Ladies and gentlemen, good day and welcome to Sudarshan Chemical Industries Limited Q2 FY 2025 earnings conference call hosted by Dolat Capital. 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 the star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Nitesh from Dolat Capital. Thank you, and over to you, sir.
Thank you, Steve. Good morning, everyone. On behalf of Dolat Capital, I would like to thank the management of Sudarshan Chemical Industries for giving us the opportunity to host their Q2 FY 2025 earnings conference call. From the management team we have with us today, Mr. Rajesh Rathi, Managing Director, Mr. Nilkanth Natu, Chief Financial Officer, and Mr. Amey Athalye, General Manager, Finance. Without further ado, I would like to hand over the call to the management for their opening remarks, after which we will open the forum for a Q&A session. Thank you, and over to you, sir.
Thank you Dolat Capital and Mr. Nitesh for hosting our earnings call. Good morning, ladies and gentlemen. Welcome to Sudarshan's quarter two FY 2025 earnings conference call. Our investor presentation has been uploaded on the stock exchanges for your ready reference. During the call, we could make forward-looking statements. These statements consider the environment as we see as of today and carry risks and uncertainties that could cause our actual results to differ from those expressed in today's call. We do not undertake to update any forward-looking statements made on this call. I would like to take you through the financial highlights. On overall basis, there has been a robust growth in the top line and recorded highest ever pigment sales in quarter two as well as H1 FY 2025. The robust performance is also reflected in higher gross margin as well as EBITDA margin. Coming to the quarterly performance.
On a consolidated basis for the quarter, total income from operation stood at INR 696 crore as compared to INR 601 crore for the same period last year, higher by 13% year-on-year. EBITDA for the quarter stood at INR 94 crore compared to INR 66 crore in Q2 FY 2024, and EBITDA margins stood at 13.6% compared to 10.9% over the same period last year. The half year performance. On half yearly basis, total income from operations stood at INR 1,330 crore versus INR 1,209 crore in the same period last year, a growth of 10%. EBITDA for H1 is at INR 175 crore versus INR 135 crore last year, and the margin is at 13.2% versus 11.2% over the same period last year.
Now, going into the details of our pigment business. Coming to the pigment business, I am glad to report that we have achieved highest ever quarterly revenue and EBITDA. This is our seventh consecutive quarter where top line has grown on year-on-year basis and EBITDA margins are now closer to 16%. Our go-to-market strategy has resulted in improving the export revenue, and we also see growth across all the major international geographies. There is a strong traction in the new products business as well. For the quarter two FY 2025, income from operations stood at INR 660 crore as compared to INR 522 crore for the same period last year, growth of 26% year-on-year. On a sequential basis, revenue is higher by 12% compared to INR 589 crore of the quarter one FY 2025.
During the quarter, we have delivered robust export sales of INR 360 crore as compared to INR 250 crore, higher by 44% year-on-year. On a sequential basis, export revenue is higher by 20% compared to INR 302 crore of quarter one FY 2025. We have seen growth across geographies with contribution coming from Europe, North America and Southeast Asia. With higher growth from the international geographies, the export-domestic mix stands at 55%-45% compared to 47%-53% in the same period last year. India sales for the quarter is at INR 300 crore, higher by 10% compared to INR 272 crore in the same period last year. On a sequential basis, India sales continues to deliver consistent growth and sales is higher by 4% compared to INR 287 crore of quarter one FY 2025.
Specialty pigment sales stood at INR 457 crore as compared to INR 362 crore for the previous year, same quarter, 26% year-on-year growth. On a sequential basis as well, the revenue has grown by 13% as compared to INR 403 crore of quarter one FY 2025. Non-specialty sales for the quarter stood at INR 202 crore, which is higher by 26% compared to the same period last year. On a sequential basis, the revenue is higher by 8% compared to INR 187 crore of the quarter one. Gross margin of pigment business for the quarter is at 47.8%, as against 44.8% for the same period previous year. Compared with the sequential quarter, gross margin have marginally gone up from 47.2%. EBITDA for the quarter stood at INR 105 crore as compared to INR 67 crore for the previous year, same quarter.
