Ladies and gentlemen, good day and welcome to the Laxmi Organic Industries Limited Q4 FY22 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 and then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Kanav Khanna from EY. Thank you, and over to you, sir.
Thank you, Inga. Good afternoon to all the participants on this call. Before we proceed to the call, let me remind you that the discussion may contain forward-looking statements that may involve known or unknown risks, uncertainties and other factors. It must be viewed in conjunction with our businesses that could cause future results, performance or achievement to differ significantly from what is expressed or implied by such statements. Please note that we have mailed the results and the presentation, and the same are also available on the company's website and on BSE. In case you have not received them, you can write to us. We'll be happy to send it over. Now, to take us through the results and answer all your queries today, we have the top management of Laxmi Organic Industries Limited, represented by Mr. Ravi Goenka, Chairman and Managing Director.
Mr. Satej Nabar, Executive Director and Chief Executive Officer. Mr. Harshv ardhan Goenka, Executive Director, Business Development and Strategy. Mr. Partha Roy Chowdhury, Chief Financial Officer. We will start the call with a brief overview of the quarter gone past and the financial year 2022, and then conduct Q&A. Now, with that said, I will now hand over the call to Mr. Goenka. Over to you, sir.
Thank you very much. Very good afternoon, ladies and gentlemen, and welcome to our earnings call of our company. This is the first full year after the listing of our company in March 2021, and I'm happy to share with you my sentiments and views on the annual performance of our company. With me on the call, I have Satej, our CEO, Harsh, our Executive Director, Partha, our President and CFO, and Miss Tanushree Bagrodia, our new CFO. The year ended on a strong note. Our consolidated revenues crossed INR 3,000 crore, a milestone, and we clocked a consolidated PAT of INR 257 crore. Cash flows from operations crossed INR 300 crore, a large part of which got deployed in the ongoing CapEx after taking care of our working capital needs.
We also completed the repayment of the long-term debts as envisaged in the IPO. I'm particularly happy that we could return a strong performance despite the headwind on many fronts. Both our businesses did well, of course, at different points in time during the year. Our AI, or the Acetyl Intermediates business, did very well in the H1 , and the Specialty Intermediates business has been continuing its good performance in the H2 of the year. This resulted in recovering part of our losses that we incurred during the 50-day plant shutdown on account of the unprecedented floods at our factory in July last year. Through the year, raw material prices remained volatile. Energy costs and international freights escalated to unprecedented heights. Other logistic uncertainties compounded the challenges.
The results this year, however, testify the resilience and tenacity of our businesses, both AI and SI, and speaks about the ability of our teams to deal with diversified business realities. Our performance this quarter was largely driven by the SI business, which performed strongly on both fronts, volume and product mix. The volumes in this quarter mirrored our last quarter performance with an improved product mix. One of the high points of our Specialty Intermediates basket this year has been our ability to enter strongly into the international markets. Our SI revenue grew by 74% on an annualized basis. One of our CapExes in SI got commissioned and shall start generating revenues from the current quarter itself. Another major CapEx will get commissioned and start generating revenues from the next quarter.
On the AI front this quarter, while our volume showed some growth, as anticipated, margins were impacted due to price corrections. However, our European subsidiary's performance remained robust, and it is expected to return similar performance in the near future. AI revenue grew by almost 98% in FY22 from FY21 on the back of both volumes and prices. Our Fluorochemicals CapEx is going ahead in the right momentum. Our civil construction, infrastructure and utilities at Lote Parshuram is nearly completed. 60% and more of the Italian equipment have been dispatched and received while the work is going on at the site. Samples from the R&D and Kilo Lab are getting approved by domestic and international customers. The project is expected to start up in Q3 of this year in a phased manner.
Going forward, we will continue to drive operational efficiencies and maintain our leadership in AI through enhanced capacities and periodic debottlenecking. For our SI segment, we are confident that new capacities will further improve our product mix while we focus on increasing the share of contractual sales and expand geographical presence. The opportunity in our FI segment is robust, and we are preparing for a phased growth, beginning with agrochemicals and progressing to pharmaceuticals and industrial applications over time. The strategy of creating a strong foundation has worked for us in our SI segment, and we are confident that we can replicate that success in our FI area as well. Just to give you a heads up on all the numbers that we have reported in the media as well as on our websites.
