Ladies and gentlemen, good day and welcome to the Q4 FY23 earnings conference call of Deepak Nitrite Limited, hosted by IIFL Securities 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 disclaimer to this effect has been included in the results presentation shared with you earlier. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then 0 on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Akul Broachwala from IIFL Securities Limited. Thank you, and over to you, sir.
Thank you, Michelle. Good afternoon, everyone, and thank you for joining us on Deepak Nitrite's Q4 and FY 23 earnings conference call. Apologies for the delay. Today we have with us Mr. Maulik Mehta, Executive Director and CEO, Mr. Sanjay Upadhyay, Director Finance and Group CFO, and Mr. Somsekhar Nanda, CFO. To begin with, Mr. Maulik Mehta will share views on operating performance and the growth plans of the company, followed by Mr. Sanjay Upadhyay who shall take us through the financial and segmental performance. I now invite Mr. Mehta to share his opening comments. Thank you, and over to you, sir.
Good day, everyone, a warm welcome to Deepak Nitrite's Q4 and FY 2024 earnings conference call. I hope you've had an opportunity to go through our results documents that were shared earlier. We entered 2023 with a very challenging business landscape characterized by diverse internal and external factors. The Russia-Ukraine war has served to fracture the global supply chain for crude fertilizers, petrochemical derivatives and specialty chemicals. Led to large rises in input prices across the board, resulting in a secular inflationary pressure unlike anything witnessed in the recent past. The cascading effects of central banks across the globe, raising interest rates rapidly, leading to a higher cost for capital even as forex volatility rose and risk spreads expanded. Internally, we were faced with a shutdown of our Nandesari plant for more than 40 days due to a fire in June.
There were challenges and constraints to logistics coupled with a rise in utility costs. Amidst this volatility in spot prices, both customers and suppliers were seeking to capitalize on short-term opportunities even as they sought assured supply and purchase agreements. Notwithstanding these adversities, we were able to navigate our schedules and fulfill all our supply obligations while maintaining wallet shares with all customers, hence guaranteeing a dependable and stable supply of products to all our clients. In this backdrop, I will give you a brief rundown of our performance for the fourth quarter and the financial year ended March 31st, 2023, and the plans and strategic approach for the upcoming financial year. Mr. Upadhyay will then provide you with granular insights on our financial performance and position.
We're pleased to share that Deepak Nitrite has displayed agility in achieving growth while maintaining the high quality and adhering to the safety standards that are expected of us. Diversification across products and user segments, customers, geographies has been a bedrock of our strategy. This allowed us to be nimble and seek out more remunerative pockets of opportunity amidst operational and macroeconomic challenges. This has allowed us to maintain a strong and resilient business model. Leveraging off a solid foundation, incremental investments are tactically utilized to increase capacity and sustain demand from end user industries. This has enabled us to drive a healthy top-line growth of 17% year-over-year and set a new benchmark of exceeding INR 8,000 crore in annual revenue, which is the first for our group.
Despite recent cooling off in input prices, they continue to remain at elevated levels and more than that, at volatile levels compared to the previous year. While profitability for the year is lower than that of the prior year, EBITDA and PAT in Q4 have grown in double digits compared to Q3, indicating that operations are progressing in the right direction as we enter the new year. Coming to the performance of strategic business units, the advanced intermediates unit delivered an impressive revenue growth on the back of resilient demand from end user industries, and we actively pursued opportunities with both domestic and international customers during the period. We expect this segment to continue performing well given the shift in global supply chains towards Asia and positive demand trends.
However, it is worth noting that challenges around logistics and high raw material costs due to internal product transfers at market prices with a time lag before prices are passed on. Future performance will be driven by several new multi-year contracts, successful pilots and new product introductions in our basket. Deepak Phenolics witnessed a healthy top line performance with some contribution from pricing, but largely driven by the continued increase in plant efficiencies. Our phenol plant recorded an average utilization of more than 120% for the quarter and achieved the highest ever quarterly domestic sales in Q4, along with the highest daily phenol production. We've seen sequentially, Phenolics has improved in volume and profitability significantly. This was due to healthy demand and improved product acceptance, resulting in a significant increase in revenue realization for both phenol and acetone compared to the previous year.
Sorry, compared to the previous quarter. Profitability in the business was lower than last year due to normalized realizations this year compared with the previous period unusually high realizations. The Phenolics business has been using more of acetone in its downstream products. It is going to increase further upon the commissioning of projects under implementation such as MIBC and MIBK, which are solvent. We're optimistic about the prospects for the business in the future. FY 23 has also been a year in which a lot of our future growth initiatives have started to take concrete shape. In a key development, debottlenecking is a crucial development for Phenolics, as it enables the company to increase its production. This is expected to come on stream within this quarter itself.
Additionally, the company has approved the implementation of advanced process controls, which is expected to be operational from the second quarter. That project is expected to further enhance the operational efficiencies of Phenolics and improve the quality of its products. These developments are expected to strengthen DPL's position in the market and enhance its competitiveness.
I'm sorry to interrupt, sir. We are not able to hear you. Ladies and gentlemen, the line of the management has been disconnected. Kindly stay connected while we try to reconnect them. Ladies and gentlemen, thank you for patiently holding. The line for the management has been connected. Over to you, sir.
Sorry for this interruption. I guess this is now part of new business processes. I will repeat the previous paragraphs. FY 2024, 2023 has also been a year in which a lot of our growth initiatives have taken concrete shape. In a key development, debottlenecking is a crucial development for Deepak Phenolics as it enables the company to increase its production. This is expected to come on stream in this quarter itself. Additionally, the company has approved the implementation of an advanced process control project, which is expected to be operational from the next quarter. This project is expected to enhance the operational efficiency of DPL and improve the quality of its products. These developments are expected to further strengthen DPL's position in the market and enhance its competitiveness.
In addition to our current projects, we're making strides towards expanding our business through several other ongoing initiatives. We successfully commissioned the installation of our SAP unit, which significantly improves our sustainability in Nandesari. We are planning to commission the photo-chlorination and fluorination project in the third quarter, followed by the acid project in the fourth quarter, which will take care of current and future needs. In the first quarter of FY 25, we're scheduled to commission our MIBK and MIBC plants, both of which, as I mentioned, are derivatives of acetone. Additionally, our hydrogenation and multipurpose distillation facility has been approved, marking further progress in our expansion plans. During the period under review, we have achieved significant de-risking of the business through an assured supply of critical raw materials and paying down debt to strengthen the balance sheet.
