GFL LIMITED — Investor Presentation 2018

Aug 29, 2018

GUJARAT FLUOROCHEMICALS LIMITED

Investor Presentation

August, 2018

1

Table of Contents

• The story so far

• The platform created

• The path forward

Note: all numbers in this presentation are based on the Standalone Financial Accounts of GFL, and represent the chemical business alone.

2

The story so far

3

Revenues

Rs. in crores

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2500 800
694.9
2084.3
700 3.90
28.731.9 42.6
2000 CAGR 16.3% 94.5 38.3%
600
1532.1
502.3
1435.1 758.6
1500 104.5 500 288.2
1321.1 28.7
30.1
100.8 43.2 9.7
1140.9 30.121.3 39.533.4 19.6
400
37.922.7 508.4
430.9
1000 519.1 417.1 186.1
439.2
300
262.3 243.1 169.9
204.3 264.7
126.0
500 234.7 200 111.9
248.8
218.2 274.6
69.6
488.8
50.9
296.9 271.7 319.4 368.1 100
0 120.7
95.4
FY2014 FY2015 FY2016 FY2017 FY2018
0
Caustic Soda Chloromethanes Refrigerants PTFE VAP Others Excise Total Q1FY2018 Q1FY2019
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4

EBITDA and EBITDA margin

Rs. in crores

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700 35% 250 35%
28.6%
30.6%
595.7
212.6
600 30%
30%
200
500 25%
25%
21.4%
20.8%
19.5% 19.6%
400 20% 150
17.0% 20%
300.0
282.3 280.5
300 15%
104.5
15%
100
194.4
200 10%
10%
100 5%
50
5%
0 0%
FY2014 FY2015 FY2016 FY2017 FY2018
0 0%
EBITDA EBITDA margin Q1FY2018 Q1FY2019
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5

PAT and PAT margin Rs. in crores

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350 333.3 18% 140 18%
16.0% 16.6%
16% 16%
300 120 115.3
14%
14%
250 12.6%
100
12%
12%
200 9.2% 10%
80
10%
141.0 8% 63.3
150
6.5% 6.6%
6.0% 60 8%
6%
95.4
100
79.6 6%
74.4
4% 40
50 4%
2%
20
2%
0 0%
FY2014 FY2015 FY2016 FY2017 FY2018
0 0%
PAT PAT margin Q1FY2018 Q1FY2019
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Note: PAT and PAT margin are after excluding exceptional items

6

Revenues – Caustic Soda and Chloromethanes

Rs. in crores

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600 300 4.9%
274.6
264.7
248.8
488.8
500 250 234.7
13.3%
218.2
400 200
368.1
319.4
296.9
300 271.7 150
36.7%
26.5%
200 100
69.6
120.7
95.4 50.9
100 50
0 0
FY2014 FY2015 FY2016 FY2017 FY2018 Q1FY2018 Q1FY2019 FY2014 FY2015 FY2016 FY2017 FY2018 Q1FY2018 Q1FY2019
Caustic Soda Chloromethanes
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Note: Caustic revenues include revenues from byproducts from caustic plant

7

Revenues – Refrigerants and PTFE

Rs. in crores

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450 800
758.6
417.1
14.6%
400
700
350 34.9%
600
519.1
300 508.4
262.3 500
243.1 439.2 430.9
250 51.8%
54.9%
204.3 400
200
169.9
288.2
300
150
126.0
111.9
186.1
200
100
100
50
0 0
FY2014 FY2015 FY2016 FY2017 FY2018 Q1FY2018 Q1FY2019 FY2014 FY2015 FY2016 FY2017 FY2018 Q1FY2018 Q1FY2019
Refrigerants PTFE
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Refrigerants revenues include traded refrigerants

PTFE revenues include sale of wastes and fines from PTFE plant

8

Revenues – VAP and Others

Rs. in crores

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100 45
94.5
39.5
90
40 37.9
80
35
31.9
42.8%
70 30.1 30.1
30
60
25
117.3%
50
43.2 42.6
20
40
33.4
15
30
22.7
21.3 9.7
19.6
10
20
3.9
10 5
0 0
FY2014 FY2015 FY2016 FY2017 FY2018 Q1FY2018 Q1FY2019 FY2014 FY2015 FY2016 FY2017 FY2018 Q1FY2018 Q1FY2019
VAP (includes new fluoropolymers and specialty chemicals) Others
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9

