Ladies and gentlemen, welcome to the Deepak Nitrite Limited Q4 and FY 2025 Earnings Call hosted by IIFL Capital Limited. At the outset, I would like to clarify that certain statements made or discussed on the conference call today may be forward-looking in nature, and a disclaimer to this effect has been included in investor communication shared with you earlier. As a reminder, all participants' lines will be in listen-only mode, and there will be an opportunity for you to ask questions at the end of today's presentation. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now like to hand the conference over to Ms. Disha Arora from IIFL Capital Limited. Thank you, and over to you, ma'am.
Thank you. Good afternoon, everyone, and thank you for joining us on Deepak Nitrite's Q4 FY 2025 Earnings Conference Call. Today, we have with us Mr. Maulik Mehta, Executive Director and CEO; Mr. Sanjay Upadhyay, Director of Finance and Group CFO; and Mr. Somsekhar Nanda, CFO of Deepak Nitrite Limited. We will begin the call with opening remarks from the management team, followed by an interactive Q&A session. To begin, Mr. Maulik will share his views on the operating performance and the growth plans of the company, followed by Mr. Sanjay Upadhyay, who shall take us through the financial and segmental performance. The result documents have been shared with you earlier and also have been posted on the company's website. I now invite Mr. Mehta to share his opening comments. Thank you, and over to you, sir.
Good afternoon, everybody, and welcome to Deepak Nitrite's Q4 and FY 2025 Earnings Conference Call. Earnings documents were shared with you earlier, and I trust you've had a chance to review them. FY 2025 was a challenging year for the entire chemical industry, marked by significant external headwinds, a global slowdown in demand amplified by geopolitical tensions and macroeconomic uncertainty, and a wait-and-watch mode in the face of tariff ambiguity has meant that supply could not be fully absorbed, placing pressure on prices of chemical intermediates. Additionally, intense price competition, particularly from Chinese producers who have been aggressively placing supply, exerted further margin pressure for Indian manufacturers. Amongst these headwinds, domestic demand served as a vital cushion, showing early signs of stabilization and recovery in almost the entire range of industry applications.
This resilience was supported by our continuous focus on cost optimization, digital transformation, and an endeavor to capture niche demand through product variants and new offerings. Given this operating framework, we've reported a resilient performance in FY 2025, where we focused on further strengthening our business model through key initiatives aimed at improving both productivity as well as profitability. Record production volumes were achieved in several products through process optimization initiatives, debottlenecking efforts, and capacity augmentation, all of which have served to enhance operational efficiency. Cost optimization has been achieved by process recalibration, simultaneously expanded our product portfolio, and secured long-term contracts, positioning ourselves for consistent and sustainable growth. As we look ahead to FY 2026, with several projects commissioning on the horizon, we're confident in our ability to deliver an improved growth and profitability scenario.
We have also started gaining benefits from renewable hybrid power arrangements, which will encompass almost 60% of our total consumption by the end of next year. For the fiscal year ended March 31, 2025, Deepak Nitrite reported a total income of INR 8,366 crore, growing 8% over the previous year. This growth has been achieved in the face of significant headwinds, and our teams have expended considerable effort to debottleneck facilities, augment capacity, and develop new products and variants, as well as seeking out additional customers and non-coal markets in order to achieve the growth. As you're all aware, product pricing remained subdued for most of the fiscal year. In this context, we've delivered a consolidated EBITDA of INR 1,176 crore, almost at last year's level despite these challenging environments.
Here, too, I would like to commend our team for undertaking these optimization measures, process recalibration, and delivering increased production volumes of key products. We reported a profit before tax of INR 953 crore for the year and a profit after tax of INR 697 crore. While top line growth was driven by volume, which helped offset the impact of lower realization, profitability was affected by several factors. These included elevated input costs, overall slowdown in certain segments like the agrochemical industry, and some customer-specific challenges. We're confident that we will be able to transition towards a normalized level of profitability during the financial year. Following a subdued Q3, we indicated an expected improvement in Q4.
Our Q4 performance highlights include a total income—this is, by the way, for Deepak Nitrite's standalone AI business—sorry, this is the entirety—a total income of INR 2,202 crore, marking a 14% sequential increase and a 3% rise on year-on-year basis. EBITDA increased to INR 339 crore, a 79% increase on a sequential basis, and a 6% increase on a year-on-year basis. EBITDA more than doubled on a sequential quarter basis to INR 279 crore, an increase of 106%. PAT of INR 202 crore is also a 106% increase on a quarter-on-quarter basis. In Q4, we achieved record production and sales levels across several key products. This was driven by capacity augmentation, debottlenecking of select facilities, and process optimization initiatives. These contributed to strong volume growth. For the quarter, domestic sales accounted for 82% of revenue, and exports contributed 18%.
Now, for the segmental performance, advanced intermediates in the quarter recorded revenues of INR 654 crore, reflecting a 19% sequential increase. For the full year, the segment reported a revenue of INR 2,527 crore, representing a 7% year-on-year decline. The quarter-on-quarter recovery was driven by strong performance across multiple product segments, which effectively met evolving customer requirements. While demand for dyes and pigments has improved from Q3 end, pricing pressure persisted. We're actively addressing these challenges through targeted initiatives aimed at improving competitiveness and margins. As previously indicated, agrochemical demand continues to be subdued, a trend that we expect to persist for the next couple of quarters. Nevertheless, we remain focused on prioritizing the production of high-demand products and strategically expanding into non-core markets that demonstrate consistent or growing demand. Our strategic roadmap also includes a downstream move in certain applications with marginal investments along with industry-leading ESG targets.
