JUBLINGREA — 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 Jubilant Ingrevia Limited

Questions and answers

Moderator · Conference Operator

The first question is from the line of Harsh Shah from Dimensional Securities.

Harsh Shah

Sir, first question is on Specialty Chemical division.

To the price reduction, which we have seen, is it more related to demand slowdown?

Or have you also seen additional supply come into the market?

And what would be the inventory situation right now?

Rajesh Srivastava

So, in Specialty Chemical, the agrochemical customers demand was under pressure, so therefore, we saw the price realization was lower.

And also, some of the products like pyridine, the prices have been under pressure.

Therefore, the performance of Speciality Chemicals was lower than last year and last quarter.

Harsh Shah

By how much percentage have the realization been impacted?

Rajesh Srivastava

Very difficult to do the exact percentage, but yes, there has been significant reduction in price realization.

It is difficult to give you product-wise.

Harsh Shah

No, maybe on a blanket basis in both Chemical Intermediate as well as Specialty Chemicals.

Rajesh Srivastava

No, Chemical Intermediates, the price realization has been as per the Acetic Acid prices.

So there has not been any deterioration of price.

Our margins also have been good.

So Chemical Intermediates, there was no challenge.

Harsh Shah

Okay.

And do we continue to hold any inventory in our book, which was bought at a higher price that still needs to get sold and whose impact is yet to be recognized in the books?

Rajesh Srivastava

No, So this performance is not because we are carrying high inventory.

This performance was because globally, agrochemical demand was lower.

So other suppliers have been supplying at much lower price to liquidate their material, but this is not the case for us.

We are not carrying any extra inventory.

Harsh Shah

Okay.

And sir, what would be the volume growth for Q4 and also for full financial year FY23 across all 3 segments?

Rajesh Srivastava

Volume growth in terms of Chemical Intermediates, we have grown to the extent of 7% to 8%.

In Specialty Chemicals, in quarter 4, our volume has been almost flat.

We have not grown.

In Nutrition business, as you know, our volumes have degrown from last year.

But sequentially, from Q3, we have grown our volume in Niacinamide.

Harsh Shah

Okay.

And sir, there's been a slight increase in the other expenses.

Could you explain what could that be?

Prakash Bisht

So, the increase in the other expenses, primarily over last year is on account of this year's higher freight expenses, the higher warehousing charges and higher processing charges.

Over the last quarter, the increase is mainly the above three factors, which is freight, warehousing charges and processing charges, in addition to that, higher consumption of stores and displays.

So, these were the reasons for which other expenses were high.

Rajesh Srivastava

They are general in nature.

They are mostly general in nature.

Harsh Shah

And just last question.

So, since the realization of many of our products, key products has come down, be it Nutrition or Specialty Chemical even Chemical Intermediaries, are you changing our guidance of revenues because the guidance which we have given, the prices of all these products are much higher than what they are now.

So, do we stick to the same revenue guidance?

Or do we want to bring that down in terms of absolute number revenue of the incremental capex.

Rajesh Srivastava

No. So, if you see, there is no fundamental change which is happening.

As Mr. Bhartia also said, I also said, what is happening in the market is short term in nature.

This is not going to last long.

We are already seeing improvement in Niacinamide market situation, and we are very hopeful that H2 even agrochemical market should start improving.

So, I don't think we are doing any change in our guidance for capex.

Harsh Shah

No, not the capex, but the revenue that you'll be generating from this capex.

There is guiding of doubling of the revenue.

So, with the prices coming off?

Rajesh Srivastava

There is no change much.

There is not much change because we have given you guidance based on what realistically we will do.

We have not given guidance, which is very hypothetical.

It's more realistic guidance we have given.

Moderator · Conference Operator

The next question is from the line of Naushad Chaudhary from Aditya Birla.

Naushad Chaudhary

Two clarifications.

Firstly, in Specialty business, what percentage of revenue comes from Agchem and is entirely from the Generics segment?

Or do we work on any innovative molecules here in specialty?

Rajesh Srivastava

So Agchem is contributing to almost 37% to 38% up of our Specialty Chemical revenue.

