Grasim Industries Limited

Ladies and gentlemen, good day and welcome to Grasm Industries Q4FI21 Investor Conference Call. We have with us today from the management, Mr. Dilip Gaur, Managing Director, Mr. Kalyan Ram, CEO, Global Chemicals and Group Business Head, Fertilizers and Insulators. Mr. Jayan Duva, Chief Executive Officer, Chemical Division. Mr. Ashish Adhukia, CFO. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. I would now like to hand the conference over to Mr. Ashish Adhokia, CFO. Thank you and over to you, sir.

Ashish Adhokia Thank you. Good afternoon to all the participants. I hope that you and your families are safe. The FI21 was a year of two halves. We started on a very grim note in quarter one with low operating rates across all the plants, which was followed actually by a solid recovery from quarter three onwards. In this quarter presentation, we would like to start the discussion with highlighting the qualities of viscose as a green fiber. What makes Viscose the green fiber is based on three tenets, which are green product, green technology, and green ecosystem. These are highlighted in the presentation on page four, which has already been uploaded. We have listed down six powerful credentials of Viscose, which makes it superior product on the sustainability front. Viscose is made from ethically 100% sourced wood and from sustainably managed forests. The land for viscose wood does not require added fertilizer or pesticides. Therefore, there's no use of chemicals for growing its raw material. Viscose needs very less amount of water as compared to other natural fibers during its life cycle, which makes it low on water consumption. Viscose is also fully biodegradable in eight weeks. In comparison to that, the other fibers take much longer. Additionally, pre- and post-consumer waste can be converted into fiber again, resulting in circularity. RASM is one of the companies which has all the three generations of fiber under one roof, which are Viscose, Modal, and Lysol. Lyocell technology is a closed-loop technology with an exceptional recovery rate of key chemicals such as NMMO, which is recovered by more than 99.7%. Even the recovered water from the process is reused. We are currently implementing a closed-loop technology in all our discourse plants, which will lead to reduction in emissions to air and water, improve the working ambience, and also cut down on raw material consumptions. We also have unparalleled focus on adopting global standards and systems accepted and recognized globally. We have received HIC FEM 3.0 average scores for all our sites, and we are committed to achieve stringent EU BAT norm for all our sites by December 2022. Key to create ecological value is to use less. On page six, you'll see how we have reduced use of water, caustic, and focused on reducing emissions. Moving on to the third tenet, which is green ecosystem, it's about making an impact that goes beyond your own operations. The three pillars of the ecosystem are responsible sourcing and the supply chain, valuable partnerships, and social responsibility. We ensure that we source our wood pulp requirements for certified forestry that follows responsible practices. We work with our partners in the entire value chain to impart the importance of sustainability. We have partnered with Green Tracks that provides end-to-end supply chain traceability for textile industry. We have also been making a positive impact to the society around us for many years. As a company, we have actively engaged with more than a million people across several states. Our CSR spends are focused on education, supporting 25,000 plus students, health, sustainability livelihood supporting almost 14,000 plus farmers, infrastructure development, and women empowerment. Our efforts towards sustainability has not gone unnoticed. Under responsible sourcing, VSF was ranked number one in Canopy's short-button report 2020 with dark green short rating. The VSF business received the prestigious Innovation and Sustainable Supply Chain Award from United Nations Global Compact Network India in 2021. The business was given the award for its pioneering innovation relating to recycled and circular fiber made with pre-consumer fabric waste based on in-house technology. Let me now switch to the operational and financial performance of the company. the fertilizer business decision divestment process is expected to be completed by quarter two after receipt of nclg approvals for the scheme of arrangements amongst other pending approvals the reported financials has already uh classified it as discontinued operations grass and premium fabric limited The erstwhile Soktas India, which was a subsidiary of the company, has received approval for merger with the appointed date of 1 April 2019. We are yet to file the final order with the ROC, but that substantial steps are already over. The financials of this subsidiary has been incorporated as part of textile segment of the company. In the fourth quarter, all our businesses witnessed all-around improvement in operational performance on back of strong consumer sentiments due to receding COVID cases. The financial performance of BSF epoxy textiles was much ahead of expectation in this quarter. The global textile fiber demand witnessed a sharp recovery in second half, led by a spurt