Ladies and gentlemen, good day and welcome to the Q1 FY 23 earnings conference call of Laxmi Organic Industries Limited, hosted by Go India Advisors. 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 zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Mrunali Jain from Go India Advisors. Thank you, and over to you, ma'am.
Thank you, Rutuja. Good afternoon, everyone, and welcome to Q1 FY 2023 earnings of Laxmi Organic Industries Limited. We have on the call Mr. Ravi Goenka, Chairman and Managing Director, Mr. Satej Nabar, Chief Executive Officer, Mr. Harshvardhan Goenka, Executive Director of Business Development, and Ms. Tanushree Bagrodia, Chief Financial Officer. We must remind you that the discussion on today's call may include certain forward-looking statements and must be therefore viewed in conjunction with the risks the company faces. May I now request Mr. Ravi Goenka to take us through the financials and the business outlook, subsequent to which we'll open the floor for questions and answers. Thank you, and over to you, sir.
Thanks very much, Mrunali. Thanks, Sheetal, and a very good afternoon, a sunny afternoon in Mumbai today to all the ladies and gentlemen attending our call. Welcome to our earnings call of our first quarter of this fiscal year. As Mrunali mentioned, I'm accompanied here today by our CEO, Satej, Executive Director, Harshvardhan, and our CFO, Tanushree. Despite the market volatility and the inflationary pressures seen across the globe, Laxmi Organics has had a good start to this fiscal. The SI business in particular saw growth both in the exports and in the contribution margins. Of course, it is heartening to know that we commissioned a new plant for SI supplies to an agrochemical major. Most of this capacity is already contracted, and we will ramp up production in.
Extensive flood-proofing work has been done, seeing our experience of last year at our SI manufacturing facility. This year, the monsoons so far have been moderate, but we are well prepared in case of a downpour. The AI business saw quarter-on-quarter improvement in EBITDA margin, and exports also grew very well. Almost 40% of the revenues of the company came from exports in the last quarter. We optimized our procurement between imports and local supplies to support the margin expansion in the AI business that was aided also by the softening of petrochemical and acetic acid prices internationally. The quarterly EBITDA at INR 104 crore resulted in an improved EBITDA margin at 14% and an increase of INR 29 crore vis-a-vis Q4 2022. This was due to better contribution margins on both businesses and an optimizing of the SI product mix.
Given that the quarterly revenue of Q1 2023 at INR 759 crore was about 14% lower than the Q4 of FY 2022, this margin expansion is very heartening. On an annual basis, the revenue of Q1 of this fiscal was flat as compared to that of Q1 of FY 2022, which was INR 741 crores. While the SI business year-on-year has seen a steep increase in contribution margins, the lower ETAC prices have subdued the margins on a year-to-year basis. This fiscal will see Laxmi Organic Industries commence the fluoro specialty unit. Almost all the civil and infrastructure work is completed at our Lote Parshuram site, and packaging and dispatch from Italy is also on track.
While the heat wave that Europe is facing has slowed down some of the dismantling work, for since the conditions are not conducive for the workers to work, a dedicated team from our side has been established at the site to put in place measures that will reduce the impact of this disruption. This is a year of consolidation for Laxmi. As we complete the CapEx of the fluoro specialty business, we will continue to invest in debottlenecking investments for the AI business. The SI business CapEx is continuing smoothly, and we are on track to commission yet another new plant in quarter three of this fiscal. Overall, the company has been able to develop core capabilities to execute organic CapEx of INR 350 crore annually. Our strong financial position ensures that we are able to deliver this magnitude and offers a growth trajectory for our company.
Before I hand over this call, I would also like to share my gratitude and thank my shareholders, employees, and all other stakeholders for showing immense faith and trust in us.
I am truly overwhelmed. Last but not the least, Laxmi is blessed with eminent independent directors whose counsel has kept the company on the right path to sustainable growth. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the 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. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Jainish Kada, an individual investor. Please go ahead.
Hello. Yeah, good afternoon. I have two sets of question. One question is, in standalone financial revenue from operation is INR 8,036 million, whereas in consolidated it is showing INR 7,566 million. Why it's in consolidation there is a less amount of revenue from operation than from standalone? Next question, last year we had a flood in one of our plant during monsoon, so we had a loss of property insurance. Whether the same has been received, if not, reason for the same, and how long will it take?
