Tatva Chintan Pharma Chem Limited (TATVA) Q4 2022 Earnings Call Transcript

Tatva Chintan Pharma Chem Limited (NSE:TATVA) Q4 2022 earnings call dated Apr. 25, 2022

Corporate Participants:

Chintan Nitinkumar Shah — Managing Director

Ashok Bothra — Chief Financial Officer

Analysts:

Anshuman Gupta — Analyst

Sanjesh Jain — ICICI Securities — Analyst

Jason Soans — Ashika Stock Broking limited — Analyst

Yash Shah — Investec India — Analyst

Vishal Biraia — Max Life Insurance Company Limited — Analyst

Tanmay Mehta — Mirae Asset Investment Managers — Analyst

Dhruv Muchhal — HDFC AMC — Analyst

Archit Joshi — Dolat Capital Market Private Ltd. — Analyst

Nilesh Ghuge — HDFC Securities — Analyst

Prepared Remarks:

Operator

Ladies and gentlemen, good day and welcome to Tatva Chintan Q4 FY ’22 Earnings Conference Call, hosted by Investec Capital Services. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Anshuman Gupta from Investec Capital Services. Thank you, and over to you.

Anshuman Gupta — Analyst

Thank you, moderator, and good evening to everyone.

On behalf of Investec Capital, I welcome you all for Tatva Chintan Pharma Chem’s Q4 and full year FY ’22 earnings call. Today, we have senior management team from Tatva, represented by Mr. Chintan Shah, Managing Director and Mr. Ashok Bothra, CFO.

I will now hand over the call to Mr. Dinesh [Phonetic] from Tatva Chintan. Over to you, sir. Thank you.

Unidentified Speaker —

Thank you, Anshuman. Good afternoon, everyone.

We are pleased to welcome you all to our Q4 financial year ’22 earning call. Please note that a copy of our disclosures is available on the Investors section on our website as well as on the stock exchanges. Please do note that anything said on this call, which reflects our outlook towards the future or which could be construed as a forward-looking statement must be reviewed in conjunction with the risks that company faces in terms of uncertainty.

With that, I would like to hand over the floor to our MD, Mr. Chintan Shah, for his opening statement. Thank you.

Chintan Nitinkumar Shah — Managing Director

Thank you, Dinesh Ji. Good evening to everyone who are present on our fourth quarter and year ending earnings call. A warm welcome and thank you for joining us.

I trust everyone is doing well. With our year-end results, coincidentally Tatva Chintan is also celebrating its birthday today. 25 April, 1996, was the day of inauguration of Tatva Chintan’s first plant at Ankleshwar. Today, we have completed 26 years. I am taking this opportunity to thank the team of Tatva Chintan who have contributed to its success and to also — also to all its stakeholders.

For Tatva Chintan, FY ’21-’22 has ended with lots of good memories and proud achievements. First time we crossed the revenue mark of INR400 crores. Again, for the first time we crossed a profit before tax of more than INR100 crores. Also, our exports revenue crossed the mark of INR300 crores for the first time. And in fact, our export revenue of FY ’22 has exceeded the total revenue of FY ’21. Last and most memorable was successfully getting listed on Indian Stock

Exchanges. So a big congratulations to all for making this as one of the most memorable year in Tatva Chintan’s history.

As you are aware, we are an integrated niche specialty chemical company working in four product categories. We are leading manufacturers of phase transfer catalysts with capabilities to offer the largest basket of PTC products. These products are used as catalysts in manufacturing of pharma APIs, flavor, fragrances, agro chemicals, etc. PTC comprised 23% of revenues during FY ’22. We have seen a revenue growth of nearly 20% year-on-year basis. We continue to maintain our leadership position in this area. During the past year, we got commercial approval from two well-known MNC customers in pharma and agro space each, who will start commercial usage from current year. We expect the revenues for PTC segment to grow at a historical pace.

Under our second category, we manufacture structure directing agents, SDAs, which are key building blocks for manufacturing high-precision zeolite, which finds application in automotive emission control, petrochemicals, continuous flow chemistries, etc. We have seen a very strong growth of 87% year-on-year in this segment. Large part of our SDA demand currently is coming from auto emission control applications.

I have explained earlier that the ongoing shortage of semiconductor chips availability is leading to a subdued demand of SDAs. This is reflected in muted rate of [Phonetic] growth of this segment during quarter four FY ’22. The ongoing political crisis has further impacted the semiconductor availability, leading into still further postponement of demands of SDAs into auto emission control area. We expect Q1 and Q2 of FY ’23 will see a weaker demand in SDAs.

So the underlying demand of SDAs continues to remain very strong. We expect strong demand revival upon improvement of semiconductor chip availability. Despite subdued demands for the next few quarters, we expect to maintain the business with minor impacts in this segment. Despite of the short-term challenges, we are very confident of strong SDA demand growth over next few years. And SDA would continue to be our growth driver for few years.

Now talking on the brighter aspects of SDA business. During the past year, we have got formal approval from two large customers. Commercial business with one of these customers has been negotiated and supply is to begin from Q2. Commercial business with the second customer is under discussion and expected to begin supply from January of ’23. Also, we are undergoing approval process with yet another important customer for which we expect to finish the planned trials within 2022.

Under our third category, we manufacture electrolyte salts, which are used in super capacitor batteries, which find the application in auto mobile, electronics and for energy storage devices. During FY ’22, this product category comprised 1.3% of our total revenue and in absolute numbers, revenue grew by more than 87% year-on-year basis. During current year, we got formal approval from a new customer for energy storage device application. And we have been already awarded commercial supply opportunity for 2022.

We are also into pilot sale approval with one new customer and we have been given opportunities to begin initial approval process with yet another customer. Both new opportunities are coming from the new products developed as a search engine in this application area during the last financial year. We are seeing a steady rise in applications getting into commercialization using super capacitor batteries and energy storage devices. The application of super caps in EV and automobile application is gaining traction. Also, the application of energy storage devices in renewable energy storage systems is getting into commercialization. We expect multiple growth in this segment and the strong application growth is expected over the coming years.

Under the fourth category, PASC, we manufacturers pharma and agro intermediates and specialty chemicals product. Under this segment, we have seen a year-on-year growth of 12% and revenues have crossed INR100 crores, contributing 23.6% to the revenue. Under this segment, one of the products is brought into full steam commercialization and should start getting a good volume growth. One more product which was under approval since 2020 has now been fully approved by the customer, and we are beginning actual commercial supply from Q2. We shall see a ramp-up of demand in this product over next two years. Both these above products involve PTC technologies in production.