The EBITDA margin is at 15.9% as compared to 12.8% over the same period last year. On a sequential basis, EBITDA is higher by 60 basis points. In H1 FY 2025, the total income from operation for the pigment business stood at INR 1,249 crore versus INR 1,058 crore in the same period last year, a growth of 18%. EBITDA for H1 is at INR 195 crore versus INR 131 crore last year, and the margin is at 15.6% versus 12.4% over the same period last year, thereby increase of 3.2%. Now, coming to the balance sheet. The balance sheet of the company continues to strengthen with healthy business operations. The net debt of the company has reduced further to INR 359 crore in quarter two from INR 445 crore in quarter two of FY 2024 and INR 375 crore in quarter one FY 2025.
This has also resulted in improving the leverage ratio to 0.3x in quarter two compared to 0.4x in the quarter two last year. The working capital cycle continues to be managed efficiently. The cash conversion cycle is down to 80 days in quarter two FY 2025, while it is higher by seven days compared to the sequential quarter, Q1, mainly due to planned increase in the inventory. To summarize, the CapEx which we have built over the period has started showing the results and getting reflected in the financial performance. We have now positioned ourselves to provide wider basket of the product to the customer globally. We are confident in our growth journey, and we are committed to deliver long-term value to our stakeholders. With this, we now open the floor for question-and-answer session. Thank you.
Thank you very much, sir. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Rohit Nagraj from Centrum Broking. Please go ahead.
Thanks for the opportunity, and congrats on a good set of numbers. First question is on the engineering business. Now, given that the pigment business has been showing robust growth in terms of both top line as well as margins, do we have now plans, and given that we are now going for acquisition of Heubach, are there any plans of hiving of the engineering business given that's dragging the overall margins and performance? Thank you.
Sure. Thank you for your question, sir. It's a great question. The board has taken a strategic view of building this business. The transformation journey for this is being launched as we speak. Give us one year, and I think this business will also show good robust numbers.
Sure. Fair enough. Sir, second question is in our presentation on slide 19, we have given the outlook for FY 2025 and beyond. Where in the first column, we have talked about the CapEx program to drive future growth and bring in EBITDA improvement. Just a clarification, will there be any incremental CapEx or the ones that we have done that is going to drive the incremental improvement?
Rohit, thanks for the question. The clarification here is there will not be any new incremental CapEx. The CapEx program which we had initiated in the past and completed in FY 2023. As I mentioned in my opening remarks, we are seeing a good traction for our new products which have been in the market. And we see that these new products and the CapEx will contribute going forward.
Sure. Thanks a lot and all the best, and Shubh Deepavali.
Thank you, Rohit. Wish you the same.
Thank you. The next question is from the line of [Rajesh] from AlfAccurate Advisors. Please go ahead.
Okay. Hi. Thank you very much for this opportunity and congratulations for a good set of numbers. I am just trying to understand that with what I would say consolidation in the number of industry players. Do you expect that the pricing power which has been hit significantly, because if I look at the global companies, P&L, most of them are operating at 0% margins. Do you think now there is some pricing power which will prevail and that can lead to better profitability? That is number one. Number two, considering that we should now, a lot of time has been spent in getting the approvals. Do you expect the CapEx which has been done, the asset utilization to improve and the asset turn can improve over the next 12 to 18 months?
Thank you for your question, sir. I think the first thing is that most of the pigment companies have not been doing well. It is because I think we have been, some of them, and Sudarshan had a different position in the market. And one of the most value-creating companies, I think, in the pigment segment, and that was because of some of the principles we follow, right. I think it is going to be important that we continue and build the new organization based on these principles. One is customer centricity. So how do we be not inward-looking and be more customer-focused, and what are the areas where we want to focus on? The second is a very lean organization based on first principles, right. And very much looking at what are the overheads we are building, how do we streamline our SG&A costs, et cetera?
I think the first, in building a profitable company, I think it will be more on focusing on the cost side rather than on the pricing side.
Okay. But in the last three to four years, do you think the pricing by and large would have reduced?
No, sir. I don't think the pricing with, there are always segments of market. But the segments which we play in, I don't think the pricing has reduced.
Okay. Can you answer also my second question, which is about the asset turn improvement in asset turn?
As we had mentioned, our CapEx plan to achieve the whole was four years. So anywhere between three and four years was our plan, and that's what we will try and achieve.