in consumer demand and restocking of the dry supply pipeline. The growing consumer preference for comfortable casual and value for money clothing has spurred demand for cellulosic fiber and VSF has been key beneficiary of this shift. In India, VSF plants operated at full capacity for two successive quarters. The domestic demand grew by 9% YOY in quarter four The share of value-added products in the overall sales mix also improved to 26% in quarter four as against 22% in quarter three. The VFF prices in China traded at their multi-year high in China. The VFF prices rose from 12,800 RMB in Jan to 15,800 RMB in March 2021. This was driven by strong consumer demand restocking and rise in cotton prices during the last 12 months. China's VSF inventory at last declined significantly from 45 days in April to 13 days in March. The VSF business reported one of the highest EBITDA of 548 crore during quarter four. As part of VSF segment, the VFY business reported revenue of of 465 crore and EBITDA of 77 crore in the quarter. The fluoralkali capacity utilization touched 94% in quarter four from 89% in quarter three. The international caustic soda prices improved sequentially led by temporary supply disruption in the large, sorry, the later part of the quarter. In the chemical segment, the advanced material business, that is epoxy business, witnessed sales volume growth given by demand across segments, especially wind and auto segment. The sector witnessed demand outstripping the supply due to raw material constraint coupled with disruption at certain global manufacturers leading to exceptional performance. Our consolidated revenue for quarter four rose to 24,399, up 26% YOY, and the EBITDA and PAT was 5,142 crore and 1,715 crore respectively, jumping 62% and 14% YOY respectively. On the standalone basis, excluding the discontinued operations of fertilizer, our revenue and EBITDA for quarter four stood at 4,394 crore, and 880 crore respectively. EBITDA reported an YOY improvement of 121%. The revenue and EBITDA from the discontinued operations of fertilizer for Waterforce to that 561 crore and 33 crore and has not been included in the published financials. On CapEx, you may please refer to page 14 of the investor presentation. The total capex spent for FY21 stood at 1,508 crore. The capex plan for FY22 excluding paints and fertilizer is rupees 2,604 crore, which includes the VFF expansion project at Goliath with line one scheduled to be commissioned in quarter two of FY22, and line two will be commissioned in quarter three of FY22. The other capex includes Grassland's plans to invest towards increasing its advanced material, i.e. epoxy business capacity, by 125 kTPA. This will be done through a brownfield expansion at the existing location at Williott Gujarat. This will include standard and specialty epoxy products, along with curing agents. Being an industry leader, Grassin will continue to play a proactive role in growing and supporting the demand growth of epoxy. In the chloralkyly business, Grassin plans to invest in 200 TPD caustic downfield expansion at Reliant. This will take the total capacity to 1,400 TPD at its relied site and will primarily meet the customer's requirement in the country's western region, including that the requirement of VSS business, which will also be commissioning its expanded capacity. The expansion will be commissioned in 24 months post receipt of statutory appearances and approval. The expansion of chemicals WAP, which is in various different WAPs, will improve the overall chlorine integration to about 40% by FY25. This is excluding what we plan to sell to our customers through pipelines. We have successfully commissioned 182 megawatt of new capacity in our solar business during FY21, taking the total capacity of solar to 502 megawatt. I would like to remind you that the solar business is in our subsidiary. It's not a division, so it's not included in the CAPEX slide that you're seeing. It's a subsidiary, so it's separately captured. In next two years, we are scheduled to add another 343 megawatt of new capacities. Our balance sheet has stayed strong despite headwinds in half one. At the end of the year, the consolidated net debt stands reduced to with these 8,831, 58% reduction from March 20 levels. At standalone level, the net debt reduced from 2,999 crore in March 20, which included the debt of Earthwise Softas, which has got merged now, to only 914 crore in March 21. Based on a performance and comfortable liquidity position, the board of directors of Ratsim has recommended a dividend of rupees five per share for the year ended 31st March, 2021. And in addition to that, a special dividend of rupees four per share, taking the total dividend to rupees nine per share. The total outflow on account of the dividend would be 592 crore. In terms of outlook, we expect the second wave of COVID to impact the operational and financial performance during the lockdown due to the demand slowdown, but we expect the recovery to happen as much as last year after the lockdown is over. With our inherent financial strength, operational excellence, and diverse product portfolio of cement, financial services, viscose, and chemicals, we've always demonstrated the ability to be resilient and rebound quickly. So now I would like to hand it back to the operators of Q&A.