Balance Sheet

Rs. in crores

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4000
3726
3500 3286
3176 761
3080
2967
3000
489 702
489
479
712
2500
626
432 561 534
2000
1500
2253
1000 2056 2061 2030 2050
500
0
FY2014 FY2015 FY2016 FY2017 FY2018
Fixed Assets Working Capital Strategic Investments Total
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4000
3726
246
3500 3286
3176
3080
2967 249
3000 291 193
442
2500
2000
3480
1500 3037
2885 2887
2525
1000
500
0
FY2014 FY2015 FY2016 FY2017 FY2018
Equity Net Debt Total
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10

ROCE and ROE

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25%
21.4%
20%
15.3%
14.5%
15%
11.4%
10.2%
10% 9.2%
5.6% 5.8% 5.4%
5.1%
5% 4.2% 4.1%
3.5% 3.2%
0%
FY2014 FY2015 FY2016 FY2017 FY2018 Q1FY2018 Q1FY2019
ROCE ROE
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ROCE = EBIT / Average Shareholder Funds + Total Debt – Strategic Investments – Treasury Investment ROE = PAT / Average Shareholder Funds – Strategic Investments

11

The platform created

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12
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Global Fluoropolymer Industry

• Global demand of various fluoropolymers would be around 336,000 MT per annum, growing at around 4-5% per annum

• Suppliers include a few Western producers and a handful of Chinese manufacturers

• Western producers not expanding because

• Tougher environmental regulations leading to higher capex requirements

• Higher operating costs impacting competitiveness adversely

• Limitation of feedstock capacities

• Chinese producers

• Cater primarily to domestic markets (less than 30% of Chinese production exported)

• Even in export markets, mainly focus on commodity grades

13

GFL strategy in the fluoropolymer market

• Differentiate from Chinese manufacturers and move closer to Western producers by

• Continuous improvement in product quality and consistency

• Understanding customer requirements and undertaking product development to fulfill customer needs

• Expanding range of PTFE grades for different applications – to become a full range supplier

• Strong presence in key geographical markets

• Ensuring regular and timely supplies through local warehouses in US and Europe

• Proactive engagement with customers providing them with technical and logistical services

• Engaging services of experienced business development and technical professionals with globally renowned expertise to hasten the process of market access, product acceptance and provide customer support

14

GFL positioning in the fluoropolymer market

• As a result of above strategy, GFL is now seen as

• Having a sustained and long term presence in the fluoropolymer market

• A reliable supplier of consistent high quality product at competitive prices

• Capable of engaging in product development to supply wider range of product grades

• Committed to make investments in additional manufacturing capacity to meet long term needs

• Consequently, GFL is now a major supplier of PTFE in European, US, Latin American and Asian markets

• In fact, with Western producers not able to meet growing requirement, and Chinese manufacturers not offering the wide range of product grades with consistent quality, GFL is viewed as the only new reliable, committed, strategic long term partner

• Additionally, with domestic market growing at around 12-15% per annum, GFL, being the only Indian producer, expects to continue to enjoy a significant share of the domestic market as well

• GFL envisons a substantial growth in PTFE sales because:

• New customers, who were initially reluctant to commence buying from GFL, are increasingly evaluating and approving GFL as a supplier.

• Existing customers are giving GFL an increasing proportion of their PTFE requirements.

15

GFL’s strategic advantage

• One of the most competitive producers of fluoropolymers due to its fully integrated manufacturing operations starting from basic raw materials

• Ability to develop new products and grades in a very short period fo time using its R&D capabilities

• Unlikely that new international competition will emerge, given complexity of business and limitation of feedstock availability

• Stringent and time consuming process of customer qualifications, approvals and meeting international standards creates a barrier to market access for others

• Stickiness of business once established, because of tedious process of customer approval

16

The path forward

17

Growth in PTFE

• GFL has further expanded its monomer and polymer capacity to cater to the growing demand of its products in all geographies

• Over the next 6 quarters, GFL expects a ramp up in volumes of the new grades of PTFE which have been developed and introduced in these markets

• The timely enhancement of capacities will ensure that GFL is able to cater to the new opportunities which have been created because of the larger product portfolio and growing demand

• GFL expects to consolidate its position and emerge as one of the top 3 suppliers of PTFE worldwide

18

Expansion in New Fluoropolymers

• After making successful inroads in the global PTFE markets, GFL is expanding its presence in other fluoropolymer products