Our standalone financial highlights, we had operating revenues of INR 2,996 crores as compared to INR 1,606 crores in FY21, which is a growth of about 87% year-on-year. Our EBITDA at INR 319 crores compared to INR 202 crores shows a growth of 58% year-on-year. Our PAT at INR 231 crores compared to INR 123 crores in FY21 is a growth of more than 89% year-on-year. Our consolidated results are mirroring our standalone. Our operating revenues at INR 3,084 crores as compared to INR 1,768 crores in FY21, a growth of 74%. Our EBITDA at INR 368 crores in this year compared to INR 217 crores in FY21, a growth of 70%.
A profit after tax of INR 257 crores compared to INR 127 crores in FY 2021, which is a growth of 102% year-on-year. All in all, a good year, a good beginning, and many more miles to walk, many more milestones to achieve. With this, I take the opportunity to thank all Laxmiites, our business associates, our investors, well-wishers for their unflinching support through this journey. I now leave the floor open to the question and answer session.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may enter star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Anyone who has a question may press star and one. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Any participant who wishes to ask a question may enter star and one. Anyone who has a question may enter star and one on their touchtone telephone. Our first question is from the line of Ritesh from RKS Equity Solutions. Please go ahead.
Sir, thanks for sharing all the details and future focus. For the next year, how you see the demand and the supply side, and how you are going to manage your cost part? Because we are seeing lots of cost inflation are actually hampering margin. Do you see how we can improve our margin, in the operation side? Thanks, ma'am.
Thanks. Ritesh, good afternoon. I'm Partha Roy Chowdhury.
Mm-hmm.
There are, as far as the costs are concerned, if you observe, our material costs are of the order of about 70%.
Mm-hmm.
That is the block, which needs to be managed.
Mm-hmm.
In fact, both the major raw materials are commodities where the prices are published and are available in the public domain. Therefore, the way we look at operating the business is not to really get a reduction or a cap on the costs, which we continuously and consistently do. It is all a matter of managing the cost and how we are able to pass them on through the selling prices.
Mm-hmm.
The phenomenon which you have noticed, over the last, say, five quarters, there has been a lot of volatility, and therefore, there has been a lot of volatility in the margin profile as well. On a consistent basis, if you have to run a model, then my personal position on this is an EBITDA margin of about 13 odd percent should be good enough to give the necessary indication, Ritesh. Yeah?
Yeah. Thanks. I have one more question on the same part. In the P&L, I can see we have the purchase of stock in trade. Which is very high in numbers compared to three times the previous quarter. Can you elaborate on this item, I mean why it is so high?
To compare to the previous quarters, if you have observed, there's a note in the published results which says that we have initiated the merger of.
Mm-hmm.
Yellowstone, YCPL.
Mm-hmm.
Post-October we are operating YCPL as a converter.
Okay.
Therefore, we are actually supplying the raw materials to them and buying back the finished from them. Which because of the accounting treatments which we give to these transactions, the traded portion looks bloated. Going into next year, our expectation is that the merger process should come through within Q1 of the current financial year, and then the numbers would get moderated. Yeah?
Okay. Yeah. On the demand side, I mean, how do you see the demand from the market in each region?
The demand side remains robust, Ritesh.
Mm-hmm. We can expect, I mean, how you see this, what is your guidance means, if you can see the mix for the year, how you see means, how much the growth you are expecting the, in the revenue, in the terms of your revenue for the year as well as for the next quarter?
See, we shall abstain from giving any guidance, Ritesh. Okay?
Okay.
That's point number one. Point number two, substantial portion or part of our top line, the revenue line also depends on the prices of the product.
Mm-hmm.
Both the finished product as well as the raw materials.
Mm-hmm.
Right?
Right.
If the prices soften, then the revenue could get softened. If you ask me for the year as a whole, we are looking at some growth, but that growth may not be as robust as you have, as we have experienced in the year which has gone by.
Okay. Any tentative numbers, because last year was fabulous year, and we have done very good job there. Do you think any 10, 20, any projection if you can give us?
No, we would not like to give you any projections as such, but we can assure you we shall work harder than what we have worked this year as well.
Okay, thanks. As our chairman also said that the new plant capacity is fully utilized. Are they able to be operational in this quarter or does that mean the exact revenues will be coming from there or still we need to wait from the operation point of view?
Ritesh, Harsh here. I think as we, as it was told, we've got CapExes coming on stream for the next three quarters.
Mm-hmm.
As they come on stream, these are chemical plants. They ramp up. They've got immediate demand offtake, but you will see maybe with a little bit of lag these things coming up, some within the quarter. The full stream might take another quarter to achieve.
