Earnings Call: Q1 2022

Jul 29, 2021

Ladies and gentlemen, good day and welcome to the SRF Limited Q1 FY 'twenty two Earnings Conference Call hosted by ICICI Securities Limited. 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. Please note that this conference is being recorded. I now hand the conference over to Mr. Sanjay Jain from ICICI Securities. Thank you, and over to you, sir. Thanks, Eyal. Good afternoon, everyone. Thank you for joining us on SRF's quarter 1 FY 'twenty two results conference call. Today, we have with us Mr. Rahul Jain, President and Chief Financial Officer, SRF Limited. I would like to invite Ms. Nitika Dhawan, Head of Corporate Communications at SRF to initiate the proceeding for SRF Concourse. Over to you, Nikita. Thank you. Good afternoon, everyone, and thank you for joining us on SRS Limited's 401 FY 'twenty two results conference call. We will begin this call with brief opening remarks from our President and CFO, Mr. Rahul Jain. Following which, we will open the forum for an interactive question and answer session. Before we begin this call, I would like to point out that some statements made in this call may be forward looking and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. I would now like to invite Mr. Zheng to make your opening remarks. Thank you. Thank you, Nikita. Good afternoon, everyone, and I extend a warm welcome to you all, and thank you for joining us today on SRF's Q1 FY 'twenty two earnings conference call. I trust you, your families and colleagues are in good health. I will initiate the call by briefly taking you through the key financial and operational highlights for the period under review, following which we will open the floor to have a Q and A session. We are pleased to begin financial year 'twenty two on an excellent month, showcasing robust operational and financial performance despite short term challenges owing to the roadmaps. The company worked on various countermeasures to address these challenges, and this enabled us to deliver a notable performance. In Q1 FY 'twenty two, on a consolidated basis, revenue grew 75% from RMB1545 crores to INR 2,699 crores and Ebix increased 102% from INR 295 crores INQ1 FY 2022 when compared with corresponding period last year. Profit after tax came in at INR 3.95 crores in Q1 FY 2022, higher by 123% over CPLY. I will note performance of Q1 FY 2021 was impacted due to large scale disruption from the initial COVID lockdown. But it should be noted that despite the low base effect that was witnessed, we did achieve substantial volume increases and higher realization for several key products, resulting in a healthy all round performance from all businesses. Q1 FY 'twenty two also had significant impacts of all round increase in cost of export logistics, where export flow rates have witnessed large increases. And with our export focused focus, we have seen a negative impact. Before I begin delving into the segmental performance, I am glad to show that the Board of Directors have approved an interim dividend of 120%, amounting to INR 12 per share. This will result in a cash outflow of approximately INR 71 crore. Let me now give you an overview of our segmental performance. During the Q1 of the fiscal year, our Chemicals business demonstrated a healthy performance with revenues growing 58% from INR705 crores to INR1114 crores during Q1 FY 2022 over TPL1. Within the Chemical segment, our Specialty Chemicals business reported a positive performance driven by improved demand from global markets and increased volumes of key products. Our pipeline of new molecules remains robust both in agrochemical space and the pharmaceutical space, so that we can serve our customers better as well as strengthen our overall engagement with them. While export trade costs have been a negative during the Q1, we believe these will come down to more reasonable levels in the short term. Certain raw material costs have also witnessed a significant uptick, which has led to an overall reduction in the current quarter margins as we would have witnessed. In Q1, we introduced 2 new products and have a strong funnel of products that will drive our future growth. At the moment, we continue to focus on improving its sustainability led parameters through various investments and process improvements. I'd like to share that we have commissioned 2 dedicated facilities at Periyush, which will cater to the agrochemical segment. These facilities will help us tap into the thriving agrochemical market agrochemical market growth across all our key markets. Similar investments combined with increased efficiency and optimum capacity utilization, should enable us to provide operational efficiencies and achieve even superior outcomes in the future. Umer is focusing on expanding its product portfolio in the pharmaceutical sector. We remain positive on the agrochemical space and will be looking to tapping to additional opportunities that we are currently focused on. From both domestic and export markets. Looking ahead, we expect the demand to grow further in the upcoming quarters. During the quarter, the segment witnessed an uptick in auto sales, which led to higher uptake of R1330 revenues, Fluoride for industrial application. Overall, I must mention that business was adversely impacted by lockdowns on account of 2nd wave of COVID-nineteen, which resulted in disruption of supply chains leading to a lower domestic offset, and we did lose some volumes due to the sale. Our timely countermeasures, however, reduced the impact to a certain extent. Also, prices of key retailers have witnessed an uptrend and the same is likely to continue. Domestic market has also started to look up and should be in better shape over the next few quarters. We have authorized a project worth rupees INR 550 crores for the integrated expansion of fluorocarbon based refrigerant facility at the range. This project is expected to be