Ladies and gentlemen, good day and welcome to Deepak Nitrite Q2 FY2026 earnings conference call, hosted by IIFL Capital Services 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 the investor communication shared with you earlier. The result documents have been shared with you earlier and also have been posted on the company's website. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ranjit Cirumalla from IIFL Capital.
Thank you, and over to you, sir.
Thank you, Amshad. Good afternoon, everyone, and thank you for joining us on Deepak Nitrite Q2 and H1 FY2026 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. To begin, Mr. Maulik Mehta 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 financial and segmental performance. I now invite Mr. Mehta to share his opening comments. Thank you, and over to you, sir.
Good afternoon, everyone, and a warm welcome to all of you on Deepak Nitrite Q2 and H1 FY2026 earnings conference call. The result documents were shared with you earlier, and I hope you have had an opportunity to glance through them. I will initiate by briefly taking you through the key financial and operational highlights for the quarter, and the half-year ended 30th September 2025. As we move into FY2026, the operating environment remains complex and challenging. We continue to uphold our commitment to responsible chemistry, creating value responsibly for all our stakeholders, our people, and our planet. This philosophy anchors our vision. Strengthened by our core fundamentals of agility, customer responsiveness, and continuous process improvement, it provides us with the resilience to deliver an accretive performance even amidst multiple headwinds. In Q2, Deepak reported consolidated revenues of INR 1,922 crores, higher on a quarter-on-quarter basis.
This was accompanied by an improved profitability, as we reported a 5% quarter-on-quarter increase in consolidated EBITDA at INR 224 crore. You will notice that we're presenting our performance on a sequential quarter basis, as the operating backdrop over the last two quarters has been broadly comparable, particularly in terms of pricing trends, tariff development, ongoing geopolitical situations, and interest rate movements. On a year-on-year basis, however, the change in the operating environment is far more pronounced, with factors such as U.S. tariffs, dumping intensity, and underpricing either being absent or significantly less severe during the corresponding period last year. Our phenolic business continues to show performance in continuously challenging times, reporting a revenue growth of 2% on a sequential basis, accompanied by a strong 23% improvement in EBIT. Top-line growth was aided by higher throughput, including achieving a record quarterly production and sales of isopropyl alcohol.
This was supported by favorable product mix and lower feedstock prices, which aided profitability. The advanced intermediate segment, on the other hand, navigated headwinds from tariff actions and the influx of underpriced imports. We countered these challenges by pivoting to non-traditional geographies and proactively engaged with customers, thereby protecting market share and volumes, which helped us to report a largely stable top line. However, pressure on realizations was fairly severe, and profitability has been impacted. We've undertaken some aggressive optimization actions to partially mitigate this impact, and this will be seen in the quarters ahead. In terms of outlook, we are optimistic about our prospects, given the strong traction in phenolics.
Further, in the AI segment, we anticipate an improvement in performance on the back of better volumes for agrochemical-linked intermediates from Europe as well as other geographies, enhanced contributions from capacities that have undergone the bottlenecking, and an improved ability to capture contribution across the value chain with our upstream integration assets, which are expected to be fully operational in Q4. There can be a further uptake to our expectations should there be an amicable resolution to the U.S. tariff matter. A key development to share is the commencement of our hydrogenation asset at Deepak Chem Tech on 26th September 2025, which came at an investment of about INR 118 crore, as well as the inauguration of our state-of-the-art research and development center at Savli, which is alongside its sister concern, which is focused on polymer compounding.
The R&D center was built with an investment of about INR 100 crore and spread over a five-acre campus, which will serve as an innovation hub for developing chemistries, specialty applications, polymer technologies, as well as scale-up and semi-commercial matches. The center will focus on expanding our product portfolio and increase our operational excellence. It will also help us to develop a technology platform and work on new chemistries in partnership with key customers. We're confident that this investment, coupled with our right strategic initiatives with key customers, will provide a platform and thrust our efforts in this area over time. It already has served to reinforce the brand value of the Deepak Group and is serving to support and attract global partnerships in the CDMO as well as the CMO space.
It will also, of course, help to further de-risk hazardous chemical manufacturing processes through rigorous process safety protocols and thus elevating our HSE practices. Moreover, we're on the cusp of a transformative growth phase. Our planned investments in a mega complex, India's first integrated polycarbonate project, which is a strategic leap towards self-reliance and high value addition, supported by long-term feedstock arrangements with Petronet LNG and robust policy tailwinds under the Atmanirbhar Bharat project. This is a landmark step in backward as well as forward integration for the group. Deepak's strong pipeline of upstream products such as nitric acid, as well as downstream products such as MIBK and MIBC, are set to be operationalized in the following few quarters. However, there have already been products manufactured under these banners for seeding made via different locations in the group's portfolio. At Deepak, responsibility is not just an add-on.
It is core and embedded in our DNA. We're transitioning towards achieving 60% of our energy consumption coming from renewable sources, which may exceed 70% once regulations and policies about banking are made clear. We've already achieved a significantly reduced emission score and increased our intensity in a meaningful way in H1 2026. In conclusion, Deepak stands at the threshold of a new era of sustainability and innovation-led growth. With disciplined execution, strategic investment, and an unrelenting focus on operational excellence, we will continue to strengthen our foundation for long-term success. Our commitment to integration, renewable energy, and digital transformation is not only enhancing our efficiency but deepening our competitive edge. As we move forward, our priority remains clear: to deliver enduring value to all stakeholders through consistent performance, prudent capital allocation, and sustainable profitability. We're building a future-ready enterprise that balances growth with responsibility and success with trust.