One more product, which I already talked about earlier, we have completed development work and should be submitting our samples within few weeks. This product involves our zeolite catalyst based continuous flow chemistry application to achieve superior quality. We are simultaneously working on pilot setup of this product as well. Commercial supply should take about 18 months’ time to materialize. We informed earlier about monoglyme. Monoglyme continuous flow development work is completed. Equipment designing is completed for pilot scale. And now we are finalizing the vendor for equipment supplier. Pilot-scale commercialization by this new technique would happen in next financial year.

Besides these ongoing efforts, we have developed and submitted our pilot-scale sample for a new product into area of metal extractions. We expect the commercial supply to start towards Q4. We are progressing steadily with our development of continuous flow application in two products. We have progressed very well with development of a solvent into EV battery application area using continuous flow chemistry. We have been recently granted opportunities to develop two more products in agro space, which involves continuous flow chemistry. We expect a strong growth under PASC product category over the next year. And we are also focusing strongly in development of various products under this category using specialized technologies to ensure continuity of growth.

I am pleased to share that our development team has successfully run pilot scale trials of a product in flame retardant category. We would undertake the full-scale plant trials from June, post installation of the necessary infrastructure at the [indecipherable] of plant. We are beginning with one product and gradually intend to develop a portfolio of multiple products under this category. This is a large product segment, wherein we are focusing on high purity and niche application area for startups [Phonetic]. We shall begin approval of our products with customers from June. We intend to henceforth report this as a separate product category.

Using our electrolysis technology, we are seeing a good progress towards achieving ultra high purity levels of products, having application into semiconductors and electronic space. We have been offered an opportunity by a large MNC customer to take us into approval process with these high-purity substances. This is an extremely high entry barrier area. With the current level of progress in development, we are very confident of meeting with the stringent quality requirements in this product. Commercialization can take about 18 months to 24 months after the initial sample of the work we are doing.

Once successful, we would be the only Indian company in this segment, and also among the select few companies globally. Towards our effort of optimizing green chemistry concept, we have taken a task to reduce usage of solvents at the plant. In one of our large products, we are ending up with a mix of solvents, which are difficult to separate. Hence, we are unable to reuse the solvents. Our development team has come up with a unique and brilliant solution, enabling us to reuse the solvent.

We have recently implemented this technique commercially in our Dahej SEZ plant. This will enable us to reuse the solvent to the tune of few 100 metric tons per annum. Also in similar direction, yet in another product, we are successful on lab scale to eliminate — to completely eliminate the use of solvent and instead make an equally pure product in water solution from direct labor [Phonetic]. We are currently discussing with the customer to take up the product for requalification due to a major process change. If the customer approves the change, we will be able to further reduce solvent consumption by several 100 metric tons.

I am immensely pleased to inform you that on together for sustainability platform, we have drastically improved our audit score year-on-year basis from 54% to 78% last year. And this year, we have achieved 87%. This is a matter of pride for Tatva Chintan, and it also demonstrates our genuine efforts in moving towards sustainable solutions. During the fourth quarter, India was facing the third wave, which spread profusely but was not as damaging as the previous COVID waves. Its effect on our business has not been much. However, the spread of omicron variant and subsequent lockdowns in China and Winter Olympics had an impact on shipping, logistics and availability of certain raw materials.

Fortunately, we had anticipated this challenge well in time, thereby stocked enough raw materials during the end of Q3, which helped us to manage our production in a smooth fashion and adhered to customer demands on timely basis. Considering the escalated raw material prices even in the fourth quarter, we are thankful to our few customers who mostly absorbed the increasing cost of freight and raw materials in certain cases, which has ensured that we could operate with decent margins during the quarter.

The freight cost rose from 3.7% to 7.6% of revenue year-on-year basis. Fuel cost increased from 3% to 6.2% of revenue year-on-year basis. And packaging cost increased from 1.7% to 3.1% of revenue year-on-year basis. Despite of this challenges, we were able to achieve an EBITDA of 23% in Q4 and 27% in the whole of FY ’22. I would like to highlight here that the effect in demand in one product category is offset by subsequent demand in another product category as our products from the applications in varied and industries across geographies.

We continue to see good synergies between our products, as we are seeing our clients consuming our products by the strength of all the good innovations and the great support we have delivered to them over the years. Also, please note that SDA is the largest contributor of our EBITDA margins, followed by PASC and electrolyte salts, and eventually followed by flame retardants and PTCs. So varying demand in these product categories will have its impact on the margin for the particular product.

For the upcoming year, with new customers additions and new products getting into commercialization, new product category of flame retardants being introduced, we will continue to grow at a good rate. Despite the change in product mix that we envisage for next year, we shall be able to maintain our EBITDA margins within our historic range for the full year. Our approach of being an integrated manufacturer, producing niche specialty chemicals, having leadership position across product categories, diversified geographically with 79% exports as on FY ’22, focus on green chemistry by using cutting-edge technology, in house R&D facility with 24 employees, including 10 senior level qualified scientists, has helped us steadily grow our presence and more importantly helped grow the customer’s confidence in Tatva Chintan, despite the turbulent macro economic situation of COVID lockdowns and geopolitical tensions globally.

Our ongoing capacity expansion of setting up additional facilities at our Dahej SEZ and expanding our R&D capabilities at Vadodara from the IPO process is running as per schedule. And we target to commission the facility by December of 2022. As some [Phonetic] ramp-up continues with total workforce strength of 471, during the fiscal, we added 35 permanent employees, which includes appointment of CTO, Chief Technical Officer. I want to take a moment and recognize and thank our employees for their unwavering commitment and hard work all through the year.

With this, I conclude my remarks. And now I would like to hand over the call to our CFO, Mr. Ashok Bothra, to take us through the financial performance. Ashok?

Ashok Bothra — Chief Financial Officer

Thank you, sir, and good evening, everyone.

I will begin by summarizing financial highlights for the year gone by. During the full year FY ’22, revenue from operations was at INR4,336 million versus INR3,004 million in FY ’21. That is growth of 44% on Y-o-Y basis, backed by increased capacity utilization and demand. EBITDA was at INR1,171 million versus INR716 million in FY ’21. That is growth of 64% on Y-o-Y basis.

Net profit was INR959 million versus INR523 million in FY ’21. That is growth of 83% on Y-o-Y basis. EBITDA margin was at 27% in FY ’22 versus 24% in FY ’21 on account of better product mix within the sale of SDA, which is a high margin product category. PAT margin was at 22% in FY ’22 versus 17% in FY ’21. For the whole year, PTC constitute 23% of the revenue, SDA was at 52%, electrolyte salts was at 1.3% and PASC. 24%.

