Ladies and gentlemen, good day and welcome to Q2 and H1 FY26 Earnings Conference Call of Apcotex Industries Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Purvangi Jain from Valorem Advisors. Thank you, and over to you, ma'am.
Thank you. Good afternoon, everyone, and a warm welcome to you all. My name is Purvangi 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 call for the Q2 and the first half of the financial year 2026. Before we begin, a quick cautionary statement.
Some of the statements made in today's conference call may be forward-looking in nature. Such forward-looking statements are subject to risk 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 the 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. Now, I would like to introduce you to the management participating with us in today's earnings call and hand it over to them for their opening remarks. We have with us Mr. Abhiraj Choksey, Vice Chairman and Managing Director, and Mr. Vivek Thakur, Chief Financial Officer. Without any delay, I would like to now hand over the call to Mr. Vivek Thakur for his opening remarks. Thank you, and over to you, sir.
Thank you, Purvangi. Good afternoon, everyone. It is a pleasure to welcome you all to the earnings conference call for the quarter on quarter and first half of the financial year 2026. I hope you all had the opportunity to read the statements and earnings presentations that have been circulated and uploaded on our website and also to the stock exchange.
Let me provide you with a brief overview of the financial and operational highlights for the quarter and half year. I'll begin first with the quarter. So for the Q2, our total volumes have increased by 11%, and operating revenue stands at INR 337 crore . The revenue shows a decline of 4% year-on-year basis. This is due to overall fall in raw material and consequently lower realization in finished goods prices.
Operating EBITDA for the quarter has increased significantly to INR 41 crore as compared to INR 28 crore in the same quarter last year. This represents a very strong year-on-year growth of 48%. This is driven by volume growth and margin expansion. The EBITDA margin stands at 12.06%. Profit after tax for the quarter is INR 25 crore. This is up 130 crores year-on-year with a PAT margin of 7.51%, which indicates strong profitability and operational efficiency.
We are also happy to inform that the company has turned net cash positive as of 30th September 2025. This reflects strong cash generation and good financial discipline. During the quarter, Director General of Trade Remedies, DGTR, has issued final findings on anti-dumping duty, which was overall positive for the company. We are now awaiting the duty notification from the Ministry of Finance.
For half-year FY26, the company achieved highest-ever export volumes and overall volumes, which are up 18% year-on-year basis. Operating revenue shows an increase of 4% year-on-year to INR 713 crore. Operating EBITDA has grown strongly at 34% year-on-year to INR 79 crore. The EBITDA margin is at 11.13%. This margin expansion is supported by volume growth, margin expansion, and better capacity utilization. PAT for the first half has increased by 73% to INR 45 crore, and the PAT margin is 6.25%.
During this period, the company has achieved highest-ever export volumes, which are up 31% year-on-year, and we have also reduced debt by approximately INR 53 crore. This demonstrates continued financial discipline and operational strength. The strong performance also reflects the effectiveness of our strategy, which is focused on volume-led growth, expanding our export and operational efficiency.
We are also proud to share that the company has received the prestigious ICC Acharya PC Ray Award for Development of Indigenous Technology. This reaffirms our commitment to innovation and self-reliance. Further, we would like to announce that the Board of Directors has reviewed and approved investments of INR 210 crore for capacity expansion at our Valia facility. The proposed capacity expansion is 37,000 metric tons per annum for synthetic latex and 14,600 metric tons per annum for nitrile rubber and allied products.
These two capacity additions have a combined revenue potential of INR 550 to INR 600 crore, while synthetic latex additional capacity will cater to additional domestic and export demand in construction, carpet, textile, and paperboard applications, increase in capacity for nitrile rubber and allied products will cater to demand in several specialized rubber product categories such as automobile, footwear, rice rolls, insulation, and hoses.
It is notable that we currently manufacture the synthetic latex at our Taloja facility, and incremental capacity will be done at our Valia plant, whereas nitrile rubber and allied products' current and additional capacities will be housed at our Valia facility. The total projected capital expenditure will be spread over the next six to seven quarters. This will be financed through debt and internal accruals, a mix of it.
The additional production is anticipated to come on stream in a phased manner by Q1 of FY27. We believe that this investment will help us increase market share, enhance profitability, and strengthen our domestic and export footprint while delivering value to all our stakeholders. With this, now I open the floor for the question and answer session. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone 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, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Dhaval Shah from Girik Capital. Please proceed.
Yeah, hi. Thank you for the opportunity. So good to see the great performance since now a couple of quarters. So first question is just a clarification. So total volumes in the growth in volumes year-over-year was it 18%? Did I hear it correctly?