Okay. Thanks. Thanks for answering me. I wish you best of luck for the year and the quarter.
Thank you.
Thank you. Before we take the next question, we would like to remind participants to ask a question, you may enter star and one. Our next question is from the line of Nitesh Dhut from Prabhudas Lilladher. Please go ahead.
Hi, sir. Thank you for the opportunity. My first question is that you know we had 48% contribution from new products you know in FY21. What would be that number for FY22? Actually, I'm asking this as the graph in the PPT you know on slide 14 mentioning about new products I think has the incorrect you know number over there. It's basically mentioning the total SI revenue instead of the new products revenue. If you could just give me that number.
We'll just come back to you on that error, if at all. We will not give a number exactly. We'll just state that our new product that we had launched in the last year and expected to grow has grown as per our expectations and little bit exceeded that. This sort of trajectory that you've seen us deliver in the past is what we're looking to duplicate going ahead.
Okay. This is one number which you have been, you know, giving out. Any specific reason why you're not willing to, kind of not disclose that number?
Just competitive reasons. It's part of our strategy because that will just let out some of the things that we are trying to do. We can assure. If you'd like a deeper conversation on this, maybe we can take this in a one-on-one session where we can explain to you this in far more detail.
Sure. That should be fine. Moving on to my next question. When did we add this 32,000, you know, metric ton capacity on the AI side? And what was the capital outlay on the same?
I'm Partha Roy Chowdhury. These CapEx, these capacity additions are results of debottlenecking through the year. Yeah. The capacity that we have enhanced, capacity that we have reported is the capacity that we have at the end of the year. You can probably take half-half, you know.
What would have been the overall capacity utilization number, including YCPL and this debottlenecking that you've done? What would be the overall-
Very similar.
Utilization number, if you can give us?
Very similar to what we have reported in the past. The capacity utilization would remain between 80%-90% at all points in time.
Sure. What would be the value and volume growth? I mean, would it be possible to give out that number? I mean, of the 98%, 100% jump in AI revenues that you've reported.
No.
Would it be like, you know, more of pricing that is, you know, around 75% all the pricing growth and the balance from volumes?
I don't think we would be in a position to give out any value and capacity utilization indication. Having said that, you have to keep in mind that even the fourth quarter of the financial year, which has gone by in the Acetyl segment, prices remained at a very elevated level. The raw material prices have started correcting, but the finished product prices have corrected for just about a quarter, right? We need to keep that in mind. Again, for your modeling purpose, you will get these price indications in the public domain.
Sure. So can I ask you, I mean, you know, what would be the EBITDA contribution of SI and AI in FY22? I mean, not clear why, you know, why we don't report the segment-wide EBITDA breakup, you know, given that the product profiles are very different and, you know, for that matter, even our closest peers giving out a clear breakup between the segments. So...
Two reasons. Three reasons. The first reason is we consider ourselves operating one business. The way these two businesses, operate, they are actually connected at the starting point and at the end point. So we have common raw materials, and we have common customers. It is only in the middle that they are divergent. Therefore, we continue to operate this business as one chemical business. That's number one. Number two, we don't want to give out these numbers for obvious, competitive reasons. Number three, we would like, everyone to look at us as one and not really as sum of parts. Yeah. So that's the principle that we follow. We shall consistently continue to follow this.
Sure, sure. Okay. Next question is on the CapEx outflow. What I see is that INR 290 crores is the number that, you know, that's there for FY22. If you could give the breakup again between AI, SI and how much would be, you know, towards Fluorochemicals. I mean, any ballpark indication would do. You know, any ballpark number would also be helpful.
See, Fluorochemicals is of the order of about INR 150 crores. Yeah.
Okay.
SI is of the order of about INR 175 odd crores. The balance investment has gone into AI. Lot of these investments in SI are also infrastructure related, which are not directly revenue generating investments.
Okay. This number totals up to more than INR 325 crore. I mean, I'm talking about the cash flow, you know, of the cash outflow on CapEx, you know, which as per your balance sheet is INR 290 crore.
You are referring to the cash flows?
Yes.
Don't do that because there are capital advances and all those splits which are constructed as per the accounting standards, right?
Sure. Okay. This is INR 325 crores, slightly more than INR 325 crores is the total.
Approximately, yes.
All right. Okay. One more question. Sorry?
No, there are also compensating entries in consolidation.
