Ladies and gentlemen, good day, welcome to Oriental Carbon & Chemicals Limited Q4 and FY 2021 earnings call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the 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. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. 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 & Chemicals Limited. Thank you, and over to you, sir.
Good afternoon and a very warm welcome to everyone. Along with me, I have Mr. Anurag Jain, our CFO, and SGA, our investor relations advisors. Before we begin, I hope you and your loved ones are in the best of health and keeping safe by taking all the COVID-19-related precautions. I hope you have received our result and investor presentation by now. You can view the same on our company website. I'm delighted to share that the board of directors have recommended a final dividend of INR 10 per equity share of INR 10 each. This is 100% of the face value. In addition to the interim dividend declared of INR 4 per equity share in November 2020, thereby giving a total dividend of INR 14 per equity share for the financial year ended 2021. Coming to the performance of the company.
Financial year 2021 began with lots of challenges due to COVID-19 pandemic and the consequent lockdown during Q1 . However, we have ended the year on a strong note. The outburst of COVID-19 pandemic had caused severe disruptions in business operations across industries. However, as the economy started to unlock gradually, we started witnessing recovery in demand. Our business operations started to pick up pace, and we saw gradual improvement in our production levels. We started seeing recovery in our business trajectory starting second quarter with normalization of replacement and OEM demand in the domestic as well as international markets. This growth momentum has sustained in Q4 FY 2021, and we have reported a top-line growth of 21% compared to previous year Q4 . For the year 2021, the company has clocked revenues of INR 344.7 crore.
In the current business environment, we have seen an increase in raw material prices, which continued into Q1 of FY 2022 as well, and hence is impacting margins in the current quarter. However, we are continuously focused on implementing measures towards controlling costs and improving operational efficiencies. Both our plants at Dharuhera and Mundra are running normally despite the second wave of COVID-19, and we are taking all necessary precautions at all our workplace. Our expansion project is facing delays on account of hampered civil work, which again, due to unavailability of labor and mobility issues of procuring machines due to the localized lockdowns that were in effect across the country in April and May. With the unlocking and the pickup in various activities, we now expect the projects to be commissioned by October 2021.
I'm very pleased to announce that OCCL has been awarded with the EcoVadis Gold sustainability rating. This places OCCL among the top 6% of companies assessed by EcoVadis globally during the year. This is a very good achievement, and we are very focused on being responsible and sustainable. OCCL addresses the demanding requirements of the tire companies worldwide in terms of quality of product on one hand and superior service on the other, often collaborating with them to work out unique solutions. We are long-term suppliers to 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. Continuous investments in technology and R&D enables us to develop our product further.
We will be focused on consolidating our dominant position in the Indian market while increasing our penetration into those markets where we have low penetration right now. To conclude, it has been a good year for us despite external challenges. We believe that the short term may be challenging, both from a demand and margin perspective in view of the various disruptions caused. However, we are confident that the medium-term outlook is stable. Now I would like to hand the line over to Mr. Anurag Jain to update you on the financial performance of the company. Thank you.
Thank you, Akshat. I will take you all through the standalone financials of the company. Total income for Q4 FY 2021 was up 21% year-over-year to INR 106.9 crores as compared to INR 88.3 crores in Q4 FY 2020. Driven by sustained demand momentum post strong Q3 FY 2021. EBITDA for Q4 FY 2021 stood at INR 38.7 crores as compared to INR 29 crores in Q4 FY 2020, a growth of 33% year-on-year. EBITDA margins for Q4 FY 2021 stood at 36.2%. Margins have been affected by increased input costs. However, our sustained focus on improving operational efficiencies and tight cost control has led to limited impact on EBITDA. Profit after tax for Q4 FY 2021 stood at INR 24.8 crores as compared to INR 17.1 crores in Q4 FY 2020, a growth of 45% year-on-year.
Our PAT margins for Q4 FY 2021 improved by 390 basis points to 23.2%. To quickly summarize the full-year numbers, total income for FY 2021 stood at INR 344.7 crores compared to INR 353 crores at FY 2020. The minor dip in total income was due to Q1 FY 2021 results being affected by the shutdown of plant due to COVID-19 lockdown and low off-take of material immediately after resumption of production. EBITDA stood at INR 124 crores as compared to INR 108.5 crores in FY 2020, a growth of 14% year-on-year. Margins for the full year stood at 36%. PAT stood at INR 75 crores for FY 2021 as compared to INR 71.5 crores in FY 2020, a growth of 5% year-on-year. PAT margins for full year stood at 21.8%. 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. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Ritesh Chheda from Lucky Investment Managers. Please go ahead.