And these are mostly the value-added derivatives, which we supply to large agrochemical companies, we are not supplying any innovative molecules.

Naushad Chaudhary

Okay.

And in terms of margin and EBIT run rate, this used to generate INR60 crore, INR70 crore that has come down to around INR40 crore, do you believe next 2 quarters is difficult to guide on this?

Or do you think this could be a bottom and sequentially you should see an improvement at least on the EBIT side in this division?

Rajesh Srivastava

I can fairly assume this is the bottom we are touching.

We have to have improvement from here.

May not be immediately, but as I said from H2 will be definitely coming back to the normal situation.

Naushad Chaudhary

And what all things should have to happen for the improvement from here on?

Would that be from the price or would it from the raw material side, what should help from here on to improve this profitability?

Rajesh Srivastava

I mean, if the demand improves in agrochemical, our products are very well suited.

Customers will buy.

And of course, we will sell the product as we have been doing it earlier.

The fundamentals are same.

Naushad Chaudhary

Okay.

And these are our Specialty largely are spot business?

Or do you work on a contractual term?

Rajesh Srivastava

No. So, we do, as we explained earlier also, we always have the annual volume confirmation of the customers.

And we discuss the volume dispatches every quarter.

So, we know we have the visibility of volume.

But if the market situation changes, the customer can change his volume in between also.

So, we know clearly what volume is asking during the year.

Naushad Chaudhary

Okay.

Sir, in specialty, see there is an operating deleverage challenge, but are you also experiencing the pricing pressure as well?

Rajesh Srivastava

Yes.

Because the demand is lower, of course, the pricing pressure is there.

Naushad Chaudhary

Understood.

And you expect this to improve from second half of this financial year?

Rajesh Srivastava

Yes.

Moderator · Conference Operator

The next question is from the line of Siddharth Gadekar from Equirus Capital.

Siddharth Gadekar

So first on Specialty Chemicals.

We have just highlighted that our volumes were flat Y-o-Y in Specialty Chemicals.

And if I look at the revenue numbers, they have increased 5% Y-o-Y.

So, what am I missing here in terms of like is that a realization decline, volume decline?

Or what explains the margin profile in this quarter?

Rajesh Srivastava

So sometimes this revenue also depends on the product mix, which you sell during the quarter, right?

So, it's difficult to say that.

So, what we said that, yes, the revenue has increased, but volume has been flat.

So, because of product mix.

We have almost 40 products to sell.

So, depending on which product mix, sometimes it happens.

Siddharth Gadekar

Sir, secondly, in terms of agrochemicals, can you just point out which products actually have seen a slowdown that has impacted our performance?

Rajesh Srivastava

So, agrochemical pyridine and some pyridine derivatives because we have mainly pyridine, pyridine derivatives, which we are selling to agrochemical customers.

Siddharth Gadekar

So, the end agrochemicals, if you could highlight which are the agrochemicals which have seen the decline?

Rajesh Srivastava

Yes.

The biggest one is Paraquat, Diquat which is produced out of pyridine and there are many host of products where we supply.

Siddharth Gadekar

And lastly, in terms of our capex, we have removed the capex slide from the presentation.

Is there a change in our capex guidance or anything?

Rajesh Srivastava

No. Actually, for so many quarters, we have been just repeating the same picture. and that we did because we formed a new company, we wanted much better communication, but I now don't want to confuse you guys.

But there is no change in our guidance, as I said earlier.

It's just that we made our presentation much more cleaner, but of course, if there is any clarification question like you are asking, there is no change in capex.

Siddharth Gadekar

Also, what should be the capex for FY24 and 25 then?

Rajesh Srivastava

So 24-25 or 23-24?

Siddharth Gadekar

FY24 and FY25?

For the next 2 years.

Rajesh Srivastava

Okay, FY24, FY25. So, FY24, I think we have a guidance of almost INR700 crore cash outflow and FY25 should be close to INR600 crore as we said earlier, if you see our earlier presentation.

Moderator · Conference Operator

The next question is from the line of Jainis Chheda from Spark Investment Advisors.