Yeah, yeah. That should be okay.
I'm talking about ballpark numbers, not exact numbers. Exact numbers you will see once the annual report is published.
Yeah, that's fine. That's fine. One more question on cash flow item, whereby there is a purchase of investment of around INR 1,035 crores and a sale of INR 1,034 crores. What do these investments pertain to?
These are actually deployment of surplus funds in mutual funds and other similar instruments which are classified as investments under the Ind AS and GAAP and all that. Yeah.
The figure is pretty significant. INR 1,035 crore number, I mean,
Yeah.
You know, there's been multiple times of churning.
Sorry, my mistake. Can you come again, please?
Hello.
Yeah. Can you come again?
No, no. What I meant is that this number appears to be quite significant. I think last year this number was around INR 170 crores. Is it like, you know, there has been multiple rounds of, you know, investment or kind of trading, you know, and which is why this number is kind of pretty large.
No. It is a no with capital N and capital O. These are all mutual fund investments for three days, five days, seven days, sometimes maybe two weeks.
Understood.
Three weeks.
Understood. Okay, no problem.
Yeah.
Right. One last, if I may. You know, on the effective tax rate, I mean, what is the kind of number that we should work with, going forward? I mean, Q4 tax was negligible, so is there any write-off or, you know, I mean, write back or one-off or anything?
No. If you have to work on that, you can work on a weighted average tax rate of about 20%-21%. If you give me the math, you can continue to
Yeah, yeah. Sorry, sir, one last. I mean, if you can give out the total R&D spend for, you know, for the year?
What is the question? Sorry, I missed that. Once again.
The R&D spend for FY22 and a breakdown, you know, if possible, between the capital and recurring.
Which we shall provide in the directors' report, when we publish the annual report. It should be of the order of about INR 15 odd crore. Leaving aside, of course, the administrative expenses and the salaries, employment costs of R&D. You will get that number in the annual report.
Mr. Dhoot, I'm sorry to interrupt. I may be requested to return to the queue. There are several participants waiting for their turn.
Yeah.
Thank you. We'll take a next question from the line of Saurabh from Asian Market Securities. Please go ahead.
Thank you for the opportunity. You mentioned about the margins in AI. If you can now talk about the margins in SI and outlook on the same.
SI margins, see, we will not be able to give you a number. Okay? If you look at the other chemical companies who are in this space, the margins are of the order of anywhere between 21%-22% to, say, 25%-26%. We operate within that range as a basket.
Mm-hmm.
Yeah?
No, sir. My question was broadly on whether there was margin pressure or what kind of margin pressure was there in Q4 and how should we look in Q1?
You know, the volatility that is there in the SI is not to the same extent in the acetates business. The businesses have different principles of operating. While you saw that extensively in AI, SI wasn't as impacted, and SI continues with the margin expansion growth as we optimize the product mix and continue to launch new products.
Mm-hmm. Okay. Coming to the CapEx, if you can give the, you know, CapEx number for 2023, what would be the, that number?
We have not made this forward-looking statement on our CapEx plan for the future, but maybe if we have a deeper conversation, we can come back to you on that.
Largely CapEx will be now on the FI and SI?
Correct. You will have I mean, our strategy as the company goes, you know, it remains quite similar. A large chunk of our CapExes will always be going towards SI and FI. AI continues the debottlenecking route, and we've got adequate headroom at our existing sites to debottleneck adequately for them several years ahead.
Okay. Should we assume this kind of eight-10 kind of incremental capacity addition in AI through debottlenecking happening every year?
More or less, we are looking to go in line with the market. As you find the end consumer demand increasing, we'll try to match that.
Okay. Just last on the, you know, your customer profile. For FI, your customer, like how many, is there the overlap, in terms of customer with SI for your FI business?
Of course. That was the primary reason to get into this business or this new vertical as there was a lot of customer pull and requests to get into these kinds of molecules.
Mr. Saurabh,
Yeah.
may request you to return to the queue. Thank you. Ladies and gentlemen, we would request you to please limit your questions to two per party. Time permitting, you may come back in the queue for a follow-up question. We'll take the next question from the line of Kunal M from Jaguar Investment Managers. Please go ahead.
Yeah. Thank you very much for the opportunity. I wanted to understand, for FY23, what was the total tonnage, if you could mention, for the entire company combined, AI plus SI? With the new capacity coming on board, this year?