Thank you very much. Ladies and gentlemen, we will now begin the session. Anyone who wishes to ask a question may press star and on the telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the questions you send in. The first question is from the line of Priyant Mahajan from Kota.

Please go ahead. Hi, this is from Kota. Thanks for the opportunity and congratulations on a good set of numbers. First question is with respect to the VHS business, a very strong recovery, but starting April, we are seeing some softness in prices and also cost is expected to catch up as far as quality is concerned. So is it possible to share some color both on prices and cost in 2021? How is it moving? And also, I mean, what are the recent volume trends given the recent lockdown and restrictions in the country? Thanks. The question is regarding the second wave of COVID, how it has impacted price, volume, both price and volume. And something more salty wanted in, right? And yeah, and the salt price because of cost is going up. Yes, sorry. If you look at the quarter score, and as we did the quarter score, the demand was very strong. I think India witnessed the highest ever consumption of the scope in the March quarter. And until the lockdown was imposed, the going was pretty strong in the Indian market. The prices, all the global prices, have been at the peak in the quarter 4, but those prices were exceptionally high because of the underlying demand, but there was a lot of weak shopping market. So, we expected some rebalancing of the prices to happen. So, to that extent, yes, there was some modulation in the price, but still the VSS price remained quite attractive as the quarter ended. With the lockdown, because as you know, it's typically textile, from fiber to garment, at least move across four to five states. So, it's not a very long down. It's not a very long down. At the other side, there has been a demand bump, and I think that the domestic demand has come down significantly because of a long down. And particularly in the south, where Tamil Nadu is hit very badly. And the retail demand lost for about 25 percent, maybe even higher. So what we are doing, but the underlying sentiment is very strong. So when you talk to the value chain, they believe that the day lockdown is lifted, there will be an uptick in demand. They pick up very fast. The good news is that global markets continue to remain very strong. People who have their support businesses are doing extremely well. So their support businesses are going full circle. And I think the U.S. economy is doing well. The U.S. retail sales have done very well. The U.S. sales are doing well. So to my mind, I think once the road bump of lockdown gets over, demand will come back to its healthy levels. Yes, like all commodities, the pulp size also has run-ups. But there's an overview. The pulp size run-up is a lag of VSS. Because VSS has already, if you look at the VSS values, they're one of the 54% YOYs. So, Pulse is not catching up. In our case, the advantage is that, if you recall last year, when the Pulse has fallen, because our pricing was one quarter behind, we are always losing. But today, we will at least for two quarters, we get a benefit. So, our conversion cost of Pulse is not going that fast, and the market price is going up. So, to that extent, there is an advantage in our pricing. Does that answer your question? Yes, and if that covers it well, I think one more point, what has happened is that, of course, the spread of VSF over pulp has gone up significantly, and it has gone beyond even FY19 levels, which will normalize with the pulp prices also catching up. Okay, okay. So can I, is it fair to conclude that fourth quarter we've hit the peak in terms of profit, in terms of margin, given the benefit of lead in VSS prices versus FULF? Is that a fair assessment? I think what Sumangal is asking is that Is it fair to conclude that quarter 4 was the peak for this course? Yes, obviously. Because you see, it was not only the demand growth, it was the peak of the program. Understood. Second question is with respect to the capex. So Ashish, last year, fourth quarter, the outstanding capex was somewhere around 5,000 crores. This year we spent 1500 and plan is another 2400 in FY22. So from our design capex around 1000 odd crores is still pending which will be spent in the following year. Is that right understanding of our capex plan? No, no. So Mangal, I don't think you should read it that way. I think earlier we used to give the sanctioned amount, right? Which was... more of an outstanding capex and then we used to show year-wise breakup. I think to give better guidance to the market because it was very difficult to give outlook of two years down the line what the capex would be to give a better outlook. Now we are giving one year outlook of capex which is, you know, other than for paints and fertilizer, it is 2600 crores. So that's how you should be reading the chart. Don't calculate the balance amount and assume that that would be the same amount. Okay. But, I mean, in terms of all our ongoing projects, will we be, I mean, completing all the expenditures towards those in this year itself? Yes, there will be some leftover. No, so the VSF 600 TPD, what I talked about, the two lines in Vilayat will complete in quarter two, quarter three. The chloral capacity expansion, which is ongoing in Vilayat, the current ongoing in Vilayat and Rehla, and Balvadrapuram. There has been some delay in these capacities to come. because of the COVID. Okay. So the local situation in, for example, is not good. So therefore, we are having to push out CAPEX commissioning. So there is some delay out there. In terms of new 200 TPP, we are giving a guidance of 24 months after receiving these statutory approvals. Yeah, so these are the broad timelines of the current plan that I talked about. Jayant, is there anything that you would like to add on that? The only thing I would add over here is that we will come up in Goliath again, you know, early H2. So, Prela will come in early H2, Dv Puram K1 will come in early H2. and has the 200 fresh expansions and take another 24 months. So, we have a fairly large set of projects which are going to be coming up in the chloralkali business this year, starting H2 early till the end of the year getting commissioned. Understood, understood. Thanks for these details. Just one small clarification. So, the Catech slide mentions X of 10. So does it mean that this year there will not be any startup capex in the paint business or you are still very early to share details on that business? Yeah, it's a latter. So there will be capex in paint business. But, you know, as you know, that it's only about three, four months back that we discussed about entering into paint business. So we are still formulating our strategy and CapEx plan as we're going along. We're looking at land acquisition, et cetera, for the locations of our plant. So right now it's too early to say what the CapEx guidance for the year would be. So therefore, we are just maintaining the earlier guidance that was given right now, which is 5,000 crore over three years of capex. And as we get more clarity, we will feed that to our investors. Got it. Thank you so much and all the best.

Thank you. The next question is from the line of Peter Jamodia from Android Research. Please go ahead.

Good afternoon, sir. Sir, I have two questions. So one is on VSS and then on chemicals. So first on VSS, sir, VSS prices like in the presentation you have shown that it has moved up from the gray VSS prices have moved from almost $1.2 a kilo to almost now $2.2 a kilo. So how does the premium move for the value-added or the speciality VSS? Because if I recall it correctly in Q2 conference call, you mentioned that premium for modal XL is generally $1 premium to the gray VFF prices. So let's say gray VFF prices are $1.2 in Q2 and now at $2. So how does the premium moves for the specialty? Because what I find from the numbers is I think the value added premiums have slightly shrink as compared to what we were earlier doing. So let's say in H1 of 521. So if you can some sort of explanation here and a related question for speciality VSS is that how is the market for speciality VSS in India? So how it is growing over the years and if you can explain our market share in terms of the growth what we have seen in the speciality VSS market in India. So this is about VSS. Good question. So I'll respond first to your premium topic. If you recall our earlier conversation, I had told you that the premium always goes up when the base VSSR is less. Your voice is slightly unaudible. Can you do it slightly louder, sir? Can you hear me now? Yeah, yeah. So now it is okay. If you recall our two conversations on a couple of occasions, I have also mentioned that the premium goes up when the base USF price goes down because there is a band in which the premium price works. Okay. If you take a modal price, there is a 18,000 to 20,000 RMP is the price.

Correct.

When the base price goes down, you see a premium going very high, it went up to a dollar plus last time.

Correct.

