CLEAN — earnings call

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Prepared remarks

TECHNOLOGY LIMITED · MR. PRATIK BORA – VICE PRESIDENT – CLEAN

MR. SANJAY PARNERKAR – CHIEF FINANCIAL OFFICER – CLEAN SCIENCE AND

MR. PRATIK BORA – VICE PRESIDENT – CLEAN

SCIENCE AND TECHNOLOGY LIMITED · Management

Clean Science and Technology Limited July 17, 2025

Moderator · Conference Operator

Thank you very much.

We have a first question from the line of Rehan Saiyyed from Trinetra Asset Managers.

Please go ahead.

Rehan Saiyyed

So I have a couple of questions.

First on, sir, could you please what is the capacity utilization across the categories like MEHQ, Guaiacol, Palmitate.

Pratik Bora

We would like to mention capacity utilization across segments rather than products.

So Performance and FMCG are in the range of 75-odd percent.

Pharma is around 68%.

And HALS is around 22% for the quarter gone by.

Clean Science and Technology Limited July 17, 2025

Rehan Saiyyed

Okay.

Another question, sir, is regarding the HALS 944 and 783 performance.

Are you seeing any offtake momentum towards INR210 crore target for FY '26 that we have put in the last con call?

Pratik Bora

Sorry, we couldn't follow you.

Your voice was muffled.

If you could repeat the question.

Rehan Saiyyed

Sir, I'm asking how are the HALS 944, 783 performing?

Are we seeing any offtake momentum towards the INR210 crore target for FY '26 that we have got in last quarter?

Pratik Bora

Yes.

I mean the volume for 944 and 783 during this quarter was encouraging.

In fact, we have seen a good volume mix contribution coming from these 2 projects also.

Rehan Saiyyed

Okay.

And sir, regarding the capex guidance that you have given in the last quarter in FY '26.

So how much amount you have deployed in the quarter 1?

Pratik Bora

For quarter 1, INR80 crores infused.

Yes.

So quarter 1 INR80 crores is infused, additional INR120-odd crore could be infused in the subsidiary company.

Moderator · Conference Operator

The next question is from the line of Sanjesh Jain from ICICI Securities.

Sanjesh Jain

A few questions I have.

So first, starting with the standalone.

I think phenol prices have fallen 8%, and we are largely growing by volume that implies that even the lower raw material benefit is benefiting us on the margin side.

Will that be a fair assumption?

Pratik Bora

No, no, Sanjesh.

So actually, for the quarter, our consumption prices have for the phenol specifically have remained in line with the last quarter on a sequential basis....

Sanjesh Jain

No, no Y-o-Y?

Pratik Bora

Yes.

On Y-o-Y basis, you're right.

On Y-o-Y basis, we have got some benefit there.

Sanjesh Jain

Okay.

The second thing you have said that...

Pratik Bora

Louder Sanjesh.

Sanjesh Jain

Can you hear me now?

Pratik Bora

Now better.

Sanjesh Jain

Okay.

Sorry.

What has gone with the non-established product?

When we say non-established product in the standalone, what exactly are we referring to the products?

Siddharth Sikchi

So these are products like DCC, TBHQ, vereitraol, corbil palmitate.

So here, there was just a little slower demand in this quarter.

Clean Science and Technology Limited July 17, 2025

Sanjesh Jain

Because if I see it's solvay’s, they have talked about slowdown in phenol and phenol derivative globally, the demand is coming down.

That's the same thing given we are seeing the same trend.

There is no different in that.

Siddharth Sikchi

Absolutely.

We are seeing, but we have still tried to maintain volumes in our existing businesses.

I mean, in our established products.

But overall, there has been a numbness or a slower in demand.

That is why we have seen that in more impact giving in our non-established products.

Sanjesh Jain

Any geographically different, we are seeing India being fine, China, US, Europe, which are the geographies?

Siddharth Sikchi

China is very slow.

Europe is slow.

China, Europe and United States was still dabbling between the tariff tensions, so that has also been a little slow.

Sanjesh Jain

Very clear.

Particularly pharma, I see there is a 29% sequential decline this quarter.

Anything which has gone wrong there or it is this glycol which is still continuing to be very volatile?

Siddharth Sikchi

No. It has been the other way around.

So what happened is because like you knew, Guaiacol was very slow and we got a lot of pickup.

I mean, we picked up Guaiacol in quarter 4.