During the year, export stood at INR3,405 [Phonetic] million, surpassing the entire year revenue of FY ’21. Exports were made to 25 — more than 25 countries, routing [Phonetic] around 80% of the revenue for this quarter. During Q4 FY ’22, revenue from operations stood at INR985 million. As already explained by Chintan sir in his comments, we saw a 9% decline in revenue Q-on-Q basis due to subdued demand for SDA during the quarter on account of semiconductor chips shortages.

EBITDA was at IND223 million and EBITDA margin was at 23%. During the quarter, freight prices increased by 2.3% as a percentage of sales and [indecipherable] increased by 1.8% [Phonetic], resulting in lower EBITDA margin. PAT was at INR175 million and PAT margin is at 18%. During the fourth quarter, PTC constitute 31% of the revenue, SDA 40%, Electrolyte salts 2.3%, rest coming from PASC. During the quarter, our export constituted around 74% of the revenue. Out of our net IPO proceeds of INR2,072.81 million, INR640.97 million have been utilized as on 31 March, ’22. Our balance sheet remains strong with cash and cash equivalents, including bank balance and FD, for FY ’22 was at INR1,770 million. The installed reactor capacity was at 294 KL, and installed assembly line at 27% with a capacity utilization of 90% and 64%, respectively, during FY ’22.

That concludes my update on financial. And now we open the floor for questions and answers.

Questions and Answers:

Operator

Thank you very much, sir. Ladies and gentlemen, we will now begin the question and answer session. [Operator Instructions] The first question is from Sanjesh Jain from ICICI Securities. Please go ahead.

Sanjesh Jain — ICICI Securities — Analyst

Good afternoon. Thanks, Chintan bhai, for taking my question. Few questions from my side. First, on the SDA. Now, we said that Q4 was weak, even Q3 was weak. Now we are talking of Q1 being — Q1 and Q2 being week for us. How does the full-year look like? Can we do the SDA revenue in FY ’23 equal into FY ’22? Or we still believe that for FY ’23, there will be a good growth over FY ’22 in SDA revenue? That’s the first question. Yeah. Go ahead.

Chintan Nitinkumar Shah — Managing Director

Yeah. So basically, what has happened is that demand — underlying demand still continues to remain strong. But everyone — because of these geopolitical issues that have recently adopted, that has caused an issue of a specific raw material required for a semiconductor. This is leading to a further decrease in availability of semiconductors for the time. So the orders are getting postponed. Demand continues to remain very robust, but only the uptake of demand is not happening.

So as soon as the semiconductor availability smoothens out, which we expect to happen by August or September of this year, and we expect this demand to again come back. So, this is going to be kind of a pent-up demand that should come back because currently people are trying to consume their inventory pipelines and not trying to order more material as of now. With all this, we expect though, Q1 is going to be really a low. Q2, we will see an improvement happening from those levels. And Q3, Q4, we should see a very strong demand coming back. So, we expect, more or less, to maintain the revenues of SDA what we have done this year more or less without much impact on the overall revenue of SDA, we should end the year coming financial year.

Sanjesh Jain — ICICI Securities — Analyst

So what we’re telling that we will be at a flattish still in FY ’23 versus FY ’22?

Chintan Nitinkumar Shah — Managing Director

Exactly. Yes.

Sanjesh Jain — ICICI Securities — Analyst

Got it. Got it. And are we prepared for that pent-up demand? Are we keeping [Technical Issues] inventories available with us to cater the pent-up demand? We don’t have excess capacity at all in fact.

Chintan Nitinkumar Shah — Managing Director

So, we still continue to produce the SDA and we are piling up on the inventory for that because we understand that when the demand comes back, which will come from multiple customers at the same time. So unless and until we have that inventory, we will not be able to cater those demands. So, we have now indications from customers to begin certain supplies happening from August. But still because of this uncertainty of the semiconductor issue, we are projecting that probably Q2 should also remain weak, but things may change if the semiconductor availability changes accordingly.

Sanjesh Jain — ICICI Securities — Analyst

Got it. Got it. From the new product pipeline, we just highlighted so many of them, can you give us the timeline for commercial production for all these products as planned and what is the anticipated effect to each of this product? The product niche, we are talking about is a favorite [Phonetic] product, then monoglyme, then our —

Chintan Nitinkumar Shah — Managing Director

Yeah. So, see, the upcoming products, the flame retardants, we are just starting commercial production. This is a new range of products, which we are about to introduce. And we will start the production from mid-June. So, we are expecting certain equipments to be installed at the plant, which we expect to happen and we can start the commercial trials at — plant-scale commercial trials. In terms of the high-purity substances for the electronic and Chinese vendors, we expect two years to be a commercialization period to begin.

Here, we will not have to invest anything majorly because we already have an infrastructure. So, these products will be produced in using the electrodialysis. We have enough capacity to take care of this product. Except, we have to invest in what you call is improving the air quality at the plant. So, controlling conditions at the plant, it has to be installed but this is not going to be a big expense in any case.

In terms of continuous flow chemistry, monoglyme is what we expect to go first in terms of commercialization from next year on continuous flow chemistry. The solvent for the EV batteries, we are almost through with the development part of it. We will get into pilot scale approvals from the customers probably between September or October of this year. So any continuous flow application from pilots [Technical Issues]. In terms of intermediate, we have one intermediate, which is now already going into full scale production, demand from the customer and again, potential to double that demand over the next financial year. So that is already happening.

The second product, which we were waiting for an approval, now the formal approval is in place and we begin commercialization of that product from this year. Then with regards to two new products, which we — two already existing products, which we are doing on continuous flow chemistries, still we are in the mid stage of development in terms of catalyst development. So, I would say it’s [Technical Issues]. And the very important product, which now we are ready with the process and about to submit the samples, here we expect commercialization to begin in next 18 months’ time.

Sanjesh Jain — ICICI Securities — Analyst

Got it. So, what is the capex for all these products? Because if I hear it all, in next 24 month, all these products will become [indecipherable]. That means a large part of this would get commercialized. We are doing a capex of INR150 crores in the unit three of Dahej. I think that — this does not include all this, right? So, what is our different phases [Technical Issues]

Chintan Nitinkumar Shah — Managing Director

All these chemistries would require one easier conventional facility, which we are already enhancing the capability. So, that will take care of that. And the another thing we require is in terms of continuous flow chemistries. So, this would — this would require an investment of about INR75 crores over next two years of time.

Sanjesh Jain — ICICI Securities — Analyst

Got it. So, basically additionally we will require INR74 crores — INR75 crores and we should be through with most of the product commercial launches, right?

Chintan Nitinkumar Shah — Managing Director

Right. Because major part of the expenditure is already being covered during this current expansion. So as and when, you have the equipment design ready, and those are the only missing points that you need to install, otherwise the rest of the infrastructure is within the installation launch of the reactor plants, everything will be in place.