completed within the next 24 months. The plant is likely to be a swim plant between the HSTs and where we will be able to test and manage technology to manufacture various HSAs in the same facility and also includes capacity for certain key raw materials for the chemical business. Our technological capabilities, integrated capacities, distribution network and production capabilities do provide us with a unique position in the industry which we will continue to build on. The Board has also approved installation of a 200 kV grid at a cost of RMB 135 crore to meet the growing power requirements of the existing and future plants of drainage. I am also proud to share that the chemical facility in Riordi has received the State Safety Award 2021 at the moment of August 1. This award exemplifies our company's commitment to safety, which is built on a strong safety culture, well executed compliance procedures and effective use of laser safe in safety technology. Coming on to our packaging film business, we continue to perform well despite impact of COVID-nineteen second wave on domestic markets. Markets. SRF was able to maintain uninterrupted delivery of all key raw materials even while we were able to reduce some costs, resulting in uninterrupted production across all our facilities. SRS has established itself as a well known player in the Global Packaging segment, which is a result of the business' full focus on scale, quality, R and D capabilities and enhanced portfolio of value added products. With our focus on increasing contributions from value added products, we are happy to share that we have launched 2 new products in the category during the quarter. We also continue to focus on improving product quality and delivery to increase engagement with our multi lagging customers, boosting the mantra of easy to do business work. SRS has now presence in over 100 countries and offers a diverse range of specialty fields. Our overseas businesses performed well during the quarter, owing to the commencement of the 2nd global client in Thailand. At the same time, our newly commissioned facility in Hungary ramped up its operations to capacity. The emergence of COVID in Thailand, Indonesia, Vietnam and Indonesia, basically the ACR region, is also having an impact in these key markets for our Thai subsidiary and may have an impact in the short term. You may also be aware that there were riots in South Africa in July, we had to shut down our plant for a few days to ensure safety of all our employees. This will also have a short term impact on the South African subsidy. As market leaders in this space, the focus on sustainability initiatives is our responsibility, and we continue to work towards innovating frames that have a lower environmental footprint. Moving on to our Technical Textiles business segment. The business performed exceedingly well across nylon, tile, polycrystal tube, the built in fabric and the polyester yarn segment. I would like to mention here that there has been structural change as we have been able to renegotiate contracts with our key customers that have positively impacted our overall results. In addition, the customer's preference to buy from local suppliers like us aided overall growth. We are confident that we should continue to register such healthy performance in the upcoming quarter vessel. As we have mentioned in the past, the segment has always been a major cash flow generator for Sarepta, and we see this trend of free cash flow generation continue at a much larger scale going forward. Lastly, in our other segment, the Corporate Products division continues to maintain market leadership both in terms of price and benefits despite an overall sluggish market. This was facilitated by efficient sourcing strategy and excellent brand performance. The business continues to innovate and will produce new products in the market. In Q1 FY 2022, our Laminated Cabin business segment maintained its leading position and performance was in line with expectations despite the demand being affected owing to the second wave of the COVID-nineteen pandemic. New products are currently being developed for the domestic market. Further, the antidumping duty on Chinese PVC FlexCell has also been extended until January 31, 2022. On the balance sheet front, our debt remained within acceptable levels and more significant increases were witnessed on the overall debt profile. Working capital management remained robust, and we continue to monitor the things to ensure strong balance sheet. At FFO, we care deeply for the people and communities that we operate in, especially related to counter different COVID pandemic. We have organized COVID-nineteen vaccination camps for the community in Maruch, Giradi and Giridwar. In addition, we have set up oxygen generation plans at KK Neta Government Hospital in Amreli District of Gujarat and Dhar district of Madhya Pradesh for community usage. The team of SARA Foundation was also involved in distribution of oxygen concentrators to government hospitals in Tamil Nadu, Madhya Pradesh and Nadia District of West Bengaluru. In other initiatives, Asara Foundation launched the Apple Tinkering Yacks program in collaboration with Capgemini India and Niti IO. We also conducted 1 strong digital summer camp with 5,304 students across 11 locations so that education doesn't stop because of the Uber, Hardham Digital Development. To conclude, we are confident of our future growth and the market potential that each of our businesses offers. SRS has established a reputable multi business entity that has enabled us to navigate in the volatile environments over the recent years. Our strategic innovations, powered by solid R and D, has benefited the company with strong external challenges. With strong infrastructure in place and outstanding R and D skills, we are confident in our ability to provide a healthy and sustainable performance that will enable us to