Looking ahead, we're expanding our portfolio with new product offerings and variants supported by new customer acquisitions, which we believe will drive a revival and growth for the segment. The new products will also serve customers in the pharma and personal care segments, as well as high-impact industrial solvents and energy applications. Phenolics. In Q4 FY 2025, the phenolic segment reported revenues of INR 1,532 crore, reflecting a 12% quarter-on-quarter and 5% year-on-year growth. For the full year, revenues increased by 16%, reaching INR 5,805 crore. This growth was underpinned by the debottlenecking capacity augmentation initiatives, which enabled us to set new benchmarks in the production and sale of key products. While the market absorbs the increased production volumes, a temporary rise in imports, which started in Q3, impacted product pricing while we had taken an annual shutdown.
Looking ahead, we anticipate an improvement in market conditions, coupled with softening input costs and supported by enhanced operational efficiency. As far as project updates and the future outlook is concerned, while some of our projects experienced delays, these spillovers from FY 2025 have created a robust and exciting project pipeline for FY 2026. By the second quarter, we anticipate the commissioning of our state-of-the-art R&D center at Sadlee, Worota. This involves over INR 100 crore of CapEx. This facility will give a better structure and embed it to our R&D program while significantly enhancing our innovation capabilities. We have already commissioned a facility which is focused on compounding, which will go into applications which are multiple in nature, from electric switches and EVs all the way to medical devices. This compounding facility will dovetail very nicely once we have our polycarbonate resin manufacturing set up.
The nitric acid unit will be commissioned towards the end of Q1, early Q2. This is a critical upstream integration which will help improve reliability, reduce costs, significantly improve sustainability scores, and allow us to capture a greater share of the value chain. Expansion projects across key chemistries, including nitration and hydrogenation, are set to be commissioned, too, building on successful commissioning of the chlorination block in Q4 FY 2024 and a recently commissioned chlorination block. By the second half of FY 2026, we expect to commission the MIBK and MIBC projects, which are downstream derivatives of acetone. These will help enhance integration and support value-added growth. We're also executing a major transformation in our energy consumption mix, with a goal of transitioning 60%-70% of energy consumption to renewable sources in Gujarat and Maharashtra.
This shift is projected to result in a 60% reduction in carbon emissions, aligning with our broader sustainability goals. To address challenges relating to intermittency, reliability, and infrastructure integration, we're targeting an optimal blend of renewable energy sources. This helps bring in sustainability and operations apart from yielding significant reduction in total cost. As a legacy, the company has been rewarding shareholders by way of handsome dividends. And so has it this year. Mr. Upadhyay will take you through the details of the dividend process by the board of directors. As far as strategic outlook is concerned, this is probably the first time and maybe the last time, I hope, that we're not going to give a sharp guidance about the next quarter, this quarter and the next quarter, owing to geopolitical uncertainty. But we continue to remain confident about an optimistic growth in our full-year projection.
Now, what started out as an investment thesis and an aspiration has now become a well-accepted industry byword, "Make in India, make for the world," as most companies embrace the concept of nearshoring. Deepak is entering a transformative phase marked by the commissioning of fully integrated facilities that will significantly enhance operational resilience and profitability. In an increasingly volatile global environment, our strategy of backward and forward integration ensures that we can better serve end consumers while enabling our commodity and specialty businesses to support each other. This year represents a renewed commitment to building a new Deepak, with project execution gaining momentum, technologies being finalized, and promising partnerships emerging in the field of material sciences. Our growth roadmap includes the development of upstream products like nitric acid, as well as downstream derivatives like MIBK, MIBC, which are set to become operational in the coming quarter.
A major highlight is that the Deepak Nitrite board approved an investment of INR 3,500 crore for new capacities in phenol, acetone, and IPA, which will be integrated into the production of polycarbonate resin. Combined with the earlier INR 5,000 crore approval, the total investment in the PC resin project, starting from phenol and acetone, now stands at approximately INR 8,500 crore. Once commissioned, Deepak will become one of the world's largest single-location producers of phenol and acetone, with over half of this capacity set to be converted into higher-value derivatives like bisphenols and polycarbonate resin. In conclusion, FY 2025, and particularly the strong recovery in Q4, exemplifies Deepak's operational resilience and the strength of its strategic initiatives. Despite ongoing global volatility and pricing pressures, we achieved volume growth, strengthened our market footprint, and advanced critical integration projects. Thank you for your continued support and trust.
We look forward to building on this strong foundation in the coming years. I would now like to hand over the call to Mr. Sanjay Upadhyay.
Thank you, Maulik. Good afternoon, everyone, and thank you for joining us today on Deepak Nitrite Ranjit Cirumalla call. I will now take you through the key highlights for the financial results for the fourth quarter and full-year ended March 2025. In FY 2025, we recorded a considerable revenue of INR 8,366 crore, reflecting an 8% growth over INR 7,758 crore in FY 2024. EBITDA accrued at INR 1,176 crore, marginally lower than INR 1,199 crore in previous year, with EBITDA margin at 14%. PBT was INR 953 crore, and PAT came at INR 969.7 crore. You all are aware that we have a strong history of proposing and distributing dividends. In order to carry that vision out of our management this year, also, the board has maintained the investment of INR 75 crore, amounting to INR 7.5 per share. We hope this offers an opportunity to be rejoiced by the shareholders who have placed immense trust in us.
We are thankful to the shareholders and believe their unwavering trust in us, and this will take us to greater heights. After a relatively muted Q3, we closed the year well, delivering 14% quarter-on-quarter revenue growth, led by recovery in advanced intermediates segment. As Maulik highlighted, we witnessed encouraging demand revival across several key products in the portfolio. In the phenolics segment, we achieved higher volumes across all product lines. However, the pricing environment and correction remained soft due to increased imports as well as the higher raw material prices. In Q4, consolidated EBITDA rose sharply by 79% quarter-on-quarter to INR 339 crore, supported partially by the Government incentive. Government incentive is a part of the business. I mean, there will be some questions on that. It is a part of our regular income because incentives are there for 10 years, which we get.