Yeah, sir. Do you have any capacity based on the Q3 and Q4 capacity utilization that you have for the ensuing year for growth? Now the incremental growth on the revenue that we saw in Q3, Q4 is purely dependent on the new capacity which kicks in from Q3 of FY 2022. That was my first question. My second question is, we did a call in Q3 around, I think around February. We were hopeful of capacity expansion coming in by Q1. Just was trying to understand why it's been dragged up to Q3 stage. That's the second question. Third is there any supply changes in the industry over the next couple of years?
Thanks for the questions. Firstly, I'll answer question 2. We were always hopeful of it coming in in July. Then we lost April and May and a lot of June due to our vendors being shut, equipment's not coming in and labor not there, that's the reason. Even right now, a lot of people are struggling in getting labor back and supplying us equipments. Since the project is very dependent on external factors rather than internal factors, that's the reason we are saying October. Point number 3, there is no new supply side developments from my side to update on except for what we've already said before and what are publicly announced. Question 1, Q3 and Q4, we were practically at optimum capacity utilization. Maybe a little bit here and there is there, yeah, the major growth would come with new capacity.
Okay. Just on that supply side, sir. In your opinion, what should be the industry capacity utilization today? Let's say in Q4, because a lot of them would have gone to their full capacity utilization. And over the next two years, based on the supply scenario, what do you think should be the capacity utilization in the industry?
I think, I'll only take it through from us, I would assume that everybody would have been at optimum capacity utilization in Q3 and Q4, right? Going forward, capacity is coming in from us, 30,000 tons is coming in from China Sunsine. I think if the situation remains like it was in Q3 and Q4, and looking at natural growth rates and all those things, these capacities should get absorbed. I don't have specific data on capacity utilization for our competitors.
Okay. The industry capacity utilization will not go through a sea change in the next three years. Right? Two years. Even after the capacity addition.
Yeah. This is assuming that in Q3 and Q4, things were at optimum levels.
Sorry?
This is assuming that Q3, Q4, things were at optimum levels and in the next one to three years, the regular levels of growth normalize.
Mm. Mm
increase demand.
Okay. Thank you very much.
Thank you. The next question is from the line of Anuj Sharma from M3 Investments. Please go ahead.
Yeah. Thank you. Am I audible?
Yes.
Yeah. Thank you. Just on the previous question, an extension of the same. How is the pricing behaving? Can you just give some insight on how the pricing is behaving and what is the outlook on pricing?
There was no sea change in the pricing during the last six months. With the increase in raw materials, we are expecting prices to go up from next quarter to absorb the increase in raw materials.
All right. As you said, on the supply side, there has been a delay and the demand continues to be optimum. Do you expect some changes on the pricing side given that the demand is more secular?
That is why I said that looking at this, we think that we will let the pricing from next quarter to absorb the increase in raw material prices.
Okay. I'm just going beyond the raw materials. Just beyond the pass on, there is no outlook you have?
Frankly, we cannot say that it will increase. If you are saying that whether the old margin will come up from what it was in Q3 and Q4, I would not say that.
All right. Thank you. My next question is on the cash balance, how are we deciding how much cash we'll require, and how are we thinking about the cash utilization?
As of now, we are looking at utilizing cash in alternate investments, which are showing up in annual report as well when they come out, and that is where we are doing it. We are also keeping some cash available to offset our debt so that option is always there and you are not running a high debt environment. As appropriate, we will see what needs to be done.
Okay. Last question on the alternate investment. What is the final or the total commitment we have decided? Is there any change on that? What is the expense structure of this alternate investments?
As of now, the committed investments towards these alternate investments would be ballpark roughly INR 60 crores.
Okay.
We are quite comfortable taking it to around 20% of our net worth gradually over time, and our net worth will also keep increasing. What was your second question regarding that? Expense?
Yeah. What is the expense structure of this alternate investment?
What do you mean by that?
What is the cost of managing the fee structure?
You're saying It's different because a lot of investments are done directly where there is hardly any fees. A little bit of them are through funds which have a standard fee. It's very different. It can't be answered in a general way.
All right. Thank you for that.
The returns we look at are always net of fees.
Okay. All right. Great. Thank you.
