Ladies and gentlemen, good day and welcome to Chemplast Sanmar Limited Q2 FY26 earnings conference call. 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. Before we begin, please note that this conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as of the date of this call. These statements are not the guarantee of future performance and involve risks and uncertainties that are difficult to predict. I now hand the conference over to Mr. Ramkumar Shankar, Managing Director of Chemplast Sanmar Limited. Thank you, and over to you, sir.
Thank you, and good afternoon, everybody. On behalf of Chemplast Sanmar Limited, I extend a very warm welcome to everyone joining us on our call today. On this call, we are joined by our CFO N. Muralidharan , Dr. Krishna Kumar Rangachari, who heads our Custom Manufactured Chemicals division and SGA, our Investor Relations Advisor. I hope everyone has had an opportunity to go through the financial results and the investor presentation, which have been uploaded on the stock exchange's website and on our company's website. Our performance during the quarter showed a marked improvement both on a quarter-on-quarter basis and a year-on-year basis, largely thanks to better margins in the suspension PVC business. During the current quarter, the company achieved a revenue of INR 1,033 crores and a net profit of INR 43 crores.
Currently, the dumping of Suspension PVC into India continues unchecked, and we have seen an increase in arrivals from China in the first half of this year. However, in the medium term, it is expected that the ongoing capacity rationalization in different parts of the world and the anti-involution measures in China will restore balance to the PVC supply-demand globally. Focusing on the business-specific performance on the PVC side, the domestic demand environment showed signs of recovery in the second quarter of this year, primarily led by the strong demand from automotive and footwear segments. The new PVC plant at Cuddalore is running at full capacity consistently, which contributed to higher sales volumes in the current quarter. However, the PVC margins were impacted due to low-priced imports, especially from EU-based suppliers. On the Custom Manufactured Chemicals business, our business performance remained on track as planned, with dispatches progressing as scheduled.
We continue to make further headway into new product leads and customer engagements. Currently, the company has 17 products commercialized and several more in the pipeline. Phase III of MPP3 and civil works for MPP4 are progressing well, with completion expected by the end of the third quarter of this year and the fourth quarter of this year, respectively. Production is anticipated to ramp up gradually thereafter. These new capacities represent a significant step toward broadening our customer base in line with the long-term strategy. Moving on to our value-added chemicals business, our business portfolio in this segment includes caustic soda, chloromethanes, and hydrogen peroxide. During the quarter, volumes for our value-added chemicals decreased by 15% on a year-on-year basis. This was largely due to lower caustic production, both on account of temporary plant operational issues and conscious makeover decisions.
The lower caustic production consequently led to a decline in hydrogen peroxide volumes as well. The demand for caustic soda remained stable in all key sectors, though prices declined marginally during the quarter. Chloromethanes saw an increase in sales volume with steady pricing in the current quarter. In the suspension PVC business, sales volume for the quarter saw an increase of 11% on a year-on-year basis, despite softer demand due to the traditionally weaker monsoon season. The pricing environment remained volatile, with prices rising in the months of July and August but correcting thereafter. Chinese and U.S. suppliers continue to exert downward pressure on prices due to surplus capacity in their regions and weak global demand. This led to further stress on prices and margins in October as well.
Looking ahead, while the business conditions continue to be very challenging, we believe that the new capacities that have been commissioned in PVC and are being built in CMCD and refrigerant gas, as well as our ongoing initiatives on green power, will help improve performance. Now, I'd like to invite our CFO, Natarajan Muralidharan, to walk you through the financial performance of the company.
Thank you, Ramkumar, and a very good morning to all the participants on the call. Talking about the performance in Q2 FY26 on a consolidated basis, the company reported revenue of INR 1,033 crores, reflecting a marginal increase from INR 993 crores during the same quarter last year. EBITDA for the quarter stood at INR 43 crores, a growth from INR 26 crores in the previous year and INR 17 crores in the previous quarter. The net loss for the quarter was at INR 41 crores. Now, coming to the quarterly segment-wise performance, our specialty chemicals segment delivered a revenue of INR 372 crores, reflecting a 22% year-on-year growth from INR 306 crores, primarily driven by increased volumes coming in from the new PVC plant at Cuddalore. Revenue from our value-added chemicals segment stood at INR 138 crores, representing a 12% decline on a year-on-year basis, primarily due to lower caustic production, as explained by Ramkumar.