It was three years back in the history when the prices were again $2.00. The premium has gone down to 0.6 dollars. So there is already a healthy premium if you plan 0.61 dollars. And when the ASI has gone up, the premium has shrunk to that extent. The other thing is premium is a, the premium dollars are a mix of, there is a modal, there is a drop-down, there is a liable or actual, and there is a leave-out. Different products have different opinions. You have to look at each category. There is no flat team across the board.

Absolutely.

The third is one product which is the Liacel or Accel product. Here there has been a bit of a structural change in the market because a lot of dynamic capacity has started to be announced typically. They have not come on the ground, they have been announced.

Okay.

And we have been able to make not the quality of Accel or Liacel which perhaps we make, or our European competition made, but that is good enough for certain applications to go in the blend. So that had lowered the, because in anticipation of the very huge capacity announcement, there was a temporary dip in the price of Liocel in Chinese market. So things didn't stop. Because one of the competition announced that I would like to sell Liocel at just 1000 RMB premium to Discord. Without anything on the ground. is now recovering back. So this is a bit of transition of the premium part of it. But the fact remains that in all these things, the premium market has been very strong. One of the big failures all along has been the demand for premium market. I think the modal is being fixed today. So there is a huge surge in the market across the world. The second part of the premium market which has taken over the world is the eco-friendly waste course. I think the brand has been very very enthusiastic in receiving this grant. So a lot of commodity waste course has been converted to an eco waste course. They can get a 15 to 20 cent premium. Now that is a free premium for a, there is no difference in the fiber. What you do is you make it in a, by a process it is more efficient, you make it, you make it and you give flexibility.

Okay.

So that has been a very big change. So I think to that extent the whole textile world is shifting more and more to specialty fiber. That's a business called a fiber business. Okay. If you have seen our share of specialty, one of the 400 businesses. Yeah, correct. A good question. India market is moving significantly. We have got a CAGR of more than 20%. Okay. Okay. We have taken a very ambitious approach of doing a specialty market in India, which we have not achieved yet. In our mind, I think specialty is taking off pretty well, and we have got the market leadership now. Correct. okay okay okay so the second question is on the chemical side so like uh if i see your uh cotton quarter which i think it has not moved up much so one of the uh uh statement in the presentation is that uh caustic has seen some cost pressures probably so so the cost increases mainly because of the power cost or any other reason so this is one and a related question is sir if we see for the epoxy what you have rightly mentioned in your opening remarks also what we have seen is that the percentage increase in the prices of LER is more than probably to all the raw materials put together be it bisphenol or be it the epichlorohydrin so but when we see the profitability I think it has not moved up much on a quarter on quarter basis so if you can help us understand that is there any lag effect which would be visible in H1 of SPY22 and if you can give some understanding about our expansion also because I think we have announced an expansion by 125,000 tons for epoxy. So are we also planning some backward integration like some of the players in India have announced standalone capacities for epichlorohydrin. Are we also planning some sort of backward integration?

Thank you.

Jayant, would you like to comment on the cost side of this? Yeah. So I think the larger impact on flat is kind of a situation on cost to the international prices. which only started seeing a little bit of an uptick in the later part of March of the last quarter. While on the commodity side, I think each one of us knows that the prices did go up, but I think our power management did a good job and we were not impacted too much on the power costs and even the coal increases which happened. But the results are more because of the cost of price movement rather than anything else on that particular front. I hope that answers your question. Because I think VCO realizations were also higher on a quarter-on-quarter basis. It is marginally higher compared to the earlier one. not significantly higher. So that's what I'm saying. The last part of the quarter, there was an update basically with the winter storm in the US, which led to a little bit of a demand supply situation, which did move the price a lot. Correct, correct. Yeah, so on the cost side, basically there were some, you know, also repairs and maintenance, et cetera, of the plant, which was, which increased the cost of, bit more than quarter three in comparison to quantum three. On the epoxy fund, I will request Kalyan to comment. I think there are a couple of questions out here, epoxy. One is on the prices increase in realization had increased quite a bit. uh but but uh according to the margin is not reflection reflective of that is it because the cost increase yeah so um yeah so i'll take that action so so um epoxy as a business has always been a an extremely steady business for us we are a business where We are now more or less sold out on our epoxy capacities. And what happened in the last six months has been more with this phenomenon. Globally, this phenomenon, for various reasons, initially force measures, and later on a real serious shortage through supply chains, have not been very easily accessible, whereas the demand has been picking up for the end products, whether it is just as resins, or in terms of our own formulations, we offer up to the formulations, the specialties as well as formulations. So when Bisphenol A became severely short, majority of epoxy players have actually not run their plants 100%. They could only run at, say, 90%, 85%, 95%. What we have done is we look at it as product, as a formulation and as a solution within the raw material that we had access because we had one of the better supply chains so we could get majority of our raw materials which we had planned for at least in the Velayat plant and we have used it for gaining the key customers and their requirements mostly from both products as well as solutions so in a way they it's hypothetical whether the business on a was low price or high price it was not just available after a while so it's about getting access whereas once you get access you would definitely be able to pitch it at a much higher price what we expect in the next one or two months this might flip slightly we expect at least for the next month or so up to June, this quarter should still be fairly strong. Still, the raw materials are not available. When the raw materials are fully available by second quarter, the prices might soften a bit, but still we expect the market to be strong because end of the day, all of the downstream coatings, electricals, auto, wind, all are going strong. That's also one reason for us we have sold out and we are looking at expansion. So very obvious. If you can think of it, we are the largest chloranthly player. We are the largest epoxy player. And we are highly integrated across the board. And we are a chlorine derivative player. So it's very obvious that we should be putting the largest CCH plant, too, It is at an advanced consideration. It is being reviewed. It is being finalized. Maybe we will have something to tell you in a period of time, in a short period in future. Thanks a lot for answering the queries in detail and all the very best. Thank you.