Thank you. The next question is from the line of Shashank Kanodia from ICICI Securities. Please go ahead.
Yes. Sir, Thanks for the opportunity. Sir, just wanted to understand. Large part of raw material inflation is already building into the numbers or is there some part which will spill over to Q1 as well?
No, large part is going to come in Q1.
Okay. In that case, then what will be a sustainable margin guidance at your end that you'll like to guide us?
See, the medium-term, long-term guidance remains the same what we said in last quarter of EBITDA margins in the 28%-32% range. It's very difficult to guide on Q1 margins and Q2 margins right now.
Sir, last three quarters you have done much ahead of the 32% upper bracket of the range, right? The operational efficiency is also kicking in with the brownfield expansion. Is that 34%, 35% kind of a range sustainable for us over long term, at least FY 2023?
If you ask is it possible, then yes, it's possible. Is it something that we can commit to right now? The answer is no.
Okay, fine. Technically, on the CapEx front, so out of the entire complete CapEx, what amount have you spent till date and what is going to spend in FY 2022 and 2023?
Till March 31st, we had spent around INR 120 crores odd. In this financial year, just for the current CapEx, we probably expect to spend another INR 30, INR 35. Let's call it INR 35. For the second round of CapEx, the amount would be roughly INR 60 crores. The exact deployment depends on when we kickstart it.
Right. Sir, is it safe to assume that it was by FY 2023 and we commission the second set as well? It can go even beyond that?
I think we'll take a call on this once this line is commissioned. From the time we take a call to do it, 16- 18 months is when it'll take to commission. The earliest we will decide on it is in October after this one is commissioned.
Right. Sir, lastly, what is the gross-
I would say, to answer your question, I would say March 2023 is the earliest that it would come.
Right.
Sir, your question is answered?
Yeah. I was just asking what is the gross debt on books, and what is the trajectory going forward for us?
Sorry, I didn't hear the question.
Sir, what is the gross debt on our books balance sheet on the standalone basis, and the trajectory going surplus cash on balance sheet as well?
Sir, the total debt as on 31st March, including short-term and long-term, was INR 178 crores.
Any repayments over the next two years?
Next two years, if you are looking at the end of the next year, we think that it will be around INR 180 crore-INR 185 crore by the end of next year also, considering the CapEx which is there and the requirements which are there.
Right. Thank you, sir. Thank you so much.
I think we are going to be close to peak debt by September 30th.
Yes.
Understood, sir. Thank you so much. Wish you all the best.
Thank you, t he next question is from the line of Chirag Setalvad from HDFC Asset Management Company. Please go ahead.
Sir, a couple of questions from my side. The first one is, what is the total revenue potential from the new capacity? If you could break that up between insoluble sulphur, the sulphuric acid part. When do you expect to achieve full utilization? That's my first question.
Just give me a moment. The total revenue potential would be about INR 140 crore, INR 130 crore-INR 140 crore, for the two lines.
Can you break that up between the two lines, please?
Hello? No. Two lines are equal, no? sulphuric acid.
No, I meant between, not the two lines of 5,500 tons each. I meant sulphuric acid, this includes sulphuric acid, external sales as well.
sulphuric acid should be around another INR 25 crores- INR 30 crores.
The total potential is INR 170 crores. Is that the correct understanding?
Basically what Anurag is saying is that line one should give around INR 70 crores, and sulphuric acid should give another INR 20 crores-INR 25 crores.
Yes.
Line 2 should give another INR 70 crores.
Got it. That's great. The second question is, in terms of growth over the last few years has been on the slower side. You've grown five-year CAGR revenue at 4% and three years at around 5%. We understand that there are opportunities within insoluble sulphur, but we also recognize the company has looked at outside opportunities within chemicals but outside of insoluble sulphur. Any thoughts on that and if you could just maybe just comment on that'll be helpful.
Chirag, thanks for the question. We did review various things outside insoluble sulphur, but none of them in a related space fructified, and we dropped the idea of doing anything in the related space. The question then comes is, are we going to do something in an unrelated space? Frankly, as per what our internal deliberations and discussions right now are, is that I don't think we are poised to do anything in a totally unrelated space.
Sorry, I didn't catch that. You are opposed or unopposed?
No. We are right now not keen on venturing into an unrelated space, which is not directly related to insoluble sulphur. The ecosystem around insoluble sulphur, around tires, around rubber chemicals, is something that we have reviewed and exhausted as of now.
