ANURAS — earnings call

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Prepared remarks

Moderator · Conference Operator

Ladies and gentlemen, good day, and welcome to the Anupam Rasayan India Limited Q2 FY

Questions and answers

Vishal Thakkar

Thank you, Amit bhai.

Hello, everyone, and thank you for joining us here today.

I would like to briefly touch upon the key performance highlights for the quarter ended 30th September 2022 and then we will open the floor for questions and answers.

Before I proceed, I would urge you to go through the detailed presentation submitted to the stock exchange and uploaded on our website.

Kindly note our numbers for the quarter and half year on a consolidated basis also Anupam Rasayan India Limited October 28, 2022 includes Tanfac numbers, which have been consolidated from 21st May 2022.

I'll first discuss the stand-alone financial highlights for the quarter ended September 30, 2022.

Operating revenue for the quarter 2 FY '23 was at INR 3,107 million as compared to INR 2,489 million in Q2 FY '22, up 25% Y-o-Y.

EBITDA, including other revenues, was at INR 898 million in Q2 FY '23. -- as compared to INR 697 million in Q2 FY '22, a growth of 29% Y-o-Y.

This would also translate to a 29% EBITDA margin for the quarter.

Profit after tax was at INR 412 million in Q2 FY '23 as compared to INR 358 million in Q2 FY '22, growth of 15% Y-o-Y.

On a consolidated basis, operating revenue for Q2 FY '23 was at INR 3,862 million as compared to INR 2,489 million in Q2 FY '22, up 55%.

EBITDA, including other revenues, was at INR 1,012 million in Q2 FY '23, as compared to INR 702 million in Q2 FY '22, a growth of 44% of Y-o-Y.

Profit after tax was at INR 478 million in Q2 FY '23 and as compared to INR 361 million in Q2 FY '22, growth of 33% Y-o-Y.

Please note, consolidated numbers for Q2 FY '22 do not include Tanfac Industries number.

So please read accordingly.

Now moving on to the segment-wise performance for the Q2 FY '23.

Our Life Science segment contributed around INR 277 crores. while other Specialty Chemicals contributed around INR 32 crores.

In percentage terms, the Life Science segment contributed 90% of the total revenue, and the balance came from other specialty chemicals. -- as far as revenue breakup is concerned in terms of geography, Q2 FY '23, the contribution of Europe was 35%, India is 31%; Japan, 15%; Singapore China, 4%; and the remaining 2% came from North America.

Exports for the quarter was around 69% of our revenue, and I believe export will continue to be a major contributor to our top line going forward.

Our top 10 customers contributed 83% of the total revenue, and there is a total of 24 products that we provide to them.

With that being said, we will open the floor for Q&A.

Moderator · Conference Operator

Thank you very much.

Ladies and gentlemen, we will now begin the question-and-answer session.

Anyone who wish to ask a question may press star and one on their touchtone telephone.

If you wish to remove yourself from the question queue you may press star and two.

Participants are requested to use handset while asking a question.

Anyone who has a question, may enter star and one.

Ladies and gentlemen, we will wait for a moment to the question queue assembles.

We have the first question from the line of S.

Ramesh from Nirmal Bang Equities.

Please go ahead.

S. Ramesh

So to start with, you mentioned the accelerated CapEx and fluorination products and the CapEx of the order of INR 600 crores.

So can you give a sense in terms of what is the proportional CapEx that will go into fluorination projects?

And what will be the increase in the share of fluorination products compared to your current percentage share?

How does your overall revenue on the fluorination products are commissioned?

Anand Desai

Vishal bhai shall I answer this?

Anupam Rasayan India Limited October 28, 2022

Vishal Thakkar

Yes, please Anand.

Anand Desai

Yes.

So thank you sir for your question.

So basically, all of these plants are going be multipurpose plants and in which fluorination will be one of the chemistries that will be taken into the project.

Yes, they will be leaning more on the fluorination side and that is where we have seen a lot of activity from our customer.

And again, some new interesting products, which we have mentioned earlier, which we are going to launch in the coming years, will be benefited in this new multiverse brand.

S. Ramesh

Okay.

So in terms of the commercial impact of your CapEx, when you see the full impact of the CapEx to be funded by QIP and what are the reasons for the additional CapEx because of the QIP document, CapEx of INR 419 crores.

So we added another INR 419 crores.