Jainis Chheda

My question is more to do with the power cost, which has gone up substantially, it's a contract from FY21 and FY22?

And also, there is jump in the other expenses.

So, can you help us understand how the power costs are likely to move in coming 2 to 3 years?

And how will it impact the profitability?

Rajesh Srivastava

So, if you see the quarter 4, our energy costs are close to normal situation, of course, a little higher, but it used to be very high in Q1, Q2, Q3. But we have arrested it, as I said.

One is that coal prices have come down.

Secondly, we have done a lot of efficiency improvement.

And also, if you see our consumption profile in efficiency improvement, we have improved.

So, I think there is not much now in terms of very high cost of power and fuel.

But of course, we are working further to optimize our energy cost.

But yes, FY22 has been very high as you have seen that.

Jainis Chheda

Yes.

So, the steady state basis, what will be the power cost as a percentage of sales or some other ratio that you can help us with.

Rajesh Srivastava

Again, percentage becomes very difficult because in our case, sometimes revenue becomes difficult to explain because of raw material prices.

But on an average, if you see last year, we have been close to 18% of our revenue on our energy cost.

So that percentage keeps changing.

Right now, I think in Q4, it is close to about 23%, that's what I said that maybe little bit more improvement will be close to our normal situation.

Jainis Chheda

Okay.

And in terms of the Nutrition business, what is the outlook for FY '24 and for next 5 years and for next 3 years as well?

Rajesh Srivastava

So, for 3 years, it is very difficult to confirm, but I can only tell you that in Nutrition business, the situation, we can see today is improving both in terms of price as well as demand.

So, we are happy to say that, of course, this quarter, we will have lag.

But by end of this quarter, our situation is coming much, much better than what we have been earlier.

Jainis Chheda

Okay.

You have previous margin around 20% at time in Nutrition business in terms of lag.

So, what will be our sustainable number is what we are trying to understand?

Rajesh Srivastava

I think we hope that H2 should be in a position to catch up.

Moderator · Conference Operator

The next question is from the line of Rohit Sinha from Sunidhi Securities.

Rohit Sinha

One is that how we are seeing this Chinese market before and after the reopening of economy which all we are talking about and how it is now increasing our business segment?

Rajesh Srivastava

I missed your point.

You were asking about Chinese market.

Rohit Sinha

Yes, yes.

How are these Chinese markets actually influencing our business and how mainly it has influenced before and after the opening of this economy?

Rajesh Srivastava

So, we have been seeing that few products like Niacinamide or maybe some base products of pyridine where we have some competition from China and of course, if China gets aggressive, we get impacted.

But most of our other products like CDMO and other specialty derivatives, there is hardly any competition we face.

And in Chemical Intermediates, there is no competition from China.

So, I don't think there is much impact in these businesses.

But some products like Niacinamide, we have competition in China.

Pyridine, we have competition in China.

So, we see if China becomes aggressive, then of course, we see the impact in price reduction.

Rohit Sinha

Okay.

So, any change we have seen in the last few months especially, I mean, already, we are seeing kind of pressure in pyridine and Niacinamide.

So, any improvement as of now?

Or still it is the same situation?

Rajesh Srivastava

Yes.

So Niacinamide, I already said that improvements are happening now.

Niacinamide, we can clearly see the improvement both in demand as well as pricing.

And China has really come out of material.

So obviously, situations are improving.

Rohit Sinha

And sir, one thing that what are the factors or measures, which should help us in sustaining the margin Speciality Chemical despite the volatility in the Acetic Acid prices or raw material, let the price be up or down, but we should at least manage to hold somewhere average margin in the segment.

Or it may be, again, the question that we are looking at actual EBITDA growth or EBITDA margin improvement in that segment?

Rajesh Srivastava

No, Specialty Chemical is not that situation.

You can say Chemical Intermediate, I can agree with you that depending on Acetic Acid, our margin percentage may vary.

But yes, in Chemical Intermediates, we continue to see our EBITDA improvements because of volume growth.

Coming back to Speciality Chemicals, we have more or less stable margins in most of the products, but sometimes when the market situation like we have now, which is not only for us, it is for the global.