Of course, this figure is high because of the cumulative INR 161 crore. Normally, we get around INR 60 crore-INR 70 crore every year. We are working on a cash basis, but it has to be actually on an actual basis, we get around INR 60 crore-INR 70 crore every year. I hope I have answered that query from the investors. Q4 has been a chilling quarter, persistent weakness in pricing. Nevertheless, we believe our initiative towards capacity augmentation, debottlenecking, and cost optimization are aimed in the right direction. While the outcome of these initiatives has been lessened in Q4, we are confident that as we move forward, strategic actions we have undertaken will further steam up our recovery trajectory and drive improved profitability in the upcoming years. On the operating front, domestic business revenue stood at INR 1,796 crore in Q4 and INR 6,849 crore for the FY 2025.
Export came at INR 384 crore in Q4 and INR 1,432 crore for the full year. The domestic-to-export mix of FY 2025 stood at 83-17 on a consolidated basis. Moving to now, segmental performance in the advanced intermediate segment, revenue increased by 19% quarter-on-quarter to INR 654 crore in Q4 FY 2025 from INR 552 crore in Q3. With EBIT at INR 45 crore and margin of 7%, for the full year, revenue stood at INR 2,527 crore, with EBIT of INR 176 crore, reflecting 7% margin. Deepak Nitrite Ranjit Cirumalla posted a stable performance in Q4 FY 2025, revenue rising 12% sequentially to INR 1,532 crore from INR 1,366 crore. EBIT came in at INR 239 crore with a margin of 16%. For FY 2025, revenue grew at 16% to INR 5,805 crore, and EBIT stood at INR 783 crore, translating to a margin of 13%.
On the balance sheet front, the company continues to demonstrate financial strength with considered net worth of INR 5,425 crore and standalone net worth of INR 3,126 crore. We enjoy a well-fortified position to undertake a planned upstream and downstream expansion, which has been covered by Maulik in his remarks. We are making notable progress with our growth initiatives. Led by a strong R&D foundation, we are developing different products to enhance our specialty chemicals portfolio. This new capacity will improve self-reliance in critical raw materials and support margin expansion as they become fully operational. Our new R&D center near Worota, with an investment of a little more than INR 100 crore, is set to be commissioned shortly. This will reinforce our innovation-led growth strategy.
In conclusion, while the past year presented external challenges and we continue to face external challenges in current year, also, our outlook remains strong and positive, with a solid pipeline of projects set to be commissioned during the year, though the number will be for the it will not be annualized number because most of the projects are getting commissioned in phase Q1, Q2, Q3, Q4. We are looking at a very bright next year with this whole project getting commissioned next year. Deepak Nitrite is well-positioned to deliver sustainable growth and long-term value for all shareholders. With that, I would now request Moderator to open the forum for question and answers.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchstone 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'll wait for a moment while the question queue assembles. First question is from the line of Sanjay Jain from ICICI Securities. Please go ahead.
Yeah, good afternoon, sir. Thanks for taking my question. First, I wanted clarification. Maulik, you said in the opening remark that we are looking at a few downstream products in agrochemicals moving up in the value chain. Second, you spoke about the new product which will have application in agro and pharma and probably another for industrial solvent and energy. Can you give us a little bit more color on this product and what is the CapEx we are looking at expansion of this product?
Okay. First of all, thank you for the question. These products will not really have any meaningful CapEx, maybe other than some balancing equipment or something. Most of these will be utilizing assets that we already have in campaigns. While we have a base load and a foundation of some intermediates that we make, we have partnered with certain downstream customers where we would run these products as a value add in certain campaigns. I think every month there will be a campaign. It will swing between the base load of products and the higher value-accretive products. Now, when we go downstream in agrochemical intermediates, here also, the focus is to do it in a very strategic manner because traditionally, we have always focused on making intermediates and not really technicals. When we are doing that, we are doing that along with strategic partners.
As far as what I mentioned about the personal care, this again is going to be an A, it is going to be an asset valorization, but B, it is also going to fundamentally add a brand new chemistry to our product portfolio. Just for the record, the chemistry is one that's called Fiddlecraft.
Can you come again? What chemistry is it?
It's called Fiddlecraft.
Fiddlecraft.
Sorry, it's a German name. I think that's two scientists who created this chemistry many, many years ago. It has a broad range of applications. Over a period of time, it will actually also feed into the polycarbonate resin as a major application. Right now, the priority focus will be to personal care and pharma.
Very clear. That means because we were running very efficiently planned, this means we will have more value from the same plant rather than more volume. Is that still the fair statement?
While that answer is yes, I mean, we have a mixture of high-efficiency continuous operation plants, for example, the phenol plant, for example, the sodium nitrite or the nitroterpenes plant. We also have a very broad range of batch plants which are very well instrumented and able to have a very large number of chemistries that we're able to use in those assets. These are assets which will be used to make these higher-value, relatively smaller volume products. Some of them will include assets such as our fluorination block. Some of them will include assets which we would otherwise have used for some other chemistries. The high-efficiency single product plants will continue to run in that manner in order to gain the base load of efficiency. The other assets which are batch will be used to generate higher-value, smaller-volume margin-accretive products.
Very clear. Very clear. Now, if we go to the standalone business this quarter, I think we had a good run on the agrochemicals sequentially. If I look at incremental gross profit to an incremental revenue, that's only 37%. That says that we are still facing some margin pressure in the underlying core product, even in the Q4. When we say the margins have stabilized, are they stabilizing at a Q4 level or at a Q3 level?
