DCMSHRIRAM — earnings call
The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.
Prepared remarks
Moderator · Conference Operator
Ladies and gentlemen, good day and welcome to the DCM Shriram Limited Q4
Thank you very much sir.
Ladies and gentlemen on behalf of DCM Shriram Limited that concludes this conference.
Thanks for joining us and you may now disconnect your lines.
Questions and answers
DCM Shriram Limited
For DCM Shriram Ltd. · Research Analyst
Thank you, Siddharth.
Good afternoon, ladies and gentlemen.
Thank you for taking
The business has worked well in consolidating its leadership in wheat seeds.
Its research and development has started yielding results with 4 new products introduced this year, including two in wheat seeds.
All the products have been received well.
Growth in this business will continue from the planned expansion of portfolio, manufacturing of crop protection chemicals which start this year and should be further cemented by our foray into manufacturing of water-soluble fertilizers and biologicals by Q4 of Financial Year ’24.
Our manufacturing of biological based agri inputs is a conscious choice to work on new technologies and also promote sustainable and organic farming.
This business is also increasing its geographical strength and is making inroads in Southern India.
Bioseed
I would like to talk about Bioseed.
Bioseed is on track to turn around its business.
The losses have come down significantly.
The product pipeline is more focused.
The product basket of research activity is being rationalized and we expect the business to do better in the coming year.
Fertilizer
The fertilizer business has seen a correction in urea prices during the quarter, led by lower energy prices.
The government has revised energy norms with effect from October 1st, 2020, till March 31st, 2023, and our energy efficiencies have also been better.
The subsidy outstanding as of March 31st, 2023, stood at Rs.
310 crore as compared to Rs.
435 crore last year.
Fenesta Building Systems
The Fenesta Building Systems business is witnessing good momentum quarter-on- quarter.
The project segment is driving good growth.
As the core business expands, we are adding more categories, adding new offerings and increasing our geographic strength, including in the international space.
We have added products in UPVC and aluminum windows, in WPC and engineered wood doors and will be launching glass façades and also continue to add further to this range.
In view of the rising demand this year we commissioned our Bhuvneshwar factory and added one more factory in Hyderabad.
We are commissioning an expansion at our Kota Extrusion Plant.
The fabrication unit for façade is under construction and will be commissioned by Q2 Financial Year ‘24.
Our growth strategy is underlined by well-executed initiative towards business expansion and product diversification along with enhancing operating efficiency.
We see our businesses of Chemicals, Sugar, , Shriram Farm Solution and Fenesta as key drivers for our growth going forward.
I will now request Ajit to give you the perspective on the business performance.
For DCM Shriram Ltd. · Research Analyst
Thank you.
Good afternoon, everyone.
We will now go through the business performance for Q4 & FY23. The net revenues net of excise duty in this quarter were flat at Rs.
2720 crore versus Rs.
2796 crore in the previous year and PBDIT stood at Rs.
372 crore down by 44%.
Chlor-Alkali
Chlor-Alkali business revenue was down 13% year-on-year and PBDIT was also down 53% mainly due to lower ECU that declined 17%, though volumes were marginally higher.
Higher energy costs impacted the margins.
Also, the electricity duty on auxiliary consumption had an impact of Rs.
11 crore related to prior periods during the quarter.
Vinyl
Vinyl business revenue declined by 44% year-on-year at Rs.
168 crore and PBDIT was at Rs.
1 crore versus Rs.
122 crore on account of lower product prices and volumes.
PVC prices were down 35% year-on-year and carbide prices were down 26% year- on-year.
Overall, capacity utilization was lower at 91% versus 96% last year.
Higher cost of product led by power and carbon materials impacted margins.
Also, electricity duty on auxiliary consumption related to previous years had a negative impact of 10 crore during the quarter.
Sugar
Sugar business revenue net of excise duty was up 24% and PBDIT increased by 10% year-on-year on account of higher volumes of sugar and distillery coupled with higher realizations.
Margins were lower since the last year increase in SAP is not compensated by the increase in product prices.
In terms of crush, we are likely to close this season at about 650 lakh quintals versus 549 lakh quintals last season attributed to better crop and commissioning of sugar projects.
Sugar recovery till date on final molasses is better by about 20 basis points over last year.