Together, we will ensure that Deepak continues to create a lasting impact for our stakeholders, community, and for India that we're all proud to help build. I would now like to hand the call over to Mr. Sanjay Upadhyay, who will address this forum and take you through the financial performance and key updates during the period under review.
Thank you, Maulik. Good afternoon, everyone, and thank you for joining us today on Deepak Nitrite's earning call. I will now take you through the highlights of the financial results for the quarter and half-year ended September 30th, 2025. Amid a challenging landscape, Deepak has sustained a resilient performance. The company expanded its market share, especially in phenolic segments. Our operations remain capital efficient, which has added to the returns. On a consolidated basis, our ROC is reported at 14%, continuing on our track record. Coming to our financial performance on the operating front, our domestic business revenues stood at INR 1,632 crore and INR 3,256 crore in Q2 and H1, respectively. Export revenues were INR 270 crore in Q2 and INR 536 crore in H1. On a consolidated level, the domestic-to-export mix stood at 86-14.
In Q2 FY2026, on a consolidated basis, revenues stood at INR 1,922 crores compared to INR 1,914 crores in Q1 FY2026, while EBITDA came in at INR 224 crores, up by 5% on a sequential basis. Margins were up by 100 basis points at 12%. PBT and PIT stood at INR 163 crores and INR 119 crores, respectively, up 5% and 6%, respectively. In H1, on a consolidated basis, revenues stood at INR 3,836 crores compared to INR 4,239 crores in H1 FY2025. EBITDA came in at INR 430 crores in H1 FY2026 compared to INR 647 crores in H1 FY2025. Margins came at 11% in H1 FY2026. PBT and PIT came at INR 318 crores and INR 231 crores, respectively.
Moving to our segmental performance, Deepak Phenolics delivered an encouraging performance with a revenue growth of 2% on a quarter-on-quarter basis, INR 1,333 crores in Q2 as compared to INR 1,304 crores in Q1, while EBIT grew at 23% sequentially at INR 145 crores, and EBIT margin came in at 11% in the quarter. In H1 2026, revenues stood at INR 2,637 crores, and EBIT came in at INR 263 crores, translating into a margin of 10%. In the advanced intermediate segment, revenues stood at INR 588 crores in Q2 FY2026 compared to INR 605 crores in Q1 FY2026, while EBIT stood at INR 23 crores, translating into a margin of 4% during the quarter under review. In H1 FY2026, revenue came in at INR 1,193 crores and EBIT came in at INR 58 crores, translating into a margin of 5% despite the current level of environmental and challenging circumstances.
On the balance sheet front, the company's financial position is significantly advanced. The company continues to maintain a low-gearing position with a debt-to-equity of 0.21 and a net worth of INR 5,550 crore, maintaining a strong balance sheet for planned future expansion. We are also excited about our new R&D center at Savli, which is set to drive innovation and product diversification. As Maulik shared, it will play a vital role in strengthening our capabilities in life science, material science, and sustainable solutions, reinforcing our long-term competitiveness by enhancing our moat in existing areas and opening new windows for growth. Lastly, our ongoing projects reflect our commitment to long-term growth and self-reliance.
Our nitric acid as well as MIBK project is expected to be commissioned soon, while MIBK, MIBC plant, along with offsite and utility projects, are in the advanced stage of completion and expected to pre-commission-level activity to start soon at a commercial phase. Apart from above, we are in the final stage of construction activity in Specialty Chemical Plant. The polycarbonate project is on track and signifies a major advancement towards building one of the world's first fully integrated value chains in phenolics. As these projects come to fruition, they will enhance our competitiveness, improve margins, and support sustainable growth, creating lasting value for all our stakeholders. With that, I would now request the moderator to open the forum for question-and-answer session, please.
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 their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Nirav Jimudia from Anvil Wealth. Please go ahead.
Yes, sir. Good afternoon. Thanks for the opportunity. Sir, a few questions. First, you mentioned that in the advanced intermediate business, we are expecting some better trajectory for the select agrochemical intermediates in the second half. I just wanted to understand when those supplies to those global majors who are using our intermediates were at the peak level. If we just compare Q2 vis-à-vis those peak volumes, how much of the volume erosion or the quantities would have fallen from those peak volumes which they were earlier using from us?
Okay. Nirav, thanks for the question. In the second quarter, regardless of the peak volumes, the volumes that we sent were essentially zero or close enough to zero. This is because there was an intense, I think, four or five quarters of inventory destocking that took place. Hence, what ended up happening is that customers were essentially not even producing. They were only trying to release their own inventory of finished good product. Now, all of this also meant that the intermediates from our side were at—so basically, let me put it this way—that these products are conspicuously absent in our Q2 results.
Got it. Sir, just taking this ahead, in terms of the recovery, what we are expecting in H2, how are you seeing these volumes picking up in the subsequent quarters based on your interactions with the customers?