Additionally, with the Nandesari plant back to full operations and other plants running at a high utilization. We are working with good momentum. With multiple plants underway to be commissioned in the coming quarters, we're poised to deliver growth and create value to all our shareholders. Recognizing this, the board of directors has announced a final dividend of 7.5 rupees per equity share, which is 375% of face value of 2 rupees each for FY 2022-2023, in view of the company's steady performance. Before I conclude, I would also like to make a point that DNL's Dahej facility received an unprecedented score of 100 upon 100 in the Together for Sustainability audit. I just want to point out that TFS is very similar. It is the European counterpart to Responsible Care, which is an American institution.
TFS is also recognized and highly valued by every single large European company and many large Japanese and American companies. This is the first time ever in the history of TFS that a company has received a perfect score in its first try. We are confident that this achievement is also going to be catalyzing many more such. I would now like to hand the call over to our Director of Finance, Mr. Sanjay Upadhyay, to address this forum and take you through the financial performance during the period. Thank you.
Thank you, Maulik. Good afternoon, everyone, and thank you for joining this call today. I will walk you through the highlights of the financial results for the period ending March 2023. During the period under review, Deepak Nitrite achieved a positive top-line performance despite facing macroeconomic challenges. In FY 2023, revenue stood at INR 8,020 crores, which is significant as compared to INR 6,845 in FY 2022, higher by 17%. This growth was attributable to stable demand and high plant efficiency. While EBITDA stood at INR 1,337 crores against last year's, but it is lower by 19% year-on-year basis because last year's base was very high. PAT stood at INR 852 crores in FY 2023 versus INR 1,067 crores last year. The results have been impacted due to war and resultant high input prices and resultant inflationary pressures.
There has also been impact on the several external internal factors, such as, summarized by Maulik in his comments. Both business segments showed solid improvements, contributing a strong revenue growth on a consolidated basis. The increasing demand in relation to, for key products drove the growth. Despite the challenging environment, DNL remains focused on driving growth and expanding its operations to capture new opportunities. Further, it's worth noting DNL's subsidiary, DCTL, has been actively expanding its team by hiring key personnel in various departments, such as projects, management, procurement, and support functions. DNL has invested INR 400 crores in DCTL towards part funding of the group's ongoing capital projects. On the operating front, our domestic business revenue stood at INR 1,512 crores and INR 6,410 crores in Q4 and FY 2023, higher by 22% year-on-year respectively.
Export revenues were INR 449 crore in Q4 FY23 and INR 1,562 crore in FY23. On a consolidated basis, domestic to revenue and the mix is 77.23% for Q4 FY23. In the quarter on a consolidated basis, revenues grew by 5% at INR 1,974 crore as compared to INR 1,876 crore in Q4 FY22. The impressive top-line performance was fueled by high production volumes in several key products. EBITDA came at INR 361 crore compared to INR 414 crore in Q4 FY22. In Q4 FY23, PAT stood at INR 234 crore versus INR 267 crore of last year. Profitability is lower on year-on-year basis due to high base in the previous year. The company has significantly improved profitability quarter-on-quarter in line with the operational performance.
Moving to our segmental performance. In our advanced engineering segment, revenue grew by 7% to INR 810 crores in Q4 FY 2023 versus INR 759 crores in Q4 FY 2022. The growth is owing to sustained healthy demand from key customers while EBIT came at INR 137 crores with a margin at 17%. As Maulik mentioned, growth in EBIT has not kept with the pace with the revenue growth due to significant increase in input costs compared to the previous year. In FY 2023, revenue grew by 21% to INR 3,074 crores and EBIT came at INR 555 crores, translating to a margin of 18% despite the current environment and challenging circumstances.
Deepak Phenolics delivered an encouraging performance with a revenue growth of 3% to INR 1,173 crores in Q4 FY23 versus INR 1,131 crores last year. The company has operated all plants, except for Nandesari unit at high utilization rate. The Phenol plant has clocked an average utilization of more than 120% or even higher for the quarter and achieved highest ever quarterly domestic sales and highest production per day of Phenol. EBIT stood at INR 177 crores. EBIT margin came at 15% in the quarter. In FY23, revenue stood at INR 4,986 crores. EBIT came at INR 594 crores, translating into a margin of 12%. While DNL has no debt, DPL has prepaid the term loan for an amount of INR 61 crores in the 4th quarter.
For the full year FY23, the prepayment of term loan by DPL was INR 161 crores, leading to a saving in interest cost. This has reduced net debt to equity ratio to almost 0, that is 0.03, as compared to last year's 0.20. On a consolidated basis, the surplus of funds for DNL remains debt-free on a net debt basis with a net worth of INR 4,090 crores and INR 2,675 crores of balance sheet is, our balance sheet is it has adequate headroom to raise growth capital for future expansions.
The input on cash flows for the cash flow segment on this cash flow remains robust. We have reported operating cash flow of INR 650 crore in FY23 when evaluated against EBITDA, OCF and EBITDA ratio at 0.49. We are entering into FY24 with a de-risked business model, a very robust balance sheet and pipeline of projects lined up for commissioning. We are highly excited of our growth prospects and look forward to building a performance momentum. Before I conclude, I would like to provide an update on the fire incident in the Dahej facility that occurred on June 2, 2022.
Against our insurance claim, we have for loss of material damage, we have received an interim payment of INR 11 crores for the, in March 2023 and further INR 14 crores in April 2023 as the interim payment. Our balance sheet. We hope to receive the balance in the coming quarter. Thank you for taking out the time to join our earnings call. It is open for question and answer session.
Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star then one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star then two. Participants are requested to use handouts while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have the first question from the line of Nirav Jimudia from Anvil Research. Please go ahead.
Good afternoon, team, and congratulations on a very good set of numbers. Sir, I have two questions. One is, sir, when we see our performance in FY 20 vis-a-vis what we have delivered in FY 23 for the standalone business, I think our gross margins have remained at the similar levels, like, at around close to INR 1,370 crores. This has come with close to 32% higher turnover when we compare FY 23 with FY 20. This could be a combination of volume growth plus some raw material cost inflation, which you just alluded in your opening remarks. My question is, with the brownfield expansions and the debottlenecking what we are undertaking in the standalone business, how much of the volume growth can we expect for FY 24?
Though some of the raw material prices have corrected, predominantly the ammonia prices, which have corrected close to two-third of the prices what they were in the month of December. How much of our current turnover of 3,000 crores in the standalone business has a scope for margin expansion on a per kg basis? If you can just answer to this, I can add up on one more question to this, sir.
Okay. First of all, you're right that there has been a lot of volatility, including in ammonia. However, India continues to remain the most expensive buyer of ammonia in the world, if I look at the indexes. Nonetheless, it has certainly come down from its peaks last year. Now, what has happened over a period of time also is that the FG prices will automatically correct as they adjust. Nonetheless, we have been able to maintain a reasonably healthy margin on a per kilo basis. As we expand in FY 2021, we had a plant which was about 15% less in terms of its capacity than we have now.
Okay.
