Ladies and gentlemen, good day and welcome to the Q3 FY 2025 earnings conference call of NOCIL Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. 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 touchtone phone. I now hand the conference over to Mr. V.S. Anand, Managing Director from NOCIL Limited. Thank you, and over to you, sir.
Thank you, and good morning to everyone. I'd like to start by expressing my appreciation for your presence here today. Joining me are Mr. P. Srinivasan, our Chief Financial Officer, and our investor relations advisors from SGA. I hope you've all received our investor presentation. If not, it's available on both the stock exchanges and our company website. To begin with, let me provide an overview of the company's performance for quarter three financial year 2025. During this period, revenue from operations stood at INR 318 crores, reflecting a 7% sequential decline. Volume saw a 10% degrowth compared to the previous quarter due to lower demand from customers on account of lower production at their end, coupled with some aggressive priced imports as compared to the previous quarter. We see this lower production as transitionary and expect demand to pick up in the next months.
Our prices for the quarter have moved in tandem with raw material prices. We have continued to experience intense pricing pressure and product dumping from Chinese, Korean, and EU rubber chemical players, which has had a significant impact on domestic rubber chemical prices. The influx of lower priced imports has created a challenging competitive landscape, putting downward pressure on margins and affecting overall market dynamics. On the export side, the year-on-year growth is encouraging. This is primarily driven by our strategic engagement with customers and product approvals, which have expanded our global reach and reinforced customer confidence in our offerings. Coming to our largest and key customer segment, the tire industry. The replacement and export demand for the tire industry in India is on a positive trend, while there seems to be a slowdown with OEM demand.
On the other hand, the expected ramp-up in infrastructure spending is expected to augur well for the commercial vehicle sector going ahead, thereby driving demand for tires in both the replacement and OEM segments. Natural rubber prices have moderated from the peak in recent months, but continue to remain at a higher level compared to the previous years. In the domestic non-tire sector, our well-penetrated presence continues to drive growth in this sector. This is largely driven by the auto components, engineering goods, and other applications. Internally, on the operations front, we continue our high focus on operational efficiencies as we stabilize our turbine, our cogeneration turbine, and enhance our renewable energy sources. On the innovation front, our R&D and application teams are working to innovate value-added products for our customers that we look forward to launching soon.
Moving forward, during these challenging times, we continue to focus on the basics and to expand our approvals. We see this trough as temporary and are quite positive to get back on a volume growth path. We remain focused on strengthening our global presence, deepening customer relationships, and leveraging our product portfolio and supply reliability to drive sustainable growth. You may also have noted in the investor presentation the slide on the vision and values, the co-creation and rejuvenation of our vision and values. This sets the direction of our envisaged future and a good balance between continuity and change. That is it from my side. I now invite Mr. P. Srinivasan to provide an overview of our financial performance.
Thank you, Mr. Anand, and good morning to everyone. Let us run through the consolidated financial highlights. On the sales volume front, volume for Q3 FY 2025 is at 127 index basis, taking a base of Q1 FY 2020 as 100. The volume growth gives a degrowth of 10%, which was already highlighted by Mr. Anand. On the revenue front, the net revenue from operations for Q3 FY 2025 stood at INR 318 crores as compared to INR 363 crores in Q2 FY 2025. Sequentially, we lost about INR 45 crores. For the nine months FY 2025, the net revenue from operations stood at INR 1,053 crores as against INR 1,088 crores in nine months FY 2024.
During this quarter, we tried to adjust the selling prices in commensurate with a drop in input prices. Overall, on a net-to-net basis, there was no dip on the valuation front. We maintained the valuation per kg. Volumes for Q3 FY 2025 grew by 3% year-on-year but showed a decline of 10% on quarter-to-quarter basis. On the nine months performance for nine months FY 2025, the volumes reflected a growth of 7% as compared to nine months FY 2024. It is very important to note that on the rubber consumption front globally, we are still seeing a degrowth as compared to marginal degrowth as compared to CY 2023. CY 2024 shows a marginal degrowth. In comparison to that, I think our performance is slightly better. On operating EBITDA.