Cautious optimism here. I think all of them, just like us, are all waiting for some degree of clarity with regards to things like U.S. tariffs and overall the situation with regards to crops such as soya and corn and other things. What we are seeing definitely is that moving forward, the number is no doubt higher than the zero that it was in Q2. We are not aware of what it will grow to or plateau up to. Right now, what we have in clarity is that material movement is to begin from, I think, this month or next month onwards. There are discussions that are ongoing with regards to volumes, with regards to diversified geographies where now even China and other regions like India have come into play. There are multiple conversations that are taking place.
Rest assured that on these fronts, especially on these kinds of agrochemical intermediates, we're looking at more traction in H2 than in H1.
Got it. So helpful. The second question is on the ammonia side. Since we are already in the process of commissioning the WNA CNA plant, and what we have understood is that most of the domestic players in India have very little to offer in terms of the excess ammonia. Also because it requires large storage infrastructure, how are we placed in terms of our ammonia contracts, A, and B, in terms of minimizing our storage and transportation cost, to minimize the impact of the higher ammonia cost, which otherwise the domestic players are currently charging on?
Fair question. One, we do have an alignment similar to the way that we have with regards to other key raw materials, which allow us to import ammonia as well as buy from domestic sources. I think there is a fair diversity in terms of our ammonia sources. Generally speaking, the product that we are buying has a degree of linkage with regards to international indexes. That said, the second question that you were asking was regards our ability to store. Now, our ability to store historically over the last 30-40 years was limited to a very minuscule volume, which was close to maybe just a couple of days of consumption. Moving forward, I think from the end of Q3 onwards, we have already commissioned a storage facility about last year, which about doubled our storage against our consumption.
It will be about, I think it will be roughly about 15 times how much we would have had over these many years. Again, I do not know whether this will be enough moving forward, but we are actively seeing how we can do it in a way which is going to give us an accurate benefit and do it in a safe way. Now we have multiple storage facilities that are all feeding into our consumption point via pipelines. We already have in place also a network of tankers that move. I think from Q4 onwards, not only will our consumption capacity increase almost to a double or more, but our storage facility will be equal to about 15 days of higher consumption as against maybe one day that we have had for the last 40 years.
Perfect, sir. Last from my side, since now we are in the process of commissioning the WNA, CNA, is it possible to share the capacities for both of them? What sort of operationalized capacities we are coming up with?
I'll tell you the nameplate capacity, but you can reflect on our experience with Sinol. The nameplate capacity is only a challenge to see how we can overcome. We would be on an annualized basis, I think, producing roughly about between 250 to 270 tons per day.
For WNA?
Yeah. I think somewhat close to that with regards to concentrated acid. Maybe slightly lower because we also are large consumers of WNA.
Got it. Sir, here in terms of this nitric acid plant and capacities, would it be fair to assume that initially as our requirement picks up over the subsequent quarters, we would try to maximize the plant utilization and try to sell the excess production in the market and try to cover up the fixed cost, or would it be only for our captive consumption only and nothing would be sold outside?
No, we will make sure that we've been aggressively increasing our nitration capacity and also in many cases our hydrogenation capacity. We are looking at significantly increasing our own self-consumption because that's where we will make more margin. The nitric acid plants, I'll just put it in a simple way, our nitric acid plants will be pushed to their limits regardless of anything. Our consumption plan is happening independently and aggressively, but our nitric acid production plan will happen aggressively of its own accord.
Perfect, sir. Thank you so much and wish you all the best.
Thank you so much.
Thank you. The next question is from the line of Arun from Arvind The Park. Please go ahead.
Thanks for the opportunity and good afternoon, everyone. My first question is on the volume growth on phenol. We have mentioned there is some sequential growth. What will be the year-on-year growth? Because we have done the bottlenecking of the phenol plant. If you can share this, it will be helpful.
Are you talking about in H1 or are you talking about in H2?
In Q2, in this quarter. Overall, if you can guide what will be the FY 2026 volume growth on the phenol front.
Yeah. In Q2, I think there was very moderate growth. I think it was about 2%-3%, frankly. We actually had a very hot summer in Dahej. These large continuous plants prefer to have nice cool climates. The cooler the winter, the more efficient our assets will be. We also had a pretty heavy monsoon. I would say that in H2, we should be able to operate the plant, we should be able to squeeze out more output in H2.
Okay. If I remember rightly, we did a de-bottlenecking and the capacity was supposed to go by around 10%. So summer to summer, should not also be a 10% volume growth, or is it some other constraint in selling the material in the domestic market? How should we look at it?
No, no, no. Let me just clarify. This 10% was something that we said earlier. I'm not sure about what base it was said on. This was, I think, several quarters ago. That we have already achieved. That is behind us. Look, honestly, Arun, every quarter, the team says that they're looking at maybe 4% opportunity to de-bottleneck. Then every quarter, they achieve it, and they come back saying that, "Okay, now we've identified some other places where we can optimize." This is an ongoing activity, and I'll join all of our shareholders in congratulating them for constantly aiming higher. Even looking ahead, they have similarly come back with the same commentary that they've given every single quarter that while they achieved last quarter's efficiency improvement numbers, they believe that there is some headroom left, and they are targeting to do that.
All of this is around with, I would say, either zero or insignificant CapEx. This is all an efficiency improvement from the plant side.
No, no, absolutely. I was just trying to reconsider my own numbers. No, it goes without saying that it's a tremendous effort.