Our Suspension PVC business reported revenues of INR 523 crores, which remained flat compared to the same period last year. In H1 FY26, the company reported a revenue of INR 2,133 crores, with an EBITDA of INR 60 crores, and the net loss for the period stood at INR 114 crores. Coming to the segment-wise highlights during the half-year, our specialty chemicals segment recorded a 10% year-on-year growth, with revenues rising to INR 726 crores. This is primarily driven by increased volumes coming in from new PVC plant at Cuddalore. The value-added chemicals segment reported revenues of INR 276 crores, a 9% decline year-on-year basis due to the reasons explained earlier. Suspension PVC segment posted revenues of INR 1,131 crores, at the same level as last year. As of September 30, 2025, the company's consolidated net debt stood at INR 1,319 crores.
As Ramkumar mentioned earlier, with the successful commissioning of the PVC expansion, as well as the forthcoming CMCD and refrigerant gas projects, and the green energy initiatives, we are confident that we are set for a stronger future. With this, we conclude the presentation and open the floor for further discussions.
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 the 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, we will wait for a moment while the question queue assembles. The first question is from the line of Sanjesh Jain from ICICI Securities. Please go ahead.
Yeah, good afternoon, sir. Thanks for taking my questions. I got a few of them. Starting with the refrigerant gas R-32, any update you want to share about the capacity planning, any work started there on R-32 plant?
Yeah. We are still working first production on Sunday, and we are still working on the utilization of the capacities on refrigerant gas. Work has already started on the swing plant of our existing R-22 plant in Mettur, and there is another—we are replicating that. Another 2KT plant as well is being set up. The plan currently is to put up one more 10KT plant there. So this is really where we are, but we are obviously—all of this depends a lot on the regulatory framework in the country, and we will be getting into more detail as we get clearer on that.
So what we are planning is two swing and two other new. So we'll have four, and then we will evaluate what we can put based on the regulatory environment. Will that be a fair assessment?
Actually, but we are already in advanced stages of engineering, etc., for the other plant as well, but that's a call that we'll take before the end of December.
Got it. Got it. That's very clear. Second, on the standalone business, if I look at standalone business overall now, we have quite a mature plant on the CSM business. We have full capacity running in the PVC new plant. And the EBITDA in the standalone business is just INR 18 crores. So what's dragging it down? Is the CSM still not broken even at the EBITDA level? Is that also dragging on the EBITDA for the standalone business?
Sanjesh, the key reason is still the softness in the PVC business. As you would see, today we have almost 110,000 tons capacity of PVC. That's the dominant product even today in the standalone business. And that price continues to be quite soft, and the margins continue to be soft. That's the key driver. As far as the CMC business is concerned, the growth has been sort of happening as per schedule. Our dispatches have been happening as per schedule. Of course, the impact of the agrochemical slowdown has had some impact for us as well. Specifically, with respect to the new molecules, the ramp-up has been gradual compared to what we had sort of anticipated. So that has had some impact. But other than that, the key driver is the PVC business. And another important aspect is the softness in the caustic soda and the chloromethanes business.
As you know, currently, chloromethanes is sort of India's nexus in terms of chloromethanes capacity. That has had an impact on the chloromethanes prices and margins. So these two are the key drivers for the softness and the profitability of the standalone business.
Sanjesh, it's largely driven by the PVC softness right now because of the prices, the low prices coming in from the European Union. When that improves automatically, you will see some better performance.
Right. It appears that we are making losses at EBITDA level in the PVC. Is that the case?
Losses at EBITDA level in? Sorry.
PVC business.
Now, if you look at PVC, value-added chemicals also together because it's a sort of integrated business. So we are making positive EBITDA in both directions.