No, neither. Even Q4 is softer than it should be. I am not going to give any opinion about what Q1 and Q2 will be because, I mean, literally on a daily basis, there are news that come out that completely shatter your perception of what would be a normalized situation. I would rather say that we are confident about coming back to a normalized number, which is neither the, I mean, which is higher than the Q3, obviously, higher than the Q4. I would say that this will be achieved on the annual number rather than on a base of Q3 or Q4.
That's very helpful. Can you throw some light on what's really happening? Is it a demand-side issue in China or is it an oversupply situation in China? What really is driving a sudden stall in competition in our products, which till now has been doing quite well even in the worst of the situation in financial year 2023, sorry, in financial year 2024?
Generally, what has happened over the last several years is that there has been a significant overcapacity that has been built in China. Along with that, a lot of the agrochemical intermediates that Deepak manufactures have a very large application base across the world but have been largely dependent on only a small handful of customers. Now, as these molecules go through a process where there is a patent expiry, the number of customers increases. For a short period of time, so does the number of potential competitors. Deepak has been focusing on ensuring that it is building cost leadership as well as ESG leadership. There is always going to be a period of time in the middle when you're essentially competing with someone's finished good inventory. It's easy for Deepak to compete with anybody at a global level when you're talking about manufactured products.
When you're competing with somebody's closing stock, which is depleting at a pretty rapid clip, but you still have the tail end of it there in the market, that competition becomes uneven. To be honest, we are actually quite well aligned with a lot of other players who say that the down cycle of agrochemicals is teetering over to the end. You have certain players who are forward integrated into the formulation, who are able to tell you that the future is much brighter because they're there with it. We follow suit maybe with a lag of one quarter or two quarters. We are well aligned that moving forward, the situation is not as grim as it was in FY 2024-2025 with regards to volume recovery as well as, over a period of time, price recovery.
Great. I have one last question. I'll get back on the queue for others. How is the market scenario for?
Sorry, Mr. Nitrite. Can you please rejoin the question queue for follow-up questions?
That's fine. Thanks, Maulik Mehta, for answering all those questions and best of luck for the coming quarter.
Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in conference, please limit your question to only two questions per participant. Should you have a follow-up question, we request you to rejoin the queue. Next question is from the line of Meera from Unwill Wealth. Please go ahead.
Yes, sir. Thanks for the opportunity. I have two questions. The first is on the commissioning of our nitric acid plant. When we see the other players in the industry having the capacities of nitric acid, they are integrated in terms of their upstream ammonia, whereas probably we have to purchase ammonia from the outside to support our nitric acid production. I just wanted to have your thoughts here that because we need to purchase it from the outside market, how we would be competitive vis-à-vis those players having their captive ammonia? Also, if you can talk about in terms of the OpEx difference between us and them over a period of time.
Okay. Hi, Meera. And thanks for your question. Just to clarify, look, Deepak Nitrite has been in the business of consuming ammonia now for 54 years, right? We started off with sodium nitrite, which is a consumer of ammonia. Our ammonia purchasing pipeline, both from domestic as well as international sources, is relatively robust, and it can be made more robust with some marginal investment here and there. We do not compete with manufacturers of nitric acid. Our asset is in place for us to consume internally. Our products that we make, while nitric acid will be made, our products will be downstreams of nitric acid. Those are much higher value in a sense of multiple end applications, domestic and international demand.
In fact, in a couple of places, we have tied up a large portion of our production for multiple years with formula-linked pricing, which includes movement of feedstock, for example, ammonia. Moving forward, I do not see us as trying to benchmark against nitric acid producers who have their own ammonia. I look at benchmarking us against nitric acid consumers who purchase their own nitric acid, whereas we will continue to purchase and expand our purchasing policy for ammonia.
Meera, you should elaborate this. See, this is a make-or-buy decision. Okay? It has nothing to do with the market. Secondly, the certainty of supply and through pipeline. These are the major components one has to look at. If I am not competing with anybody, we know they will be far superior to us. Assured supply, pipeline supply, cost as compared to market will be much lower. Paybacks are better, quite good, in fact. This is what goes for a make-or-buy decision, not as compared to how they are doing and what we are doing. How efficiently we are doing is more important. Hope we have answered your question.
Correct. Just one thing here. Last quarter, you mentioned that probably we would have our own storage tanks also for ammonia. How is that progressing and when could that be commissioned? Because now our nitric acid facilities are getting commissioned in Q2. If you can share something on that storage tanks, that would be helpful.
What we've done is we've already made investments and commissioned investments about storage of nitric acid as well as unloading of nitric acid to have a much higher rate of consumption on a steady basis. We have also invested into expanding our storage to allow us a greater degree of flexibility and then take that ammonia via pipeline into our consumption site. I won't say that that is a significant investment, but that should also be operationalized during the year.
Got it. The second question is.
To ensure that we have a strategically de-risked ammonia sourcing strategy.
Got it. The second question is in terms of the input prices. Some of our major raw materials like toluene, octanol have seen a price correction from March onwards. Just wanted to have your thoughts here. Have the product prices been adjusted commensurate with the fall in these raw material prices, or would we have some extra delta left with us to work with? Given the kind of commentary we have seen in your investor presentation, you have mentioned that we are seeing a kind of demand revival in dyes and pigment segment. If you can relate all this with reference to these raw materials as well as your outlook for DASDA and OBA for FY 2026. Thank you so much.
Sure. So look, Meera, as you mentioned, there is a price softening of key petrochemicals like benzene and toluene and such. Now, because we are intermediate manufacturers, we are also present in multiple parts of the value chain. For example, my OBA prices do not move in line with toluene prices. In some parts of the business, when we have a contractual agreement with a customer for an intermediate, we have a formula with a pass-through clause which may have, in some cases, one month; in another case, it is a quarter, where there is an adjustment to the price of the product based on quarterly average movement. In other places, it is linked to the market price. When I am selling optical dry cells, nobody really asks me about the price of toluene and how its downward revision would improve my OBA prices.