Sanjesh Jain — ICICI Securities — Analyst

Got it. And that means if you’re launching so many products simultaneously, you will need to plan for a new product sooner than earlier anticipated, right? Earlier, we were talking of three to 3.5 years for this plant to fully utilize. With so many product launches, are we planning to develop the units for land earlier than what we anticipated earlier?

Chintan Nitinkumar Shah — Managing Director

That is what logically we will have — we will be compelled to do that probably over the next 24 months is when we should start doing that capex, maybe 18 months to 24 months timeframe.

Sanjesh Jain — ICICI Securities — Analyst

Got it. Got it. And last question before I get back in the queue, can you explain the opportunity in the flame retardant? How big that could be and what is the visibility? And what is the capacity we are starting with now in the mid-June and what is the kind of opportunity we are looking? Because we are calling this out as a separate segment. That means we are thinking that this can become an independently very, very big segment in its own. So what is the anticipation in the flame retardants side?

Chintan Nitinkumar Shah — Managing Director

Flame retardant is a huge market potential. So it runs into $3 billion. But we are specifically targeting very niche segments serving applications as high purity flame retardants getting into more into the electronics area, and also into certain specialized electrical applications. So this area, we, with our existing capacities, we can probably hit up a revenue, a large revenue and this is very scalable. So, this segment can itself become as good as the Tatva Chintan’s revenue as of today. So, this is the product category, which can actually lead into large growth prospects.

And also with niche applications, so there are flame retardants in the category, which can be sold at a regular quality with — at a reduced price, whereas you have the same product going into a niche application area, which can fetch you a premium. So, this is the area where we are trying to focus — position our products in.

Sanjesh Jain — ICICI Securities — Analyst

Sir, what is the current capacity we are starting within flame retardants right now? And is it the same process as PTCs and existing plants can be used for the flame retardants?

Chintan Nitinkumar Shah — Managing Director

The existing plant and the upcoming expansion can be used for making these flame retardants. Currently, with our existing capacity, before the expansion is completed, technically, you can produce about 80 metric tons to 100 metric tons a month. And with the expansion coming up online from December of this year, then we can increase this capacity to about 4,000 metric tons to 5,000 metric tons per year. So roughly about 400 metric tons to 450 metric tons a month.

Sanjesh Jain — ICICI Securities — Analyst

Got it. Got it. And again…

Operator

Excuse me. This is the operator. Sir, I’m sorry to interrupt.

Sanjesh Jain — ICICI Securities — Analyst

I will get back in the queue. I will get back.

Operator

Sure. Thank you, sir. [Operator Instructions] The next question is from Jason Soans from Ashika Stock Broking. Please go ahead.

Jason Soans — Ashika Stock Broking limited — Analyst

Yes, sir. Thank you for taking my question. Sir, I just wanted to know, I mean, you had alluded before that Q2 has been your best quarter in terms of an optimum utilization of the plant and you will require more capex to bring in more revenues. So just wanted to know, how was the capex that was slated for November, December? Just an update on the capex. Is it on track?

Chintan Nitinkumar Shah — Managing Director

Sorry, I didn’t get your question. Can you please repeat that?

Jason Soans — Ashika Stock Broking limited — Analyst

Yeah. Yeah. Sure. Sure. Sir, I was telling you that, basically, you had mentioned that Q2 was your best quarter in this year. And you had mentioned that there is very limited scope for beating that revenue in Q2, that’s because of capacity constraints. So just wanted to know this capex, which you are planning INR1.5 billion, which is at the edge, what is the update on that? And when is it slated to go on stream?

Chintan Nitinkumar Shah — Managing Director

So, this capex is running on time, on schedule. Probably not more than seven days of delay is what we expect. So still, we can cover up that delay. And we expect to have this plant available for production from December of ’22 this year.

Jason Soans — Ashika Stock Broking limited — Analyst

December of ’22. Okay. And — sure, sir. And you in the previous participant’s question, you had mentioned that now, with the heightened geopolitical crisis, you’re looking at a flattish SDA sales for FY ’23, right? So just wanted some sense from you. Because SDA has been our main product, main growth driver. So looking at even beyond, say, FY ’24, sir, do you look at growth being very backhanded from that perspective? I mean, you said the underlying demand is very strong. So how do you look at it and how do you look at the whole….

Chintan Nitinkumar Shah — Managing Director

We still continue — this segment to grow at the most rapid pace. This is just a small hiccup that is on the way because of this unavailability of the key raw materials for the auto industry. Once this is through, then we again are back into a very high-growth situation with this particular product segment.

Jason Soans — Ashika Stock Broking limited — Analyst

Okay. So, we do look at it growing at a rapid pace rate as well?

Chintan Nitinkumar Shah — Managing Director

Yes.

Jason Soans — Ashika Stock Broking limited — Analyst

Sure. Sure. So yeah, that completes the question from my end for right now. I’ll join back in the queue.

Chintan Nitinkumar Shah — Managing Director

And, again, currently, this SDA applications in auto API is mainly going into the BS VI or the Euro 6 application. So going forward now we are going to transition into the BS VII area, which will again push up the demand. So, this growth rate is going to continue in a very robust way, that is what we are expecting and we are very confident of that as well.

Jason Soans — Ashika Stock Broking limited — Analyst

Thank you.

Operator

Thank you. The next question is from Yash Shah from Investec India. Please go ahead.

Yash Shah — Investec India — Analyst

Am I audible now?

Operator

Yes, you are, sir.

Yash Shah — Investec India — Analyst

Hi, sir. Sir, my question was regarding flame retardants, which is a new segment. Can you throw some light what will be the capacity? And is there any sense that you will be targeting niche applications? So can you be a bit more specific and how is this going to be?

Chintan Nitinkumar Shah — Managing Director

Flame retardants are basically added into polymers to give them flame retardant characteristics. So in an event of fire, it holds up the fire and doesn’t let it propagate. So, that is the basic application of this flame retardants. And we are specifically targeting the area into the electronics application. So, for example, just to give you an overview is, when you have printed circuit boards, so these also are polymeric substances, and these also involve high purity grade of flame retardants applications. So, this is the area where we are currently focusing on.

There are other commercial applications, for example, in your roofing sheets, or even in your electric cables. So, these are the applications where you don’t require a very high purity rate of this flame retardants, but the electronic area is which commands for the high purity application area. So, this is a key segment where we are focusing. So primarily, we intend to sell these into the East Asia market, where you have a larger consumption of this — larger production of these printed circuit boards kind of stuff.

Yash Shah — Investec India — Analyst

Got it, sir. And what about the capacity, sir? Are we eyeing — have you decided on the capacity?

