Q3 20/21

Feb 10, 2021

Ladies and gentlemen, good day, and welcome to Q3 and nine months FY 'twenty one Earnings Conference Call of Oriental Carbon and Chemicals Limited. This conference call may contain forward looking statements about the company, which are based on the beliefs, opinions and expectations of the company as of the date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Akshat Goenka, Promoter and Joint Managing Director of Oriental Carbon and Chemicals Limited. Thank you, and over to you, Mr. Goenka. Good afternoon, and a very warm welcome to everyone. Along with me, I have Mr. Anurag Jain, our CFO and SGA, our Investor Relations Advisers. Before we begin, I hope you and your loved ones safe and doing well in these unprecedented times. I hope you have received our results and investor presentation by now. You can view the same on our company website. I'm happy to report that we have witnessed a healthy pickup in sales momentum post COVID disruption which has helped us to deliver a strong financial and operational performance across all parameters in quarter three FY21 with a top line growth of 33% year on year and quarter on quarter in quarter three. Post the reopening of the economy, the tire industry has witnessed strong demand growth in replacement segment driven by multiple factors like pent up demand, shift towards personal mobility, a buoyant rural economy and increasing vehicle utilization trends. Restriction on import of tires, higher demand from road construction, mining and e commerce segments have further propelled demand. Though it remains to be seen how much of it is due to pent up demand and how much of the growth is sustainable. We are pleased to inform you that operations at both our plants have attained normalcy and utilization levels have gradually risen. As indicated on our previous two earnings calls, we have been we envisaged a delay in our CapEx plan on account of shutdown period during the pandemic and unavailability of labor thereafter. However, post the unlocking work has been progressing well, and we expect the phase one of the 5,500 tonnes per annum in sulphur sulphur line and the 42,000 tonnes per annum sulphuric acid line in Haruwada to be commissioned by July 2021, which will spur the next level of growth for the company. We are committed towards developing new products and offering customized solutions for our customers. We are long term suppliers for most of the prominent global and Indian tire companies. We are focused on leveraging our strong execution track record to help us increase our wallet share with existing customers. To conclude, this has been a good quarter for us. We expect the sales momentum to sustain going forward With rising auto and tire capacities domestically and globally in the next decade, we are well positioned to capitalize on the enormous opportunities and expand our market share further. The Indian tire industry is embracing new trends to meet the changing market dynamics. There's growing emphasis on lowering emission levels and enhancing fuel efficiency in vehicles. The onset of BS VI emission norms last year has accelerated the trend towards more efficient radial tires as against traditional bias tires, especially in the LCV and CVR segments, which remain underpenetrated. We expect that with increasing urbanization, penetration of vehicles in rural and urban areas shift towards radialization and increasing investments in auto and tire industry will increase the demand of insoluble sulphur going ahead. We will be focused on consolidating our dominant position in the Indian market while increasing our penetration into high potential geographies like North America. We are focused on developing high quality grades of insoluble sulphur through continuous investments in technology and R and D. Now I would like to hand over the line to Mr. Anurag Jain to update you on the financial performance of the company. Thank you, Upshur. I will take you all through the standalone financials of the company. Total income for Q3 FY21 was up by 33% year on year to INR109 crores as compared to Rs. 81.9 crores in Q3 FY20 driven by recovery in demand post the reopening of the economy. EBITDA for Q3 FY21 stood at Rs. 42.8 crores as compared to Rs. 24.8 crores in Q3 FY20, a growth of 72% year on year. Our sustained thrust on cost control and better sales are led to operational efficiencies and resulted in strong EBITDA margins for Q3 FY21 of 39.3%, up by 900 basis points year on year. However, due to upward trend in raw material prices, the next quarter EBITDA margins are expected to be in the early 30s. Going forward, we expect our long term EBITDA margins to be in the range of 28% to 32%. Profit after tax for Q3 FY21 stood at INR28.4 crores as compared to INR16 crores in Q3 FY20, a growth of 78 year on year. Our PAT margins for Q3 FY21 improved by 60 basis points to 26.1%. To quickly summarize the nine month numbers, total income for nine month FY21 stood at Rs. 237.8 crores compared to Rs. 264.7 crores in nine month FY20. EBITDA stood at Rs. 85.3 crores as compared to Rs. 79.5 crores in nine month FY20, a growth of 7% year on year and PAP stood at INR50.2 crores as compared to INR54.4 crores in nine month FY 2020. With this, I would like to open the floor for questions and answers. Thank you very much. We will now begin the question and answer session. The first question is from the line of Ritesh Gandhi from Discovery Capital. Please go ahead. Hi, and congratulations on your numbers. Just a couple of quick questions. So is the higher revenue and profitability that we've observed this quarter driven by actually the pricing increase, by higher utilization? How should we be thinking about it? And how should we be looking