On a stable year, I mean, you can expect sodium nitrite and its associated nitrate volumes to increase by about 15%-18%. How this results with regards to top line growth is difficult to say because the market continues to be volatile.
Okay.
We continue to maintain reasonably healthy margins, which have been, you know, as they were when ammonia prices were low, as well as they were when ammonia prices were high.
Okay. Because you rightly said that turnover is difficult to predict because all depends upon the selling prices of the products. If we see FY20, we were close to INR 800 crores of operating profit when the ammonia prices were lower. As last year also, we were at around INR 680 crores. Though there, this year would have seen some cost inflation on the operating cost side also because the plant was not running full and several other factors. What could be the fair assumption, based on the volume growth you just alluded upon? What could be the figure we should look upon? There could be some benefits coming to us in terms of some pockets of the raw material prices as well as reduction in the operating cost.
Neeraj, I would expect that FY 2024 and FY 2021, one reason why they should not be compared is because one of the key raw materials, which we used to get as a large volume in a formula linked price, which was linked to ammonia prices.
Yeah.
Now we are forced to buy it in the spot market at far higher prices, and we have to see how we can de-risk our supply chain itself. For this year, I would say that one can expect a, you know, a performance which is in Deepak Nitrite similar to what it was last year if we had not faced, you know, the impact of the fire and I think between 40-60 days of lost production.
Correct. Correct. We could be closer to FY22 performance in terms of our absolute EBITDA numbers, right?
Uh-
Nirav, let's just interrupt here. You are comparing this with 1920. Am I right?
Correct, sir. Correct. In 1920 we were at INR 800 crores.
You are just seeing the absolute number. 19-20 had a very abnormal year for DASDA. You know, we have been. If you re-see the co-con calls and the.
We have always maintained that DASDA was abnormally high. That's why the % is high. You know, you cannot just pick up one period and then compare with that.
No, sir. Even FY 2022 also, I think we were close to INR 680 crores. I think I just wanted.
Point is it's not going down. It was one single product, whereas what you are seeing now is overall across all the products, in spite of, and despite of rather, the several challenges which we as the industry is facing outside, you know. I mean, it's very, it's very difficult to compare. 1920 period was completely different than what we are facing, the world is facing now is completely different. It will not be... These numbers तो कोई भी analyze कर लेगा. Point is, you must see the outside environment also when we are comparing this.
Correct. Correct. Second question is on, like one of our competitor is also expanding on the OBA side. How we are placed in terms of our existing utilization here, because I think one of the monomer of OBA is doing well because of the downstream agrochemicals is doing well. If you can just help us explain our exposure of sales to the agrochemicals out of our standalone business and are sales more prone towards the generic, niche generic or the patented agrochemical products where we supply those intermediates?
First of all, one thing I can correct here is I do not believe that there are any patented agrochemical intermediates. The other thing that I can say is that we are running our plant at full utilization.
Okay.
We will also be looking at expanding that. We will also be, you know, in our own manner, significantly improving the resilience of the value chain. We are already also going downstream. We have piloted several downstream products which come out of this chain. Those have been accepted by the customer with regards to quality, and now we are at an advanced stage of discussions for volumes and long-term contracts.
Got it, sir. Got it. Thank you so much, sir. I have a few more questions, but I'll join back in the queue.
Thank you, sir.
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. Two questions from my side. Could you give some color on the demand trends that you've been witnessing, for your key end segments in the month of April and May? If I believe in the last quarter, you did say you started to see some green shoots. It would be great to get an update on that, by segment, if it's possible. The second question was, you've been mentioning that the share of exports has been rising in your portfolio the last two quarters. Just wanted to understand, what is the margin profile for these export markets vis-à-vis the domestic markets? If there is a difference, what could be the differential? Thank you so much.
Okay. First of all, thanks for the question, and interesting that you should mention color and green. One thing that I can tell you is that our products, which are intermediates, are spread over multiple end applications. You can have the same product which goes into different end application. However, right now, you know, dyes and pigments is seeing a nadir in that sense with regards to demand and with regards to inventory levels even at customers and consumer ends. The segments which are doing better comparatively are oil and gas, explosives, personal care, food, rubber, infrastructure. The segments which are relatively neutral are pharma and agro. Now, when I say neutral, I am talking about it with regards to volumes.
Prices may go up or down, but in most cases we are protected by volume contracts with passthrough clauses. When I spoke earlier about exporting more, that is because in, you know, in Q2 and Q3, the Indian demand for textiles when it comes to dyes and other intermediates was very, very poor. Whereas the export need was higher because Europe had curtailed its available supply. Finally, when oil prices were nearer to $120, there was a flurry of activity coming with into oil and gas exploration. As we are intermediates, we were able to pivot away from supplying to a, you know, a low demand domestic market which prioritizes textiles towards a high demand export market, which prioritize things like water treatment and oil chemicals.
Now, this is where we are able to remain nimble. In India, many of these segments have started showing a certain improvement, and hence we have been pivoting back towards India to an extent. Our export markets continue to remain served by us. The margin profiles on a net back basis, I would say, are relatively similar for 2 reasons. One is that the freight rates have normalized compared to their highs of last year. B, that, you know, there is a duty on our product when it is supplied to the US. I am talking about net back rates, which also addresses the duty element. Our rates were not lower or higher compared to our domestic rates, and hence, in both cases we are okay.
We have adequate opportunities to grow in this segment. We have the ability to pivot depending on end segment demand. As we will have, you know, this year we will have higher productivity and higher production. We are hopeful that we will be able to cater to the growing demand without needing to lose wallet share from one end segment to another. I hope that answered your question.
Sure, sir. Thank you so much. I'll return the queue. All the very best.
Thank you.
Thank you. The next question is from the line of Rohit Nagraj from Centrum Broking. Please go ahead.
Yeah. Thanks for the opportunity. Congratulations on a perfect score through TFS audit.
Yeah.
My first question is on phenol capacity. When we talk about 120%, what is the base we are taking? Is it 200 or 250? We have again mentioned that we will be debottlenecking further by 10%. What will be the final capacity that will be on stream in Q1? Thank you.
Base is 2 lakh tons.
200 KT.
200 KT. When we say we have said it is above 120, so it is higher than that. With debottlenecking and this, we are expecting 50% increase in the capacity.
From INR 2 lakh.
From the base.
Right. Right. Got it. Thanks for that clarification. Second question is in terms of the domestic demand. Exports demand has been very dynamic. What is our understanding in terms of domestic demand for the products, which are further being exported by the, you know, converters or the downstream players? Thank you.
For which segment are you talking? Are you talking about Phenol and Acetone?
No. for the standalone segment.