So today, glycol is sold out, but the base was very high in quarter 4 because we sold maximum Guaiacol during the quarter 4 to vanillin producers.

Sanjesh Jain

Okay.

Instead of cough syrup, we have now even reached out to vanillin.

Earlier, we used to be...

Siddharth Sikchi

You remember we had surplus stock.

We had excess inventory, which we were able to let it -- I mean, which we were able to sell it to vanillin producers.

Sanjesh Jain

Very clear.

No, that's fair.

Because that also restricts our MEHQ production, right?

Siddharth Sikchi

Absolutely.

That is why we never hold MEHQ production.

We rather prefer to stock up Guaiacol.

Sanjesh Jain

Very clear.

My next question is on the gross profit margin in the console minus stand-alone, that swinged a lot.

Last quarter, it was like 62% and this quarter 42%.

What explains such a sharp movement?

I know it's a small base, but still curious?

Pratik Bora

So Sanjesh, last quarter, our RMC was 45% for the subsidiary company, which this quarter is around 62%.

That is primarily because last quarter, we were carrying a higher closing stock and hence related overheads.

That led to a lower RMC last quarter.

So it's more of an accounting impact.

But as we have been maintaining HALS, RMC is in that range of 65%.

Sanjesh Jain

Got it.

So 35% gross profit margin is what we are telling and that we hold on?

Clean Science and Technology Limited July 17, 2025

Pratik Bora

Yes.

Sanjesh Jain

Okay.

And from the full year perspective, what we talked about earlier, I think revenue we may miss, but margin we may still achieve.

That's the way we look at it, correct?

Siddharth Sikchi

See, subsidiary is a little tricky because we are like seeing a slower demand, but HALS will pick up and with the performance chemical 1, we are very upbeat about the quarter 4 numbers.

And hence we feel we should not really miss the profitability even if we miss on the revenue side.

Sanjesh Jain

Got it.

One last question from my side.

Can you now know that we have started water trial and all, can you throw more light on the -- this product 1, we are now going to expect, say, the end of next quarter?

Siddharth Sikchi

Sanjesh, water trials will begin in the next three to four weeks.

And post that, we will share much more details.

Sanjesh Jain

Clear.

So probably in the next call, we will hear more on it.

Siddharth Sikchi

Absolutely.

In the next quarter concall, you will have all the details.

Sanjesh Jain

Thanks for all those answers and best of luck for the coming quarters.

Siddharth Sikchi

Thank you, Sanjesh.

Moderator · Conference Operator

Thank you.

The next question is from the line of Jason Soans from IDBI Capital.

Please go ahead.

Jason Soans

Thank you so much sir for taking my question.

Sir, just wanted to know, last call we had a very sanguine road map for HALS for FY '26 and targets beyond that also.

So the volume target was probably 4,500 tons and now sales of INR210 crores, which we are targeting for FY '26.

Just wanted to know, sir, with the run rate in Q1, are we still maintaining that or just some color on that?

How do you see that shaping up?

Siddharth Sikchi

So we are trying to maintain that number.

In fact, by the newer HALS, which we are trying to introduce, which are more expensive and which we feel will be able to help us to complete the number which we have stated in the last call.

So as of now, we are holding to that statement.

Jason Soans

Sure.

Sir, possible to give with the volume and the sales this quarter for HALS?

Pratik Bora

This quarter the sales is close to INR24 crores in terms of value.

And in terms of volume, it's close to 580 tons.

Jason Soans

Okay.

Thanks for that, sir.

And sir, I just wanted to understand also one more thing.

I mean, sir, in terms of competition, of course, you're looking at it as an import substitution product, which Clean Science and Technology Limited July 17, 2025 it HALS.

Now I understand that everything can't be spelled out.

But just wanted to know, there are players like Chinese players like Rianlon also competing with -- in this segment in the market and being a major competitor as well.

So just wanted to know if -- just whatever you could share, what steps are we taking to basically compete with such players with such a big TAM market for us.

Just wanted your perspective on that?

Siddharth Sikchi

Yes.

So the perspective is Rianlon is not the real competitor.

The real competitor in China is Suqian please note that it's English name is Unitechem .

So that is a major competitor for all the HALS producers, not just to us, but for all the players.

What are we trying to do is, A, of course, trying to increase our yield efficiencies, which is happening as we speak because as and when our plant is running more capacities are coming up, whatever we are understanding for them -- from this process, the yield is improving, which will help us to compete.