at it going ahead into Q4 and next year? So as far as the guidance for Q4 is concerned, Mr. Jain already gave it in his opening remarks, where we are expecting the EBITDA margins to be in the early 30s in Q4. Q3 was, I would say, driven largely by two things. One is optimum capacity utilizations, and secondly, by benign raw material prices, which have now started going up drastically. How much would we be at on our existing capacity? Sorry? Sorry? In terms of capacity utilization, how much would we be on our existing capacity? In quarter three, we were in the nineties. In the okay. And and and you would expect that to continue into into q four as well? Mean, roundabout that. It's a very dynamic situation and orders are coming in month to month. But the capacity utilization as of now in quarter four is also expected to be good even though not as high as quarter three. Got it. And just to understand, for the incremental capacity which we'll be adding as of when it comes on stream, how long will overall ramp up take? And would there be operating leverage benefits as effectively the new car comes in? And and how should we just think about quantifying it from that perspective? So there are three three ways to look at it. Firstly, obviously, something that one cannot escape is that there will be depreciation and interest that will come apart. Right? Right. Right. That is an inescapable fact. But as far as the EBITDA level is concerned, we expect almost no fixed cost increase on account of the new capacity capacity. It will be very marginal, if I need if I need. So operating leverage would obviously be very high. As far as the ramp up is concerned, I mean, from a technical standpoint, it can ramp up very quickly. It all depends on how the sales ramp up and the allocations come in, which we are working on. It's it's a bit too soon to say whether it will take a few months or it will take, you know, six to nine months or or what it would be. I think it's a bit early to comment on that. But, yeah, the ramp up would be based on the sales allocation. Got it. Thanks. I'll get back in queue, and all the best. Thank you. Thank you. Thank you. The next question is from the line of Aditya Ketan from East India Securities. Sir, my first question is on the EBITDA margin. Sir, on an yearly basis, we are witnessing 800 basis point jump in the EBITDA margins, and sequentially, the margins has been maintained. So if you can give a rough sense on the spreads of sulfur and coating oil with the eight seeable sulfur, so that would be helpful, sir, understand. So what we are looking at today is that roughly about 10% to 14% increase in raw material costs overall in Q4 over Q3. Again, we think that at least before it stabilizes, there could be some more increase going into Q1 of next year. After that, we feel that the market should stabilize and it should come down. So that is as far as the raw material part is concerned. As far as the margins are concerned, I think we have already said that in q four, we are expecting our EBITDA margins to be in the early thirties and going forward to earlier, we used to say that, you know, our margins EBITDA margin should be in the late 20s. Now we are saying that it should be between 2832%. Okay. And sir, said that we are witnessing some increase in the raw material cost in Q1 also. So are we also able to negotiate with our clients to increase the insoluble sulphur prices or the trend is not visible as of now? No, the trend is not visible as of now. Okay. So that means so okay. So for the next quarter, we can expect some margins to be around 27% to 29%. Would that be a fair assumption? No. No. We have already said in the opening remarks that in the net in quarter four, we expect margins to be in the early thirties. Okay. And sir, just would like to know how is the North America market shaping up right now? And what is the opportunity post lockdown have you witnessed? Is there any improvement in terms of supplying the consignment or there is still some shortage of shipments which is affecting us? And what is the market size like you of North America what we can target for the next month? The market size of North America is around 40,000 tons. And and we we from a technical standpoint, we have seen very good traction in North America, and things are progressing. Now we still need to get the actual allocations. But the existing supplies that have been going have been going smoothly even though the freight rates have gone up and availability is a challenge, but we managed. Okay. are we witnessing any new capacities in sort of brownfield coming up for the next year? Please repeat the question. Are we seeing any new capacities brownfield expansion coming up by Eastman Chemicals or Shikoku Chemicals Japan? Any of the competitors expanding their capacity? No. East Eastman and Shikoku are not expanding. Okay. So none of the competitors are expanding, you mean? Sunshine Chemicals has announced an expansion. That's the only thing that we are aware of. Okay. Okay. And sir, what would be the full year tax rate guidance for FY 'twenty one? And consequently, for the next two years, what can we take a number on that? So our tax payout would be again on MAT for this year and next year. So Okay. So we'll get the MAT benefits. So so we can expect around 20 to 22%. We we can be in in that range. That would be So we will be paying taxes on MAT basis this year and next year also. So that's it from my team. Thank you. Thank you. The next question is from the line of Pritesh Chedda from Laki Investment Managers. Please go ahead. Yes, sir. My first question is the INR100 crore revenue run rate that we see in we had a similar number in FY 2019 throughout FY 2019. Is fair to assume that