create value for all our stakeholders in the future. On that note, I conclude my remarks and will be glad to discuss any questions, comments or suggestions that you may have. I would now like to ask the moderator to open the line for Q and A session. Thank you very much. Thank you very much. We will now begin with the question and answer session. The first question is from the line of Rohit Nagaraj from MK Global. Please go ahead. Thanks for the opportunity and congrats on a good overall performance. My first question relates to the raw material. So we have seen increasing raw materials for our chemical segment and we have seen that even the product prices we are trying to increase. So how is the scenario looking like currently? And whether the price increases in refrigerants suggest to pass on the increase in the raw material cost? Thank you. I think there is some confusion here, though. The fact is that we have witnessed price increase across raw materials, where we were also talking about the Specialty Chemicals business. There has been some price increase in the Fluorochemicals business also. However, that one is a bit much later, which we're seeing from a Specialty Chemicals perspective when we compare everything. The other thing that you are saying in terms of the parcel, I don't think it is. We've seen positive prices that have come through for the Fluorochemicals business in terms of the rest gases. That's what I had indicated during the Q2. Hopefully, we have also. We do believe that is a trend that is likely to continue in the So is this predominantly for captive convention or is there any split between captive and external sales? And from backward integration, which are all the areas where we'll be putting our money in? Thank you. So the plant is mostly for external sale. The let's say about 50% of it is a component, which is likely 40% to 50% of it is a component, which are key raw materials to the products that we are looking to manufacture. So that's how we are looking at it. Let's say when you are looking at it from an overall sales perspective, the overall cost of the facility, which is for external sales, will be around 40%, 50%. Thanks a lot. That answers your question and best of luck. Thank you. Thank you. The next question is from the line of Shalini Vasanta from DSP Mutual Funds. Please go ahead. Sir, good afternoon. What I'd like is the CapEx numbers for this year and next year totally in terms of whatever you plan to spend on CapEx. That's the only question I have. This is Vivek Kamakshan, by the way. Thank you. My sense is that for this currently, the cash CapEx that we will do will be in the range of about INR 2,000 crores. For next year, given where our current CapEx plans are, I think the ones that are currently being under implementation, we will probably be at the range of INR 800 crores to INR 1,000 crores, those that are currently, let's say, under implementation, those that we have announced. Over and above that, on a modular basis, to INR 500 crores to INR 600 crores of CapEx on an annualized basis, we will keep announcing going forward as projects get finalized. So my sense is that INR 2,000 crores this year and between INR 16,000 crores to INR 18 100 crores for next year as well on a consolidated basis. Yes, yes. Thank you. Good luck. Thank you. The next question is from the line of Noshrat Chaudhry from Systematics. Please go ahead. Hi. Thanks for the opportunity and congrats to the management team on a good set of numbers. First thing, I wanted to understand on the NTCS part, especially the major growth, was it driven by end user industry growth or was it because the market share gain? Because in previous quarters, you have mentioned that there was some global capacity consolidation in this part. So this is my first question and follow-up to that, if we can quantify what percentage of global capacity would have been consolidated in NTCS? Let me try and answer the second question first because I don't know the answer of that question. I will have to check and come back. So that's a simpler answer. We will have to come back to you in terms of what capacity and what consolidated, we will do that. To answer the first question in terms of the shift in margin, when you look at it and compare it to quarter 1 last year, you would see a significant growth in volumes given the fact that Q1 last year was completely inundated by the lockdowns that had happened across the country, there were forced lockdowns of plants, plants took 1.5, 2 months to start up again. All of those things had happened. So therefore, the growth in volume is significant. However, even if you compare it to probably, let's say, last quarter, we have seen significant growth happening in volume. And like I said in the opening remarks as well, there has been a structural shift in the industry. We have told you that because some of these capacities in China had closed down and are looking to consolidate, prices of the products have gone up. The landed prices of, let's say, imported products have gone up significantly, which has allowed us also to renegotiate our longer term margins with our customers. So that's probably the way things are actually here. I hope it explains it, Nushal? Yes. So would it be fair to assume it was largely because of the market share gain instead of end user demand. If we can broadly quantify how much The market share percentage is probably remained flat to, let's say, 100 basis points increase or not. The most of the gains have actually come through price growth positive, which we believe is likely to continue at least in the short to medium term. Okay. And where do you see this 27% of EBIT margin in textile business is getting settled up? Because historically, we have seen pages maybe super close because a lot of it does depend on the capital outcome pass through. Therefore, I will not be in a position to give you a percentage