Chintan Nitinkumar Shah — Managing Director

With our new plant, we will have a capacity of producing about 5,000 metric tons of this flame retardants. But of course, this is not going to happen overnight. This product — this segment will also scale up gradually over next two years to two and a half years to reach that kind of a level.

Yash Shah — Investec India — Analyst

Right. If I’m not wrong, you mentioned the capacity will be commercialized within 18 months. So, that will be by H2 FY ’22?

Chintan Nitinkumar Shah — Managing Director

So, we are going to start commercial — we are starting the commercial plant trials from June, just this June, so two months down the line. And immediately after that, we will start commercial production. But when we start from our existing facility, we will be only able to produce about 80 metric tons per month. So nearly about, let us say, starting with a capacity of 900,000 to 100,000 metric tons a year. And when we have the new plant available from December, this capacity automatically ramps up for the 5,000 metrics tons per year.

Yash Shah — Investec India — Analyst

Got it. Got it, sir. Sir, one last question. In continuation with the previous participant’s question, you said that SDA growth will be flattish as compared to the previous year. So are we — do you expect to [Phonetic] stay in line to achieve about more than upwards of INR550 crores of revenue? And if yes, which segment will it be coming from?

Chintan Nitinkumar Shah — Managing Director

I’m sorry. Your voice is not coming very clearly. Can you please repeat it little slowly?

Yash Shah — Investec India — Analyst

Am I audible now? Hello?

Chintan Nitinkumar Shah — Managing Director

Yeah. Please.

Yash Shah — Investec India — Analyst

Yeah. So, sir, my only question was that you said that SDA segment will be flattish as compared to FY ’22 for FY ’23, right?

Chintan Nitinkumar Shah — Managing Director

Yes.

Yash Shah — Investec India — Analyst

All I wanted to ask is, will we still be able to reach revenues in FY ’22 in upwards of INR550 crores? And if yes, which segment will it be basically coming from because — since SDA is the highest segment? I just wanted to understand that.

Chintan Nitinkumar Shah — Managing Director

Right. So, we expect the PTC segment to grow at a normal pace, where we have been growing at about 20% in that area. The pharma segment where now the commercializations have begun on a full-scale commercialization, so this is the area where we may expect about 30% to 50% of growth. Also, the Electrolyte Salt segment is where we will see a multi-fold, maybe four times to five times of this year’s revenue is what we expect. And then we have this addition of flame retardants, which will be a new revenue. So yes, indicatively, we can still — despite flattish SDAs, we expect to grow at a significant rate even in this financial year.

Yash Shah — Investec India — Analyst

Got it, sir. Got it. If may squeeze in one last question, sir, just wanted to understand, sir, how did you manage the — on quarter-on-quarter basis, how did you manage to increase your gross margins by approximately 300 basis points in an increasing raw material price situation [Technical Issues].

Chintan Nitinkumar Shah — Managing Director

Sorry. I absolutely could not understand that.

Yash Shah — Investec India — Analyst

Can you hear me now?

Chintan Nitinkumar Shah — Managing Director

Yeah.

Yash Shah — Investec India — Analyst

My question was about the gross margins. If you see quarter-on-quarter, our gross margin has increased by approximately 300 basis points. So just wanted to understand in an increasing pricing scenario, how have you managed to do that is what my question is?

Chintan Nitinkumar Shah — Managing Director

So — see, basically, what is happening is with the customers, we have a very good pricing mechanism with the customers. So, most of the key customers is where we are able to pass on prices quite easily and customers are also heavily reciprocating by way of accepting this prices. And recently, there is a scenario where we have approached a customer just in this current month of April, where certain prices have dropped and we have, of course, the customer to reduce the prices accordingly.

So it’s a vice versa mechanism that works very well. So, we are able to maintain our margins more or less in the trajectory what we are doing. And so overall margins definitely get impacted because the SDAs, since this is the highest margin among all the four categories, so with reduced SDAs, of course, our EBITDA percentages are dropping from quarter two to quarter three to quarter four. But overall, we are able to maintain — in the rest of the segments, we are able to maintain our pricing and margins comfortably. So, I explained the — if you see on year-on-year basis, the increase in revenue — sorry, increase in the shipping cost, increase in the fuel cost and increase in packaging cost has been quite significant. But this — we have been comfortable in passing on this prices to the customers and it has worked well so far.

Yash Shah — Investec India — Analyst

All right, sir. Yeah. Okay. Thank you, sir. I will get back in the queue.

Operator

Thank you. The next question is from Vishal Biraia from Max Life Insurance. Please go ahead.

Vishal Biraia — Max Life Insurance Company Limited — Analyst

Hello. Congratulations on a good set of numbers, specifically on the margin side. So, my question is more on the glyme side. As to — we were trying to reduce the moisture content in the glyme, so where have you reached? And at what stage are we in terms of approvals from some of our clients or supply of the client? Thank you.

Chintan Nitinkumar Shah — Managing Director

So now in glymes, we are undergoing two stage of hydration — dehydration to achieve the required quality. So, now, we have decided that we will go with this current ability to bring the product within the required specifications and start approaching customers for approval basis. But our eventual target still remains to achieve this dehydrated product with a single stage of purification, which we are working on. We are very close. We are now hitting in the range of about 30 to 35 ppm of moisture, but we need to go down to below 20 ppm. We are not too far and we are working really hard in this range. But with two stages of dehydration, we are able to meet the customer specifications. And now we are deciding that let us first start getting into commercial approvals with these customers. And simultaneously in the backdrop, we’ll continue to work to achieve the desired specifications using a single-stage of dehydration.

Vishal Biraia — Max Life Insurance Company Limited — Analyst

Okay. So just to understand this better, with the two stage of dehydration, you are able to meet the 20 PPM requirement?

Chintan Nitinkumar Shah — Managing Director

Yes.

Vishal Biraia — Max Life Insurance Company Limited — Analyst

Currently, you are doing it via two stages. So, you need to get that from two stage to one stage. That is the issue.

Chintan Nitinkumar Shah — Managing Director

Exactly. Because doing it two stage basically reduces my production capacity by 50% or I have to install additional dehydration machine. So — and also in a stage of purification, you typically lose about 4% to 5% of product, along with the water that is going out. You also tend to lose about 4% to 5% of [indecipherable]. So eventually, your final target is to achieve these specifications within a single stage of dehydration.

Vishal Biraia — Max Life Insurance Company Limited — Analyst

Okay. Yeah. And how big this market will reach [Phonetic], as to this glyme market, the one that you will be targeting?