Hi, Dhaval, Abhiraj Choksey. Yes, it was 18% for the first half, H1.
18% for H1. Okay. Got it. And how much did exports contribute to the quarter?
To the quarter, it was about 31%, I think. 31%-32%.
Okay, so is there a seasonality in the business where compared to Q1, export contribution was a little less this quarter? Is there any seasonality?
Maybe partially, but I think quarter on quarter, sometimes that does happen. You get some large orders, and one quarter, it goes up, but our endeavor is to be at around 35% and over time grow it to 45% or so over the next year or two. Plus minus, every quarter can happen. Sometimes, like in this quarter, there are some orders that may come at a very low margin,
which we have sort of let go with a real focus on improving margins this year, likely the last quarter. And therefore, if you see in the last quarter, the growth of volumes has been about 11%, lower than in Q1, so we try and balance out margins and volumes, so that may be the reason, but I wouldn't read it too much into sort of quarter on quarter numbers.
Okay. Good to note it. Now, on the announced expansion, so out of the two products where we are doing the expansion, can you help me understand the average realization of that basket would be how much would be how compared to your overall to the other two products? So we are expanding in this synthetic latex and the other product.
NBR.
Yeah. Yeah. And I said other than allied products. Yes. So how that realization will be with the other products? So what I want to understand is that, so A, we are doing so there'll be a 28% kind of volume increase on the capacity. And then in terms of realization, also, how will this impact the P&L going forward? So then what will be the combined impact, value plus volume?
So overall, if I were to add both, the volume overall comes to Vivek, correct me if I'm wrong, but about 51-52 thousand tons, right, both put together. And the overall revenue expectation, see, revenue is hard to predict because just for example, in Q2, overall prices have fallen quite a bit for raw materials, therefore our finished goods. But we expect about INR 550 to INR 600 crore depending on what the price of the product is or the products are. Approximately in that range for this entire 52. So I think you would assume a little over INR 100, INR 110 or so. Is that what you were asking?
Yes. So that compared to the other two products, which is high styrene rubber and nitrile latex, so that realization so this INR 100, INR 110 is higher than the other two products?
So, realization see, the rubber products are typically double of the latex products. Now, that's the bottom line now. Typically, but sometimes it could be 2.2 times, 2.3 times. Honestly, it's not a relevant question if I were from your point of view. I'm just trying to understand the relevance of the question maybe.
So, same thing. I mean, you give it a revenue number, so it just answers that. I was just trying to understand that how much of total revenue increase it can happen. So yeah.
Yeah.
Yeah. Okay. And last question, what will be the CapEx for this year and next year? So this INR 210 crore will be spent in next two quarters, two, three quarters?
No. As Vivek mentioned, it will be six quarters, actually.
Okay. So we are starting the plant in Q1 2027?
Yes. Which is six quarters from now.
Okay. So it'll be calendar 2027, you mean?
No. Q1 FY27. So it's calendar year. Yeah, you're right. Sorry. Q1, you're right. Q1, Vivek, can you what you mentioned, but it's Q1 FY27 '28 or Q2 FY27? Is that right, Vivek? Is that what you mentioned? Are you there, Vivek?
Which is April to June quarter of 2027?
No, so that's FY 2027-2028, though, right? I think that's what the distinction is.
Yeah, so what we've written in the price is Q1 2027.
Okay. Yeah. So we planned by March, April 2027. That's the target. So around, I think we should have been. Yeah, careful of that. I think it's Q1 FY 2027-28.
Yes.
FY20.
We've based and corrected, and I think we'll have to make that change.
Yes. Thank you. Thanks for pointing that out.
Yes. So this year, how much are we spending in FY26, the current financial year, and how much are we going to spend in next financial year in terms of CapEx?
Yeah. So there are two parts with CapEx. So obviously, the INR 210 crore is the expansion projects, but there will be other CapEx projects as well related to, for example, we are going to invest in some solar projects, some cost-saving projects, maintenance CapEx. So that will be in addition to that. So overall, I think this year, we expect a total CapEx of about INR 65 crore, out of which probably about INR 20 to INR 25 crore will be for the expansion projects. And the remaining would happen in the following year and perhaps spill over into FY 2027-28 as well.
Okay. Got it. And you'll take around two years to utilize the expanded capacity or three years? What's your assumption?
Yeah. I mean, somewhere between, I would say, three years after it comes on board, comes on stream. That's our plan.
Okay. Okay. Good luck. Thank you.
Thank you.
Thank you. The next question is from the line of Rudraksh Raheja from ithought Financial Consulting. Please proceed.