Fenesta Building Systems
Fenesta Building Systems revenue reported a growth of 13% year-on-year and PBDIT was stable.
There was volume increase in the project category.
Margins were better in projects as well as retail categories.
Both the categories witnessed improvement in the order book that was up 10% year-on-year.
For DCM Shriram Ltd. · Research Analyst
Shriram Farm Solutions revenue and PBDIT witnessed a decline due to seasonality factors.
For the year as a whole, the business witnessed growth.
Fertilizer
Fertilizer revenue declined by 4% year-on-year, driven by lower gas prices, which is a pass through.
Volumes were higher by 4% YoY.
PBDIT witnessed a growth of 44% owing to higher energy efficiency, energy saving rate and volumes.
Fertilizers subsidy this year was lower as stated earlier.
Bioseed
Bioseed revenue is better, however, Q4 is an off season.
PBDIT improvement was led by higher volumes and inventory provisioning in last year.
Coming to the highlights of FY23: FY23 net revenues net of excise duty was up 20% year-on-year at Rs.
11,547 crore and PBDIT down 9% year-on-year at Rs.
1726 crore.
Chemicals revenue and PBDIT were up 27% and 15% respectively due to better ECUs led by prices of lye in the first 9 months of the year and improvement in chlorine prices and improved volumes of caustic.
Margins were moderated by higher input cost.
Vinyl revenues and PBDIT were lower by 31% and 84% respectively, led by significantly lower prices.
Volumes were also lower.
Margins were further affected by higher input costs of coal and carbon materials.
Product prices seem to have bottomed out and coal prices are declining.
This should help margins going forward.
Sugar business revenues were up 21%, mainly on account of higher domestic and export volumes of sugar together with better prices across products.
Distillery volumes were stable at 11.87 crore liters versus 11.95 crore liters.
Production from distillery was higher as stated earlier.
PBDIT was lower by 20% since the sugar prices increased and did not fully compensate for the increased SAP in the earlier season and non-availability of purchase molasses from the market.
Better export realizations added to the profitability.
Fenesta also reported a good performance, revenues and PBDIT increased by 32% and 70% respectively.
This was on account of a strong order book, which increased by 23% and growth in volumes in projects and margins across categories.
Fertilizer revenues increased 50% year-on-year on account of higher gas prices, which is a pass through and better volumes.
PBDIT was up 62% with energy efficiencies, better energy norms and a higher savings rate as a result of prices of natural gas.
Shriram Farm Solutions revenue and PBDIT were up 7% and 37% respectively, aided by an improved product mix and better prices, SFS witnessed healthy margins across categories and remains the leader in wheat seeds.
Bioseed revenues were up 19% and PBDIT was at Rs.
(-2) crore versus Rs.
(-70) crore on account of better volumes.
PBDIT was also better due to higher inventory provisions made in the last year.
Our income tax payout was at Rs.
246 crore as compared to a tax charge of Rs.
502 crore as a result of MAT Credit available.
With healthy cash flows across our businesses, our debt levels remained at comfortable levels despite the continuing CAPEX.
Our net debt as on 31st March 2023 is Rs.
681 crore as compared to Rs.
4 crore on 31st March 2022.
Return on capital employed for March ‘23 came in at a comfortable level of 27%.
The Board has recommended a final dividend of 180%, amounting to Rs.
56.14 crore in this Board meeting.
The total dividend for the year is at 700% amounting to Rs.
218.32 crore.
Despite the macroeconomic concerns and higher input costs, our Company has had a good year.
That concludes my opening remarks and I would like to request the moderator to please open the forum for the Q&A session.
Thank you.
Moderator · Conference Operator
Thank you very much, Sir.
Ladies and gentlemen, we will now begin the question- and-answer session.
We'll take our first question from the line of Riya from Aequitas Investment Consultancy.
Please go ahead.
Riya
My first question in terms of Fenesta.
So, basically, the order book has grown by 10%, however, in the past few quarters were growing on a higher run rate.
So, how is the demand scenario panning out there and what is the situation for Fenesta?
So, I want to know the demand scenario as well as the margin impact for the quarter, why the margin is lower with the lower raw material price?
Amit Agarwal
The demand is pretty stable, although in this segment we are seeing competition coming up from larger players as well.
But Fenesta continues to remain the pioneer and has a big brand value that is point number one.