Going back to the earlier question, when do you expect to achieve full utilization of both lines?
Okay. Anurag, do you have the figures for this? When do we expect to achieve full utilization of both the new lines?
Probably 2024, 2025, somewhere in the second half of 2024, 2025.
The first line we would hope would be in the next financial year. That would be our hope, depending on how the growth rates come and how the new approvals come.
By the end of FY 2023.
Correct. By the end of calendar year 2022, early calendar year 2023 is when we expect to achieve full utilization for the current line. I think it's a bit early to talk about when we expect to achieve full utilization of the next line, because we're going to review the scenario in September and October. That's when a lot of our approvals and orders are supposed to come in for calendar year 2022. Now if everything comes in smoothly and we have very good visibility from the current line, that's when we'll pull the trigger to expand the other line. That would basically be commissioned by March, April 2023, assuming we pull the trigger to start it at the end of this year. That would take its own few months to ramp up.
Sure. Could you speak about the alternative investments? What are they in right at the moment?
Sorry, please repeat.
You had mentioned alternative investments of, I think, INR 60 odd crores.
Yeah.
In what fund? What's the format? In which funds, what type of funds have you invested in?
I can speak about it and when our annual report is published in the next few weeks, all the data as on 31st March, which is around INR 30 odd crore, along with commitments, will be published. These are various, I would say, a lot of opportunistic investments that have come about as well as some focused ones. Would you like me to go through each one right now?
The more meaningful ones would be helpful. Of the INR 30 crores and the commitment of INR 30, what are the larger investments?
The larger ones out of the commitment of 60 would be funds. Funds like Fireside Ventures, funds like India Quotient, and some high-yield debt funds which are doing very well.
These are either high-yield private equity or some form of equity funds.
Correct. There is no public markets, firstly.
Sure.
There is nothing in public markets. Now, if you want to, some other marquee names that you may be familiar with, which has actually given a stellar return on paper is ShareChat. That has been in the news recently. We got in at a very good valuation. It's already gone to 3x in six months. Similarly, things like Blue Tokai, something like Bira has doubled in six months from when we invested. Another company where we invested money in March-
These are directly invested in the company. Blue Tokai, for example, you would have invested directly into the company, not via a fund. Hello?
The line for management has disconnected. Kindly stay on the line while we reconnect them. Ladies and gentlemen, we have the management line reconnected to the call. Thank you, and over to you, sir.
Sorry, we got disconnected. Apologies for that. Chirag, did you catch my entire answer?
No, I got part of it. My question follow-up to that was so companies like Blue Tokai, you would have invested in directly, not through a fund?
Correct. The larger investments, if you talk about out of INR 60 crores, the larger checks that comprise that would be through funds. Smaller checks would be direct.
Right now a INR 30 crore investment and a INR 30 crore commitment. Is that right?
Like the co-invest or through the network. You see, in the last year, a lot of companies, as you know, went through a lot of distress, and they were forced to raise funds at very good rates and very good opportunities. What happened is plenty of the existing investors did not have the liquidity or did not want to commit more capital to exercise that pro rata. People like us got the opportunity to participate at rock bottom rates.
Sure. This is a INR 30 crore investment at present with a INR 30 crore commitment, additional INR 30 crore commitment.
That's correct. Also the reason for that is because, as you know, in the fund structure, you make a commitment which is drawn down over four years.
Understood. My follow-up to that is that, obviously our base business is a manufacturing entity, and our payout is still extremely low. Despite the fact that you have paid out INR 14, the payout as a percentage of profit remains very low. Hence, wanted to understand the rationale. We understand this commitment of INR 60 crore has already been made, but the comment that you will go up to 25% of net worth and last year's net worth will take you to around INR 100 crore investment. The justification for increasing investments further from here is what we'd like to understand when the payout ratio is as low as it is.
Look, it's a valid point, it's always a point. I would say that one has to look at it from a point of view of returning money to shareholders versus earning a good return for the shareholders. I think that's where the conversation has to come to. I think, let me give your point more thought and then circle back to you and answer it in a better manner.
What we would look, certainly, I think all minority shareholders, these kind of investments, we understand the commitment of INR 60, but we would look to see that any investment above the INR 60 is done in an individual capacity. You can pay out the money as a dividend, and then individually as promoters can do that in their own individual capacity. Because as shareholders, we are keen to invest in Oriental Carbon. We are not necessarily keen to participate in Fireside or Blue Tokai or others. I would urge management to think about restricting this investment to INR 60 crores and not enhancing it to 20% of net worth, which is a very substantial number in our minds.