Thank you. The next question is from the line of Chirag Siveka from DSC Mutual Fund. Please go ahead.

Hi, this is Vivek. I'm a Christian. I just wanted to know about the leverage policy because the net debt has come down significantly. And the way I see it is even doing a CapEx on some fertilizer sales and internal growth, you'll be probably net debt negative or you'll be cash positive in the matter of a year or so. Could you please explain where would you like to take this? Thanks. Yeah, sure. I think, see, I would not like to comment on it being net cash by end of the year because, you know, we have certain CapEx plan. We've not yet discussed Pains CapEx, but if we include Pains CapEx, then it's possible that we will not be able to go back to the net cash position. Uh, but overall, if you look at the policy that we follow, uh, you know, it's to stay, uh, AAA for GRASM. I think it's very important that we remain investment grade, both in the international as well as domestic markets, because that's a leverage that I have in terms of my cost of debt and my ability to therefore, uh, uh, uh, undertake projects and implement projects. Our AAA balance sheet also helps a subsidiary like ABCL to get a good cost of debt as well. So it improves the return for the equity holders because of their margins, NIM, et cetera, going up. And therefore, keeping that in mind of keeping a strong investment grade balance sheet. We don't like to go definitely not beyond three times on a net debt basis, but that's on the, really on the outer limit where I have to get worried and start doing things like selling at non-core, et cetera, to make sure you come back. But I don't anticipate our net debt to EBITDA ratio in the next, you know, five years going beyond two, two and a half times. So even with the implementation of our things, graphics. Thank you for that. That was very useful. Thank you.

Thank you. The next question is from the line of Sati Kumar from Anti-Stock Broking. Please go ahead.

Yeah, good evening. Thanks for the opportunity. My first question is on your paychecks. Last quarter, we call like while the numbers are not given very precisely but we were sort of thinking of spending capex of around 2500 crores for next 2 years 2023 now we are saying it 2600 crores for FY22 so just wanted to understand what is the new capex which is around in this quarter particularly on new expansion projects on FOCSE and FOCSEX and otherwise? Without giving the numbers, like I said, the new capex that is there is your Veliac 200 TPT. So viscose, there is no new capex. Let me first clarify that. Okay. In chemicals, we have taken Veliac 200 TPT. and this is going to be an incremental CapEx is going to be very small because this is a brownfield expansion, the infrastructure, utility, et cetera, all that. So there is no question of a large CapEx out here. Okay. Then there is, there are a couple of value added products, which is, the chlorine derivatives, which we have also included. So we talked about chloromethane. So like that, there are few more that we have budgeted for. We are not disclosing right now for competitive reason of what those products are, but those are some of the products that is there in chemicals. Then I've talked about epoxy. Epoxy, you know, While it is not a very large capex, but amongst the capex between chemicals and others, other than VSF, which is pending, that is probably one of the larger capex that is there for epoxy. And other than that, in VSY, we are considering and right now we've budgeted for a small CSY expansion. So you have three products out there, PSY, CSY, and SSY. And CSY and SSY are much better contribution products in comparison to PSY. So over a period of time, we want to make the VFI product mix more oriented to the high-margin products. So that's why the whole idea is to put up some capacity in CSY. So that's broadly what the overall plan in CapEx is. I'm just looking to go to 1457 earlier. That's a complete pie. Earlier we were looking at 1222. Now that completes seven. So, the voice was not very clear, so I missed what you asked. The australian caustic expansion, we were looking to have a caustic capacity to 1367 kTPA. Yes. That was expected by 1Q22. Now, when do we expect that capacity? Yeah, sure, sure. Thanks. So, that capacity, like Jayant mentioned, is likely to come in second half in the early second half. So there is, it was supposed to have come in quarter one, quarter two, but it has, it's got delayed to second half because of COVID. And what you see out there in the chart is additional 200 TPT, which I was supposed to another 73 KTPA, which will take 24 months. On VFX, like the prices, I mean, based on our channel text and industry interactions, like pricing looks very high, strong, strong too. It's sort of slow to profit, but cost also seems to have increased by 15% quarter on quarter. Is it already impacts of higher bulk during the quarter or is it some other cost that has hit the quarter? No sir, BSF there is no impact of high raw material cost in this water. Only one, sulfur. Sulfur price has gone up and coal price. Okay, sulfur and coal has gone up. And pulp, while the market has gone up about 50%, our convention cost is one of the 70%. Yeah. So the impact of, the real impact of the raw material cost increase due to pulp will come in only quarter two, perhaps, quarter two, quarter three, yeah. And the last question on the so-called amalgamation, since when has it been amalgamated and how many, I mean, by 2021? Yeah, so what you see in the financial is the entire year's financials of soft tasks is included in the financials of textiles. So what you see is 100% of soft tasks. No, I mean, it is 20 and 21. Yes, that's right. Even the comparable figure. Absolutely right. I'll get back to you.