Again, let us split the businesses. While we have declared the numbers on the AI part, and we've seen that, and we've spoken about that earlier. SI, we've always maintained, is not about volume. Volume does not give you the value that they are looking to drive. Therefore, it's more about the kind of products and the new products in the portfolio optimization that actually drives profitability over there. Yeah, I hope that answers the question.
Got it. Just a continuation on that. In the SI business, could you mention what portion of the business will come from acetic anhydride? If you just give a rough ballpark number, what portion will come from that?
We don't give product-wise splits.
Got it. Just regarding the fluorine initiative, I wanted to understand when, you know, at the end of FY23, once commercial, and once we get the facility operational, if you could give us a rough figure as to, you know, what sort of capacity in terms of metric tons, and, you know, what is the size of the gross block. If you could quantify those two numbers, that would be very helpful.
I'm Partha Roy Chowdhury. The top line that we are looking at full capacity should be of the order of about INR 300 odd crore. Yeah.
Sure.
The block is going to be of the order of INR 450 odd crores, maybe slightly lower than that.
Okay.
The tonnage is not important. Again, as Harsh had mentioned, the product mix here is important. Therefore, we don't really would like to sort of discuss the tonnage.
We start from the, you know, as you mentioned, we start from the base products in agriculture, and then as we move along, we'll make it more and more, I would say, a value-added product mix as we move along and expand out to pharmaceuticals and other areas. That's the way we should look at it. The margin will start off from a, you know, margin which is comparatively lower than, you know, probably what the peer, you know, peer set is making. Then gradually it will ramp up over time. Is that the right way to look at it?
Yeah. Principally, I'd say yes, and that's the sort of story we have been able to achieve in the SI segment, and looking to duplicate that model with the FI.
Last question from my end. I wanted to understand the way we, you know, our pricing policy in terms of, you know, the volatility in acetic acid and all the underlying raw materials and including is fairly high. I want to understand firstly how much quantity of inventory do you carry on your books at any given point of time? Of course, right now where we are in supply, so you may carry more. On an average, how much inventory would you carry? And is the pricing, I mean, does the pricing change every week, every fortnight? I mean, how does the pricing adjust to the, you know, volatility in acetic acid prices?
You also mentioned that, in one of the comments, you mentioned that the raw material prices have gone down and the final product prices have not gone down to that, I mean, to the, you know, in accordance with the raw material. Next quarter, at least on the gross margin side, can we expect some improvement for next one, two quarters?
There are actually several questions in what you just now said.
Yeah.
To answer your first question, you see, we deal with liquids and liquid cargo, therefore we have a physical limitation of stocking.
Okay.
Right? That's number one. At any point in time, on an averaged out basis, I don't think we carry inventory more than say two-three weeks because we don't have physical carrying capacity. Having said that, the prices get locked in for supplies of about 60-75 days, yeah. Depending on our view on the prices. Now, with regard to the next part of the question, where you say that the finished product prices are holding up and the raw materials have declined. In the AI business, when the raw material prices soften up, the finished product prices immediately soften up. Okay? So therefore, there is a margin correction which takes place. Whereas in SI it is somewhat reverse, because in SI we have longer term contracts. On an average, every contract is for two-three months, the shortest ones.
We of course have annual contracts and multi-year contracts as well. Therefore, the margin profiles behave differently at different points in time. As a result, you will observe that even if the raw material prices get halved between two periods, our margins don't get halved. The average margin sort of travels within a bandwidth of maybe a couple of percentage points here and there. Yeah.
Thank you. We'll take our next question from the line of Meet Vora from Axis Capital. Please go ahead.
Yeah. Hi, sir. Just wanted a little bit more clarification on the AI segment. As you said that once the raw material price is correct, the finished goods prices correct immediately. Is it reversed when the prices are increasing? Because acetic acid prices were somewhere around, hovering around 90, 95 in Q3, and in Q4 they were around somewhere 60, 65 kind of. You know, have ethyl acetate or similar kind of product prices, you know, jumped by a similar margin, and that is what is being able to see on our margins as a pressure. How do we pass through or there is no pass through?
When you have observed these prices of acetic acid, what is the price of ethyl acetate that you have observed?
They have.
These are my prices.
Yeah. These are like GNFC basic prices that I observed.
Yeah. You have some GNFC margin, right?
Mm-hmm.
then you do a bit of a markup and give us a few points for our efficiencies. You know the margin.