There it is about being able to secure long-term customer contracts. As you have mentioned, OBA, we have debottlenecked our optical dry cleaner manufacturing capacity. We have also launched a few new SKUs, including into certain segments where we were originally expecting an extinction threat in that segment. Now our optical dry cleaners are able to service those applications as well. We are working very tightly with our key accounts, our customers, to increase our wallet share. We do debottleneck in anticipation of, and then over the next year, work to see how we can increase our wallet share with them. This is an ongoing activity. Even this year, we will be able to debottleneck the asset with marginal investments.
Our goal is to ensure that we are increasing our wallet share because we have upstream integration and because we have strong value chain pieces that we are able to give to customers.
Thank you. Next question is from the line of Ankur from Axis Capital. Please go ahead.
Yeah. Hi, sir. Ankur from Axis Capital. Thanks for the opportunity. First question on the AI part. Your commentary suggests volume-led uptake across some of the segments wherein we are seeing some green shoots. My question is more on our thoughts and strategy, given that the pricing-led scenario is the way it is. Probably it will take some time for it to recover. Is there any enhancement in product specifications that we are doing to address the margin pressure, or there could be a reset in terms of AI margins over a medium term as we scale up this business?
In the AI business, the part which goes into dyes, pigments, and their associated industries, I think I had mentioned also in February that from the closing end of Q3 onwards, there has been an improvement. That improvement was volume-led, and eventually, it would turn into pricing improvement as well as margin improvement. I think the volume improvement has persisted. Now we're starting to see some level of margin improvement. All of this is significantly influenced by geopolitics. I am cautiously optimistic. We are seeing along the lines of what we had mentioned in February. When it comes to other segments such as agrochemicals, for us, in a certain group of products which go into agrochemicals, we are seeing price as well as a margin as well as a volume improvement, but not in others.
The other ones will come maybe towards the end of Q1 or Q2. I'm not sure. I am not going to give any clarification with regards to the other chemical which goes into agrochemicals. What we have done in the meanwhile is we have seen how to ensure that we are optimizing on the cost front, how we are ensuring that we are able to even go downstream in partnership with certain customers, as well as ensure that there is a level of asset fungibility where we are able to use the same asset to drive production for intermediates which will go into other applications such as pharma and personal care.
Sure.
As a result, if that revival is fully realized, we will have more options than we did one or two years ago because we will have more products commissioned across a broader range, as well as we will have gone downstream to be able to have greater security about the future of these assets.
Sure. Just a follow-up on that. Within AI, is there any specific segment wherein the pricing or the competitive pressure is significantly higher, multifine specialty or basic chemicals, or even DASDA?
Pricing pressure, of course, is significant on products such as DASDA. There is a pricing pressure on a couple of agrochemicals. In another couple of agrochemicals, the situation has been on an improving track. I would not say that it is where I would like it to be or that it has been in the last few years, but it is on an improving track.
Okay. Great. Just a second question on our medium-term expansion into phenol acetone downstream. There was a tech tie-up which I think was pending on the BTA side. What is the status there? From a tech perspective, are we more or less done across the product range that we are looking at, or is there still more to go?
Sorry, what is BTS?
BTA.
Oh, Bisphenols. BTA.
Yeah. Bisphenol. Yeah.
Yeah. I think we're at the final leg of concluding all that. The other licenses have already been tied up. Polycarbonates, as we mentioned earlier, we are in a unique position where the equipment, the license, the final product trademark, as well as our anchor customer all happen to be the same name, which gives us a great degree of confidence not only in servicing the Indian requirement because of our polycarbon—sorry, because of our combatting facility that we've already put up, but we've already started servicing the domestic market, as well as the anchor customer which will be located in Europe and will continue to consume product that comes out of this plant. I think we're well placed with India's growing demand as well as our anchor customer's expected demand.
Okay. That's it, qualified. Thank you and all the best.
Thank you.
Thank you. Next question is from the line of Abhijit Akela from Kotak Securities. Please go ahead.
Yeah. Good afternoon. Thank you so much. Abhijit Akela here. Just a clarification on the Government incentives. Number one, I mean, this was used for 10 years. How many more years does it continue for? If I heard you correctly, you mentioned that there was some accumulation of the incentives this year. For what period exactly has this INR 161 crore number been received?
Abhijit, I mentioned that accrual basis, say INR 60 crore-INR 70 crore is the accrual every year. This is till December 2028. Okay. You make further investment, you further qualify for this incentive. When we are considering the larger projects, we fall into a mega project scheme that the schemes are again better. As such, incentives and these things will continue there also. On current results, if you are—this INR 161 crore is—you see what Government does is that they release 80% and 20% is withheld till they do the final verification and certify that. That was completed last year. We got current year as well as the accumulation of past year of 20%. Henceforth, it will be INR 60 crore-INR 70 crore on an accrual basis.
For the existing investment.
All right. So is it—yeah. Sorry. Just to clarify, is it fair to assume that out of this INR 160 crore, maybe INR 60 crore or INR 70 crore would have pertained to FY 2025 and the rest would have pertained to the previous year?
Yes. Yes. Really fair.
Okay. Got it. Thank you so much.
Everything is different. They will have, obviously, they will have their own period of time. That will be accrued separately because there will be separate investments.
Yes. Sure. I guess the commissioning for that would be basically from fiscal 2028 onwards or thereabouts, right?
Yeah. Correct.