Good afternoon. This is Tanushree Bagrodia. On your first question, sir, on the standalone entity, you see a higher revenue because when we consolidate subsidiaries, any purchases and sales which are intra-group get canceled out. On consolidation, we've netted out the sale that we have made to one of our subsidiaries. The difference that you see of roughly about INR 40 crore is that.
Okay.
On the insurance claim, the work is in progress. We are very confident and in touch with all the required stakeholders, and we should be able to get the claim in this fiscal.
How much is the claim amount?
Sir, in the annual report you'll find all the details.
Yeah, it's long now. One year has been passed, but no claim has been received.
Sir, the thing is the process of this claim is quite cumbersome because there are different elements to the claim, right? The flood was a massive flood which had a significant impact on both property and stock. When the process happens, the underwriter appoints a surveyor. The surveyor then comes and does a first assessment, asks for a number of documents, data, backup, then they will come and revisit the site and that process is, you know, how it's defined by the underwriter. That process is on. Like I said, we are in touch with the underwriter, with the surveyor, with all the stakeholders, and at the moment we are very confident that in this fiscal we should get the claim amount.
In this financial year it will be done.
Ji, sir.
Okay. Yeah. Thank you.
Thank you. Participants who wishes to ask a question may press star and one. The next question is from the line of Jay Shah from Capital PMS. Please go ahead.
Hi, good afternoon and congratulations to the management to take their robust performance even after going through a lot of difficulties last year. I wanted to know on the business side and especially on the fluorination front, what are the kind of inquiries are you getting? I think I understand it may be confidential, but can you throw some light on whether it's more from the pharma intermediates or even from the agro space? Also because of the ongoing problems in Europe, do you see a lot of, you know, it may be that there might be a shift in the business that might become stickier for us going ahead. Like, are you getting even those kind of inquiries or these are just plain, vanilla inquiries from clients, from customers?
Sure. Hi, Jay. This is Harshvardhan Goenka. Happy to take this question, both the questions on. Regarding the first, which is inquiries of fluoro. I think we're getting inquiries on all three product segments, so pharma, agro, and what we classify as industrials, which primarily goes into coatings, inks and adhesives. It's broad spectrum. These are typically all new products that are required by our existing customers at some point in their new product life cycle, and we are already partnering with them on that. About Europe, yes, this is quite a hot topic which we discuss with several people in the industry. Certainly large products that are very energy dependent may not be sustainable in Europe at these levels, and that would have some tailwind effect on the general Indian chemical industry.
What specifically comes out of it, I'm sure time will tell.
Okay, got it. In terms of the setup, I just wanted to know what kind of integration do we have when it comes to chlorine molecules? Like, do we have access from Miteni for TFE or fluorspar or anything, or that is all gonna be procured, like, through import or domestically? Like, what kind of integration do we have when it comes to trade and things?
Sure. I think Mexichem's value proposition just started off differently. They did not start off with HF. Their starting points were chlorine and toluene, and then HF was one of the steps that they performed in their value chain. We are looking to replicate that in India. We are following what Mexichem did, but with Indian cost base and Indian raw materials.
Understood. Basically the raw materials would have to be procured from the market.
That's right.
Okay. Thank you so much, and all the best for the future.
Thank you. Thank you, sir.
Thank you. Participants who wish to ask a question may please press star and one. The next question is from the line of Saurabh Bhatia from Mangalam Finance. Please go ahead.
Yeah. Hi, and good afternoon, everyone, and thanks for taking my question. Am I audible?
Very much. Go ahead.
I have two questions. One is like company operates in three segments. One is AI, second is SI, and now coming up with the fluoro segment, right? What will be the kind of revenue mix going forward, say, from here three years, five years down the line, what is the kind of revenue mix which the company is looking in terms of the three categories? One. How would the margin improvement be in terms of the revenue mix going ahead? Will it improve with the SI and fluoro segment? This is one. Second one is on the environment side. I mean, how compliant are we on the environment side, and what are the things which we are doing to mitigate the risk of any ESG norms? Thank you.
Sure. Saurabh, I'll answer the first question about our general strategy. If you see Laxmi's history, we've started off with bulk chemicals, and that's the history has been started off with the acetyl intermediate space. A decade ago, we took on the challenge to come into specialties and we managed to scale that. Now we are looking to do the same with fluorination in a new market segment on a new technology base, which has already been proven, and where the addressable market is a lot larger. I think the margin profiles of each of these businesses is quite clear, and as you go more and more specialty and more and more complex chemistries, therefore the barriers to entry and margins also improve.