here. What I can tell you is that this looks like a more robust trend. It looks like that the prices that we have been able to negotiate with our customers are more, let's say, longer medium term in nature, which should lead to, let's say, slightly even better performance as going forward. You plan any capacity expansion in this product? Modular capacity expansion will keep going on, Nossa. But I won't put up a 2,000 ton line at any point in time. Okay. Lastly, on the packaging side, sir, as we have been reading that there is a gradual shift in the packaging industry towards the circular model. So just wanted to understand what percentage of our total portfolio in the packaging sales would be recyclable? And if it is needed, would it be easily easy for us to convert into recyclable products by adding some properties? So that's almost all of the packaging films that we do are recyclable. The problem is actually collection mechanism and reuse mechanism and implementation mechanism of these for us to be able to recycle it. We have the ability to recycle it. Whenever there is an established view of collection, users come through. We should be in a good position on that side as well. While there is a chat about moving to a circular model, it will take more time for it to get affected and let's say, it's profitable. Currently, are we doing it any percentage of our sales? I think we need to let others also answer questions. I'll come back. Thank you. Thank you, sir. Thank you. The next question is from the line of Ankur Peddewal from Axis Capital. Please go ahead. Yes. Hi, sir. Thanks for the opportunity and congratulations for good set of numbers. First question on the chemical business here. This INR550 crores, I'm sorry, just a clarification there. Out of this INR550 crores, you mentioned external sales will be roughly 40% to 50% of that. What is the typical asset terms that term that we are seeing there? No, I made a mistake at that point. I said the plant that we have put up, there will be about 40% that will be for the catalyst, 40% of captive use, which will be our key raw material for the product that we will be manufacturing in the chloroparbon refrigerant. My apology, maybe I made a mistake. It will be other way around. Okay. So 40% will be captive and the balance 50% will be largely addressing the export market? B. Balaji:] Well, I said the market is not necessarily export. Growth. Okay, sir. That's interesting. Okay. Sir, secondly, in the last quarter, we did mention on the CapEx side, around INR 375 crores or INR 400 crores CapEx coming for the new plant, wherein we were not looking at fluorination but also on the non fluorination side. And joining that with the 2,000 crores CapEx that we are expecting for this financial year. Any thoughts on the Specialty Chemicals side, on the growth side? Or it will be given the new plants will be coming in FY 'twenty three and hence we can see a bigger delta there? So then my sense is that you are asking a question about scrap access in Specialty Chemicals business because what you seem to be believing is that this is not something that is important for the overall chemical business. So let me tell you, we've completed a large amount of CapEx sales very, very recently. The 2.58 crores CapEx is already being completed or on the verge of being completed. There will be future announcement that we'll make. We are probably also currently implementing CapEx, which are smaller in nature, but about, let's say, INR 250 crores to INR 200 crores for the current and the next year going forward as well. So that's all in place. Hopefully, there will be newer projects like we will do. And going forward, more announcement on the specialty chemicals side should be seen. Okay. Thanks for the clarification there. And just one last on the packaging film side. The presentation does mention that expectedly more capacity is coming in on the site on DOPP and GoPEC as well. Your sense on the, let's say, overall demand supply scenario for both DOPT and PEC? Are we seeing probably a short term glitch there in PET, while BT may still look continue to look better? Will that be right? There are a couple of lines on 2 or 3 lines on PT that are also coming in. One of them is actually our line only, which is what recently commissioned. There are 2 other lines that are coming in probably in Q2 and Q3 going forward. So on track side also, we see 2 lines that should get commissioned very soon. The point to note is that it will control the short term demand supply imbalance. Growth still seems pretty robust, and therefore, our belief is it should remain a bit short term in nature rather than very long term. Sure, sir. Where I was coming from was, if I look historically, there has been volatility in the overall industry margins there, given the demand supply mismatch. But now, because the demand is probably going at a much stronger pace, this supply will create short term blip, but longer term trajectory remains intact. Will that be right understanding? [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Mostly. The only change that I will do to your understanding is that if there are newer lines that keep coming in, right, the demand and supply imbalance could be a much larger one than what is currently visible. Thank you. Before we take the next question, take the next question from the line of Arjun Khanna from Kotak Mutual Fund. Please go ahead. Thanks, Rahul, and congratulations on a group set of numbers. So just trying to understand the 5 50 crores CapEx and RevCast and this is further. So it's obviously stated as an integrated complex. So just to understand, so while you did clarify that part of the input would be probably using creating other FSCs, But essentially, what would be the output in message terms that's favorable? So current configuration that we are thinking about, it should be in the range of 15,000 to 16,000 tons per annum from