Neogen Chemicals Ltd (NEOGEN) Q3 FY23 Earnings Concall Transcript

Neogen Chemicals Ltd (NSE:NEOGEN) Q3 FY23 Earnings Concall dated Feb. 13, 2023.

Corporate Participants:

H. T. Kanani — Chairman & Managing Director

Ketan Vyas — Chief Financial Officer

Analysts:

Nishid Solanki — CDR India — Analyst

Mihir Damania — Ambit Asset Management — Analyst

Saurabh Kapadia — Sundaram Mutual Fund — Analyst

Archit Joshi — B&K Securities — Analyst

Anirudh Shetty — Solidarity Investment Managers — Analyst

Unidentified Participant — — Analyst

Yash Shah — Investec India — Analyst

Nitin Tiwari — YES Securities — Analyst

Sabyasachi Mukerji — Centrum PMS — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Neogen Chemicals’ Q3 FY ’23 Earnings Call. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Nishid Solanki from CDR India. Thank you, and over to you, sir.

Nishid Solanki — CDR India — Analyst

Thank you. Good evening, everyone, and welcome to Neogen Chemicals’ Q3 FY ’23 earnings conference call for angels and investors. Today we are joined by senior members of the management team, including Dr. Harin Kanani, Managing Director; Mr. Anurag Surana, Director; and Mr. Ketan Vyas, Chief Financial Officer. We will commence the call with opening thoughts from the management team, post which we shall open the forum for questions and answers where the management will be addressing queries of the participants. Before we come in, I would like to share our standard disclaimer. Certain statements made or discussed on the conference call maybe forward-looking statements and actual results may vary from these forward-looking statements. A detailed disclaimer [Indecipherable] in Neogen Chemicals’ Q2 FY ’23 earnings presentation which has been shared already.

I would now like to invite Dr. Kanani to share his perspectives. Thank you, and over to you, sir.

H. T. Kanani — Chairman & Managing Director

Thank you, Nishid. Good evening, everyone, and welcome to our Q3 FY ’23 earnings conference call. We published our Q3 financial results and subsequently earning presentation over the weekend. I hope you are able to go through them. I will be sharing the performance overview, key developments, and strategic insights, while our CFO, Mr. Ketan Vyas, will share the financial highlights for the period under review.

Q3 of the current fiscal year was an eventful period for us. Not only did we demonstrate financial performance but also undertook several strategic initiatives to further strengthen our business model across both existing as well as lithium-ion battery space. I will share some of the key fine prints of this development in just a minute. Firstly, on the financial performance. We reported 40% gains in revenue in Q3 FY ’23 with solid profitability, where EBITDA increased 27%, profit after tax grew by 40%. [Technical Issues] result of our relentless efforts of having higher plant throughput with increased focus on value-added portfolio based on incremental capacity revenues. It was achieved despite the impact of continued high inflation in some of the key input parts, especially lithium withstood elevated during the period under review. Having said that, we were able to pass on this cost pressures to our customers, thereby [Technical Issues] the absolute EBITDA.

In Q3 FY ’23, we registered 30% gains in organic chemicals revenue, while growth in inorganic chemicals stood at 85%, which was steered by a mix of realization, improvement, and volume expansion. The demand trajectory continues to be favorable and we are capitalizing on the incremental opportunities emerging in the sector. Our scale-up in advanced intermediates and custom synthesis manufacturing is progressing well, and as expected, we are taking up more complex assignments that require multiple steps, thereby leveraging our process expertise and manufacturing infrastructure to deliver customized solutions. The objective is to further elevate the performance trajectory of high-margin value added portfolio within the business mix by utilizing our competent R&D capabilities during the nine-month period, we have added eight new customers across various geographies and industry. And with this, we are now engaged with more than 39 customers in this custom synthesis and manufacturing segment. Overall, we are working on 23 products with combined revenue potential of INR2,100 crores with further pipeline and new inquiries flowing in.

Now, let me take you through some of the major developments in this quarter. Firstly, I will update you on some of the existing capex initiatives. With regard to the expansion of specialty organic chemical capacity by 60,000 liters, or 60 meter cube, we are glad to have commissioned 15,000 liters, or 15 meter cube, while remaining 45,000 liters will come up by September 2023. [Technical Issues] capacity of 466,000 liters, or 466 meter cube in organic chemicals. Our expansion of inorganic chemicals capacity from 1,200 metric tons to 2,400 metric tons in Dahej, which amounts to 30 meter cube reactor capacity and the existing inorganic MPP is in progress and we are on track to commission this by May or June 2023. Within battery chemicals, the new capacity of 400 metric tons per annum, or 92 meter tube reactor volumes for manufacturing of specialty lithium and additive for electrolyte will be commissioned by June 2023.

Lastly, as you may know, we have announced capex for building a pilot plant to manufacture 250 metric tons of electrolyte at Vadodara facility. This will now come at Dahej SEZ facility. And based on expected demand, we are enhancing this capacity to 1,000 metric tons, which will be ready by August, September 2023. All these initiatives will start contributing to our revenues in a phased manner from FY ’24 and will peak out in FY ’26.

Moving onto second key development. We are setting up a wholly-owned subsidiary of Neogen Chemicals Limited that will accommodate the battery chemicals business of the company. This was executed after numerous internal discussions and considerations. The key rationales of this are: battery chemicals business requires a high-volume setup with different capex and opex as compared to the legacy business. This business requires different kinds of skill sets and expertise across functions. And we would like to take advantage of lower corporate tax rate of 15% for newer corporates. Now third development in line with robust demand environment for battery chemicals in FY ’25 and beyond, the board has approved expansion of one electrolyte capacity to 5,000 metric tons, which will be operational by June 2024, followed by specialty chemicals — specialty lithium salt capacity of 1,000 metric tons, which is about 232 meter cube of reactor volume, which will be operational by June 2024. The board has also approved further greenfield expansion of electrolytes and specialty lithium salt at a new site for dedicated battery materials. This will include additional 5,000 metric tons of electrolyte capacity, making total installed capacity across sites 10,000 metric tons and additional 1,000 metric tons of specialty lithium salt, making total installed capacity about 2,000 metric tons, both of which will be operational by September 2025, which is expected to meet the incremental demands rising from FY ’26, FY ’27. This project [Technical] add to revenue from FY ’25 and will peak out by FY ’26, FY ’27. The overall capex for all the new projects will be close to INR450 crores and will be funded by a mix of debt and internal accruals. While the debt levels will increase with this expansion, the debt-equity will continue to remain below 1.25 times as guided earlier. These capex initiatives will significantly contribute to our earnings from next financial year. At a consolidated level, our goal is to attain more than 30% revenue, compounded annual growth rate, translating into INR2,000 crores to INR2,250 crores of revenue by FY ’26 or FY ’27. This compares to INR487 crores top-line achieved in FY ’22. I’m immensely pleased to outlay our growth plan, and let me assure you that our teams will work tirelessly, judiciously to achieve that. Neogen has anticipated to experience a substantial increase in its financial performance and demonstrate its proficiency in manufacturing to clients worldwide, an optimistic outlook for demand and India’s position as a desirable manufacturer — manufacturing center will increase the market size and attract additional customers throughout the supply chain.