the existing capacity would largely be fully utilized at the INR100 crore revenue run rate? Or would you have any more room to post incremental utilization on these numbers? So I think at this INR100 crores run rate, we are in the 90s. Is it still up more than that or that's usually the I mean, plus minus year end, that can happen, but but but we are at this run rate, we are largely at optimum. So it would be obviously 5% year of the MO room. But largely, we had incremental capacity utilization of this INR100 crore plus standard for the quarter. Okay. My second question is when the new lines come in, which is the 5,500 ton two lines, which you are adding in Phase one and Phase two. So does it mean that the margins directionally should go higher because of the operating leverage coming up on those lines versus the historic margins that we have? So we have already revised our margin guidance upward in this call to 28% to 32% from the earlier stated position of 25% to 28%. Okay. Then what is the depreciation number which will get added on the entire CapEx in two parts, if you could tell? One second. So the CapEx that will come in is around $1.50 crores. So let's see what the depreciation number will be. Just give us one second. On the total CapEx? So that is annualized, not on the quarter basis. It's crores on the annual basis. CapEx of INR 115 crores, which you have scheduled or on the? Right now, INR 150 is coming on, and then the then the balance, $60.65 is for the second phase. Thank you. We would request the current participant to please come back in the question queue for any follow-up questions The next question is from the line of Anuj Sharma from M3 Investments. Go ahead. We would request the participants to please limit your questions to two per participant. Anuj, you can go ahead, please. Yes. Thank you, and congratulations on good set of numbers. My first question is we are currently 10% of world capacity, and we are slowly in stock and after this expansion of 11,000 will be 11, 12 percent. Is that a trend in the world demand is growing by 23%? Can we continue to inch up our market share? And what is our thought process that just five, years down the line? What market share do you see we can aspire for? Can you please repeat the question? It wasn't clear. Yes. I'm saying that we have gradually over a period of time inched our global market share to 10% and after 11,000 ton expansion, we'll be 11% to 12% of global market share. In the next five, ten years, can we see our market share only increasing, and what is the global market share we aspire for in the next five to seven years? So after these current expansions, how much it would increase by and all is, I think, quite far because even after the current expansions, our capacity would be close to 47,000 tons. And if you look at the FY twenty sales numbers, they would be, you know, very low, very, very low looking compared to 47,000. So even if we go from today to actually selling out 47,000 tons, that is a, you know, massive growth rate in the next three to four years. So right now, we're just focused on that. Alright. Alright. My my second question is in the next, let's suppose, twelve to eighteen months, we will see 15% of incremental capacity getting added. You know, how many instances in the past have we seen that, you know, this kind of capacity additions have happened, how has it led to pressure on other relations? While we have said in the last call, directly won't affect us, but just your thoughts as to how how it has behaved historically. So, actually, if look at it, the incremental capacity that is coming on now as a percentage of overall global capacity is much lower than, you know, what used to come earlier Because in absolute terms, it's the same amount, but in percentage terms, it's much lower. So I don't think that this incremental capacity on a stand alone basis, you know, should put any pressure or anything. It's it's it's it's all actually linked to the the end market demand. If demand is robust, everything will be fine. Okay. And and just in continuation to that, see, one of our competitors is we have been very efficient in our CapEx, but our company the Chinese competitor would be putting up the 30,000 ton at 40% our CapEx cost. So, again, you know, with this kind of low CapEx cost, would that hurt the real factor of 40% of our CapEx cost? I don't think that is correct at all. So they seem to be putting 30,000 ton at $3.00 5 crores. Right? And our CapEx is approximately $2.01 6 per 11,000 tons. So 45 to 47% maybe. Maybe less than half. See, I think there is some mistake in the number. Secondly, our CapEx includes sulfuric acid plant expansion also. And as far as I know, their CapEx does not include the common utility costs. So it's not that, you know, apple to apple comparison if you look at it that way. From 215, you have to actually remove around 35 crores, which is for sulfuric acid. So just for insoluble sulfur, we would be at hundred and 80. Alright. That that that that's fine. I'll come back for later question. Thank you. Thank you. The next question is from the line of Anubhav Rawal from Monarch Net Worth Capital. Please go ahead. Yes. Hi. Good afternoon, sir. Just a couple of questions. So, sir, this given the supply glutton in soluble sulfur, so what is our plan for this phase two? I mean, will it start immediately after phase one? What is your thought process on that, sir? I think we have another six months to decide because this is getting commissioned in July. So the earliest we would start is July. And I think today, do not need to, you know, decide or or commit anything. Let us see how the next six months pans out and and this level of demand continues or increases or subsides. And