an HST perspective, but it is tweakable and changeable depending upon what configuration that we work with to a top of about 20,000. Unfortunately, it's impossible to give you an exact number on the capacity because it really does have a lot of variables around the world. The fact is that if you are doing a certain type of product, you will have a lower capacity. You could be doing a certain product which has a lower settling time and therefore larger capacity. So on the current configuration basis, 15,000, 15,000 tons, which can expand to 20,000 tons at an appropriate time depending upon how we debottleneck it and how we are using that plant. But to just understand it, so theoretically, we could say produce R32 or maybe 134A or 125 depending what's required. Is that same facilities? Or it's basically just one that or are there 2 components? C. Wei:] Sure. Sure. Sir, just to understand this question further, in terms of for PPSE, we had talked of augmenting our 22 capacity. So maybe if you could help me Can you remind the last one, one more thing? So for PPSE, we had when we announced PPSE, we said to make PAC, we may look at augmenting capacity. So that capacity is different from this? I didn't understand the question. For TPSE, our polymer business, which we have a long term effect before, we have talked of increasing R22 forward making PAP. So that obviously is different from this. Is that a right understanding? Absolutely. So that's a completely different project. Sure. And for our polydor project, are we thought of maybe PVDF or ATB, APB, PFA other polymers? Or right now we are just looking at PPSE? Arjun, there are probably 10 other polymers that you can look at. As of now, the total is 50 of it. There is no plateau bar or need to go into multiple other polymers on flooring or let's say TEQ or multiple others that are there. So those can be looked at at a certain point in time, but the focus now is PTFE and we will look at first, let's say, commercializing the plant and then ramping it up and then looking at UHFA other opportunities and products. Sure. When do you expect commercialization of the PTFE plant, sir? Is there any further delay? On November 22. Okay. Thank you, sir. Thank you. The next question is from the line of Sanjay Jain from ICSA Securities. Please go ahead. Thank you, Raul ji. Thanks for taking my question. Sorry, I'm shaking on that CapEx of RUB 5,500,000,000. We are saying that it's a swing capacity. It will also include R134a, but we expect R134a capacity expansion freezing sometime in the near future, right? December 23 for India. December 23 for India? All HFCs will be freeze for any further expansion. Is that what you're talking about? For air conditioning or that type of use. Like for R22, you cannot increase capacity for refrigeration use. You can use it for raw material use or any other downstream use. Maybe there are some users that we also that develop over time, we don't know. But you are right, it is for refrigerating purposes, yes, capacity will get you may not be able to put up additional amounts. So this is in December 23 and it include all kind of HFCs including our 32, 125, all those capacities. Yes, India has agreed in the Tiwali agreement. Okay. That means this capacity will help us to cater demand in the future when it comes and should be well within the December 23 time line. Yes. So it is focused on future demand. No, that's fair. That's fair. Thank you. My second question is on the Specialty Chemical guidance, which we shared in at the end of last quarter. With this robust performance in Q1, do we are rethinking on that number in terms of upgrading? Because this performance looked way better than probably our guidance. And the new molecule addition, which we are talking, that also increases the outlook for us. Right? So that seems to be the case, right? I'm not commenting on it. We are sticking to the guidance that you have given, the 15% to 20% increase in revenues of the Specialty Chemicals business. We are sticking to that guidance. Maybe next quarter when you have more visibility, we will come back to you. But as of now, we will get it. Got it. One last bit of question from my side before we go to others. We talked about ramping up of pharma in Specialty Chemicals. Now what gives us confidence because we are now coming and telling, we also have put a cGMP plan few years back and we have been slowly scaling up, but now we look like we are much more confident in terms of molecules, in terms of market and all. So how should we look at the mix and how should we look at the growth in pharma for us? Again, the point of note is we are about 10%, 15% on pharma as of now. Intentionally, we want to grow the business. It will probably take us 3, 4 years to get to a better scale. We want to get to a 35%, 30% level over a medium term period. What gives us more confidence and more visibility is the fact that we are running a couple of campaigns for pharma products. Those going to be in very good shape. And as those come through, we will probably do much better on other pharma products also. It's something that we are very confident about. So that's how it's been working. Unfortunately, for confidentiality reasons, I cannot give you the names of the products. That's how it is. Sanjush? Got it, sir. Thank you and best wishes, sir. Thank you, Sanjush. Thank you. The next question is from the line of Ritesh Gupta from Kotak. Please go ahead. Hi, sir. Thanks for taking my questions. Am I audible? Yes, you are. Please go ahead. So just wanted to check on both Fluorine Fluorine Fluorine Fluorine Refrigerant as well as on the packaging and capacity utilization. Expanded. I just wanted to get an update like on 1st quarter or let's say last 2 quarters, have you started selling most of those volumes? Have you reached the 80%, 90% utilization there? Or is it because of the COVID situation, those volumes continue to remain or