Chintan Nitinkumar Shah — Managing Director

So the potential customers with whom we are talking right now — the market is really big. I mean, the overall demand for monoglyme could be anywhere in the range of 15,000 metric tons to 18,000 metric tons. But the customers which we are focusing right now — [Technical Issues] Yeah. Sorry about the phone call. So the customer base, which we are trying to reach out for this EV, particular EV applications, the customers with whom we are in touch, we can easily scale this up to around 3,000 metric tons [Phonetic] to 4,000 metrics tons of demand.

Vishal Biraia — Max Life Insurance Company Limited — Analyst

I see. So 3,000 tons you can supply is what you mean?

Chintan Nitinkumar Shah — Managing Director

We can supply. Yeah, we can.

Vishal Biraia — Max Life Insurance Company Limited — Analyst

So, this will be 3,000 tons of the 18,000 tons market globally?

Chintan Nitinkumar Shah — Managing Director

Right.

Vishal Biraia — Max Life Insurance Company Limited — Analyst

Okay. So, you will be basically taking market share and so the market itself is expanding, not denying. But you would also be taking market share of some of the existing players?

Chintan Nitinkumar Shah — Managing Director

Yes.

Vishal Biraia — Max Life Insurance Company Limited — Analyst

Okay. And then just to get the sense in terms of the rupees crore terms of — million dollars terms of value of these 18,000 tons of market, could you help me with that as well?

Chintan Nitinkumar Shah — Managing Director

Basically, it is roughly about product, depending on the quality where we were telling, which will be between $5 to $7 a kg product.

Vishal Biraia — Max Life Insurance Company Limited — Analyst

Okay.

Operator

Thank you. The next question is from Tanmay M. from Mirae Asset. Please go ahead.

Tanmay Mehta — Mirae Asset Investment Managers — Analyst

Yeah. Hi. Thanks for the opportunity, sir. Sir, just again a question on SDAs. As you mentioned that we will be seeing a flattish number in FY ’23, but you also mentioned that you have added two customers. The commercialization for one customer will be starting from Q2 and other will be starting from Jan ’23. But instead of that, you are guiding for a flattish SDA growth. So, any reasons apart from the auto slowdown that you are seeing in the legacy portfolio or if you could just specify that?

Chintan Nitinkumar Shah — Managing Director

Basically, we are going to see a quite low demand of SDAs in Q1 and slightly better demand in Q2. But this getting offset and coming to almost the same volume levels in Q3 and Q4 means very strong demand of SDAs in those two quarters. Right? And when we say a new customer introduction, typically takes about clearly two when you — the customer tests you in terms of your performance, consistency in your quality and in your logistic aspects. So, this is basically a area where you gradually ramp up your confidence with the customer and that also in turn ends up with a ramp up of your volumes going up. So, this is the same thing which happened with our three current large customers, where we started with probably a very minor volume of their overall demand and now we are commanding nearly more than 50% of their demand. So, this happens over a period of two years to three years where the customer confidence builds up and we start to getting more better volume share.

Change of source is also an equally risky proposition, right? Because I have always — the application is so sensitive area. So — and that is the reason why it is such a high entry barrier area. So when the switch or the change or an addition of a new vendor is happening, or any kind of a change is happening, that is always done quite cautiously. So the ramp-up in terms of volume will happen periodically year-on-year basis where you start to get in the larger portion of the base.

Tanmay Mehta — Mirae Asset Investment Managers — Analyst

Sure. But, sir, considering, I mean Q3 and Q4 both being muted, don’t you think, I mean, on that base, we can see some growth starting Q2 onwards? I mean instead of that, we are [Speech Overlap]

Chintan Nitinkumar Shah — Managing Director

We already — for the first customer, we already have the orders on hand. This was expected to begin supplies from May of this year and now customer has postponed the delivery to July of this year. So, this is all leading to because of the semiconductor uncertainty, which is leading all this delays of postponements that are happening. For our largest customer also, the May schedule has been postponed to end of July schedule. So, these kinds of movements are currently happening just purely because the demand is very strong, but because of the further — the supply chain is disturbed at the upper end, which is causing these delays of postponements of demand.

Tanmay Mehta — Mirae Asset Investment Managers — Analyst

Okay. Because I was just wondering, I mean, if the auto industry will start recovering, so we should see sort of a pent-up demand for our products as well. So that was the reason.

Chintan Nitinkumar Shah — Managing Director

See, basically, Ukraine is supplying a neon gas. So, probably almost 70% of the neon gas, which is required in the semiconductor production is coming out of Ukraine. So, this war which had began in this January, February area, so this has actually further dampened the availability of semiconductors. Otherwise, we were actually expecting this strong revival happening from this first quarter to happen. But again, we are seeing postponements and this is purely becoming an output of the geopolitical issues that are currently going on.

Tanmay Mehta — Mirae Asset Investment Managers — Analyst

Sure. And if I understand correctly, FY ’22 — sorry, FY ’23, then we would be seeing a slight shift in the product mix. So, any impact on the margin because of this we should expect?

Chintan Nitinkumar Shah — Managing Director

We expect to maintain margins at the Q4 levels because, see, overall revenue is going to increase and SDA is going to remain stable. So, theoretically speaking, we expect the Q4 margin levels to hold up.

Tanmay Mehta — Mirae Asset Investment Managers — Analyst

Sure, sir. Got it. Thanks.

Operator

Thank you. The next question is from Dhruv Muchhal from HDFC Asset Management. Please go ahead.

Dhruv Muchhal — HDFC AMC — Analyst

Hi, sir. Thank you so much. Sir, just to reconfirm, you mentioned glyme market is about 18,000 tons and we are targeting about 3,000 tons, is that right?

Chintan Nitinkumar Shah — Managing Director

Right.

Dhruv Muchhal — HDFC AMC — Analyst

And the application — I missed it, the application [Speech Overlap].

Chintan Nitinkumar Shah — Managing Director

So the pilot — so once this piloting is done, the first phase, we intend to only set up a continuous flow capacity with 3,000 metric tons. And currently, the customers where we are focusing, their demand is higher than that, but we understand that over a period of two years to three years, we will be able to take away almost 50% of their available business. So, this is why we are projecting 3,000 metrics tons therefore. Actual available business with these existing — these potential customers is already much larger, but we understand that complete switch will never happen in this case. So, we’ll just take a part of that business out of that.

Dhruv Muchhal — HDFC AMC — Analyst

Got it. And the application is in pharma or is it in electronics and others?

Chintan Nitinkumar Shah — Managing Director

Pharma, already we are catering. So pharma application, we are already in a range of about 5,000 [Phonetic] metric tons a year or slightly higher, but this is what we specifically are targeting in the EV segment.

Dhruv Muchhal — HDFC AMC — Analyst

Okay. Because, sir, if I remember correctly, the current glyme was through the conventional route that you — I believe applied to pharma.