That I had mentioned, it has already been achieved. We've gone past that. The 3% I'm referring to is over and above. I don't even know when I said 10%, but I think it would have been at least a few quarters ago. We are past that point.
I was reconsidering because last year we took a shutdown in Q3. After that, we said there is a de-bottlenecking. I was expecting that's why Q2 to Q3, there should be some bigger volume growth. Nevertheless, no problem. I'll reconsider offline.
Just to be clear, there is a summer, winter, monsoon aspect that does come in. I would hasten, don't look at it literally in a quarter-on-quarter last year, Q2, and this year, Q2. Don't look at it from that perspective at all. What I had said last year in Q2, 10%, we've done it. It's behind us. After that, subsequently, there has been further de-bottlenecking. Now, subsequently, the plant is confident of being able to create even more headroom in H2. Let me just put it that way.
Understood. Okay. All right. Now, clear, very clear. My second question is on the current seed of roughly INR 2,000 crores is there in the balance sheet. We can know that we are in the final stages of the project, each of the projects, which is about to be commissioned. Can you just give a breakup of how should we look at this INR 2,000 crores and how much of this INR 2,000 crores so far we have spent on the Phenol and the integrated polycarbonate? And how much of this will be capitalized in the balance sheet in the next six to eight months?
Most of this is not on Phenol and polycarbonate. Maybe if there is something minor that would have been with regards to things like licensing fees or something like that, but I do not think that would be considered. This is for investments, which will be commissioning this quarter and in the next quarter. There is some balanced amount of it, which will be in commissioning during the first quarter of FY2020.
Sorry, can you still provide some kind of a breakup between various projects which are under commission, excluding maybe the polycarbonate?
All of this is not, I think 95% of this would not have anything to do with polycarbonates or phenol.
Right.
I think we are in the nitration, hydrogenation, and fluorination in the Hage. This would be over nitric acid in Nandesari. This would be over the R&D facility. This would be over a couple of other purpose plants. All of these are, so the R&D facility was commissioned. The hydrogenation was commissioned. Nitration will be commissioned at some point either this month or early next month. Nitric acid will be commissioned this quarter. It is in the process of being commissioned, in fact. You will have some balance, the multipurpose plants, which are going to be commissioned between March and May. Finally, MIBC and MIBK, which will be commissioned by March. That will be then taking care of all of that INR 2,000 crore that we had announced into specialized chemicals and upstream integration.
So largely this INR 2,000 crores, say by March 2026 or April or before June 2026, we should see fully capitalized, right?
Most of it in this year. I think two projects will be commissioned in the first quarter of next year. By June, I think June end, everything will be commissioned, whatever we had announced.
If you can also provide timelines when we can see the full impact on both revenue and bottom line, it should also be by June, or it will be a little bit elongated, or it will be delayed?
Good. When it is for upstream integration, such as nitric acid, we start running hot as soon as we are able to because we do not foresee any challenge in consumption. In nitration and hydrogenation also, we will see how quickly we can go to 100. These are all now, as compared to before, they are all flexible assets. They will be able to do multiple different kinds of products. For the multipurpose plants, which are going to be commissioned between March and June, there will be a ramp-up based on customer validation and on the basis of those stability trial things, which traditionally take anywhere between three to five months. There we will have some production, and it will be over every customer. High operating rates will be, I would say, from mid Q3 onwards.
It will then arrive at their end in December or, yeah, December onwards. That's how it would be.
Sorry, I missed on I didn't hear anything on the Oman plant. How much have we spent on the Oman plant so far?
Oman will take some time. Maybe 24 months from now.
Understood. Understood. One final question is there.
Sorry to interrupt, sir, but I may request you to rejoin the question queue for follow-up questions.
Sure.
Okay. Thank you. The next question is from the line of Abhijit Akela from KIE. Please go ahead.
Yeah, thank you and good afternoon. Just on these agrochemical intermediates where there's been some kind of stop in exports, are the U.S. tariffs a factor behind this as well? Are these intermediates subject to the tariffs? Is that a factor holding back the demand from customers, or is it purely a matter of end demand?
Okay. Abhijit, the problem is that the U.S. tariffs have been spread across the whole world. Nowadays, everything is one way or another linked to U.S. tariffs, either the anticipation of tariffs being withdrawn or the imposition of new tariffs or the uncertainty about what is tariffed and what is not tariffed. This creates a lot of uncertainty in the customer's perspective. Even if there is a conversation about whether ag purchases will take place in China bought from the U.S. and those questions, I would say that anything that you want to throw at this, you can throw this tariff word at anything nowadays. With fair confidence, you can say that there is some impact because of this.
I would rather say that while tariffs are certainly a significant portion of the uncertainty in the quarter and in the previous in Q1 and in Q2, but mostly in Q2, the gap has been genuinely simply because of an inventory buildup, which took a lot longer than it should have to deplete itself. When our customers are not producing, they're not in a position to buy our intermediates. When the customers start consuming, then they are in a position to buy our intermediates. Moving forward, as I have mentioned, it is more linked to the consumption plan rather than just the tariffs. The tariffs will, of course, affect the intensity of the consumption plan.
Okay. Fair enough. Yeah, got it. Thank you for that. Just on the advanced intermediate segment, the 3% revenue decline we see year- on- year this quarter to INR 588 crores, would it be possible to just help us get a split between volumes and prices for that segment for the quarter?