Secondly is we are trying to diversify into more complex products.

One is 2020, which we mentioned which we are starting next month.

So all these is giving customers confidence that it is not that we are only into four, five basic HALS product, but we are also into more complex series, which gives them the confidence to switch over as my base keeps increasing, my fixed costs keep reducing and thus the EBITDA margin should improve.

Jason Soans

Sure.

Thanks for that.

And just finally, I just would want to know, sir, you did mention that established products saw and exhibited good growth in this quarter.

Any particular reason for that?

So I would assume MEHQ, BHA, that did well for you.

So just any particular reason you saw in this quarter for this growth?

Siddharth Sikchi

This is just volume momentum.

I mean, nothing in general, but I mean these are -- I mean, this is just regular for us.

But the most important point which we are trying to make is we have not lost any market share to any competitor if that is important for others to understand.

Jason Soans

Sure sir.

Thanks.

Those were all my questions.

Thank you for answering them.

Moderator · Conference Operator

Thank you.

The next question is from the line of Rohit Nagraj from B&K Securities.

Please go ahead.

Rohit Nagraj

Thanks for the opportunity.

Sir, first question is you mentioned just now in your earlier remarks as well that we will be going into the premium HALS.

So in terms of the market, in terms of the customer, will it be a similar set of customers or we will have to scout for new set of customers?

So how are we looking at from the marketing and scale-up perspective?

Siddharth Sikchi

Similar customer base.

Rohit Nagraj

Okay.

Clean Science and Technology Limited July 17, 2025

Siddharth Sikchi

In fact, by introducing these higher version of HALS, we are trying -- the customer is getting that confidence that we are equivalent to any other European player who has the entire basket to offer.

Thus, it is helping us so that -- I mean, when we are supplying these -- I mean, these higher grades, so the regular grades, I mean, they will increase that wallet share with us.

Rohit Nagraj

Right.

Got it.

That's helpful.

Second question, in terms of -- I mean, we've been hearing that Q4, there were generally frontloading in the US.

And subsequently, there has been some impact in terms of exports, particularly to the US market.

So have we also experienced a similar situation during the quarter gone by and probably for the last maybe 15 days during this quarter?

Siddharth Sikchi

That has happened overall because the customers wanted to stock up because they were really unsure about the tariffs.

So yes, to some extent, yes, but it's not that the biggest item in our list.

Rohit Nagraj

Sure.

Just one last clarification.

On the stand-alone numbers, we have clocked the highest ever EBITDA margins.

So any specific reason beyond the raw material cost being low?

Siddharth Sikchi

Product mix.

I mean the non-established products sold lower than the established ones.

And hence, the margins in our established products have always been better than the non-established products.

That's all.

Moderator · Conference Operator

The next question is from the line of Ankur Periwal from Axis Capital.

Ankur Periwal

First question on the pricing trend across all the products, the core one as well as HALS side.

Any changes that you're seeing from last quarter versus this quarter?

Siddharth Sikchi

Not during the quarter, but if the raw material prices correct in the future, then yes, we might have to reduce the finished product price, which is a very general trend.

Ankur Periwal

Sure.

And even in that scenario, the percentage gross margins that we have been guiding for will largely stay intact there because it's a price...

Siddharth Sikchi

Yes, it's more or less.

Pratik Bora

Yes, more or less.

Ankur Periwal

Sure.

Second thing on the new product launches, the Performance Chemicals 1 and 2.

One, you mentioned that samples have already started going on.

How has been the feedback?

Is there any sort of teething trouble that one can think of there, maybe some iteration required or the feedback...?

Siddharth Sikchi

The pharma plant -- I mentioned, Ankur, the pharma plant, which we started has -- now the samples have been going out to the customers.

The Performance Chemical 1, where the water trials will begin in the next 3 weeks' time, then the plant will start, the production will come and Clean Science and Technology Limited July 17, 2025 then the samples will go out to the customer because customers would be keen to test the commercial sample, not the lab or pilot samples.

Ankur Periwal

Sure.

So that was more for the pharma product there, not performance.

Performance probably will happen next quarter?

Siddharth Sikchi

Yes.

The pharma product, Performance Chemical one.

I think the sampling will start somewhere in September, October.

Ankur Periwal

Okay.

Fair enough.