then July would be the right moment to actually even start, you know, venturing the call because we can start at a day's notice. The day we want to start next day, we can we can actually start off. There is no prework required. So we will in July, we will decide. Okay. Understood, sir. And, sir, for this quarter, can you give us the split within the domestic and export revenue? Just give me one moment. So about 50 about about 60% has been export and 40% has been domestic. Okay. Fair enough, sir. And, sir, just on a gross debt and cash on books, what would be that right now? What what would be the? Gross debt and cash on book, sir. So so gross debt, we are expecting by March as of January. Okay? As of first January. Maybe 34%. So so the the total borrowing that we are looking at is about hundred and 63 crores as in December 31. No. No. Thirty first December, not hundred and 60. It's not long term. Including long term. Including the working capital. Yeah. This includes working capital, borrowing also. So hundred and 63 is the total borrowing out of which around around 40 will be working capital. And the investment would be around it $2.02 83 crores. 1. Sorry. Total. I'm so sorry. $1.50 crores. Sorry. Sir, I didn't get $1.50 is what? $1.50 crores is the total investment. This includes cash on books and your investments. Right? Investments. This cash on book is high. The cash on book plus investment is higher. Hello? Yeah. $1.50 includes both investments as as well as cash. Okay. Okay. Perfect, sir. Thank you. I'll I'll come back in the queue. Thanks. Thank you. The next question is from the line of Shashank Kanodia from ICICI Securities. Please go ahead. Yeah. Good afternoon, sir, and congratulations for a good set of numbers. Sir, I have two set of questions. So the first one, you you aspire to, I think, some 10% market share in the North American market. So could you please guide us what is the market share now? And are we on track for the trajectory next two to three years? Yes. We are on certainly on track to hit 10% plus market share in North America in the next two to three years. Our current market share remains in single digits. Roughly five, seven odd percent, sir, as in No. Less less than 5%. Okay. Technically, you help us with your the sulfuric acid prices for the quarter end sequential movement? I think there should be good amount of gains arising out of prices, sulfuric acid prices as well to us. So if any color that you can share? See, sir. Food acid prices are very dynamic, and they usually change with the change in the sulfur prices. For example, now since the sulfur prices have started going up, the sulfuric acid prices have started going up. So there is nothing fixed about sulfuric acid price. It varies with the sulfur prices. But, sir, in q three versus q two of last quarter, were the prices more robust in terms of, like, 1.5 x two x type? Q three was more than q two. Yes. Sir, any color in terms of what quantum increase? Was it 50% more or a % more? I will tell you this. I'll just get the content, and will tell you the the data is the offline. I will tell you the exact percentage increase. Sir, lastly, the phase two of CapEx for Intralu sulphur, sir, at max, we'll commission it by end of FY twenty three, or or it can even go beyond that? No. So this one is coming in July 21. I would say the earliest report commission is December is December 23. So you said end of FY twenty three. Right? Right, sir. No. So 2122 December 22 is the earliest report commission. So this yeah. So that is the earliest. That is not the latest because we would need sixteen, seventeen months from when we start off, and we will not start off before July, August at the earliest. Right. Right. Fine, sir. Understood. I'll wait for the Asking a question, they were higher by about 30%. Thirty %. Yes, sir. Yes. Thank you so much. Thank you. The next question is from the line of Nitin Gandhi from KISS Trade Capital. Please go ahead. Yes. Thanks for taking my question. For Phase one, due to current environment and lockdown, do you see some asset turn changing for you at the peak level? No. Because I think the the cost is still in control. Okay. So how much is peak revenue is possible at current price? Sorry. I know. Can you repeat peak revenue again? Peak revenue for the phase one expansion expanded capacity. Expanded capacity, peak revenue would be Should be around 65 to 70 crores. And that will be it coming at a margin of 28 to 30%, right, EBITDA margin? So 28 to 30% is overall 28 to thirty twenty eight to 32 is the guidance for the company as a whole. Yeah. Okay. So for this expanded capacity, it will be comparatively higher. Right? Yes. But it's we should not look at it that way, but theoretically, what you're saying is right. Okay. Thanks. Thank you. The next question is from the line of Dhruvam from HDFC Fund. Please go ahead. Yes. Thank you so much. Sir, just one question, all others answered. On the tax rate, you mentioned that you will be under MAG for the next two years. So that effectively means about 80 naught percent. Right? Yes. That will be the payout. Correct. So why am I confused is because prior to f y '20, you were paying about 27, 20 eight percent effective rate, which was well above then max rate. So has something changed that we are in this revised low rate now? No. No. We have we have never paid above above the my trade. The p and f obviously reflects the different picture. P and f is the provision that we made, which is on the actual price, and then the the difference gets adjusted in the deferred tax. Deferred tax. Okay. Yes. So the effective P and L rate will be around 25%, and the cash tax will be around 18%, is it? Yes. It. Got it. That's it. Thank you so