Is it possible to give us the split of the total CapEx, including the year wise number?

And when do you see the full impact of the entire CapEx program?

Anand.Desai

Vishal bhai, you can add on the full impact on the time line.

But on the product, Mr. Ramesh, what we are seeing is that there is a huge demand from customers coming in for new products that we have been planning for the last two years.

And based on those demand that is why we have expanded the CapEx currently, and that is why we have gone forward for the QIP.

I think there will be some forward-leading answer, so I would not like to go into that right now.

But maybe once the statements are clear, we'll be able to give you more information going forward.

So Vishal bhai you can add on this timeline for the project completion.

Vishal Thakkar

So Mr. Ramesh, if you see, when we said INR 670 crores in the opening remarks also, that is INR 250 crores that we had earlier announced then INR 220 crore plus INR 190 crores.

These are the total three projects that we are undertaking.

And this we are planning to complete in the next 18 to 24 months, as Amit had also mentioned in his opening remarks.

And within another 1.5 to 2.5 years from then on is where we are expecting it to reach the fairly full capacity of the plants by then.

So that's the timelines that I would suggest.

S Ramesh

So just to give some clarity on the LOIs and contract you have and the CapEx, guided earlier of INR 250 crores.

So this additional CapEx and the overall number of about INR 670 crores.

Is there an additional capacity you are creating for expanding the order book?

Can we get some light on that?

Vishal Thakkar

Can you just repeat again or explain what we are trying to ask here?

S Ramesh

Yeah, so basically you had mentioned that this 250 crores initial CapEx, you had indicated last time was for the LOIs and contracts were INR 2620 crores.

So in addition to this you are spending another INR 420 crores.

So is there an overlap of capital expenditure required for this LOIs and contracts already announced in this INR 420 crores of additional CapEx or are you planning additional capacity and business capabilities to building your future growth in terms of new contracts and new LOIs you may add in future?

Vishal Thakkar

Yes.

So Mr. Ramesh, as we mentioned that, yes, INR 250 crores is what we spent for the LOIs and contracts and others are for the capacities that we are creating as Anand bhai had mentioned, Anupam Rasayan India Limited October 28, 2022 for the new products and the additional demand that we have been seeing from our customers, both on the fluorination and other parts of the business and that's what the balanced capital deployment will go for.

Moderator · Conference Operator

Thank you.

We will take our next question from the line of Vidit Shah from IIFL Securities.

Please go ahead.

Vidit Shah

So just to take this point forward in terms of the additional CapEx that you've announced of roughly INR.

24 crores, INR 30 crores.

Is this to do with this expansion and fluorination that you mentioned on slide 15 with the revenue potential of 220 to 260 million?

Is this CapEx going to be largely for these six to seven molecules that you mentioned out here?

Vishal Thakkar

Anand bhai should I take…

Anand Desai

No, you go ahead, Vishal bhai.

Vishal Thakkar

Okay.

So yes, this will also cater to the 14 new products that we mentioned in the slide as well.

On the fluorination, and we will have some more capacity to do other products as well.

But largely, yes, it will also cater to the fluorination part of the business, which is presented in slide 15 where we mentioned that there will be 14 new molecules that we have identified.

Vidit Shah

Sure.

So just to understand the CapEx needs of this revenue potential.

Is it safe to assume a 1.75 asset turn for this 220 to 260 potential?

I'm just trying to figure out how much CapEx would be totally needed to reach this revenue potential that you mentioned on slide 15, like with the 1.75 asset turn it comes to roughly INR 1,000 crores of CapEx.

So that would be another INR 600 crores to get to full potential.

Would that be a fair understanding?

Vishal Thakkar

So this INR 220 to 260 million, what has been mentioned is the full potential going forward over a longer period of time.

When we say 14 molecules, we are talking about a subset of this number.

And hence, what we are mentioning is 1.75 is the minimum that we would expect from the capital deployment, which will be catering through these 14 molecules, but we plan that we may be able to do a better asset turn than that as well.

But for now, we are only mentioning 1.75 as the multiple but these two are different.

So basically, you may want to read the 220 to 260 as a different number than the total 220 to 260 is the total that is around more than 30 molecules that we will be commercializing over a longer period of time.

And that's what is mentioned here.

Vidit Shah

Okay.

Got that.

And in terms of margins of these molecules, will they be similar to the current margins that the company operates at.