the utilization continues to remain under optimized? And then if I understand correctly from the previous comments? I will maybe answer the ask the second question. Let me answer the first long one first. Yes. Yes. So you're saying it right, the capacity utilization has been better in well better in Q4 relative to Q1. Given the fact that you are aware of Q1 is typically the best offtake season for those oral clinicals as we discussed. Given the fact that the country was in partial or multiple lockdowns that were happening across the country, We have no storage facility. We are probably lower by about 15% from our budgeting numbers in terms of what we would have planned to sell in the domestic market, really in the range of about 1500, 1600 tons, we would have done better had there been less of a COVID impact. So that's how it is structured. We were able to mitigate some of it by being able to sell more into export market. There were some impacts in terms of availability of manpower also during the quarter given that there were some let's say some of our people in the plants were getting hit by cable as well. So multiple factors have got laid out. We are very confident that we will be able to ramp up all of these to full capacity in the very near future given where there are orders and the traction that we see today. So I hope that explains that Yitesh, still go ahead with the second half. Yes, it does answer. It does answer. So when you said that new capacity is coming in HFC, that's more of you're trying to I'm just reaffirming what the logistics has been in this 5%. This is largely to cater to the demand after 2023 before sunset, I mean, after sunset kicks in. The plant are coming at the end of July. So it's a 24 month project. So let's say by the end of Q2 FY 2024 is when the plant comes in. Again, I would say that there is a understanding of the plant that comes in. To be able to ramp it up to full capacity. It will take 6, 8, 10 months to take it there. And therefore, what we are telling is also right that it will meet the projected demand for the future. We've seen multiple heat waves that have spread across the world today, not just in India, but the Northern American continent, Europe is going through a little bit. The need for that revolution is seemingly growing at a rate that is faster today. And the developed market also cannot. Got it, sir. And on the packaging side, the 2 new line expansions that you had in the other end and other end, now as we speak in the quarter 1, they were fully utilized from a volume perspective at least? Yes. Okay. And just on the resilient base, the exposed versus the domestic demand, so like because it's a large market, let's say, once you put up the capacity, you are able to utilize the volumes very quickly. But then there is a domestic market that grows at, let's say, 10, 12%. So isn't that your margins in domestic are far better than, let's say, what your export margins are? I mean, exports are more of a kind of a volume neutralization, clear out and heavy margin growth? It really is a function of time, Ritesh. Generally, Indian prices will come to clarity with export prices, right? And because we are a large Indian player, you will probably end up paying a price which is slightly lower than the parity price to be able to capture the market. Generally speaking, the restricted margin should be better, but it really is a function of the time and the prices that are prevailing in the international markets. The next question is from the line of Tarang from Old Bridge Capital. Please go ahead. Hello, sir. Good afternoon. Just one question. If you can give us a split of the INR 2,000 crores CapEx in terms of I know the INR 550 crores and the INR 140 odd crores on power, but that is also going to be deployed over maybe the next 2 years, right? So if you could just give us a sense on the split of this INR 2,000 crores CapEx for FY 2022. My sense is about INR 1,000 to INR 11,000 crores on the chemical business. I think about INR 400 crores to INR 500 crores on the packaging, selling unit. These are not just the line CapEx but multiple other CapEx that are going on. Roughly about INR 200 crores of CapEx that we are budgeting today for those that will come up during the year. And some of the new ones that we have sanctioned, we will start to incur money on those. And probably the balance will be the single textiles and balancing CapEx that we will do. Okay. And this obviously the INR 1100 crores of chemicals would be new capacities plus maintenance. So nearly INR 500 crores of packaging will be new capacity including in the capacity of debottlenecking plus maintenance, correct? So I would say the maintenance is separate. It's not so these are all ROI denominated CapEx. So there is INR 2,000 crores in growth CapEx? Yes. Okay. Thank you, sir. Thank you, Parag. Thank you. The next question is from the line of Amijit Akyla from IIFL Securities. Please go ahead. Yes, good afternoon. Thank you, Rahulji. Just one clarification on the Chemical segment. So you talked about the higher raw material costs and the freight charges, which impacted margins this quarter, if I already correctly. So is it correct to sort of assume that this headwind could sort of fade away in coming quarters as we try to pass it on and as freight costs come down, so we should expect some margin improvement in chemicals going forward? You're right, Abhijit, because again, we believe that these are short term in nature. Some of these commodity raw materials have gone through the roof because of the polar storm that had happened and multiple other things that created a supply shortage in the market. There is no shortage of capacities in the world. As more capacity come back online, prices should come down. And therefore, to a certain extent, we have not negotiated that with our customers. This is more, let's say, a continued phenomenon. There will be some