There, then it becomes difficult to hold the prices and we have to compete with the market.

And that time, we have to really see our margins going down.

But in specialty, it doesn't happen that raw material prices goes up, so our margin will go down.

Rohit Sinha

No. Just because this quarter, obviously, we are facing a different kind of pressure, but that is where I was indicating that it should not be coming again going forward as I think we were also saying that this should be a bottom out kind of situation.

Rajesh Srivastava

Yes.

Rohit Sinha

Okay.

And one last question, if I can squeeze in.

In power cost, earlier there was also a question at how you are placed going forward.

So, as we are seeing that therefore on quarter-on-quarter, we are improving on power cost.

So how we are now placed with the coal dependency?

And are we still looking the opportunity for renewable process?

I mean putting our plant and or looking for sourcing the renewal.

Rajesh Srivastava

Overall coal prices have come down, as you know.

So overall cost has come down.

But in Gajraula, we see some positive results in terms of our contract volume supplies.

Some volumes have started coming in.

So that is why you see improvement.

Coming back to further improvement, as we have said in our speech also, in Gajraula, now we are also going to get connectivity of grid.

So of course, our power cost will further reduce and also, we are working on sourcing the renewable energy, which is solar and wind combined.

That something will happen after a year or so, maybe 1.5 years so that we are not committing for this year.

But yes, we are working, which will long term give us the benefit starting next year onwards.

But currently, I think situation is very much in control both because the overall market price of coal has come down and Government has eased a little bit of supplies of contracted coal in Gajraula.

Moderator · Conference Operator

The next question is from the line of Nitesh Dhoot to from Prabhudas Lilladher.

Nitesh Dhoot

So, my first question is on the Specialty Chemicals and on the CDMO side.

So, we had a couple of contracts totalling INR270 crore.

So that was to be executed over a 3-year period.

How much are we targeting to execute in FY24 from this contract?

And if you can provide a revenue guidance for CDMO facilities overall for FY24.

Rajesh Srivastava

So that contract, which we had informed you is happening as contract volume.

There is no change.

Of course, what happens in these customers, sometimes the volumes you dispatch in one quarter and then second quarter, the volumes does not go.

So, quarter-on-quarter may vary.

But on an annual basis, whatever the customer has asked for is happening.

There is no change.

Nitesh Dhoot

Okay.

So, any number that you can ascribe for the CDMO revenue potential at an optimal utilization, any number that we can work with?

Rajesh Srivastava

So earlier also, we have said that the new GMP facility, which we have just commissioned is going to add up the revenue in our CDMO business.

And that revenue, it will normalize coming up in the H2 of this year because plant is picking up in capacity.

And of course, as to onwards, our CDMO revenue also will go up.

Nitesh Dhoot

Okay.

And sir, where have we reached on our Diketene derivatives plant utilization?

And if you are maintaining our 70% utilization guidance for FY24 there.

Rajesh Srivastava

Yes, we are very close to 65% of our utilization.

We are hoping that it will continue to improve in going quarter.

Nitesh Dhoot

Okay.

Sir, on the Chemical Intermediates side, where would we be on the capacity utilization of the CI segment for Q4 and for FY23 as a whole?

And I mean, separately for Acetic Anhydride and Ethyl Acetate if possible.

Rajesh Srivastava

On Acetic Anhydride, other than this new plant, which we have just commissioned, I think we are operating at 85% to 90% capacity, and that is the reason we brought this new capacity.

And in the current quarter will be our first quarter where the new capacity will be sold.

And of course, we have a plan to slowly gear up on volume gradually.

So, we have a plan in the next 1.5 to 2 years to use this entire capacity, which is about 50,000 tons.

So, quarter-on-quarter, we will have improved volumes from this capacity.

Nitesh Dhoot

So, in a couple of years’ time, you're looking at a full utilization there?

Rajesh Srivastava

Yes.

We always say that, but it also depends on demand like in last plant we said that this will take 2 to 3 years.

But fortunately, because of market conditions within a year, we could utilize the capacity.

