Ladies and gentlemen, good day and welcome to the conference call of Apcotex Industries Limited. As a reminder all participant lines will be in the listen only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal for an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Anuj Sonpal from Valorem Advisors. Thank you, and over to you, sir.
Thank you. Good evening, everyone, and a warm welcome to you all. My name is Anuj Sonpal from Valorem Advisors. We represent the investor relations of Apcotex Industries Limited. On behalf of the company, I would like to thank you all for participating in the company's earnings conference call for the first quarter of financial year 2022. Before we begin, I'd like to mention a short cautionary statement. Some of the statements made in today's earnings conference call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by and information currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions.
The purpose of today's earnings conference call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. Let me now introduce you to the management of Apcotex Industries Limited participating with us in today's earnings call. We have with us Mr. Abhiraj Choksey, Managing Director, Mr. Sachin Karwa, Chief Financial Officer, and Mr. Anand Kumashi, Company Secretary. Without much delay, I request Mr. Anand Kumashi to give his opening remarks. Thank you, and over to you, sir.
Thank you, Anuj. Good evening, welcome everyone to this earnings conference call for the first quarter of FY 2022 under review. Along with me in today's earnings call, I have our Managing Director, Mr. Abhiraj Choksey, and Mr. Sachin Karwa, the Chief Financial Officer. I hope you had an opportunity to review the financial statements and earnings presentation, which has been circulated and uploaded on the website and stock exchanges. To brief you on the financial performance for the first quarter of the financial year FY 2022, the revenue from the operations was around INR 185 crores, with operating EBITDA at INR 39 crores, with EBITDA margin at 15.82%, while the net profit was INR 32 crores, with PAT margin at 11.82%.
As you can see, the results are flattish as compared to the previous quarter on account of slightly lower volume due to second wave of COVID-19 and partial maintenance shutdown at Taloja plant during the month of June 2021. On the CapEx front, all debottlenecking projects will be completed in Q2 of FY22, which will give an additional revenue of around INR 60-70 crores per annum once completed. We have also obtained an initial environmental clearance in Q1 to start the construction for two new greenfield projects, one each at Valia and Taloja plant. The total CapEx for these new projects are expected to be around INR 140-150 crores, which will be incurred over the next four quarters.
On the antidumping duty front, on NBR for both the petitions, after a thorough investigation, DGTR recommended an antidumping duty, but the Ministry of Finance has decided not to notify the duty. As of now, no antidumping duty exists for NBR imports into India. Lastly, the Taloja plant three-year agreement with the unionized workmen was amicably signed in this quarter. With this, I'd like to open the call for question and answer. Thank you.
Thank you very much, sir. Ladies and gentlemen, we will now begin the question and answer session. The first question is from the line of Ankit Kanodia from Smart Sync Services. Please go ahead.
Thank you. We have got an EBITDA margin of almost 16%. How confident are we that it can be sustained throughout the year, and why?
Thank you, Ankit, for your question. Can you hear me?
Yeah. I can hear you.
Okay. This is Abhiraj Choksey. Yeah. Thanks for your question. As we have been mentioning in previous con calls, and I think you have been part of a few con calls, we have consciously made an effort to increase our margins from sort of the low teens, in fact 10%, 11% to almost the last now 3-4 quarters, we've consistently been doing somewhere between 14%-16%. We feel fairly confident that at least this 14-15 number is doable. We are at high capacity utilizations, that's why it's helping. Therefore, we have been able to also improve our product portfolio, product margins, and manage our customer margins as well as product-wide margins better. We feel fairly confident that, of course, there'll be a couple of quarters where we may see some ups and downs.
In our kind of business, that does happen. On average, I think that we're fairly confident of doing somewhere in the mid-teens now.
Okay. Thank you, sir. That helped. Before I move on to the next question, thank you for sharing more details about ApcoBuild in the annual report. That really helped.
Thank you.
Yeah. The second question is about the antidumping duty. In the last call also, we had a discussion where we said that if that antidumping duty does come, we are very confident that we'll go ahead with the CapEx plan. Now that the Ministry of Finance has put that on hold, is it on hold or they're not doing it at all?
No. As of now, our information is that they have not notified it.
Okay.
For one of the cases, there is also a notification that comes for one of the petitions, that they will not be implementing it. However, there are some legal processes that we have available with us, which we are evaluating whether to do it or not. For the last six months, in fact, since December 2020, there have been no anti-dumping duties in place in India for any import of NBR. As far as CapEx is concerned, the CapEx that has already been approved by the board and which we are going ahead with, both are largely latex projects. One is in Valia, INR 110 crore CapEx, and another one in Taloja, which will be somewhere between INR 30- 35 crore, which I think we have mentioned in our earnings presentation as well.
Yes.
That we are going ahead with. As far as the NBR is concerned, anyway, we are waiting for environmental clearance for that project. We have some time to decide. The environmental clearance is expected sometime next year, maybe by April of 2022. Only after that we can go ahead with that project. We have some time to decide. We need to go ahead with it because frankly, in the last six months, we have competed effectively. We have tightened our belts. We have implemented a few things, reduced costs. It's a question of where we want to allocate our capital. The NBR business, according to us, is still attractive, and we will decide by next year. We have applied for the environmental clearance approval for that project.