I think fair enough, and point well taken, Chirag.
The-
We'll circle back on this. I made a note of it.
Sure. The last question I had was, I believe Eastman has sold out their insoluble sulphur business to One Rock. Do you see any impact of that?
Yes, this is certainly there. They have sold it out. I believe the price that has been declared is around $725 million. Impact on that, I think it's too soon to say how it's going to shake out. The deal hasn't closed. It's expected to close in the next few months. Then we have to see what happens in the market with that.
Sure. Great. Thank you very much.
I think the deal value certainly seems quite less to me, if I had to say it that way.
Do you have a sense in terms of what would be the revenue or profitability of the business if sold? Because I know it's not just insoluble sulphur, it also includes something else.
Yeah. We don't have exact figures. If I had to make a wild guess, this seems to be in an EBITDA multiple of maybe 6x- 8x, somewhere in those single-digit regions.
Sure.
Yeah.
Great. Thank you very much, and all the best for the coming year.
Thank you.
Thank you.
The next question is from the line of Dixit Doshi from Whitestone Financial Advisors. Please go ahead.
Yeah. Thanks for the opportunity. Most of the questions have been answered, just a couple of small things. What would be the cost of debt currently? You mentioned that our capacity of 10,000 is coming and Sunsine is coming up with 30,000 tons. What would be the current global capacity?
The cost of debt would be somewhere at an average of about 7.3%-7.4%. As far as global capacities are concerned, they should be around 300,000 tons.
Okay. One more thing. Last time you mentioned that this 41,000 tons of capacity is coming up between OCCL and Sunsine, but there is some reduction. Reduction is also going to happen in one of the Japanese plant and Eastman plant. Post this expansion, do you think that such reduction will happen? Post this deal of Eastman, will they be looking for shutting down the plant, or it may not happen?
I think the Japanese plant has already happened, but we don't know what will happen in future, because it has already been taken up by One Rock. It will not be right to speculate just now what steps they will take with that company in the near future.
Okay, fine. That's it from me, sir. Thank you.
Thank you. We would like to remind participants that you may press star 1 to ask a question. The next question is from the line of Avishek Datta from Prabhudas Lilladher. Please go ahead.
Hello, sir. I just wanted to know, has there been any significant disruption in the month of April and May, and how is it looking like in the current month?
Has there been any significant disruption in the month of April and May? Sales. Yes, there has been an impact on sales, especially in the month of May, which is going to continue in June. April was okay. In May, there was a reduction in demand, especially in the domestic market. That reduction continues in the month of June. We hope that with everything opening up and the auto companies now starting to be manufacturing again, it should again ramp up from July onwards.
Okay. If I had to, just in percentage term from Q4 levels, what will be the impact? Just ballpark, what kind of downside was there in the month of May?
There was a reduction. I will not be able to tell you exact percentages because we do not discuss the quantities here.
Okay. In terms of raw material price
I will tell you in the domestic market, there has been a reduction of more than 20%.
Okay. Sir, raw material side, is the pricing upstream still on, or has there been some softening because there has been softening in prices of other chemical prices also?
Unfortunately in our case, what has happened is that they have attained stability in the last three months, but we do not see any softening as of now. They have been increasing consistently for the six months till April, and now they have been more or less stable since then. We are not seeing any softening. We were expecting some softening in the month of May or June, but unfortunately it has not happened till now.
Okay, sir. Thank you so much.
Reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The next question is from the line of Rohit Nagraj from Sunidhi Securities. Please go ahead.
Yeah, thanks for the opportunity. Sir, pardon me for my limited knowledge, but as I can see in terms of our capacity expansions, these have happened at the rate of 5,500 metric tons on a consistent basis. Is there any thumb rule to this? Since we have reached at a level where the growth probably will be relatively faster, again, why are we going at just 5,500 tons, two lines instead of going in for a little higher in expansion, which can probably give us benefits of scale. Thank you.
No. The only thumb rule is that our lines are designed this way, that one line may approximate capacity of 5,500 tons. These are the lines that we keep adding one by one. There is no other thumb rule on that in terms of demand, et cetera. Obviously, if the demand is more or less, we can pace the lines accordingly to meet the demand.