Chintan Nitinkumar Shah — Managing Director

That is what we are already doing. That is what we are already doing by the conventional synthesis [Speech Overlap].

Dhruv Muchhal — HDFC AMC — Analyst

Okay. Where the conventional route does not work. And for EV supplies only, the conventional route or the — only the continuous route works, is that fair?

Chintan Nitinkumar Shah — Managing Director

No. See, basically, the conventional route also works for the EV application, but in production also, you have to add one minor purification stage and then you have to go for the old stage of dehydration process to achieve that quality. So, then theoretically, your margins get eroded, if you try to do all those things and try to sell the product. So it is better that we wait for the continuous flow process to actually commercially start supplying the EV and [indecipherable]. And the logical decision why we took that let us at least get into the queue of — into a queue of approvals because that itself is going to take you eight months to nine months at least to get a formula for investment [Phonetic]. So for the time being, you can always work the old stage of dehydration and extra purification to meet the quality. But eventually, to make that business really a margin — a good margin business, then this will happen only when we go to a continuous flow chemistry application.

Dhruv Muchhal — HDFC AMC — Analyst

Sir, got it. The two stage that you’re currently doing is using the conventional route and getting the product approved and once that [Speech Overlap]

Chintan Nitinkumar Shah — Managing Director

Because producing that conventional route typically has a larger raw material usage. So, that is one disadvantage and then you have to undergo an additional purification stage at the process. And also you have to do dual dehydration process. So, that is also an additional process. Then, you are left with very low margins to sell the product. So, this you can do it for next eight months to nine months, but eventually, you need to move for working as well.

Dhruv Muchhal — HDFC AMC — Analyst

Sure, sir. And sir, what is the application — specific application in EV of this glyme?

Chintan Nitinkumar Shah — Managing Director

So basically, this goes as a mix. So, typically, the Electrolyte Salts, let us say, LiPF6. So LiPF6 is a solvent, which typically is dissolved into a combination of solvents. So the most prominently used is the dimethyl carbonate. And then with dimethyl carbonate, they also add few other solvents. So monoglyme is one of those solvents used as a mix combination with dimethyl carbonate or other solvents to dissolve the Electrolyte Salts. So, this actually becomes a part of the — heart of the Li battery. So, this becomes a part of the electrolyte solution within the Li battery.

Dhruv Muchhal — HDFC AMC — Analyst

Okay. Got it. So, this market is already supplied by someone and we are developing our own independent process to make this and capture this market?

Chintan Nitinkumar Shah — Managing Director

Correct.

Dhruv Muchhal — HDFC AMC — Analyst

Got it. Sure, sir. Sir, the second thing was the flame retardant product that you mentioned, sir, is there any interlink between — in the existing product that we do or probably the customers or probably the RMs that we have, this — on the flame retardant, I mean, is there some integration benefit that we are leveraging on?

Chintan Nitinkumar Shah — Managing Director

So it can be one of our very large customers. So, we are basically supplying a catalyst for epoxidation to a multinational customer. And these people are into manufacturing. So, my catalyst is being used to manufacture the raw material for the flame retardant. So, the catalyst what we are supplying is actually utilized in manufacturing of the flame retardant raw material. So, this is how we became aware of this business and we started talking to the customer. So, customer is also wanting a forward integration of what they are looking. So, this forward integration is what we will do for them, one of the potential customers. So, this is how this segment has evolved. So, we have been working on this since last three years, four years and now, the things have materialized.

Dhruv Muchhal — HDFC AMC — Analyst

And there is a reasonable confidence, at least based on your comments that the June commercialization will be done. But, sir, how is the production — approval process? Because, again, here it’s the electronic application where I mean, I think the semiconductor kind of thing where application — the approval processes are generally very long. So how do you think about the approval process? Is it the same auto cycle where it takes four years, five years?

Chintan Nitinkumar Shah — Managing Director

It would take about four months to five months at least, from June to get a formal approval. And this would be a good timing to launch it in June, so that by November when you have a real plant availability of making these products, by the time you are ready with the application and with approvals from the customers. So, June logically is the best time for us to launch this product, so that by November when you have most of the application approvals in place, then you can deal with full production.

Dhruv Muchhal — HDFC AMC — Analyst

Got it. I mean, I was wondering from the final approval, for example, for SDAs, it takes a very long time given the application is very specific.

Chintan Nitinkumar Shah — Managing Director

See, basically, just to give you an idea, this product, typically, a customer would consume something in few 1,000 metric tons a year. So in the last year, four customers, each of them would be consuming at least few 1,000 metric tons of this product. So for getting into a commercial approval process would also require them to buy few loads of this product, few containers of this product running into a couple of 100 [Phonetic] metrics tons to go into final approvals. And this is what we will be able to make from June to November, right, to any customer demanding 50 metric tons or 80 metric tons for approval process and this is max what we can actually produce from our current plant. So, this is the reason why we are going with — not waiting till November, otherwise it will again take you another five months or six months to start the approval.

Dhruv Muchhal — HDFC AMC — Analyst

Okay. Got it. That was very helpful. Thank you so much, sir.

Operator

Thank you. The next question is from Archit Joshi from Dolat Capital. Please go ahead.

Archit Joshi — Dolat Capital Market Private Ltd. — Analyst

Hi, sir. Thanks for the opportunity. Sir, a few bits more on the flame retardant side. I understand that this is a category of some halogenated products and derivatives and largely on the bromination side. Sir, just wanted to understand our technical expertise. Also knowing the fact that there are some very large multinationals who have integration benefits also like Albemarle on the bromination side. So how are we looking at this? Other than what you mentioned earlier, that we are forward integrated from our catalysts only to eventually manufacture flame retardants. Other than that, have we identified certain supply-demand gaps? And other than that, if you can also throw some light on the technical expertise or the know-how that we have on bromination. Thank you.

Chintan Nitinkumar Shah — Managing Director

See, there is — see, basically, what has happened is a couple of years back, China went into a regulation where in certain cases, usage of flame retardants had been made mandatory. So, this has pushed up the demand of flame retardants drastically. And this has caused a severe gap in demand supply, right? So, this is the reason why we find a good opportunity getting into this. Secondly, there are three large players globally in this area; Lanxess, Albemarle and ICL. Now, the key position, of course, will have their own significant benefits because of their backward integration into the raw materials as well. Where we bring in value is to offer a consistent high purity of products where the customers are still struggling to get it. So, this again, we are talking about impurity profiles of certain metal elements into this product being into low PPM levels. So, similar to our SDA applications, where we are producing substances with very low trace metal impurities, the same is the application where we are trying to position ourselves in the same database.