Ankit, thank you. That helped again. Regarding the export, which is doing really well for us today. How much are we expecting, as in, I know you can't give any guidance, but any ballpark direction, as in can we see export doing even better throughout the year? It's already 24% of that, if I got it correct.
Yeah, it is. This last quarter was 24%. There were two reasons, though. Frankly, it's not that we're doing exports for the sake of doing exports. One was, of course, we wanted to de-risk out of India because something like what happened, lockdown. We've seen a couple of times in the last year India has gone through lockdown. We were therefore able to quickly, even in April and May, when we had this problem in India, we were able to quickly pivot and make sure we didn't lose sales and were able to sell more in the export market.
Now, that percentage may vary. It may be 20% next quarter if the domestic market picks up. It just depends. Now we're quite comfortable with this kind of 20%-25% exports. Even our exports market are largely in Southeast Asia and the Middle East, right?
That is our, I would say, 80% of our exports happen around that area. What we are seeing currently, for example, in the months of July and even August, from what I hear, countries like Thailand and Malaysia have gone into a strict lockdown because the Delta variant has now erupted there, which was the case in India two, three months ago. Now it's happened there. There, some of our customers are shut. The percentage of exports may vary. The only thing that's important from our point of view is frankly, that we have now the capability and we've built products, a team, sales, and relationships with customers that we can go up to 24, 25%, we're able to do export sales.
Okay. Anything drastic change in or it is still a minor portion of our revenue? Do we expect?
Yeah.
significant this year?
Earlier, we were in and around the Mumbai-Pune region, more around in Maharashtra. Now we've expanded to Gujarat, M.P., Goa. We're trying a few other territory and seeing how it goes. We expect while it'll still be a small part of our business, we are seeding it. We continue to seed it. It's a good profitable business, but a much smaller part of it.
Okay. One last question. EBITDA per ton, are we near the peak right now or do we see more leg from here as well? Looking at the raw material prices and all. I know you don't share the exact number or EBITDA, but directionally.
We don't give the numbers, but frankly, we feel comfortable with these numbers. I don't know if it's at the peak or not, but yeah, I mean, the raw material prices have been rising for the last few months, as you know. I'm not sure. Difficult to say, but we feel confident that this kind of EBITDA numbers are possible going forward as well.
Okay. Thank you. Thank you so much.
Okay. Thank you.
Thank you, Ankit.
Thank you very much. Ladies and gentlemen, we would request all the participants to limit their questions to two questions per participant. Time permitting, you may return to the queue for your follow-up questions. We would like to remind participants that you may press star and one to ask a question. The next question is from the line of Manav Vijay from Deep Financial. Please go ahead.
Yes. Thank you. Am I audible?
Yes, you are audible, Mr. Vijay. Please go ahead.
Thank you very much. Satya, first of all, congrats on the great quarter and numbers. I have a couple of questions. First of all, on the XNBR latex. Last year, when you started talking about the expansion, you started with around 30,000 tons of expansion. Somewhere you increased that to around 40,000 tons. In the latest AGM, you talked about a 60,000-ton kind of an expansion plan. If you can just first of all explain as to what is the kind of expansion that we are looking at, what will be the CapEx, and what kind of sales you expect to make from that project at the peak level?
As of now, the first phase in Valia is 50,000 tons of latex. I don't think we had ever said 30,000 tons. It was always somewhere between 50,000-60,000 tons. Right now, as of now, we feel confident that we'll be able to do 50,000 once the project is commissioned next year. Now it will be sometime in 2022.
We will be able to make 50,000 tons per annum annually, but we will be leaving some more space in our buildings to add more reactors if required and more equipment if required in the future. Initially, we are going to be investing around INR 110 crores for about 50,000 tons, which would be around INR 400 crores of revenue with current prices at conservative levels. In Taloja, we are planning around a INR 30-35 crore project, again, to start off after the monsoons, construction after the monsoons.
It'll be ready by the middle of next year. That is a project that will give us flexibility to make either 10,000 tons of XNBR latex, or we can make other latexes as well, the traditional SB Latex. It'll be a combination plant. Conservatively, again, that will be about, I think, around INR 80- 100 crores of revenue. INR 80 crores of revenue. Overall, we're looking at about INR 140- 150 crore CapEx on these two projects besides maintenance CapEx and so on, that would happen, of course, through the course of the year, over the next 11- 13 months. That would be about little less than INR 500 crores of revenue in top line.
Sure. Abhiraj Choksey, one of the main, I would say, achievement that you have mentioned in last couple of calls is that you have said that we want to stick to the timeline. You believe that this INR 150 crores or INR 140 crores of CapEx in next 12 months without any kind of urgency, maybe, I mean, one month here and there is obviously beyond anybody's control. 12 months is something, 12, 13 months is something that you will be able to finish it off because since now you have the CLSM in place, and the speed at which you move is now up to you. You believe that is doable?
