Q4 23/24

May 21, 2024

Ladies and gentlemen, good day and welcome to the Sudarshan Chemical Industries Limited Q4 FY24 earnings conference call hosted by Axis Capital Limited. As a reminder, all participants' 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. Ankur Periwal from Axis Capital. Thank you, and over to you, sir. Yeah. Thank you, Manoja. Good morning, everyone, and welcome to Sudarshan Chemical Industries Limited Q4 and twelve-month FY24 post-result earnings call. The management team from Sudarshan Chemical Industries will be represented by Mr. Rajesh Rathi, Managing Director, Mr. Nilkanth Natu, Chief Financial Officer, and Mr. Amey Athalye, General Manager, Finance. We will start the discussion with a brief management overview on the earnings performance, followed by an interactive Q&A session. Over to you, Natuji, for the initial comments. Thank you, Ankur. Thank you Axis Capital and Ankur Periwal for hosting our earnings call for Q4 FY24. Good morning, all of you, and thanks for joining to discuss Sudarshan Quarter 4 FY24 and financial year 2024 financial results. It is pleasure to be with all of you. During the call, we could make forward-looking statements. These statements consider the environment we see as of today and carry risk 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. We have uploaded our financial results and investor presentation on the stock exchanges. Now I will request Mr. Rajesh Rathi to give his perspective on the business side. Thank you, Mr. Natu. Thank you Axis Capital and Mr. Periwal for hosting the earnings call. I am very pleased to report that our pigment business has delivered a robust financial performance in financial year 2024. We went through a phase of subdued performance in FY23, however, have bounced back much stronger. The quarter and fiscal year is a milestone moment for our pigment business. We have achieved our highest ever quarterly EBITDA above INR 100 crores in Q4 and an annual EBITDA above INR 300 crores in the financial year FY23. At the same time, we have laid a strong foundation for future growth. This swift turnaround in business performance is a result of our overall strategy on building Sudarshan's core pillars towards Leap to 3, which we are working for the past few years. One of our strong pillars is focused on research and development. We have more than 100 plus technical members working in R&D under the leadership of global pigment veterans. The team constantly strives to explore new products, technology, processes that can be used to develop superior and sustainable color solutions. The R&D center is well-equipped with the state-of-the-art equipment, a world-class application lab, and analytical testing facility, thus enhancing the product development and scale-up process. This has helped us in creating the widest product portfolio in the industry, which is at par with any Tier 1 supplier. This gives us a definite edge offering a holistic solution to our customers. Our second pillar, a world-class manufacturing. We have two world-class manufacturing sites located in Roha and Mahad. In fact, after the expansion, Roha is one of the largest single pigment manufacturing sites globally. We have created global-scale capacities and infrastructure in terms of best-in-class effluent treatment plants, warehousing. With our world-class manufacturing capabilities, Sudarshan is well-positioned as a global reliable pigment supplier. To enable our reach to customers, Sudarshan has established a strong go-to-market framework consisting of local regional sales teams, customer service support, technical marketing teams, and local stocking points. This has resulted in Sudarshan now serving all significant pigment markets directly. We believe that our growth should be sustainable, and for this, we have a well-defined sustainability pillar. We already have more than 60% to 70% of our purchase power from green energy. In addition to this, we have a strong decarbonization plan, and we are committed to SBTi targets. We have many uploads for our care for society. We moved our focus from workplace safety to process safety and set up a strong corporate governance framework. All the above pillars have strengthened Sudarshan and have provided a unique opportunity to take the global leadership position. The current tailwinds such as Make in India initiative, the turbulence in the global pigment industry, and the uncertain global geopolitical situation will further accelerate the growth for the company. I would like to conclude by expressing my gratitude to all our stakeholders for their continued support and faith in us. I look forward to growing together with all of you and achieving our collective vision of being a global leading color solution provider. I will now request Mr. Natu to speak about some of the financial highlights. Thank you, Mr. Rathi. I will begin with the