Right. As I can see historically, every after couple of years, we have seen that there has been a capacity addition. Is it not possible to do it at one go instead of going it on a yearly basis, which as I explained, probably would be good in terms of benefits of scale. Instead of having 11,000 tons capacity directly going for maybe a 22,000 ton capacity which can give us those kind of benefits.
We buy the land and when we do the civil work, et cetera, and common utilities, we do it on the scale for it to be able to meet 11,000 tons. That is why whenever we do the CapEx, the first phase is much more expensive than the second phase because in the second phase only the line comes in, the common utilities, civil work, et cetera, is done in the first phase itself.
Right. Generally, how much time does it take to put up a line?
It takes around 18 months for a line to come up in a normal circumstances.
Okay. Right. We have to plan probably a couple of years in advance if we gauge that there would be certainly a demand will increase. Right?
Yes. Ideally we would like to see the demand two years ahead and then put up a line.
Correct. You explained in the earlier answer that we expect that sometimes in mid 2024 we see the incremental capacity utilization being absorbed and we are at optimal level. Effectively it seems that every single year we'll have to add another 2,500 tons of line.
Well, that depends on the growth, what growth we see in future. Based on that, we have to time the expansion.
Correct.
We have to take into account what is the market growth that we are anticipating and accordingly we time the expansion.
Right. Just a last small clarification. Maybe sometime in 2017, what was the cost to put up 5,500 tons of line and what has it been now? Just to understand what has been the price inflation in terms of the equipment and the capital expenditure.
When we started off the expansion, there was not much inflation at all. Thankfully a lot of our equipments and expenditure was done before the COVID. A lot of the commitments are made. After this COVID has come with steel going through the roof, there has been massive inflation, I would say maybe even 30% in just the last one year. We've been protected from a major part of it because we had our orders in before COVID.
Sure. Understood. Thanks a lot.
Thank you. The next question is from the line of Niraj Mansingka from White Pine Investment Management. Please go ahead.
Sir, hi. Just wanted to know, you are talking of Duncan Engineering. Can you give your thoughts on what you see going ahead and how you see the investments in that firm and where the business is going? Some more color on that would be useful.
Sir, the line is not very clear, but basically what you're asking is how Duncan Engineering is doing and what the way forward is. Am I correct?
Yes, sir.
Duncan Engineering performance continues to improve as is evidenced from its numbers. The cash position also keeps improving. In the last year we've beefed up the team, we've brought in new people in engineering and in procurement and all these kinds of areas. In terms of growth for that company, that will come from new products, better products and new approvals. They have different approval things like EIL approval and all those kinds of things. Approvals in the PSUs like BHEL and NTPC and places like that. Working towards that and then the growth should be good.
Can you give more color on whether you're planning to invest more money in the firm?
No, we're not planning on investing more money from here. That I can tell you.
Okay. Long-term prospects of having this business as a core business or is it ultimately a sell-off or hive-off?
When that is decided, you'll be the first to know.
No, the reason I'm asking you is because some time back, you just mentioned that you're not having much ideas of investment. Right? You don't want to enter to unrelated space. This is a space you are present, so that's why I was wondering.
No, there is nothing on the table to invest further.
Okay. Thank you very much.
Thank you. The next question is from the line of Shiv Chanani from Elara Capital. Please go ahead.
Good afternoon, sir, and thanks for the opportunity. Just wanted to have your view on how do you see Oriental Carbon evolving, let's say, over a five-year timeframe? The reason I'm asking this question is that clearly, let's say, once the new capacity is on, it will be generating anywhere between INR 150 crores-INR 200 crores kind of an EBITDA number, depending on cycle and a whole lot of other things. Which will sort of make it self-sufficient, in terms of the new expansions going forward. How do we see Oriental Carbon?
Is this a company which sort of grows along with the underlying industry growth, which generally is a single digit kind of a number. Hence, consequently throws out a lot of cash. Of course, the management takes a call on how and where to deploy that cash. There are some other thoughts around it. If you can just give me a color, like how should we look this company over a 5-year period?
Right now we are basically focused on selling out the capacity that is going to come on stream. If we look at our overall tonnage numbers that we sold in the year ending March 31st gone by, and if you look at the potential capacity that we'll have three years from now, there is still a huge delta to cover. Covering that delta on its own is also going to give a lot of growth. Beyond, no, we have not thought of anything else. If you had to push me to pick one of the two options that you suggested, then the first option, where if the company grows with the underlying growth and throws up cash.