Thank you for the opportunity, sir. Sir, I want you to understand more on the gross margin side. We have seen a very healthy improvement. It's one of the best in last six, seven quarters, I would say.
Yes, so sorry, what's the question?
The gross margin improvement we have seen in this quarter. What contributed to that?
Right. So combination of a few things. One is, as well, two things. One, I would say the main is that the chemical industry had a couple of good years post-COVID in 2022, 2023, even FY 2021. And 2024 onwards was more challenging because a lot of capacity was added worldwide for a lot of products. We added capacity. Now, as the capacity utilization is going up, especially for us,
I don't know about the rest of the industry, but also for the rest of the industry, but definitely healthy for us. We are at above 80% on average for all our products. In some cases, even close to 100%. So that really helps in sort of improvement of margins. And the other thing, overall, the market and the scenario worldwide has improved for the chemical industry, is what I feel.
Obviously, notwithstanding the current tariff issue and the uncertainty around that stuff, the tariffs and some geopolitical tensions that still remain, other than that, things have improved, I feel, in terms of capacity utilization for the chemical industry. Of course, there are some pockets of the chemical industry that are still not doing so well, and some that are doing better. In our case, I think things have been better this year in terms of margins, or at least in the last quarter, but I would say in the last six months than they were in the previous few quarters as you said.
Okay. Sir, did we see any pricing improvement in the nitrile latex front? Was that the main reason this margin improvement?
That is one of the reasons. I would say more than pricing improvement, I would say a little bit of margin improvement. As our capacity utilization went up, we have got some more approvals. We are able to build a margin on that better than it was in the last one year for sure, and the previous year, financial year for sure. But I think it's still some ways to go. That market still remains challenging, although it's easier now than it was last year, and that has definitely been a factor.
Sir, answer for H1, what would be the contribution from different product segments? You give us a split of how much does nitrile latex contribute and the rubber segment, etc. Could you give us that?
Overall, the contribution still remains at about 30, 70. Rubber is 30% for the quarter. I don't have H1 number, but it should be similar. So for example, for the quarter, it's 30, 70. And in terms of contribution of the segments, I guess in terms of latex, out of the 70, paper and construction would be about 15% to 18%, 16% to 18%. Carpet textiles put together is a little lower this time, is 11% to 12%. Nitrile latex, again, would be about 15% to 16%. Tires, tire cord would be about 10%. And the remaining 30% is all rubber.
Got it. And capacity utilization for the segment?
I think all our plants we're running at above 80%. I think for our sort of synthetic latex, Taloja plant would be at about 80%. Nitrile latex would be about the same, and NBR and all are 95%. NBR is at 95%. NBR and allied products, so yeah. Almost full capacity, I would say.
Got it. Got it. And one thing more on the global market side, could you guess on what would be the industrial capacity utilization in nitrile latex market?
Honestly, hard to say, but it's still fairly low from what I mean. It's improved for sure, but it's because there's no new capacity that's been added in the last couple of years. But it's still not very healthy, which I consider to be at least 80% and above, and it's below that. I don't have an exact number right now.
Got it. Answer, getting a little bit more clarity on this NBR front. Historically, what you have said that we require a duty, a significant duty to get the advantage. Last time, I think duty was passed and the number was quite low. But this time, the number that the Government of India has written in their document, is that sufficient for us to recover margins in that segment?
Yeah, for sure. I mean, it's been a mixed bag. See, first of all, the duties have still not been notified. The Finance Ministry still needs to notify those duties. Right now, it's just a recommendation from DGTR, which is under the Commerce Ministry. So I would say it's been a mixed bag for us in the sense that for most of the imports, we will have a reasonably good duty for which we are happy with. But for one particular manufacturer, there is zero duty. So we'll have to see how the market plays out, and we'll see. But first, we're just waiting for the notification from the Finance Ministry, which has not yet come. After that, we can sort of see how things play out.
Sir, do we have any expectations like in?
Thank you, Rudraksh. May we request you to join the question queue again as there are other participants waiting for their turn?
Sure. Thank you.
Thank you. The next question is from the line of Farokh Pandole from Avestha Fund Management. Please proceed.
Hi, Abhiraj. Good to see the strong numbers, especially the good margin recovery. In that, we just wanted to check on the nitrile latex. Since at the time we had done our expansion, we had also made provision for a second leg of expansion, which would be at a far lower cost. Is that something we would also consider given you have now said that we are at 80% capacity over there as well? And I'm presuming there is some modicum of profitability now as opposed to the loss levels we were seeing for many quarters.