That ends my opening thoughts. I would now request our CFO, Mr. Ketan Vyas, to share the financial highlights for the period under review. Over to you, Ketan.

Ketan Vyas — Chief Financial Officer

Thank you, Dr. Harin. Good evening, everyone, and welcome to our Q3 and Nine Months FY ’23 Earnings Call. I will now take you through the key financial highlights. Please note that these are on stand-alone basis and based on year-on-year comparison. In Q3 FY ’23, revenues grew by 40% year-on-year basis to INR186.3 crores, and nine months FY ’23, it grew by 46% Y-o-Y to INR482.3 crores. The growth was boosted by the increased utilization at plant which was aided by firm demand and crucial end-user industry. The company has started to see positive results from the efforts around scaling up its high-margin advanced intermediates and custom synthesis manufacturing business as highlighted by Dr. Harin. Organic chemicals saw a growth of 30% Y-o-Y at INR136 crores in Q3 FY ’23, whereas inorganic chemicals jumped 85% Y-o-Y at INR50 crores. In nine months FY ’23, organic chemicals saw a growth of 23% year-on-year to INR326 crores, and inorganic chemicals grew by 137% percent Y-o-Y at INR157 crores. The domestic and export mix for Q3 FY ’23 stood at 47% and 53% respectively. EBITDA increased by 27% Y-o-Y at INR30.1 crores in Q3 FY ’23 and 32% Y-o-Y at INR79 crores in nine months FY ’23. Despite the persistent inflation in some raw materials and utilities, a robust EBITDA was attained through effective management of the product mix. The company sees a rise in certain costs such as employee expense which aligns with the management plans to enhance workforce across various departments.

Coming to PAT performance. For Q3 FY ’23, it improved by 40% Y-o-Y at INR14.7 crores, and in nine months FY ’23 it enhanced by 23% Y-o-Y to INR35.7 crores. The increase in profit after tax demonstrated our operational efficiency which was marginally impacted by high depreciation resulting from the additional new capacities and surge in finance costs caused by rising interest rates.

Those were the key financial highlights. I will now request the moderator to open the forum for Q&A session. Thank you.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Mihir Damania from Ambit Asset Management. Please, go head.

Mihir Damania — Ambit Asset Management — Analyst

Yeah. Hi. Sir, my first question is, you alluded that we are looking to fund the entire INR450 crores of capex by debt and internal accruals. Do you envisage or do you want to give like a breakup of how we are going to fund the entire INR450 crores? An indication would be really helpful. And just a follow-up on that, are you also looking to raise additional capital to fund the INR450 crores of capex?

H. T. Kanani — Chairman & Managing Director

Hi. Thank you for your question. So, based on our projections and numbers that we’ve looked at, for this INR450 crores capital which we had raised in last financial year would be sufficient in terms of our equity. Approximately, the bank normally funds 70% to 75%. So, we would utilize maximum funds from the bank. So, somewhere between 70% to 75% of the INR450 crores will be funded through bank term loans. We are also requesting banks for a longer maturity and longer moratorium term loans considering the business is growing significantly well. And so far, we have received positive response. The balance will be funded through our own internal accruals. And like part of the equity which we had drained last year which we have kept aside in the form of investment and financial products will be brought in, and together we’ll be funding the equity portion of the INR450 crores.

Mihir Damania — Ambit Asset Management — Analyst

Got it. Thank you. That is very helpful. My second question is, what do you envisage the anticipated payback for the capex of INR450 crores useful to come on board, or internal ROEs, whichever…

H. T. Kanani — Chairman & Managing Director

Sorry, Mihir, I didn’t get your question.

Mihir Damania — Ambit Asset Management — Analyst

What would be the anticipated payback for the capex of INR450 crores which we are doing, or what would be the internal return on equities on the said projects?

H. T. Kanani — Chairman & Managing Director

So, when we are looking overall, like when we look at when the capex is fully utilized by FY ’27, our ROEs and ROCs will stand much above 20%, is what we are projecting.

Mihir Damania — Ambit Asset Management — Analyst

And so, sir, this capex will be ROE accretive to the current business?

H. T. Kanani — Chairman & Managing Director

That’s what my understanding is from.

Ketan Vyas — Chief Financial Officer

Yes.

H. T. Kanani — Chairman & Managing Director

Is that true?

Ketan Vyas — Chief Financial Officer

Yeah. I would say it would be more or less equal because it will be more or less similar because even existing on a full utilization, once the business has stabilized, would be like a 20% plus. So, the way so far we have looked at it that if we are making — so currently, in the lithium salt business — in the electrolyte and lithium salt business, what we have seen is that if we are making the salt ourselves along with the electrolyte, it looks almost similar to our existing business, at least in our projection. That’s what we’ve taken. So, we’ve taken like know similar assets on — we are taking similar kind of like operating margins as well. Again, as I’ve said in my previous call, this is a new industry first time being established in India. So, as it gets established, we’ll have a better picture on it. But at least currently in our models and based on whatever we have looked at pricing, investment, and internal cost structures, we feel we should be able to get at least similar asset turns as well as similar margins on investments.

Mihir Damania — Ambit Asset Management — Analyst

Got it. And just my last question, do we have any firm orders or something of a guarantee of sorts which gives us the confidence of achieving the INR2,250 crores of revenue?

H. T. Kanani — Chairman & Managing Director

Yeah. So, from this INR2,000 crores to INE2,250 crores, about INR1,000 crores odd is coming from our regular business. So, when we look at our pipeline, the incremental demands of our customers, we are fairly confident that our existing business can easily earn like up to INR1,000 crores to INR1,200 crores, let’s say, by FY ’26, FY ’27. Now, when it comes to battery business, what gives us the confidence in this is like we have worked both with international customers for lithium salt as well as we worked with Indian customers for their electrolyte requirement. Several of these customers have started evaluating Neogen samples and some of them have given like very positive feedback that the first samples submitted also met majority of their criteria. This is both for our electrolyte as well as interventional salt customers with whom we have worked. So, I think together, this has given us the confidence to basically continue the journey what we had started. So, we had already discussed basically — we already discussed the initial trial investment which we had already planned, the 250 metric tons of electrolyte which we are now revising it to 1,000 metric tons and the salt of 400 metric tons. So, looking at the timelines which are required for India from our customers’ side, we have decided to basically take the decision. And based on the feedback received from customers and their plants getting more and more clearer, we have decided to go ahead with our capex plan.