So, you never know, we always give a guidance, which we can definitely do it.

So yes, in a couple of years, we will be in a position to utilize this capacity.

Nitesh Dhoot

Okay.

So, have we already seen a base EBITDA number for the segment at INR960 crore with the pricing and the spread normalization that has happened for the older capacity?

I mean or do we expect further spread compression coming up?

Prakash Bisht

Unless there is very severe market headwinds we face, I don't think there will be change in this base profile.

You never know in commodities; something very drastically happens.

You don't know.

But in normal situation, I think we should be seeing similar level or better because our volumes are going to be better.

Nitesh Dhoot

Sure.

Sir, one question on the management change.

So Mr. Anil Khubchandani’s exit at a time when the company is in the middle of executing a large capex, especially on the Specialty Chemicals side.

So, anything to read into this?

Or if you can give some colour on this.

Rajesh Srivastava

I don't think there is much to read about it.

I mean, it's a market where he found his next inning better somewhere else.

He decided to move on.

Of course, it's not a good situation for us, but we have our successive pipeline so strong.

Our structure is such that the below, we have all the business heads who are taking business, Anil was responsible for Specialty Chemicals business, which is consisting of 3 or 4 smaller business units.

Those business unit heads are already at place.

They are taking care of their business.

I am already there, and there is now a new head for a leadership point of view.

So, I don't think there is anything to be read more in this.

But yes, anybody leaves the company.

There is a situation where we don’t feel good about it.

But I think as some business continuity point of view, I don't see any challenge as of now.

Nitesh Dhoot

So, one last question, if I can just squeeze in before I come back in the queue.

So, sir, how are we confident of the impact on the Specialty Chemical side and when we say that this is a one-off, 1 quarter impact.

Because if I draw a parallel from what we experienced over the last year or so and what we initially perceived to be a short-term impact in case of Nutrition segment, or in case of the coal issues on the Specialty Chemical side.

So, I mean, how are we so confident that this challenge will go away in a quarter's time.

Rajesh Srivastava

No. So, we are also looking at the market.

You are also looking at market.

I'm also reading that agrochemical market situation should improve in H2.

If you read anywhere, any company in terms of agrochemical performance, everybody is saying that H1 is going to be tough, H2 has to improve, and that's how we can envisage.

I don't think I'm saying anything new.

Moderator · Conference Operator

The next question is from the line of Dhruv Muchhal from HDFC Mutual Fund.

Dhruv Muchhal

Question similar to the earlier ones.

On the Spec Chem, for the last 2 years, a decent part of the growth in Spec Chem was driven by agro.

I get data from your presentation.

Your Agro and specialty revenues have moved from about INR300 crore to about INR700 crore in the last 2 years, FY21 to 23.

And now that we are hearing all about China recovering back, normalizing and all those things.

Our revenue growth was also coinciding a lot with the disruption, which has happened globally.

So, I'm just trying to understand, is there something which was some kind of one-off benefits that one should be aware of when you're thinking about the growth in the future?

Rajesh Srivastava

So if you see the regularly for last 7, 8 quarters, our performance of Specialty Chemicals has been improving both in pharma and agro and this time in this quarter, we have seen a very, very poor demand from agrochemical customers, and therefore, there is a performance gap but I don't see that this is something which is changing our regular performance of Specialty Chemicals business.

Shyam Bhartia

See, just to add that we hear from our customers that from H2, the demand will be normal.

And that is why we feel that the customers who we are supplying the material, their excess stock of agrochemicals line with them because of lower demand of agrochemicals in Brazil and U.S. Therefore, they feel that this excess production which they have with them will be used by North America and Brazil and Europe.

So therefore, we strongly believe that listening to our customers that from H2, the demand should be normal.

Dhruv Muchhal

Sir, I was just trying to dissect it because there is a lot of news flow that China is now back to normal versus what it was in the last 2, 3 years.

So, this is not because of China recovering.

Shyam Bhartia

No, no. This is not because of China because our agrochemical companies in U.S. and Europe, they have surplus production lying with them on the finished agrochemical because of lower demand of agrochemicals in Brazil and in U.S., mainly and in Europe.