Vishal Thakkar

They should be better, but let's look at similar margins for now and then we can see as we go.

Vidit Shah

Okay.

Understood.

Secondly, my question was around these two new LOIs in the benefits of the Europe plus one that Anand bhai mentioned in the opening remarks.

So if I look at slide 14, the number of LOIs and the revenue potential has sort of remained the same.

So how much revenue Anupam Rasayan India Limited October 28, 2022 would these delays LOIs bring in addition to these5, 6 LOIs that we've already signed, would this INR 2,600 crores number change materially because of these two LOIs that have come

Vishal Thakkar

So first is that the INR 2,600 crores is a number which was for the quarter ended and the LOIs were signed after that.

And that's the reason the number has not been added on to it.

However, that number should be around $10-odd million in that context, it will be a limited impact on the LOIs and contract, if you were to see the total size.

Vidit Shah

Okay.

So $10 million, is it

Vishal Thakkar

Yes, that's what.

Vidit Shah

Okay, understood.

And just one clarification on the change in accounting that you've done I missed the consolidated revenue number that you mentioned, but you happen to say that Tanfac has not been included in the consol revenue.

In the results, your 1Q revenue seems to suggest that Tanfac has been consolidated with the minority interest being recorded, could you just explain the accounting that you’ve done and how it's going to be going forward?

Vishal Thakkar

So basically, what we were saying was that for FY '23, post March to May 21, the consolidation is on a full basis.

However, for FY '22, the consolidation number has not been added because that time we have not done an acquisition.

And hence, when you're looking at the comparison, we want you to be aware that for FY '22, there is no consolidation of Tanfac numbers, whether an FY '23 post 21st March, the number has been added.

21st May, sorry, I stand corrected on that.

21st May.

Vidit Shah

Okay.

Understood.

And going forward, it will be done on a full consolidation basis, 25%.

Vishal Thakkar

Yes, it's a full consolidation basis.

Moderator · Conference Operator

Thank you.

Our next question is from the line of Rohan Gupta from Nuvama.

Rohan Gupta

Yes, good evening, and thanks for the opportunity.

So though given some explanation with the regards to new CapEx, some doubts and clarifications.

So one is that you are planning to spend another close to INR 500 crores exclusively on fluorination CapEx.

That is on top of INR 250 crores for this year and maybe INR 250 crores for next year.

I mean that for your initial guidance was that INR 250 crore annual CapEx.

So it means that including this 500, we are planning to spend another in INR 1000 crore over next 24 months.

First of all, that is that understanding correct?

Vishal Thakkar

No, when we are saying this number, we are saying 250 for the year.

So basically INR 670 crores is what we are going to do CapEx from today until next 24 months.

That's what we are saying for now.

That includes the INR 250 crores of what guidance will be given for the LOIs and contracts and the other ones.

And Second point on this, when we said about the fluorination, it's not only the fluorination it has other products as well, as Anand bhai said it will be a multipurpose plant, not only one Anupam Rasayan India Limited October 28, 2022 product or one chemistry.

But yes, there will be leaning towards catering to those 14 molecules which we have identified.

But over and above that, there will be enough capacity there.

Rohan Gupta

And sir, So you're guiding roughly 1.75x kind of asset turnover, which is significantly higher than the current level of 1.1x asset turn which we are able to achieve right now.

So, with 700 approx. CapEx, you see that how much time -- I mean, 24 months probably is going to take for commissioning of the CapEx?

And how much time you think that will take further to achieve that 1.75x, expected?

Vishal Thakkar

Two years from then on, we should be looking at that number Two and a half years, two years plus minus six months is what you should look at where we would be able to ramp it up fully.

Because again, why I'm saying this is also because these assets will come on a sequential basis and not on a same day because all assets will be planned out in that phase as well.

And that's the reason I'm saying these numbers in the manner.

Rohan Gupta

Even in a staged manner, all the CapEx will be commissioned within 24 months.

And beyond that, you are saying that it will take another two years to achieve a 1.75x kind of asset turn.

Vishal Thakkar

Correct.

And also, just wanted to note that the current asset turn is also where such capacity should also give us a growth for the next two years.

So, we should be reaching a similar asset turn from these assets as well.

So, it's not that current assets will only give us 1 to 1.1x, it is today but as we see that for the next 18 to 24 months, the growth will come from the current capital assets.

Rohan Gupta

So, in fluorination.