Mihir Damania — Ambit Asset Management — Analyst

Got it. Thank you and all the best.

Operator

Thank you. Next question is from the line of Saurabh Kapadia from Sundaram Mutual Fund. Please, go ahead.

Saurabh Kapadia — Sundaram Mutual Fund — Analyst

Yeah. Thanks for the opportunity. Sir, this project as of [Technical Issues] what I understand, we don’t know have firm contract from the customer for this electrolyte capacity. But now according to you, by when we can get that correct in terms of number of customers for electrolyte and whether it will be more one customer or there is [Indecipherable] customers what you’re looking at?

H. T. Kanani — Chairman & Managing Director

So, thank you for your question. So, we are working with almost 15 potential customers for electrolytes within India and maybe couple of customers outside as well. Several of these customers are starting by 2024, especially, those who are part of the PLI scheme need to start and some others also will start by 2024. Therefore, we need to be ready by, at least, end of 2023, to take care of their initial requirements. So, that’s why we are projected like initially to increase the capacity from these people 1,000 metric tons, followed by immediate increase of that 1,000 metric tons to 5,000 metric tons hopefully by June 2024, which will take care of their FY ’25 requirements and early FY ’26 requirements. [Technical Issues] customers, some of them have already approved the — our samples like in the Phase 1 trial. The next approval will be once the pilot facility starts. So, we need to start the pilot facility so from where we can submit the samples and then we can start more commercial supply to them from, let’s say, in FY ’25.

Similarly, as I explained on the salt side also, the customers have already-approved our R&D samples and once the pilot facility starts, let’s say, by June or so, they will also start approving the samples as well.

Saurabh Kapadia — Sundaram Mutual Fund — Analyst

So, the firm contracts will only come post the pilot facility product gets approved?

H. T. Kanani — Chairman & Managing Director

Yes, after the pilot facility. So, somewhere beyond June, let’s say, beyond June to December period. Before that, we may get some conditional contracts. So, the contracts will be approved or like we may have some conditional contracts. But they will be subject to final qualification of the final plant.

Saurabh Kapadia — Sundaram Mutual Fund — Analyst

Okay. And sir, if you can give some color in terms of how the margin profile will be also how the working capital cycle could be for this new business?

H. T. Kanani — Chairman & Managing Director

So, we are expecting that the margin profile will be — at a EBITDA level, we are expecting, let’s say, between like at least like same what we have, 18.5% plus or minus 1%. That is the bare minimum we are currently considering. And we are considering this when we’re speaking from, let’s say, starting from lithium carbonate and making the salt ourselves and then we are making the electrolyte. So, if we’re doing the whole thing, the minimum margin we should be getting is this much. If we are able to get a better margin, we will, of course, try for that. It will depend upon how much value we are able to add and how the competitor landscape looks like. So, this is on the margin. And in terms of working capital cycle, we hope, because this will be fewer products and more — fewer customer and more long-term kind of business, from a working capital cycle point of view, it should be significantly better as compared to our existing multi-product, multi-customer, organic business. So, we believe the working capital cycle would be better. And this is what we have presumed in our models.

Saurabh Kapadia — Sundaram Mutual Fund — Analyst

Okay. Sir, lastly, no, where we stand in terms of working capital improvement on our [Indecipherable] business?

H. T. Kanani — Chairman & Managing Director

So, in absolute terms, our working capital utilization, our inventory remains more or less similar to what it was at six months level. But like you know, our revenues are increasing. So, if you are looking from like number of days point of view, the working capital cycle is improving. And let’s say by next quarter, it will improve further. So, we stand by what was our original kind of view that, let’s say, by FY ’24, we want to come down to net working capital cycle of around 120, 125 days. And then beyond FY ’24, we will look at further improving it.

Saurabh Kapadia — Sundaram Mutual Fund — Analyst

Okay. Thank you. All the best.

H. T. Kanani — Chairman & Managing Director

Thank you.

Operator

The next question is from the line of Archit Joshi from B&K Securities. Please, go ahead.

Archit Joshi — B&K Securities — Analyst

Yeah. Thank you. Thanks for the opportunity, sir, and congrats on a great set of numbers. Sir, my first question is rather a clarification. I couldn’t hear the number that you said about the CSM business, I think. Did you by any chance say that the potential of CSM is INR2,100 crores, or is it for the total potential that we are envisaging up for the battery chemicals symmetricals?

H. T. Kanani — Chairman & Managing Director

So, the number which I mentioned in the call, INR2100 crores, refers to all the molecules which are currently under development. So, we are currently like there are 23, 24 molecules which are various stages of development, something which is in R&D, something which is in pilot, something which is, let’s say, in our first trial run. The total value of that is around INR2,100 crores.

Archit Joshi — B&K Securities — Analyst

Right, sir. And with — in the due course of time upon considering the waiting period and once it gets approved, any the direction that we’re looking at with respect to achieving any milestones or when this will be realized into sales?

H. T. Kanani — Chairman & Managing Director

So, this is at R&D level. So, from — and this is the total potential of this molecule. So, depending on how successful is the R&D like how much percentage of revenue, how much percentage of them succeed, like it will determine finally how much is realized. So, like this is basically the pipeline what we have, when we, let’s say, go from like INR480 crores last year to, let’s say, INR1,100 crores or INR1,200 crores revenue potential what we are saying, let’s say, by FY ’25, FY ’26. So, this is what — so, that’s the healthy pipeline we have. Now some of it may even some of the existing molecules if the demand or the margin profile were to change. So, this was just to kind of give an idea of what is the pipeline.

Archit Joshi — B&K Securities — Analyst

Understood.

H. T. Kanani — Chairman & Managing Director

It doesn’t mean exactly how all of that will get converted.

Archit Joshi — B&K Securities — Analyst

Understood, sir. Thanks for that clarification. And sir, currently, at what run rate or what annual number we’d be looking at only in the CSM business, I think, which is largely on the agri side? Is there a meaningful change that we’re seeing with respect to all these molecules that are in the pipeline in the R&D stage? Are the application areas increasing or any color on that, sir?