quarterly financial performance. On a consolidated basis for the quarter, total income from operations stood at INR 764 crores compared to INR 691 crores for the same period last year, higher by 11%. EBITDA for the quarter is at INR 119 crores compared to INR 85 crores in quarter four FY23, higher by 41%. EBITDA margin stood at 15.6% as compared to 12.3% over the same period last year. Profit after tax is at INR 57 crores compared to INR 33 crores for the same period last year. On the annual performance, for the FY2023-2024, total income from operation on a consolidated basis is at INR 2,539 crores versus INR 2,302 crores in FY23, a growth of 10%. EBITDA for the period is INR 301 crores versus INR 211 crores last year, higher by 50%. EBITDA margin has improved by 330 basis points and seen at 12.5% versus 9.2% during FY23. Net profit is at INR 110 crores compared to INR 45 crores for the year FY23. Now going into the details of our pigment business. For the quarter FY24, income from operations stood at INR 644 crores compared to INR 594 crores for the same period last year, a growth of 8%. On a sequential basis, operating revenue has grown by 23%. Domestic sales for the quarter is at INR 345 crores, higher by 15%, compared to INR 301 crores same period last year. On a sequential basis, domestic sales have grown by 24% compared to INR 278 crores of Q3 FY24. Exports for the quarter grew to INR 299 crores versus INR 293 crores in the same period last year, higher by around 2%. On a sequential basis, exports have grown by 23% compared to INR 244 crores of Q3 FY24. Year on year in export is owing to continued challenge in the Europe market. While Europe region has shown improved demand environment quarter on quarter, this region has registered marginal degrowth on an annualized basis. North America market continues to register double digit growth on sequential and year on year basis. Other major export geographies have also shown improvement in the demand scenario. We continue to remain watchful towards international geographies considering the geopolitical issues. Specialty pigment sales stood at INR 439 crores compared to INR 412 crores in the same period last year, higher by 7%. On a sequential basis, revenue has grown by 23% compared to INR 358 crores in Q3 FY24. Non-specialty sales for the quarter is at INR 205 crores, higher by 13% as compared to the same period last year. On a sequential basis, non-specialty revenue has grown by 25% compared to INR 163 crores of Q3 FY24. Gross margins of pigment business for the quarter is increased by 250 basis points to 44% as against 41.5% for the same period previous year. Year on year increase in the gross margin is due to softening of the raw material prices and also improvement in the product mix. EBITDA for the quarter is at INR 100 crores in quarter 4 FY24, the highest ever EBITDA for the quarter as compared to INR 73 crores in the same period last year, which is higher by 37%. This is the highest ever EBITDA we have achieved in our pigment business. EBITDA margin stood at 15.6% as compared to 12.3% over the same period last year. On a sequential basis, EBITDA margin is higher by 230 basis points. Speaking about the financial year performance of pigment business, the total income from operations stood at INR 2,223 crores versus INR 2,079 crores in the same period last year, a growth of 7%. We did see double digit volume growth in this year. However, value growth is lower due to price pass-through. Gross margin has improved to 44.3% for March 2024 as compared to 40.2% for FY23. EBITDA is at INR 300 crores, which is highest ever versus INR 194 crores in the previous year, and EBITDA margin has increased by 420 basis points to 13.5% versus 9.3% in the previous years. The company has, during the year, declared interim dividend of INR 3.6 per share, which is 180%, and the board has recommended final dividend of INR 1 per share, which is 50% of face value, taking total dividend outflow to 230% for the year, which translates to the dividend payout of 35% of profit after tax. Now coming to the balance sheet. The balance sheet of the company as at March 31, 2024 has strengthened, and this is reflecting from the improved financial ratios. The net debt of the company stood at INR 394 crores in Q4 FY24, down from INR 797 crores in Q4 FY23, and INR 434 crores in Q3 FY24. With the overall better results from the operation and monetization of assets during Q1 FY24, the debt of the company has reduced substantially, resulting in the better financial ratios. The net debt to EBITDA stands at 1.2x as at March 2024, compared to 3.8x in Q4 FY23, and 1.5x in Q3 FY24. Debt to equity stands at 0.3x at March 31, 2024, compared to 1x in Q4 FY23 and 0.48 in Q3 FY24. The working capital cycle has been effectively managed throughout the year, thereby resulting into cash conversion days of 66 days in Q4 FY24 as compared to 74 days in the last year Q4 FY23, which has in turn improved the current ratio to 1.4x compared to 1.1x last year same quarter. To summarize, it has been a good quarter and financial year. We are poised for growth given the capabilities we have built and the strong tailwinds in our favor. We are confident that our long-term prospects remain intact. We remain confident in our growth strategy and continue towards commitment to deliver long-term value to our stakeholders. With this, we now open the session for Q&A. Thank you. Thank you. 