Yes, absolutely, it's doable. As you said, it's now, of course, it will be more in our control. We were waiting for some environmental approvals, which is what delayed it by a few months. Now immediately after the monsoon, we expect to start construction. We've already finished the detailed designing of the project. We are already manufacturing this product in reasonable quantities for the last one year now, or more than that. Even before pre-COVID, we were doing it in smaller quantities. Now, of course, given what happened, we modified some of our reactors to make nitrile latex for gloves in the last one year. We're fairly confident. We have everything in place, right? We have the technology, we have the customers, we have plant capabilities. It's only about project execution.
As you said, one month here or there, unless some third wave hits us badly. Of course, there are those kinds of challenges where some of our vendors, like for example, even in April and May, when whatever machinery we had ordered, some of it got delayed because of the second wave, and some of them were shut, especially in the north. Barring those kinds of things, we feel fairly confident about our one-year timeline.
Okay. You also mentioned that apart from this 50,000 tons in the Valia plant, you will have some space. After this expansion, I believe that is a plot of around 22-23 acres, and currently, I think you are using some around 7-8 acres. Post this expansion, how much space you will still have to do any future expansion apart from the NBR that you are planning?
As of now, we are looking at this nitrile latex project of 50,000 tons. I said we'll be able to add some more. We'll have enough space maybe to increase capacity in the future by up to 50%. Exact numbers I would only have to work out. I'll be able to tell you by end of next year. For nitrile and then NBR. That's it. I think beyond that, I don't think we'll have more space.
Okay. For this INR 150 crore, I believe you have around INR 80 crore, INR 90 crore of cash on books. You would want to, let's say, raise some debt, or you believe that the internal accruals, plus, let's say that you have the portfolio, all that is sufficient to fund this expansion?
Frankly, we feel confident that the internal accruals and of course, if we use all the cash that we have on our books, then that's sufficient to fund the next one year. We do plan to take on some debt at least, because in our kind of business, we have seen in the last 10, 15 years, there have been cases where it's always good to have some cash in the books, because the volatility in raw material prices, sometimes availability, sometimes what happened with COVID-19 last year. We would not use up all the cash that we have on our books. We would take debt, and as of now, we are almost debt-free, so we have the ability to raise some debt at least.
Sure. Abhiraj Choksey, last question from my side is that, I've been seeing you guys for the last almost 10 years. In last one and a half year, you've added some people at the top level. You believe that now the size of the business has become so big that you need extra hands to take care of it?
As the business grows, I'm sure you would agree that you need people at all levels, and that's what we do. As and when we think we require people, we recruit.
Sure. Thank you and all the best.
Thank you.
Thank you. Next question is from the line of Manoj Sejpal from Avadh Developer. Please go ahead.
Hello.
Yes, Mr. Sejpal. Good evening. Go ahead.
Sorry to interrupt, Mr. Sejpal, but we are not able to hear you. Can you speak a bit louder?
Hello.
Sejpal, we don't give quarter-on-quarter guidance. Overall business is strong. Things are looking good. We don't give exact guidance on % [Non-English content ]. Overall, I can just say that business is looking okay. There are obviously challenges, as I mentioned earlier. Currently, [Non-English content ] like Thailand, Malaysia. [Non-English content ]. India market has picked up. This is the monsoon season, so a few of the markets, a few of the industries that we are catering to, like construction, carpet, and paper, this is not their peak season. Those kinds of quarter-on-quarter challenges can happen. Overall, we're looking at overall nothing substantially changes in the business quarter-on-quarter.
Okay, thanks.
Thank you.
Thank you very much. Next question is from the line of Alisha Mahajan from Envision Capital. Please go ahead.
Hi, sir. Good evening, and thank you for taking my question.
Sorry, Ms. Mahajan, but may I request you to speak a bit louder?
Sure. I hope this is audible.
Yes, it's audible.
Yes. Good evening, sir, and thank you for taking my question. Sir, firstly, I'd like to understand that for the kind of growth that we're witnessing, is this all volume growth or is it some kind of value realization growth that we're also witnessing?
Compared to which period?
Obviously, while I understand that Q1 is on a low base, but in general.
for the last one year, or the kind of growth that we've seen, just wanted to understand that is it a volume growth or is it a realization growth, or are we seeing a mix of maybe the volumes are going up, but maybe the realizations are correcting? Just want to get some kind of answer.
If you see the last one year, then, of course, we've had mostly it's around volume growth. If you see the last one quarter, yes, realizations have also gone up. It's a combination of realization and volume. For example, if you compare Q1 of this year, which is this quarter, compared to the previous quarter, which is Q4 of last year, the top line is about the same. It's about flat, but frankly, our volumes have been a little bit lower. Again, we don't give exact numbers, but I would say in the single-digit percentage lower. The main reason is because we had a long partial shutdown in our Taloja plant, which affected production, and partly also because of the lockdowns in India that affected sales in some of our segments.
Some of our customers were shut, especially in the north, for weeks, three, four weeks, because of a lot of COVID-19 cases. Obviously those kinds of things happened in Q1 that were not there in Q4. By and large, if you were to compare a whole year, it's been largely volume growth driven.
Got it. Thank you, sir.
Yeah.
The other thing that I wanted to understand was that this quarterly run rate of about INR 180- 190 crores that we're doing, we can maintain this with our existing capacities. Is there scope to improve this with the current capacities?
