TANFAC Industries Ltd (TANFACIND) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to TANFAC Industries Limited Q2 FY '27 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero, on your touchtone phone. Please note that this conference is being recorded. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions, and expectations of the company as on the date of this call. These statements are not guarantees of future performance and it may involve risks and uncertainties that are difficult to predict. I would now like to hand the conference over to Mr. Afzal Malkani, Managing Director of TANFAC Industries Limited. Thank you, and over to you, sir.
Afzal Malkani (TANFAC Industries Limited): Thank you. Good morning everyone, and very warm welcome to TANFAC Industries Q2 and H1 FY '27 earnings call. Joining me today are Mr. Himangshu Gupta, our Chief Executive Officer; Mr. N.R. Ravichandran, our President and Chief Financial Officer; and SGA, our investor relations advisers. The first half of FY '27 has been an important period for TANFAC as we continued to make progress on our growth initiatives, while navigating a challenging external environment. We are pleased to announce that Q2 FY '27 was a landmark quarter for TANFAC as the company achieved its highest-ever quarterly revenue of approximately 230 crores, growing 37% YoY. For the first half, revenue grew by 21% to approximately INR 418 crores. Despite elevated raw material prices, higher energy costs, and ongoing geopolitical uncertainties, we delivered healthy revenue growth supported by an expanding product portfolio and stronger customer relationships. This performance is encouraging and reflects the progress we are making in expanding our business across existing and newer fluorochemicals applications. During the quarter, we increased our solar grade DHF manufacturing capacity from 20,000 metric ton per annum to 25,000 metric ton per annum through debottlenecking, representing a 25% increase in installed capacity by incurring nominal capital expenditure. We have added few new products in our fluorinated inorganic fluorides portfolio, expanding our offerings to existing and new customers. These developments reflect our continued focus on diversifying our product offerings and serving broader range of industrial applications. As these products are still in the early stages of commercial
Afzal Malkani (TANFAC Industries Limited): We remain focused on scaling up production, enhancing operational efficiencies, and improving capacity utilization. On the gross margin front, in our AHF business, our gross profit per tonne has remained largely stable. The moderation in gross profit margin percentage is primarily attributable to higher product realizations, which have increased the revenue base and consequently lower the margin percentage despite stable gross profit per tonne. While elevated sulphur prices have impacted input costs, we are beginning to see signs of price moderation, which is encouraging. Additionally, the initial ramp-up phase of certain newly introduced products where gross margins are yet to reach their optimal levels. We remain focused on improving cost pass-through, optimizing operating efficiencies, and scaling up newly introduced products. As these products achieve higher volumes and raw material prices pass through, we expect profitability to improve progressively. Another important area of focus during the quarter was raw material procurement and supply chain management. Given the ongoing geopolitical developments in West Asia and the potential risk of disruption to international supply chains, we undertook bulk procurement of critical raw materials, primarily fluorspar, towards the end of the quarter, leading to a higher-than-normal working capital. This was a precautionary measure to ensure adequate raw material availability and continuity of operations. We also continue to strengthen our supplier relationships and procurement practices while maintaining a close focus on operational efficiency and cost optimization. Moving to another key development, I am pleased to share that we successfully completed our preferential issue of approximately INR 100 crores in September 2026, including an investment of approximately INR 61 crores from our promoter, Anupam Rasayan. With this, following our INR 250 crores QIP completed in June, we have raised approximately INR 350 crores during the first half of FY '27. The successful completion of this fundraise has further strengthened our financial positions and provides us with greater flexibility to support our ongoing expansion plans and future growth initiatives. On the strategic front, our upcoming HFC-32 refrigerant gas project continues to progress as scheduled with target commissioning in Q3 FY '27. This remains one of our most important near-term growth initiatives and marks a significant step in our downstream expansion journey. Looking ahead, we expect the second half of FY '27 to deliver a strong performance than the first half, supported by the scale-up of newly introduced products, improved operating leverage, and anticipated moderation in raw material prices. Further, the commencement of commercial production from our refrigerant gas project is expected to provide an additional growth driver towards the end of the financial year. With that, I invite our CEO, Mr. Gupta, to share his perspective on our fluorinated product portfolio, emerging opportunities, and product development initiatives. Thank you, and over to you, Mr. Gupta.
Himangshu Gupta (TANFAC Industries Limited): Thank you, Mr. Malkani. Good morning, everyone. I will take you through some of the developments and the demand we are seeing across our key applications, our product development initiatives, and the progress on the HFC-32 project. We see opportunities wherein fluorine-based chemistry finds wider application in specialty polymers, electronic chemicals, and the new generation refrigerant gases apart from pharmaceutical ingredients and agro molecules. There are also opportunities arising from import substitution and customers looking to diversify their supply chains. Our focus is on developing application-specific products to address these requirements. We get an edge to serve customers by virtue of our expertise in handling fluorine for the past four decades. This makes TANFAC among select few companies in the world specializing in the handling of fluorinated molecules. These are specialized industrial applications where product quality, technical specifications, and consistent supply play an important role. At the same time, import substitution and the increasing focus among customers on diversifying their supply chains present ample opportunities for domestic manufacturers like TANFAC.