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 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 Sanjesh Jain from ICICI Securities. Please go ahead. Hey, good morning, sir. Thanks for taking my question. First, on the global scenario of the pigment, now that it looks like we are back to the growth track and utilizing the network, how do you see next year panning out at the pigment business, and how is this global supply chain disruption going to aid us? That's number one. Number two, which all the geographies do you think will benefit Sudarshan? Will it be more North America or Europe or rest of the world? Number three, there is consolidation in the industry. Can you help us understand which are the pigment category where you think the opportunities are rising and where Chinese competition is more benign? Say, as AZO is more competitive, high-performance pigment are less competitive, more color into it would be helpful. This is initial questions. Thank you. Hello, operator. Yes, sir. I hope I was audible, right? Yes, sir. Okay, thank you. Mr. Rathi. Hello? Yeah. Hello. Yes. You are audible. Yes. Sorry, I was just saying that, if you could repeat the first question for me. There were two, three questions, right? Okay. First question is on the pigment growth for next year. Considering the Okay in the industry and which geography do we think we are better placed to capitalize that? That's number one. Got it. From your perspective, where are we well-placed and where the competition is more benign, say, AZO versus HPP versus effect pigment? And probably a follow-up question is on the application. Which are the application which will benefit because of all this? So I think there are two, three areas to answer your question for our growth. Yeah. From a perspective, Sudarshan Chemical Industries has been investing itself on the journey of becoming a global leader player, which I described the four, five pillars which we've been working on and which are now playing out. We've created the broadest product portfolio, created a good world-class manufacturing facility. Given the current events where you've seen a lot of turbulence in the pigment industry, it gives us a golden opportunity of accelerating our growth. In terms of quantifying the numbers, I would say our margins are back to normal. Now we are really focusing on growth. With the recency of the events, and the uncertainty, it's very difficult to give you a pointed number. However, I can tell you directionally that all these positive statements, we are very deep our engagement with customers, the velocity of our opportunity funnel has really accelerated. We do see good set of numbers coming forward. In terms of our global landscape, I think Sudarshan Chemical Industries has a very unique place where we are placed now in terms of being the global reliable supplier with the broadest product portfolio. There are other competitions from China and India with a narrow product portfolio and a limited go-to-market strategy. That's where we kind of distinguish ourself or that's our USP in the market. Yeah. No, again, my question was with geography, do you think we are better placed to grow? Sorry. Yeah. Geography is definitely Europe, North America, South America. I think all these geographies, the international geographies, are going to be playing a significant role in our growth forward. That's where the engagement is more. No, I think I asked question on the portfolio overlap versus the consolidation happening. I know we have the broadest portfolio, but that broadest portfolio, does it overlap with the Yeah with the customers who are in the turbulence? And number 2, how long does that approval cycle for those product takes if somebody wants to replace them? Right. Yes, we probably have the most complementary product with the global players. Probably 80% of our portfolio would be complementary, right? We have been preparing ourselves. Like I said, the opportunity has accelerated. Now it depends on customer to customers. Some customers have really decided to accelerate the approval process. Whatever you would have taken 6 months or 1 year, could happen in 3 to 4 months. That process has already begun. Is that understanding right? Yes. The process has begun. The biggest opportunity we have is in the coatings industry. The approval process