Second, coming to the margin.
The margin has come off, I think by about 1% from about 21% in the same period last year to about 20%.
That's, I would say, very marginal but fundamentally, as I had also mentioned in my last call, that business like Fenesta should ideally have a margin in the range of around 15% to 20% so let's say ballpark 17%, that's the right kind of margins for this business.
Riya
Is it because of higher competition because since the raw material prices are getting lower so we should see an improvement in margin on a QoQ basis?
Amit Agarwal
I just said if there is a reduction in the raw material prices, some part of it will be passed on to consumers as well.
So, I don't see margins improving from here.
Riya
So, Q4 numbers are sustainable.
Amit Agarwal
Yes.
And as I said the range should be around 17% (+/-2%) that's the right number, because if you see in FY22, the margin of this business was 16%.
So, that was closer to the right kind of number.
Riya
And with increasing competition, do you think we will have a price war kind of a scenario where we have to reduce prices more?
Amit Agarwal
It's difficult to say at this stage depends.
They have just started so we will see how it pans out.
For DCM Shriram Ltd. · Research Analyst
I’ll just add that I think Fenesta’s position in the market is fairly sound.
We are a leader in the market.
And the good thing is the market is growing so I think there is space for everyone but it depends a lot of course on the product quality plus the service.
How do you take care right from the time you book an order till the time you install and commission and hand over the door or window to the customer so I think we have a good edge there.
So, that's the positive sign for us.
Riya
I think this makes sense.
My second question is in regards with the sugar sector.
So, basically, what was the cost of production for us last sugar season and what is the cost of production for us this sugar season?
Amit Agarwal
The cost of production last season was around Rs.
3,300 per quintal and this year, March end, was about Rs.
3210-3220 per quintal
Riya
It is reduced?
Amit Agarwal
Yes, because as you mentioned that our production is higher and secondly, our recovery is better by about 20 basis points.
Riya
However, I was reading that in UP the wage norm has increased and the lot of ancillary cost which has piled up so what kind of impact is there on the cost of production?
Amit Agarwal
It could have been further lower I don't have the number exactly by how much but marginally lower definitely but that's our cost.
Riya
And in terms of production, what kind of acreage or production increase have we seen for the current year?
Amit Agarwal
I don't have the acreage number, but the crush is 650 lakh quintals of sugarcane.
We are nearing that number by the time our mills close versus 549 lakh quintals which we did last year.
Riya
Mills will close by May end?
Amit Agarwal
So, out of four mills, three mills closed and one mill, which is operational will close in next 3 to 4 days.
Riya
And in terms of the current untimely rainfall, does it have an impact on the crop?
For DCM Shriram Ltd. · Research Analyst
I think it's a very positive thing as far as the crop is concerned.
We've had a very dry winter spell, so any rainfall is always welcome because this aids the farmer in terms of irrigation free of cost virtually.
Riya
My second question is in terms of ethanol, what is the kind of offtake are we seeing from the government and what are the current volumes and the next year volumes we are wanting to do with the enhanced capacity from Q1 FY24?
Amit Agarwal
In terms offtake you're talking of at the industry level offtake?
Riya
Yes, industry as well as for DCM.
Amit Agarwal
Industry level offtake as CMD mentioned, the total contracted quantity this season already is about 505 crore liters.
For us in the coming season, we have the capability to produce 18 crore liters.
Last year we had about 14 crore liters.
Next year we should be progressing towards 18 crore liters.
Riya
Industry wide offtake last year would be around?
Amit Agarwal
I don't have the figure.
404 I think that's what CMD sir said, about 404 crore liters.
Riya
In terms of diversion on an industry perspective, I think 4 million ton is the amount we are seeing.
Amit Agarwal
Yes.
Riya
This was last year around 3-3.5, 3.4 million ton or something?
Amit Agarwal
3.5 million ton.
Riya
For ethanol what would be your transfer price molasses, are we doing juice based or how is it?
Amit Agarwal
We are producing primarily on B-Heavy.
We have done a small experiment on juice based as well but primarily it is B-Heavy ethanol.
Transfer price I think one should look at overall, if you have sugar as a business, every business every company might have their own transfer pricing mechanism as per the accounting standards.