No, it doesn't matter. No. Whether you're exporting it or you're giving it to a domestic converter who is exporting it because the domestic converter has a contractual agreement with an international client, it's essentially the same thing. It depends on product to product, because in the dye segment there's not much of this. This is much more prevalent when it comes to agrochemicals. As I mentioned earlier, we in most of our cases, it's not all of our cases in agrochemicals, we have medium and long-term contracts. Some are annual and some are multi-year contracts. The volumes are relatively protected. As and when we are able to debottleneck and make a little additional volume, we do have, you know, customers who we are able to supply that on a spot basis at a spot price.
Sure. Got it. Just want to ask clarification. In our press release or presentation, we have mentioned that there are 2,500 crores projects currently, which are undergoing. What is the completion timeline and CapEx for FY 2024 and 2025?
What I mentioned earlier is that the fluorination and photo-chlorination project will commission in Q3. The Phenol, you know, debottlenecking will finish to a certain extent in Q1. With the advanced process control, which will further improve on our already, you know, standard, you know, global standard quality will start to, you know, get realized by Q2. Our upstream project will be commissioned in Q4. Downstream derivative of Acetone, which is also a solvent, will be commissioned in Q1 of next year.
In the meanwhile, as I had also alluded to hydrogenation, multipurpose distillation and a certain amount of, you know, difficult challenging nitration, this will all be commissioned over, you know, the end of the second half of the year all the way till the, you know, end of the first quarter of the next year.
Sure. Thank you so much.
The project which we have announced. Finally, one last one, which I forgot to mention. The Polycarbonate compounding facility will be commissioned over the next 18 months.
Sure. Sure. That's that is helpful. Thanks a lot and best of luck, sir.
Thank you.
Thank you. Ladies and gentlemen, a request to all the participants. If you're using a speakerphone or hands-free, please pick up your handset while asking a question. This is required to ensure optimum audio quality on the call. Thank you. We have the next question from the line of Chetan Thakkar from ASK Investment Managers Limited. Please go ahead.
Good afternoon, sir.
Good afternoon.
Sir, just two questions. One was, if you can throw some light on the domestic demand for MIBK and MIBC. What is the capacity that we are putting up, and how do we see that ramping up? Second was on the INR 2,500 crore CapEx. If you can let us know how much it is into backward integration and what is the growth CapEx, and what kind of IRR should we expect on the backward integration projects?
First of all, MIBK and MIBC, we are targeting for the entire volume of both products to be consumed in the domestic market. We will take the opportunity to export if we think that the realization is better. The domestic market has significant scope for it. When we're talking about volumes, we're talking about 40 KT for MIBK and about 8 KT for MIBC. Both of these projects will be commissioned pretty much together.
With regards to upstream and downstream integration, I would not consider that to be a crucial question. The upstream integration will be able to significantly add to our bottom line, no doubt. While we're doing it, we are also confidently expanding our consumption capacities, which will therefore add to the top line. Those expansions come at a fraction of the CapEx that the upstream distinct projects require. Net-net, I will look at even the upstream integration to be able to generate growth with minimum investment in debottlenecking of our existing products.
Sure.
As usual, we don't get into a lot of detail about the CapEx involved when we're talking about debottlenecking of products.
Got it. sir, Just to get a sense, the domestic total volume for MIBK and MIBC. 40 and 8 is-
Yes.
48 is what we are setting up or 48 is the domestic consumption?
It's both of these are the same. We are confident of being able to take a 100% of the requirement. Let's also keep in mind that the requirement is growing at a healthy CAGR. We hope to apply ourselves to seeing how we can debottleneck this in short order after commissioning. We're confident that we should be able to take as close to a 100% of the consumption demands. Today it is 100% imported, which is in the same range. That's what, I mean, we'll be able to supply to the market, substitute the import.
Got it. On the INR 2,500, so the total CapEx that is there, is it fair to assume that since we are moving up the value chain, our payback time should be anywhere between 3 to 4 years for these projects, which is essentially faster than what it would have otherwise been?
Yes. Yes, you are right.
Yeah. This is a correct assumption.
Sure. Okay, sir. Thank you so much. All the best.
Thank you. Just I'll highlight that, you know, when we count payback, we are only considering the incremental value that we get.
Got it. Yes, sir. Sure. Thank you.
Thank you.
Thank you.
Thank you. The next question is from the line of Abhijit Akella from Kotak Securities. Please go ahead.
Yeah. Good afternoon. Thank you so much for taking my questions.
Hi, Abhijit.
Hi. First of all, on this government incentive that's mentioned in footnote three of the results, you know, it was about INR 59 crore for the year compared to only INR 1 crore the previous year. Just wanted to check if, you know, whether this is the usual export incentive or it's something else. Is it a one-off item or do we expect it to continue in the future?
59. Abhijit, can you comment on the question, please? 1 is incentive. What is that question?
Yeah. I was referring to footnote 3 of the results.
Yeah.
Where there's a table showing the government incentive income. It shows about INR 59 crores for FY 2023.
Yeah, 59. Right.
compared to only 1.6 crores in FY22.
Right. Right.
Was just trying to understand what this item exactly is and is this a recurring item going forward?
It is a recurring item going forward. This is incentive given by the government for setting up the project. I believe this will continue for next 5-6 years.
Okay. Is this at Deepak Chemtech or at Deepak Phenolics?
This is Deepak Phenolics.
Okay. Okay. We should expect the same number to sort of continue for the next five, six years, more or less?
It does make, vary up and down depending on. See, there are various parameters on which the incentive is given. You can, roughly take the same amount year-on-year, not an issue. Can be a little higher also.
Sure. Understood. Thank you. Second thing was just on the polycarbonate compounding capacity. It would be helpful if you could please guide us a little bit on what sort of value addition we should expect, you know, between the compounding the product versus the base polycarbonate that we eventually produce. You know, in terms of maybe the price variance or the difference in margins, how much should roughly we expect on that?
Abhijit, see this is rather than looking at this facility as a EBITDA increase or something like that, more important is that we are setting a base for polycarbonate, you know. I mean, when you are going with polycarbonate, if you go with just a polycarbonate without knowing the market, then it will not be the right. In fact, we want to go further one step beyond, not just polycarbonate, but little polycarbonate derivatives also so that we have edge over the normal. You know, there are various applications of polycarbonate. Which application makes sense for us, where to go, where is the strength lies and where is the demand growing?
I mean, these are all parameters we'll test by getting into polycarbonate compounding facility first, for which we have sanctioned INR 50 crores. We are actively working on that. Parallelly, we'll start work on polycarbonate. This has to happen first. This is a precursor to the polycarbonate. It will certainly when you select the right application, your EBITDA is bound to go up than normal polycarbonate. I will refrain from giving any numbers now because we are ourselves studying, but it's the whole idea is to make your product more, I would say, not a commoditized product, but somewhere it is getting a color of value addition.