Only if I look at the competition at the current prices at caustic and chloromethanes, they are making around 8%-10% EBITDA margin. Okay. So INR 140 crore of what we are doing value-added services, at least there should be like 6%-7% of EBITDA margin. That means we are left with the other two businesses, which are the PVC and the suspension and the CSM business, right? Now, there is either one of them not adding or dragging EBITDA, it's what I feel.
So we do not look at the EBITDA within Chemplast on a standalone basis because there are a lot of shared facilities, and we do not really allocate the cost in that sense. We look at it at the gross margin stage. And like I'm just repeating myself here, the gross margins of PVC are definitely not where they should be. And that would be addressed once we address the question of the low-cost material or the low-price material coming in from the European Union.
Got it, Ramkumar. Just following up on that industry scenario itself, now we are hopeful that there will be some rationalization of the capacity and then there are anti-involution coming. Any sign that we are seeing, or it's just an hope we are having on it?
There is some rationalization that's already started in Europe. So we have had one plant that has been shut down, a PVC plant that's been shut down around 230,000-ton capacity, and others around the chloro-vinyl business, but not particularly a PVC plant that have also been rationalized. So there are enough and more signs that this could. More announcements could be expected in the months ahead. As far as China is concerned, we only get information about some plants running at lower operating rates, but we still see a lot of material coming out of China. Therefore, I guess there we still have to wait to see it pan out.
Got it. Got it. But in fact, still seeing a very soft real estate market. We haven't heard much about the closure. That will continue in the sector, right?
Absolutely. I fully agree with you. From the demand side, there still is no real signs of a recovery in China. And that is the reason why I think the Chinese authorities are also talking about this anti-involution, etc. But while there's a lot of talk about that, right now we haven't seen anything really happening on the ground. We'll have to wait and see how that plays out.
Ramkumar, just one last question from my side. On the balance sheet and cash flow, I was just looking. Last four years, we have generated what, EBIT of INR 20 crore, absolutely. While we have such an ambitious plan, the CSM as well as now. If this situation continues, how are we planning to manage the cash flow and balance sheet? We are already at net debt of INR 1,300 crore, which appears to be.
The major capital is already behind us. So we have already—what we did was on the CMCD side or the PVC side, those have already been commissioned. PVC, like I mentioned, is running at over 100% utilization. Therefore, that is really the major CapEx program that we had. The refrigerant gas is really not going to be that significant an expenditure. So I believe that we will manage. And some of the other measures in terms of cost, etc., the green power initiative, etc., that we are undertaking would also shake loose some cash.
You don't see immediate requirement of a capital in the company because balance sheet appears a little stretched for us.
We believe that we will manage this.
We'll be able to manage. Got it, Ramkumar. Thanks, Ram, for all those answers. Coming quarters.
Thank you, Sanjesh.
Thanks very much. The next question is to the line of Rohit Nagraj from Centrum Broking. Please go ahead.
Thanks for the opportunity, and good to see that there is some sequential recovery in terms of operating performance. First question is on the CSM part of the business. Do we still hold the guidance of INR 1,000 crores by FY27? And in terms of the margins at that particular level, what would be the EBITDA margin range that we would be looking at? Thank you.
Hi, thanks a lot, Rohit . This is Krishna. Can you hear me?
Yes, sir.
So with respect to the CSM, the pipeline remains to be strong, very active engagement with our customers. We have commercialized three molecules already so far this year and one more anticipated in the fourth quarter. So the traction with respect to the engagement as well as the product pipeline continues to be strong. As you may be aware, there has been overall the global agriculture market sort of remains mixed with stable demand, but there is significant ongoing price pressure. And the market appears to be recovering with volume growth happening for some of the innovators. But the price pressure remains due to significant capacity overhang in China and then putting in a lot of lower-priced generic AIs into the rest of the world.
So this in the near term is impacting offtake of newly launched molecules by many of the innovator companies, leading to a slower ramp-up in their business, particularly on the pipeline molecules. And a lot of the projects that we have done, that we have commercialized in the recent past 18 months or so, many of them are newly launched molecules. So while the long-term demand and forecast appears to be very strong, we could see some deferment by a couple of quarters. Let's say in terms of how it ramps up, there may be a slower growth ramp-up. But overall, we remain confident about the long-term projections for this business.