So where are we in that journey? So basically, some time has been already passed, am I right? Almost I think 24- months has been, and CapEx was happening every year, correct? From FY 2019, FY 2020, FY 2021. So I am saying in that journey, where are we in terms of—
I think we are about, let us say between one and two years, right, in that journey. So we are in the mid 18 months, right? I would say.
Understood. And by when you think you will be doing the QIP to this resolution, which was passed through to fund this acquisition, by when you think that will be done?
The QIP related, the procedure will be followed as per the regulatory guidelines.
Okay. Got it. No, basically my question was by when you think the raising will be done? [crosstalk].
Sorry to interrupt, Mr. Rajesh. Could you please come back in the question queue for further questions?
Sure. No problem. Thank you. Wish you all the best.
Thank you.
The next question is from the line of Archit Joshi from B&K Securities. Please go ahead.
Hi. Good morning, sir. Thanks for the opportunity, and season's greetings to all of you. I have two questions. Firstly, on the reported exports growth, which has been quite robust for this quarter, I just wish to ask if this growth is driven by any product-related or customer-related issues that Heubach might be facing at the global level, and there has been a natural shift towards us in terms of garnering that market share from them because we are going to be a unified entity sooner or later. Or is there any other green shoot in a particular industry or segment that we are witnessing which is the reason why there has been a strong export growth?
Archit, this was a planned growth, right? Given the new CapExes, these were all oriented more towards the international markets, and that's where you see this growth coming.
Sure, sir. Any particular industry that is aiding to this strong growth in exports? Just clarifying that this is not because of Heubach's issue, right? Not any market share gains coming from Heubach to us.
This is mainly coatings and plastics market which we are gaining. There are headwinds in the general industry which has also helped building this. Nothing very particular to, I would say, Heubach, but general, I think headwinds in the industry which are favorable for us.
Got it, sir. My second question is on the capital structure. I think from what we heard from you all during the last con call is that, we need somewhere close to INR 900 crores of incremental CapEx for Heubach, legal costs, et cetera. We have obviously made an announcement towards raising INR 1,000 crore + INR 250 crores with the green shoe option. That leaves us with another INR 1,000 odd crores left to fund the entire acquisition along with further CapExes. Are there any plans beyond what we have announced on the QIP and would we be looking to sell maybe the EPC business or maybe any spare land at our disposal or would this be entirely funded through debt? If you can just help us outline the capital structure for this fundraise.
Sure, there will not be any further plan to increase the equity beyond what we had mentioned as far as our QIP issue is concerned, t hat is point one. Second is, as Mr. Rajesh Rathi mentioned in the opening question, as a management, we have taken the decision to transform the Rieco business and build this business. Currently, there is no plan right now of monetization of that particular asset, and there is no spare asset like land, et cetera, available for monetization.
Would it be fair to assume the balance amount will be all funded through debt, if one were to build in some numbers? If you can just give some clarity on that account.
Yes.
Got it. Got it, sir. Thanks a lot for the clarification and happy Diwali to all of you.
Thank you.
Thank you.
The next question is from the line of Noel Vaz from Union Asset Management. Please go ahead.
Yes. Hi. Thanks for letting me ask the question. In the presentation it is mentioned that you have a market share—
I am sorry to interrupt, sir. Your voice is coming very low.
Hello, can I be heard? Hello.
Yes, sir. Sounds good now. Thank you.
So it is mentioned that the current market for the pigments is about $8.6 billion, so relevant to Sudarshan Chemical Industries. So with the potential acquisition from Heubach, are we looking at market share being closer to about 30% or 25%? How should we think about that?
Sure, I think the organic pigment market is about, I would say, 5 billion. And the balance, you would kind of include the inorganic micas, et cetera. From that perspective, if you look at the market share, it could be about 20% going forward.
Okay. Thank you. That is all from my side.
Thank you.
Thank you. The next question is from the line of Sanjesh Jain from ICICI Securities. Please go ahead.
Yeah, good afternoon, sir. Thanks for taking my question. First is on the operating leverage in the pigment business. You said that there is a 400 basis point YoY improvement in the gross profit, and there is another 400 basis point improvement at the EBIT level. We are not seeing the operating leverage playing out in the margin. Even if I look at the other expenses, that inflation remains quite steep. Can you help us understand what is driving such a sharp increase in the other expenses?