generally is in here, but we feel this will get shortened. Got it. That is very helpful. Second question on the gross profit margin. I understand year-over-year it has improved, but sequentially, there has been a drop in the gross profit margin. Any particular reason? I think the raw material still remains at a very reasonable level. What is the reason for the decline in the gross profit margin sequentially? I do not see mix being too different in this quarter versus previous quarter. I think as the raw material pricing, this is a pass-through of raw material prices. We were able to hold a larger portion in Q3 than Q4. That is one reason. Natesh, you would like to add anything more? Yeah. Thank you, Mr. Rajesh Rathi. One reason, as you explained, is we were able to hold on the raw material price pass through in Q3 compared to Q4. Also, there has been a marginal product mix between the specialty. Also, there has been a product mix changes and the inventory effect. Total put together, we see that our gross margin for the quarter has been in the range of around 44%, which is if you really see on a long-term basis, it is a long-term average. But I think over a period, our mix has only become better, right? With more high performance, more effect. So long-term average is not a benchmark we are looking at, right? Yeah. Mr. Sanjit. So, I agree with you. The long-term average, the reason why we mentioned is, post the raw material inflationary trend, we are seeing that we are coming back to the normalcy. And as you have rightly mentioned, the mix would play out favorably in the coming year. That is very clear. Thanks, sir. I will come back in the queue for more questions and best of luck for the coming quarters. Thank you. Thank you, Sanjit. Thank you. Thank you. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the queue, please limit your questions to two per participant. Should you have a follow-up question, we will request you to rejoin the queue. The next question is from the line of Madhav from Fidelity Investments. Please go ahead. Yeah. Hi, good morning. Thank you so much for your time once again. My question was on the margin profile for Sudarshan over the next two or three years. If you look at the past, I feel our product mix used to be very different than what it is today, and we have been working for the last four or five years to expand the portfolio, which seems like it is in place now. Given that, pre-COVID, we used to- Yeah. Madhav, hi, Nilkanth here. You are not clearly audible. Maybe can you be slightly closer to the mic and slightly slow down the speed? It is coming. I am not able to hear it clearly. Is it better now? No. Hello, is it better now? Slightly. You can go ahead. Yeah. I will speak a little loudly, a little clearer. My question basically was that if you look at Sudarshan's margin profile pre-COVID, we used to be in that 14%-15% range. That was when our product portfolio used to be very different than what it is today. I think since 2017 or 2018, we have been speaking about expanding this portfolio, which seems like it is in place now. My question was that if you think from a two, three-year perspective, as some of these newer product SKUs start scaling up for us, can the margin profile of the company move above that 14%, 15% into the, let us say, 17%, 18% range? I do not want an exact number, but directionally, is there scope for margins to be higher in the coming few years versus what it was pre-COVID? Thank you. Yes. Thank you. This is Rajesh here again. That is a very good question. I think there are two factors, sir. I think if you see average before COVID, our margins probably were around 14%. One year was kind of an outlier. Our endeavor first now was to come back on margins and create a healthy balance sheet, which has happened now. Now we are focused on growth. We need to get growth first and then again focus on optimizing and improve our margins. Going forward, definitely economies of scale should play up. Our EBITDA margins should improve going forward. Could you give some sense in terms of how different the gross profit margins are for the newer portfolio versus the older portfolio? Is it 300-400 basis points higher, or how different is the margin profile globally? Madhav, would you like to take this question? Madhav, hi, Nilkanth here. We do not give the specific between the specialty product portfolio and the range between the specialty product portfolio, but as Mr. Rathi has mentioned, the new CapEx is more on the specialty side and that too on the higher performance segment. We see that overall basis, our margin, it should be margin accretive once we see the CapEx ramp-up happening. Understood. Thank you. Thank you. The next question is from the line of Rohit Nagaraj from Centrum Broking. Please go ahead. Yeah. Thanks for the opportunity and congrats on good set of numbers and margin