Okay. Typically when the prices of raw materials are rising, for the AI segment, we will see that the margins are improving. Similarly, a downward trend is seen when the prices are going down.
Okay, let's see. Let's take the model aside, right? If prices move with... Prices of raw materials and finished goods are constantly moving. The business model that we are into is managing that and ensuring that we're able to constantly expand on that spread that's there in this business. Which is how we grow this business and manage it. At any point in time, there'll be a 30-45 day lag at best. Through cycles which we have seen, this normalizes and constantly operates within a band.
Can we hear that number like AI business or margin by any chance so that we are able to understand how it moves?
See, the AI business operates on a long-term basis at an EBITDA margin of, say, low double-digit. Yeah?
Sure.
In this business, we operate on per kilo margin. We don't operate on percentage margins.
Sure, sir. The second question was regarding the FI segment that we are adding to our portfolio. Just wanted to understand more on the product side. Will these products be totally import substitution products? What is the market size that we are looking at? And, you know, whether it will be, you know, complete capture of market immediately once we, or are we at pilot stage or have we got approvals for our products? Any rough idea on that?
Yeah. I think the FI addressable market for us remains fairly large. If you see fluorinated derivatives that the Indian industry is serving is worth more than $4 billion. That's the broader market sense. India does import a lot of fluorinated derivatives. As the buzzword is going on, a lot of new assets are being set up in India to either serve import substitutes and serve international customers that require these products in different geographies. I don't think it's one or the other, but a combination of both that will feed our growth.
Sure, sir. I'll come back in the question queue for a follow-up. Thank you.
Thank you. We'll take our next question from the line of Rohit Nagraj from Emkay Global. Please go ahead.
Yeah, thanks for the opportunity. My apologies if this question has been answered. I was dropped off in between. The first question is in terms of the dynamics of the acetic acid. If you could just give us what has changed over the last few months that the pricing has come off drastically. Are there, I mean, what are our expectations given, is there any demand side issues which we are currently facing or we are expected to face because of the maybe non-availability of raw material or probably some demand decline from user segment? Thank you.
Sure. First on the acetic acid, like we mentioned earlier, raw material prices constantly fluctuate for various factors. This is a large global commodity. We're not in the business of predicting what the price will be. We are in the business of managing our spread and risk and ensuring we're able to expand on that. We're fairly agnostic to where the raw materials are. Now, sorry, what was your second question again?
Is there any demand side issue for acetic acid which we have experienced or how the things are moving from that perspective?
Acetic acid is not our sold product, therefore I wouldn't be able to comment on that.
Sure. Got it. The second question is, Partha indicated that we expect this year to be better than last year. Given that the commodity prices have come down, what gives us confidence that we'll be able to do better? If you could just give you know subjective assessment in terms of each of the business segments where we see traction in terms of the new products, in terms of the volume growth, and obviously there'll be contribution from FI segment as well. Just your assessment how the growth is likely to come during the FY23. Thank you.
Sure. If you take a step back and look at our model, right, there are three businesses sitting within us which are all connected in some way. The Acetyl business continues to have and operate within a band as mentioned, and have fairly high asset turns. The Specialty is growing via CapExes, and the FI is a brand new platform that sets us up in a very exciting and new space, which will also grow via CapEx. You've seen our CapEx numbers, that we've been putting into the business year on year, not only right now. CapExes have delivered. We've constantly grown our business in steps, which is what you will continue to see as our strategy going ahead as well.
Irrespective of where our acetyl business margin profile lies at the higher end or at the lower end of the curve, our CapEx and our growth projections are towards our SI and FI businesses.
Right. Got it. Just one request. Since the year is over, and probably from a modeling perspective, we need the CapEx number. As you rightly pointed out just now, that is going to drive our growth. If it is possible for us to share that number on a, at least on a yearly basis, that would be really helpful. Thank you, sir. That's all for now.
Thank you.
Thank you. Our next question is from the line of Dhruv Muchhal from HDFC Asset Management. Please go ahead.
Yeah, sir. Thank you so much. Just one clarification. For the AI business, the capacity last year was 1.6. With the Yellowstone, I was building about 2 lakh tons. The presentation is 2.33. The incremental has come because of the debottlenecking that you mentioned earlier. That's right, sir?
Yes, it is.
Sir, this Yellowstone acquisition, is that part of our numbers? I mean, is that consolidated or not yet?
It is part of the consolidated numbers for half year.