H. T. Kanani — Chairman & Managing Director

I think in terms of application areas, I already gave a little bit of a additional information last call, that like we are also seeing interest from flavors and fragrance area as well as another, like just the specialty chemical industry, which is non-agri, non-pharma. So, both the areas, we are seeing more interest coming in and that continues. In terms of PSM like percentage, our target was that by FY ’24, we wanted to achieve 20% of our revenue coming from CSM business. So, far currently in this year, we are at about 15% number. So, we are getting close to that and we are hoping — we have received like several further like initial first commercial orders which we are planning to execute, let’s say, between now to June. And depending on that, we feel this will add further. Plus, we are trying to work with the existing customer with their increasing demand. So, hopefully by next year, as we had planned, we are reaching at least INR700 crores, INR750 crores on a standard lithium price, which with today’s lithium price might become somewhere close to around INR800 crores, INR850 crores, with at least 20% contribution coming from CSM. So, that was our target. And we stand by that target.

Archit Joshi — B&K Securities — Analyst

Understood, sir. That’s great. Sir, just one more on the battery chemicals capex that you have announced. Sir, the greenfield expansion that we are planning, which as per the presentation, most likely will be commissioned in FY ’26. And the total revenue target that we’re looking at INR1,000 crores INR1,200 crores odd only from the battery chemicals division. Would that — would it be fair to assume that after we commission the INR5,000 ton plant in electrolyte and another 1,000 tons from specialty lithium salt, will be some EBIT in terms of ramping up that capacity going into, say, FY ’27 or or FY ’28? So, is there a number that we are looking in FY ’27, FY ’28 also with the contribution coming from a capacity that we’ll commission in FY ’26 or right now, for now, we’re just looking at INR2,000 crores in FY ’26, FY ’27?

H. T. Kanani — Chairman & Managing Director

So, what we have said so far is, first of all, in the battery materials, we have only assume India electrolyte demand currently. As soon as we see the international demand as a backup, but we’ve not taken like any significant number from that into our projections. So, we also have said that the capacity which you said, like it would peak by, let’s say, FY ’27. So, we will be fully utilized by FY ’27. And this is based on the clarity that we have and this is a minimum we feel what we need. So, as we go further, as we talk to more customer as requirements decline and as we keep signing contracts, if there are opportunities beyond this in electrolyte depending on what market share we are able to get, we may have to further increase our capacity. And for sure, we will have to increase capacity beyond FY ’27, FY ’28, like as we get into FY ’30, where the overall demand is expected to be around, let’s say, 100,000 to 150,000 metric tons per annum. So, with this capacity which you said, we will have only capacity of 10,000 metric tons. So, by FY — like by 2030, we will definitely need more. And depending on the market share, even by FY ’27, FY ’28, we may need more. But this is the bare minimum that we need. And just to keeping in mind, this additional capacity which we may require beyond this, as well as, let’s say, if like our initiatives for salt at the international market may work as well as if the cathode material requirements also work. So, to consider this opportunity, that is why we felt the subsidiary having its own space and maybe having a greenfield site would be beneficial. And that’s why the board is currently considering if this can be done at a greenfield site, especially, once we have taken care of the initial requirement of the next few years, afterwards, we can move — in parallel, we can get the greenfield site ready and then that becomes the main site for our battery [Indecipherable]

Archit Joshi — B&K Securities — Analyst

Got it, sir. Sir, pardon my ignorance here, but is it — how easy or difficult is it to ramp-up this capacity? I can see that in FY ’25, we will have a 5,000-ton plant in place which will be a brownfield expansion, and then we’ll have 5,000 tons from a greenfield expansion. And we are looking at INR2,000 crores odd potential in FY ’27 or FY ’26 for the year. So, is it that once it gets commercialized, the ramp-up…

H. T. Kanani — Chairman & Managing Director

Just to clarify, that INR2,000 crore number is both battery and regular molecule together, right? So, from that or the regular demand we have already made most of the investments are already in place and the remaining will come, let’s say, by middle of next year.

Archit Joshi — B&K Securities — Analyst

Right, sir. So, actually by not the INR2,000-crore number but the INR1,000-crore to INR1,200-crore number that you had talked about only from the battery chemicals division. So, my question was, how easy or difficult is to ramp up these capacities because as I said earlier, the FY ’25, we’re looking at a brownfield expansion of 5,000, and then immediately in the year after that, we’ll have 5,000 more? So, all in all, with these 10,000 tons in place, we’ll be able to achieve this INR1,000 crores, INR1,200 crores odd number. So, that will happen in the same year instantly. Is that understanding correct?

H. T. Kanani — Chairman & Managing Director

Yes. So, what will happen is the greenfield and brownfield will be running in parallel, because the greenfield will take a little longer time. So, some of the things like site development, etc., will be happening in parallel. So, we’ll start the 1,000 metric ton we are doing is, in the existing plant with very limited modification. So, that will come first. Then in parallel in our existing facility, we’ll do a brownfield to 5,000. In parallel, we’ll also increase the salt capacity, which is 400 metric tons to 1,000 tons. So, all these will come at our Dahej site because this is where our majority of the lithium chemistry and the expertise current is. In parallel, we’ll start working on the greenfield. So, we feel that’s why we have made all the announcement together because some of this may run in parallel, so it’s not one after another. So, yeah, I mean, it will take little bit of a challenge, but we feel with what we’ve been doing in preparing for this for last one and a half years, we are now fairly well-prepared to be able to achieve this target.

Archit Joshi — B&K Securities — Analyst

Thanks a lot for answering all the questions, sir, and I wish you all the best. Thank you.

H. T. Kanani — Chairman & Managing Director

Thank you so much.

Operator

Thank you. Next question is from the line of Anirudh Shetty from Solidarity Investment Managers. Please, go ahead.