All I can tell you is that I'll give you the answer, but the answer won't make sense because the value drop is from one direction where the volume is not high, and the volume bump is in another direction where the margins are not high. Let me put it this way. As I've mentioned, key chemicals being absent from our Q2 sales plan have been a significant contributing factor to the top line as well as the bottom line. In other places, ironically, our production efficiencies and our throughput continue to remain high, even in the face of dumping from China, as we are ensuring that we maintain market share. Whatever one says, important at this point is to ensure that we keep our plants running at optimized efficiencies, and we remain key in our customers' wallet shares.
We are confident that sooner or later, this kind of dumping, either by policy measures or non-policy measures, will start to moderate to levels which have been traditionally there over the last how many years. Honestly, nothing stops a large country like China from importing sanctioned natural gas from Russia, even if other countries cannot. This will, of course, lead to a degree of arbitrage, which we are happy to forgo because it is better to operate with all legal compliances, not really get into spaces which have sanction risks and all those things. We believe that these things will moderate in terms of the impact on the bottom line. We believe that it will be in H2.
Right. Are there any pre-operative expenses also within advanced intermediates that are depressing the results? If so, is it possible to just quantify how much that impact might be?
There are expenses, which is a part of this. To quantify, it will be around INR 15 crores for the quarter.
Okay. Okay. Similar number in 1Q as well, or?
Yes, yes. Similar number.
Okay. Okay. Got it. Thank you so much. Maybe just one last thing, if you'll permit me. Just on the new products that we are proposing to launch in advanced intermediates, any incremental color you could share there regarding just end users, those sorts of things? I mean, maybe growth potential and revenue potential, that would be very, very helpful, Maulik. Thank you so much.
Sure. What I can tell you right now, rather than getting into revenue potential, because these are still products which we have recently started producing. I'm happy, actually. I'm delighted to share that I think we have started production of, I think, seven new products in just Q2 itself. These are all homegrown, home-developed products, which we did not really require any technical technology licensing or anything. All of these products are into, for example, in one case, it is into life sciences. In another case, I think in another three cases, these are into what we call effect chemicals. They go into applications such as polymers, flame retardants, mining chemicals, etc. Now, all of them do have a validation and an approval cycle. Some of these are, I think, a large amount of them would go to customers in Japan and in the EU.
They do have a validation cycle required. Happy to share that our product specifications so far have exceeded what is available in the market as told to us by our customers. Nonetheless, stability studies and all that have to be carried out because in some cases, they are what they qualify as food-grade because they have contact with food ingredients. These qualification cycles can take as little as three months or as much as five months. I think by some point, maybe towards the end of Q4 or the middle of Q1, we will be able to have an aggressive ramp-up on all of these. All of these will be done in existing assets themselves. They will be done in campaigns. All of them have good margin profiles.
They will factor significantly in our FY2027 numbers and completely in our Q2 FY2027 numbers, but they will start to feature in Q1 as well. I think as we come closer to that, I will be able to share more light. These are exciting molecules with a lot of upside potential on margin and volume. We are just about starting to scratch the surface.
That's very, very helpful. The total investment in these products would be how much? Is this part of the multipurpose plants? If so, how much have you spent on that area?
In a couple of cases, yes. For agrochemicals, it will be, I think, one pharma product. It will be in the multipurpose plant. In the others, it will be in existing plants which have already been refurbished to make them more compliant to these stringent specifications. Other than the multipurpose plant investment, nothing else is, I would say, a significant capital investment. Maybe small things such as solid handling systems and powdering systems, HVAC systems, those things. These are all what we consider as minor. We do not go into tom-toming about them as investments, but there is good upside potential in terms of their market penetration and growth because the product quality has been surpassing the customer's expectation. Now we have to await their validation period.
Understood. Thanks a lot and wish you all the best.
Thank you.
Thank you. The next question is from the line of Sanjesh Jain from ICICI Securities, please go ahead.
Yeah. Good afternoon. Thanks for taking my question. I got a few of them. First, on the agrochemical molecules, spoke about moving up in the value chain. When we should see that and how many products are we working there and the effect of that should be visible in the second half of this fiscal year, that's one. Number two, on the phenol spread, that appears to be quite depressed. It's gone further down. Can help us understand whether it's a demand-side issue or whether it's a supply-side issue. If it is supply-side, where are we seeing the supplies coming in and how much more can come in? That's second. Number three, you said in opening remark that we have seen Chinese dumping a few products in other geographies because they are facing challenge from U.S. tariffs. Which are these products and which are the geographies?
Whether it is also coming into India can help us. These are the three questions. Thank you.
Okay. Sanjesh, your third question first. The significant amount of dumping that we are finding from China would be in products such as sodium nitrite, would be in products such as DASDA, which is an intermediate to make optical brighteners, and in a couple of cases of nitro aromatics. The pressure from Chinese dumping is substantial. Now, obviously, it is always going to be a fight about maintaining wallet share versus maintaining a price premium. This is a balancing act. With regards to the margin question, with regards to phenol spreads, I think right now we are in a very strange position where none of these things are actually representative of the reality on the ground simply because you had a lot of these situations such as a few traders and distributors in India being sanctioned by the U.S. government.