I think we look at it as a Sugar business as a whole because it’s very dynamic whether we produce B-Heavy or we produce C-heavy or different feedstock mix.
Riya
In terms of the ECH demand that we are hearing about the Epoxy we are hearing that the demand is decreasing and a little sluggish outlook on the entire space.
So, what is your opinion around it?
For DCM Shriram Ltd. · Research Analyst
I think these businesses we are getting into will come in the next couple of quarters.
It will take a little while to stabilize the plant.
Our way of looking at business and industry is we're not in it for the short term.
We are in it for the long haul.
Our objective is to come up with a class product and supply to the customers who are satisfied with our product.
So, the market’s ups and downs are part of the ballgame.
We've seen that in every industry across the board.
We are quite bullish on the long-term, positive in medium-term, positive impact of ECH and H2O2 as our growth plans go forward because of the plants we are putting up, the technology we've got and the team of people we have who will make sure that the plant runs efficiently and we have a good relationship with our customers.
Riya
By when do we expect the plant to be commissioned or stabilized?
For DCM Shriram Ltd. · Research Analyst
Before the end of Q2.
Moderator · Conference Operator
We take a next question from the line of Ahmed Madha from Unifi Capital.
Ahmed Madha
My first question is on the cement business.
This year we reached close to 50 crore loss.
I know that we set up this facility about 30-35 years back.
I just wanted to understand the rationale how this business has a relation with our Chloro-Vinyl business.
Does any byproducts are used as a raw material for this?
Can you give some clarity?
How was this business initiated?
Amit Agarwal
So, see cement business is essentially a waste utilization or the pollution control mechanism in a way because the sludge that’s gets generated when we manufacture PVC through carbide route that sludge goes into cement for conversion.
I think we at least look at it like that.
Yes, there have been times when cement has given us reasonably good profits and now because we are on a wet process, our cost of production is higher, visibly appears and therefore the realizations were not commensurate with cost.
I think the way one has to look at least for us, the way we look at it's a pollution control or waste management mechanism.
Ahmed Madha
Is it fair to expect that with the coal prices coming down and even the cost of production for a Vinyl business coming down the losses will reduce going forward?
Amit Agarwal
One, the chemicals and the Vinyl business are not into losses.
Whether the margins will improve or reduce will also depend on how the prices move.
But yes the costs are expected to come down definitely going forward.
Ahmed Madha
I have a few questions on the Sugar business.
Number one, how much exports we are supposed to do in April or even Q1 quarter?
I think we have done about 8.5 lakh quintal till Q4. So, how much is left for Q1 April month?
Amit Agarwal
One, we've completed everything by April.
That is point number one.
I don't have the exact number, 1.2-1.3 lakh quintals is what we exported in April.
That ends our export quota.
Ahmed Madha
And this was at what prices?
Amit Agarwal
Around Rs.
40 a kg.
Ahmed Madha
And another question on the ethanol side.
We did production of more than 14 crore liters and our sales was 11.8 crore liters.
So, what explains this difference?
For the next year how should we look at the ethanol total production with the grain based facility also coming up?
Amit Agarwal
So, one, these are timing differences based on tenders and things like that.
That gets covered up over, I mean this commodity will get sold.
This is all committed contracted kind of thing.
These are timing differences as I said earlier that is one.
Second with grain based distillery coming in, so our capacity to manufacture goes up to 18 crore liters.
So, we'll try to maximize that.
Ahmed Madha
How much sugar production we have done so far in Q1 roughly?
Amit Agarwal
I don't have the Q1 numbers.
When you say Q1 you are saying for this month, month of April, right?
Ahmed Madha
Yes for this month?
Amit Agarwal
I don't have the month number right now.
I'll share it with you after the call.
Ahmed Madha
No issues.
The last question on the caustic business.
So, with the caustic prices coming down further in March and then in the April month, it is expected that also the realization ECU will go down.
So, I have two questions on this.
Number one, how is the chlorine pricing as of now in the market?
Number two, with the coal prices also going down, how should we look at the profitability for the caustic business?
Do you expect that there will be from Q4 base there will be further significant decline or do you see that the decline in the caustic prices will be offset by the decline in the coal prices and then our power plants coming up?
Amit Agarwal
The situation is very dynamic right now.
We do expect prices to improve from H2.
At least that's what our marketing team estimates.