So you have a history of doing this chemistry.

But I think that the confidence has increased after the Tanfac acquisition.

So, have you got any kind of customer contract or visibility of this CapEx, which we are going to put up INR 450 crores mainly catering into fluorination?

What is the confidence level and how much it is backed by the customer's contract right now?

Vishal Thakkar

Anand, would you want to take this?

Anand Desai

No, you go ahead.

I'll add later on.

Vishal Thakkar

So, if when we mentioned that 14 products, we have been in discussion with these customers for a long time.

We have been developing these products in our R&D and lab.

So it is not that we are starting the process now.

The process was done for last three to four years and more.

And today, with the Tanfac coming in, the supply security coming in is when the customers are now converting into demand.

And that's where we have been able to talk about the ramp-up here because our R&D and pilot samples and all others have been validated and that's where we are coming from.

So the confidence that is there is pretty high from this perspective.

Because if you understand the product development phase is when there is a product developed, then there is an R&D, then there is a pilot phase and then you get into commercialization to share this 14 molecules, what we have mentioned in the slide 15 is where we are practically at the twilight of the Anupam Rasayan India Limited October 28, 2022 commercialization phase and that's where we are coming from.

And hence, that's the confidence that we are seeing.

In terms of interaction with the customers, customers have been pushing us for a lot many more products, the kind of demand and the kind of confidence and the urgency with which the customers are requesting for the products and the supply -- it's quite unprecedented compared to what we have been seeing in the last few years and what Dr. Kiran and Anand bhai in his opening remarks also mentioned about the Europe Plus One and the interest coming in.

We are seeing a very strong interest coming from all major customers, current and also a few potential ones.

Anand bhai if you want to add something, yes?

Anand Desai

Yes.

So Mr. Gupta, I would like to add on to what Vishal bhai mentioned there.

That the Europe Plus One strategy as well as the China Plus One is really playing out very hard.

The kind of demand and the inquiries for new products, both into fluorination as well as to the general chemistry is unreliable.

For example, the sulphuric acid price in India is one fourth the price what is in Europe.

So you can just imagine the cost.

I would not say the arbitrage, that would be too rude, but I think the difference is quite high.

So people are desperate in Europe.

Of course, they have a long term view.

They have seen this in the past.

So, they will not take an urgent view, but at least a major movement will start of products which are not high margin or which the security product for them to be shifted out from Europe and it can be India and it can be China also.

But at the same time, what we are seeing as far as Anupam is concerned, a major demand in our existing chemistries, which any would see that most of the products that we are manufacturing go to Europe today.

And a major shift is surely happening.

And we will be able to give you more information in the coming three to five months.

As I would not like to give you any forward- looking statements now, but in the next three to five months, you will see a lot of information coming out from Anupam as to what we have been doing in the last six to nine months.

And we have been focusing on long-term projects with customers, which will be deferred in ‘25 and ‘26.

But on an urgent note, we are seeing huge demand for a lot of products to be shifted into India, from Europe, and that is where we are coming from.

Rohan Gupta

Okay, So you have mentioned that the working capital days has come down and with the safety inventory for the customers, that has also been reduced in terms of the contract size also, from the annual to half yearly.

By year end, if you can just guide us that what kind of inventory holding period you are targeting and from the current level, how much we can see the further reduction?

And also on the new contract which you are taking, all this in fluorination, the 14 new products, and I believe that the most of the customer's profile remains same.

So, for the new product, or the new contract, are we still following the same mechanism what we have been following earlier?

Or it is going to be completely different like for any other agrochemical players where the inventory requirement is not so high.

So how is the arrangement on the new product?

Anupam Rasayan India Limited October 28, 2022

Vishal Thakkar

Okay, let me address the first question first and then I'll come to the second one.

The first question about looking at the inventory levels as we've mentioned, I think as also suggested in the opening year quarter as well, the first quarter this year as well.

But we will endeavour to move back towards the historical level of the year before where we were, and we will look at coming to those kind of numbers by the year end, as well as cautionary inventory drops and our business in terms of the contract structure get amended and implemented.

So that's the number we would like to be focusing on.

And that will be a fair bit of release from the working capital cycle in that sense.

And second on the newer contracts, you will appreciate that the way we have designed and structured our business is a more in-situ kind of a business where we are more part of a supply chain for our customers And when we are, we need to, and where we are mostly single or a primary supplier to our customer, there we would need to hold a particular level of inventory.