Sanjesh, thanks for this question. If you look at the other expenses, it is a combination of two, three cost levers. One is the manufacturing related cost. Second is the selling variable related cost. A small portion remains is on the admin or fixed cost. Predominantly, this other expense has been on a higher side as far as the manufacturing and selling variable cost is concerned. With the increase in the sales and with the increase in the volume, it gets also translated into the production related cost going up, which is in line with the manufacturing volume. The sales increase gets reflected in the selling variable cost. With this, we see that this percentage should be more or less in this line. That is the reason how we are looking at EBITDA margin increasing in line with increase in the gross margin.
You are telling that there is absolutely no operating leverage because you say that the percentage remains static and it has been static till now as well. We are telling that there is no operating leverage in the business from the manufacturing side. I thought ETP and all we run continuously. That cost should not rise equivalent. Again, utility cost should not be proportionate. Admin cost should drive certain operating leverage. Clearly none of them are visible today. Why would sales and marketing costs will go up similar to the gross profit?
Sanjesh, sales cost will go up due to the freight, correct? The freight and the commission which is related to the domestic sales part. To that extent, those will be in line with the increase in the sales.
Okay, got it. The second is on the Rieco. Can you help us understand when you say we are in the process of transformation? What actually we mean in terms of transformation, does it involve more investment? What are we really trying to achieve when we say we are in a transformation of it?
There's no investment envisioned. We are strengthening that organization, the business processes, so that the numbers are more consistent and we improve the numbers.
No product changes, no product improvement. Where are we really focused on? We are telling only organizational is a problem right now in Rieco and rest of all in the place?
It's our whole go-to-market strategy. There are a lot of levers in how the transformation takes place. To answer your question, obviously, there's no new investment we need. I think what we need is to execute our projects well. And the entire process, it's a project-based business, so ensuring that any cost runs are adhered to, et cetera. There are several levers, which today I can't tell you, but basically it's more on the execution areas. We believe that phase one, whatever business we have, how do we deliver better and get better value even if, and then looking at any other diversification in that business.
Okay. Great. Thanks for those elaborate answers and best of luck for the coming quarter.
Thank you.
Thank you, Sanjesh.
Thank you, sir.
The next question is from the line of Dhavan Shah from AlfAccurate Advisors. Please go ahead.
Yeah. Thanks for the opportunity, sir. My question is on the export side. I think you mentioned that because of the better growth in the coating and plastic, we did some good revenues in the export business. I just wanted to understand, is this largely because of the inventory filling in the system due to restocking, or is it the genuine demand in the end segment? How do you see inventory and the demand situation for our type of pigment in the export business?
Just to clarify, sir, I didn't say that the markets are growing. I said this was what we aim to deliver through our CapEx projects, right? And transformation of our sales area. That was the crux area. Our CapEx program has now started delivering, which was focused mainly on the coatings and plastics area, and that's where we are seeing growth.
Exports were for the products which we were not manufacturing earlier, and the competitors were there in the international business. We are getting the market share of those products. Is that correct?
Absolutely. This was the synthesis of the whole getting into more specialties and doing the whole CapEx program, right? The whole—
What is the market size of this coating and plastic in the international business, and how much would be our addressable market? Based on INR 750 crore of CapEx, what we did, how much revenue do you expect from these two verticals in the export business?
As we've been giving guidance to the market, we expect the 750 to deliver in three to four years, but a potential of about 2x, a bout [INR 1,500 crore].
Okay. How much of that have we already done? This INR 360 crore kind of the revenue denotes how much asset done at this moment, if we annualize it, because there was earlier base business also was doing some revenue?
Like we said, we are into this process to acquire the 100% utilization. We would take three to four years. We are on the mid mark. We've completed about 18 months in this journey.
Got it, sir. Got it. Okay. Thank you. Thank you so much, sir.
Thank you. The next question is from the line of Rohit Nagraj from Centrum Broking. Please go ahead.
Yeah. Thanks for the follow-up. There is an exceptional item regarding the fees related to a transaction. Have we accounted for all the fees or will it be carried forward for a period of time till the entire transaction is not consolidated? What could be the quantum for the same? Thank you.
Rohit, the exceptional cost which we have reported, these are the costs which are incurred in quarter two for this particular transaction, majorly on account of legal fee and the due diligence cost. We don't comment on the quantum till the time the transaction is closed.
Yeah. There will be incremental cost which will come as and when the transaction is completed, right?