And just lastly, on the revenue breakup bit, while you did mention that China and Europe looks lower, US and India specifically have shown reasonably good numbers on a year-on-year basis.

Will this delta be largely backed by HALS here?

Or specifically for US

Pratik Bora

No, no. Ankur, on an annual basis, it is largely backed by other products also on the Performance segment.

HALS is one contributor.

Ankur Periwal

So HALS right now also is largely India 75% you mentioned?

Pratik Bora

Correct.

Yes.

So that's what I'm mentioning is other products also from the Performance segment.

Ankur Periwal

Okay.

Fair enough.

Moderator · Conference Operator

The next question is from the line of Abhijit Akella from Kotak Securities.

Abhijit Akella

Yes.

So Siddharth, if you could please share some insights into this communication from the promoter and promoter group regarding the intent to significantly reduce the stake, it seems.

So if you could please just help us understand the exact plans out here?

Thank you.

Siddharth Sikchi

So the basic plan is some fraction of the Boob family are exiting part of their equity.

I am not selling a single share, and the business will remain as usual.

And I think -- I mean, anything more or I think this is what it is.

Abhijit Akella

So at present, the total promoter stake is 75%, and we intend to keep it above 50%.

So up to 25% -- up to 25% is...?

Siddharth Sikchi

24-ish.

Abhijit Akella

And -- okay.

This is -- I mean, entirely to do with estate planning purposes basically.

Siddharth Sikchi

Absolutely, absolutely.

From the Boob family.

Clean Science and Technology Limited July 17, 2025

Abhijit Akella

Okay.

The second thing I just had was on the 18% to 20% EBITDA growth guidance that we had sort of communicated last quarter.

So in light of the softness in business conditions, does that still seem like an achievable target for us for this year?

Pratik Bora

We think it could be in the range of 15% to 18%.

But we'll have a little more clarity by Q2 end.

Because we are also banking on DHDT stepping up, Performance Chemicals 1 starting to contribute and the higher grades of HALS to contribute.

So 18% to 20% could be moderated to 15% to 18% at this stage.

Siddharth Sikchi

But just allow us a couple of months, I think, at least 2 months more once we get this clarity on, so we would be far more clear on the numbers going forward.

Abhijit Akella

Sure, sure.

I appreciate that.

So in terms of the quarterly trajectory, maybe can we expect that 2Q might remain comparably subdued similar to 1Q?

And then the real pickup growth starts to happen in 3Q and especially in 4Q.

Is that how we should think about it?

Siddharth Sikchi

Absolutely.

Yes, yes.

Yes, that's a good way to think about it.

Abhijit Akella

Got it.

And just one last thing from my side.

In the MEHQ/anisole derivatives business, have we started to see any early signs of any competition products in the market yet?

Or is that still not visible?

Siddharth Sikchi

Not yet.

And hence, we mentioned that our volumes of our established products have remained intact.

We have not lost any business.

So we are not seeing anybody, any -- I mean, at the moment.

Abhijit Akella

Okay.

Great.

All the best.

Moderator · Conference Operator

The next question is from the line of Arun Prasath from Avendus Spark.

Arun Prasath

So the first question is on the two grades that you spoke on the HALS.

This is something that we have done recently, or this was always in the plans.

How should we look at it?

Siddharth Sikchi

So out of two, one was already in the pipeline, we always wanted to do.

The other one, which we are trying to start in Q3 is something which we learned is very critical, and there are -- it's a single source product for the customers.

So I think we developed the process, we developed the tech.

We made a pilot sample, submitted to the customers, got approval.

And I think this is something we should do on priority because it will help us increase our margin and that product is itself about $30, $35 a kg.

Arun Prasath

Okay.

So one grade you mentioned that 2020.

What is other grades mean?

Can you just number it?

Siddharth Sikchi

Let us start that, Arun.

We will give us a couple of weeks, months, yes.

Perfect.

Clean Science and Technology Limited July 17, 2025

Arun Prasath

Okay.

Understood.

And is there any such more opportunity on the HALS side where we haven't thought about, but customers demanding or requesting us to do that?

Any such more opportunities...?

Siddharth Sikchi

See what happens is, Arun, once we started with the basic 770, 622, 944, 119, then the customer asked us, can you make these two grades.

Once we have established those, when we start these, then I'm sure the customers will come up that since that you have made these, can you come up with these as well?

So it is a lot of interest coming from customer side.

And I think it will keep coming as and when we keep gaining their confidence by making such products which are, I mean, not made by all.