Mm-hmm.
What commitment we are making is that more than 90% of our CapEx will go towards specialty-like businesses. Very little CapEx goes towards our acetyl business currently and will continue to do so. That will define the product mix and the business mix that will be generated going ahead.
Okay.
If I can add to what Harsh just mentioned, and, you know, if you have the presentation on slide four of the presentation, what you will see is exactly what Harsh was talking about. That we started with a bulk business in FY 2011 to FY 2014. 77% of our revenue came from AI, and in that period our EBITDA CAGR was about 4%. As the revenue contribution from the SI business has increased, the EBITDA CAGR has also gone up.
Right.
This is exactly what we plan to do even with the fluoro business, because what this allows us is to generate profits and use that money for future growth of the company.
Does it mean that we will evolve as a company from an operating margin of around, say, 12, 13 kind of margin to somewhere upward to 20% of the margin going forward? Is it what logically I see?
I'll leave that number for you to estimate. What we are committing is where our CapEx and efforts are going and the kinds of businesses we are getting in.
Okay. In line with this, we are saying that we will be doing around, say, INR 350 crores of CapEx annually. What is the kind of own accrual and debt mix which company is looking forward?
If you look at the current financial position, right? We also have unutilized proceeds from IPO of about INR 110 crore.
Okay.
We have sufficient internal accruals as well, and the balance sheet is completely unleveraged. There is you know today there will be some debts that we take on as an organization because it will only improve our working capital. We don't want to just be reliant on our internal accruals. If you see our history, we've been very, very prudent on our debt equity, and we will remain below the 0.35 debt equity ratio.
Coming on the last part, regarding the environmental clearances and ESG norms which the company is following and looking for me.
Sure, sure. Saurabh, this has been something that's very dear to us since the company's been founded. Investing into environmental CapExes ahead of its legal requirement is a principle that we follow. Today you will find our sites which are capable of much higher levels of adherence of environmental norms than is generally required by legal statute.
Mm-hmm.
This allows us to operate with a great degree of freedom. That I think talks about our culture, and we will continue to do that irrespective of which business we get into.
Thank you, and all the best for a very, very bright future. Thank you.
Thank you.
Thank you. Participants who wishes to ask a question may press star and one. The next question is from the line of Seema Bajaj from RK Consultant. Please go ahead.
Hi. Good afternoon. Thank you so much for taking up my questions. My first question is that if you could please throw some light on the demand supply outlook for your key products?
Sure, Seema. You know, we have many of our products and find application in a diverse set of markets. Given Laxmi's global supply chain, we've been able to move product across different geographies as well. If you notice our acetyl segment had a slight increase in its export ratio the last quarter, primarily because we found some other markets being more fruitful than others. Similarly on the SI side, we've in this time included a slide which shows you a constant change in product mix optimization. The mix allows us to serve different market segments, because we are so diversified. Being not really concentrated gives us flexibility to not only operate different products but also serve different industries irrespective of the cycle that they're going through.
Right. Thank you so much for your answer. My next question is that will the margins in fluoro be higher than the current 12% margin that you're doing? Just some ballpark number or just if you could throw some light on this, please.
I think principally, Seema, yes, because that's what we have gotten to the fluoro business for. It should. We want to move our existing EBITDA margin up, and that's been our strategy for the last several years. Our whole journey is to get into more specialty-like businesses.
Mm-hmm. Right. Right. Your take on debt. Will you be taking debt in future for your growth going forward?
Seema, currently if you look at our balance sheet, we have absolutely no leverage, right?
Mm-hmm.
Which means that we're completely equity funded, which means that just from a simple 101 principle we are. Our weighted average cost of capital is quite high. We will be availing of some debt. We are very fortunate that, you know, we have large public and private sector banks, foreign banks that have had long partnerships with us. Getting loans at very competitive rates is something we are fortunate to be in a position for.
Right. Thank you so much. That's all from my side. Thank you.
Thank you. The next question is from the line of Abhishek Nawalkha from NBIE. Please go ahead.