Thank you. Thank you. The next question is from the line of Naveen Sahelu from Envise. Please go ahead.

Hello. Yes, Naveen. Hello. Yeah, good evening, sir. And just one question. I'm sorry if it's a repeat. Maybe due to bad audio, but what was the average pulp cost in Q4 and where are the prices currently? do you want to know the market price yeah i mean uh uh because i i think we are like you know largely we are integrated so if you could help us with our costs as in what was our cost for q4 and uh we are integrated we are armstrong pricing so we don't we don't have so we buy it from our subsidiaries and armstrong basically it's a market given price Yeah, so if I give you an indication, so that's the bulk spot price, excuse me, in quarter 4, our consumption rate right would be because we are getting advantage of the uh earlier pulp prices and our uh contracts etc would be somewhere around 54 000 per uh per metric cup also the consumption price and what this will as as the time goes like we said it will go up Correct. So both from a pricing point of view, like, you know, because there is some cool off that has happened to the VHF prices also. I mean, their presentation says that March prices are 13%, March exit prices are 13% higher over Q4. But thereafter, clearly there is some easing off that has happened, if not more, at least 1000 RMB to the China prices and cost is also going up. So fair to assume that there can be a decent sort of a margin pressure in the coming one to two quarters, right? The other way to look at it is a key forward exception margin quarter. It's not a normal margin. Normally, a good VSS business has a VSS of 5 delta 0.9. And that delta went up to almost 1.3, 1.4 in Q4. That was an abnormal quarter. So I think what we will do is we'll come back to the healthy margin. Sir, I was just looking at slightly longer term in the sense this current quarter margins were at 24%. And historically, like, you know, a peak has been even higher, upwards of 35% and so. So just from a longer term, like, you know, perspective, given, let's say, China is acting up towards some of the environmental concerns, a slightly broader question. And this is more from the feedback that even in metals, We're seeing China acting towards these environmental concerns and hence shutting some factories. So is there anything that is happening on the BSF front from a broader perspective which can see that margins can or prices can see uptick or this is what the range boundary is? There are two things in BSF what is happening. The biggest question is cotton. China makes cotton in the Indian region with 85% of China's cotton comes from there. And that cotton has been banned by to US and European brands because of the human rights violations and various sanctions are there. Now, if that happens, and it is happening already, and that's why there could be a run-up in the cotton prices. And the moment cotton prices go up, of course, get the benefit. So the one big upside is what happens to Indian cotton issue with the China. So there is no way China can prosecute the Indian production if they have to win the export market. If we don't do it, then the market gets irritated and people benefit because of that. So either way, it should help the business. But that's the upside. Now it's a way to see how it unfolds. You can't predict how it will unfold. Thank you. have gone up despite the fact that people thought it might come down the today cotton price is pretty high uh both the cotton yarn price has also the cost and the export of cotton will happen every day that's the that's the okay thank you thank you thank you the next question is from the line of sati kumar from antique stock broking please go ahead Yeah, so thanks for the question, Kevin. Given the very strong exit of caustic lower entry prices for March quarter, so our margins can be quite different in Q1, let's say in Q22, or they should be like rainbound here as well because of higher costs? Yeah, No, so I think, you know, it's difficult to give us guidance for quarter one. I mean, I generally, I mean, we had a very strong margins in cost segments also in FY19 and in FY20 also first half. Then it started to fall in line with industry, I guess. But with now the improving prices, I'm not sure if they're sustainable, but should we see margins of chemical segment moving forward? Yeah, so maybe I'll take that, Ashish. Yeah, please go ahead. I think the assumption very clearly, even in terms of our aspiration for this year has been that it should be at least equal or higher than the previous year. And hence, we are expecting or we are hopeful of it. Two or three things which are concerning us. Number one, in the first quarter, because of the second wave, we have some difficulty in certain segments for at least six weeks. The second concern we have is we were expecting certain projects to take off by, end of first quarter, the second quarter, and then that's coming towards the later part of the year, the second half, as Ashish mentioned. See, both will have a slight impact on the overall year ahead. What we are banking on is what was unexpected last year was the V-shaped recovery. If really the markets recover as well as last year, it's not, you know, I'm probable to imagine that we would at least partially recover this, but it is too early. As Ashish said, we can't really say it's going to be as good or better or worse. We've taken one quarter at a time. This quarter, I think we want to just see how May goes and then June, how it recovers, and we'll take it from there. Thanks. Thank you.

Thank you. The next question is from the line of Saqib Kapoor from Kapoor and Company. Please go ahead.