Correct. Okay. Got it. Yeah. Thank you so much. The other question I had was just on the normalized margin outlook. While I understand that for the next couple of quarters, it is very difficult to hazard a guess, but when you are alluding to a more normalized level from a full-year basis, is there some rough range you could point us to for the two segments regarding where margins could end up normalizing in each of them?
I think it is probably not the right time to be able to answer that. We believe that the normalized margins should be higher than what they are right now. Whether that happens in one quarter or two quarters or three quarters, I do not know. We are confident about an annualized margin which is higher. Perhaps we see how the situation plays itself out. There will be pockets of opportunity even in the short term. It might look disproportionately higher than it should be. I will just hasten to say that it does not mean that Q1 and Q2 will be low and Q3 and Q4 will be high. We are positioned in a place where we are able to take opportunities. Those opportunities may be short or medium-term in nature. They may be long-term in nature.
We will remain agile, and we will always ensure that we are giving a high degree of transparency to investors.
Okay. Understood. Thank you so much, sir. I wish you all the best.
Thank you.
Thank you. Next question is from the line of Vivek Rajmani from Morgan Stanley. Please go ahead.
Hi, sir. Thank you so much for the presentation. Just a couple of clarifications on phenols. I know last quarter was a difficult one because you'd mentioned the perfect storm. Given that you've been able to run the plants a lot better in this quarter, just wanted to get a sense of if we've been able to recoup the market share that we lost last quarter to imports and possibly increase it because we obviously expanded our capacities. As an extension, I think you had mentioned that you will see some relief from the import pressures after March. Just wanted to get back to see if that has been happening as you were guiding in the previous quarter. Thank you.
Yeah. Yeah. I mean, you are right in this, Vivek. Of course, we are not losing a market share in that. In fact, it's growing. We have the—we go on the debottlenecking capacities, and those are—I mean, the market absorbs whatever we are selling. I know we do not see any pressure on market share as such. As well as Q3 had some pressure on raw material pricing, but—sorry—Q4. Q1, we are seeing though. Maulik has told me not to hazard guess. I am hazarding guess. Q1 is much better for phenol as compared to Q4 because the raw material—the cracks are going back to the level. I mean, I can say things are in place. We are able to sell in the market whatever volumes we are supplying to the market, and cracks are also getting improved cracks.
Whenever we talk about something, we'll have to see the Deepak Nitrite product portfolio. Frankly, we are into domestic 83%. Domestic market is growing. Domestic market is stable. Though there will be some pressure here and there in one of the quarters, overall, domestic markets are doing reasonably well. Export, we are facing pressure maybe somewhere because of the export dynamics, what we are facing outside, geopolitical situation, this. I mean, phenol and this, so far as domestically, we do not see much of a pressure on that, which is a larger part section of our business. When we talk about AI and all these things, there also, we are doing—it's not that there is a pressure on product volumes or anything.
It's only because of some concerns on the base, but that is also now more or less getting in a stable situation now. It will further improve from here. I mean, whatever we have seen up till now, I think we have seen the bottom. All I can say, future looks very bright. Not that with all the commissioning in a phased manner where we are very confident we'll go on because it's already done. I mean, nitric acid has already started. We see in a part of it. With all these things, we see a very good next year from this onwards. Various steps are taken. These R&D, small, small things which Maulik was highlighting. We must realize how are we differentiating our product, how the efficiencies are getting improved, how the nitric acid question, the supply start from pipeline.
I mean, many things are done internally because if the external environment remains external environment, we are doing so many things here. I see a good year, and next year will be further better because of steps what we are taking. I'm not talking about the global uncertainty what is happening, but by and large, things are in control from our side. We don't see much of an issue in running our plant operations and the commissioning of the plant. I am very optimistic about this. Though cautiously optimistic, that's the right word Maulik has used. Yes, this year could be better than last year because we have seen the bottom which I feel.
No, I totally agree. One thing that we have learned last year is that maybe we need to have a much sharper messaging about when we do our regular shutdowns for cleaning and maintenance because when we announced it, we announced also the period of time that we will have a shutdown as well as the fact that we would have inventory. I think a lot of traders, because of the country's large dependence on Deepak, which has served them well, anticipated for whatever reason that we may extend our shutdown or they wanted to deal it themselves. We had much more of an input coming in in the end of October, early November to compensate for a perceived extended shutdown, which never actually took place. We were in fact able to start back up at a shorter notice along with larger asset available capacity debottlenecking also.
Our increased capacity came head to head with an increase in imports. I think maybe we can learn from this, improve our communication strategy that we put out to ensure that this kind of situation gets avoided because at the end of the day, our customers just want to feel secure about the availability given the face of uncertainty in geopolitics.
I'm sure that this is very clear. Thank you so much and all the very best.
Thank you. I mean, cheers.
Thank you. Next question is from the line of Arun Prasad from Avendus Park. Please go ahead.
Thanks for the opportunity and good afternoon, everyone. First, Maulik, just coming back to the technology part on our phenol polycarbonate integrated project. You said this phenol is in the final stages. Have you finalized for the new phenol acetone complex? Is it the technology licenses finalized, or are we just continuing with the existing one that we have?
I won't answer that question. I'll just say that it has been finalized.
Okay. All right. Also, you said that from the polycarbonate project, the anchor customer's expected demand is very healthy. Can you indicate what percentage of our overall polycarbonate capacity this expected demand would be, the anchor demand would be?
I'm so sorry. I know I'm saying this a second time. The same gentleman, I won't answer that question as well. Frankly, that is part of the discussion that we are having. If I answer that question, I'm giving away any leverage. We are in conversation, and what we are telling strategic partners is that once we have commissioned, their interest in working with us is well noted, and we are happy to be their partner of choice because we're able to service them with technologically trademarked products. If they can help us debottleneck fast and further expand capacity quickly, then we will be able to service them faster. We work with that little bit of leverage for negotiation. Rest assured that our first priority is to ensure that anchor customers as well as the domestic market are both well served.