Therefore, they as soon as stock levels will come down, they will start buying them.

This is what we hear from our customers, there's nothing related to the Chinese Market.

Dhruv Muchhal

Yes.

Sir, the second thing is on pyridines.

Now based on a basic understanding, Pyridines also find a lot of application in some of the newer molecules, I mean, you might not directly be linked to it, but indirectly, your products might go, or some other competitor pyridine products be going.

So, I'm just trying to understand your earlier comment that your products or pyridine products are largely into Generics.

Just wanted to get some better understanding there.

Shyam Bhartia

See pyridine products are used in various uses and the new uses of these products are in electronic products like in the electronic circuit board also it is being used.

So, I'm just saying that new uses of product is coming in.

But the overall demand increase is about 3% to 4% only.

New uses are coming, which is a higher value pricing.

But of course, the total demand is growing only at 3% to 4%.

Rajesh Srivastava

In case of pyridine if you see that all the new product development, which we are doing, we are taking care of many industries, so there are a lot of derivatives, which we are planning.

And every year, we are launching 4 or 5 new derivatives.

So, pyridine for us, we say pyridine but there are almost 35, 40 products which we regularly sell which are used for pharma, agro, electronics, personal care, all those uses.

Shyam Bhartia

And just as a comment I'm telling you, that in pyridine, 40% pyridine is used internally by us.

So, it is important for you to understand that we are also making new intermediates.

New intermediate means new captive consumption goes up.

So, we are adding value.

Our objective is to add value to pyridine in next 3 or 4 steps and then meet the requirement rather than selling pyridine.

Dhruv Muchhal

I got it.

Sir, that is question, if you have a lot of inter-segment consumption, ideally, that should have knocked off in the intersegment revenue reporting, but that does not happen, probably take that offline.

Shyam Bhartia

Pyridine-based intermediates, which are used in agrochemicals, the demand for this was less so our sales was less.

So now that demand will become normal, then our sales will go up.

Dhruv Muchhal

Sir, the second question is on the capex for FY24, you mentioned INR700 crore.

I believe the capex that you had earlier in the presentation mentioned this committed capex, large part is done in the end of FY23 or probably commissioned in early FY24. So, what is this capex now for INR700 crore, if you can probably mention the key projects?

Rajesh Srivastava

Okay.

So, if you see our last presentation, the key capexes are this non-GMP multipurpose, which is going on.

We have expansion of our Vitamin B3 into cosmetic grade, which is now going on.

We have plans to approve vitamin B4 food grade capex then we have plans to add one more GMP facility.

All that what we have said earlier in our last presentation is still prevailing.

And we have said INR700 crore this year is still prevailing.

So, there's nothing changed.

If you see last presentation, you will find everything.

Dhruv Muchhal

Okay.

Because a lot of these projects were not to be committed.

So probably they have converted to committed now, is it?

Rajesh Srivastava

Yes, yes., yes.

Of course.

So, quarter-on-quarter, we keep taking decisions on those capexes which are ready with design, development, everything.

So, it takes time.

First, you develop a product, then you pilot it, then you design it, then you take a call of capex approval.

So of course, we take it gradually, not all together.

Dhruv Muchhal

Sir, last question on the food grade ascetic asset.

It's about a year now.

So how is the ramp up?

I think in the last call, you mentioned it takes a year or so about to get the approvals done.

Rajesh Srivastava

So, food grade acetic acid very much on place.

We have a good product, quality product GMP plant being audited by customer now and volumes are picking up slowly.

So of course, this is a product which is low volume, low pack size, going to food customer, we can't expect a large tanker load, but it is picking up very well.

So, it will pick up.

Of course, it will take a little time to gear up in the customer segment to catch up the volume, but very well done in terms of facility being audited by customers.

So, we are well placed.

It's doing well.

Moderator · Conference Operator

The next question is from the line of Rahul Veera from Abakkus Asset Managers.

Rahul Veera

Sir, the plants that are coming online and the opex is where the demand for the segment is only going to improve in H2.

What is the probability for the overall consol EBITDA to degrow next year?