Hi, Farokh. Yeah. So it's definitely on the cards, although that's not what's been approved yesterday in the board meeting. We're keeping it on the cards, and we will see when to do that. The issue is with margins are still not healthy enough to justify additional capacity when there's already enough excess capacity worldwide, or at least in Asia, not worldwide.
It's mostly in Asia, so as of now, that's not on the cards, but yes, it's something that we will keep considering, and we will see how it goes every few months, and depending on where the industry is, as I was explaining to the previous caller, we feel that there has been an improvement in the industry in the last few months. We just want to ensure that margins go back to the levels that we had set out at the beginning before the project, the first project was initiated. So once that happens, we'll certainly consider that.
Right. And on the NBR, how long do we think before we actually see this notification?
On the anti-dumping? Yeah.
Yes.
Generally, so we expect by before December 10.
Okay, so in this calendar year.
Yes.
And so am I right in saying that it is the June quarter of 2027 wherein we start seeing the addition of capacity, right?
That's correct. No, but look, there'll be some addition. So this entire INR 210 crore expansion is actually a series of four or five sub-projects. So some of the stuff will start maybe even before that, by June, July of next year. Minor sort of some debottling and things that we're doing, that'll come in June, July. Some other things will come in December of 2026. And then large majority of the expansion will be completed in around that time between March and May of 2027.
Okay. So we will complete the expansion by 2027. It's not that the expansions will start commencing from 2027.
That's correct. But a large chunk of this, I would say 80%, would come toward the end. But there are certain debottling projects that would start a little bit before that for NBR.
Sure. Sure. And NBR, in the past, I think we mentioned that it would have been good to ideally have had a larger capacity in the sense of competing with other NBR capacities globally. So is this sufficient in terms of overall size to extract synergies and scale benefits, etc., like you have seen in some of the other products?
Yeah, absolutely. Even with the expanded capacity, I think we would now be a mid-sized player in the global scenario. So our total NBR and allied product capacity would be around 35,000, 36,000 tons after we're done with this. And just to give you a flavor, there are smaller plants around that size, 30,000 to 50,000 tons. But the largest plants are around 90,000 to 100,000 tons. So we're still below what I would say is the largest capacity, but we would certainly be reasonably global size, at least as a medium-sized plant is concerned. And it'll definitely help with overall economy to scale.
Great, and lastly, is there, similar to the earlier expansion, any sort of slack being built in for if, let's assume, hopefully, that this investment will be better timed than the last investment, and we will have that in our favor? If that were to be the case, to expand capacity to the next level, are we making provision for that, or will that have to be done in a step function?
For NBR, it'll have to be done in a step function. But for the synthetic latex, yes, we are making certain provision now for future as well.
Great. Thanks a lot and all the best.
Thank you, Farokh.
Thank you. The next question is from the line of Saurabh Shroff from QRC Investment. Please proceed.
Yeah. Hi, good afternoon, Abhiraj. Congratulations on a great set of numbers. Yes, you partly answered my question, but if you could maybe elaborate. So my concern really was that with NBR running at full capacity and 80% across latex, both in Taloja and Valia, we could potentially hit a volume air pocket sometime, maybe this time next year, if we continue on this 15%-18% kind of volume growth. So if it's not possible on this call, maybe next call, if you could just sort of help us understand how the volume and the capacity ramps up from, let's say, June quarter of FY27, like you mentioned, that it's coming up in phases. I think that would just be helpful to understand where things go.
Yeah.
And on the anti-dumping, so obviously.
No, no, no. Just a quick question. Yeah. You were right. That could happen for a quarter or two, but our sense is that we would have enough capacity, and there are other options possible in the short term, like outsourcing certain products and so on, which obviously is not ideal because that reduces the margin, but that's something we could do for the short term. We think we have enough capacity for next year.
There might be a situation where I'm talking about for the latex products, yeah? For rubber, NBR, we are already at almost full capacity. So you're right. There we have already hit. And for the next year or so, we will hit a situation not a year, but about three quarters, we will hit a situation where we can't grow further than this. I hope that answers your question.
Yeah. So I mean, in the past, I guess we've managed to juice this facility with significant debottling, but I think you mentioned that at 21, we are pretty much as tight as we could run this ship. So that I appreciate. So is it fair to say that as and when this duty gets implemented by the Finance Ministry and gets notified, is there a significant boost to our margins, at least on the rubber side, based on this? I'm just trying to understand what does this mean for us? Given we don't have the capacity, does it improve our realization in a significant manner?