Anirudh Shetty — Solidarity Investment Managers — Analyst

Hi. Thanks for taking my questions. Sir, my first question was on the INR1,000 crores to INR1,200 crores revenue potential that we see from our battery chemical business, of that how much would be from salt that we will be selling to third-party customers? And I believe that a majority of the salt capacity will be used in-house. So, my second question around this is, is why aren’t we investing more aggressively towards salt for international opportunities, especially, given that the pace at which EV is growing globally is much faster than it is in India at [Indecipherable]

H. T. Kanani — Chairman & Managing Director

So, to be — so, like yeah, so the way we have currently said is that 10,000 metric tons if you are using, then it will require somewhere around 1,200 to 1,500 metric tons of salt itself. And then the remaining 500, 600 tons would be available to us. But let’s say, for now, we don’t want to commit ourselves that so much will come from electrolyte and so much will come from salt. So, as the business will develop closer — because we are like three years away and we are just starting, as the business will develop closer, we will keep evaluating and we’ll see how the mix kind of develops. So, how much comes from salt and how much comes from electrolyte. Like as I’ve said in my previous call, like in terms of strategic advantage, in terms of modes, when we think of this India electrolyte demand, we feel we have the maximum number of modes or the strategic benefit or the value at which we can do, like right now, when we are working with electrolyte, we have advantage of local like being able to take care of logistics. So, we have some benefits over China. Now if we are targeting a non-Chinese international market, like we are in a direct competition and it’s a head-to-head comparison. I mean, there is — the China has a clear scale advantage over us, whereas the only thing which we have is we can be China Plus One. Other than that, so far, we are a catching-up phase in the international market. So, that’s the reason why our primary focus remains on domestic electrolyte demand. We keep exploring international salt. We have got positive feedback. But like we always — like at least at this point in time, it’s our like a plan B or a second source. In fact, as we go forward and as — once our trial production starts, we do commercial supplies. And we really can see a — like we understand our costs structure as compared to the Chinese, how much is it different, and also willingness of customers to be able to pay a premium over China for a China Plus One or a supply security kind of a strategy. So, that’s when we’ll have a better idea of how much further investment which we would need, let’s say, for the salt demand for the international market.

So, like you know, there are many moving things here. So, this is the capacity which we have announced is the capacity which we feel we’d barely need to take care of India’s demand and we need to get started on that, so we meet the customer timeline. So, that’s the announcement we’ve made for now. And as our pilot facility starts, trial production starts, as we keep getting more customer feedback, that’s when we can keep revising our plans further.

Anirudh Shetty — Solidarity Investment Managers — Analyst

Got it. Sir, my next question is on the margin profile for the battery chemical business. I remember in one of the past calls, you had mentioned that on the innovation curve, the organic specialty would be higher than this — the electrolyte and salt business. So, what would explain why the margin profile would be similar for this new business? And second question is, within electrolyte and salt, is there a difference in the margins that one would make, if you sell the salt to — directly to a third-party customer?

H. T. Kanani — Chairman & Managing Director

So, when we are looking at our salt business, like it’s similar to making a simple lithium salt. It’s just like in bromine derivatives, as we made bromine derivatives, and then we went on to make advance intermediates and then maybe making advance intermediates for innovator, which is a CSM business. So, I think, it’s almost like that in the sense that we have to first make from lithium carbonate, a basic lithium salt. Of course, the purity requirements are much higher. Then we have to make a lithium salt which will be a little two-stage, three-stage kind of a reaction. And it also has its own stringency in terms of purity. It has its own stringency in terms of like the moisture control and other impurity control requirements, and also some of the handling challenges of these materials. And then you are also doing a value add and making an electrolyte out of that, which adds to another layer of complexity and customization for each individual customer. So, I think it’s kind of a — so, when we are doing all three together, we feel it’s similar to basically making bromine derivatives, making advance intermediates and then doing CSM on the OEM businesses. So, that’s why we see this kind of a similar margin profile. When we looked at it also from a cost point of view, the reactor volumes versus business point of view, it looked similar. So, that’s why we are hoping that, let’s say, we will get at least similar margins. So, that’s the bare minimum we are looking at. Depending on the criticality, customization required by the customer, and if we are able to add further value and competitive scenario, we may try to get a better margin there. But at present in our models, we are using a, like you know, similar margins as our current target, which is 18.5% plus or minus 1%. So, basically on that. And in our models to be more comfortable, we are using like a 17.5% as a base. So, we’ll see like as the business develops, we’ll have — the right number will emerge.

Anirudh Shetty — Solidarity Investment Managers — Analyst

Got it. And — but if you say the margins are similar, then shouldn’t the return on capital for this business be higher at scale because like I mentioned, the working capital days are much tighter over here? And I believe in lithium, the asset turns also tend to be better. So, if everything goes as per plan, couldn’t this be a [Indecipherable] business for us?

H. T. Kanani — Chairman & Managing Director

So, two parts. The asset turns, like you know, we have seen are similar because like this has the other complexity of moisture control and like very high purification requirements, etc. So, ultimately, the asset turns are coming similar to that of like organic production that we’ve seen based on whatever we can see now. But yeah, working capital cycle could be better. And in that term, yes, on the ROC level, we could have a separate business. But I mean, we can have an improvement over our existing like organic business. But for now, at least, let’s consider similar margins and returns, they should be 20% plus at ROE and ROC levels.

Anirudh Shetty — Solidarity Investment Managers — Analyst

Got it. I had one final question. May I go ahead with it?

H. T. Kanani — Chairman & Managing Director

Yes.

Anirudh Shetty — Solidarity Investment Managers — Analyst

Okay. In our existing business, with our current run rate, we could — probably we do around INR600 crores, INR650 crores within this year. And the revenue potential by 2027 is around INR1,050 crores. So, that translates to anywhere between 13% to 15% kind of sales figures. So, given the opportunity that we have in this business and the China Plus One days and scope for more value-add, is 13% to 15% a conservative number, or do you think that this — the opportunity is much larger and the growth could be higher than this as we make further investments along the lines?

H. T. Kanani — Chairman & Managing Director

Yeah. So, Anirudh, I think this is just based on the investments which we have done so far. Like, we are seeing, like as Dahej is stabilizing, we are seeing lot of customer visits to our site. So, we have seen several pharma, agro, aroma, and like other industry customers also come in and show a keen interest, work with Neogen for this new project, like you know, some of them are also discussing fairly large project volumes like our right-now target is how we can hove single molecule between INR50 crores to INR100 crores or a INR100-crore plus as a single molecule. So, we are seeing several projects come in which kind of meet this criteria. So, we remain hopeful there. But the number which we have shared is based on our current existing capex which we’ve already announced. Beyond that, if — as I said, we feel we will max out by FY ’25 and maybe FY ’26, FY ’27, if we require further investment. I mean, it might require further capacity, so for that we may have to be further capex in FY ’25 or FY ’26 depending on how the business develops.

Anirudh Shetty — Solidarity Investment Managers — Analyst

Got it. Thank you for answering my questions.

Operator

Thank you. Before we take the next question, I’d like to remind the participants to limit your question to two per participant. If time permits, you may join the queue for any follow-ups. The next question is from the line of [Indecipherable] from Union Asset Management. Please, go ahead.