Yeah. My question is maybe on the product profile in the fluorination business. Just would like to understand what sort of product profile you will be having and in comparison to, let's say, what Navin Fluorine and SRF are doing in the specialty chemical space. In the initial years, what would be the margin expectation for in this business?
Sure. Fundamental difference with what Miteni used to do is they would do only fine and specialty chemicals. The entire refrigerant gas space is not something that we are looking at as a business. Now, within the fine and specialty chemical, the products that Miteni would manufacture, none of those products were produced in India at that time. Our intention is to start off with a basket of eight-10 products, which sets the baseline and the bench very strong, and then pick it up from there and go down to further and further other products. Regarding your margins, I think I just alluded to that in the previous part.
Our intention is to increase our margins overall as a company and investing in specialty like businesses with what you benchmark us as against different peers in the market. That's what we'll be targeting.
Sure. Broadly you're saying these will be the building blocks or the catalog products only largely in the initial layers which we'll be targeting, right, in the specialty chemical space?
Our immediate first phase will involve some building blocks, but we'll also be getting into the downstreams of those building blocks with which Miteni would manufacture. It's not just building blocks.
Sure. Thank you.
Thank you. Participants who wish to ask a question may press star and one. The next question is from the line of Rohit Nagraj from Centrum Broking. Please go ahead.
Yeah. Thanks for the opportunity. The first question is on acetic acid. Last couple of months, we have seen that prices have declined quite a bit. Any particular reasons for the same? Are there any demand related issues for the downstream products of acetic acid? Thank you.
Sure, Rohit Nagraj. Regarding acid, I think overall global demand and supply has undergone change, where demand you might have seen slightly weaker, and therefore you've had acetic acid prices correcting. Feedstock prices would have come down as well, therefore that has happened globally. Our business model is agnostic to that. We look at making margin irrespective of where the raw materials are, and we will continue to operate in that manner.
All right. Thank you. The second question is on the fluorochemicals business. Since we are, you know, constructing it, importing the entire capital asset and constructing it over here, what could be the initial time lag in terms of, you know, teething issues because it will be a completely new asset, and it may have some initial time lag. What is our expectation? We have earlier indicated that the commercial production is expected to start by Q3 FY 2023. Do we stick to that timeline? Thank you.
Broadly, yes, we are sticking. There are different, they're fairly large plants. The first plant we are starting up will happen in the end of this calendar year, beginning of next year. Regarding your concern on startup and issues, definitely is very valid. We have done this before, so we are taking adequate precautions and have learned some things from our previous experience. Of course, these are chemical plants and, they're naturally prone to such things. Looking at our strategy, I don't think we're trying to say that let's do it 10 days or 20 days earlier.
We are generally moving towards a much more specialized molecule structure that was either underutilized or inefficient in Italy and allows Laxmi to get into a much more strategically focused space and serving customers for a lot of their new product requirements. That's what's really exciting and driving us to get into the fluorochemicals.
Right. Got it. Sir, just one clarification. Have we started feeding the market with the products that we would like to introduce from this facility? Or it will take time only after the facility is ready?
I missed that, Rohit Nagraj. We've set up a kilo lab where we have many customers. It's essentially a miniaturized plant of the Italian plant in India. We did this during COVID because we couldn't get access to Italy. This allowed us to absorb technology, get our people trained on that, and as well as sample out to customers. Currently various customers, the sample is in various stages of approval, and that's a process that has helped us shorten the time, as you said.
Right. Once the commercial production starts, we will be able to immediately put out, you know, orders, commercial orders to our customers. Is that right, Harshvardhan Goenka?
Correct. Every customer would like to see that, okay, your new plant has come up or it's been resurrected, is it performing well? There'll obviously be a few extra checks when the first batches, et cetera, go. Besides that, it should be a lot smoother than starting up a brand-new product.
Got it, sir. Thank you so much for answering all the questions and best of luck.
Thank you.
Thank you. Participants, to ask a question, may press star and one. The next question is from the line of Meet Vora from Axis Capital. Please go ahead.
Yeah. Thanks for the opportunity. My first question was regarding the other expenses that we are seeing on our books. YoY, if you see our revenues have been around INR 10-50 crore. There has been a margin expansion of around 4%. But our other operating expenses have, you know, more than doubled YoY. What's the component of that? Is it the freight cost, power cost, logistics cost or what is it?