That's what it was supposed to do, but unfortunately, as I mentioned to one of the previous callers, there has been a mixed bag for us in terms of the recommendation. We'll see what the final findings that are notified by the Finance Ministry. But one of the manufacturers, one of the importers, has not been levied any anti-dumping duty. So we don't know if margins will really improve.
Of course, I think it will help us because from Russia, from China, reasonably good anti-dumping duties have been levied. So overall, we feel that's a fair thing for us to compete in India, and we'll see how that impacts the margins. But all these expansions or all our workings that we have done are based on zero anti-dumping duty and sort of assuming margins at current levels without anti-dumping duty.
I think even without that, it's justifiable, and we worked out a fairly innovative way. Earlier, our thinking was that only for NBR, we would need an INR 200,000 crore to INR 225,000 crore expansion. But here, with around INR 210,000 crore, we've been able to do NBR and synthetic latex, both. We're quite confident that with or without anti-dumping, we are going to go ahead with this expansion.
So that's a big statement from you because I guess we've for about six quarters been waiting for this anti-dumping duty, and you said once you have clarity on that, only then will you do NBR. And now, so obviously, significant work has happened for you to commit to this amount of CapEx with or without the anti-dumping.
Yeah. We were waiting for that, and as I said, it's been a mixed bag. If had it been something which was absolutely negative, we may have even considered, but we were ready with these numbers for the last quarter or two, I would say. But we were just waiting for the recommendation. In fact, ideally, maybe we should have waited till the December quarter, December, January period. But I think right now, we feel pretty confident to go ahead with this.
Got it. And finally, margins back to sort of low double digits. Our aspiration has always been closer to mid. Is that sort of path clearer now with demand as you see, I guess, nitrile latex aside?
Yeah.
Are we sort of on the right track there?
Yeah. I think nitrile latex aside, we're already in the mid double digits in this quarter. So if you don't include nitrile latex, with nitrile latex, it's still pulling it down a little bit. But as nitrile latex improves over the next few quarters, I think that will also help. And the one challenge, though, that remains right now is we have seen our business and margins in certain industry segments affected because of U.S. tariffs.
Not directly, but indirectly. Some of our customers in technical textiles, in the tire industry, in carpet, their exports have been affected, especially to the U.S. So there are challenges in pockets, but we're hoping that it will sort itself out in the next two, three months as far as the tariffs are concerned, and nitrile latex will improve. So yeah, I think we should see some improvement, or not improvement, but continued reasonable margins in the next few quarters as well.
Okay. That's great to hear because exactly my question was about that only that carpets have taken a big hit from India, especially. So if that also comes back, we would benefit from it.
Sorry? Yeah. If that cycle comes back, we would benefit. Sure. Yeah. Absolutely.
I guess 80% utilization is also kind of the level where a significant amount of operating leverage starts to kick in as you go from 80% to 85%, or is that number closer to 90% for you to be optimal on the plants?
No, frankly, operating leverage at every 5%, 10% higher, it increases. So that will increase from 80 to 90, 90 to 100. The one thing that more than operating leverage, I think it gives us the confidence to say no to certain orders, which are very low margins or customers that payments are very delayed, those kinds of things. I think that's where the real advantage is, and that's where sometimes margin can be bumped up by a percentage or two.
Okay. Got it. Thank you very much and all the best, and great show on the cash generation as well this quarter. That's really heartening to see in a tough time.
Thank you.
Thank you. The next question is from the line of Rudraksh Raheja from ithought Financial Consulting Please proceed.
Yeah. Thank you for the opportunity again, sir.
Sure.
Sir, could you give us more details on this synthetic latex expansion? For what applications are we expanding this time?
So the same application. So we have about a 100,000-ton or actually, I would say without about a 90,000-ton plant for the synthetic latex production. The two main products we make there are styrene-butadiene latex and styrene-acrylic latexes. And that's why I said we are close to 80% capacity utilization there. It would be for similar carpet construction, paper, textiles, and there are a lot of specialty applications as well that we are now focusing on.
A few specialty applications that we're now focusing on. So it would be for similar products. It's just that instead of Taloja, we are doing it in Valia. One is to de-risk from Taloja, which has become a large site for synthetic latex and, I would say, globally comparable site. So we just wanted to manufacture this product at another site, and we have enough space and buildings and all that in Valia.
So we decided to do it in Valia. Whereas for the NBR, we need economies of scale at the same plant. We're still below optimal sort of global capacity, which is what I mentioned to one of the previous callers. So there we are continuing to do in Valia. So the entire next 16 months, 18 months, focus on expansion is going to be in Valia, Gujarat.