Unidentified Participant — — Analyst

Hello. Yes. Thank you for taking my question. Just had one question relating to capex. So, INR450 crores is the total capex, so exactly how do we see it being phased out over the next five or six years? And also you had mentioned regarding capex itself as in case the demand is much higher or much lower — much higher than expected, then accordingly you would have to make changes also. So, if that were to happen, then how would that exactly — like how would that exactly happen, like within a few years — I mean, within next two years you could see another recession to the — this growth?

H. T. Kanani — Chairman & Managing Director

Yeah. So, if you see, we in current — so, in the next financial year, we are increasing the 250 metric tons to 1,000 metric tons electrolyte capacity. And then in parallel, we’re also building a facility which can increase this up to 5,000 metric tons, which will come by FY — which will come by, let’s say, June 2024. So, like — so this is the first part. And this will be — and in parallel, we have working capacity which will come online by June ’25. So, I think, we don’t have like a year-wise number which we can share at present. But yes, we do have our internal models, but we wanted to further fine-tune it before we give you a year-wise breakup of the capex. So — but based on that, you will see that initially we are just doing 1,000; 1,000 becoming 5,000, and then the 5,000 is again doubling. So, the majority will be — the capex will come when we are setting up a greenfield and when you are doing the doubling part, which is basically coming online by FY ’26. So, you’ll see significant capex happening on that line in FY ’24 and FY ’25. So, this is on the capex breakup. Also, as I explained, yes, this is a — so this is the bare minimum demand that we see and we are quite confident that we can achieve this number, like you know, through several customers. But as I said, we’ll be able to give more clarity whether this is sufficient, whether we need more, or let’s say, we need more of the salt or more of the electrolyte, etc. So, that’s kind of a slight adjustment that we will have to do. We will be able to do, let’s say, maybe six months, nine months down the line once our pilot facility starts and more approvals start coming in from our customers and then we can give more clarity. And if required, based on that, our FY ’25, FY ’26 capex plans can be fine-tuned.

Unidentified Participant — — Analyst

Okay. So, quite simply put, based on the offtake that you would be getting at the pilot plant, then definitely we will get a much more clearer picture as to what the demand scenario would be so we’d get a much more drilled-down idea as to the whole [Indecipherable]

H. T. Kanani — Chairman & Managing Director

Yes.

Unidentified Participant — — Analyst

Okay. And…

H. T. Kanani — Chairman & Managing Director

Yeah. Because a little bit on this side, the demand is a bit more fluid as compared to our bromine derivatives and pharma business. That is the reason why we felt having a separate subsidiary. It gives a very clear view of how the operations are shaping up and how the changes are taking place.

Unidentified Participant — — Analyst

Okay. And just one last query regarding the revenue guidance. So, is this assuming a full utilization, or is this like like a 80% utilization? What’s the best way of looking at it?

H. T. Kanani — Chairman & Managing Director

Yeah. So, basically the guidance whenever we give, it’s considering 80% utilization of a facility.

Unidentified Participant — — Analyst

Okay. Thank you, sir. That’s all from my side.

Operator

Thank you. The next question is from the line of Yash Shah from Investec. Please, go ahead.

Yash Shah — Investec India — Analyst

Hi, sir. Thank you for taking my questions. Sir, my first question was regarding our capacity on formulation and salts. So, we can see that we have — we will be increasing our capacity in tandem, which will be basically 20% of the salt capacity for the formulation. So, wanted to understand from you, sir, like how much of the demand will be filled from the — will be captive consumption and how much will be have to procure from outside, the electrolyte salts for the formulation? That would be my first question.

H. T. Kanani — Chairman & Managing Director

So, most of the salts will be made in house. So, in fact, we have slightly excess above what is required for internal consumption. So, let’s say, depending on the formulation, how it forms, a 10,000-metric ton electrolyte facility would need somewhere between 1,000 to 1,500 metric tons of salt. Against that, we are planning a 2,000 metric tons. So, we always have a little bit of a buffer because the reaction chemistry — the lithium salt reaction takes a bit longer time. So, it’s always like — it’s always good to have slightly overcapacity there. So, if at all, you have additional electrolyte requirement, you can quickly do the electrolyte and be able to serve your customers at a shorter period of time. And the additional capacity can always be used to target international demand. So, that’s the way. So, at least the way we have taken it, most of the lithium salts, we should be able to make ourselves. However, there are many new additives which — so the main electrolyte salt and then there are some specialty additives that we need to take. Usually, the specialty additive in terms of volume are not much, and new additives keep coming all the time. So, some of the additives we will be making ourselves and some additives we may — if it’s a specialized one, we may have to buy it from Japan or Korea where it has already been established and we make on our own. So, majority of the salts should be made in house. Only small quantities, additives, some specialized additives might be bought till it becomes of a scale where it makes sense for us for make ourselves.

Yash Shah — Investec India — Analyst

Got it, sir. So, that was going to be my next question, like if we intend to sell the additives as well to the third party customers, so if my understanding is right, we do not intend to sell them, right?

H. T. Kanani — Chairman & Managing Director

No. So, like the salt which we are making, whenever we have a higher capacity available, we are — yeah. Similarly, additives [Speech Overlap] we make our own additives, yeah. Even additives also, if we make ourselves, we would be happy to sell them as well if we have excess capacity available.

Yash Shah — Investec India — Analyst

Sure, okay. Sir, my next question was about our inorganic segment, the lithium, the traditional lithium salt business, which has been performing extremely well in this year. Can we expect a similar kind of growth to continue in the fourth quarter and in the year ahead, FY ’25? And also if you can provide some kind of commentary on the prices of lithium? Yeah.

H. T. Kanani — Chairman & Managing Director

Yeah. So, prices of lithium as we have shared earlier like as compared to their standard lithium price, what has been there for many years is around six to eight times — between six to eight times of whatever is the usual lithium prices, like you know. So, they are significantly on a higher side. And like when you are comparing last year versus this year, a significant portion of that is also because of this price increase. So, when you go a year forward, yes, so as we would explain, we are increasing our the Dahej facility. And over next two to three years, we also expect that that facility should get fully utilized. But like — so if the lithium price remains the same, you may see like a 40%, 50% increase over next two to three years. But in terms of percentage, what we are seeing 85% and stuff like that, with the lithium prices — so that’s — a significant portion of that is because of the higher lithium prices. So, if the lithium prices were — so next year, you will — like, we’ll maintain the same level and then show further volume increases. On an absolute value term whether it remains the same or it might even drop if the lithium prices start going down, let’s say, what we are estimating is that when the dust settles and when enough lithium demand supply is kind of balanced, it might be two times or three times of what was historical lithium prices. So, like as it goes there, that transition, when it will happen, it’s very difficult to predict. Will it happen in two years, it will take four years, or it will take six years to reach those levels, it’s very difficult to predict. So, that’s why lithium price remains a bit of a question mark. But at least from what we’ve heard, it is not going down to the previous level for sure. Even when it settles down, it would be two times or three times what was historical lithium prices. And it might happen any time between next two to four years. So, volume-wise, we expect the volumes to like — the additional 1,200 metric tons which we are adding, which will give us additional volumes over next two years here. But value-wise, it’s a bit uncertain depending on how the lithium price behaves.