Sure. Yes. There will be incremental cost as and when we move ahead in the transaction.
Right. Just a second question. I am not too sure whether I should ask it from the Heubach perspective, but given that we had also explained in the earlier call that for domestic business, we will not be doing any investments given that it is already been done. So, given that Heubach is also probably operating at relatively lower utilization levels, can we expect that for the next maybe three to five years, there may not be material investment from capacity increase perspective? However, it could be primarily because of maybe some refurbishment and maybe some maintenance cost associated to Heubach facilities. Thank you.
Absolutely well said, sir. At least three years, we do not see any major CapEx coming in. As we mentioned, whatever CapExes in the three years would be regular in nature in terms of maintenance, et cetera.
Right. Thanks a lot, sir. Thank you.
Thank you, Rohit.
Thank you. The next question is from the line of Jignesh Kamani from Nippon Mutual Funds. Please go ahead.
Hi. Just from the specialty segment. If you think about export grew around 44%, and generally export is slightly more heavy on the specialty segment or systematic. If I look at the specialty and the non-specialty growth, both is around 26%. So why export high growth is not reflected in the higher growth in the specialty? So we are selling more of a non-specialty in export this quarter? Hello?
Yeah, just a second. The growth is in—
Hello, sir?
Yeah, y eah. Can you repeat your question? Can you please repeat your question, sir?
Export grew by over 44% for [a time], and generally export is very heavy on the specialty compared to the, you can say, non-specialty mix. But when I look at the specialty and non-specialty growth, it is almost 26%. There is no additional higher growth in the non-specialty. I just want to understand, we sell more of the commodity grade in the export, you can say? Because specialty growth is not reflective of the export growth.
No, sir, I think the specialty growth for exports is good, too, because it is all CapEx today.
And second, on the operating leverage, which earlier [Sanjesh has asked] , i f you think about based on the EBITDA margin, the gross margin you mentioned on the pigment division, we used to have a close to around INR 160 crore quarterly cost, you can say, or overhead, I can say, last quarter. Which increased close to around INR 210 crore this quarter on the pigment division. So almost 26% growth in the overhead cost you can say. Even if you compare QoQ, which is almost 12% increase in the cost. So why the overheads and everything is increasing drastically in pigment division?
Sir, first of all, it is not the overhead. If I see the quarterly numbers, the consolidated number for the other expenses, which I mentioned, which is the combination of the manufacturing, selling and other cost, is at INR 176 crore compared to INR 158 crore. So it is not the number which you are referring. As I mentioned, that majority of this part is linked with the manufacturing production activity as well as the sales activity. Since we have seen growth in the sales number, which also gets translated in our production volume and the utilization, we see the cost getting increased in that line.
But, sir, listen, I'd like your pigment sale is grown up by around 26% YOY, while your overhead is grown by 26% YoY. So there's no benefit of leverage you can say.
Let me check then. So sir, it is not overhead again. It is the expenses which are related to the freight, commission, the manufacturing cost related expenses. So it has been in line with the increase in the sales there.
Incrementally also, whatever the growth in the revenue, we will see similar kind of growth in this cost item also, right?
To some extent, yes. What you are saying is to some extent, yes.
Understood. Thanks, sir.
Thank you. The next question is from the line of [Aditya] from Security Investment Management. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. This 26% growth which you are witnessing in pigment division, what would be the share of volume and price mix for this 26% growth?
The prices have been quite stable, but we don't split up the volume, et cetera, right now in a public forum. But direction I'll just give you saying that the pricing has now been stabilized. Yeah.
The second, sir, last year there was raw material deflation and the market was also not doing good, and the prices I believe were at rock bottom. So why haven't seen increase in pricing of our end products?
We're not able to follow your question, sir.
Sir, last year, there was raw material deflation which was impacting the end prices, and the market was also not doing that great. Because of which the end product prices for the products were quite low. We haven't seen any improvement from those raw prices.
The prices of raw materials remain to be the same, sir. I've not understood. Why are you assuming that the prices have increased?
This strong growth which you have witnessed is majorly due to volumes only.
Yes.
Understood. Sir, this strong volume growth, this is majorly because we have gained market share from our competitors or the end market has also started improving in the export markets.
As I explained earlier, sir, that our whole CapEx investment was for specialty products targeted towards the global coatings and plastics market. That's playing out now. I think that's the question which.