Yeah. Meet Vora, Tanushree Bagrodia here. Meet Vora, on the other expenses, you are right. Year-on-year, if you see the large increase actually comes from the freight cost component, because globally you're aware the freight went up significantly and it's only started to sort of taper down now. Similarly, there is a cost expansion that has happened on coal and on electricity, and that also has had an impact. Those are the two major components. The third component year-on-year, which has had an impact to some extent on the other expenses, has been the diesel cost because you know, domestic transportation, the road transportation costs also go up.
All in all, other than these three large elements, the cost elements which are in our control have either been very prudently kept under check or, you know, we've also tried to reduce them where possible.
Sure. These costs might be primarily affecting the AI business or SI business?
These costs affect both, right? Because your exports are for both products, your imports are for both products. You use electricity in both plants. The costs actually impact both AI and SI. What we've been able to do, and you know, you will see a slide on that in the presentation. What we've been able to do is optimize the product mix of the SI business. As a result of that, what has happened is that our overall contribution margin for the SI business has seen an expansion. We make sure that where we can, we optimize our product mix and keep expanding on the contribution margin annually. Even on the year-on-year result, where you are seeing that the overall EBITDA has gone down, actually the contribution margin of the SI products has gone up significantly.
It's 35% if you see it on that slide. If you go down.
Mm-hmm.
If you go to slide one up, eight on the presentation, you will see that if I rebase my contribution margin percentage to 100% in Q1 FY 2022, the contribution margin percentage today has grown to 135%.
Yeah. Yeah. Understood. This contribution margin includes our power cost as well? Have you excluded power cost while calculating this contribution margin?
Yeah, yeah. This contribution margin includes your landed cost of your raw material. It includes your power cost. It is your complete variable cost.
The impact which we are able to see on the EBITDA on a consolidated level should be more from AI side, right? Because there is a margin expansion because of better product mix, despite a higher power cost.
Absolutely. The product mix has also changed. If you see the graph above, what you'll see is if we were making 100 products in Q1 FY 2022, we then were making 96 products in Q3, we were making 88 products in Q4, and we are back to 100 products in Q1 FY 2023. Now, this doesn't mean the same products, right? The basket has moved. If you see the contribution margin growth has been constant except for Q2 FY 2022, which is the flood impacted quarter.
Correct. Sure. Great. My second question was regarding the fluorination business. You know the basic building block that we require for fluorination is HF. Now, you know, have you already contracted volumes of HF from our sourcing guy for our prospective requirement once our plant starts or how are we getting it? Because, you know, what I'm able to understand is that India has four major players in HF, that is SRF, now including GFL and Chemtrack. And the other three of them are using it captively. You know, only Chemtrack is having HF to sell it readily in India. Are we backward integrating or are we procuring it from Chemtrack or how is it gonna happen?
Amit, Harsha, take the question. Regarding HF, I think our fundamental is that our requirement for HF remains fairly small. Our focus is not just fluorination, but fluorination is one of the steps among many that we are doing. The European market was living off for 60 years until today since Miteni's existence with buying HF in the market. Yes, we will be doing that, and that is our intention. Plus, we are not seeing any product overlap with the existing players. Therefore, we are seeing this not as a major issue.
Sure. The transportation of HF in tankers or availability of it in high pressure environment for chemistry et cetera is not an issue?
No, it's been done globally. Globally since it being transported overseas, I think every chemical has its own hazard, which you have to have scientific study to control. That's how it's transported.
Okay. Understood. Thank you so much, and best of luck for the future. Thank you.
Thank you, Amit.
Thank you.
Participant who wishes to ask a question may press star and one. The next question is from the line of Abhijit Ranjan from IIFL Asset Management. Please go ahead.
Yeah, thanks. Just a couple of questions. First on the acetyl intermediate business. Could you just help me understand, in terms of, the contribution margin we are mentioning that we have seen 30% quarter-on-quarter improvement. Can we say that generally, the contribution margin that we make in this business remains so stable, adjusted for the inventory losses. If the inventory gain and losses, if we take aside, generally the contribution margins will remain stable in this business. Can we assume that?
Yeah. I'll answer that. I don't know about the number that you mentioned, but yes, very, very much true. If you take out the inventory ups and downs, the contribution margin in the last five-seven years has tended upward. The reason for that is that we have a very large site, and that enables us to expand at the same cost base. As we do that over years, you'll find our contribution margin slowly increasing.