recovery. First question is on the sequential side in domestic. Domestic, again, we have shown a very strong growth. Which all are the segments where we have seen this growth and which all segments are still relatively lagging behind? Thank you. In India, usually the Q4 quarter is a stronger quarter. What we found is in this quarter, a lot of our plastic customers, the ramp-up happened, and they were also stocking up. Plastics did very well. I think printing inks was muted. Printing ink was a muted growth. Sure. Second question is, globally, the second-largest player has called off for an insolvency. Are we seeing any signs of traction because of that? Based on our talks with our customers across the geographies, how does the foreseeable future look like, and what is your understanding of the entire phenomena that because of the insolvency, would there be any capacities which have already gone out of the system or will go out of the system? Thank you. Sir, I think it's a dual effect, right? I think we were positioning ourselves as a global reliable supplier, and that's what we've been engaging with our customers. I would also like to admit that the current event has accelerated product samplings, more in-depth interaction with customers, and our velocity of opportunity funnel has improved. Right. That's the current scenario from a perspective of the market, right? Your second question, sorry, could you repeat your second question? Yeah. Have we seen any capacities going off the stream or whenever we are talking to our customers are now looking at incremental order flow to us, given that there could be some disruptions. Yeah, sure. So wherever we are already approved, we are seeing a better flow. But I think what's more important is not any new set of customers are getting engaged, which is very important for us. The capacities going off is very difficult to comment right now because the recency of the event is, it's a very recent event, so it will take some time to kind of come to that stage. Sure. Thanks for answering all the questions, and all the best. Thank you. Thank you. Thank you. The next question is from the line of Archit Joshi from B&K Securities. Please go ahead. Hi, sir. Thanks for taking my question and congrats on a very solid Q2 performance. My first question is with regards to the new assets that we have capitalized after the INR 750 crore CapEx that we did. I just wanted to understand what would be the utilization levels of the new assets, given a strong operating leverage that we saw in the first quarter. Point being, trying to understand is, on the current base, how much would be the realizable sale that we can garner from the leftover utilization that we have? Right. Nakulji, would you like to address a few things and I can add on? Sure, sir. Hi Archit. This is Nilkanth here. On the new CapEx ramp up, this new CapEx projects we have commissioned in FY23, and as we guided the market then, this product has been well received by the customers. The approvals are in place, and we are seeing a good traction. The targets which we have set in for us as a company for the first year, we are on target for that. We earlier guided the market that it will be the gradual ramp-up. We are seeing that we are on track in terms of getting those assets utilized over a period. Mr. Rathi, over to you if you would like to add anything. Yeah. I think on your question on how this plays out, sir, we are hoping that we are able to. Our earlier guidance was four years, that we will get these assets fully utilized. We are hoping that we would be able to accelerate this now, but it's too early to comment on what that period would be. Sure, sir. Thanks a lot. One final question on the previously spoken of comments on the insolvency proceedings. Sir, obviously there are multiple subsidiaries of the incumbent, and I think the news is that there is only insolvency proceeding happening with their parent entity. Would you have any assessment of the scenario across the group, given that they have a sizable market position in terms of market share? Would these lead to irreversible opportunities for us in garnering whatever market share that we can with the enhanced talks that we are having with our customers as on date? Thank you, sir. Right. I think it has definitely created a big uncertainty in the market, which has opened up some of the doors for us, right? Opened up some of the doors and we started a deeper engagement with our customers. Now, how this plays out and how this works out, we will find out in the recent times. But I would say that we are looking at not one-off demands, right? We are looking at ensuring that we are deeply engaged, we are able to get a sustained order book, and we are not playing with one-off demands. Sure, sir. Thanks a lot for all the clarification and all the best. Thanks. Thank you. Thank you. The next question is from