Yeah. We have invested in the last five, six months and we continue, and I think that's also mentioned in the investor presentation, is that we have spent some amount for de-bottlenecking, which will increase capacity by about 10%-15%, somewhere between 10%- 15%, which will obviously keep us going for the next one year. After that, of course, these two new projects are coming up as well by next year.
Sure. The last question that I have is for the new capacity for the brownfield that you're doing that is expected in FY 2023, you're expecting it to be utilized in about two odd years? Or in general, does it take longer to get utilized?
I think that would be a conservative assumption, but we obviously would like to do it quicker than that. It will take time as soon as it gets commissioned because even though it's in the same plant, it's a new plant, right? It's a new building, new reactors. Our customers would sort of slowly ramp up. I'm hoping we can do it in 6six months to one year, but certainly, definitely in two years we'll be able to ramp it up.
Okay. Thank you, sir.
Thank you very much. Next question is from the line of Satyan Wadhwa from ProFusion Capital. Please go ahead.
Hi. You mentioned that raw material prices are inching up. Just wanted to get a sense of how much end product prices are moving as well, so that is there likely to be a compression in margins in the near term or an expansion? If you could shed some light on when the new brownfield expansion will be ready and how much they would contribute to the top line in FY23, and what is the full capacity top line contribution likely in FY24 at current pricing.
To answer your first question, we are in general, our endeavor is always to pass along the cost increase. By and large, we've been successful. Even for example, in Q1 compared to Q4, we were able to pass on the cost increase. In fact, we may have done a little bit better than that. Therefore, our EBITDA margins were frankly a little bit better than or around the same as Q4, or EBITDA was around the same as Q4.
As far as the project is concerned, look, we expect it to be sometime by the next call I should have a more accurate number, because we have recently received these approvals and our project team is now reworking the entire timeline and schedule. We expect it to be sometime in the middle of next calendar year, sometime in the middle of 2022.
As I was telling the previous caller that we'd want to ramp it up in less than one year. It's very hard to exactly pinpoint what would be the revenue extra generated only for FY 2023. Overall, as I said, at full capacity with the new volume, we expect revenue of about INR 500 crores to be generated from the new CapEx.
Fine. How much was that at full capacity?
INR 500 crores per year additional.
INR 500 crores. Okay.
Yeah.
Thank you.
Thanks.
Thank you very much. Next question is on the line of Abhishek Basumallick from Intelsense Capital. Please go ahead.
Hi. Thanks for taking my call. I just wanted to understand a little bit on the lay of the land for your latex gloves space. Because I've been reading up a little bit, and I find that I was looking through LG Chem and Kumho and some of the other players in this space, and they seem to be saying that there is a very large demand which is there. Basically wanted to understand, also Top Gloves, trying to understand what are your thoughts on the demand scenario and what kind of volumes you're expecting, say in the near term or the medium term, and especially when you're competing with other MNCs. What would be your competitive advantage, if there is any?
One is that even pre-COVID, we had identified this product range way back in 2015, '16 as something that was worth looking at because of two reasons. One is general, the level of hygiene going up in Asia, nitrile latex or nitrile gloves taking more of the market share from natural latex gloves because they have some inherent properties that are better than natural latex gloves, and the competitive scenario or the competitive space being limited. There are a handful of players, mostly in Asia, that manufacture this product. We had identified it four, five years ago. It took us two, three years to develop the product. We started selling, started building customer relationships, and now we're at a stage where we're selling reasonable quantities of this product for the last one year and then investing more into it.
Overall, I would say, look, the space of nitrile gloves and latex pre-COVID was obviously attractive. Now given what's happened with COVID, obviously it's expected to be even more attractive for the next one or two years, given overall the hygiene levels and the overall vaccination drives also, which will be continuing for the next couple of years. We'll all need to get boosters at some point, even after your first two shots and so on, where also gloves are going to be used. Asian countries typically had much lower glove usage per capita, glove consumption per capita, which I think will also, or we think, and as per all reports are going up. All this makes it an attractive sort of segment to be in, both for glove manufacturers as well as the raw materials for glove manufacturers.
As far as Apcotex is, of course, we do have certain competitive advantages. The one is our capital-
Sorry to interrupt. Before you get there, could you quantify in some manner what kind of growth can be possible? What are the numbers look like or possibly what is the market size that you're looking at and things like.
I have all these numbers, not with me at the current immediately, number one. Number two, we don't share details of the market research that we have done because we believe that's proprietary. Having said that, even pre-COVID, the expectation was that this market would grow at 12%-13% per annum. Obviously, the last year the growth has been phenomenal. That's not likely to continue that kind of growth, but at least 10%-12% per annum is something that we see easily growing over the next five, seven years. Given that even at 50,000, 60,000 tons that we plan to sell even up to 100,000 tons, it won't even be, according to me, maybe 5% of the global market for nitrile latex.
We're not aiming towards a high market share, which of course some of these guys already like you mentioned a couple of players in East Asia, they have larger plants than ours, and they do have certain advantages in terms of economies of scale. I believe we have certain advantages in the way we have developed a product and the way we make it in terms of cost as well as some amount of quality parameters also where we think we're stronger than them. We do have strong competitive advantages as well.