Got it.
Abhijit, just to clarify, the 30% growth in SI contribution margin, contribution margin percentage expansion is year-on-year and not quarter-on-quarter.
Got it. Perfect. The recent correction, you put a chart in the presentation in the acetic acid FOB prices, the correction that we have seen, has it already factored in the current quarter, or we can expect that impact to come in the subsequent quarter?
The acetic acid prices correction that has helped the margin expansion in the AI business in Q1 FY23, along with the fact that we optimized purchasing locally versus importing.
acetic acid prices correction will lead to inventory losses, right?
Our inventory holding is not very long, Abhijit. I don't know why it would lead to a loss because we don't hold on to raw material inventory for a very long period of time. Our longest inventory holding period time is, let's say, about 30 days and no more.
Got it. In terms of SI business, just wanted some clarification. One is that, the contribution margin rebasing that you have given, on the base of Q1 FY 2022, we have seen significant growth. Is it only because of the high product, better product mix, or it's also because of the tightness in the market in terms of, you know, the kind of the product that we do or selling higher in the overseas market like Europe, and we are also talking that we have recently entered to U.S. Is it a combination of multiple factors and what are the sustainability in that improved contribution margin in this one?
Sure. No, I think, you know, it's been fairly strategic the way we have gone about the SI. To do that consistently quarter has been. It's been strategically done many years back. Of course, international markets was one. New product innovation, you know, introductions was the other. Some amount of operational excellence was there as well. Combination of all, but I think what we're trying to drive is that it's more about product mix optimization that we run this business with and will continue to do so, which is what will lead to improved margins.
Got it. Just last clarification on the acetyl intermediate side. In terms of the way we were discussing the inventory adjustment that happens, is my understanding right that the inventory gain or loss is mainly pertaining to the acetic acid prices coming down, which is leading to losses? When it moves up, it helps the company in terms of inventory gain, and that gets reflected in the contribution margin.
As a business model, I think you're perfectly right, where the inflationary benefit of raw materials would be accounted towards the company. Deflationary goes the other way. Long-term sustainability of the margins have been proven, I think, and we've shared enough, quite a bit of data regarding that.
Got it. Perfect. Just one last clarification on this one. You have given this time PAT breakup and 50% contribution to acetyl and 50% to specialty. Around INR 32 crore contribution came from acetyl intermediate. Given that the prices remain where they are for both ETAC and OA, can we expect similar kind of numbers in consecutive quarters or subsequent quarters also for acetyl business?
I will not comment on that exactly, but I will. If you look at the last five-year trend, I think you'll be able to find your answer quite easily. We stated, and I said that before, about our capital investments going towards the specialty, and that's what will start driving our margins up further.
Got it. Thanks. Just one more clarification. On the fluoro side, our total CapEx that we are estimating by let's say when the plant will get commissioned in Q3 FY 2023 will be INR 350 crore. That's total CapEx bit.
Yeah. Around 350-400 will be the range.
Got it. Perfect. Thank you. That's all from my side. Thanks.
Thank you. The next question is from the line of Naman Bhansali from Portfoliocity Ventures LLP. Please go ahead.
Hi, I have two questions. Are we planning to enter into any new chemistry? The second is, please explain a bit on your future prospects. Is there enough space to execute those same projects, or we are planning for any greenfield expansion?
Sorry, I'm sorry, there's a lot of disturbance. Couldn't understand any of your questions. Could you repeat, please?
Yeah. My first question is, on are we planning to enter into any new chemistry? The second is, please explain a bit on your future prospects. Is there enough space to execute those same projects, or are we planning for any greenfield expansion?
Sorry. Sure. New chemistries, I think, we are constantly doing new chemistries at Laxmi. We've just taken on Miteni, which gives us a basket of 13-14 new chemistry platforms that itself has significant room of growth. I don't think we're restricted to chemistries.
Okay.
As projects come about, customers have seen that Laxmi's proven itself by adopting new chemistries at a significant scale.
Yeah.
That's my response to the first question. Future projects, yes, there will be growth. Today, we are fully focused on the fluoro project. I think there's adequate amount of room on our plate. Our next phase of growth, we will come back to you and tell you all more about that at a later time.
Okay, that's all. Thank you.
Thank you. The next question is from the line of Anurag Patil from Roha Asset Managers. Please go ahead.