Yash Shah — Investec India — Analyst

Got it, sir. Sir, last question from my side would be, in the previous quarter, sir, we had mentioned that we had added about five customers on the CSM side on the flavors and fragrance, which had a revenue potential of INR200 crores, and wherein n some of our projects had moved from pilot stage to the commercial stage. So, have you already started supplying them in the current quarter?

H. T. Kanani — Chairman & Managing Director

Yes. So, whatever has moved to — from — led to commercial stage, we’ve started supplying. Some we will be supplying in Q4 of this year. So, like yeah, so we did supply something last year, something this. The aroma ones are still under discussion, the flavor fragrance ones are still under discussion. We have not yet commercialized, but we are hoping in next financial year, we’ll see some revenue contribution coming from that.

Yash Shah — Investec India — Analyst

So, we remain intact with the 20% contribution from the CSM business by FY ’25, right?

H. T. Kanani — Chairman & Managing Director

By FY ’24, yeah, that’s the target.

Yash Shah — Investec India — Analyst

Okay, sir. Thank you so much, sir, for answering all my questions. Thank you.

H. T. Kanani — Chairman & Managing Director

Thank you.

Operator

Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to one per participant. Thank you. The next question is from the line of Nitin Tiwari from YES Securities. Please, go ahead.

Nitin Tiwari — YES Securities — Analyst

Good evening, sir. Thanks for taking my questions. Sir, my questions are targeted specifically on capex [Indecipherable] So, the first part of that is the INR150 crores capex that you are doing on the existing business side…

Operator

Your voice is not very clear. Can you, please, use the [Indecipherable]

Nitin Tiwari — YES Securities — Analyst

Sure. Is this better?

Operator

Yes.

Nitin Tiwari — YES Securities — Analyst

Yeah. Hi, sir. Sir, my question is on the clarification question on the capex side. So, the INR150 crores capex that we had announced in the existing business, sir, is that completely over or what percentage of that capex is over? That is one. And then secondly, is that INR150 crores of part of INR450 crores in new businesses that you’ve announced? And thirdly, if not, then does that INR450 crores cover both the phases of battery plant expansion — battery electrolyte plant expansion?

H. T. Kanani — Chairman & Managing Director

So, thank you for your questions, Nitin. [Technical Issues] how much INR150 crores we’ve done. As I said in my opening remarks and in the investor presentation, 15 meter cube out of 60 meter cube inorganic capacity has the already been like already been commissioned. And the remaining 45 meter cube we are expecting to complete, let’s say, by September. On the lithium capacity increase, like we expect most of the reactors to be in place, let’s say, by March. So, anywhere — anytime between March and May is we’re targeting full commercialization of that. And the third part of the INR150 crores was the lithium salt trial production. This we will be completing by June. In terms, I think, we have of the INR150 crores, we have already spent somewhere around INR50 crores or INR60 odd crores, maybe a little bit more than that. Ketan would have a number. But that’s where we currently are in terms of the total capex which we have.

Your second question was that does the INR450 crores in addition of this INR150 crores? Yes. This INR150 crores is separate. INR450 crores is for the additional capex, which is basically to increase the 250 metric tons to, let’s say, 1,000 metric tons, and then 1,000 to 5,000 metric tons, increasing the salt sourced from 400 to 1,000, and then another 1,000 and another 5,000 at a greenfield site. So, together, this will be INR450 crores capex, and it includes both the phases.

Nitin Tiwari — YES Securities — Analyst

So, does the INR450 crore capex also include the cost of land at the new site which is not declared? I mean, is it excluding the cost of land that you would have to acquire?

H. T. Kanani — Chairman & Managing Director

Yes.

Nitin Tiwari — YES Securities — Analyst

Yes, is I mean, excluding the cost of land?

H. T. Kanani — Chairman & Managing Director

No, it includes the cost of the land.

Nitin Tiwari — YES Securities — Analyst

So for — so, let me summarize this. So, for 10,000 tons of electrolyte and 2,000 tons of salt, the entire capex requirement is INR450 crores?

H. T. Kanani — Chairman & Managing Director

Yes.

Nitin Tiwari — YES Securities — Analyst

And can you break it up in terms of like how much would be required for the salt capacity and how much for the electrolyte capacity?

H. T. Kanani — Chairman & Managing Director

So, currently, because of confidentiality reasons, we don’t want to share the breakup of this. Please give us some more time where we are comfortable sharing a bit.

Nitin Tiwari — YES Securities — Analyst

Sure, sir. No worry. Lastly, sir, any comments on the lithium deposits found in Jammu in India? So, what’s your take on that? Would that work to bring the crisis prices down or making — how do you see it evolve?

H. T. Kanani — Chairman & Managing Director

So, we are very happy to know that this — with this development — this will definitely, like you know — and we are sure that as the world progresses further, more such deposits will be found, because originally, if we look three years ago or four years ago situation, we already had identified a lot of deposits as compared to what the world needed. If you just think of India also, it required hardly 2,000, 3,000 metric tons of lithium. So, nobody was motivated enough to look hard. And now, I’m sure the entire world is looking hard and I’m sure — like I’m happy that in India we already found a deposit and there’ll be more deposits also which will be found, because previously, people were just not looking hard enough because the demand was not to that extent. It would not help us immediately because I personally believe there’s lot of work still to be done to understand the exact composition. They have an estimate on the quantity, but what is the commercial viability of that. So, we are also still trying to find out the exact composition, concentration, what are the other minerals and how the separation would work. So, we keep our fingers crossed. We’re still trying to find more. But I don’t think this alone — this all the lithium price issue. But overall, I personally feel that ultimately, demand-supply will catch up. There’s a lot of lithium capacity being added world over. So, like over a period of next, let’s say, between — somewhere between three to six years, the lithium price and the demand-supply will match up and the prices should, like become more closer to what they were. As I answered in my previous call, it might be two times or three times what was the historical average just because some of the new resources which are being found, the processing cost is much higher, and the royalty which you have to pay to the government is much higher. So, therefore, it will never go back to the historical level unless there is some very strong demand track or something or a path-breaking new innovative technology. But it will be like lower as compared to what it is. It’s just difficult to predict when.