much. Thank you. The next question is from the line of Kunal Mehta from Valem Capital Advisors. Please go ahead. Thank you very much for the opportunity. My first question, I just wanted to understand the margin bracket which we are guiding for now is 28 to 32%. When I look at the historical margins and we've we've been somewhere in the range of 26 to 28%. So so by by, like, giving this margin guidance with the next few I mean, next year year or two, are we are we seeing that specifically seeing that this sort of capacity utilization which we are running at as which is heading to the superior margin? Of course, there is you have your spreads, which is which is in a favorable domain. But we so this sort of capacity utilization, we we we we would continue to do do so in the next year, quarters, and sometime of I'm excluding the new capacity, but just from the base capacity, this utilization will should continue for us to earn this level of margin 20 to 32%. You know, even historically, our margins have been around around around these figures. Our margins have not been we've been guiding on lower margins, which is which is, you know, what we always do, but the actual achieved has been higher. Okay. I think there was a lot okay. Okay. Sir, I think I'll I'll then I'll then I'll Because I I just want to check for you. Do you have any specific figure that you're referring to? Yeah. I was looking at the historical quarter. I mean, January important margins, and I could I could see that in most quarters or maybe in most years, we have been somewhere around 27, 20 eight percent. And that's been the that's been the trajectory which we have, which we've been on. So I think I I I think this is your question is that is the is the '28 to '32 guidance you are giving dependent on capacity utilization being robust? Then the answer is yes. Naturally, it is dependent on capacity utilization being robust. Okay. Okay. Okay. Yeah. Yeah. That yeah. Is something yeah. That is what I wanted to understand. Yeah. And with capacity utilization. I I I I Got it. Alright. And and secondly, just wanted to understand this this new this new five thousand five five hundred tons capacity is I mean, last time when when we saw your Mundra, the capacity coming up at Mundra, some other size, it I think it took us at least it took us, I think, eighteen months to but even to twenty to twenty four months, you will just use it to full scale. So this this capacity of 5,500 in phase one, do you expect it to be used in in a similar time frame? I mean, at least, if it's fifteen to eighteen months for it to reach full full 5,500 tons? Two differences. The last time when that capacity came in, we were instantly hit by a global downturn in the auto market in 2019, and then 2020 was a COVID year. So it would not be a like for like comparison. And, also, as a percentage of increase in capacity, this one would be lower than the times it has come on to Mundra. So I would expect it to be much better than than the ramp up in Mundra. Understood, sir. Understood. Understood. And just last question from my end. I I was I was looking at the the in some of the set of prices, and I think this quarter, I saw I mean, as we reached the end of last quarter, I mean, around December last week, I think the prices are starting to starting to fall off soften a little bit. I'm talking about the finished product prices. And now the raw material prices actually were starting to be as you guys mentioned also that they were on the higher side. They were on the higher side compared to other quarters we were able to get good inventory. So on the cheaper side. So I don't understand. This this margin guidance which you have given for the q four is is is also including the lower finished product prices also. Right? That's correct. Because in quarter three, EBITDA margins are close to 40, and we are guiding for in Q4 to for them to be in the low thirties. So we factored that in. Got it, Sallad. Got it. Thank you very much. And all the best for the. Thank you. The next question is from the line of Pritesh Chedda from Lucky Investment Managers. Please go ahead. Sir. Sir, what is the net supply chain globally that we will see post the addition from your side and sunshine and some capacity reductions, which were supposed to happen over the next two years? No. Please please I mean, I didn't understand the question. I said what should be the net global supply change, which will happen in soluble sulfur post the capacity increase of 11,000 tons that we have planned and 30,000 tons that, Sanchez planned, and there were few expected close down of all the time. I would say the net increase would be around 20,000. 20 thousand. So that is about If you include r thirty if you sorry. In r eleven, Sunshine's 50 and the reduction of the Japanese plants or instruments, then that is around net net increase is around 20,000. That's about 6% of total demand as of now. Okay. And my second question is, sir, when is the phase one going to get commercially operational, which was initiated for quarter one of twenty two? Yes. Of July. That's what we're targeting. That's what we expect. So it's on track. Right? Yes. Yes. Yes. My last question is, the as a percent of our revenue should be how much ballpark if you could help us do that? Yeah. We'll just tell you one second. It should be about six to 8%. Okay. And lastly, when so you said 70 crore is Six to eight percent currently now. Yeah. Yeah. Yeah. After the going forward or not? Correct. Currently. Yeah. If the blue line comes up and, you know, if that also ramps up well, then it would be higher. No problem. And this 42,000 of sulfuric acid will also come in phases. Right? No. No. No. This is the entire thing is coming now in July. Okay. So Sanskuru is coming immediately. Yes. It is part of the upfront CapEx. So then the two CapExes put together, what should be the peak revenue based on the realizations which are as of now? So when you mentioned 70 crores is peak revenue phase one. Phase one, phase two put together should be what revenue, sir? So phase one, we have already said it should be around 70 crores. Mhmm. Take phase one and phase two, it should be around hundred and 25 crores or Okay. Sulfuric acid. So so hundred and 10 crores or so. 35. 