negotiation that will have to happen with the customer on these. Ones. Understood. That's great. And just the last quick one for me. On the packaging films business, you had talked about 2 new product introductions. If you could please shed some color on that, that could be helpful. Mostly value added products, there are various types. I don't have a sense of the nature where there may be a PCR versus a chemical recycling mode, PCR PET and some lab field grade for BOPT. Those are the ones that are launched. But there are multiple that we keep doing. Again, there are many small volumes today. They will grow up in volumes over a period of time. Great. Thank you so much. Wish you all the best. Thank you, Abhijit. Thank you. The next question is from the line of Rohan Gupta from Edelweiss. Please go ahead. Okay. So first question was on our chemical business. So almost on a single revenues of TCO, sir, our average market in the I just wanted to understand is there any long acting pricing pressure which is getting reflected in the margins or it was just only some product mix change which led to this kind of margin drop in the Q1 versus Q4? I already answered it. No intent to do it today. Okay. So second question is on the packaging the film business, sir. As we have keep on moving up in the value chain, as you have mentioned that the value added shares has been going up. So if you can just give some sense that whenever we see that the packaging business or the industry dynamic will change, there will be pressure, margin pressure across the industry. Will there be similar pressure will be there in number of value added to that basket also Or do you see that the margin profile in that value added basket will remain same? What kind of margin you see there right now? So the value added product basket is typically a delta over the virtual margin. Now whatever be the price of the boat sales, we're returning the margin of the plane or the fuel in in the OTC sales, so it's 38 micron or 12 micron, which is the base sales. The delta may not change all the value added products, But if the base prices have come down, the net margin that you can make will come down. So, sir, but the delta will continue to wait, right? So, of course, our base margin are 10%, and we are right now enjoying 12%. So even if the base margin goes to 0, we will still be higher 12% type of margin difference, right? Let's not talk about the percentage. Let's say, if the conversion margin is INR 100, this could be within a range of INR 125 to let's say INR 150 as the delta. If the gross margin goes down to INR 70, the delta of that 25, 35 rupees remain. So the gross margin will probably be INR105, INR 120 rupees, so that range. So that's how it works rather than on a percentage basis. Fine. So that's very helpful. So I think just only clarify That is something that I have never given out and really going forward I should not provide. Thank you very much for answering the question. Thank you. The next question is from the line of Nitin Agarwal from DAN Capital. Please go ahead. Hi. Thanks for taking my question. So on the photochemical expansion that you mentioned, with the vertical integration that you're doing, that will be doing along the project. I mean, what's the strength of the business model that you're doing versus the work that we don't have right now? Is this something to be critical that you're not doing earlier, you are? And how do you change the equation for us at any rate today? I'm probably unable to figure out the question. What you are probably asking is how does it change the current scenario? Yes. From the does it change the power, run chain, I mean, it has meaningful load, what is the integration that we're going to do as part of the expansion? What it only changes is that because it has given me a swing ability, depending upon where market is, I will have the ability to then shift to a let's say, within the HFC thing, whatever HFC we do, I will be able to then switch to it. So that's what it changes. The value chain that we have talked about, be it from the chlorination plant or the R22 or the chlorination molecule or the CTC, all of that remains well entrenched. And then a swing kickback capability comes as only from the incremental project, So that's already there. This one is probably an even better larger plant. That was a relatively smaller plant between let's say 5,000 to 7,500 tons. So this is a much larger plant in that sense. So should we have a larger plant is probably more difficult. We now have the confidence that we will have the ability to do that as well. Got it. And just secondly on the business, for this year, as you caught on mentioned, again, was Yes. Sorry. On the lower 20th of March, on the domestic side, you mentioned because of various past kind of lockdowns during the quarter, there was an impact on the demand uptake. What capacity did you operate at during the quarter? Over the quarter, I think because of the bandwidth, our current estimate is between 1500 to 1600 tons we've already lost. Maybe from export we made up 300, 400 tons. So that's how it works out. Okay. Thank you. Thank you. The next question is from the line of Vishwa Kumar from Spark Capital. Please go ahead. Thanks for the time, sir. So you commented on the severe heat rate across the globe helping us on the FCAS side. The same is kind of also going to impact us on the agro at some point, Brazil and U. S. Are facing significant stress. Any indication from your suppliers in terms of offtake in the second half, either on the lower side or anything that you could highlight on this? As of now, I don't see a negative around the agrochemical space. Our outlook seems to be pretty robust. I would also say that even the Specialty Chemicals business was kind of affected by the lockdown because of availability of manpower and some of our plant people not being able to make it. And therefore, for us to