For half year. Okay, got it. The second is a bit related to the earlier question, is on the demand. We are seeing significant price increases across commodities or across products. Just trying to understand, just trying to get your sense, are you seeing some implication on demand at a broader level? Are you seeing some implication on demand, our customers, you know, getting a bit back? Also, you have Europe as a decent exposure as in terms of exports. We're seeing a lot of price increases, the fuel price increases and some capacity closures or temporary closures there, because of the unviability it seems. Any thoughts on what's happening in terms of your products?
Any, you know, implication on demands that you see, at least, from a six months, one year, or probably, relatively near-term, medium-term basis?
Sure. First on the demand front, I think we are past the high watermark, if you look at it on a general basis. Even at the previous high watermarks, we've not seen demand contracting because we find our products being essential to several applications. Substitutes have tried to come in but not been successful. We've seen a fairly robust demand throughout last year, irrespective of the cycle. Regarding Europe, we find that it to be a larger opportunity as local producers over there have a significant increase in their energy costs, which might give us some opportunities to play.
Okay. From a demand perspective, does that have any implication? Because I was actually coming from demand, but you mentioned interesting point on supply that opened an opportunity. From a demand angle, does it have any implications, some of the chemical producers, you know, shutting there temporarily or something?
We have not seen that in our segments. Yes, there have been shutdowns or trimming of capacities as far as possible in the overall industry, but our segments have been fairly unaffected.
Sure. On the second point that you mentioned, the supply, that benefits us because, for us, the cost of the fuel or others will not increase as much as probably for the Europeans and hence, that puts us in a better position.
That's right.
Sure, sir. Perfect, sir. Thank you. Thanks a lot.
Thank you, Dhruv.
Thank you. Our next question is from the line of Rohan Gupta from Edelweiss Financial Services Limited. Please go ahead.
Hi, sir. Good afternoon.
Good afternoon.
Sir, a couple of questions. First is on your SI business. We have seen that in the current quarter, the exports growth has been pretty decent, and roughly 39% of the business in the Q4 has come from exports, which is much higher than the 29% contribution came in Q3, and definitely much higher than 19% in last year. I just wanted to understand that, is there any competitive pressure you are seeing in the domestic market? Because it seems that in Q3 versus Q4, you have lost probably some business in domestic market, while the growth has been coming mainly from the exports. Just wanted to understand that, what can be the possible reason for that losing domestic market in SI business.
You know, we had stated our strategy of going into exports almost a year ago. I think this has been very strategically driven over a long period of time, and this is a resultant of that. Losing a domestic share to another competitor coming up or another import substitute, you will have some changes happening quarter on quarter. Our trajectory for export has been strategically driven.
Sir, you are saying that this is intentional and I understand that we are in a hurry to grab more market in exports. But that doesn't mean that we may lose the domestic market or unless we have some capacity constraints. I think that is not in the case of our company. We still have some surplus capacities available. We're not able to comprehend that whether it's a competitive pressure which is driving the domestic market or as you did mention that your focus is more on exports, but I just wanted to understand that focus on exports should not be coming at the cost of domestic markets, isn't it?
I mean, I don't have much of a comment to add on that, but I just say that we're operating our business strategically, where we value both markets and we're serving customers everywhere.
Right, sir. Going forward once again in SI business, now fairly almost closer to 40% of business coming from exports. Just want to understand more strategically what kind of margin difference is there in exports versus domestic? Does this export market give us more comfort in terms of any kind of volatility or easily passing on of the raw material volatility or versus domestic? I just want to understand what are the key differentiating factors between the domestic market and exports market.
The margin profiles between the domestic market and the export markets are similar.
Right.
That's number one. Yeah. In specific product ranges. It is not that every product is sold in the domestic market and the same product is sold in the export market. We have a large basket of products. Yeah. Now, if Harsh you wanna add something.
No, that's enough.
Okay. Sir, second is on our fluorination. I believe that our plant, as your presentation already mentioned, that we are on track to commission this by end of Q3 FY23. However, we have definitely did have some Kilo Lab trial runs which you have done on your lab. Just wanted to understand how we are progressing in terms of reaching out to the customers in fluoro specialty, because this is a new business for us, a new more complex chemistry for us. How we have approached to the customers in terms of trial runs and sampling, and how do you see that the customer acceptance has been there toward the fluoro specialty business.