Understood, sir. Thank you, sir.
Thank you. The next question is from the line of Tejas Sonawane from Asian Markets Securities. Please go ahead.
I have two questions. Firstly, on the exceptional item that we reported in our quarterly numbers. The notes which are there, mentioned below the quarterly result, which is a net amount which we have recorded, which is net of the gain which we have received from the sale of freehold land and the expenses which we have incurred. Correct me if I'm wrong over here. The expenses which you have incurred for our Heubach transactions are close to INR 325 crores net of which we have reported close to INR 11 crore of loss for this quarter?
Tejas, if you see the exceptional item line under note number seven. Note number seven gives a reference to the exceptional gain on account of the land sale, which we had done in the last year, April 2023, and that is during the financial year 2024. That transaction of INR 315 crore is different. Currently, the INR 11 crore which is reported for the quarter under consideration is related to the cost, in relation to this definitive agreement entered for Heubach. These are two separate transactions.
Okay, understood. Secondly, just wanted to ask you if you could provide us at least some sense as to whether the Heubach Group, whether their EBITDA operating profit is on the positive side or the negative side for CY 2023. Any sense which you can provide on that front?
From a confidentiality and an antitrust perspective, we can't comment on their numbers, sir, currently.
Okay, no problem. That's it from my side. Thank you so much.
Thank you, Tejas.
Thank you. The next question is from the line of Rohan Patel from Turtle Capital. Please go ahead.
Yes. Thanks for the opportunity. I just want you to share me with data points related to volume growth that for quarter two, as well as for first half, for domestic and export, and specialty and non-specialty, if you can provide that.
Rohan, from a competitive perspective, sir, we don't provide these numbers.
Okay. If you can just give us an idea that for the domestic revenue for half year, which has grown 10%, and export revenue, which has grown 27% year-on-year, how much would that be from volume and how much would that be from price? It would be more dominated by volume? If you can give us any idea.
Yes, the same question, sir. We can't give you volume, but like I mentioned, prices are quite stable now and prices are quite stable now.
Okay. You don't see that now it. So you are just referring that now it has bottomed out and now it's stable. Now we cannot see any more going down.
Yes.
Okay. Can you share your perspective regarding phthalocyanine market, like what are the trends and how the market is on year-on-year basis?
I think as a company, we do have that business but we are spread across. Phthalocyanine business is a very competitive business. There is overcapacity in that business.
Okay. That was from my side. Thank you.
Thank you. The next question is from the line of Sabyasachi Mukerji from Bajaj Finserv. Please go ahead.
Yes. Hi. Thanks for the opportunity. Two questions. One, on the export side, we have seen a very good growth this quarter. Last few calls, you were saying that there is an increase in customer inquiries, and a good possibility of shortening of approval cycle and all. Any update you can share? Have there been conversations, any progress, anything on this thing, if you can share?
The progress is seen in our numbers, and as I mentioned that our CapEx program has started yielding results, and that's how we are seeing this.
How do you see the rest of the year pan out? Is the momentum continuing, or do you foresee any challenges ahead?
I think, going forward, we do not see any major challenges. Whatever our average growth so far has been, I think we should be able to deliver those numbers from the half year.
Okay. Second question. On this fundraise, will the promoters participate?
Can't comment on that currently. I think we're going through the process right now.
Okay. That's all from my side. Thank you.
Thank you.
Thank you. We have our next follow-up question. It's from the line of Sandeep Abhange from LKP Securities. Please go ahead.
Hello. Yes, can you hear me?
Yes, we can hear you.
Yes. Thanks for taking my question, sir. Sir, I wanted to understand the overall growth in the exports. How is the market looking overall? What is your view on the exports? Do you see this kind of a growth on a sustainable basis? Because we have done the kind of CapEx, and we are kind of trying to achieve our targeted growth, majorly in the specialty market. Do you see this growth sustainable going forward, or how do you see it? If you can comment on this particular export growth.
I think the question is that, as I mentioned, is the new CapEx program. There is some echo in the line.
Hello, can you hear me?
No, we can hear you. But there is an echo in the line. Can organizers could check because there is some echo in the line. We hear our voice only.
Okay. Steve, can you check, please? The line cannot help.
Sandeep sir, are you on a speakerphone?