Thank you for the opportunity. How is the current price trend for Ethyl Acetate compared to Q1 quarter?
You know, I think if I could predict price of Ethyl Acetate, oil, et cetera, I think we make a lot more money than what we are. We don't like to predict to keep it simple. Our business model is agnostic of raw materials or finished good prices. We've got to make margin on that, and that's how we are running our acetyls block.
Okay. Sir, I'm not asking about the future, prices. What are the current trend means it is decreasing or increasing, that's the only thing, till now in the Q2, for 30 days only.
It's immaterial to our business, and we wouldn't have a perspective on that.
Just to highlight to you, in the last quarter, if you look at the acetic Acid, if you look at the ETAC FOB graph that we've shown, right? You will actually see that there was a decreasing trend. In our case, the domestic prices we could maintain flat, right? I think that's what we believe in. Given that we have a sizable capacity, gives us the opportunity to be a consistent and a reliable supplier, both of quality and quantity to our customers, and that helps us maintain a certain price level in the market.
Okay, ma'am. That's it from my side. Thank you very much.
Thank you. The next question is from the line of Rupesh Tatia from Intelsense Capital. Please go ahead. Mr. Rupesh, your line is unmuted. Please go ahead with your question.
Hello, sir. Can you hear me?
Yes, we can hear you.
My first question is, how much CapEx has been spent in SI business so far, and how much is left to be spent, and when will it be capitalized?
Sure. Just a second. We're just getting the number.
We are hopeful of capitalizing the CapEx, the entire plant this year because we should be able to commission by the end of this fiscal. By the end of FY 2022, we had spent about INR 152 crores. In this quarter we've spent about INR 30 crores more. Till now we've spent about INR 180 crores till the 30th of June 2022. There is a balance of about INR 120 crores-INR 150 crores more to be spent.
What kind of asset turns do we expect from this investment?
On the asset turns, I think the way to look at this, there's two ways to look at this, the total business of Laxmi, right? One is you can look at it overall. The other one is to look at the business holistically, and that is how we believe in looking at the business. Because the AI business is the cash cow, SI business is far more stable, and the fluoro business will only start off. If you look at the AI, the SI business as being the base of asset turnover, the AI business will always be about 30% more asset turnover than the SI business, given that there is no CapEx that is happening. Whatever we do will only be debottlenecking.
The SI business, given that the CapEx is largely happening now, the asset turns will be about 30% lesser than the SI business.
Just to add to what Tanushree is saying, that because SI is a greenfield site, your asset turn will be slightly lower. As we're able to add on more and more blocks, that's when it significantly improves.
What is that number? Is it 1.5x? Is it 2x? Is it 2.5x? What is the number?
The cap, it'll be below one in the beginning. For just exclusively for SI.
No, no. I'm not asking about fluorine. I'm asking about specialty intermediates, SI.
SI is much above one because it's a brownfield expansion.
How much would it be, sir? I mean, is it?
20%.
Oh, 1.25?
You know, I think again, to look at the asset turnover from the SI business potentially is. Like I said, is potentially not the best measure of it because there is constant CapEx that we are doing in the SI business, right? For example, this year we are looking at 40, close to about 45% of our entire CapEx going into the SI business. Now, for whatever goes in, you know, to that extent your asset turn will drop. At a stable or at a steady state, what Harsh is saying is at about one point two.
sir, one other thing is I think you are largely into, you know, ethers, diphenyl ethers, and acetoacetamide, that whatever I have understood, and one of the global company has sold their business to, you know, PE group, I think. So, I mean, how do you see your market share going ahead with this selling to the PE fund and also the energy cost in Europe?
Competition and competitive environment constantly changes. I think we're agnostic to that. Our strategic focus has remained to get into some international markets because of demand pull reasons. Our new product basket that we get into tend to be more specialized and focused with end customer contracts. That's remained our strategy. That's why we went IPO to get money and to put up plans for this very purpose. Regarding energy prices, indeed, there will be a larger impact on European players for energy today. Many of our competition in both our segments would be European players, and that can have an impact if and what it is yet to be seen fully in the market.
I mean, let me ask you in a simple way, sir. What is our market share today and where do you see this market share in biphenyl business in, let's say three-five years?