However, if you see the risk of inventory is practically not there for us because the price and volume risk both are passed through and even the carrying cost for the inventory is also borne by the customer in that sense.

So to that extent, we will have a structure similar to what we have in our existing business.

However, we will keep on tightening that premise and focusing on a shorter cycle as much as possible.

But there need to be a healthy mix of both being a responsible supplier to them and assuring them, especially when we are a single or a primary supplier.

So that will be a healthy mix that we will try and focus on.

Moderator · Conference Operator

Thank you.

The next question is from the line of Rohan Kamat from Finterest Capital.

Please go ahead.

Rohan Kamat

My first question is basically on the six months pricing.

I just wanted to check whether it is done for all the customers or not.

And just to follow up on that, what kind of levels that are expected for this year and the next year?

Vishal Thakkar

Okay, so first is that as we mentioned that around 60% to 70% of our contracted revenues are now on a six-monthly basis.

And second, as we mentioned and as we guided in the last question itself, that we will endeavour to be moving back to the older inventory cycle levels that we had in the previous year.

And going forward, we will try and focus on compressing that as much as possible.

But right now, that's the guidance that we could go with for now.

Rohan Kamat

The second question is on the CapEx guidance.

What kind of CapEx guidance do we have for financial ’23 and financial ’24?

Vishal Thakkar

So again, this year we should be looking at around INR 250 crores of capital deployment and next year should be around INR 350 crores to INR 400 crores of capital deployment.

We'll come to that number with more clarity between INR 350 crores and INR 400 crores by the next quarter.

But that's the number you should go with for the FYs allocation if we were to look at.

Moderator · Conference Operator

Thank you.

Next question is from the line of S.

Ramesh from Nirmal Bank Equities.

Please go ahead.

Anupam Rasayan India Limited October 28, 2022

S. Ramesh

Just to understand the consolidation of Tanfac how you have done the broad consolidation and how you are arriving at the minority interest because if you look at the Tanfac results and the way its consolidated, it can be difficult to understand how the numbers are aligned?

So can you explain the consolidation and how you run in the minority interest?

Vishal Thakkar

So if you look at the consolidation, we have done a line-by-line consolidation at 100% basis for the opening ones.

And that starts from 21st May to 30th September.

And that is the number that has been added because on 21st May is where we are deemed to have a control over the company when the open offer was concluded.

And then the minority interest comes post the PAT numbers that I mentioned and that's what is mentioned below, where the minority interest of 74% will be identified.

S. Ramesh

The question is, if you look at the standalone number and consolidated number, Tanfac reported INR 48 crores profit.

So you're talking about consolidated profit of 478 million or INR 47.8 million crores compared to about 360 million or INR 36 crores?

And the minority interest is not equivalent on that 75% of Tanfac number, which will be closer to about INR 6 crores.

So that's where I think the question is…?

Vishal Thakkar

Yes.

So Mr. Ramesh, the challenge is there is an elimination of INR 1.8 crores of dividend and intercompany profits, which are there, which has been eliminated.

That's the reason it is the number that is not looking like which is 1.4 of dividend and 0.4 of intercompany profit, which has been knocked off, and that's the reason you are seeing these two different numbers.

And then the minor interest comes below that.

S. Ramesh

So this INR 1.8 crores of writing off, whereas has been adjusted in the consolidated number

Vishal Thakkar

That's what I'm saying that INR 8.8 crores was the profit for Tanfac, whereas if you see the consolidation is showing only INR 6 crores of that.

And this is because of INR 2 crores, a little less than INR 1.8 crores of adjustment, which is a knocking off because INR 1.4 crores was the dividend, which came from Tanfac to Anupam, which has to be knocked off and two, is INR 0.4 crores of profit from the business.

So INR 8 crores minus INR 1.4 crores, minus INR 0.4 crores gives you INR 6 crores.

And that's the reason consolidations are fixed.

S. Ramesh

I'm sorry, you hold about 26% stake in Tanfac.

So you shall be consolidating at the net level, you should be getting only 25% of Tanfac’s profit, right?

So I'm not sure I could understand how you can get INR 6 crores out of the INR 8 crores?

Vishal Thakkar

So because if you see below that line, there is an adjustment that has shown as a minority interest post PAT and that's where the numbers are existing.

Because this is consolidated on a line-by- line basis and not on a 25% shareholding basis.