Sure. That's helpful. Just in terms of margins, so at that level in terms of the scale-up, what could be the margin profile that we are looking at at EBITDA level?
Between 20%-25%. Industry is operating somewhere between 23%-25%. So it could fall. As we ramp up, it could be between 20%-25%. Currently, we are not at that level. We are slightly lower, but we eventually would land up in that range.
Perfect. Perfect. That's helpful. Second question, I missed earlier commentary part. So if we have touched it, probably it's repetitive. On the PVC ADD front, suspension PVC, so the due date from the Finance Ministry notification has been yesterday or today. So any comments on that? And if it lapses, then what is the procedure that usually government follows? Thank you.
Yeah, so that's a good question. In fact, the final findings were recommended on the 14th of August, and it was notified in the Gazette on the 17th of August, so we are not very, there are two views floating around. One that the last date is the 14th was yesterday, or the other is that the last date is the 17th, so we are not very sure which is the last date, but however, since you asked, let me just give you, and this might become a little bit of a long answer, so forgive me for that. If the ADD is allowed to lapse or it does not become effective, we believe that it will be detrimental to the country's interests on many grounds because it is absolutely crucial that we should have it.
Firstly, the entire recommendation of ADD itself was made after a very intense two-year investigation process that spanned right from the initiation of the investigation. It spanned detailed data analysis, then oral hearings, then visits to the plants, etc. In fact, because of a change in the top at the DG during the investigation, there were two oral hearings as well. So with all of this and having very clearly established the presence of both dumping by the exporters to India and the injury to the domestic industry, the duties were recommended. Now, if these are not implemented, it then actually calls into question the entire two-year process. And again, a non-implementation will be detrimental not just to us as the domestic PVC resin producers, but it will equally be detrimental to the downstream consumers of PVC, as also the non-Chinese exporters to India.
You can imagine how or why the established downstream producers were actually welcoming the ADD in their own calls and interactions. And that would have been because they felt that it would reduce price volatility, improve the sentiments, and increase the demand pull. Now, of course, if it is not implemented, then all of that is the question. But most importantly, I think that this could open the floodgates of entry for largely low-quality, substandard, unfairly priced Chinese imports into India. And it will shut out all the other exporters, also exporters in the U.S. or Japan or wherever they are. They will be edged out by China. And this will also have a severe quality impact on downstream products in India. So there will be a lot of negative outcomes if this does not happen. So that is really where we are.
So we are still waiting on news on this. It is of absolute importance, but let us see where it goes.
Sure. That's really helpful. Just one bit of one more question from my side. I think yesterday, day before yesterday, we have seen that there has been again withdrawal of the BIS quality control orders, and it includes PVC as well. So again, your thoughts on this?
The same thing. Actually, I can then talk a little bit more about the quality side of it. These quality control orders were actually brought in across multiple products, not just chemical products, across multiple industries to ensure that there is a higher quality of the manufactured products that go out of India that are available for both the consumers in India and also available for exports, and to ensure the quality of the finished products, you will also need to ensure the quality of the feedstock that goes into the manufacturing of the finished products, and that was one reason that the quality control order was brought in in the first place. Specifically on PVC resin, given that a large part of the PVC resin goes into the manufacture of drinking water pipes, it is all the more important that it adheres to a certain stringent quality standards.
In fact, these standards are in terms of the residual VCM that is there in the PVC resin. And when it goes into drinking water pipes, the standard is that it should not exceed 1 PPM. So multiple producers around the world, including all the producers in India, have gotten themselves certified and their plants also licensed by BIS under these guidelines. And except for possibly a large proportion of the carbide PVC producers in China who are not compliant with these stringent standards, almost everybody else is compliant, and they've also got themselves certified. So it is actually a setback if we have a reversal of the quality control order. It's actually a setback on public health grounds and safety grounds. And I believe that, and I hope that the government will soon have a meeting on this.
Sure. So thanks for all the elaborate answers and all the best.
Thank you.
Thank you very much. The next question is to the line of Pujan Shah from Molecule Ventures. Please go ahead.