Rajesh Srivastava

Next year means FY25?

Rahul Veera

Yes, FY23 over FY24.

Rajesh Srivastava

FY24 over FY23.

Rahul Veera

Yes.

Shyam Bhartia

So far, we are confident that the EBITDA of FY2024 will be better than FY2023.

Rahul Veera

Okay.

And what is the operating cost coming from on the new plant, sir, at opex level?

And if they are working at 10%, 15% utilization given the demand scenario, I believe there will a large cost that will come in the opex, sir?

Rajesh Srivastava

Not all plants are 10% to 15% operating.

Most of the plants, we start with full operation.

Of course, during the year, the volumes will start picking up.

But once you start the plant, you have to start full plant.

Shyam Bhartia

I can only tell you that our cGMP facility and also non-CGMP facility.

From H2, it will be 100% utilized.

100% means probably 85% will utilized.

Rahul Veera

Okay.

And given the current prices of the Specialty Chemicals, even at 85%, will it break even?

Shyam Bhartia

No, this will be a CDMO.

Rajesh Srivastava

cGMP is mostly pharma.

So, it's not agro basically.

Rahul Veera

Okay.

And for pharma, the demand is still maintained?

Rajesh Srivastava

Yes, still there.

Shyam Bhartia

So, see cGMP is pharma.

And non-cGMP is also agro and some extent of pharma also.

But demand for agrochemicals from H2 is going to be normalized.

So, from H2, all our plants are going to be used by at least 85% because that is why we put our plants because there is a demand for our products.

And we are confident that we will use 85% of the cGMP.

Rahul Veera

So, I'm just trying to understand, like if we take the sequential EBITDA degrowth from Q3 to Q4, it's almost been like a INR50 crore degrowth.

Rajesh Srivastava

But that sequential EBITDA degrowth is not only Specialty Chemical.

If you see Nutraceutical, we have significantly dropped in EBITDA.

That is the major issue.

That is improving now.

So, you will see overall performance going to be better.

Rahul Veera

Right.

But sir, overall, if you see continue the same argument again, given the current prices of Pyridines or even the opex that will come from the new plants, EBITDA, in my view, even if there's an offsetting factor of power savings or offsetting factor of Niacinamide improvement on the Nutrition segment, there should be EBITDA degrowth.

Shyam Bhartia

No, see our performance on Specialty Chemicals, from H2, it is going to be totally normal.

Plus, new plants will add to the additional sales that will give us leverage rather than deleverage, firstly.

Secondly, on Chemical Intermediates, because of our new acetic anhydride plant starting, our over sales will be better.

Now on Niacinamide, we have already told you that we expect the situation in Q1 has improved substantially.

Q2 we expect to be better.

And going forward, we expect the situation to be normal as we use to operate normally.

Last year was a very unusual situation.

Basically, in H2, if you see, it was very, very low.

H1 last year was also reasonably okay in Niacinamide.

Rahul Veera

Sure.

Sir, just one last question from my end.

I wanted to understand what have been the incremental depreciation or interest costs that will come for FY24?

Prakash Bisht

So, it will be in the range of INR20 crore to INR25 crore on depreciation.

And about interest will be in the range of INR15 crore to INR20 crore.

Rahul Veera

Incremental?

Prakash Bisht

Yes.

Moderator · Conference Operator

The next question is from the line of Tarang Agarwal from Old Bridge Capital.

Tarang Agrawal

A couple of questions from me.

If I were to look at your Nutrition business, what will be the indicator that you think help this business move up?

I mean, last one year, we've seen a significant compression in this business, because of market dynamics.

So, what are you seeing now which is leading to the believe that Q1 situation is improved, and it should consecutively move up?

Shyam Bhartia

See, last year, there was 2 factors.

One is the Avian flu in Europe and then Avian flu in U.S. So, if you see this Avian flu reduced the total requirement of the listing and supply was more.

So, the prices also went down.

But now the Avian flu effect is gone.

And now the situation is normal, and we strongly believe, and we are seeing in the market today both the volumes and the price going up, what we are telling you what we are seeing in this quarter.