the line of Neeraj Vas from Union Asset Management. Please go ahead. Yes. I just had one query. What has been the price? I think you had mentioned that the recovery in FY 2024 versus 2023 has been largely volume-led. How do we see pricing in fourth quarter versus third quarter and fourth quarter versus first quarter? Thank you. Nakul, would you like to take this question, sir? Thank you, sir. As we have seen during the year, the raw material prices have been more or less stable after the quarter 2. Between Q3 and Q4, we saw the raw material prices were fairly stable. As I mentioned in my opening commentary, and then in the follow-up question, we had done the raw material pass-through, which is very calibrated during these two quarters. But in terms of the pricing differentiation between Q3 and Q4, there has not been much difference. Okay. 4Q versus 1Q so far? Can you repeat the question, please? One Q in the current quarter, which we are in, versus the fourth quarter average. Is it higher or lower? Versus the last year, correct? Q4 to Q1, you are talking about? Yes. Sequentially. It should be. Hello? Yes, sequentially. Natus sir? Yes, sir. I am there on the call. If I compare the current. Hello. Yes. Please go ahead. Yes. Yeah. As I mentioned, between Q3 and Q4, sequentially, it has been fairly stable. If I compare with the Q1, it has been a steady decline in the raw material prices. Last year, Q1 FY 2024 compared to now, Q4 2024, we have seen the sequential price reduction compared to the H1. Okay. Thank you. Regarding CapEx for FY 2025, how much are we looking at, and what will be the focus of the CapEx? Natus sir, we've already given the guidance, right? Yes. You want to take this? The CapEx is mainly maintenance led, right. The figure for CapEx is around INR 100 crores. Okay. Thank you. That's all from my side. Thank you. Thank you. The next question is from the line of Dhawal Shah from Alphacurate Advisors. Please go ahead. Yeah, thanks for the opportunity, sir. My question is on the growth of the fourth quarter. We did roughly 35% quarter-on-quarter growth. I understand that the fourth quarter is always the largest one. Can you share how much of the incremental revenue has come up from the, recently we did the CapEx of roughly INR 700 odd crores. How much of that revenue come from the new CapEx, and at what utilization that capacity is operating right now? As we've given a guidance, our capacity was going to get utilized in four years. This was the first year of our CapEx, so we were at around one-fourth, I mean, that kind of number. Less than that, as some of the CapEx has got online a little later. Atul, would you like to add more? Thank you, Mr. Akhil. As we mentioned in our opening commentary and the follow-up question, this has been a gradual ramp-up. Currently, what we see, the current scale-up for the first year has been as per the target which has been defined. We don't declare the capacity utilization as a group. I would not like to comment on that, but it is in the early utilization stage for this CapEx. Sure. On the quarter-on-quarter and Y-o-Y, what we are seeing, the margin improvement in the EBITDA, this is largely coming from the lower O&M, I mean operating and manufacturing expenditure. If I look at the breakup of this manufacturing cost, I think majority of them are variable, like power and fuel, freight, and given that the volumes have been increased. What led the lower other cost during this quarter? Can you please explain? Atul? Yeah. Thank you, sir. As Mr. Akhil has also mentioned, we worked on the dual strategy. One is the growth, and then coupled with the EBITDA improvement. There are two effects. During the quarter, the revenue on a sequential basis has grown up, which is normally the strong quarter during the year. At the same time, we have also seen that on the other expense side, we have seen the reduction in the core prices, which has also helped the company in lowering the manufacturing cost. Third effect is overall increase in the revenue and with the cost being moderated or lower, has also helped us in better operating leverage. Thank you. Got it. Thank you. That is all from my side. Thank you. The next question is from the line of Nitesh Dhoot from Dolat Capital. Please go ahead. Yeah. Thank you for this opportunity. Congratulations on a good set of numbers. My first question is, with the strong volume growth coming through and with the healthy improvement in cash flows and the balance sheet, are we looking to reevaluate the backward integration CapEx? Hi, Nitish. Nilkanth here. Hi. Yeah, sorry. Sorry. I was on mute. Sorry. I can take it. Basically, our focus right now is on growth, and given the opportunity of what we have on board, we are focused on banks currently. We are getting some benefit of our backward integration because we get some of our raw materials store manufactured, right? The