I'll just add one point here. This is, you know, what you would consider as seed marketing, because customer approvals, especially for high value compounds, it takes anywhere from like, you know, six months to a year and a half. Our goal is to make sure that we put our foot in the door there. Now, of course, it is a cherry on the top that the financials do, they do look attractive in any way when we're talking about the compounding facility. The purpose of investing this, you know, these few hundred crores is so that we can fast-track the approval and validation process with the customers. In the meanwhile, we work to see how we can connect between our current product portfolio and the manufacturing over a period of time so that we are end-to-end, completely integrated.
Thank you. Thank you. That's helpful. Next question I just had was on the contracting within the business. You know, the presentation does mention that significant part of the business is contracted. If it's possible to give us some sense of, you know, roughly, I mean, what percentage of the volumes might actually be contracted, and what's the pricing arrangement on these? Are we sort of giving, you know, three monthly pricing arrangements, or is it longer than that? That would be helpful. Thank you.
Ladies and gentlemen, the management line has been disconnected. Kindly stay connected while we try to reconnect them. Thank you. Ladies and gentlemen, thank you for patiently holding. The management's line has been connected. Over to you, sir.
Yeah, Abhijit.
Yeah. Sorry, I'm not sure if you heard my question, sir. I'll just repeat it.
Yeah.
It was basically with regard to the, let's say the, you know, volume of contracted arrangements in the business. The presentation mentions that there is contracted supply of products from both the segments, which provides high visibility for continued growth. Just sort of wondering, you know, if we could share what % of the business might be contracted in both the businesses and what sort of pricing agreements do we normally have? Is it on a quarterly basis for these contracts or is it longer term?
I will answer about the pricing first because, see, pricing is not, it's always formula-based. In today's world, nobody gives you a fixed price unless it is only a couple of months or a maximum for a quarter. There is no fixed pricing arrangement in most of the cases. In Finance Specialty segment, yes, there will be a few contracts where it is fixed pricing, but their margins are certainly in our control and that way. In DNL, this volume should be in the range of around 25%-30%, whereas DPL is in the range of 20%-25%, the contracted business. Okay?
If you know, by and large, we have same set of suppliers in DNL also, in DPL also, I mean, and they are with us for years and ages. I mean, DPL also we are, supplying to the, most of the, large consumers, and they continue with us. In today's market, nobody enters into a long-term contract, which you also know.
Sure, sure. Thank you so much. That's really helpful. Just one last quick clarification, I'll get back in the queue. On slide 7, we have shared some volumes. So for example, sales of inorganic intermediates of 7,600 tons and hydrogenation volumes. Just wanted to clarify, are these for the quarter or for the full year?
7,000. Would be in a month.
For the quarter.
We will come back to you with this answer. Sorry about that.
Sure, sir. No problem. Thanks a lot. Wish you all the best.
Thank you. We have the next question from the line of Rohan Gupta from Nuvama Wealth Management. Please go ahead.
Yeah. Hi, sir. good evening, and thanks for the opportunity. Firstly, just clarification on with our Phenol business in terms of the sourcing and availability of ammonia, where you have said that, we still have a lower cost availability, but the things have changed now.
I'm sorry to interrupt, sir.
In terms of our-...
Mr. Gupta, your voice is muffled. May I request you to use your handset, please, to ask a question?
Yeah, just a second. Yeah. Hi, sir. Hope it is better now.
Yes, sir. Please continue.
Yeah. Sir, I was asking on this ammonia sourcing and for our Phenol production cost. How do you see that you have mentioned that, the changes has been there already in place for the cost structure what we had earlier versus going forward now. With the falling gas prices globally and also in India, how we see that our gas cost and ammonia cost of production ammonia cost will come down and how the Phenol spread, in your view is going to move in near future? If you can just give some sense on that, sir.
Both of these are challenging questions to answer with this volatility. One thing that I can say is that right now, while the gas prices are temporarily subdued, especially in the summer season in Europe, what we will end up having is, compared to last year, an increase in the production of ammonia. In the meanwhile, most places have large inventory stockpiles of urea, there will, I believe, be more ammonia available for chemical companies such as Deepak. There will also be an increase in the new capacities that come in with regards to ammonia production, which I hope will give at least some level of consistency with regards to price and availability. Beyond that, with regards to the spread between phenol acetone and their upstreams, these are linked in some to some extent, you know, to crude.
One thing that has happened over the last 2 years is that very easy linkage where you were able to you know, derive, you know, some sort of a regression analysis, that has broken because even the consumption has been affected. Styrene Monomer, which is a Benzene downstream, is doing reasonably okay compared to before. polyurethanes, in fact, are not at the current time. In the meanwhile, Paraxylene is not doing well, therefore, there's lower production of Benzene. Some refineries are down because they do not want to manufacture at a volatile crude price. This has currently affected that easy predictability. What I can definitely say is that Benzene currently is exhibiting some level of resilience. Propylene is getting softer. We'll see how this goes as more plants either tone down their production or increase it depending on availability of crude.
Very difficult question to answer given the current circumstances. One thing is for sure, I think everybody, whether it's a manufacturer or whether it is a, you know, a consumer, everyone expected that even this year would be business as usual. I don't understand why, because the second-largest player in the chemical space, which is China, it came back with a bang in, you know, from January onwards, with huge stockpiles of, you know, manufactured product which they had not earlier moved out of the country for reasons of labor unavailability and some such. Of course, you're going to have a short-term situation where there is a glut in the market of certain products simply because they need to exhaust their inventory levels as well. The situation will normalize.
What that means is difficult to answer, but you must look at the last quarter and the current quarter keeping this brand new dark horse also in mind. The largest player coming back disrupts the entire supply chain.
Sir, it means that with the China situation and that you said that the way the Chinese production is coming in the market and since they have just started coming in the market, there may be high supplies of phenol in the market. Where you see that going forward or in near term, phenol prices can further come down?
No, absolutely this is not what I am saying. Let me reiterate. First of all, we do not we have not in the past and we do not in the present or in the near term, in the future, next year or whatever it is, expect to have competition coming from Chinese Phenols. We have had Phenol coming from other countries, but not China. At least I can assure you that when it comes to Phenol, Acetone and IPA. Your company remains resilient with regards to its wallet share. Most of it, or if not all of it, is dedicated to domestic consumption, which is also on an improving trend. You don't need to be worried about China coming in into India with, you know, value-destructive prices in Phenol and Acetone.
Sir, still a large part of domestic market is fed from the Phenol import. As what I understand the Phenol business, we may have a control on domestic consumption. The volume we are not worried about. Pricing, sir, will be determined by the global prices.
China is a large producer as well as a very large consumer of Phenol. China, generally speaking, is a producer and a consumer, and it will focus on increasing and maintaining its consumption activities within China itself. China has never in the past been a global player when it comes to the export of Phenol. It is self-sufficient, just like it is in, say, the chlor-alkali industry. It is the largest producer of caustic chlorine, but it does not affect the, you know, the global trade flows in any way.