Thanks for the opportunity, sir. My first question pertains to so you have elaborated the thing on PVC ADD. Just wanted to understand the context. So first of all, removal of BIS standard. Second, not implementation or getting delayed about the PVC ADD. And then so first thing is to understand that whenever this decision doesn't come up, so we have to do all the procedures again for the next two years, or it is just a mere form or something like that. It is an easy procedure compared to the last two years. So just wanted to understand that part.
Sure. Sure. As far as QCO is concerned, QCO was actually not already enforced. The implementation date was extended last time till somewhere around the 23rd or so of December. So it wasn't as if it was an existing measure that has been withdrawn. It was a welcome measure that should have come in, and that has now been revoked. So we are hoping that there will be a rethink on that, especially for PVC. I'm not talking broadly, but especially for PVC, considering its importance in drinking water, the quality of drinking water, and public health and safety. In terms of the anti-dumping, if it doesn't come up, so the question that you have raised is whether we need to go through the entire process again.
Yes, if we have to, if it doesn't get implemented and we go for another anti-dumping application based on current data, the entire process will have to be repeated. Last time, it took an inordinately long time because of certain other challenges. Going forward, it may not take that time, but it will still have to go through the process.
Got it, sir. And second on the Paste PVC, so ideally, there was some anti-dumping duty also announced on the Paste PVC. So just wanted to understand, please correct me if I'm wrong, but if it has been implemented, why we are suffering from low-priced imports from Chinese guys?
Yeah. Good question. It's not from China. Paste PVC, there is already a hefty anti-dumping duty on China and a few other countries, and that came in earlier this year, but like we had explained in earlier calls as well, we started seeing dumping increase from European Union producers, so that is the reason why we have filed another petition against the European Union producers, and that petition is already, that process is well underway, and it's ongoing. We hope to see some resolution of that soon.
Got it. I just wanted to understand on a broader aspect. So can you just in this call only, you have mentioned about that there is one company who shut down its PVC capacity. So I just wanted to understand what is the current out of the total production, what would be the contribution of European guys in the PVC right now?
See, out of a total PVC capacity of around 60 million tons worldwide, the European Union would have maybe around 7, 7 and a half million tons of capacity, but production-wise, they would possibly be slightly lower because their production, not all the plants are running at full operating rate given their own challenges.
Got it, sir. Got it. So do you expect that this 7million-7.5 million so there is one thing which is going is Anti-Involution in which might be lower quality production capacities or lower efficient capacities might get shut down. Or while might some of the companies in China only will try to expand their capacities, and they might be taking that pie of that market share. So do you think that this flow of European companies getting shut down will be able to cater from India will be catered by India, or do you feel that that would be almost shifted to China?
Okay. Incidentally, your earlier question was about the Chinese capacity, and I spoke to you about the seven and a half million tons. If you're talking about the European capacity, and they said it is seven and a half million tons, if you're talking about the Chinese capacity, that's now close to around 30 million tons. So it's not like that is a much larger capacity. The Anti-Involution campaign is really in China. How much of that, like I mentioned earlier, how much of that will get shut down and within what timeframe is something that we are able to see? We'll have to wait and watch how that pans out.
Yeah. But sorry to interrupt, but just following the same question. So what I'm trying to understand is the capacity from European guys. Let's suppose 50% also the capacity gets shut down. Will that be transferred to India, that India will be the net exporter of PVC in coming years, or it would be difficult because Chinese will be able to build up their own capacities from 30 million- 35 million just to cater to European guys?
No, no. In India, I don't think I see India being a net exporter of PVC in the near future because India's demand is so high, and the GAAP in India is also equally high. Last year, for instance, the demand in India for suspension PVC was 4.3 million tons, and the domestic production is around 1.5 million tons. But even with around 2 million-2.25 million tons or 2.5 million tons of new capacity coming in announced and hopefully coming in in India, but by the time that comes in, the demand would have grown even further. So I expect that India, at least in the foreseeable future, will continue to be a net importer.
Got it, sir. Got it. And last question would be on the R-32 side. So just wanted to get an update about the quota availability. So do we have got the quotas for R-32, and we are now full-fledgedly able to ramp up the capacities?