technologies which we've developed. We don't see this investment coming back in the next financial year, at least, for the backward integration. That's what the board has taken. I think we wanted to ensure that our balance sheet becomes very healthy, right? But the technologies are developed and though we are not getting all the benefits of if we are able to make them ourselves as we get it store manufactured at a higher price. Sure, sir. Are we eyeing the competitors, domestic assets, or any part of it? Sir, I think firstly, like I said, we wanted to ensure that the debt had gone to a very high level. The first thing was to manage the debt, right? This was not by design, right? This was only because of COVID happening or our CapEx is getting delayed and the geopolitical situation which came in, right? From an M&A perspective, once now our balance sheet is also healthy, we want to make sure we don't take our debt very much higher, but at the same time, we are very open to any inorganic opportunities if it makes financial and strategic sense. All right. And sir, are we reevaluating the divestment of Repco Industries in terms now that it is an EBIT positive and there's a turnaround apparent. Are we reevaluating the divestment there? I think first we want to, I think there's a scope to improve the operations further. We are now focused first on strengthening the business performance. That's where the board has taken a decision to transform that company too. No, which is why precisely I asked that now with the rising focus further on the pigment business, this non-core business could be reevaluated. But thank you for your answer. Yeah. Wish you all the best. These are the questions from my side. Thanks a lot. Thank you. The next question is from the line of Dhruv Muchhal from HDFC AMC. Please go ahead. Yeah, sir. Thank you so much. The question was, over the last few quarters, we have seen a consistent improvement in your working capital days, cash conversion days that you report. Is that broadly achieved or is there still further scope? Broadly, if you can give some sense, is this because there is some change in industry structure or is this something internal that you have achieved? This is definitely internal what we have achieved. We have improved our planning cycles, our inventory management greatly. There may be a slight scope, but in further improvement, but I think we are very much to that level. Nakulji, would you like to add? Yeah. Thank you, Mr. Rakei. Dhruv, as Mr. Rakei has explained, there has been a lot of process improvement which we have done and which we have driven it internally. If you really see the last entire year, the working capital cycle has improved, and we will continue that. Currently it is at 66 days, so maybe the optimal days, but we will also look for any further opportunities. However, given the current short-term scenarios and the way market is looking out, given the recency of the event, we might take some call in terms of the stocking up at our overseas marketing arms. Otherwise, we remain confident that this working capital efficiency will remain in the systems. Got it. Yeah, sure. Thank you so much. The second question is probably just a clarification. If you look at the performance of the last few quarters, it has been driven primarily by domestic and primarily by the non-specialty, which would suggest that your specialty has yet to reasonably ramp up, which is more, I think, driven to exports and relatively higher margin. I understand you don't give exact margin guidance, but it is reasonable to assume that 15%-16% that you have currently has a meaningful scope of improvement as some of your newer product segments starts to deliver, primarily exports and the specialties. That would be a fair understanding? Dhruv, can you please repeat the question? There was some disturbance at my end. I could. I could hear it. He was talking about quarter 2. I think two areas, sir. One is, I think, as you mentioned, our base load will be the sum of the non-specialty which is already there. There would be improvements, of course, in margins coming through specialties and as we ramp up the CapEx. More importantly, I think where the margin improvements will come is through economies of scale, as our fixed costs get leveraged. That is what will give the main increase in margins going forward. Got it. Sure, sir. Thank you so much, and all the best. Thanks. Thank you. Thank you, Dhruv. Thank you. The next question is from the line of Sabyasachi Mukherjee from Bajaj Finserv AMC. Please go ahead. Yeah. Hi. Thanks for the opportunity, sir, and very good set of numbers. Two questions primarily. One is, on the peak revenue potential from our current fixed asset base. A few quarters back, you had guided that it would be somewhere around INR 3,000 crore to INR 3,300 crore in the overall pigments business. Now, if I