I will not give that number out straight, but I will give you a strategic intent, right? This has been stated publicly before and written down as well. We've had more than a 50% market share for domestic, and we were fairly insignificant internationally. We managed to move that curve, and we will continue to do that where products with margins are attractive. That will be our strategy. We are not necessarily chasing only market share.
Okay. Thank you, sir. Thank you for answering my question.
Thank you. The next question is from the line of Vignesh Iyer from Sequent Investments. Please go ahead.
Hello, sir. Yeah. I wanted to know about this AI and SI capacity. What is the utilization levels as on Q1, if you could tell?
Sure. The acetyl block tends to be at fairly high utilization levels, constantly running at whatever best possible. Our specialty chemical business doesn't really operate on measuring capacity utilization. It doesn't give you any result. Therefore, we've shared some information around product mix optimization, which is how we try to drive the business.
Right. As in, like, when the product mix changes according to that, it operates, right? If I'm not wrong.
That's right.
In SI, there was a new plant commissioned for some high-value molecule product for global use. I want to know if, as things stand, have the sales already started for the same?
Indeed. It has already started, and it's been supplied. Supplies have commenced.
Okay. It started from Q2 only, right? We'll see some revenue contribution coming from that area from Q2.
Correct.
Yeah. Okay. Thank you. That's all from me. All the best.
Thank you.
Thank you. The next question is from the line of Saurabh Bhatia from Mangalam Finance. Please go ahead.
Yeah. My question is, with the slowdown in global economy, since 40% of our revenue comes from export, do you see any margin pressure or say, slowdown in demand, in export market?
We see demand pressures across the world, Saurabh. I don't think it's just in India. Globally as well, you do have some amount of contraction of demand. Our strategy and our attention goes towards driving the product wherever we can find the market and the right margin, and that's how we drive our business.
Okay. One more question is, like, with the talk of this China plus one strategy, do you see any increase in the demand on Indian companies and say for a company like Laxmi, do you see increased demand due to this strategy, China plus one?
Saurabh, definitely, I think not just for Laxmi, but the Indian chemical industry. This is a general trend around the world, which is why there's so much attention going towards our industry. It's a phase of CapEx building. Several companies have their own niches and many companies will look to capitalize on this as there's a lot of demand coming India's way.
Okay. Thank you.
Thank you. The next question is from the line of Rohit Nagraj from Centrum Broking. Please go ahead.
Yeah. Thanks. Will follow up. Just one question. You mentioned in the opening remarks that acetic acid we have started procuring from domestic market as well. How has the proportion changed on a year-on-year basis, from sourcing perspective, import sources, domestic? Thank you.
Nothing significant in terms of its change. It was more of a spot change that we had to do for the quarter to optimize on the prices. There was a disparity between global and local prices, which we try to take advantage of.
Generally, what would be the import component of acetic acid for us?
Just to tell you, India imports more than 1 million tons of acetic acid. Local pure play local production tends to be less than 100,000 tons or less than 10%.
Right. Just one clarification on the slide number 12, where we have given the contribution to profits. This is contribution to PAT, right? Not EBITDA.
This is contribution to EBITDA.
EBITDA. Okay. 50% from AI and 50% from SI.
Yeah.
Okay. Okay. Thank you so much.
Thank you. The next question is from the line of Shubham Thodath from Perpetual Investment Advisors. Please go ahead.
Yeah. Thank you for taking my question and congratulations on good set of numbers. My question is, what will be the incremental revenue arising out of the new plant, like, your specialty intermediates business vertical?
Sure. We are putting in about INR 350-400 crores of CapEx. Miteni at its peak would have, would achieve about EUR 30 million of revenue. We will try and achieve that in a phase-wise manner.
Cool. Last question is that, do you expect any headwinds from international demand outlook, due to the ongoing talks of recession, particularly in U.S. and Europe?
I think recession and demand headwinds are definitely there. That's a global phenomenon. What exact impact will it have on several necessities and things that we do is still a little unclear. Generally, we are seeing some amount of demand contraction globally.
Cool. Okay. Thank you so much, sir. Wish you all the best.
Thank you.
Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to the management for closing comments.
Thank you, everyone. Thank you for attending the call. I think we've had a good start to the year and looking to continue on this trajectory. Our attention is focused on getting the fluorospecialty chemical plant started, and look forward to talking with you all again. Thank you.
Thank you. On behalf of Go India Advisors, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.