Got it, sir. Sir, I think last time when we expanded in paper, some other player also expanded at the same time, and this led to some sort of lower prices in the market. And again, we have announced our CapEx in synthetic latex, and another listed player in this space has also announced CapEx in the latex segment. So how do you see this playing out in the future and affecting our margins and all?
I'm not sure who you're referring to, but look, I mean, there's always cycles. I think what happened post-COVID was not just in India, but globally, everyone also added latex. So while we don't compete globally, I think it does affect. There's always an option, right, for people to go abroad. And I think if that does happen, depending on the timing, and I'm not aware of the timing and who you're referring to specifically,
but I don't think it's going to be like what happened post-COVID, where if you remember what happened in COVID, it's between 2020 and 2021, everything was shut, right? There was nobody expanding. In fact, people were not going out of the house. And then suddenly, the demand picked up very quickly because people were sitting at home and ordering goods. So manufacturing demand picked up. So that was a very unique case.
In that euphoria, I think a lot of capacity expansion worldwide and India happened with large numbers. This time, we are increasing capacity by about 35-40%. I would say about 35-40%. Last time, I think our percentage expansion was much larger, as it was for the other player. So we'll have to see, that's a cycle that will play out. We have decided that we have certain strengths in this segment, and we're going to go ahead no matter what everyone else is doing. And sure, a couple of quarters then at that point, margins may be affected. We'll see. We'll have to deal with it.
Understood, sir.
But I must also mention that who you're referring to, there may be others that have entered, but we believe that the technology and the next level of technology is going to be even sort of the next generation technology, better than what we have today. I think we're quite confident that what we're doing in the synthetic latex segment now, going forward, will be revolutionary for India. It's never been seen in India. And the productivity, the cost, the quality, all of it will be at a different scale. So we're quite confident that we'll not only compete this time, but we'll have significantly better products at perhaps a little lower cost as well.
So are we entering more sort of specialized segments that are margin-accretive than what we have done previously?
We will be, but obviously, investing at a 37,000-ton capacity. It cannot only be for specialized segments. We would need the segments which provide the volumes as well.
Got it, sir. And I think you have mentioned this number. I'm repeating this. With this sort of CapEx, what would be the revenue potential that would unlock?
About INR 550 crore to INR 600 crore.
Got it. Got it. And sir, assuming at this point of time, there is no pricing improvement in any of our segments, what is the peak revenue that we can do with existing capacity?
I mean, I know we had worked it out last year, and it was about INR 1600 crore to INR 1700 crore. I think it would obviously, now in the current context, prices are very depressed, but in this Q2, but that kind of will at some point start going up again. But I'm assuming around the same, probably 16-17.
Yeah. Sure. Got it, sir. Got it. Thank you.
Thank you.
Thank you. The next question is from the line of Arun Arora from NB Investments. Please proceed.
Do you mean congratulations on the good performance?
Thank you. Thank you, Mr. Arora.
I had two questions. One is regarding the AD. Last time, it so happened in spite of DGTR recommending for this AD, the Ministry of Finance did not issue a circular imposing that. So is there any possibility that it can be repeated again this time also?
Yes, that can be a possibility. But from what we understand, what's happening through our lawyers and basically watching, that in that period of 2020, 21, I think the percentage of cases that were not being notified were much higher, and now it's like one out of 20, or I mean, much lower. So there's a higher level of confidence, and that's the reason why we, again, applied for anti-dumping because we saw that there seems to be now some kind of alignment, and we feel that the majority of cases are now being notified. However, as you said, that always remains a risk, but the risk is low from what we understand on what we've been advised.
Okay. Good. My second question is, almost a year back or so, when some participant had asked for the future capacity expansion, you had mentioned that we do not have space except for that nitrile latex, that additional 50,000 capacity or so. You may have to venture out for a new land or so. So I was getting a little bit confused. So Valia, we are doing, and Taloja, so is it being done in the existing plant sites only?
Yeah. It's being done in the existing plant site at Valia. So maybe there was some misunderstanding, but in Taloja, yes, we are tight on space. We can perhaps do a few things as well there, but as of now, our decision is to do the entire expansion in Valia, and obviously, we are utilizing some current buildings that have already been built, and we are going to build some additional structures as well for this expansion. So we do have space in Valia.
Okay, so after this expansion, plus the 50,000, that space, what is there for the nitrile latex? Do we have still some more space left, or we are done with whatever the remaining space?
No, we will have some more space left.
So lastly, regarding nitrile latex margins, now that we are at 80%, is it fair to assume that in the coming quarters, the margins would slowly and steadily keep going up?