be able to operate the plant safely, there was a certain number of people that was always required. We were not able to operate it well in certain situations and therefore we did do some volumes on that side as well. But as of now, I don't seem to see a negative around the existing products. The campaigns that we are doing for new products are running very well. Hopefully, those will also provide better traction. The business is also, to a certain extent, seasonally linked to Q3 or Q4, where some of the export markets are demanding certain types of products in that season. And therefore, I don't see a current negative amount, to be frank about it. And that's the reason we have stuck to the guidance that we provided earlier. Got it, sir. And secondly, just on the margin, sir, between the two, if the RM cost continue to kind of impact, let's say, continue to impact us in the forthcoming quarters as well. Which segment is easier to pass on or at least on the agro on the ref side, which is where you can't pass it on, if you could give us some thoughts on it. Refgas margins, prices are typically linked to international prices. Royalties. And generally speaking, the international prices would be raw material prices are much higher. We will also kind of adjust it. And therefore, while I necessarily may not have a singular ability to budget on, the market does adjust the price to a certain extent. On the specialty chemicals business, if this is a trend that continues for a even longer period, we will have to go back to the customer and renegotiate. That's the only way to do it. Just one if I can squeeze, sir, on the we are seeing super normal demand of the auto across the world. Now would it mean for next year probably there could be a slight decline in the rev gas demand from an export opportunity side because at every market our auto demand is phenomenal. So should we say this year's gas would probably be super normal and next year it should normalize? Any thoughts on that? I would only defer to it from an overall perspective because most of the spot demand that we also survey is less or more of the secondary market. I don't see the secondary market demand falling off. Okay. Got it, sir. Thank you a lot. Thank you. Thank you. The next question is from Manish Gupta from Solidarity. Please go ahead. So just explain how the pharma side of our business has developed. You did mention in your earlier comment that it's about 15% of your business. But would you comment on how it has developed over time, what challenges you faced and whether the development is in line with your expected pace a few years ago? And just a little bit more color on the pharma side of your specialty chemical business. So Manish, I would say if you talk to a customer, they would really like an open loop pricing. Now in certain situations, you will have to look at what you can do, where are you looking at squeezing the costs, where are you looking at developing your position on the product, what is the kind of volume the customer is talking about, what is the kind of effort that you will need to meet in your plants to be able to manufacture the product. And those will become, let's say, requirements for you to be able to give a price. Now also what happens is that you know where the current product is being sourced from. If it is a more generic product in nature and therefore you are then able to ascertain what's your cost of the product and price it appropriately. Wherever you are doing joint development with the customer, you are then able to talk to the customer in terms of what are the included margins that you and the customer can work with. And therefore, they decide on a more longer term price of the product. That's how it typically works in most situations, but there could be other situations as well where the prices can be renegotiated either on a spot basis or on a contracted basis depending upon what you are doing with the customers. Sir, I'm not clear. Is your point that our margin expectations are far higher than customers are willing to give us? From a new broader perspective. So sorry, I'm not clear. So you're saying that we are expecting far better pricing than customers are willing to give. Is that right? No, I never said that, Anish. What I'm only saying is it covers the price appropriately. I'm sorry, sir. I'm not being able to understand your answer. Manish, let's do it separately rather than on this call because there will be other people looking to ask questions. Then Matthew to sit down with you and answer it separately in terms of how the product pricing is. Done. Sure. I'll give you separately. Thank you. Thank you. The next question is from the line of Vibha Batra from Fair Connect. Please go ahead. Yes. Thank you. My question is on your technical textile business, which has seen, I think, over 25% growth in top line and also very significant expansion in EBIT margins. So is it sustainable going forward? I think I did answer that earlier. I think there has been import import prices of the products have gone up significantly. That does remain. And therefore, both from a volume perspective as well as pricing and margin perspective, we do believe that we are in good shape for at least the next 5 to 18 Okay. Thank you so much. Thank you. Thank you very much. We'll take that as the last question. I would now like to hand the conference back to Mr. Raul Jain for closing comments. Thank you, everyone. I hope you've been able to answer some of your questions, if not all of them. I wish that each one of you to continue to remain safe and healthy. If you have any further questions, we would be happy to be of assistance. We hope to have your valuable support on a continued basis as we move ahead. On behalf of the management, I want to again thank you for taking the time to join us on this call. Thank you. Thank you very much. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.