There has therefore been a curtailment of the normal trade flows that one would see between South Asia and India in terms of these large volume petrochemical products. Obviously, that also affects products such as phenol and others. What you are seeing as indexes are different from what is being felt on the ground in terms of the ease of availability or the premium that is charged over and above the index to service the Indian market. What turns out to be a negative for the AI segment because of a challenge in bringing petrochemical products into India also turns out to be at least a short-term advantage for phenolics because it is able to ensure that it continues to retain a market share even if it is able to create a small premium in the short term, it is able to do that.
Got it.
What was your first question? Sorry.
On the moving up in the value chain in terms of agrochemical, you spoke about it a few quarters back. Just wanted to get your sense. Where are we in the process, and when should we see these products commercializing?
Our ability to commercialize will be within the quarter. We're speaking with a couple of potential strategic partners to see how we can do it together, which allows them to have an expanded presence in India without needing to put steel on the ground. Now, we're trying to see whether we can do it together. If not together, then we will find a different strategy to approach the market. What we've also done in the meanwhile is assets which are used for making one agrochemical intermediate are now fungible towards being able to make other agrochemical intermediates or other life science intermediates. Most of our assets over the last six months have been made increasingly fungible because we are continuing to anticipate a degree of volatility that we have not seen in the previous few years.
First and foremost, our focus has to be to see that we can do multiple products in the same plant in a campaign basis or by saying, "Okay, let's break this plant up into stream one and two. Stream one will continue to do the legacy products. Stream two will continue to do these two or three new products in campaigns." This is how we're approaching to increase our own resilience and by being product-agnostic but chemistry-focused.
Got it. One follow-up question there, Maulik, on the sanction part you spoke about in the phenolic spread. Now that increasingly when Indians are talking of using lesser Russian oil, that means the feedstock prices can increase in India. Are you seeing that impact, and can it act as a negative catalyst in coming quarters?
Okay. Feedstock prices in products such as toluene, benzene, xylene. Normally, even if there are large Indian refiners, there is also a significant trade flow that takes place from Asia, from South Asia. Somehow, you do not generally see these products being imported from China, but whether it is Korea, whether it is Thailand, Taiwan, etc., you do see a regular trade flow from these regions into India. I think there is a short-term blip with regards to the dealer-distributor network having some sanction threat over them. Other than that, I would not say that Russian oil sanctions would dramatically affect the prices on such things such as toluene, benzene, xylene. I could be wrong. I could be wrong. So far, we have not seen any direct implication of that.
That's clear. Thanks, Maulik, for answering all those questions and best of luck for the coming quarters.
Thank you so much.
Thank you. The next question is from the line of Kumar Saumya from Ambit Capital. Please go ahead.
Hi sir. Good afternoon. A couple of questions for myself. Firstly, when I look at the difference between advanced intermediate and standalone business, we are seeing good improvement over the last two, three quarters. If you could help me understand what is driving this, is it entirely Chem Tech or there is some contribution from polymer compounding as well?
No, not so far. We're optimistic. I think once the projects start getting commissioned, Chem Tech will become a significant contributor to the group's bottom line. Again, just to be clear, the products that are being made in Chem Tech are products which are largely familiar to the business teams in both Deepak Nitrite and Phenolics. The teams are across the board working together to ensure that there is smooth project execution and commissioning. There have been delays in the last couple of quarters. There is no doubt about it. We're starting to ensure that there is a greater degree of control and coordination. That is why we are more positive about the commissioning dates, as I had mentioned earlier.
Okay. Where are we on this compounding business right now? Have we started that asset, or are we starting to test the market?
We put up a polymer compounding facility, which I would still call a pilot facility, in Savli. This is a state-of-the-art facility. This is allowing us to create formulations which are in their validation process. In compounding, these validations, unlike agrochemicals and other products, can take up to almost maybe a year or 18 months. That is the reason we started early. That is the reason that we started seeding this. We have been getting a lot of positive traction on that front. What we are also starting to do is engage with potential strategic players who are already there in this space to see if there are opportunities to approach jointly for certain applications where there is IP on there which they have and an interest and intent in getting into the Indian market.
At the same time, they're able to see how to get this made in our own, as I mentioned earlier, our pilot facilities to service the customers. Otherwise, it's not really competitive for them to do it in high-cost regions such as Europe. This is an ongoing activity. It is still too early to congratulate ourselves, but we are seeing positive traction from global majors on this front. How much this translates into what percentage of the polymer revenue coming from these kinds of partnerships and how much of it comes from doing it ourselves, it's too early to say.
Got it, sir. Two questions for Sanjay, sir. Firstly, on the cost control measures that we have seen in the standalone business, how should we look at this? Should we expect this runway to continue? If you could throw some light on this. We are seeing some cost controls, even Q1, Q1, year- on- year on the employee cost side of their expenses.
Yes, yes. I mean, this is an ongoing exercise. In fact, I had mentioned in last conference also that company is actively, actively pursuing this cost-cutting measures because the market being whatever it is, these tariffs, and we are certain things are not in our control. Cost-cutting or reducing the spend, we can certainly do. You are seeing in the first half, and you'll see in the second half also. Going forward, there will be reduction in the fixed cost over and over, whatever we have achieved so far.
Okay. Lastly, the CapEx guidance for this year was about INR 1,500 crore. Are you holding on to that?
Sorry, can you repeat?
The CapEx guidance for this year was about INR 1,500 crore. Is it still there or?
It will be more or less same. I don't see that.
