Archean Chemical Q4 FY25 Earnings Analysis

- June 2024 quarter marked the lowest sales in 2-3 years; improvement expected going forward with new units addition. - Anticipated volume pickup over recent months in bromine and salt, with continual efforts to increase volumes. - FY 2026 likely to see double-digit revenue growth due to base business recovery and derivative business ramp-up. - Bromine production targeted at 20,000 to 25,000 metric tons in FY 2026, including captive consumption. - Bromine derivatives business (Acume) expected to contribute significantly in FY 26, with clear brine fluids and PTA synthesis ramping up. - Salt business recovering post-monsoon and cyclone disruptions; aiming for 1 million to 1.2 million tons run-rate soon. - Oren Hydrocarbon units being restarted progressively, expected to enhance revenue from this segment in FY 26. - Order book remains healthy with volumes locked in for next 6-12 months; new client acquisitions signal future growth.

- Company anticipates a recovery and gradual pickup in demand for bromine and salt businesses starting FY ’26. - Bromine production target for FY ’26 is 20,000 to 25,000 metric tons including captive consumption, signaling potential volume growth. - Bromine derivative business (clear brine fluids and PTA synthesis) expected to ramp up, contributing to meaningful revenue growth in FY ’26. - Salt volumes are set for improvement post logistics disruptions, aiming for a 1 to 1.2 million tons run rate in coming quarters. - Revenue growth for FY ‘26 is expected to be in double digits, driven by base business growth and derivatives ramp-up. - Operational profits and EBITDA margins improved in Q3 FY ’25; continued focus on cost optimization and supply chain efficiency. - The company remains resilient to market challenges and committed to long-term value creation through investments. - No large capital expenditure planned in near term, helping maintain a strong, net debt-free balance sheet.

- **Semiconductor Facility**: Through subsidiary SiCSem Private Limited, an investment of about Rs. 3,000 crores is planned for a compound semiconductor fab in Odisha, targeting industries like electric vehicles, energy storage, and data centers. Land allotment and groundbreaking are done; next steps include permissions and construction over 24-30 months post-shovel down (post-Jan 2025). - **Clas-SiC Investment**: Strategic investment in UK-based Clas-SiC Wafer Fab Limited to acquire process know-how and technology for silicon carbide wafers. Initial subscriptions of GBP 10 million plus GBP 2.5 million secondary purchase completed; balance pending. - **Offgrid Energy Labs**: Committed $12 million investment in a US company specializing in zinc bromide battery technology, complementary to bromine business and focused on energy storage solutions. Pilot plant to be set up in the UK with plans for an India factory later. - **Near-Term Capex**: Limited to ground work, civil and equipment advances for semiconductor and Offgrid projects; no major CAPEX beyond these in the next 6-12 months.

- The Company remains net debt free and has a strong balance sheet, focusing on using the balance sheet prudently without unnecessary exposure at the parent level. - For the large Rs. 3,000 crores investment in the semiconductor facility through subsidiary SiCSem Private Limited, financing mix details will be clearer after financial closure; a good part of CAPEX is expected to be subsidized by the Odisha state government. - The Company will likely need to approach the banking system for financing this large project, but they remain sensitive to leverage. - No major capital commitments or big CAPEXs are planned in the near term (6-12 months) beyond groundwork and some equipment advances related to the semiconductor and Offgrid Energy projects. - No indication of planned equity fundraising; existing strategic investments and partnerships are primarily equity investments in subsidiaries or external companies (e.g., UK wafer fab).

- The Company’s order book continues to be healthy as of Q3 FY ’25. - Both bromine and salt volumes have been locked in for the next six to twelve months. - Despite short-term moderation in demand, the Company believes these are temporary. - New clients have been onboarded recently, indicating strong future growth and buyer confidence. - The company notes that the market is healthy with continued offtake for bromine products. - Approvals from oil and gas procurement for bromine derivatives are progressing, expected to improve quantities in coming quarters. - Logistics and supply chain challenges from previous weather disruptions have largely been resolved, aiding order fulfillment.