrawal — Chief Financial Officer

I don’t have that number readily available with me. We’ll — after the call, we’ll —

Bir Kapoor — Chief Executive Officer

You can connect, Yash, with Vibhu…

Manoj Agrawal — Chief Financial Officer

Vibhu. Vibhu will tell you.

Yash Shah — Investec India — Analyst

Perfect, perfect, sir. Thank you very much.

Bir Kapoor — Chief Executive Officer

Thanks a lot, Yash. Thank you.

Operator

Thank you sir. We take the next question from the line of Mr. Rahul Veera from Abakkus. Please go ahead, sir..

Rahul Veera — Abakkus Asset Manager LLP — Analyst

Hi, sir. Sir, in our notes to accounts, there has been a — one of the points which mentioned that there’ll be a INR18 crores commission which is supposed to be put up during our AGM for some executive — Non Executive Director. So may we know what exactly the commission is for and who is the Non Executive Director?

Manoj Agrawal — Chief Financial Officer

This is part of our — which is part of the remuneration, which is paid to the MD and Chairman, but as a part of the Secretarial procedure that has to be put up for the approval at AGM also. That’s what note is given.

Rahul Veera — Abakkus Asset Manager LLP — Analyst

Okay, okay. Sir, thanks. Thank you.

Bir Kapoor — Chief Executive Officer

Thanks, Rahul. Thank you.

Rahul Veera — Abakkus Asset Manager LLP — Analyst

Thank you sir.

Operator

Thank you. Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to the Management for closing comments.

Bir Kapoor — Chief Executive Officer

Thanks a lot. I would like to thank all of you for showings interesting in GFL and asking questions.

So, any further questions, I would request all of you to please be in touch with our communication person Mr. Vibhor Agarwal. And I would like to thank you all once again. And thanks, Archit.

Operator

[Operator Closing Remarks]