So, we expect the H2 performance is likely to be good in Niacinamide, both on volumes and price.

What we are telling you that we are seeing that is not that we expect.

That’s why We have stated that.

Tarang Agrawal

Got it.

And sir, given how this market has been under pressure last year, are there significant inventories that are there?

Rajesh Srivastava

No. So as Mr. Bhartia said that in the beginning, it was the impact of flu for 2-3 quarters.

But then last 1.5 quarters, we have been facing the liquidation of inventory.

So therefore, the prices are under pressure.

But now the inventory is almost gone, it's normalized.

And then only we are seeing the market situation coming up.

So, there is no inventory in the pipeline.

Tarang Agrawal

Sir, second question is basically, if I look at your Specialty Chemicals and Chemical Intermediates business, the indexation of both these businesses to pharma is reducing.

I mean, percentage of revenues coming from pharma for both Spec Chem and Chemical Intermediate, that successively gone down.

So, I under agrochemicals grown but is there any specific development in the Pharma segment that you all are seeing?

Rajesh Srivastava

So, let me tell you both.

First, we start with Chemical Intermediates.

Chemical Intermediates, pharma, mainly is paracetamol and ibuprofen.

In that market, we have a very strong market share.

And whatever market growth is happening, we are also growing.

Now in Chemical Intermediates business, in Acetic Anhydride there are multiple uses where the growths are happening, like for example, in agrochemical is one part of it.

There are other products which are also growing.

So obviously, where the market will grow, we will also grow.

So, there is nothing wrong happening in pharma.

It is just because the other end uses are growing better.

Obviously, our volumes will also grow better.

And the same is happening in Specialty Chemical.

There is not a bad or something going down in fact in GMP, we are going to add capacity in GMP.

So as much, we will add capacity in pharma, we will have the growth in revenue from Pharma also and at the same time, there is a growth happening in agro also.

So, there is no fundamental change which is happening.

If the demand is going a little higher in agro, we will do there equally better.

Moderator · Conference Operator

We'll take the last question for today, which is from the line of Siddharth Gadekar from Equirus Capital.

Siddharth Gadekar

Yes.

Also, just on the food grade acetic acid.

So how do we look at the utilization for FY24 and FY25?

Rajesh Srivastava

FY24, we see that we will be in a position to utilize approximately 50% of the plant.

Siddharth Gadekar

Sir, secondly, in our Specialty Chemical again, now what we are looking in the market is that this quarter will be a peak destocking quarter where even domestic agrochemical companies have lowered their production.

So, is it fair to assume that the revenue contribution from Specialty Chemicals in first quarter will be lower versus last year?

How should we look at it?

So even our profitability will be lower in the first quarter?

Shyam Bhartia

We expect the demand to pick up slowly and will get normal by the H2.

So, It's not that total demand is not there.

Total demand is less than the normal demand that we were getting from our customers, mainly international customers.

So, I think what we hear from them, what we hear from our customers, that demand will, of course, gradually go up, but ultimately it will become normal in H2.

Siddharth Gadekar

Just specifically from the next quarter, given that we are almost 45 days into the first quarter, so we would be having a fair sense of how things are because what I understand is at the entire margin deterioration or the volume decline that has happened would have happened after 15th or 20th February, that is where we have seen that impact in the global market.

So now given that you have 45 days into the quarter, is it a fair to assume that even first quarter would be on similar lines or would be better than this or worse than this.

Rajesh Srivastava

Yes.

First quarter also is in the similar lines so far.

But we still have half of the quarter.

So far, we are seeing the same situation.

Yes.

Moderator · Conference Operator

This was the last question for today.

I would now like to hand the conference over to Mr. Pavleen Taneja for closing comments.

Pavleen Taneja

We thank you all for joining this call today.

We hope we have been able to answer your queries.

For further clarification, I would request you to contact me.

And thank you once again for your interest in Jubilant Ingrevia Limited.

Moderator · Conference Operator

Thank you.

Ladies and gentlemen, that concludes this conference.

Thank you for joining us, and you may now disconnect your lines.

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