• Considerable time, energy and resources have been invested over the past two years to develop the technology and build production capacities for a bouquet of specialty fluoropolymers

• • Product trials currently under way in all major markets – initial approvals already started coming in

• Ramp up of market in these new products expected to be much faster due to GFL’s established presence and reputation as a reliable, committed, strategic long term partner capable of delivering consistent high quality products at a competitive price

• Trade names of all new products registered

19

New Fluoropolymers business snapshot

• New fluoropolymers include FKM, FEP, PFA, PVDF, Micropowders and PPA

• Global market 1,35,000 tpa

• CARG 5% - 6%

• GFL capacity 6,500 tpa

• GFL global market share 4% - 5% (at full capacity)

• Annualised turnover at full capacity Rs 600 crores

• Annualised EBITDA at full capacity Rs 300 crores

• GFL is working on additional fluoropolymers that will keep on being added to the product portfolio

20

New Fluoropolymer: FKM

Substance Name:	Fluor Karbon Material
Applications:	Fuel hose, automative seals and gaskets, o-rings, turbocharger hose, fuel injector, fuel resistance tubes, shaft seals, valve stem seals
Global market:	25,000 tpa
Annual growth rate:	5% pa
Major suppliers:	Chemours, 3M, Solvay, Daikin

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21

New Fluoropolymer: PFA

Substance Name:	Per Fluoro Alkoxy Alkane
Applications:	Chemical resistance lining, tubing, cast film coating, impregnation for high temperature chemical resistance
Global market:	5,500 tpa
Annual growth rate:	5% pa
Major suppliers:	Chemours, 3M, Daikin

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22

New Fluoropolymer: FEP

Substance Name:	Fluoro Ethylene Propylene
Applications:	Chemical resistance lining, hook up wire, co- axial cable, LAN cable, film and coating
Global market:	29,000 tpa
Annual growth rate:	5% pa
Major suppliers:	Chemours, 3M, Daikin, Donguye

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23

New Fluoropolymer: PVDF

Substance Name:	Poly Vinylidene Fluoride
Applications:	Electric wire insulation, pipes, connectors, battery binders, architectural coatings, solar panel films
Global market:	42,000 tpa
Annual growth rate:	5% pa
Major suppliers:	Arkema, Solvay, Kureha

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New Fluoropolymer: PPA

Substance Name:	Polymer Processing Aid
Applications:	Extrusion and blown film applications
Global market:	7,000 tpa
Annual growth rate:	6% pa
Major suppliers:	Chemours, 3M

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25

New Fluoropolymer: Micro powders

Substance Name: Direct polymerized / irradiated / thermal extruded Applications: Additives for inks, coatings, rubbers, plastics, greases Global market: 25,000 tpa Annual growth rate: 5% pa Major suppliers: 3M, Solvay, Shamrock

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Entry into Specialty Chemicals - outlook

• Major applications: crop protection chemicals and pharmaceutical intermediates

• Organic Fluorine (F) molecules are increasingly becoming ingredients in newer crop protection and pharmaceutical molecules due to

• Higher efficacy as F has the highest electronegativity or reactivity

• Liphophilicity property which means F can dissolve readily in fats in plants and insects

• Low volume dosage (due to high efficacy) thereby cuasing minimal environmental impact

• Due to healthier crops and more effective medicines with F incorporation, it is expected that around 40% (from 20% presently) of pharma intermediates and around 50% of crop protection chemicals (from 30% presently) will have F molecules in the next few years

27

Specialty Chemicals – GFL status

• GFL has set up an R&D centre, approved by Ministry of Science and Technology, Government of India, with 4 analytical laboratoris and 2 pilot plants

• Using this R&D centre, GFL has developed in-house technology for about 11 molecules on lab, kilo lab or pilot scale

• First MPP (multi-purpose plant) commissioned earlier this year, with 2 products already commercialized

• One more product commissioned and under commercialization

• Plant facilities for additional 4 products expected to be commissioned in Q4FY2019 and commercialized in Q1FY2020

• Most of the capex for these already incurred

28

Specialty Chemicals - business snapshot

• GFL strengths:

• Nearly 30 years’ experience in safely handling F molecules

• In-house availability of host of key building blocks for F molecules

• Cost competitive manufacturing due to fully integrated value chain

• Annualised turnover at full capacity Rs 400 crores

• Annualised EBITDA at full capacity Rs 150 crores

• GFL is working on additional specialty chemicals that will keep on being added to the product portfolio

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Thank you!!

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