That's the reason these numbers are there.

If you go below that, on the CFS, you will see there is an allocation for the minority interest as well.

S. Ramesh

Yes.

So No, let me ask you a different way, the minority interest of INR 2 crores or 22 million you're showing.

Does it include any other item because technically, it should be equivalent of 75% of Tanfac’s profit..

So out of that INR 8 crores, 6 core would have been set out.

I’m not able to understand how it?

Anupam Rasayan India Limited October 28, 2022

Vishal Thakkar

So if you're talking about September.

September, if you look at it, there is a INR 6.2 crores of non-controlling interest, which is being adjusted on the net profit.

If you see below down, there is an explanation given there as well.

So INR 47.3 crores is the comprehensive income less Net profit attributable to owners of the company, INR 41.5 crores, and non-controlling interest of INR 6.2 crores has been mentioned in the CFS as we go down post PAT, there's a line which is going further down, so if we open the financials that we have submitted to the stock exchange, we will be able to see that number, Mr. Ramesh.

S. Ramesh

And you're saying, okay.

I can correct -- so this INR 47.8 crores before the minority interest for the quarter out of which INR 6.2 crores is a minority.

I stand corrected.

My apologies.

Vishal Thakkar

No problem, Mr. Ramesh.

This is the first time we are also consolidating.

So everyone will take time to get to that.

So no problems, please feel free.

S. Ramesh

So when you're looking at these 14 molecules and the increased CapEx, how are you positioning us into source your materials?

How much of that is going to be captive?

How much you have to import?

And what is the arrangement for them?

And what is the kind of additional impact you could have on your increase in working capital?

Vishal Thakkar

Let me go first and let me answer that for now is that our working capital cycle, as we have said, we will keep on driving it, as we mentioned in the earlier question as well, so this increase in business will not expand the working capital, but we'll try and continue to compress as much as possible is the first statement.

Second, what we are saying in terms of supply chain, if you see with the acquisition of Tanfac, the import dependence is only looking like reducing.

Today also less than 20% of our purchase will be imported, and we will endeavor to keep it as low as possible.

We are not seeing any significant change in terms of our purchase profile.

In fact, it is only going to go more towards the domestic consumption and more vertical integration for us.

S. Ramesh

Sir, if I may just ask a follow-up question?

In terms of the increase in core working capital or the kind of CapEx, you also get about 100% additional revenue, given the kind of working capital number of days, it implies about another INR 500 crores of additional working capital requirement.

So how will you finance that?

Will you need further debt raising or will you be able to fund that through your operating cash flows?

What is the company's plans on that?

Vishal Thakkar

So Mr. Ramesh, if you see the kind of operating cash flow that we have generated for the first half and if you look at going forward, because this ramp-up is also looking over the next few years, so operating cash flows will be able to suffice any requirement for the growth in terms of working capital?

And also, there is a bit of a compression as we have mentioned that our working capital will compress as we go forward.

And that will also ensure that the requirement for the working capital will be to that extent only.

So both put together, we don't see any significant external requirement for our growth of our business from now.

S. Ramesh

One last part, so between Europe plus and China Plus strategy in terms of the customer profile for your current and new order book you’re getting, are you going to see your margin profile Anupam Rasayan India Limited October 28, 2022 improve as you move towards more of Euro Plus customers?

How do you see that going forward?

Anand Desai

So margin profile, we have been always positioning ourselves with the European customers and European suppliers to that extent in terms of our supply to our customers.

So we are typically replacing them most of the time.

And there, if you really see the margin profile, we don't see it to be significantly different.

It will be tad better, but right now, as we have mentioned earlier also, we will keep with the guidance of the same margin profile.

If you do it better, it's always good for all of us.

But right now, let's go with the numbers that we have been guiding for now.

Moderator · Conference Operator

Our next question comes from the line of Dhruv Muchhal from HDFC Mutual Fund.

Please go ahead.

Dhruv Muchhal

You mentioned about increasing opportunities from Europe and customers looking more for us.

So if you can speak a bit more about these opportunities, are they short-term or are they long- term based on the nature of inquiries that you're also getting the kind of sectors exposure that these inquiries are coming from?

And also, you mentioned that the intensity is very high now.

So does it mean that in the future, there is a scope that the ROCE that we probably used to demand earlier can improve significantly going forward?