1 30 5 crores. Roughly $1.35 crores. 1 30 5 crores, the entire CapEx. $1.35 includes everything. $1.35 turnover should include the? Everything. 11,000? Yes. Okay. Thank you very much, sir. Thank you. The next question is from the line of Anuj Sharma from N3 Investment. Please go ahead. Yes. Thank you again. Sir, we keep hearing about new product launches in insoluble cells right now. Are these products more incremental in nature, or once in a while, we can have one revolutionary product which can have significant efficiency management, or it's mostly incremental? It's mostly incremental. Okay. So so just, you know, in a matter of three years, what proportion of revenues could come from a new product launching? Eventually, the market starts moving towards it. So it's very difficult to predict how soon market will move, when it will move. It just happens. It's very difficult to predict it like this. Okay. Sir, on your subsidiary, Duncan Engineering, congratulations, there's been a good turnaround and being profitable. Profitable. Do we have plans for new segments within Duncan? Or it will pretty much remain a steady ship as it is now? Sorry. Please repeat the question. I'm saying we've done well with Duncan in terms of its turnaround over a period of time. Do we have any plans to introduce new products, or it will remain a steady shift as it is now? Soon. Yeah. Last few years was in the turnaround. Now we've actually beefed up our top management team there, and now the focus for that company is now going to be growth. Okay. And and that's what we are embarking on now, and that's what we're going to attempt to do. Okay. But it will be existing products or some new areas you're looking at? I would say it would be improved versions of existing products as well as complementary products that we don't have in our portfolio that can go to the same set of customers, which our competitors are already in. So the missing products in our portfolio are now going to be attempted to be added, and that's how the growth is expected to come. Okay. And my last question is, we have indicated in the past that new capacities will primarily cater to under connected companies and geographies. So in terms of tires, if it was existing relationship, it would have been easier. But any update on any new customer geography you've been able to tie up for this coming up or upcoming facility or capacities? Thank you. We are we are still in talks. Since it has not been concluded, it would not be fair to me for me to say that. I'll give details on it. But we are getting good traction. All right, sir. All the best. Thank you. Thank you. The next question is from the line of Samad Singh from TBS Capital. Two questions. First one is we are planning on moving to Gap and Mundras. So has that happened already? It's it's gonna happen from May. From May. And what is the expected savings from that? The expected savings are in the range of one to 1.5. Okay. Great. And second question, out of the CapEx for Phase one, how much have we spent on it as of thirty first December? Around INR 100 crores. You. The next question is from the line of Nikhilupadhyay from Securities Investment. Please go ahead. I just want to come back to one question because the earlier participant's question was very relevant because we also had another question earlier that asked for our cash and debt position as of thirty first December. So I just want to highlight that that cash and debt position is after already spending INR 100 crores out of INR 150 crores that is earmarked for this. So I just wanted to, you know, highlight that. Thank you. Please go ahead with your question. Yes. Thanks for the opportunity, and congrats on good set of numbers. Sir, my question is on the overall demand supply economics. And sorry if this question or related has been discussed because I joined the call late. If you look at our company, like, last five or six years, our CapEx expansion has been at a much aggressive pace. And, parallelly, if we look at some of the other companies in the rubber chemical space, they've also done the CapEx and have seen a significant shift from this China plus one, which has helped them ramp up the capacities quite significantly. Would you say the ramp up of the new capacities which we are putting could be much faster than what we have seen earlier? Or are you getting any flow through or benefits of this the global thing which people are talking of? If you can share any thoughts. No. So I certainly expect the ramp up of this capacity to be quicker than the ramp up of our capacities that have happened in Mundra. As as regards to your question on the the Chinese angle, no. Because simply because the Chinese are not really big players in this market globally. So therefore, the shift would not impact us because they are not there to be shifted out of, if you know what I mean. Okay. Secondly, if we understand the CapEx plans, like, I think you and China Sunshine have plans of any new CapEx. Other than these two, anyone else is planning to put new capacity? No. So if if that's the case, would you say that there is a lot more room for realizations to go up if the demand supply is equally balanced or if the market is