In H1 we expect them to be distressed.
Costs are coming down.
But we've seen coal prices, they were low in March.
In April actually they picked up marginally.
So, it's really dynamic situation.
So, it'll be difficult to really comment.
We also have to just watch the trend for 1 or 2 months and then we'll be able to give better guidance.
Ahmed Madha
And any comments on the chlorine pricing?
Amit Agarwal
Yes, chlorine is still negative but it's not that bad.
Like in Q3 last year it was almost 10,000 negative.
Now it's about 3000-4000 negative.
Ahmed Madha
How much export we did for caustic in Q4?
Amit Agarwal
How much export for us?
Ahmed Madha
Yes, for caustic for this year?
Amit Agarwal
I won't have that exports number for the quarter.
Yes, I don't have that number right away.
Moderator · Conference Operator
We take a next question from the line of Vivek Ramakrishnan from DSP Mutual Fund.
Vivek Ramakrishnan
My questions are around the CAPEX—I’m sorry I joined a little late if I missed the number—what is the balance CAPEX in terms of amount that is to be paid off which is there in the current year and where will your peak debt levels be?
That's my only question.
Amit Agarwal
The total CAPEX program that we had was for Rs.
3,500 crore.
Now out of this, we have already commissioned close to about Rs.
600 crore.
Rs.
530 crore in sugar and about Rs.
60-70 crore in chemicals.
So, we are left with Rs.
2,900 crore.
Now what we have spent till date is close to about Rs.
2,000-2,500 crore, approximately Rs.
2,000 crore on project.
So, we have another Rs.
1,500 crore to go in the next financial year, which is FY24. Our peak debt as I see, net debt by March will be in the range of around Rs.
1,500 to Rs.
1,800-1,900 crore.
That's the range.
Moderator · Conference Operator
We take our next question from the line of Saket Kapoor from Kapoor & Co.
Saket Kapoor
Just to clarify the last number once again, when we look at your capital work in progress, it stands at Rs.
1,600 crore.
I think the Rs.
530 crore sugar CAPEX will be accounted for and has been capitalized in the first quarter.
Can you give this in relation to the number of capital work in progress how is this number going to shape up?
Amit Agarwal
You read it correctly Saket.
As I mentioned we have spent close about Rs.
2,000 crore and Rs.
600 crore is what got capitalized.
Balance is close to about Rs.
1,500 crore which is standing in CWIP.
Saket Kapoor
Sugar we have capitalized in March itself?
Amit Agarwal
In Q3 and in Q4.
Saket Kapoor
So, that Rs.
530 crore has been capitalized.
This Rs.
530 crore CAPEX how is it going to contribute going ahead?
What would be the turnover ratio?
Amit Agarwal
The Rs.
530 crore of CAPEX should give us a ballpark return of close to about 20%.
I think we should live with that.
Saket Kapoor
The turnover will be what, for Rs.
530 crore what will be the asset turnover?
Amit Agarwal
Turnover because there are some measures where our refinery capacity has gone up.
There are some measures where our feedstock has changed.
I mean the feedstock is a different feedstock on grain.
There are some dynamics which will support cost and there are some dynamics which will support sales.
Saket Kapoor
In the presentation about 120 MW power plant is also mentioned.
What would be our annual savings and the commissioning of the same?
Amit Agarwal
This 120 MW power plant the total project cost is close to about Rs.
500-550 crore and we expect this to give us savings in the range of around Rs.
100 to 125 crore on an annualized basis.
Saket Kapoor
Will we be getting the benefit for the entire full year or that is this power plant has been commissioned or what is the update?
Amit Agarwal
So, as CMD mentioned, the power plant is expected to be commissioned by Q1 end.
Saket Kapoor
For nine months we will be getting the benefit of this?
Amit Agarwal
It takes time to ramp up any large project.
Saket Kapoor
On a full year basis it will be a Rs.
100-crore savings that will be expected from next year onwards in totality?
Amit Agarwal
Yes, from next year.
Saket Kapoor
In the opening remark MD sir you mentioned about some hydrogen production part.
I missed your comment on the same.
What were you trying to convey for the Bharuch unit?
If you could elaborate more?
For DCM Shriram Ltd. · Research Analyst
Just to clarify when we make caustic soda chlorine, another product which is made automatically in the process is hydrogen.