Thank you, sir. Just last bit from my side, and I'll come back into you. On our further Phenol extension, sir, have we any further future plan or is it in near term, any further plan on extension of the Phenol plant, sir?
Yes. There is.
Rohan, this question is again linked to your earlier question also. Frankly, China, no China, India today imports around 2 lakh tons of Phenol. The demand is growing significantly. Okay? Did it not surprise you people giving higher correction, higher numbers than what you people have expected? I mean, it's not only the price game and China comes. There are other things also. Like in first commentary we said that we are digitalizing our systems and processes, which is going to improve our efficiency. That you do not know what the impact is. Quite large, you know, those by doing those things, operational efficiency. We have other products which are also equally doing well, like AMS and Acetone, and IPA. I mean, let's not get too much, read too much into China remarks and these remarks.
We are very confident that this year also we'll give you a good result. Don't worry on that. There is a room for one more player, I must tell you. India is growing significantly in phenol and yes, at an appropriate time, we may also come to the market. You'll have to wait for that.
Thank you, sir. Thanks for answering my question.
Yeah.
Thank you. The next question is from the line of Naushad Chaudhary from Aditya Birla Sun Life AMC. Please go ahead.
Yeah. Hi. Thanks. Just one clarification, sir. If I remember it correctly, earlier we had indicated the project in Phenolics regions. I think it was butyl phenol we were talking about. Can you what is the status currently of this project? What kind of investment we are planning and by when should it be commercialized?
No, this was a conjecture. We are not looking at butylated phenols.
Okay.
Where we announce it. I don't think we have ever made any announcement on this.
Okay. Okay. Secondly, sir, on the investment pipeline of INR 2,500 crore, as of FY23 closing, on a base of INR 1,300 crore of EBITDA with this investment of INR 2,500 crore, where we should.
Okay.
How much EBITDA it could contribute, on the base of INR 10 million. Yeah. Yeah.
Let me just give some light here. Over the next four years, four to five years, we are planning, as a group to be doubling the revenue that we have had in FY 2023. Products that we are getting into are a mix between downstreams of Deepak Nitrite and downstreams of phenolics. The margin mix will be similar. This is what we are putting into motion over next, four years.
Doubling of revenue and doubling of gross profit and EBITDA, should we take it the same way? Because revenue would be...
As I mentioned, the margin profile is similar. I hope you're not asking about the percentage margin.
Understood. Understood. Understood. INR 1,300 crore of EBITDA and INR 2,600 crore of gross profit should be doubling ideally with the kind of investment we are doing.
I'm just reiterating. Margin profile is similar to the current margin profile in a normalized year. FY 2023 was slightly suboptimal in that sense. If it was a normalized year, we would be talking about doubling of the revenue and a similar margin profile over the next 4 years.
Understood. Got it. Thank you and all the way, sir. Thank you.
Thank you.
Thank you. The next question is from the line of Krishan Parwani from JM Financial. Please go ahead.
Yeah. Hi, Maulik bhai, thank you for taking my question.
Okay.
Yeah, two or three clarifications. One is on the photo-chlorination. Just wanted to understand, is it for side chain reaction of toluene or xylene as well? Is chlorination being done for reducing the import dependency?
Photo-chlorination, what we have put up as an asset is an up-engineered asset. You're right that it can do toluene, but it can also do others like xylene.
The asset itself will start off with a base chemical, and then, we will be looking at, you know, utilizing part of the asset, which is actually broken down into multiple, plants. We're talking about photo-chlorination, but it's done in multiple trains.
We will be able to dedicate individual trains to different products as we require them. The balancing equipment is all that will be required, which is minor and which can be executed very quickly. With regards to the fluorination, this is in a similar fashion up-engineered when it comes to the MOC, the pressure, the temperature that it can handle. While it may make one product to start off with, which will reduce our, you know, volatility and, you know, increase our ability to deliver higher value intermediates-
It is also designed with the intention of manufacturing products which are using this platform but are not directly connected to any existing value chain.
Understood. Thanks for this.
It will also be able to operate individually in individual trains.
Understood. The second is on... on the Phenolic side, can we also think of adding, let's say, diacetone alcohol or hexylene glycol? Because, you know, they also are imported into India and there's a high demand. Just wondering about that.
No, these are all very good ideas. Certainly, we can talk about them later, because they are, you know, being worked on. Whether they should be worked on with a higher priority or a low priority, again, the question is: what is going to get us to, as I mentioned earlier, doubling of our revenue in the next four years? Is it going to be a better substitute to something else that we may be working on? It's worth considering.
Understood. Just the last bit on the CapEx front. I know I think you mentioned about the commercialization schedule, et cetera, but I'm sorry if I missed out. Can you just give us a quick CapEx breakup of 2024 and 2025 and the commercial schedule once again? Sorry. Thank you.
The CapEx breakup I won't give you because these are all in process. Because the CapEx breakup might include CapExes which we have not yet announced so that we can achieve our, you know, target, 4-year target, 5-year target.
He's talking about 2,500 only.
Okay. If you're only talking about the 2,500 which we have already announced.
Yes.
very quickly, we have, you know, the Phenol debottlenecking happening in Q1, the APC, the advanced process, APC, happening in Q2. We have photochlorination and fluorination happening in Q3. We have the upstream integration happening in Q4. We have the Acetone derivatives happening in Q1 of next year. Between Q4 to Q1, we will also be commissioning our expanded hydrogenation, multipurpose distillation and multipurpose nitration.
Understood. That's very helpful.
I mean, lot of things are happening in
I'm sorry to interrupt. Sir, your audio is not coming on the management's line. I would request you to kindly unmute yourself. Ladies and gentlemen, kindly stay connected while we try to reconnect the management. Thank you. Ladies and gentlemen, thank you for patiently holding. The management's line has been connected. Over to you, sir.
Yeah. Whatever we have announced, INR 2,500, each quarter from next quarter onwards, you will find one or other project getting materialized, and the numbers will itself speak about on that. As Maulik gave project-wise details, you can consider all this coming up in next 2 years, INR 2,500. The revenue, doubling of revenue, with 4 years, there are different plans.
Understood. just 2,500 is for 2024 and 2025 combined for whatever you have announced. 2025 could be higher, depending on whether you announce a project or not, correct?
Right. Right. You are right.
Correct. Sorry, last one that I forgot to mention is, the compounding facility, which will be commissioned over the next 18 months.
Understood. Sorry, I think I missed one point, just last point on the reason for higher phenolic spread this quarter, I mean, on a gross level, that is before power, fuel and other expenses. Just that's the last one from me.
In Q4.
Yes.