Operator

Thank you. We’ll take our last question from the line of Sabyasachi Mukerji from Centrum PMS. Please, go ahead.

Sabyasachi Mukerji — Centrum PMS — Analyst

Yeah. Hi. Thanks for the opportunity. First question is, if you can explain the reason behind the gross margin dip during the quarter both on Q-on-Q basis as well as Y-o-Y basis? Is this lower?

H. T. Kanani — Chairman & Managing Director

Yeah. So, it’s just a function of both the lithium prices as well as the product mix in the current quarter.

Sabyasachi Mukerji — Centrum PMS — Analyst

No, I mean, you have been saying this, we are increasing our CSM mix, which I believe is a higher margin and which was kind of reflected in the margins and gross margins in Q1 and Q2, but then, sequentially, has there been — I mean, any other thing other than lithium prices, let’s say, bromine prices were very expensive or something like that, or any other reason?

H. T. Kanani — Chairman & Managing Director

Yeah. So, between CSM projects also, there are some projects which are more longer and have different gross margin profiles. So, it’s again, just product mix difference between these molecules.

Sabyasachi Mukerji — Centrum PMS — Analyst

But long — in the long term you would stick to around 45%, 46% of gross margin that we intend to do. Does that remain intact?

H. T. Kanani — Chairman & Managing Director

Yeah. So, what I had explained earlier that we used to be like 40% plus, minus 2% historically. And now, we expect 42% plus, minus 2%. So, let’s say, between 40% to 44% on a stable basis. That’s the way so far we’ve seen. Yeah. So, at least till FY ’24, we expect that to be the case. Sometimes, we may have a slightly higher margin. But more or less, right now, the way that it looks [Technical Issues]

Sabyasachi Mukerji — Centrum PMS — Analyst

Okay. Next is on this electrolyte capacity that we are putting up some 10,000 metric tons. And this is largely, almost, 1,200 to 1,500 metric ton will be internally consumed. So, largely, if I do a broad math, 10,000 metric tons yields INR1,000 crores of revenue. I know this is not so easy, but then broad crude map, 1 metric ton is yielding INR1 million. So, the 150,000 metric tons of potential capacity that India will have, I mean, India will need by 2030, does it reflect that it is a probably a 15,000 crore market size that we are looking at that we’ve been fairly we would be having a bare minimum 25% kind of a market share or more than that? That is — is that the way we are looking at?

H. T. Kanani — Chairman & Managing Director

So, that’s why all purpose, we have still not said how much 150,000 metric ton means. So, again, this is a mix of salt and electrolyte. These are the capacities. And like as I said, not all can happen together. So, we would still not want to comment on the exact price and the exact market size. We’d like to wait like till at least some few contracts are signed or let’s say, there’s a better clarity in terms of how this business develops in India. So, please allow us time till that time.

Sabyasachi Mukerji — Centrum PMS — Analyst

Sure. And just INR2,000 crores to INR2,250 crores, whatever you were guiding in FY ’27 at peak utilization, these are at, I believe, at stable prices and on top of that, if I do the 18.5% or let’s say 18% EBITDA margin, so we are looking at INR350 crores, INR360 crores of EBITDA by FY ’27. Is the math correct?

H. T. Kanani — Chairman & Managing Director

No. So, we wanted to keep tracking what is stable lithium price and what is normal lithium price. So, currently — like for now, the current price looks like the price is going to stay for the next two, three years. So, that’s why when we get the revenue projections, it’s more keeping in mind the current lithium prices.

Sabyasachi Mukerji — Centrum PMS — Analyst

And do you believe this 16% or whatever we are doing, 16%, 16.5% margin, that will probably inch up to, again, the 17.5%, 18% or 18.5% by the time you reach the INR2,000 crores to INR2,250 crores by FY ’27, right?

H. T. Kanani — Chairman & Managing Director

Yeah. So, if the lithium prices remains the same, then it might be like, again, a little bit on the lower side. So, the way you are seeing it, I’ll have to do the exact math that how much lithium will contribute. And it will be somewhere around 16.5% to 17.5% in that region. And like, yeah, with a stable lithium price, it will be somewhere around 18.5% to 19% in that region.

Sabyasachi Mukerji — Centrum PMS — Analyst

Okay. So, last question…

H. T. Kanani — Chairman & Managing Director

So, last, in our business, if we do the lithium price correction, we have been able to — like depending on like how, like for lithium as well as the currency, or how significantly we do the correction, we are again in that range of 18.5% to 19% EBITDA. So, this year also, we had targeted about INR110 crore EBITDA and with the run rate that we are at, most likely, we should be able to increase, like overshoot like the INR100-crore to INR110-crore target which we had kept for this year. We should be overshooting beyond INR110 crores. For more specific like EBITDA level targets, etc., my request is let this business deliver a little bit and then as we are more closer to the years, we’ll keep giving you guidances on what the EBITDA looks like, what the lithium price looks like. This is just to kind of give you an approximate idea on what kind of revenues we can generate and what kind of capex which we are planning, which we wanted to give today.

Sabyasachi Mukerji — Centrum PMS — Analyst

Sure, sir. Appreciate it. Last question, if I can squeeze in. The greenfield capacity for the battery chemicals, I believe, would be mostly domestic focused, and hence, probably, this site will not be in Dahej or in some other place. Is my assumption correct? Have you finalized the land?

H. T. Kanani — Chairman & Managing Director

So, it will not be in an SEZ. So, you’re right, it will be largely domestic, and so it will not be in the SEZ. So, that’s correct.

Sabyasachi Mukerji — Centrum PMS — Analyst

Okay. Thank you, sir. That’s all from my side. Wish you all the best.

H. T. Kanani — Chairman & Managing Director

Thank you so much.

Operator

Thank you. Ladies and gentlemen, that will be our last question for today. I now hand the conference over to the management for their closing remarks. Thank you, and over to you.

H. T. Kanani — Chairman & Managing Director

Thank you, all the participants, for joining the call. I hope we were able to address your queries. If you have any further questions, please feel free to reach out to our Investor Relations team, CDR India, and we will address them. Thank you, once again. Stay safe. And we look forward to connecting with all of you again in the next quarter.

Operator

[Operator Closing Remarks]