Yes, sir. Thank you for the opportunity. In continuation to the remarks, when the first wave of COVID hit, it was all of a global phenomenon. But now as we see that the international markets have opened up and the utilization levels there industry-wise are coming to their pre-COVID levels. so in terms of uh in terms of that scenario sir uh how well is this cost of market uh shaping up and what kind of imports uh have happened for the last year and what should be the situation going forward this year so let me take that uh i think uh Yes, you're right. At the end of the day, when you look at Q4, you had in the winter storm coming up a robust global demand on coffee, including India. And practically, all of us grew and we did actually better than the Q4 of the preceding year on volume basis. At this point of time, I think coffee demand is actually linked with chlorine demand. And chlorine demand is largely globally linked with the benign demand, which is doing very well. Whereas the live production of PVC production in India is not there and that's why the impact is significant over here. Plus it's a localized way too that is impacting the situation currently. But even like last year, it took us about, you know, if you look at it from removal of lockdowns to getting back to peak, it took about 60 days and the entire industry was up and running in late 18 with capacity utilization. And that is what I think Ashish and Kalyan have been alluding to. That if the situation changes, it will change very fast because the inherent underlying demand continues to be there. And globally, we also expect that the demand will be robust. As regarding imports, I think the entire supply chain globally was disrupted. So we did see a marginally about 10-15% less import compared to last year. That is also because the Q1 was a washout for the whole industry as large capacities were not up and running. We expect the imports to continue at the same pace as they were last year in the current scenario, and largely to the eastern and the western part of the country, which is coming from your Japan side or Southeast Asia. So not too much expected on the import side. It will continue to be at the same pace as last year and a half like times, and maybe which came in earlier will come in now. and for on the anti-dumping part front that something was initiated earlier in two months ago so what is the update so the update is i think with the entire covid situation the investigation case has closed down uh we've had a couple of meetings with the body but i think uh the till the investigation is not over we will not be able to comment but taking these sectors into account, the price trends in the cost shift market are likely to be subdued only because if If the recovery in other chemical segment or other market have not led to recovering caustic soda realization, what factors would lead to recovery? I think it is still hovering around the $300 bank, something in that vicinity. Right, it's hovering in India at about a $300, shade less than $300 band. What would be the factor that will reverse this downtrend in the ECU realisation that is there for the last 2-3 years? So, see the point is that cost is the basic chemical, so it goes into all the commodity applications. And at this point in time, you know, any capacity which comes in, it's like a step curve. And the prices are very high, a lot of capacity additions took place. We expect that lately the capacity utilization for the industry has gone up, and also the recent trend in the last quarter, Q4, we did see that the prices of caustics have moved up slowly. We expect that trend to continue, but it is again a function of this larger clarity coming when this COVID wave 2 settles down and we start seeing the industries in the lockdowns opening up. So it's very difficult at this point of time to say anything on that front. More so, the current capacity in India is about 20% higher than the current demand, 25% of the current demand. So it's a combination of the lockdown and the capacity, which is keeping the, you know, the cost of price, I would not call it subdued, it's basically being at this point of time, you know, it's not being able to keep pace as like it used to keep pace in the past. very small point and we are also coming up with new capacity now not only grassing other players also have somebody someone has commissioned also and people I have lined up fresh capacity say six months one year two years down the line including you so in that case that there has to be a demand push to to keep up for these expanded capacities going forward and plants running at a at higher 90s, otherwise the fixed cost and the variable cost matrix will also dampen down the margins level. That assessment is correct, sir? I will not be able to comment upon what the others are doing. I think everybody understands and looks at the market situation, looks at their own customer base and capabilities, and then arrives at, you know, and it's not that you can set up a caustic plant, it easily takes you about 24 to 36 months to put up a VC. and about 25 months for a brown field. So all in all we all believe that caustic has a great future being a basic chemical and that's what is what is moving this industry forward. If you look at from our consumption scenario or our demand supply we're just about not even yet at a five million ton capacity but the good part what is happening is is the chlorine storage what is also now balancing the echo which is earlier mostly stood towards caustic and chlorine as of now. So I think there is potential in this business to grow further and that's what is being led by the entire industry including us. Right, and for the chlorine derivative part, my concluding remark, for the chlorine derivative part of what percentage of our chlorine goes to the downstream and how much is in our market sale? As Ashish put it, I think we gave a figure. There are two parts we look at clearly. One is the entire VAP story, which by 2025, we will be at 40%. And then there is a pipeline by which goes to industries along with us, or our ancillaries, or what we would call it. If I would take it by 2025, we will be somewhere around 65-ish, or 60-65%, which will be consumed at this particular moment. And the balance will go to the market. yeah right so so for just to repeat 40 percent wrap another 25 would be pipeline and the balance uh would be much in the same that that is for two zero two pipes and currently yeah so currently about 27 percent is uh right and so one of your competitors are developing the product hydrogen hydrate uh they are coming up with the capacity and as for their presentation and all uh they will be the only player in the country so have you looked into this product also and the demand scenario what are the metrics Like we've been saying quite earlier, because of competitive reasons, we don't want to get into a discussion what we are analyzing and studying. But let me assure you in one cut, there are multiple products that we are analyzing, studying, and looking at. And in the appropriate time when we reach the comfort level is when we will get into announcements. Just to add a couple of points. Sir is only answering me and I have concluded. Yes, please allow us to complete. Yes, sir, please complete. I said what I had to say. Hello? Yeah, I can add one last point. I think first of all, globally, there are no new chloralkali investments. They are just getting relocated. You might have heard there have been closures in US and elsewhere. Each of the players in different countries are making choices. So there is a huge amount of relocation going on from west to east. So globally, as the demand is going up globally, the new investments are not actually coming globally. They are only getting relocated. India is actually seeing the growth. Second, I think we don't invest on a next two-year basis. We invest it based on next 30-year basis. And we see, as Jen said, a very, very strong growth option there. And we'll continue that. And the last one is we'll fundamentally see, unlike in the last 10 years, we'll fundamentally see chlorine being making a lot more leading product compared to caustic in future, just like what happens globally. We will see more of that and more of chlorine derivatives and chlorine pricing, which is going to determine the equal levels in future than before. So we have seen all types of products. Again, when we look at derivatives, we look at derivatives where how much of chlorine intensity is going into these products. As Jen said, I think we are doing a lot of calculation, but our scale is very large, unlike other competitors. So when we look at it, we will have a much – more focused conversations on selective chlorine derivatives than all of them. Thanks. Thank you, sir. Thank you for all the answers. And all the best, sir, and stay safe. Thank you.