Operating EBITDA for Q3 FY 2025 stood at INR 24 crores as against INR 38 crores in Q2 FY 2025, with EBITDA margins at 8% in Q3 FY 2025. For the nine months ended December 2024, the operating EBITDA stood at INR 103 crores as against INR 150 crores compared to the nine months of previous year. Margin standing at 10% nine months FY 2025. On operating profitability, operating PBT for Q3 FY 2025 stood at INR 19 crores as compared to INR 32 crores in Q2 FY 2025. The nine months FY 2025 operating PBT stood at INR 88 crores as compared to INR 124 crores in nine months FY 2024. On the profit after tax, the profit after tax for Q3 FY 2025 stood at INR 13 crores as compared to INR 42 crores for Q2 FY 2025.
Primarily in Q2 FY 2025, there was a step in tax credit consequent to the taxation changes for the budget announcement. For the nine months FY 2025, PAT stood at INR 82 crores as compared to INR 91 crores for the corresponding nine months period of FY 2024. With this, we would like to open the floor for question answers.
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 Nirav Jimudia from Anvil Research. Please go ahead.
Yeah. Good morning, team. Sir, I have two questions. First, sir, if you can explain geographically, we see ex-China. How are the various markets in terms of consumption, specifically Europe, Japan, U.S., Malaysia, Thailand? If you can just give a flavor of the consumption basket of antioxidants and accelerators in this broader geography. Also, if you can share some thoughts of the available production capacity in these regions and how much of these regions are currently relying on the imports of rubber chemicals.
Nirav, morning. This is Srinivasan here.
Yeah.
If you look at the rubber consumption, rubber chemicals demand is derived out of rubber consumption.
Yeah.
IRSG, the International Rubber Study Group, releases periodical data on a quarterly basis. From that data, one can understand that 36% of the consumption of the world is consumed by China. 12% is done by European Union, 9% is done by U.S.A., and India is probably 7.5%, 8%. Japan is 5%, and other markets are much different. The key thing is, apart from we see India showing a growth in the volume front when you are looking at CY24 data, whatever period up to which we have received the data till June. If you analyze that, India is still showing a growth of 4%-4.5%. China is relatively lower growth.
Sorry to interrupt you, sir. Mr. Nirav, can you please mute your line while the management is answering?
Yeah, sure.
Thank you. Thank you very much, sir. Please go ahead.
China is growing at a slow rate. As compared to CY23, CY24 has been at a slower growth rate. India is showing 4%-4.5%. We do not know what is the data till December, but the trend based on January to June indicates that. Other markets are all showing a degrowth. Under the circumstances, we see India and probably Southeast Asia, one or two markets which have shown a positive growth. The rest everyone is flattish or negative growth or degrowth. This is as far as the consumption is concerned. In so far as the supply is concerned, I think the supply is largely concentrated around China, which is 80%. Then the European Union entities who have operations across the world, they contribute about maybe 14%-15%, and the remaining 5%-6% is su pplied by NOCIL. I think that is what we can give a-
Sir, is it safe to assume that-
There are other markets who are supplying like Korea. There are other players in India or European, but they do not have their intermediate manufacturing capability. Therefore one should consider them as influenced by China.
Correct. Is it safe to assume that, let us say out of 10 lakh tons of rubber chemical consumption globally, U.S. is 90,000 tons and they do not have any capacity to produce, so they are relying on the imports for their consumption. Is it a safe statement to make, sir?
Yes.
Some small production, but largely import.
Largely European domination and then other, basically European sourcing.
Correct. Sir, secondly, after many quarters, we have seen our volumes dipping. Mr. Anand in his opening remarks mentioned that because of the lower production from the customers, the demand was lesser. We are seeing those volumes again coming back next month, if I heard him correctly. I just wanted to understand, in our previous interactions on the conference call, you have mentioned that the intent is to grow our volumes quarter on quarter, and this was the quarter where we have seen a dip in the volume. If you can explain when can we recoup this lost volumes and start growing again. A.
Where we have seen the dip in the volumes, if you can explain between the domestic and the export side. C, given the kind of current situation in terms of the falling volumes, are we doing anything in terms of controlling the cost so that we can save some bit of per kg cost and that could improve our EBITDA per kg?
Yes. I think one is, like I mentioned very clearly, we are to stay on the growth path. I see this as a temporary blip. What has happened is, typically, we do not expect this kind of production drop in this particular quarter in the way it happened, and that has had an impact from a domestic market point. Also, in the international markets, typically, we do see it every year. It is not new. It is the year-end where there is usually a lower inventory offtake because of the year-end. It was slightly a bit more than we had expected. These two areas did play a role. I would say also with the aggressive pricing, maybe a little bit of the judicious price mix that we had to play, we had to kind of hold the pricing to a certain extent. That, I think, we can retrieve.