Right. Again, a follow-up to that is, and again, which is probably an extension of what Chirag asked earlier. Is the company at some point of time going to decide on its capital allocation policy and say that, "We are going to sort of pay out this much as a percentage of profits to the shareholders, which can be a mix of dividend and a buyback, and this is the kind of cash we are going to deploy in surplus investments.
No, I think that's a fair point that Chirag has raised and now that you followed up upon. Sooner rather than later, it appears we will have to chalk out a policy and come up with it for the shareholders.
Sure. Fair enough. Thanks a lot and all the best.
Thank you. The next question is from the line of Apurva Mehta from AM Investments. Please go ahead.
Yeah. I just wanted to ask this new capacity, what will be the timeline to ramp up this capacity? Like when it starts in October, can we ramp up in one month's time or two months' time if the demand is there, or it will take some time to ramp up?
What Akshat has also pointed out, that once it starts in October, we hope to ramp up a substantial part of it by 2022 when the anticipated orders should flow in for the next year. The dispatches of that should start, some from November, December for exports or January, like that.
Okay. On the customer front, when you were telling we will be ramping up and exporting more to U.S., are we still in place and getting new customers from the U.S., or what's your take on that?
Yes, we are looking at new customers from U.S., but not new customers globally. Most of them would be plants of the customers where we supply elsewhere but not in U.S. That will be there.
Okay. A request to the management to think about giving dividend, which is taxable very high nowadays for a HNI kind of thing and everybody. It's better to have a buyback kind of a thing which will be sustainable buyback where the management having only 51, 52% kind of holding. That can also go up or management participating in that same buyback and you know the company is still traded at a very reasonable or a less than fair value kind of thing. It's better to have a buyback kind of a thing that could be more tax-friendly also.
Okay. We have noted what you have said.
Yeah. Thanks a lot.
Thank you. The next question is from the line of Rajat Setiya from iThought Financial Consulting. Please go ahead.
Hi. Thanks for the opportunity. My first question is, what will be the blended tax rate after the new capacity comes online?
Are you talking about tax rate after the new capacity?
Correct. On the new revenue.
The tax rate applicable to now is 25% plus surcharge. That is the rate which will be applicable to us. Obviously, we have some MAT carry forwards, so the outflow would be on MAT basis only.
Which is around 22%?
MAT 20% or 18%.
Yeah. It will be around 18%. The outflow will be around 18%.
Okay. All right. The second question is about the capacity extension. Once we are done with the ongoing brownfield CapEx, is there room to grow in a brownfield manner after this?
I didn't get your question. No, there is no room to grow brownfield after this.
Okay. Let's say after two years, we decide to grow in a greenfield manner, what kind of cost differential will come? Today we are spending around INR 220 crore for 11,000 tons. What kind of CapEx can it take for the similar capacity in greenfield?
I think in today's prices, for greenfield, INR 220 would, ballpark, become INR 300 or more.
300. At some point in time you will have to undertake that. At that cost, what do you think will be IRR that can-
There is no payback for greenfield today for anybody.
Okay. How do you uncertain scenario from our side, our capacity and all, after five years? If there is no payback, then are we not going to grow after five years?
That bridge will have to be crossed when we reach there. Today's situation is what it is. Today's situation is 11,000 tons brownfield expansion and greenfield expansion is not viable. Now, let's see when the time comes, what the market scenario is at that stage.
Sure. Appreciate your reply. Thank you so much.
Welcome.
Thank you. The next follow-up question is from the line of Ritesh Chheda from Lucky Investment Managers. Please go ahead.
Just I have one follow-up. In the quarter gone by, which is the current quarter, were our units plants operating or they were shut for some days?
No, the plants were not totally shut for any day. They were operating, albeit at a lower capacity because of the fall in demand, but they were operating, yeah.
And for us, expo-
Demand.
Sorry?
We took shutdowns more because demand went down, right? We did not run the plants because of that.
Plant was unoperational for how many days in the quarter?
No, sorry. We took shutdown of lines. The plants were operational.
Okay. Understood. For us, the exports should have been doing well, right?
Yes. Again, exports did well in April. There is a slight decrease in the month of May and June. Hopefully, it should come back in July.
Okay.
The decrease has been more remarkable in the domestic market.
Okay. Thank you, sir.
Thank you. Due to the time constraint, this was the last question for today. 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 or Strategic Growth Advisors, our investor relation advisors. Thank you once again. Take care.
Thank you. On behalf of Oriental Carbon & Chemicals Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.