Okay, cool. Thank you.
Thank you.
Thank you. The next question is from the line of Nikhil from Perpetual Investment Advisors. Please go ahead.
Yeah. Hi, Abhiraj. Congrats on a good quarter. My question is about IOCL has announced plans to build a styrene plant in Panipat, which might take a couple of years. If we assume that another company plans to add a plant for acrylonitrile, we have all three monomers being produced in the country. What is your opinion on how does this change the downstream industry? Does it open newer markets, I mean, market for newer products for us, or will it only help in reduce our working capital and help with logistics cost and further increase the pace of input substitution?
No, absolutely. I think it's absolutely critical in terms of having some of these monomers, which I believe are critical building blocks if a country wants to develop a downstream industry. Because more than the cost, I think the issue is when you have security of supplies and when you have strategic supply of these products in the country, it really gives people like us a huge level of confidence to put in more investments downstream.
Today, one of the things that we look at is these kind of things. We are necessarily, as you said, having large inventories, more working capital, and we are still dependent on imports for a lot of things. Acrylonitrile you mentioned, just a few months ago, there was a huge shortage. In fact, a lot of companies use acrylonitrile in India that had a shortage.
They had to shut down their plants for two, three weeks. Those kinds of things don't happen if there is at least some amount of inventory or some amount of supply that's within India. I think it's extremely critical. Whether we'll be able to Just because they'll have new products, I don't think so. I mean, that's an internal issue. That's an internal R&D, and that's depending on the competitive landscape, so that's a different issue. It will certainly give us a lot of confidence to invest more.
Okay. I think that more or less it will increase the pace of input substitution, then it will make you aggressive in terms of CapEx.
Absolutely. For example, going forward, once both our plants are completely utilized, and we've been discussing at the senior management level and the board level, is also that, if we want the next phase of growth, if we want to do a greenfield project, one of the important considerations is raw material availability. There is option to do it in other parts of the world. Why do it only in India? Raw material availability is a huge consideration. By then, if there are raw materials that are available in India, then that makes the case for India better for us. Of course, that helps.
Yeah. I think you sort of just touched on my next question. I wanted to ask, so now if you are planning your third plant, can we expect it to be in a petrochemical complex where there is consistent supply of butadiene, so which will again help you save on working capital and logistics?
Yeah, absolutely. I mean, it's not easy because we have to work with other parties to make that happen, considering we don't have our own petrochemical plant. Certainly, yeah, I mean, that's one of the big considerations for future expansion.
Okay. That's it for me. Thank you.
Okay.
All the best.
Thank you. Thank you very much. Thank you, Nikhil.
Thank you very much. Next question is from the line of Amar Maurya from AlfAccurate. Please go ahead.
Hi, Abhiraj. Am I audible?
You are audible.
Yes, Amar. Go ahead.
Bit feeble, Mr. Maurya. Please speak a little loud.
Abhiraj, my question was pretty long-term. I had watching this company from last 10, 11 years. One thing is that there is a fair amount of visibility, you reaching to a INR 1,000 crore revenue either by 2023 or by 2024. The thing which I asked you 10 years back that, broadly at that point of time, you were having five chemistries which were at certain level, and you were already a market leader.
I think the same kind of situation now looks in a majority of your chemistry except the gloves latex. How do you now plan to change the whole course of the business? I mean, how you plan to include new products into the business, so that the next level of growth can come faster and probably, the size which we are at a INR 1,000 crore can become double in next three, four years?
Yeah. Frankly, we have in the last few years seen opportunities. What we have done is we have realized what our strengths are and played to our strengths. Therefore, the acquisition that we made five years ago was also with an objective that, look, we understand the chemistry. It was a new product and new market for us, and we understood the chemistry, and we added value, we turned around the company. Now we're building in that facility because at that time also, we knew that nitrile latex was something we wanted to get into. Similarly, we do have other products on the horizon, which we are seeding now, but obviously, those are things that we don't talk about, and it'll be a little premature to talk about that. Certainly, we do have plans to try and develop other products.
Again, keeping in mind our strength and keeping in mind the market opportunity, we do have a few things in mind that we're working on.
Those products like are a large size product kind of gloves latex, which can take you global and which can basically give you a pretty larger runway than the earlier ones?
Well, there is one or two products that are more specialty, don't have the kind of global market size that nitrile latex, for example, does, or styrene-butadiene latex, for example, does. They are more niche products, but certainly large enough for a company of Apcotex's size, which is, as you said, for a INR 1,000 crore company, we need to grow to the next level.
We're conservative in terms of investment and taking risks, taking a lot of debt and so on. We will take it step by step. For now, I think our hands are full for the next two, three years, and at the right time, of course, we would be talking about the future plans for growth. Of course, we are open to also not only investing in brownfield or greenfield, but also potential acquisition that could add value.
Got it.
Yeah.
Thank you, sir. Thanks a lot.
Thank you.
Thank you. Next question is from the line of Rajesh, a retail investor. Please go ahead.
Hello, sir. Am I audible?