Arun Prasath

Understood.

Siddharth Sikchi

Niche market.

Arun Prasath

Yes.

Right.

And do we need to do any modification, or our existing facilities is good enough to handle this and...

Siddharth Sikchi

A little bit modification.

Some modifications are needed.

But because we are not running our existing plants at full capacities, hence, we can take that liberty to quickly change over and produce certain grades, so that there is improved plant utilization.

Arun Prasath

Understood.

And on the domestic front, have we done any incremental market share gains on a quarter-on-quarter basis or...

Siddharth Sikchi

Absolutely.

All products, I think, have now increased in domestic.

So the 622, 944, 119, which hadn't picked up so much.

Now most of the accounts have at least started trying using the product.

So I think in the next quarter, 2 quarters, we will have much more better penetration even in Indian market for other HALS as well.

Plus, when we are introducing the higher HALS, which was not even available for some of the users have given them the confidence that with us or with partnering with us, they will have access to products, which was not even accessible to them.

Arun Prasath

I just need one clarification, Siddharth, because Q-o-Q, ours HALS revenue seems to be more or less flat, but our export has grown.

So I thought domestic, we have done a little bit lower on a quarter-on-quarter basis...

Siddharth Sikchi

No, no, because of absolute prices have come down a little bit.

Arun Prasath

Okay.

Pratik Bora

Volume-wise, there is no reduction.

And point two is, if you see, our exports have also grown.

So month-on-month, now we are starting exports to Vietnam, which market we didn't have probably 3 months ago.

So these newer markets are now opening, which, of course, we had Clean Science and Technology Limited July 17, 2025 started work probably 6 months ago, and the fruits are now -- I mean, now these orders are coming through.

Arun Prasath

Okay.

Understood.

My second question is on the Performance Chemical 1.

Is this primarily a domestic product or export market?

Siddharth Sikchi

Both.

Arun Prasath

Okay.

And you said that after the order trials, you'll be doing the sampling from the commercial plant.

Typically, what is the time line from the sample sending approvals and then ramping up?

Any rough time lines?

Siddharth Sikchi

Between 2 months to 6 months.

So for some people, it could be as little as 2 months, probably in India could be a very quick market for us.

Taiwan, China, South Korea could be very quick.

Europe might take a little bit longer.

That's all.

Arun Prasath

Okay.

And bulk of the revenues that we are expecting that is from the ex-Europe markets?

Or - - where is the demand coming -typically coming from?

Siddharth Sikchi

Demand is global demand, but the quickest market I mentioned would be Asia market for us.

Arun Prasath

Okay.

And that's where the maximum volumes will be looking to?

Siddharth Sikchi

Eventually, all major volumes eventually go into Asia only.

Moderator · Conference Operator

The next question is from the line of Jason Soans from IDBI Capital.

Jason Soans

Actually, just a clarification.

I just wanted to know that at a run rate of INR10 crores for HALS, there's a breakeven.

That's what you mentioned.

Is that correct?

Siddharth Sikchi

Absolutely.

Just to clarify, we just not have any -- I mean, if we attain a revenue of INR10 crores, we will do a breakeven in the subsidiary.

Jason Soans

That's a monthly run rate, right, Siddharth?

Siddharth Sikchi

Of course, monthly, monthly.

Jason Soans

Yes, monthly, monthly.

Okay.

Moderator · Conference Operator

The next question is from the line of Abhigyan Srivastav from Marcellus Investment Managers.

Abhigyan Srivastav

Okay.

Sir, I wanted to ask a follow-up question on the stake sale that was earlier asked.

You mentioned that the final stake would be 51%.

Do you mean that the Boob family would continue Clean Science and Technology Limited July 17, 2025 to retain more than -- so the Boob family would continue to retain 51%?

Or would it be the total promoter stake that would remain above...?

Siddharth Sikchi

The total promoter stake from 75% will go down to 51%.

The difference of 24% will be sold by a faction of the Boob family.

Moderator · Conference Operator

As there are no further questions from the participants, I now hand the conference over to Mr. Siddharth Sikchi for closing comments.

Siddharth Sikchi

Thank you so much for all of you for taking time out and to attend our earnings call.

Looking forward to connecting you post the Q2 numbers.

Thank you so much and have a great day.

Moderator · Conference Operator

On behalf of Clean Science and Technology Limited, that concludes this conference.

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