Actually compared to sequentially in Q3, we had a rather unfortunate incident out of our control when the largest, you know, supplier of one of the feedstocks had an extended shutdown longer than was originally announced. Hence we were forced to buy the intermediate Cumene from the, you know, global market at prices which would be much higher than what we would have manufactured at ourselves. This has impacted our Q3 numbers. Of course, in Q4 we did not need to do that, and our supply of raw materials was steady, as was our Phenol and Acetone to customers.
Perfect. Thank you for patiently answering my question. Wish you all the best.
Thank you.
Thank you. The next question is from the line of Nitin Tiwari from Yes Securities . Please go ahead.
Good evening, sir. Thank you for the opportunity. I'm sorry if you've already answered this question and it's a repetition, but just wanted to know, what is the purchase of finished goods, reported in this quarter of about INR 122 crores?
Cumene.
Next, I think that is Cumene.
As Mr. Mehta was just mentioning, this cumene is purchased for this quarter, it was for the last quarter. I mean, I didn't quite get that.
Q 3, largely Q 3.
It will be Q3 largely.
Q three also had a small figure of about 16 crores. In Q 4 we are looking at a figure of 122 crores. There is a large purchase in Q4 as well of cumene.
Yes. We did have the regular shutdown that we have, which is for catalyst replacement and maintenance activities along with, you know, minor activities that were done for some expansion, resulted in a period where we did, you know, purchase a little bit.
Understood. On the Phenol expansion, I mean, I just wanted to get some clarification. Right now, we are operating capacity at 250,000 tons per annum. Is it? Or the nameplate is still 2 lakh tons per annum.
No. Nameplate is nameplate. Forget about the nameplate.
Okay.
What I can tell you is that normally with most chemical manufacturing plants, especially ones which are continuous in nature, which require cooling and chilling-
The plant throughput is higher in winter because of cooler environment and lower in the summer. Hence we have actually touched much higher numbers in winter. The debottlenecking activities will allow us to manufacture at a much higher rate through the entire year. Maybe possibly try to squeeze out a couple of more tons in winter if possible.
So when we say-
It will increase our throughput even in summer months.
Understood. When we say 120% utilization, that's 120% of 200,000. Or as we had alluded in June last year, that we have now operational capacity to work at 250,000. Is it 120% of 250,000 or 200,000? Is what I'm trying to understand.
It is what we have said is above 120%.
Uh.
We have not given you exact 120%. It is more than that.
120% of what?
You are right.
It is more than 120%. With this debottlenecking in this we are definitely going to hit 3 lakh. I think let's not do too much of mess 120, 240 or the 260, because that will keep on varying based on this. Our capacity will touch, you know, 50% higher than 2 lakh. That's the base.
All right. We'll be roughly at 300 after the debottlenecking.
Yes. Yes.
Understood. Sir, lastly, my last question, sir, if I may. Sir, how do we look at the phenolic pricing? As you mentioned that, 30% roughly, like, you know, is contracted. Is this understanding correct that rest 70% business in Phenol is spot market related. Is that right understanding? That is one. Secondly, if that's the case, how do we see the pricing for us? Because, like if we look at the March quarter as far as, like, you know, Asian prices are concerned, we did see some weakness in Phenol and Acetone prices in crack. How do we like, you know, basically foresee our traction pricing in, in the backdrop of how Asian prices behave?
If you can just throw some light on that.
No, this contracted then you have not heard my second this thing because I said it is always a short-term contract and a formula-based price. We are not contracting anything on a long-term basis because neither the customer would want that nor we will want that.
Right.
Phenol.
Prices keep on fluctuating. In Deepak Nitrite you will have fine and specialty business at a price for maybe for 6 months, 9 months, but not in Phenol.
Right.
There are no fixed price contracts in Phenol.
Sir, the pricing contracts are short-term and or either spot is what you're saying?
Yes, volumes are tied up.
Volumes are tied. Sir, on the pricing front, sir, how do we try and like, you know, understand the pricing that we have vis-à-vis the Asian pricing? If you can just help us understand that a little bit, because there's a contrast in the way Asian prices have behaved in the quarter and the way our margins have behaved.
You are linking where the prices is margin. You do not consider our other things, which I repeat, there are efficiencies, there are other products. I mean, it must be, like you honest very honestly, whether it was better than what you expected or not?
Sir, 100% better than what I was expecting. That's why I'm curious to know that, understand that how do we see it going forward?
Every quarter we have been surprising you. Every quarter you ask me.
All right. Understood. Great. Great. Congratulations and all the best for the future.
I must tell you again and again, we are doing really well. The, I mean, there are several steps we are taking. There is a product called AMS, which was earlier going to China, where our relations were very low. We are going to Europe with that. That is also adding to the Phenol margins. You know, these things are never, ever considered by you people. Okay. Those things are definitely like Maulik Mehta was mentioning, import Cumene and this. There is definitely an impact of that. When you consider with that vis-à-vis, this year we are going to do better as against last year also. There are several improvements which we keep on doing, you know, If you think like this, we'll not be able to run our business.
we are taking so much of steps, so many steps, right? To strengthen our business and make our base so sound, which gives the numbers. This is what we precisely we are doing, you know. Doubling the capacity. These are all there. Of course, it will be there in the... first you make your business solid. That's what we try to do. Like, that is the export for the quarter. We have done export also really well for this quarter, this year, you know.
Sure, sir.
These are all things which we continue to do and which, I mean, strengthens our bottom line and business.
Thank you, sir. The next question is from the line of Janakiraman from Franklin Templeton Mutual Fund. Please go ahead.
Thank you. Good evening, Mr. Mehta, and congrats to you.
Yeah. Good evening. Good evening, John.
Yeah. Good evening, Mr. Padhi. Congrats to you and your team for a very creditable performance.
Thank you.
Mr. Mehta mentioned that China's return to the chemical industry is a big given for this year. In that context, you know, while Deepak's Phenol business may be immune to that development, will the other operating segments, will they be impacted by that, either on the raw material side or on the finished goods, either positive or adverse impacts?
China currently operates as a wild card. What we believe influences our performance in DNL standalone more is the volatility in the consumer buying behavior. We maintain very, very high wallet shares with our customers, and our customers have been gracious enough to always give us a premium over whatever the, you know, the prices in China are. Let me also reiterate that, you know, in 2020 and in 2021, China was operating at full. In 2022, did it go into partial or total shutdown. While the rest of the world did have a COVID induced lockdown and scare, in 2020 and 2021, we were competing head-on with China in every one of our products, and we were able to maintain strong, you know, performance.
While China is there, customers continue to prefer to buy from Deepak. Regardless of whatever happens, we are always confident that our operational efficiencies are as good as China, if not better, in every one of our products. In most of the products, we actually have to compete in European markets with giants like BASF and Lanxess as well, where, you know, while they are not Chinese companies, they have a home market advantage which we have to be able to match. When we have global scale, we have the capability and the experience to match that. I will only say that what I am cautious about is, you know, inflation and consumer buying behavior.