Okay. All right. So that's fine. On the compounding facility you spoke about, when do we get to see some kind of a revenue traction from this facility? Is it this year, next year? What stage are we in in terms of, I know you mentioned that you have sent a few loud sailors to the customers, but are we in a stage where we can confidently go and sell and book revenue in this? What is our aspiration in the next two, three quarters or on the medium term?
No. Just think of this as an R&D center. Now, it is able to make in terms of total throughput much larger than what you would expect very often in an R&D center, sometimes even larger than a standalone plant. It is still to be considered as an R&D center. We have generated revenues already in the last year. We will extend that this year. These are all to be considered as, in a chemical, what you would look at is a PO for a piloted product. When you are talking to customers and you are scaling up your production in order to give them confidence that these are plant representative samples, right? That is what they pay for. When you send them a lab sample, they do not pay for that.
When you send them a pilot sample, a larger volume, multiple SKUs, that they do pay for. Still, these would be considered, I would consider them as R&D projects to build customer confidence. Pick forward as we're able to have them do their extended testing in multiple environments, temperature, heat, sorry, temperature, conductivity, those other things. They will expand into full-fledged business SKUs. We've already started seeing value. We've already started engaging with customers' long-term contracts. These are still pilot projects. These are pilot projects.
Encouraging results. You have a few reports from.
We have.
The response what we have got from our customers is very encouraging. Product is getting acceptance. Frankly, this is seed marketing what we are doing to ensure that when we come up with phenol plant and this, we are ready with this facility also on a larger scale so that we are again, I mean, back to back, we have integrated facility of compounding also. The idea is that next phenol plant will be consumed captively rather than being product in the market.
This is a change for our strategy because the traditional thing that Deepak would do would just be to manufacture the resin and sell the resin. Now, while we will do that, we will also ensure that we are selling compounds which are made using that resin and other smaller raw materials which have significantly higher price as well as margin but have a significant approval cycle. We are starting that approval cycle earlier before the PC plant comes up so that we can then reduce the amount of resin that we sell in the market and increase the amount of compound that we sell.
Typically, what is the approval cycle in months? Is it 24 months, 36 months?
For some products, it can go from 6 months to other products in things like medical devices and all that can go to even 36 months. They have obviously much, much higher value. Because of that, there is a very strict regulation and control. I mean, we've been working with potential customers in multiple segments, including EVs, including switches, including furniture, as well as medical devices.
What I understand is some of these approvals need to also come from the customer's customer. Is it the right way to think? Because 36 months is too long.
No, it is not as long as you see, we look at it from a different perspective. Thirty-six months for something which is going to be around helping people in difficult situations where things cannot be repaired easily. And these will last with the customer, the consumer for decades. Thirty-six months is a fair thing. And Government, India, as well as the state, they've been very supportive. So I would not put too much value into the fact that something takes thirty-six months. It takes it because it will be there as consistent business for decades to come.
Okay. Okay. Understood. Finally, one question on our capital working.
Sorry to interrupt. Can you please move to the question queue for follow-up?
Sure. Sure. Thank you.
Thank you. Next question is from the line of Kumar Somia from Ambit Capital. Please go ahead.
Hi, sir. Good afternoon. Just a couple of questions on that compounding facility. Is it the same capacity that we had indicated earlier, or has there been any changes there?
It will be that capacity in a phased manner. Right now, it is smaller but not significantly smaller.
Okay. Sir, any indication on what is the revenue that they have booked this fiscal from the compounding facility?
No, I won't answer that question right now because it depends on what products get accepted, when the same customer expects maybe different SKUs for separate registration or approvals, those things. We are working together with multiple customers and multiple segments. Yeah, it's too early to speak on.
Sandeshwar, if you could just give us an indication, what is the cash CapEx for this fiscal?
This fiscal, it won't be that high because we are almost at the verge of completion of all our earlier CapEx. This should be in the range of INR 1,200 crore-INR 1,500 crore out of whatever we have announced, INR 8,500 plus the residual of the earlier. So out of around the INR 9,000 crore-INR 9,500 crore, our cash output this year should be around INR 1,500 crore.
Got it. All right. Thank you, sir. That will be all. Thank you.
Thank you.
Thank you. Next question is from the line of Ajithi Luharuka from EDIK Research. Please go ahead.
Sir, I would like to know that how much is not-for-modest CapEx justified in the light of uncertainties in global trade in general and chemical industry in particular?
Sorry. I didn't understand the question. Could you repeat it, please?
A little louder, please.
Yeah. How much is not-for-modest CapEx justified in light of uncertainties in global trade in general and chemical industry in particular?
The CapEx justification, are you asking?
Yes, sir.
What I mentioned just now?
No, in general.
See, the point is I don't know. If you're asking about the CapEx, what we are, the approvals what we have got from the board, about INR 8,500 CapEx, these are all well-thought-out strategy and well-integrated business strategies, going backward, going forward, like compounding, like nitric acid, like polycarbonate. I mean, market remains the market what it is. However resilient business you are creating is very relevant in this situation. If you have to answer the question on this, if we can answer it confidently, we have that backward integration, forward integration, and all kinds of efficiency in the place. CapEx justification in any case, this CapEx is going to take time. By December 2027, we'll be ready. I don't see much of a problem in taking these CapEx decisions, whatever we have taken. I can understand if you are entering into some agenda.
These are all very well known and thought-out strategies what we are following.