Difficult to assume that. I don't know. The answer is we don't know. No one can exactly predict the future, but at least we hope it remains stable, and perhaps over time, as capacity utilization globally or in Asia goes up, that it should technically happen because nitrile latex margins are still much lower than what they were pre-COVID, so technically, it should go up. I don't know when.
Okay. So for you to start this second phase of the CapEx, are you looking at the improvement in the margins or the increase in the capacity utilization?
Look, we should be at sea, selling product is not a problem because at a price, you can sell anything, right? So it's not more about the volumes, but sure, now our capacity utilization is already at 80%. We can go up to 100% immediately if we just give a little bit more discount and all, but we are trying to balance between pricing, margins, and volumes. So it's more about the market than internal at this stage.
What you are trying to say is the improvement in the margins only will make you go for the phase II CapEx?
Right.
Okay.
Correct.
Thank you very much, and wish you all the best.
Thank you, Mr. Arora.
Thank you. The next question is from the line of Manav Vijay from MV Investments. Please proceed.
Yes, sir. So thank you very much for the opportunity. Sir, my first question is regarding the expansion that you are doing. Now, you just mentioned to the last caller that even after doing this expansion, you will have some space left in Valia. So are we in the process of, let's say, figuring out even a third piece of land so that as and when we take the decision to expand further, we will have land available?
I think we have land available in Valia even now. We obviously will explore, but I think the decision is around, but the thinking is until we have a clear idea on what we want to do with the land, we would not be purchasing it. I think we have a reasonable amount of land in Valia where we can further expand if we so choose to, but it depends on what products. So if it's in the same products like latex and all, I think we have enough land in Valia. But if it's completely something different, then we may look at a third site. As of now, there is no decision on that, but yeah, we're always on the lookout.
Sure. Okay. Sir, the second question is regarding the raw material price decline that we are witnessing now for the last three quarters. So I believe that actually quarter four, we had a 3% price decline. Quarter one, we had 13%, and in this quarter, we had roughly 15% kind of a price decline. Now, this three quarters continuously is a slightly, I would say, longer period. So in history, have you seen such a long period of price decline continuously happening? If you can elaborate on that.
Yeah, I think so. There have been, I think in the last 20 years, there have been three or four periods like this, not very uncommon. Of course, it doesn't happen all the time, but not very uncommon. We saw it during at least three quarters during the COVID period, from January to March, and then after that as well for a couple of quarters, and then it started moving up again quickly.
We saw it in 2009, 2010, I think in between as well in 2014, 2015; suddenly prices had gone up, and then it came down, so three quarters, sometimes four quarters is not uncommon. Well, it's not common, but it's not uncommon either. Every four or five years, this does happen, but as I said, look, I mean, we are okay with that. Sometimes it does help us.
If price decreases, it's good for us in terms of, for example, one of the reasons why our working capital management is better, right, because of lower prices. So that helped. At the same time, we probably have had some stock losses because we bought at a higher rate. In spite of that, margins have been reasonably okay. We've been able to manage that. It's not so much of a concern. Any specific reason why you're asking this question?
No, no. Sir, for the simple reason, actually, so actually, since our sales to an extent is also dependent on the price growth as well. So while we have been, let's say, getting a good volume growth, so along with that, if we had pricing growth as well, then the bump up in margins would have been much better. That's why I'm asking that I would say three continuous quarters of price decline.
Actually, margins and revenues are two different things, right? So we can still hold on to the margins even if prices are declining or going up. I'm talking about margins on an absolute level, not on a percentage level. So in fact, when prices decline, our margins on a percentage level sometimes seem better, are good, because we try and hold on to the absolute margins.
Sometimes it doesn't happen. We have to also reduce our absolute margins. And vice versa, sometimes when prices go up dramatically, we're not able to increase percentage margin at the same pace. But absolute margins, we are at least able to increase, and therefore, our EBITDA margins, so EBITDA margins for us is the key, not so much contribution margin.
Sure. Okay. Sir, my next question is regarding the working capital. So in this quarter, in our cash flow from operations, we had INR 61 crores coming in from receivables, which I believe is the best that you have done in the last few many, many years. So any specific reason because of which you could receive so much of money from the customers?
No, no specific reason. I must commend my sales team. They're doing a good job.
One of the reasons is because of the lower price at which the finished goods are being sold. So that is one of the reasons why in absolute value, the receivables are much lesser. If you see the number of days, there also is an improvement, but absolute value we're comparing is largely because of the lower FG prices.