No, R-32 quota will not be determined anytime now. It will be determined only by around 2027 or so. So I think the full clarity will come in only by then.
Only by quarter three?
By 2027. Calendar 2027.
Okay. Got it. Got it. That's my question. I will join back. Thank you, sir.
Thank you. Thank you very much.
Thank you very much. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants, I kindly request everyone to limit to two per participant. Participants who wish to ask a question may press star and one at this time. The next question is from the line of Harsha from Axis Capital. Please go ahead. The line for the participant is disconnected. The next question is from the line of Sajal Kapoor from Antifragile. Go ahead.
Yeah. Thank you for taking my question. Krishna, when do you expect CMCD to sort of become self-sustaining in operating cash flow to be able to fund all the future CapEx after FY 2027?
I think somewhere in the 27-28 time period. Muralidharan, you want to add?
Yeah. Somewhere around the 27-28, when we sort of cross around INR 1,200 crores of revenue, at that point in time, we'll be able to more or less be self-sustained.
The operating cash flow should be able to fund all future CapEx. Do you expect majority of this CapEx to be brownfield or incremental from the same site, i.e., Berigai?
Yeah. It will all be from the same site at Berigai unless our customers come to us and ask for a second site for which we have an alternate site already identified as well.
Yeah. We have sufficient land that alternate, sorry.
Go ahead.
No, no. I was just wondering how far is this alternate site, because the scientists would feel comfortable. So basically, the way it works is when you are scaling- up, if your R&D center is nearby, scientists can walk up to the plant and help the operator to scale- it- up because sometimes what works in the lab doesn't work in the actual plant.
Right. No, I mean, just so Morali was trying to say that we have sufficient capacity available at our current site to take care of our needs for the foreseeable future. So our preference would be to continue at our current site. But what I was trying to say is that if needed, we have a backup option available, and we will cross that bridge when we get there.
Sure. Sure. And just finally on one bookkeeping question, when do we expect the deleveraging of the balance sheet to start? I know one of the earlier participants was also wondering about the rising debt levels. It's just at some point in time, if not already, it becomes unsustainable given the operating cash flow is where we are because over the last couple of fiscals, we have largely funded our CapEx relying on external funding, i.e., debt.
Yeah. Like Ram mentioned earlier, I think significant part of the CapEx is already over, and only a small part left is the represented R-32 CapEx that we need to implement. So more or less, we can say the debt level is sort of peak now. And then I think you're also seeing the gearing to be maybe slightly higher because of the current level of profitability. So two things will happen. We will start getting the benefits of the higher capacity in the coming years, one, and we'll also start getting the benefits of green power, which will also add significantly to the profitability. All of this will sort of result in the gearing coming down in the coming quarters. And we are confident we'll be able to take care of the existing leverage comfortably.
What is the repayment plan? When do we start the repayment schedule? What's the schedule for repayment of debt?
Normally, these are all project loans which have generally, they have post-project completion. You have one year and then seven-year repayment, and it varies from loan to loan, I think. Normal period is, and our cash flows will comfortably take care of all of that.
Sure. Sure. That's helpful. Thank you so much, Muralidharan.
Thank you.
Thank you very much. The next question is from the line of Harsha from Axis Capital. Please go ahead.
Yeah, sir. Thank you for the opportunity. So first question on the CSM side. So just since Krishna indicated that there is some softness in the near term on the AgChem side, so just wanted to understand what is the pipeline in this business and split between AgChem and non-AgChem molecules here?
So the pipeline is mostly AgChem. I mean, we have some projects in the non-AgChem, both pharma as well as other fine chemicals. But AgChem is a significant portion of the pipeline. But the AgChem market is turning around. I mean, the softness I'm talking about has been there for the past couple of years. I mean, we have mostly insulated from all of that, and that is coming around anyway.
Okay. And second question on the spread side. So what is the current spreads in Paste PVC and S-PVC side, and what is the outlook here? And if the ADD is implemented on the S-PVC, then what could be the incremental benefits here?