Archit Joshi — Dolat Capital Market Private Ltd. — Analyst

Understand that. Within the bromine category, this is by volumes one of the largest application areas. So anything on the supply chain side as to how we’re going to procure bromine and [Speech Overlap]?

Chintan Nitinkumar Shah — Managing Director

So, we are working with a couple of large bromine suppliers in India, as well as one internationally where we tend to have a tie-up with them, some kind of a tie-up in terms of supply agreement consistency and also in getting consistent

— because bromine itself is in raw tech [Phonetic] since last few years.

Archit Joshi — Dolat Capital Market Private Ltd. — Analyst

Yeah, exactly. Yeah.

Chintan Nitinkumar Shah — Managing Director

Supply situation with bromine itself is in a short supply. And this is the reason why you need to have a good tie-up with a couple of bromine producers and that is what we are currently working on.

Archit Joshi — Dolat Capital Market Private Ltd. — Analyst

Right, sir. Sir, one last bit. I think you mentioned that it’s a $3 billion market and out of which, we are targeting very niche applications within electricals and electronics. So just some broad numbers, I mean, how big would this market be specifically pertaining to any numbers on smart charges?

Chintan Nitinkumar Shah — Managing Director

Also, again — this market is also again quite large, so running into a billion dollar plus market segment. And we just need a small pie out of it actually. Because this — our existing new capex will only entail us to produce somewhere in the range between 4,000 metrics tons to 5,000 metric tons a year. So, this typically product costs between $6 to $8 or $9. And this is just the beginning flame retardant what we are. And so like in phase transfer catalysts, how we have a large basket of products, laser flame intermediate — flame retardant and that is the key area where we will eventually focus.

Operator

Thank you. The next question is from Vishal Biraia from Max Life Insurance. Please go ahead.

Vishal Biraia — Max Life Insurance Company Limited — Analyst

Yeah. Sir, my question is again on the gross margin side. Is there any of the segments that saw a very sharp improvement in margins or any sharp, I mean, decline in raw material costs or anything of that sort, which helped the sequential improvement in gross margins?

Chintan Nitinkumar Shah — Managing Director

No. Not really, any major impact. It’s just change in product mix or an independent product that’s being sold slightly higher than something else is causing this [Technical Issues]. And broadly speaking, there is no question of any kind of reduction in price or in relation to cost because everything has increased, right? But we are fortunate enough that customers are agreeing to accept the increased pricing and we are able to pass on those prices. But more or less speaking, there is no change in individual products in terms of margins.

Vishal Biraia — Max Life Insurance Company Limited — Analyst

Okay. And the freight scenario, has it improved over the last few months?

Chintan Nitinkumar Shah — Managing Director

Sorry. What scenario?

Vishal Biraia — Max Life Insurance Company Limited — Analyst

Freight, logistics because we are seeing some of the [Speech Overlap]

Chintan Nitinkumar Shah — Managing Director

No. The freight scenario has gone from bad to worse actually during the last quarter and it continues to remain at the worst level. It is good that it is not going from worse to worst. So it is still at those levels, where freight cost is still not coming down. Fortunately, since last couple of weeks, availability of containers has kind of slightly improved, but still the destination port congestion is a big issue that we are facing. So, we have lots of containers in transit. And probably today we have four containers very close to Rotterdam Port since last 30 days, but not being delivered on the Rotterdam Port. And customer is also drying out [Phonetic] with one more products. So, that is an actual scenario that is happening in terms of logistics. So from here, you are able to ship the product probably on time, but then it is not being delivered to the customer on time. That is the key issue today.

Vishal Biraia — Max Life Insurance Company Limited — Analyst

Okay. Okay. And so last question is on the raw material side, the TBAB and the other key raw materials that we use and a lot of it is imported. So, do we have some contracts in — with these players where they have also not been able to increase the prices with us and we have got the raw material at the lower prices, and which may have a reset in the coming few quarters?

Chintan Nitinkumar Shah — Managing Director

Typically, the way we are working on most of the large products is where we do a quarterly contract for the raw materials and also revise the pricing with the customers on a quarterly basis. And this works in the best way for even my suppliers and also for my customers. So — and this is the key reason why we are able to sustain these margins for such a turbulent year and still we could stopped the increasing price from the suppliers and also pass on the increased price to the customer. So, that is what really was the whole supply chain for us.

Vishal Biraia — Max Life Insurance Company Limited — Analyst

Okay. Very good, sir. Thank you. This is all my questions. Thank you.

Operator

Thank you. Ladies and gentleman, we take the last question from the line of Nilesh G. from HDFC. Please go ahead.

Nilesh Ghuge — HDFC Securities — Analyst

Yeah. Hi. Thanks for the opportunity. Sir, my question is on the Electrolyte Salts. As you mentioned that these Electrolyte Salts, you have the chemistry and technology available with you and you’re currently manufacturing these in the product side, is my understanding correct?

Chintan Nitinkumar Shah — Managing Director

Correct, sir.

Nilesh Ghuge — HDFC Securities — Analyst

Yeah. And sir, on particular electrolyte, there is a specific electrode that one can have, right? Or is it like that you can have the electrolyte for across lithium-based any electrode? Is the one-on-one combination between electrode and electrolytes, or one too many relation between electrode and electrolytes? Just clarification from your side, sir.

Chintan Nitinkumar Shah — Managing Director

No. See, basically, Nilesh, see, we are not into the electrolytes for lithium batteries. We are into electrolytes for the super capacitor batteries and the energy storage practice. So typically, when you say energy storage batteries, these are, again lithium-based batteries or nonlithium-based batteries. So people talk about sodium-based batteries or the zinc-based electrolyte batteries. So, we are nowhere into the lithium-based side of the battery application. But, typically, just to answer your question correctly, so people — each company would have its own proprietary combination of Electrolyte Salts, and also its own proprietary mix of solvents or additives that they use to dissolve these salts and make a unique electrolyte formulations. So, these are all guarded and patented technologies, where each company will have to come up with its own formulation of the electrolyte, which has to be different compared to its competitor. So, depending on which electrodes you’re using, your electrolyte could change, while keeping the same electrode, again, still, your electrolyte could be different from your competitor.

Nilesh Ghuge — HDFC Securities — Analyst

Okay. Thanks a lot, sir. Thanks a lot.

Operator

Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments. Sir, you may go ahead.

Chintan Nitinkumar Shah — Managing Director

This is Chintan here. On behalf of the management, I thank you, everyone, for participating in this earnings call and for your continued support. We have tried to address all your queries. However, if we have missed out on any of your questions, please feel free to reach out to Mr. Ashok Bothra, our CFO, or our IR advisor, E&Y. And we will connect with you offline. Thank you. And have a great evening.

Operator

[Operator Closing Remarks]