starved? Now there is lot of excess capacity in the market. So first, demand needs to come up a lot. Okay. Okay. Fine. Thanks a lot, sir. Thank you. The next question is from the line of Anubhav Raval from Monarch Net Worth Capital. Please go ahead. Yeah. Hi, sir. So, sir, last call, we had this discussion on our investment in AIF. Just wanted to, sir, you know, ask what what will be the total investments from our side, and for how long will this money be locked in, sir? The total investment, sir, on thirty first December that have already been done in these AIFs for durations anywhere from average duration of five years would be around $20.22 crores. The committed figure was would be higher, but as you would know, the money is taken in stages. Okay. But the total I mean, any any idea on the total amount? Would it be 50 crores, hundred crores? Yeah. The committed the committed amount as of today would be around 50 crores, but but this amount would not be taken until over it will be taken over the next two, three years. But but, yeah, we continue to make commitments as and when good opportunities arise. Okay. Fair enough, sir. And just one last question. So, sir, this peak revenue that you said from phase one are roughly around 65 to 70 crores. So and you are seeing from phase two, it will be the double of that. So and then are we not accounting for the revenue from sulfuric acid? I mean, pardon me if I'm getting the math stronger. So so so when we when we give we are we are giving this guidance, we have assumed the lower price of sulfuric acid going forward, and that is why this difference is coming. But but, yes, what you are saying is right. If the sulfuric acid price remains the same, then our guidance would be around INR145 crores. Okay. Okay. Understood. Thank you. Thank you. All the best. Thank you. The next question is from the line of Nitin Gandhi from KIFS Trade Capital. Please go ahead. Thanks for taking my question. For Phase two, any amount is spent? In this $1.50 crores, there are a lot of common, you know, common things. So that is why if you notice in 215 crores, 1 50 is coming in phase one, and only 65 is coming in phase two. So all the common activities are part of this one fifty. No. So you said a hundred crore is spent, so it could be Hundred is spent out of one fifty. Okay. So phase two is nothing. And how much is the date of portion for that out of January? Sorry? The duration is two is is to one. Two is to one. Two is to one. So one third is internal close and $2.02 30 is debt. So out of current date of January, '40 is for the working capital, and approximately 67 is for the phase one. Right? Correct. Okay. And when you said that the demands would be like Oh, no. No. One second. One second. On thirty first December, '60 '7 would not be for the phase one. So phase one, out of that would be around 65. Yes. Because we we picked up some of that balancing thing in January after the project cost was finalized. So as of thirty first December, we'll be around 55 would be from phase one. Okay. Which will peak out to somewhere around hundred crores by completion time. Right? Yeah. Yeah. Yeah. Okay. Second question is, when you said that there's a global demand supply mismatch and the demand needs to go up to meet the excess supply, so what is that difference at this point of time? No. I I don't have the exact figures. But just to get estimate, whether it is 15 or 20 or little more than that. I don't want to speculate. Okay. I was just trying to equate with the additional supply coming out for '20 post 2020. But I don't want to get into this COVID test. Yeah. Is it possible to get it at later date? If possible, I'll be grateful. It will be very helpful. This is available in lot of public domain, so you can, know, try and get But listening from you will be of more intelligence. Know. I know. Okay. Thank you very much. Thank you. The next question is from the line of Abhishar Jain from Monarch AIS. Please go ahead. Yeah. Hi, sir. Congratulations for the good set of numbers. Sir, just wanted to get a sense from you on the capital allocation going forward considering now for the next two years, you know, the CapEx plan is is limited to whatever announced. And we we expect you to have a strong cash flow, and we are almost net cash positive now. So can we expect a, you know, higher return of capitalized in the form of dividends or buyback? Would that be the way? Or you you have you seem to have some other plans for capital allocation going forward? No. No. We have no other plans for capital allocation going forward. There is nothing else that we are looking at spending money on. So so, yes, what you're saying could be a logical next step, which we would do at the appropriate time. But but Right. It would it would it it we we we will go to, you know, the rewarding of the shareholders in some way or form or the other. Okay, sir. Understood. Understood. That's it from my side, Thank you and best of luck. Thank you. The next question is from the line of Kunal Mehta from Valen Capital Advisors. Please go ahead. Sir, thank you very much for the follow-up. Just wanted to confirm the math actually. So INR215 crores investment is for the entire 11,000 tons capacity and 42,000 tons of sulfuric acid plant. Out of this, hundred and 50 crores is for the phase one, and the rest of the 65 would be for the phase two. That would be right, Or Yes. That's the correct way to look at it. And out of this hundred and 50 crores for phase one, you have spent hundred crores? Correct. Yeah. And the second second thing I wanted to understand is that we are we are based on the current and the prices that we have. We we are guiding for a combined revenue from this whole investment of $1.15 crores