So the very fact that actually in this quarter, you have turned net cash positive, and this INR 61 crore has helped you a lot to turn actually cash flow to actually cash positive. That's why I'm asking, so what you believe is the probability of continuity of this huge cash flow generation? Like you have got INR 107 crore in this quarter, so I would say in H1, which you have never done in the prior quarter.
Sorry, I'm not sure where you have calculated the number of 107? What is that?
Sir, so in this H1, you have generated INR 107 crore of actual cash flow from operations that you have never done in the last 15 years of history. So I would just like to figure out whether this number is actually abnormal or this is what, let's say, the business should look like even going forward because now the business dynamics are turning in your favor.
So I think, as Vivek mentioned, that the reduction in prices of raw materials has definitely helped us in this. So in that sense, yes, it is I mean, if prices go up, suddenly our working capital requirement also will go up, right? If prices, let's say from now, they are going to climb by 30%, 40%, our working capital requirement would also climb that much. So certainly, that has helped us, yeah.
Sure. Okay. Mr. Abhiraj, thank you and all the best.
Thank you. Vivek, I hope I've answered Manav's question okay.
Yes, that's correct. And just to also clarify, a large portion of INR 107 crore is from profits, which is EBITDA, which has come back into the kitty , so the internal accruals, and about INR 20 crore, which is released from working capital on a net basis.
Yes. Correct. Correct. Yes. Okay. Thank you. Yeah. So that's very much.
So that's what you would say is like a little bit of a bump, right? We have had is that right? Sorry, I'm asking the question in our own conference call. Sorry.
No, sir. No. So I think.
Sorry. I think.
Sorry, Vivek. I had to move.
No, sir. I think the main point is that the cash flow operations were actually fantastic in this year for starters. Does it help you to actually turn cash positive, which in turn should help you to have cash for the upcoming CapEx, sir?
Exactly. Thank you. Thank you, Manav.
Thank you very much. All the best.
Thank you. The next question is from the line of Ankit from Adezi Ventures Family Office. Please proceed.
Hi, good afternoon, and congratulations on the set of numbers. I joined the call a little late, so apologies if this is slightly a repeat, but I just wanted to understand currently what is the ongoing status of the ADD, and when are we anticipating that this might kind of come to fruition if we have any estimates?
Can you repeat the last part of your question? What is the current status of ADD? I understood. What is the second part of the question?
Yeah. And when do we anticipate if we have any estimates when this might come to fruition, when this might?
Yeah. So I'd mentioned to one of the previous callers that as of now, the DGTR is recommended through their final findings, anti-dumping duties on certain countries and certain companies. One company or one importer has not been subjected to any anti-dumping duty. The rest have been subjected to a reasonable anti-dumping duty. We expect that the finance we are told that the Finance Ministry typically notifies within three months of the final findings. So we expect by December end.
Okay. Right. Thanks a lot. That's helpful, and usually, I mean, what kind of if something like this has happened in the past, what kind of impact can you expect on pricing and margins from something like this coming through?
As I said, it's been a mixed batch. We're not quite certain how the market will play out because one of the big importers has not been subjected to any anti-dumping, so that will continue as it is. The rest, we'll see how it plays out, but we'll, instead of speculating and seeing let us first finally see what the final notification says because there can be changes there as well, and then we'll comment on it,
and honestly, we'll have to also just see what happens in the market because we're not the only player in the market, right, so there are many things that other players can also do in terms of pricing, so we'll have to see how that impacts. As of now, our plans, our expansion plans, all our projections are based on no real benefit or bonus from this anti-dumping duty.
That we had asked for because we are the only manufacturer of NBR in India. We are subscale in terms of global production, and we wanted some help from the government for a short period of time of five years to be able to invest and recoup our money and make reasonable margins and profits and returns on our investment. We have found an innovative way to do that, at least for another 14,000, 15,000 tons. But after that, we'll see. We could do that because we have a brownfield; it's a brownfield expansion. Had it been a greenfield, then we would definitely have not been able to do it with the current margins. There would not be any justification for additional CapEx.
Just one person who has not been subjected to the DGTR, what percentage of the imports or the market will they continue to have an estimate?
I'm not sure, but a large percentage, 30% to 35%, perhaps 30% at least of the Indian market.
Okay. Thanks a lot. I'm wishing you well.
Thanks.
Thank you. That was the last question for the day. I would now like to hand the conference over to the management for the closing comments. Over to you, sir.
Thank you very much for joining our Q2 investor and analyst conference. We look forward to seeing you all in Q3 and updating you on any other major further updates. Thank you.
Thank you very much. On behalf of Apcotex Industries, that concludes this conference. Thank you for joining us, and you may now disconnect your line.