See, as far as the spreads are concerned, the spreads are between if you look at the reported prices of VCM and PVC, PVC is anywhere between; it's a wide range, but the Chinese PVC is coming in at $650, suspension PVC, and the VCM is at around the $500. So that is really where we are in terms of the PVC minus VCM spread. But obviously, to that, you have various other things that add on or come off. I think it is a little presumptuous at this point in time when there is so much of a lack of clarity on this ADD. I don't think we should be looking at counting that in the picture now.
All right. All right. That's all from my side.
Thank you very much. Participants who wish to ask a question may press star and one at this time. I repeat, participants who wish to ask a question may press star and one at this time. The next question is from the line of Ranjith from IIFL Securities. Please go ahead.
Yeah, sir. Thanks for the opportunity. I'm referring to your presentation, slide 19, where you have mentioned the capacities for R-32, 10 plus two plus two. So if you can help us with that timeline for these capacities and also the CapEx that you are.
See, the one first 2KT is actually a Swing Plant. We are converting the existing R-22 plant into a Swing Plant. That should be ready anytime now, maybe within the next one month or so. I think definitely by 1st of January, we should have that ready. The second 2KT plant should be ready by around April or so. The next 10KT plant, as I mentioned in the earlier call, is something that we are getting ready on all the engineering approvals, everything, and the actual decision will be taken very shortly, depending on some clarity that we are seeking on regulatory approvals. The CapEx for the first two for the 2KT will not be much, will not be significant.
For the 10KT, yes?
The 10KT, when we do it, it will be around INR 250 crores, around that.
All right, sir. Given that we are able to ramp this up in CY26, what kind of quota or eligibility we would be looking at?
No, that is the clarity that we are seeking. So I wish we had that clarity right now, so.
Okay. On the second front, you have clearly discussed on the PVC front. Is there any update on the domestic capacity front that you can give us?
No. We all know there are two major projects that have been announced and are under construction. I don't think it would be correct on my part to hazard a guess on when they would be coming up. But there is one project of 1.25 million tons and another project of one million tons, both of which have been announced and I presume are in different stages of construction.
All right, sir. Thank you. One last bit. There have been contradictory signals from at least the government front, while there has been DGTR has recommended ADD, and now we have seen the rescinding of the BIS standard. So what is the thought process that you probably be gathering from your interactions with the government, if you can shed a bit more light on that? Because these are kind of contradictory signals that we are getting. On the one hand, we continue to see that there has been pressure on the pricing, and the dumping has only intensified. And on the other hand, rescinding the BIS standards can only increase the dumping.
BIS standard is more than just a trade measure. It was also equally to implement the quality of the products. And that is why it is even more important because especially in products like PVC resin, which goes into an end product that comes into contact with drinking water, food material, food, and so on, and pharmaceuticals. Therefore, it is more important from the public health angle. In terms of ADD should have come in by now, it should have been a no-brainer, but we'll have to wait and see. Like I said, we'll have to understand what the government's thinking is on.
Okay, sir. Thank you.
Thank you very much. The next question is from the line of Vatsal Shah from Knightstone Capital Management. Please go ahead.
Yeah. Hi. Thanks for taking my question. So I just wanted to get some basic clarity on the PVC ADD. So on the Paste PVC side, China, we can understand that they can dump because they produce at scale, and the labor cost might also be lower. But why are the European guys able to dump their products in India? So are they selling at losses, or on the gross level, they are better than us? So wanted to understand the reason for that.
Very good question. Their cost levels, they are complaining when they are calling for anti-dumping on various others on PVC, they are complaining about their cost levels being high. Therefore, it is definitely not any cost advantage that they have. We believe that there is cross-subsidization where they keep their domestic prices high and cross-subsidize their exports. And that is exactly what the entire anti-dumping application is about. So in fact, when in the previous application, Norway was part of it. Norway, as you know, is not part of the EU grouping. And Norway was part of that application, and an anti-dumping duty of around $490 was imposed on Norway. And Norway's cost would be pretty similar to the European Union producers' cost. So I'll just leave that thought with you.
Okay. And on the Suspension PVC front, so hypothetically, let's say the result comes out to be negative. So how sustainable in the near to medium term is that business for us?