While they continue to buy the same volumes from us, they remain, you know, more focused on what will happen over the next three months and six months. Nonetheless, every one of our customers who has an annual or a multi-year contract with us has reiterated multiple times in the last 2 months that the entirety of the contract is to be honored, both by Deepak as well as by them. They recognize that volatilities are there. They are there in the short term, but they are expecting us to honor those commitments just as much as we are expecting them. Those relationships continue to grow, and we are looking at expanding the amount of business, even in new products that we have with these same customers, even when these are products which are new, extensions to our existing product basket and value chains.
Got it. Again, from a broader perspective, the last three, four years, the kind of ROC that Deepak has generated is fairly impressive. In light of this and the fact that you'll be committing a large amount of CapEx over the next two years, can you sustain this levels of mid-twenties ROCE?
Mid-20s is easier to sustain. Right now we have been operating at the high 30s and the low 40s, so mid-20s sounds doable. Right. Excellent. Thanks, Mr. Mehta. All the best.
Thank you very much.
Thank you. The next question is from the line of Meet Vora from Axis Capital. Please go ahead.
Hi, sir. Thanks for taking my question. I just wanted to understand the dynamics of a Phenol Acetone plant. For example, we have set up a plant with a nameplate capacity of 2 lakh tons. Now we are debottlenecking it by 50% and taking it to 3 lakh tons. For example, if our requirement of Phenol Acetone increases going further, how much we can debottleneck further till the time where there's a need for setting up another capacity?
There's a need for setting up another capacity. Beyond 3 lakhs, I mean, we're actively working on that because the amount of easy headroom is limited after 3 lakh. It is still possible, but it takes more effort, and maybe after that, you know, it'll start coming with certain possible downsides. When we are making 150%, we are confident of being able to do it without any impact whatsoever with regards to the reliability and the maintenance of the plant. Anything beyond that, then we start having to take compromises we're not willing to. We do need to actively work to see how we can maintain and grow our wallet share.
Here also, I'll rather add to what Maulik is saying. Our technical team, they have always surprised us. We used to believe that we cannot cross 250. We have crossed 250, we are in 275, now 3 lakhs. People are giving a surprise. They are saying there is no capacity. It is more to do with the competency. I will not be surprised if they can, they give me 5,000-10,000 more beyond 3 lakh also. I mean, let's keep our fingers crossed. There is a need for one more plant now. That is for sure.
Sure, sir. Also, if you can highlight the CapEx that we need to do. For example, we set, we did a CapEx of around 1,400 crores for our original 2 lakh tons. Now, how much CapEx would we have spent on this additional 1 lakh tons debottlenecking that we did over and above the 2 lakh tons capacity?
Less than INR 100 crores.
Where have you seen anything in my balance sheet showing higher CapEx? You must appreciate this.
Sure, sir. We have done hardly any CapEx on the additional 1 lakh tons.
Yeah. Actually, the only CapExes that we did were on IPA and the power plant.
Okay. That's great, sir. Sir, second question, regarding, sir, if you can share any update on the Sodium Nitrate project in Oman that we had announced the last quarter.
Yeah. That is going along on track. You have to remember it's a different country which has its own challenges, but we're targeting between 24-30 months for commissioning. As I mentioned earlier, this is in line with that.
Sure, sir. thanks. That's all from my side.
Thank you. The next question is from the line of Anik Mittal from Nvest Research. Please go ahead.
Hello, am I on, sir?
Yes.
Yes, ma'am.
Hello.
Yes, you are on.
Yeah, we can hear you.
Hello. Yeah. I have only two questions. My first question is why is this delay in the commissioning of the project? Which factors have contributed to this delay in commissioning, and how will it impact the potential later?
Which delay?
Which project delay?
In quarter three presentation, all the projects were, they were delayed by 1 quarter. I will tell you. In MIDK and MIDC plants, in quarter three presentation, it was written that they will be commissioned by quarter four 2024 financially. In this presentation, in this quarter's presentation, it is written it will be commissioned in quarter one financial 2025. Will there be?
Yeah, yeah. There were certain challenges when it came to the, you know, the technology supplier and some part of the engineering. This is partially also owing to some challenges that they have faced from their own subcontractors in Europe. These are actually very large and complicated assets, especially the columns. They have a significant amount of engineering required. Nonetheless, I do believe, I hope that the problem is behind us. We should have a better chance of sticking to the schedule that we have announced. We see what best we can do to try to bring it forward. What we're telling you is something that it seems, you know, something that we are willing to commit to.
All right. My second question is, we are expecting our businesses in downstream and upstream products which are more profitable and value-added than our current offerings. We have more than doubled our revenue from INR 2,700 in 2019 to INR 6,800 in 2022. Our margins have been affected by the fluctuations in commodity prices, which makes us look like a commodity-driven company rather than a value-added one. We are not saying that we can avoid the volatility of the industry, we believe that our margins can improve with our new products. My question is, when you think we can be recognized as a value-added company rather than a pure play commodity one?
We are neither a pure play commodity company nor are we a CDMO company. We're a diversified chemical manufacturing company which has significant operational excellence and a wide basket of operational platforms that we can put into play. When you see, you know, things like margin pressures and all, at the same time, you have also seen, I mean, if you look at, say, Deepak Nitrite, like, we had a fire incident. I accept that, and that has resulted in an impact with regards to our percentages. Over the last 3 years, you would, you know, every quarter you will see a remarkably stable, you know, margin profile for the company as a whole. That's because of the length and the breadth of our value chain.
Now, when it comes to Phenolics, yes, of course, there is a nature, you know, commodity, margins creeping in, and that is one of the reasons why there are certain projects which are more focused on downstream rather than upstream in Phenolics. DNL has investing, investments both in upstream as well as downstream. Phenolics has only investment in downstream, and those investments will have margin profiles which are similar to Deepak Nitrite standalone. As between them will help to elevate the margin profile of what you consider the Phenolics business to something which is somewhere between its current profile and Deepak Nitrite. Please do not, you know, make the mistake of treating us as a purely commodity. Again, let me highlight, we are a diversified chemical manufacturing company.
We prioritize on intermediates because this is where we believe we can play a great, you know, role with regards to operational capabilities. Our ROCE, please find me companies in commodity space or in what you would call the CDMO or the specialty space, which have consistently over 14 quarters been able to deliver higher than 35% ROCE while also making new investments for growth.
Yes, Deepak Nitrite. All right. Thank you. Thank you.
Right.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Thank you all for joining this call. In case you have any further questions, you can write to us or get in touch with Mr. Somsekhar Nanda or Mr. Gopal Thakkar. Thank you all. Thank you once again.
Thank you very much, sir. On behalf of IIFL Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.