Himangshu Gupta (TANFAC Industries Limited): continuous to build on these opportunities by offering a wider range of application specific products. Our focus is not simply to add more products to the portfolio, but to develop value-added products that meet specific customer requirements in terms of purity, consistency, and application performance. Beyond expanding our product range, our focus is also on increasing the value addition within our existing portfolio. Our R&D and pilot plant infrastructure supports product development and the scale up of products towards commercial manufacturing. We have already developed several products at the lab stage and scaling up various organic and inorganic products from the R&D to the commercial production. Another important area is our ongoing research and technology development. Our R&D focus on refrigerants, fluoropolymers, fluoromonomers and electronic chemicals. We are also exploring vapor phase chlorination technologies for application in electric vehicles, energy storage, advance surface protection, and aerospace. Currently, we have 10 products under development in this various advanced applications. We are also collaborating with academic and research institutions to bolster new product development and identify additional applications for existing products. These efforts are aimed at strengthening our technical capabilities and creating a broader pipeline of fluorinated products over the longer term. Coming to our HFCC project, as we approach commissioning in Q3 FY '27, our focus is on ensuring operational readiness and a smooth transition to commercial production. Overall, our priorities over the coming quarters will be to strengthen our product capabilities, translate product development into commercial opportunities, and ensure disciplined execution across our manufacturing operations. We believe these efforts will support our objective of building a more diversified and a higher-value fluorochemicals business over the coming years. With that, I would now request our President and Chief Financial Officer, Mr. Ravichandran, to take you through the financial performance for Q2 and H1 FY '27 in greater detail. Thank you, and over to you, Mr. Ravichandran.
N.R. Ravichandran (TANFAC Industries Limited): Thank you, Mr. Gupta. Good morning, everyone. I will now take you through the company's financial performance for the second quarter and first half of FY '27. Starting with the quarterly performance, revenue from operations for Q2 FY '27 stood at Rs. 230 crores compared with Rs. 169 crores in Q2 FY '26, registering year-on-year growth of 37%. On a sequential basis, revenue increased by approximately 23% from Rs. 187 crores in Q1 of FY '27. The growth was mainly driven by higher realizations and contributions from newly introduced products. For the first half of FY '27, revenue from operations increased by 21% year-on-year to Rs. 418 crores compared with Rs. 345 crores in H1 of FY '26. Coming to gross profitability, gross profit for Q2 FY '27 stood at Rs. 75 crores compared with Rs. 66 crores in the corresponding quarter of last year. However, gross margin moderated to 32.5% compared with 39% in Q2 of FY '26 and 37% in the preceding quarter. Profit after tax increased in, increased to Rs. 19 crores from Rs. 17 crores in Q2 of FY '26, registering year-on-year growth of approximately 11%. For the first half of FY '27, profit after tax stood at Rs. 36 crores, which is in line with Rs. 36 crores in the corresponding period last year. Now, coming to our balance sheet and financial position, the successful completion of our equity fund raises during the first half has significantly strengthened the company's capital base, providing greater financial flexibility to support our ongoing expansion projects and future growth initiatives. Coming to our key financial ratios, the company's adjusted return on equity for S1 FY '27 stood at approximately 18%, while adjusted return on capital employed stood at approximately 19%. These ratios exclude the net proceeds from the QIP and preferential issue to better reflect returns on the company's existing capital base. Our fixed asset turnover ratio stood at approximately 3.5x on annualized basis for
N.R. Ravichandran (TANFAC Industries Limited): H1 FY27 compared with 3.4 times in FY26, reflecting improved revenue generation relative to our fixed asset base. Overall, while profitability and operating cash flows were impacted by higher input costs and working capital requirements during the first half, our financial position remains well supported. Going forward, our financial priorities remain focused on improving working capital efficiency, optimizing operating costs, and maintaining financial discipline, while supporting our ongoing expansion plans. That is it That is it from my side. We now be happy to take your questions. Thank you.
Moderator: Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes 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 handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Meet Gada from Sanghvi Family Office. Please go ahead.
Meet Gada (Sanghvi Family Office): Yeah, thank thank you so much for the opportunity. Good, resilient quarter in challenging times. My first question would be that, what is the status of R-32 project in terms of stage of completion and when does the trial production start and what would be the ramp-up expectations? Also, what kind of utilization one should expect in FY27, 28, and 29? And the other question would be, how has been the activity from the industry lately, like in terms of import bookings or manufacturing pace, as we enter the last 2 months of quota determination period? And what kind of impact do we have in CY27? Yeah.
Himangshu Gupta (TANFAC Industries Limited): Yeah, the first question, Mr. Meet, is the status of the R-32 project. So, everything is on track. 90% of the work has been completed. And as on September 26 end, we we have already committed about INR360 crores of rupees, which represents about 90% of the total project cost. So, that is the current status of R-32 plant for us, HFC-32. And your second question was that you asked about what is the utilization rate, right? of HFC-32. So, in this financial year, I think we are expecting to utilize about 20% of that utilization in the last quarter only, because we'll get that benefit only in the last quarter, mainly. And next year, we expect about 95% of utilization. And the coming years, almost 95% to 100%, you know, 90% to 100% of in the range of this only, yeah. That is our answer. And about the commercial activities, you were asking about the imports and other things. I think the it is going on normal, the Chinese prices are elevated and the Indian prices are lower than the Chinese prices. So, there is no benefit as such in importing. So, Indian domestic demand is being catered by the Indian manufacturers mostly and remaining, you know, I I very little import is expected is coming in, it's not much. So, it's going on smoothly. I don't see anything any overturns or new things or any significant changes happening in the last 2 months of this calendar year, yes, yeah.
Meet Gada (Sanghvi Family Office): Got it. Thank you. My other question would be that the gross and EBITDA margins are down sharply during the quarter on YoY and QoQ basis. You know, how should one look at the margin for H2 and, you know, how do the margin shape up for FY28 and 29 given the increased contribution from R-32, you know, which has a better margin which is a better margin product and would be helpful if you can quantify the same.
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