I will just add one point to that. I say this unequivocally, I think that Deepak Nitrite has the best investment thesis in the chemical industry in India. Across the segments, across the company sizes, the investment thesis that Deepak has is attracting interest across the globe. There is no question about the fact that we have made the right decisions. Sometimes you do have project delays, and those are regrettable. We have to work hard to see how we can always keep on improving on those fronts. If you are asking about why we are investing, what we are investing in, I think that you will have a remarkable resilience moving forward. We are exactly where we need to be in order to take the best advantage of the geopolitical global situation.
Yes, we have a large neighbor in China, but that does not change the fact that India has significant headroom to grow, and Deepak has made the right choices for investment.
At the right time also. That is very important at what point of time you are taking decisions. Delayed decisions do not help. If you have a strategy, then I think we are at the right time you have taken a decision and the right execution philosophy we are following.
Okay. So sir, what is your strategy to handle trade uncertainties in near term?
That's a whole separate question, and it cannot be answered over an investor call. Strategy is it involves working with our internal operation. It works with external customers, and it works to see how to make certain assets fungible to be able to apply to multiple applications. Beyond this point, trade uncertainty is a fact of life which we should be poised to take advantage of as well.
Okay, sir.
Thank you.
Thank you. Thank you. Next question is from the line of Sanjay Kushawala from an individual investor. Please go ahead.
Thanks for the interview. My question is, sir, polycarbonate and BPA products come from petrochemicals and may face more regulation in the future. As the world moves to more greener and safer materials, how are you planning to this transition?
To be honest, the world is moving towards greener solutions. That is a wonderful thing that companies around the world are doing. The interesting thing is that the products that will come out of these systems will be required to house these cleaner and greener processes. When you have an electric vehicle, the polycarbonate that is used to manufacture the electric vehicle and to house the battery of the electric vehicle is also as required as the source of the fuel. Let me just give you this kind of assurance that moving forward, products such as polycarbonates will have different end users, but will be just as much of interest to the downstream customers who are also engaging in improving their sustainability.
It will be a slightly different SKU, but the core product will remain the same and impart a different physical property based on the requirement. We may not manufacture more internal combustion cars, and the polycarbonate resin that would be used for that compound will be the same polycarbonate resin which is used for a compound which makes an EV.
Thank you, sir.
Thank you.
Thank you. Next question is from the line of Hussain Paruchawala from Carnelian Capital. Please go ahead.
Thanks for taking my question. Just one point. After the debottlenecking, what is the capacity, what would you say, on the phenol plant?
We've stopped. I think we should have stopped much earlier answering questions about capacity because one thing that has happened is because of that, then you have licensors saying, "Oh, you know what? Now, if you're running it at that capacity, please pay us license fees for that." Yeah, we're consistently ensuring that we have the asset debottlenecked. Our focus is to ensure that we maintain and grow the domestic market share. With the current capacity, we will continue to find ways to optimize further. We've also signed up for greenfield plants because we are seeing that we will soon, not right now, but soon, maybe over the next 6-8 months, reach the kind of ceiling that we can expect from this asset.
We need to work quickly to see that we have corresponding greenfield asset which will service the polycarbonate asset as well as the market.
Got it. That's all the questions on my side. Thank you so much.
Thank you.
Thank you. Next question is from the line of Meet Vora from MK Global. Please go ahead.
Yeah. Thanks for taking my questions. I have just two bookkeeping questions. First one is that what would be the accounting treatment for this Government incentive income? Will we be doing this consistently on a cash basis or on an accrual basis? As the INR 600 million-INR 700 million of income is more or less certain that we are planning to accrue every year going forward.
Yes. I'll tell you something from me and auditors also. My auditor is questioning if I answer you something here.
Okay.
We will take a call. I understand you are mostly at dilemma, but we will take a call. Let me talk to auditors also.
Sure, sir. Just secondly, on the interest cost every quarter or year that we can work with, as I see that there has been a debt increase to around INR 1,000 crore by the end of March this year. If you can give some indication over there.
No, please. Frankly, we have about INR 900 crore cash also lying with us. So net debt to every debt is hardly anything. I mean, frankly, this was borrowed to make sure that cash flows and these. Secondly, we are putting pressure on our team also that we have our habit of borrowing has gone to go ahead completely gone. So negotiating skill, hey kidney, are we getting the best rate? Are we getting the best opportunity for 14 years payback? Sorry, the term loan. Those things are tested here in a smaller way. I can pay back this loan today also. I mean, there is hardly anything on the debt front. This was more, I mean, we borrowed in a company where there was a new company what we started in GCTS. This is what we have done.
Frankly, I know there is no pressure on the debt at all.
Correct, because gross interest cost ideally should be in sync with that INR 1,000 crore. That is why I was asking. I understood your point. Okay. Thanks. That is all from my side.
It's also there. It will be another income, right? That interest also will be hardly anything. It gets capitalized also. I mean, there are several factors here. I think it's a bookkeeping question, I think.
Thank you. Next question is from the line of Arun Prasad from Avendus Park. Please go ahead.
Thanks for the question to the follow-up opportunity. I was asking about the capital work in progress, INR 1,600 crore we have in our book for March 2025. Apart from the long-term projects, can you just help us understand what portion of this is getting commercialized in Q2 and Q3?
All the projects what we had earlier announced for INR 2,000 crore-INR 2,200 crore are getting commissioned in the current year. This whatever balance will be in whatever we are spending here, phenol technology or the polycarbonate technology, and this gets over spillover to the next years. Other all earlier announcements are getting completed by this year.
Will the majority of those be capitalized this year?
Yeah.
All right. Thank you very much.
All will be capitalized.
As there are no further questions from the participants, I now hand the conference over to management for closing comments.
Thank you all for joining this call. In case you have any further clarification, our team can answer that. Thanks once again for joining this call.
Thank you.
Thank you.
Thank you. On behalf of IIFL Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your line.