You know, we've, with Miteni, luckily been able to get a company with a fairly rich history of more than 50 years of producing some of these products. Customers we have seen have generally been very receptive and happy to see the company get a new life in India and get the advantage with Laxmi since we share existing relationships with a lot of the same customers. The sampling plan is going on fairly well, and there's a whole way that we have set forth with customers of how we are going about it, and that remains on track.
Just last one, and if I'm allowed to ask, otherwise I can come back very well in the queue. On this diketene, as you know that, one of our closest competitor have entered into diketene and have commissioned the plant. Do you see that, the product basket which they are developing, competes with your product basket in diketene? Is there any kind of, pricing related, competitive pressure you are seeing in diketene derivatives or they have a completely different set of product basket which is not competing with yours?
Well, I think competition has not just been there today, but been there from international sources since we existed in this business, in the same product basket. Competition has always existed, and we've been able to perform and consistently grow across products and new products throughout the decade, which we'll see continue to grow. We have explained some of the competitive advantages that we have as Laxmi in this business, and we think that will keep us in good stead for the times ahead.
Mr. Gupta, may we request you to return to the queue, please?
Sure. Thank you very much.
We'll take the next question from the line of Tarang from Old Bridge Capital. Please go ahead.
Hi, good evening, everyone. A couple of questions from my side. One, has there been a change in your trade policies with your customers or with your suppliers in terms of taking credit or giving credit?
No, not really.
Okay, got it. Second, you know, just from a reconciliation standpoint, if I look at your inventories as of March 2021 and compare it to March 2022, inventories have moved up by about INR 170 crores from INR 203 crores to INR 373 crores. But when I go back to your cash flow statement, the delta on inventory or the working capital squeeze on inventory is about INR 123 crores. So if you could just help me understand that better. That's number one. Number two, how much of the delta on inventory that we are seeing is on account of prices and how much of it is on account of, you know, holding on to additional volumes.
Tarang, I think this is very specific. If you wouldn't mind, you can take this question offline, and we'll be happy to answer this. It's fairly technical. We may have to refer to some of our notes.
Okay. No worries. No worries. I'll connect back. Thanks.
Thank you.
Thank you. Next question is from the line of Rohit Sinha from Sunidhi Securities. Please go ahead.
Yeah. Thank you for taking my question, sir. Some of my questions are already answered. Just wanted to understand the outlook on this fluorospecialty business. We have, I believe, close to 14,000 capacity in this business. You have mentioned that close to INR 300 crore kind of revenue would be from this at the peak utilization, I think. First of all, what would be the progression in this business once it is commissioned? And secondly, what are our plans to basically invest more on this or how are we looking to add capacity on this fluorospecialty going forward?
Sure. You know what, again, we spoke about this, but happy to speak again. The size of the opportunity that is available, that has opened up to us with the SI business is fairly large. What we achieved with the SI business in a much smaller market was we took a few years to establish the base very strongly, and then that allowed us to multiply and get into either downstreams or find our own niches in the market. Miteni had a very strong base in which they were operating in Europe, and they could operate in Europe in a healthy manner. We're looking to extend that over here and possibly do it much faster than what we did with the SI business.
Maybe, I mean, you were mentioning that all those customer who was with Miteni, I mean, our initial customer would be the similar profile, right?
Exactly. The in-
Okay.
The existing customers of Miteni or जो हमारे customers थे, they're fairly similar, which gives us a good starting point.
Great. Just that is what, I mean, going forward, how we are looking to scale the capacity, I mean, from this current starting and, I mean, next maybe three years, would it be possible and would it be 100% utilized and be looking to add, another or putting some CapEx in that?
No, that's exactly in the vision where we bought this platform because we see the larger, much larger addressable market available. This is really just the first phase, and we're just allowing ourselves some time to establish the platform and absorb the technology safely and successfully, which then allows us to invest more and grow this business significantly.
Okay. The margins in this fluorospecialty would be how much in the north of what we are currently experiencing? If at all you can mention.
No, we benchmark ourselves with other peers in the industry, so you can think of it like that.
Okay. That is from my side, sir. Thank you.
Thank you. That was the last question. I would now like to hand the conference back to the management for closing comments. Over to you, sir.
Thank you very much. I hope we've been able to answer most of your questions. If there is anything that still remains to be answered, please feel free to send us a mail, and we will talk to you or discuss and send you the relevant answers in as soon as possible. Thank you for your patience. Thank you for your time. Thank you for your support, and thank you for being with us. Thank you, everybody.
Thank you, members of the management. On behalf of Laxmi Organic Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.