looked at FY 2024, specialty versus non-specialty, specialty is somewhere around INR 1,500 crore, whereas non-specialty is INR 700 crore. Can we get a sense of the peak revenue segment-wise, like specialty, what can be our peak revenue potential vis-a-vis non-specialty? Natu, sir? I am not sure what numbers. Yeah. Thanks, Sabyasachi, for this question. Currently, the revenue mix between the specialty and non-specialty is two-third, one-third, which is 67%-68% to 32% in the non-specialty side. Given the recently commissioned CapEx, majority of them is on the specialty side. So when we guided the market of INR 3,300, we also guided them saying that we expect the tilt in the specialty to go upward, maybe in the percentage point by around 4% to 5% across the number. So that tilt will be closer to 72% to 74% number compared to the now based on the full utilization of the newly commissioned CapEx. Got it. Okay. That's helpful. Directionally, a follow-up to that, directionally, our exports and specialty mix should improve and that should further help in margin improvement. I know this is a bit repetitive in nature, but just wanted to have your views on it. Sure. Thanks, Sabyasachi. As we have mentioned that directionally, what we see the specialty and the export, specialty as a segment and export as a market, we should see the growth coming in. The margin will be led more by the increase in the specialty segment over a period, which will have the margin accretive profile for us as a company. Got it. Second question. You have mentioned in one of the slides in the presentation that year-over-year growth in full year non-specialty segment is due to improvement in the phthalocyanine pigments. You reported about 9% growth, whereas the specialty pigments segment saw 6% year-over-year growth in revenues. This is in value terms. If you could help us, what would be the volume growth in both non-specialty and specialty? Natu, sir? Yes. Sir, we don't give the specific volume growth number. But as we have mentioned that during this year, we have seen the volume growth which is in the higher double digit between specialty and non-specialty on an overall period. I see both the segments have performed equally well, barring the quarterly abbreviation. Otherwise, on a yearly performance, both these segments' growth has been in line. Thank you. Okay. Thank you. That is all from my side. Thank you. All the best. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants, please limit your questions to one, two questions per participant. Should you have a follow-up question, we will request you to rejoin the queue. The next question is from the line of Jatin Sanghavi from Barman Capital. Please go ahead. Thank you for taking my question. Sir, I wanted to ask how much of our sales come directly to clients and how much of our sales come through distributors? I think, sir, we always have a dual distribution strategy in every geography. The range of our direct business would be between 60%-70%, and our distribution would be balanced. Got it. You mentioned that you are seeing increased traction after the Heubach bankruptcy announcement. I wanted to understand under which category of pigment, phthalo, AZO, or HPP pigments are you seeing increased traction? Sir, I think we are seeing for our specialty products more traction. In the specialty we count AZO pigment and HPP pigment. Yes. HPP, yes. Okay. Thank you. Thank you. Thank you. The next question is from the line of Aditya Singh from RoboCapital. Please go ahead. Hi. Thank you for the opportunity. With the ramp-up of the new capacity, how much volume growth do we anticipate for FY 2026 and FY 2027 in regards to it? I think from the sector, sir, we do not give volume, but like I said, directionally we are seeing the good traction and we should be able to grow our business there. I think I will not be able to give you particular numbers. Natuji, would you like to add anything? Yeah. We do not give the number or forward-looking statement, but as Mr. Rakesh has mentioned, there has been a lot of positive tailwinds, companies poised, having a lot of capabilities built up over a period. We expect that current year should be good in terms of overall performance. Directionally it will be good, but we would not like to put a number for it. All right, sir. Got it. Thank you. Thank you. Due to time constraints, that will be the last question for the day. I would now like to hand the conference over to the management for closing comments. Over to you, sir. Yeah. Thank you Axis Capital and Ankur Periwal, and thank you participants for your time and interest in Sudarshan Chemical Industries and putting forth business questions. We remain confident in the long-term prospect of our business, and we look forward to engaging with you again in future. Thank you. Thank you. On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.