Thank you, sir. That was all. Thank you.
Thanks.
Thank you. The next question is from the line of Vivek Rajamani from Morgan Stanley. Please go ahead.
Hi sir. Thank you so much for the presentation. The question was an extension to the previous participant just with respect to the downstream integrated polycarbonate projects. Could you just give us how should we think about the CapEx for fiscal 2027, fiscal 2028? If you could also give us an update with respect to the timelines of the commissioning of the various parts. Thank you.
Commissioning, we had mentioned earlier. It will be in January to March, 2028 quarter. Okay. We are trying to see all the projects go on stream by and large at the same time because it is a very integrated approach we are taking. Some projects may start late, but ultimately, completion should be in the same time. Now, we are still working on one or two products on that. Exact dates and these will come back to you later. By and large, our endeavor is to complete at the same time by March 2028.
Sure, sir. That is clear. Any increase?
Sorry, let me complete. If there is a delay in the propane supply, then we may have to push back our project also, or we may run through imported BPA. All calculations we are making now once we know the reality when we come nearer to the project.
Sure, sir. That's clear. Any indication of how we should think about the CapEx spend over the course of this March 2028 startup?
What's the question like?
I just wanted to get a sense of you mentioned INR 1,500 crore of CapEx for this year. Could you just give us an indication for fiscal 2027 and fiscal 2028 as well?
Okay. You want the CapEx outlay for next three years? It will be around INR 3,000 crore-INR 4,000 crore because the total outlay is around INR 9,000 crore. So INR 3,000, INR 3,500, and then INR 4,000 next year.
Okay, sir. That's helpful. Thank you so much, and I'll rejoin the queue.
Okay.
Thank you. The next question is from the line of Sajal Kapoor from Antifragile Thinking . Please go ahead.
Yeah, hi. Thank you for taking my questions. Maulik, I heard the refreshing keyword fungible earlier on the call. How does the new state-of-the-art R&D center at Savli, combined with Deepak's existing digital and intellectual capital, enable a more sort of nimble and multipurpose incremental CapEx investments approach, perhaps helping avoid the prolonged rigidity and risks that are often associated with large dedicated CapEx in a volatile and uncertain world? That's my first question. Thank you.
Okay. Thanks for the question. Basically, the R&D facility has a three-pronged approach to it. One is to develop new molecules. The other one is what we call process intensification, how to make the same molecules more efficiently. The third one is to basically look at processes independent of each other. For example, I have a plant that makes sodium nitrite, or I have a plant that makes nitrotoluenes.
Now, it is a plant. It has certain reactors set up. It has certain peak efficiencies and kinetics.
What can I do using AI? What can I do using the data lake that we have generated? What can I do to identify other products that can be made in the same reactor assembly without compromising on safety? Perhaps ensure that rather quickly using just the digital tools available at our fingertips, like modeling software, for example, or by doing failure mode analysis, how can I quickly have a tech pack developed internally to be able to replace the existing product with a new product as quickly as possible so that at least my bottom line is secure if I feel that there is a period of time where I'm expecting a lull in the marketplace?
One of the key things that we have done thanks to that is, as I mentioned, we have genuinely accelerated our ability to take products from idea to commercial. Now, they do appear to be attractive to customers, but they have to go through their validation period. We have cherry-picked ones which would be made using assets where there is currently a lower occupancy. We have made large volumes of those and then seeded them out in time to ensure that the assets are then cleaned up so that they are available to make the legacy product. Once we get this feedback from customers, hopefully for steady-state supply, we will be able to run multiple products in campaign.
All of this, again, feeds to a very tightly integrated system between the idea generation, the R&D, which is both the software as well as the hardware, the people who are there in it, the piloting and scale-up for sample seeding, and then the plant teams. That is why I just want to carefully say that while we're introducing a lot of new chemistries, I think by the end of next year, we will be, at least in India, a company that has the maximum amount of chemistry platforms under one house compared to any other Indian chemical company. We will also see that much of this is developed using in-house R&D and a collaborative approach, as I mentioned, software, hardware, pilot, plant, engineering, and R&D.
Yeah. No, data lake.
Sorry?
Yeah. So data lake, I like that. Thanks for giving a very detailed and very reassuring answer. We have all been personally invested in Deepak for many, many years and look forward to a long-lasting glory ahead. My second question is, Maulik, given India currently imports all the polycarbonate, what market intelligence beyond "import substitution" underpins conviction in future domestic demands from EVs, electronics, and also healthcare?
A lot of the investment that is going into all of these, what you would call sunrise segments in India, although I would say also that you have a neighbor like China where these are mature technologies. What I qualify in India is it's a term which I think other people do not like, but I'll share it anyway. It's a second-mover advantage where a lot of these applications are already finding a high degree of maturity and acceptance. Polycarbonates, they're the backbone in a sense. What is important is the changing formulations and the compounds that are created by using polycarbonates as a backbone. If I was to give you an example, a chair has been a chair for the last however many centuries. What changes is the fabric. What changes is various things like the flexibility, the modularity, those things. A chair remains a chair.