Yes, you are. Please go ahead.
Yes, go ahead.
Yeah. Thanks for taking my question. This is regarding this Raniya plant. It was shut down in the beginning of this month, right? Is it up and running now?
Yes. It was a maintenance shutdown we needed for about 10, 12 days. It's up and running now.
Okay, thank you. With the Maharashtra facilities, is there any impact because of the recent rainfall?
No, fortunately not. We are in the Taloja area, which is not in the parts of It's in Raigad district, but not in the parts where there was heavy rainfall. We've had no impact on production because of the recent rainfall.
Oh, okay. Thank you. Thanks, sir. That's all from me. All the best for your future.
Thank you very much.
Thank you. Next question is from the line of Farokh Pandole from Avestha Fund Management. Please go ahead.
Yeah. Hi, Abhiraj Choksey.
Hi, good evening, Farokh .
Hi. Just a couple of questions. Firstly, this expansion at Valia, you mentioned 50,000 tons. You also mentioned that you were making provision for a further expansion at an appropriate time. Given once this 50,000 comes up, how much further can we expand it, and at what cost?
I alluded to the fact that we are at least making provision for up to 50% more expansion. It would be at obviously a marginal cost, additional marginal cost. We haven't exactly worked that out. If you don't mind, let's get going. The idea was to at first sell the 50,000 tons, make sure we are currently doing a good volume. This would be a different scale of operation. We just wanted to first stabilize and then take a decision on the further, but obviously it would be. Let me put it this way, asset turn ratio would be much better than what it is currently.
Got it.
Yeah.
Just wanted to get some sense on this Ministry of Finance not notifying on the anti-dumping duty for. Assuming a status quo on that.
Yeah
What will be the determining factors for this NBR project? Could it also be that you may shelve the NBR project entirely and look at maybe new products or maybe look at expanding gloves capacity further? What's the thinking? I don't expect you to commit to anything, but just in terms of what are the deciding factors for whether this will go ahead or not, presuming things.
Yeah
Go as hoped.
Good question. I just want to mention two, three things. One is that for the last six months, there has been no anti-dumping duty in India, and we've competed effectively with all the steps that we have taken. We feel fairly confident that NBR also, we are quite competitive at these levels. If we do decide to go ahead and double the capacity for NBR, obviously we'll become even more competitive because some economies of scale will start kicking in. Number two, the Indian market itself is large enough. We're even currently at only about 25% market share. We feel the Indian market itself has that. The third important factor is just one month ago, one of our large competitors has announced they're coming out of the NBR business by December. We'll wait and watch.
We have applied for environmental clearance for that project as well. We expect to get it sometime next year, calendar year in 2022. Given our experience over the last six months, I don't want to commit to which month or which quarter, but sometime in the first few months of 2022 is the current expectation from what my team tells me. We'll have another year to decide on that. Also from a risk point of view, we want to focus on the current two projects that we've taken up, finish those, and by then we'll decide. The issue is, I frankly think the NBR market personally will be attractive in India to invest as well. It'll depend on where we want to allocate our capital at that point.
Got it. Okay.
That's the thinking. As I said, we haven't committed to it, but we are optimistic that it would work out, and we are leaving space in Valia for now. We may take up that project next year.
Okay. That's good enough. Just lastly, You mentioned earlier, one of the earlier questions was regarding the interim 12 months before the new capacity, the two new projects go on stream. Is it fair to assume a 10%-15% growth between volume and price for the next four quarters, going forward in terms of revenues, given that, as I said, we are in this zone of being high on our capacity utilization at this point in time, and still four quarters away from the new projects.
As I said, we have invested some for debottlenecking in the last few months, and which will all come on stream in Q2. Some of it is already started playing out. I think we should be okay for the next one year for 10%-15%.
Great. Thanks a lot, Abhiraj, and all the best.
Thank you, Farokh Pandole.
Thank you. Next question is on the line of Karan Bhatelia from Asian Market Securities. Please go ahead.
Hi, sir. Thank you for the opportunity, and congratulations for a great set. Sir, now that we don't have any anti-dumping duties in place for the NBR. Just wanted to understand the pricing delta between our pricing and what is the landed price.
We are forced to price it at whatever price it comes in at, right? We have to compete. If we want volume, even if our price is 5% higher, buyers won't buy from us, 5% or 10% higher. It's more of a commodity than latex is in that sense. The pricing at the end is the same. Yes, there was injury. We want some duty, and we had a very good case for duty. The DGTR, which is under the Commerce Ministry, actually went into the details. It was a 1-year detailed investigation. For both petitions, they did impose some duty, different types of duty for both petitions. They did think our case was strong and agreed to it. It's unfortunate that the Ministry of Finance did not notify it. I think it's not only us.
From what I understand, this is happening for a majority of the cases these days. I hope that answers your question.
Yes. That does this. Also wanted to understand how far are we with respect to our historic high realizations or margins, especially in the NBR portfolio?
NBR portfolio, quarter-on-quarter, there are changes, of course. Certainly NBR in the last 3-4 months has not been the historic high margins of, because we went through April and May where we had a really, because of the lockdowns, especially the automotive industry in the north, went through some trouble. It hasn't been historical high recently.
