With that, let's get into another earnings conversation. We do have Vinati Saraf Mutreja, Managing Director of Vinati Organics, joining in. The company's revenue in the first quarter grew by about 28%. The EBITDA, however, grew by just 7%, margins compressed, and the net profit on the back of that grew by about 4.5%. Vinati, thank you so much for joining in. That really is the first question, because you've guided for 26%-27% margins for FY 2027. Now, despite the delay in pricing or passing on the raw material price hike, are you confident of this 26%-27% number? What kind of products will be margin drivers for you by the end of this year?
Hear me? Hello? Good morning.
Yes, we can hear you.
Okay, great. This quarter we saw an improvement in the revenue. A couple of factors have led to revenue growth. One is, of course, the rupee depreciation. 55% of our revenues do come from exports. Also, one significant thing is that the raw material prices increased a lot owing to the Middle East conflict, especially starting in March, April, May. Some of it we were able to pass on as price increase. With that, the volume growth we saw in certain products, such as antioxidants and certain other new products, and that is what led to the revenue growth. Consequently, the EBITDA margin did not grow by as much because most of it was just rupee depreciation as well as RMC increasing.
Right. Which is why the question. You have guided for 26%-27% margins by the end of this year, and you are confident of that, right?
Yeah, I think that we should be able to maintain it in this quarter. I believe the EBITDA margin is in that range of around 26%, and that is taking into account our entire product mix of ATBS, antioxidants, butanols as well as IBB and other derivatives.
In the second half of this year, how much would ATBS contribute in terms of extended capacity? Because you have increased capacity from what, 20,000 tons per annum to about 60,000 tons. That, and even Veeral Organics starts in October 2026. So the second half will have a lot of these new products coming in.
Yeah. So ATBS, we have expanded capacity from 30,000 to 50,000 of the high quality that is the metric. We do expect some demand recovery in ATBS starting October. Veeral Organics, like I had mentioned, the plant is under re-engineering, which should get completed by December, and we expect more revenue coming in from January. So the second half should be better than the first half, and hence we expect overall, let us say, volume growth of maybe translating to revenue growth also of at least 15% this year, and consequently margin EBITDA growth as well.
This particular financial year, how much would be the incremental revenue from the ATBS capacity? Veeral this year would do how much? Because on a steady state, you said it could do about INR 120 crores-INR 130 crores.
Yes. When Veeral Organics to full potential on a steady state at 70%-80% capacity utilization will be close to INR 400 crores-INR 500 crores. But just this year, starting FY 2028, if I look at starting March 2027, I would expect about INR 150 crores from Veeral Organics itself.
Right. Okay. All right. Hi, Vinati. Good to see you. Well, another debatable issue which some analysts have written about is about anisole. That is the key raw material for the new product line, I believe. What they are saying is that it is cheaper when it is imported in comparison to when it is produced in India. Could you tell us what is your take on the situation?
See, yes, anisole we are going to make from phenol and it will always be a make or buy decision. If it is cheaper to import it and buy it, then we will not make it. We will import it, buy it, and then convert it into MEHQ as well as some other products that we are into. If phenol prices remain low, then we will produce our own anisole. I do not think that is any factor as such in revenue or EBITDA growth.
All right. Just a final question before we let you go. You have embarked upon a serious CapEx as well, which is currently still underway. If you could give us a sense on what your ROCE could decline to once the CapEx is at its peak, and by when does it start turning, and what the peak could be, and by when?
I think we are presently at an ROCE of about 15%-16%. I think once we achieve full capacity utilization of our CapEx, one can expect improvements in the ROCE up to 20% after two years or three years. Having said that, we are making some new investments in downstream products, in some of our forward integration products into butylphenols as well as MEHQ, as well as 4-Methoxyacetophenone and a few Isoamylene-based derivatives, as well as adding a few antioxidants to our kitty.
Antioxidants, you said would be how much? You said that you are also considering new CapEx. How much would that be roughly in value terms?
No, actually, the marginal new CapEx in antioxidants will not be much. We will start achieving full capacity. We are already running at a very good run rate. The AO market has improved quite a bit in the last three months, and we are seeing realization improvement as well. As a marginal CapEx, we will be able to add some new antioxidants, and soon we will be reaching a 15%-20% ROCE in the additives business itself.
ROCE doesn't go below this 15%-16% in the near term as new capacities come on stream before they start to contribute positively, right?
No, because actually most of the CapEx has already been done. Only thing now, ROCE can only improve as the utilization increases.
Okay. All right. Thanks very much for joining us, Vinati. Appreciate your time here on CNBC -TV18, and good luck as you continue to execute.
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