Today we make about 2 lakh cubic meters of hydrogen per day.
Now once we commission our expanded capacity at our Gujarat factory, we will come to almost 3 lakh cubic meters of hydrogen per day and we are selling this so that is also a good source of revenue for us.
Saket Kapoor
Turnover wise can you give a yearly number for the same?
What has been the contribution from the sale of hydrogen?
Amit Agarwal
Last year we had a turnover of about Rs.
155 crore on account of hydrogen and our sale was close to about 2 lakh NMQ per day and EBITDA on account of that is about Rs.
129-130 crore.
Saket Kapoor
On a sale of Rs.
150 crore?
Amit Agarwal
Yes.
Saket Kapoor
One more point about this ESOP part.
If you could explain to us, why did we choose this route of creating trust and then buying the shares from the market rather than going for direct ESOP, what has been the differentiation?
Amit Agarwal
So, Saket this is an old policy, existing policy that we have which we had framed in 2013.
The policy is continuing.
We already have shares under this policy which is reflected in our balance sheet as well.
We are just adding shares for the benefit of the employees.
Saket Kapoor
But the other route of direct ESOP credit coming.
Amit Agarwal
Saket I don't think I can do that discussion here because these are longish discussions to explain what is the difference between an ESOP and ESPS.
What are the benefits.
I think we connect one-on-one.
Saket Kapoor
I conclude with my last question.
Taking into account the commentary and the type of CAPEX that we have envisaged, going ahead for this year will we be starting to reap the benefits of the entire CAPEX for the chemical segment or it will take another 1-year for the entire thing to capitalize?
I want to understand the trigger for FY24, what are the key triggers?
For DCM Shriram Ltd. · Research Analyst
As I have mentioned earlier Saket we expect all our chemical expansions to be completed by the end of Q2 financial year ‘24.
Now you'll appreciate it whenever an expansion is made, especially when a new product line comes in, one can't expect that within 1 week you come to 100% capacity utilization.
It doesn't work that way.
It will take a little while to get stabilized, to get the market going which is already working on the market in any case so it will take some time.
We will not get the full benefit of this financial year ‘23-24 but we will definitely get the full benefit of that in the year ‘24-25.
Saket Kapoor
On the caustic market side, I think you mentioned that globally there has been no any big capacity addition.
It is only the Indian market where a 1 million tons capacity was added.
Taking into account the expanded capacity what have been the average utilization for the country as a whole?
For DCM Shriram Ltd. · Research Analyst
I think the utilizations in the country as a whole is running at about 72%-73%, which is pretty good.
Ours was a little higher, which is beneficial because we have a lot of our chlorine supply which goes directly by pipeline to many customers around our Gujarat factory.
In our caustic soda factory at Kota, we use almost over 50% of our chlorine ourselves for making PVC and stable bleaching powder, etc. So, our utilization was higher but with the capacity coming in you're right, it will take a couple of quarters to stabilize and we hope the international economy also picks up or stabilizes so the demand from there also picks up a little bit.
Because ultimately end of the day, today whether it's caustic you can just import it there's no issue.
So, our objective is how do we actually have going down the line little balance in the capacity in India and international prices going up.
Saket Kapoor
And just for the textile sector there was a big dampen in the demand from them.
How is the textile sector looking up for the month which has gone by?
Have the textile sector opened up post the corrections in the yarn and the cotton prices the inventory written down and also, I think so getting adjusted for the year.
What's the outlook from the textile sector?
Any feelers you can share?
For DCM Shriram Ltd. · Research Analyst
Textile sector discussions we've had and our people have had.
The textile sector as you rightly said has gone down a little bit.
In the textile sector is important because the use in the textiles also as well as in dyes etc. which are used in the textile sector, caustic soda is used in both.
We hope down the line with the Indian economy moving at (+6%) this textile sector also picks up over the next few quarters which should give us a little positivity.
Saket Kapoor
Lastly on the power and fuel front.
If you could explain once again what led to this increase in power and fuel cost, Q-on-Q basis also; year-on-year there's a significant gap of 100 crore, even on Q-on-Q, there's a 40-45 crore change on even lower turnover.
If you could explain the mix that led to the escalation in power and fuel cost?
Amit Agarwal
Saket the power cost has been going up.