Right. Just wanted to understand how far are we? Is it a 10% or a 20% lower in terms of pricing or in terms of margins?
Sorry, I don't have the exact numbers with me right now.
Right. No issues. Just one last question if I go ahead. We are catering to various set of industries in latex. How is the overall sense for FY 2022? Which industry you feel can grow faster and which can be a laggard or which can be a flattish industry?
We supply to several industries, paper, carpet, construction, auto, gloves, a lot of industrial rubber parts. What we've been seeing for the last 6 months is a fairly, at least in India, fairly bullish trend. Everyone seems to, in general, feel that this year is going to be quite strong for them. However, we have to wait and watch, and the way we are building our business, at least, is that we're making sure that from an industry point of view and from a geographical point of view, we're de-risked. In case 1 of the industries doesn't do well even, at least some of the volumes can be pushed into another geography or another industry. We're trying to de-risk from that. Yeah, in general, it seems that our customers seem to be quite bullish for the next year.
Right. Yeah, that was helpful. Thank you for the detailed answer.
Thank you.
Thank you. Next question is from the line of Vinay Nagori, an individual investor. Please go ahead.
Hi, Abhiraj. Congratulations on the great set of numbers.
Thank you, Vinay.
My first question is, for the last three quarters, we've been spending on repairs and maintenance to make our reactors fungible. Going forward from the next quarter, as you had guided before, do we expect some operating leverage coming from here?
Frankly, I don't know where the question is coming from. I don't think repairs and maintenance is that large a line item that a significant advantage would be there. Look, whatever is required, both our plants are now fairly old, 30-40 years old. As and when repairs are required, we do them. We ensure that assets are maintained at a high level. There are some quarters where we have higher than normal repairs and some quarters that are better. I don't think it's going to be a big factor in terms of overall margins or anything on that front.
Okay. Just wanted to understand. Now three years down the line, say we'll be reaching a top line of around INR 1,100-1,200 crores. We'll be having a very strong cash flow. After that, are we thinking of, say, going downstream in NBR or say, brand-building in ApcoBuild? Are those logical steps am I thinking into?
As I said, our hands are quite full for the next two, three years, I think, if we go ahead with all the plans that we have. I think it's a little premature to talk about it. Certainly we have, besides seeding products and businesses that we are already doing, we also have opportunities at that point. When we feel that we are comfortable amounts of cash, again, we are going to take on some debt this year. As and when we feel comfortable and we have enough levels of cash, we may even look at other opportunities, inorganic opportunities. Both options are on the table.
Okay. I just wanted to understand, have you added a good amount of customers in the last one year? Have you developed some new products?
Well, for nitrile latex for gloves certainly has been a new big industry for us, and we have added quite a few customers in that space. As far as the other industries are concerned, we obviously all add, but it's a good point. One of the things at least I don't track very closely is how many number of customers we have, but I know our sales and marketing department tracks it. Next time I'll perhaps get that number for you. Certainly, every quarter we add new customers. Even within the industries we are in, grades are always increasing or tweaking or changing. We always find niche applications within those industries, like paper and construction as well.
Okay.
Yeah. I hope that answers your question.
Yeah, yeah. Thanks a lot. Best wishes for future.
Thank you.
Thank you. Next question is from the line of Deepak Mehta, an individual investor. Please go ahead.
Thanks for the opportunity and great set of numbers in this quarter, sir. My question is around the product R&D. What is the pipeline for new products and R&D?
Thank you, Mr. Mehta. Look, we have a pretty good, strong R&D team. Again, within the industries that we are in, we are constantly doing work for increasing the number of grades, improving our current product range, reducing costs wherever we can. As far as completely new ideas are concerned, we have a few, but as I mentioned to one of the previous callers, that's something we don't really talk about till we are sure we are going to invest in that business and go ahead with it.
My next question is around you mentioned that one of the competitor is exiting the market and we have market share of 25%. If you can throw out how much market share is that with that competitor and what, in terms of market share we can grab due to this exit?
Well, I think this competitor, at least in India, the market share was low. It was in the single digits, I think maybe 7%-9% from what I recall last. The bigger issue would be that with one big plant shutting down or they are diverting their capacity elsewhere to other products, not taking NBR. They're not going to make NBR from what I understand. It could, of course, overall, globally or in Asia, help the entire demand-supply ratio. I'm not sure if immediately we'll be able to increase market share by too much because we are already running at pretty close to 100% utilization for the Indian market. We feel the margins are good enough. Next year we will double the capacity of NBR and then take a call going forward.
Okay, sir. Thank you so much. I will get in touch with you.
Thank you.
Thank you. Next question is a follow-up from the line of Manav Vijay from Deep Financial. Please go ahead.
Yes. Thank you for the opportunity once again. I have a couple of questions for me. Now, in next, let's say, 12 months, you will have your XNBR project ready. You also mentioned what kind of sales it can generate for you. Help us to understand one thing, is that, as far as your current existing business is concerned, there, the number of customers that you have are large. Whereas as far as XNBR is concerned, there, the number of customers would be lower. You believe that once you have this entire sales in your P&L, this volatility in margins that you have will actually subside to a large extent, or we still continue to have, depending upon the way raw material prices move, that volatility?