to be to with the revenue to be around $1.35 crore $1.35 to $1.30 crores. So just wanted to understand this this this I mean, from a business case perspective, this makes sense for us because, as you mentioned, that this new invest this new capacity will not entail any overhead cost. Right? It's the whole of the gross margin will I mean, not not not the whole of the gross margin, but a significant portion of the gross margin will come down as as an EBITDA margin for this project. I mean, that's the way to look at it. Otherwise, this asset turn on this I mean, to end the King Road investment, $1.42 revenue. I mean, is that is that the way to look at it, sir, the from a return on capital perspective? Yes. Because that will work. That that that would be the way to look at it. You're absolutely right. The that's how the return on capital would be calculated in this. And I so so so to put it very bluntly, a greenfield expansion makes no sense even the current industry structure and the pricing. A greenfield expansion for anybody, let alone us, anybody globally cannot expand greenfield because it makes no financial sense. Got it. So got it. So so, technically, the prices the capacity industry capacity is at such a level that, I mean, the demand has come up a lot for the prices to actually improve and and and and make new sense. And that is why that is why I have confidence that no further capacity expansion is gonna happen in insoluble sulfur because greenfield capacity expansion makes absolutely zero sense for anybody, even if it whether it is Sunshine or x y z, anybody. Nobody is going to do a standalone greenfield expansion. Mean, Got it, sir. Got it. Got it. Thank you very much. Okay. Thank you. I completely understand. The next question is from the line of Dhruvam from HDFC Fund. Please go ahead. Yes, sir. Just one clarification. So this 140 is on the incremental 11,000 tonnes. But would it be fair to say the existing capacity is also a bit underutilized, not the q three number, but if we probably, if you are working from the full year number or FY '20 base. So the yes. The full year number is full year number would be severely underutilized. Full year number for for us would be severely underutilized, the capacity. Yeah. Even the FY twenty five CE, the revenues were down, so that could indicate there was some volume probably pressure. I understand, sir. I'm not sure. FY twenty also was severe underutilization of capacity. Got it. So that would not be the right base. So this is one forty plus some additional from the utilization of existing capacities. Right? That is the broader understanding. I mean, there will be some plus to be The only reason we got into this January and all because are the questions that we have I understand. I got that point. Yeah. The right way to look at it. It's I agree with you. It is not the right way to look at it and do it that way. Okay. Well, I'm looking at it. Yeah. Thank thank you so much. Thank you. The next question is from the line of Anubhav Rawat from Monarch Networth Capital. Please go ahead. Yeah. Hi, sir. Just final question from my side, sir. What would be our cost of debt for this new bank that you're taking? It should be between $7.07 and a half percent. 7%, seven point five %. Okay, okay. Perfect, sir. Thank you. Thanks a lot. Thank you. The next question is from the line of Nitin Gandhi from KIFS Trade Capital. Please go ahead. Yes. It was the same question. I know who asked it. But is there any repricing which you are looking for, thanks to your rating update or anything which you have in this is for even for the project, Right? This is for the new project, and it takes into consideration the our ratings. In current scenario, we are not looking for any repricing in in the short term. Okay. Let us see how the whole industry can turn, but not in the short term. Okay. Thanks. All the best. Thank you. The next question is from the line of Sunny Ahuja, an individual investor. Please go ahead. Hi. I have seen regarding the participation of the institutions. What are we looking at in terms of specific equity and free Mister Ahuja, we would request you to come off speaker. You're not able to hear me. Yeah. Yes. Yes. I'm audible now? Yes. Yeah. Yeah. So, you know, to improve the institutional participation, what are we look are we looking at any steps since, you know, the equity and the free float is pretty small at the moment? So I just wanted to know if, you know, we are looking in that direction. No. I didn't understand the question. Please repeat. Yes. So I'm I'm audible. Right? Yeah. Yeah. So I just wanted to you know, from the shareholder point of view, in order to improve the institutional partition, are we looking at any steps? You know, since our equity and free float is pretty small at the moment, so are we looking at, you know, any steps to that so that, you know, maybe larger FIs and institutions, you know, would be more maybe, you know, be able to participate in a better place? So we keep thinking about what are the different options and evaluating them. If you ask me if something imminent, the answer is no. But but but but we constantly keep looking at, you know, what could be different ways and best things to do. Due to time constraints, that was the last question. I would now like to hand the conference over to the management for closing comments. I take this opportunity to thank everyone for joining on the call. I hope we have been able to address all your queries. For any further information, kindly reach out to us, our strategic growth advisers, our Investor Relations adviser. Thank you once again. Thank you. Thank you. On behalf of Oriental Carpet and Chemicals Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.