Or do you think there is enough competition in the market for these kind of sourcing opportunities that the ROCE will remain at the levels that we have been doing, I mean, this 20%?

Or do you think given the supply-demand dynamics, the ROCE in future can be even better given your demanding position now?

Vishal Thakkar

Anand, would you want to take the question?

Anand Desai

Do the second part.

I think in Anupam’s case, we tend to prefer to take long-term contract base products only and there has been the modest operandi of the company going in the last so many years. they will see so many products which have been having a long-term perspective, even there are some products which are not in contract. but which we've been manufacturing since 2004 and still today, they are without a contract, but issued to Anupam only and even in some cases, they are on an exclusive basis.

So this model, we would not want to change.

We only look at a long-term agreement products only even if there is not a written agreement, but there has to be an understanding between us and the customer and based on our relationship of last for so many years with all the major players it's very clear.

And in the future, if Europe situation changes, once the product comes out, there are so many things which are associated with it registrations, internationally, locally, domestically, a lot of things have to be taken into accordance over there.

And so when a customer gives the product to rather plants to take a product out from a certain manufacturer or a country, there are a lot of issues involved.

It's not a knee-jerk reaction that today the prices are high in Europe, and so we'll take it to India or China, it's not that.

There's a lot of thinking going into that.

Yes, Europe plus one situation is giving an impetus to that.

Some products which we are planning in '25 will be launched in 23 itself.

So yes, some products will Anupam Rasayan India Limited October 28, 2022 be fast-forwarded.

But again, coming back to your main point, we at Anupam prefers to take products which are having a long-term agreements or offtake agreement only.

That is the plan, and that is how we go about.

And customers like that they understand Anupam’s philosophy of a cost-plus basis price transfer, so they are also aware about it.

And of all the costs that would be incurred on to that product could be manufactured, So we are very clear on that part.

We tend to be a good supplier in that and that we optimize the process.

We share the benefits with the customer and ensure that his interests are arranged over long term period.

So that would be my answer to your first question.

On the second part, on the ROCE part, I'll ask Vishal bhai to take it.

Vishal Thakkar

See, on the ROCE side, as we said, yes, when you have a higher demand, you tend to have a better bargaining power.

However, the way we see things is that we look at sustainability, visibility and profitability.

And all three are completely important, and we would want to have a long-term sustainable business with them.

So we will be looking at a good ROCE.

However, it has to be also making sense for our customer and it should be sustainable that they don't look for other suppliers going forward.

So the range that we have been suggesting, which is 20-plus percent ROCE, should be there now, how many percentage points we can always discuss as we go.

But primarily, that's where we will be looking at.

Dhruv Muchhal

So basically, you would continue to target this 20% ROCE?

Vishal Thakkar

Yes, absolutely.

And customers are more than happy to offer that

Anand Desai

Dhruv want to add over here.

See, I mean, Anupam has been known to be a fair supplier., we do not take advantage of any manufacturer issues in Europe or anywhere else.

We have always tried to see our customer benefits, not our benefit because that is what pays off in the longer term.

And that is the hallmark of where Anupam stands.

All customers appreciate and understand.

And we know for a fact that many of most of the products that we offer are manufactured in Europe.

And in the last 12 months, a lot of things have happened in Europe, but we have never taken an advantage of what's happening over there.

We see our benefit, we see our understanding of the business, and we ensure that we come out looking as a rational supplier and not take advantage.

People do take advantage of customers in this situation, which we prefer not to and customer appreciate that customers are elephants.

They remember for a long time, and we prefer to be a rational supplier and not take advantage of not only a customer, even our supplier for that matter.

We are known to be a fair company and a logical company

Moderator · Conference Operator

Thank you.

Ladies and gentlemen, that was the last question.

I now hand the floor back to the management for closing comments.

Over to you, sir.

Vishal Thakkar

Thank you everyone for your questions and we hope we have been able to answer most of your queries.

If you have missed out on any of your questions, kindly reach out to our IR Advisers EY and we'll get back to you off-line.

Hope you have a good weekend.

Look forward to your Anupam Rasayan India Limited October 28, 2022 continued support in our growth journey.

Thank you.

Happy Diwali once again to everyone of you.

Moderator · Conference Operator

Thank you, members of the management.

Ladies and gentlemen, on behalf of Anupam Rasayan India Limited that concludes this conference.

Thank you for joining us and you may now disconnect your lines.