I'm not sure even nitrile latex for gloves, there are many customers all over the world, mostly in Asia, of course, these days. In the future, I believe America also, we've had a few now, America and Europe, there are a few glove manufacturers that are coming up from what we heard, so they're also interested in importing latex from Asia. I don't think the number of customers are bearing on margins. It's just the volatility of the raw materials that we're in.
Sometimes we do because we're importing so many raw materials, sometimes we do get stuck with higher cost inventory. That does happen, and therefore, margins quarter on quarter could get affected by a few percentage points. As I said, it's very hard to predict what happens. I'm just saying historically what has happened is that margins have got affected quarter on quarter.
Overall, if you see our endeavor has been, if you see annual numbers or take any four or five quarters together, our endeavor has been to slowly improve margins, and we have done that by and large. From the single digits to the last, I would say almost one year we've been in the mid-teens, between 13% and 16% for the last four quarters.
Abhiraj Choksey, my question was slightly on the longer term. Let's say for the last 10 years, you have increased your margins from around 8%-9% to almost 15%-16%. All I'm saying is that because of the volatility in raw material prices, your margins move very sharply. You always will be in a position to pass on that with a certain time lag. Because of the, let's say, lower number of customers, it's all relative. On the XNBR side, the margin predictability will be better or not? That is my sole point.
I'm not sure. Frankly, the answer is I'm not sure. As I said, it's a new business for us as well, and as we do higher volumes, I think margin predictability would be a little better, but I'm not sure. Suddenly if raw material prices, obviously you are stuck with some high-cost raw materials, then overall market falls for whatever reason, then the margins will fall in that segment as well. I'm sorry it's not a great answer, but the real answer is I'm not sure.
Sure. My next question is, sort of what little understanding I have on the NBR Rubber is concerned. Auto is a large part of business for you, of your current business. You believe that the way whatever changes that is happening on the EV side, you believe that is going to have any kind of impact on the demand of NBR over the next 5- 7 year timeframe?
The short answer is absolutely yes. The long answer is that overall, 30%-35% of the Indian NBR consumption is in autos, according to our studies that we have done. Within autos also, there's two-wheelers, three-wheelers, passenger cars, trucks and buses. Obviously within that, we do think in the next 5- 10 years, especially two-wheelers, three-wheelers, there'll be a large amount of electrification that would happen. If you see, the remaining will grow. Overall, while the growth on the NBR market may not be as strong as some of the other products and segments that we are in, I do feel that there will be a good single-digit growth either way, with or without electrification. Of course, electrification is going to happen. There's no question about it.
Okay. My last question to you is that, now you mentioned that because of the bottlenecking, we will have around 10% kind of a growth, let's say, till the time the expansion comes in place. Would it be safe to assume that the quarter one sales becomes a baseline, and that whatever you do, let's say, whatever that will come from the bottlenecking, will be on top of that?
I would say in Q4 and Q1, so the previous quarter and this quarter, we have been at somewhere between 90% and 95%, almost 100% capacity utilization. Anything above 90% is almost 100%, I would say. The only reason is because in some products, obviously our capacity is not, we can't make every product in every asset that we have. There are some products that were at maybe 80%, 85% capacity utilization, and some products were 100%. I would say, if you see the last two quarters, they would be a good benchmark and a good base.
Okay. What kind of tax rate is possible for this year and next year? Last year also, your tax rate was around 42%. Quarter one, you are at 21%. Whereas normally, let's say if you move to the new regime, you will be paying 45.6%. What would be a safe number to work with?
Yeah, I think we had some carry forward, that credits that we could take for a couple of reasons. I believe they've now come to an end. We don't have any more credits. I think the safe assumption would be 25%.
Sure. Thank you, and all the best.
Thank you.
Thank you. Next question is from Darshita Shah from Axis Securities. Please go ahead.
Hi. Am I audible?
Yes, you are. Please go ahead.
Yes. Go ahead.
Hi. Yeah. Thank you for the opportunity, and congratulations on the good set of numbers. Most of my questions were already answered. I just needed the revenue contribution between the segments that we have, that is Latex, HSR, and NBR, for the current quarter and also for FY 2021, if possible.
FY 2021, I think it was overall about 55% Latex and 45% Rubber. In Q1, I think it was more Latex because some of our Rubber customers were affected due to the lockdown in India. I don't have the exact number, but it would be more Latex, maybe 60%-65% Latex in Q1. On average, I think we expect Latex to be going forward at least about 55%-60%, and the rest Rubber.
Okay. All right. That's it for my question. Thank you. Yeah, that's it. Thank you.
Thank you very much, Darshita.
Thank you. Ladies and gentlemen, that was our last question for today. I now hand over the conference to the management for closing comments. Over to you.
Thank you very much. Thank you for once again joining us, ladies and gentlemen. We look forward to meeting you next quarter again. Till then, stay safe. Thank you again.
Thank you very much. Ladies and gentlemen, on behalf of Apcotex Industries, that concludes today's conference call. Thank you all for joining us, and you may now disconnect your lines.