Hello? Hello?
Yes, I'm there.
Sandeep, can you hear us?
Yes. I can hear you.
Okay. So I think the CapEx program is yielding good results. I think a lot of our customers are looking at. Initial trials are over. We have commercialized a few businesses. Going forward, we do expect growth in terms of, I would say, between somewhere in the mid-teens numbers, going forward too, and I think that's how we should be able to build.
Okay. That's helpful. Secondly, I wanted to know the kind of revenue target which you had earlier given during the CapEx plan, that you will be achieving between INR 3,200 crore to INR 3,600 crore kind of a revenue by 2026 and 2027. Is it my understanding you are already almost inching up towards INR 3,000 crore kind of a revenue for Sudarshan Chemical Industries. So are we expecting a faster reach towards that target in the next coming one or two years? Or how do you see only on the Sudarshan Chemical Industries part, like standalone basis?
On the standalone basis, sir, our guidance was that the INR 750 crore revenue should give us about INR 1,500 crore between three to four years of our time. Since the Europe market and some of the other markets are recovering slightly, somewhere between three and four years we should achieve it.
Okay. Just last question I wanted to understand, when would we expect the integration of our back-end solutions in terms of the financials? By when we can expect that?
I think the closing should happen somewhere in our Q4 quarter, r ight.
Q4, o kay.
After the closing, the integration process will begin.
Okay. Thanks so much. That's very helpful. [inaudible] . Okay.
Thank you. The next question is from the line of Dhavan Shah from AlfAccurate Advisors. Please go ahead.
Yeah, thanks for the follow-up, sir. My question is again on the export side. You mentioned that we did CapEx of roughly INR 750 crore and peak revenue would be INR 1,500 crore. Out of that, what would be the share of this coating and plastic in the overall pie? If you can share the global market size out of this $5 billion of the global addressable market, what will be this coating and plastic market? Or maybe what could be our addressable market for our products in those two segments?
I think the majority of this INR 1,500 should come from coatings and plastics. The rough thumb number, I do not recall, but about, I would say $3.5 billion should be the market for the coatings and plastics.
The products that we are selling right now, out of this $3.5 billion, what could be the market? There are other competitors that are also selling, right? If you can clear me a bit up, what would be the market of those products which we are selling right now?
As I mentioned, sir, overall basis, this would be the few chemistries which we don't do for the coatings and plastics. But we are covering majority of the spectrum of the market. There will be exceptions, but overall the spectrum.
Out of this $3.5 billion of global market—
Mr. Dhavan, sir, could you please—
Yeah
—follow up on the question, please for other questions. Thank you. The next question is from the line of Noel Vaz from Union Asset Management. Please go ahead.
Yes. Thank you for the opportunity again. Just one follow-up on the acquisition that could happen. The thing is that as it currently stands, domestically, we have over 35% market share. Will there be some potential issues that could pop up because of anti-competitive rules in any specific geographies or even domestically? Thanks.
We are going through the antitrust filings, but I think we have quite a complementary product portfolio from that perspective. But the process is being followed vigorously currently via regulation.
Okay. That is all from my side. Thank you.
Thank you. The next question is from the line of Rohit Nagraj from Centrum Broking. Please go ahead.
Thanks for the follow-up. Again, on the Rieco front, sir, we have done in the last four years from the revenue front, it has done extremely well. You said that there is a strategic focus on the same. Just one clarification. The EBITDA margins of Rieco had been sub- 10%. Is it possible that once it attains a particular size and based on our strategy, it can reach the margins of the pigment business, or will it be always a lower margin business than the pigment business? Thank you.
The first phase is to get into the low teens and have it consistent, right, so that our processes are robust. I would look at it from a first phase of this. The second phase, whether we can go in the mid-teens, et cetera, I think that answer we can't give today, sir. But first focus would be that to reach there.
Sir. Thank you so much.
Thank you. Ladies and gentlemen, that was the last question for today's conference call. I would now like to hand the conference over to the management for their closing comments.
Thank you, Steve. Thank you, Nitesh Dhoot and Dolat Capital, and thank you, participants, for your time and interest in Sudarshan Chemical. We remain confident in the long-term prospects of our business. We look forward to engaging with you again in future. We also wish all of you a very happy and prosperous Deepavali. Thank you.
On behalf of Dolat Capital, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.