It is only in let's say by February-March when the spot prices of coal started coming down but the company carries inventory for its operational safety.
So, that inventory by March we more or less liquidated the high-cost inventory which we had bought in the month of November- December-January and now we are seeing our fuel prices or the coal prices coming down, the consumption rates coming down.
Saket Kapoor
Can you share the mix, what is the coal part and how much is the direct purchase from grid?
Amit Agarwal
So, about 38% we purchased from the grid for our chemicals complex at Bharuch and as well as Kota.
Saket Kapoor
The balance 62% is coal-based coal and gas both because it is for fertilizer if you...
Amit Agarwal
Coal primarily but then we are also using biomass now in a big way.
We are using almost 20% biomass in Kota and nearing over 10% biomass in Bharuch.
Saket Kapoor
So, the grid pricing can you share?
How are the grid pricing shape up for Q-on-Q or a year-on-year basis?
Amit Agarwal
Grid pricing that also keeps changing with the coal prices.
There's a fuel surcharge but that ranges between Rs.
7 to Rs.
8.
Saket Kapoor
Because I was just trying to make sense of this 9% to 10% increase Q-on-Q basis.
Is it only because of the inventory?
Amit Agarwal
We will discuss that offline Saket.
Moderator · Conference Operator
We take our next question from the line of Riya from Aequitas Investment Consultancy.
Riya
This is just in regards with the cost of production for sugar.
You had said that last sugar season was Rs.
33 and this time it's 32.
This includes the Rs.
25 incremental, per quintal SAP increase?
Amit Agarwal
Yes, so even last year this Rs.
25 was there.
This increase in SAP happened in the last season.
What JMD sir mentioned, was actually saying that the increase in SAP in the last season which is ‘21-22, the sugar that is produced in that season is sold in the next season.
That is where the cost increase had happened but we didn't get the benefit in terms of the price equivalent benefit in the price increase and therefore, the margins were lower.
This year in any case there has been no SAP increase but because of production and recovery our cost is lower.
Riya
Can I know the cost of production for sugar season ‘21 or the year before the SAP increased?
Amit Agarwal
That was close to about Rs.
2,950 so I may be off by Rs.
10-15 but ballpark.
Moderator · Conference Operator
We take our next question from the line of Ahmed Madha from Unifi Capital.
Ahmed Madha
First on the epichlorohydrin realization so we see that the prices of epoxy and ECH both have come down significantly.
In FY24 as we progress for our CAPEX will be based on the spreads which are on the export basis will we do break even for ECH?
I know that we have plans for the long term and the business will be very supportive for the long term but how should we look at the near term?
Should we break even or no?
Amit Agarwal
Ahmed I think what you're looking at is and if I'm not wrong, you're looking at the prices which you are right over the last 1-year have come down from about Rs.
200 per kg to now about Rs.120 kg.
But then even the glycerin price has halved like the crude glycerin is from Rs.
65 a kg has come down to Rs.
32 per kg.
So, ballpark my spread so if I look at my margin, my EBITDA margin is still in the range of about 20%-24%.
Yes, absolute number is lower and therefore quantum will come down.
I don't deny that but it is not under too much pressure, I would say it is fine.
Ahmed Madha
Second question is on the Bioseed I know that in this year we have made efforts to turn around the Bioseed business.
So, can you give some outlook how do we look at FY24-25 and how does our product pipeline and product launches look for the Bioseed’s business?
K.K. Kaul
FY24 we are looking at the same kind of growth that we have seen in FY23 because of the products which have been accepted in the market and because of some new good products which we have in the pipeline.
We are having products almost all the crops that we deal whether cotton, corn or paddy or even vegetables.
I think FY24 should be even better than FY23 and we should be coming over that in terms of turning around.
Ahmed Madha
Over the long-term beyond FY24-FY25, how should we look at the business and the viable margins in the business?
K.K. Kaul
As of now the long-term looks good but it has to be seen year-on-year because the market also somebody else comes with a better product but we also have a very good end products so we do see in the next 3-4 years we should be growing and doing better.
Moderator · Conference Operator
As there are no further questions from the participants, I would now like to hand the conference back over to the management for closing comments.
Over to you sir.
For DCM Shriram Ltd. · Research Analyst
Thank you.
Ladies and gentlemen thank you very much for your participation in our