A polycarbonate resin is a chair. The compound is the different functionalities that you can add to it. If you want to create a resistance to heat, if you want to create insulation or conductivity, all those properties are added onto the backbone of a polycarbonate. That is where you have the compounding and the formulations. The interesting thing is that India actually imports a substantial amount of the polycarbonate backbone itself. Our effort, step one, has been to make polycarbonate as cost-efficiently as possible. Because that takes a couple of years and a large-scale project execution, what we have done is, in the meanwhile, we have gone downstream and we started seeding ourselves into the mind space and the factory space of our customers to say that we are here, we are offering you compounds which are made using polycarbonate as a backbone.
Now, as these compounds start getting accepted and validated at our customers' end, those are electronics, those are things like mobile phones and auto components and those things, then it will just simply look like polycarbonate manufacturing was an upstream integration. Even though it was thought of first, it came in last, and it integrated as a cost optimization measure.
Yeah. No, absolutely. Thanks for that. Second-mover advantage is brilliant strategy, Maulik, because if you can learn from the mistakes of the first mover and make it better and cheaper, maybe. Nothing like it. Thank you for that.
Thank you. I really appreciate it. I'll just add one more point. This is also one of the reasons why we chose to go with, rather than investing and putting up a brand new polycarbonate facility, we went with an asset which has been proven with a high degree of reliability where over this period of time, you've seen the cost of everything like metals, exotic alloys, and all that go up. Honestly, if I was to put up a brand new plant today, the same exotic alloys would be available at at least a 100% higher cost. Here we have an asset where we have proven reliability, understanding about how maintenance has taken place, how scheduling for those things has taken place. Learning from experience comes in for free in a sense.
I mean, I want to allay anyone's concern here thinking that if it was a greenfield investment, would it have had more traction? To be honest, the way that we've gone ahead with this has not been to save money, but it has been to be able to hit traction very fast with where we have been able to buy in experience literally for free when putting up the asset.
Absolutely. Brilliant thinking and all the very best, Maulik. Thank you so much.
Thank you so much.
Thank you. The next question is from the line of Nisha from Vajani Capital Services. Please go ahead.
Yeah. Am I audible?
Yes.
Hello.
Yeah.
Yes, yes. Got it. My first question is, could you please explain the sensitivity of your margins to the fluctuations of the phenol price? Propylene price, sorry. That's the raw material of phenol.
I've mentioned this earlier also that the index, I think because of these short-term challenges, is not a fair representation of the price at which we consume the feedstock. I think it's a fair question, good question, but maybe the same question if it is asked next quarter or in Q1, I would be able to give you a more honest answer.
The second question that I have is, can you just give me guidance about the revenue and the profitability for the next quarter or the financial year?
Look, all I can say is that we are cautiously optimistic about an H2, which is, I would say, better than what we saw in Q2. This will partially come from what we hope is an improving market sentiment and a demand sentiment. Partially, it will also come from the commissioning of investments that are in that process in Deepak Chem Tech. I am referring to this answer after.
Yes. Okay. Thank you so much.
Thank you.
Thank you. The next question is from the line of Arun from Arvind The Park. Please go ahead.
Thanks for the follow-up question, Maulik. My question is once again on the polycarbonate project. Now that we have reaffirmed our start date as before March 28th, if we have to work backwards, what should be the latest period by which we should finalize, let's say, each individual package like detail engineering or ordering long lead items or when we should be breaking ground? Those timelines, if you can just explain, it will be very helpful.
I think I can just say, one, that we've already broken ground, first of all. There is already site development that is taking place. In the meanwhile, we've already appointed the dismantling contractors in Q1. Dismantling has already started in Stade in Germany. We have also, as I've mentioned, as Mr. Upadhyay clarified, that this is our goal with regards to ensuring that this is an integrated complex. If there is a mismatch in timelines for whatever reasons, we have already ensured that the investment includes that degree of flexibility where we are able to afford a degree of mismatch. Everything will be integrated as the final outcome. If there is a mismatch where one thing comes up before another thing, there is ample opportunity for placing that in the market also.
There is ample opportunity for us to buy the feedstock and have that as a storage in our site where the downstream consumption may be ready before the upstream integration.
In the reverse too, Stade polycarbonate resin capacity behind any cost before this time period, but you are flexible with, say, BPA or the phenol one, right?
We've already signed an agreement for licensing and basic package for the phenol plant. As you're aware, we've already signed an agreement with Trinseo for the technology and assets to make polycarbonate resin. We've already approved the dismantling contractor in Q1. We've already appointed an EPCM for polycarbonate and all the offsite and utility packages. We're in advanced stages of our discussion with regards to certain utilities being supplied as part of the integrated asset. I think across the board, there's a lot of activity. A lot of things have been signed. There are a few things that are still in front of us, but I hope that this gives you confidence about the alacrity with which we are progressing on this.
Any other on BPF part? Because I think we are to finalize the technology.
I look forward to answering that question.
Okay. Still, the discussions are going on, it seems.
Let's give the team the best opportunities they have to get the best technology for.
Just to be clear, rest assured, nothing in this value chain stops us from executing whatever has been signed off. None of these things are dependent on something else happening first. Let's be clear about that.
Okay. Understood, Maulik. All the best. Thank you very much.
Thank you.
Thank you. Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Thank you so much for taking out time to join us on the earnings conference call. I hope you adequately answered all your questions. We look forward to connecting with all you again in the next quarter. Thank you.
Thank you. On behalf of Deepak Nitrite, that concludes this conference. Thank you for joining us, and you may now disconnect your line.