Clean Science and Technology Limited

Clean Science reported a robust Q3 FY25, with consolidated sales reaching ₹240 crores, marking a 23% year-on-year increase and remaining steady sequentially. Consolidated EBITDA stood at ₹98 crores, growing 14% YoY and 10% QoQ, with an EBITDA margin of 41.5%. Profitability (PAT) for the quarter was ₹66 crores, up 5% YoY and 11% QoQ. Standalone figures also showed strength, with EBITDA at ₹102 crores (up 8% QoQ) and PAT at ₹74 crores (up 10% QoQ), achieving a PAT margin of 32.5%. The company attributed margin improvements to a favorable product mix, reduced utility costs, and a slight reduction in raw material prices coupled with a depreciating rupee.

The HALS product line demonstrated significant progress, with sales volume scaling to approximately 190 tons per month during Q3 FY25, and an exit rate of 200 tons per month in December. The company aims to reach 300 tons per month by Q4 FY25 and targets 3000-4000 tons in total sales for FY26. The HALS product offering has diversified to include HALS 701, 770, 622, 944, 119, and 783 (a blend). Management expects the average realization for HALS to improve from $4.5 in Q3 FY25 to $5.5-$6 in FY26, driven by a favorable product mix towards higher-priced advanced HALS like 944 and 119, which are targeted for European and American markets.

Clean Science successfully commercialized two new products in Q3 FY25. DHDT, a pharma intermediate for Lamivudine, positions the company as a key domestic manufacturer, driving import substitution. This product, developed with a CAPEX of ₹30 crores, is expected to generate ₹80-90 crores in revenue and achieve 70-80% capacity utilization within 1 to 1.5 years. Additionally, BHT, an antioxidant for the Performance segment, was introduced with minimal CAPEX of ₹2-3 crores by utilizing existing HALS facility capacity. BHT is projected to contribute ₹60-80 crores in annual revenue from 2000-3000 tons of production, strengthening the company's antioxidant portfolio.

The company incurred CAPEX of ₹160 crores during the first nine months of FY25, primarily for its subsidiary, Clean Fino-Chem. The construction of a new performance chemical product facility is on track for commercialization by H2 FY26. This ₹150 crore CAPEX is anticipated to yield ₹300 crores in revenue on full runs, with peak revenue expected in two years. Another ₹150 crores CAPEX is planned for water treatment in the next fiscal year. The subsidiary, commercialized in March last year, is currently impacted by higher fixed overheads due to its greenfield nature but is expected to break even at ₹11-12 crores of monthly revenue and reach optimal utilization within 2-3 years as new products scale up.

Management acknowledged the challenging chemical industry environment and ongoing price competition, particularly from Chinese and European players in the HALS market. However, Clean Science highlighted its competitive advantages, including its unique clean technology, backward integration, and different geographical location, which appeals to customers seeking non-Chinese/non-European sources. The company has established a robust distribution network across Europe, Latin America, the US, Gulf, and South Africa to drive market penetration for its HALS portfolio. The DHDT product is also seen as an import substitution opportunity in the Indian market, where the company faces no direct domestic competition.

Clean Science continues to advance its ESG commitments, expanding its solar capacity by adding a 400-kilowatt rooftop solar plant at its subsidiary. The company also uploaded an updated sustainability report for FY24 based on GRI standards. In a positive move for shareholders, the Board approved an interim dividend of ₹2 per share. These initiatives underscore the company's focus on sustainable operations and shareholder returns.