Thank you. The next question is from the line of Amit Murarka from Motilal Oswal. Please go ahead.

Hi, good evening. Most of the questions have been answered. Just had one quick question on the timeline of the fertilizer business realization. So I believe for your director, one year completion. So that comes around September to December. So are you still confident of being able to receive the funds by then? And the second question to that is, is it fair to say that the papers for the payments will only start after the evaluation of the funds from the foreclosure phase? So the first question, you got it absolutely right. So I think by September, we'll be able to complete the process and receive the funds. On the second bit, paints is irrespective of fertilizer. So it's not that we will start. So we will right now, the first dollars of paints will go into acquiring land. So which is already actively looking at and we have started deploying that. And of course, I'm not talking about employee expenses and also that are already started From the capex point of view, land will be the first one which we've already started doing.

Okay, so that's all I have.

Thank you. The next question is from the line of Bhavin Chheda from Inam Holding. Please go ahead.

Yeah, good evening, sir. What was the EFY top line and the EBITDA missed out from your presentation? Yeah, no, no, I had mentioned it in my speech. It is 465 crore of revenue and 77 crore of EBITDA.

77 crore of EBITDA.

Okay. And the other thing, I think the voice was not clear. I missed out. Because of the quarter one lockdown, how are your factories operating currently, both chemical and VSF, and what would be the... utilization level at both in the quarter one or current one? I take on the VSF? Yeah, please. I think VSF, all our factories are right now running full capacity except Harihar because normally every year we take an annual shutdown for the self-plant. It was supposed to be taken in the first week of June. So that will advance to this month of May. So I think this is a good time to finish up all the shutdowns, so that when the demand comes back, we have some capacity available to us. That's the only thing we have done so far. Let's see how the lockdown continues, and then we'll review it once again. One more thing we have done is, like last year we did, as the lockdown happened, we took a lot of exports. So there are a lot of exports we are doing from the Indian market right now, so that our plants are going to be utilized. So export of hydro as well as we have converted one line to nonwoven in Kharag and maybe one more line will convert. So we start making again nonwoven in Kharag which will be exported to Europe and US market till the time the India normalizes. Just as we are making sure that the plants are utilized fully.

Okay. Thank you, sir.

Thank you. The next question is from the line of Nirav Jamodia from Anvil Research. Please go ahead.

Thanks for the opportunity again, sir. So continuing with the earlier question, so let me mention that we are going for more of the exports of the speciality VSS, what we mentioned about non-roman. So as far as you speak to, as in that we are selling more of Modal and Excel in the domestic market and Dubdide and other well-hearded products are exported. So the mix looks like more of Modal and Excel is sold here domestically. So the realizations are higher in the domestic market as compared to that of the export market for the specialty VSS customers? You are right. So, you see, modal is sold in domestic market and exported both.

Okay.

About 30 to 40% is sold in local market and balance for export. Okay. Laya sale again is sold in domestic market and export, but 30% domestic, 70% export. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. Okay. I would like to inform, we should make our Leewa Eco, which I told you, the Eco variant of our Scots Fiber, we have now started manufacturing in Vilayat. That is just got commissioned. And we did big export from Gafting going forward because Leewa Eco, huge demand by the global brands, which we started product about a year and a half back and we have almost done many folds. in the presentation you have given the exit prices for China VAT as well as the starting prices also but if you can tell us about our realizations for the grey VAT some sense some idea about how we have been so our realization yes for Q4 for grey VAT So our relation is broadly in line with China, slightly plus minus. The issue is, as I told you, China is an indicative drive. Correct, correct. The Indian market is governed by the local conditions. Because what happens, how the value chain is doing. Because the build-up in the Indian market was slow.

Correct.

From June to June, January, March, it went up full capacity. So our price also went up gradually. correct okay okay so the full catch has happened in the month of march correct that's right correct but in the last one and so the last and final question is on the epoxy so if you can give some sense of the percentage growth in our absolute EBITDA on our IOI business. So let's say as compared to last year, last Q4 of FY20 and this Q4 of FY21, how, in what percentage terms our EBITDA has grown for the epoxy? Epoxy would be almost still a big growth actually. If you look at Q of Q, for example, okay. QOQ would be almost close to twice. Okay, it's almost ever. Yeah, so and Q4 of last year was quite depressed because that was a quarter when you lost one week of this one. So you could assume that one and a half times compared to one and a half to two times roughly, but much more in comparison to Q4 of last year. Got it, got it. Thanks a lot, sir, and all the rest. Yeah, thank you.

Thank you. That was the last question for today. I would now like to hand the conference over to Mr. Ashish Adhukia, CFO, for closing comments. Over to you, sir.

Thanks. Thanks. See, I think we're all going through difficult times personally. So I hope everything is safe at your end. And please take care of yourself. Stay safe. And of course, we will connect again in the next quarter. Thank you.

Thank you. On behalf of Karachan Industries, it concludes this conference. Thank you all for joining. Give me now disconnect your lines.

Thank you.