Well, it will pose an immediate challenge. But then even today, there is no anti-dumping duty, and we are slowly seeing some sequential improvement. So we believe that with an organic improvement in the PVC cycle and with prices and margins, then we'll continue to slowly improve. Of course, there will, like I said, be at least for the next two or three quarters, there would be some challenge. But we are hopeful that this too will see.
Okay. And on the Suspension PVC, what are the major countries which are dumping their products?
The single biggest country is China. China is accounting for around 54% of the total imports coming into India. Another 14% comes in from Japan. And then that is followed by Taiwan with around 10%.
ADD on all these countries will come, or is it like first China will come, then Japan? How is it going?
Like I said throughout this call, right now, we are not very clear about what the ADD will do.
No, no. I'm asking, is the application for all of those countries filed, or the application itself is not filed, like the European Union guys for Paste PVC?
All of them were covered in that application that we filed back in October 2023 or back even earlier, and it was initiated in October 2023. But anyways, I think we'll, like I said, the final word, we are awaiting it. Maybe if it is negative, then it would definitely pose some immediate challenges.
Okay. All right. Thank you.
Thank you very much. The next question is from the line of Archit Joshi from Nuvama. Please go ahead.
Hi. Good afternoon, gentlemen. Just wanted to hear your thoughts on the quota determination that is expected to come in 2028 for HFC gases. So is it that because we have been legacy producers of R-22 and the fact that there's a decent bit of provision, at least as per literature, for determining quota on the basis of what we produced in 2009 to 2011, we have made this decision to have this 10,000-ton plus R-32 plant? Does that allow us to produce more basis R-22? Or otherwise, what would be your thoughts that we might expect from the government about the quota?
See, the quotas are country-specific, not company-specific. And no country allows quota squatting by any individual company. And of course, we do have, based on our own HCFC production between 2009 and 2011, we also will have a certain we can lay claim. But again, like I said, that is a country quota. And what will be allotted, given the fact that India needs the R-32 capacity, the air conditioning demand in India is very high, and there will not be enough capacity of gas. So we will need the capacity in India. We believe that based on the capacities available on the ground in the sequence in which it comes up, quotas should be allocated. This is our belief.
Sir, I got your point. So another one on the CMCD piece. Given that last two to three years, I don't think any Indian agrochemical-oriented CDMO company has been able to make a decent ROE. Of course, the current onslaught from Chinese companies is very much visible. But has there been any change in the dialogue that we are having with our customers when it comes to the ability of an Indian company to be able to sustain X level of margins? Because we have been guiding this 20%-25%, and we have seen a sharp decrease in AI prices, have we seen that change come through wherein we are being maybe suppressed in terms of making that kind of margin purely because of the pricing pressure?
And since we are maintaining this 20%-25% odd range, what is giving us the confidence to be able to do that? Thank you. That would be my last one, and all the best.
So I'm not sure what you're referring to in terms of other CDMOs in the AgChem space, but a lot of the pressure with respect to pricing has been on generics. So the AgChem generic companies have been struggling because of the China prices. So I don't see the Custom Manufacturing business itself having significant pressure. So I don't see that as a problem per se. Most of the companies which are in the CMO space, I mean, they are continuing to be the good ones, continuing to be at these levels.
Sure. Sure, sir. Thank you. Thanks for answering it. All the best.
Thank you very much. The next question is from the line of Rohit Nagraj from Centrum Broking. Please go ahead.
Thanks for the follow-up. So just one clarification. If we have the same plant ready in the next month or so, is it safe to assume that we will be operating at more or less optimal utilization throughout 2026 and the another 2,000 which may come by mid-calendar year 2026? For the next half of the year, again, it will be operated at more or less optimal utilization? Thank you.
Yeah, it will be. It will be. That is the plan.
Okay. That helps. Thanks a lot.
Thank you very much. As there are no further questions, I would now like to hand the conference over to management for closing comment.
Thank you, everyone, for joining us today on this earnings call. We appreciate, as always, your interest in Chemplast Sanmar Limited, and if you have any further queries, please do contact SGA, our investor relations advisor. Thank you again, and have a good day.
Thank you very much. On behalf of Chemplast Sanmar Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your line. Thank you.