Otherwise, these volumes we expect to come back in the next quarters. In terms of growth, I would see that the volumes are expected to come back in all the markets that we are focusing on, both domestic as well as international. Surely, as you said, the last part of what you said, there are significant initiatives under.
Yeah. My last part was that, given the kind of lower volumes and the pricing pressure from probably the countries which are dumping into India and elsewhere, are we seeing or doing any cost initiatives which could bring down our cost per kg and hence could elevate some bit of EBITDA per kg margins?
Absolutely. I was just coming to that. In terms of internal initiatives, I just briefly touched upon it in terms of operational efficiency. There are multi-pronged efforts. One is also in terms of our steam utilization, the steam efficiencies. There are quite a lot of initiatives underway to look at our ratios. That is surely going to bring in some cost elements. We still get to see the full kicking in of the turbine as it is kind of stabilizing and getting on stream. That I should see should start giving more benefits going into the next few quarters. With the volume increase, there will be operating leverages that will also kick in.
Quite a few other initiatives also on process yield, et cetera, which we see will also happen in the next two quarters, yeah. There is quite a few initiatives on that front. Srini, you would like to add something else to it?
Nirav, actually, if you see the other expenses and the employee cost utility, if you take the conversion cost, basically, what we are looking at as a number of maybe INR 350 crores or INR 330 crores or INR 332 crores. Whereas on the production front, we have seen a growth of 11%, which means when your activity is going up at 11%, there are some element of variable cost which is in there in the conversion cost which will proportionately grow along with the volume. But what is more important is on the other part, we are trying to control the cost.
Overall, if you see on a nine month basis, if I take the other expenditure in and aggregate the employee cost, the overall growth is about 5.5% or thereabout. In a way, the cost cutting or cost rationalization measure is already in place, which we can see from the data.
To summarize, if we can infer from the statements being made by you, is it safe to assume that the lost volume in Q3 would be recouped in Q4 and possibly from Q1 we will again start seeing the volume offtake getting higher from the customers?
Yeah. So, broadly, I would expect volumes to be better going forward. But then, yeah, exactly how much do we recoup in a span of three months or six months, I think this we will see as we go along. Yeah.
Got it, sir. Thank you so much, and wish you all the best.
Thank you.
Thank you.
Thank you very much. We now invite the next participant. The next question is from the line of Nitesh Dhoot from Dolat Capital. Please go ahead.
Yeah. Hi, sir. Thank you for the opportunity. So need some clarity on your previous answer. So in Q3, despite the moderation in freight costs and initiatives around power cost saving and others, which you have been talking for a while, we have seen the OpEx to be stable quarter-on-quarter, that is around INR 120 crores or so, despite the lower volumes. So, if you could give some color on why we are not seeing any softening of OpEx and by when can we see this reflecting?
Nitesh, I did not understand your question. What is this INR 120 crores? Where are you picking up from?
So this is basically, if you see the employee expenses and the other operating expenses for Q3, which is at around INR 118 crores, and even in Q2, the number was around INR 119 crores. So it is broadly the same number. But we have a sequential dip in terms of volumes, which is what I was referring to.
I think you are only looking at the sales volume degrowth, whereas we are looking at the activity. When I am looking at the activity for nine months, if you see the nine months data, we are under control and production levels are already high. If you see this quarter, our plan already was to produce at a higher rate than the Q2 volumes. That was our endeavor, that was the plan. Resources committed, and we had to do the activity. Unfortunately, the sales volume dipped because of the lower demand at the customer's end, and therefore, this has resulted in a higher inventory. The inventory buildup is there, and you can see it from the stock change in the P&L account, which has a INR 21 crores credit. That is a clear case where the activity is more than the sales.
I got your point. But sir, this was there in the previous quarter also. Last quarter also, you had mentioned that there was a higher production, and there was an inventory buildup in Q2 as well, and there is not much change on that part. Which is why-
Which means the expenses are already incurred for a higher level of activity. That is where the key point which we want to say. What we are trying to say is these operating expenses are based on the manufacturing activity rather than the volume of quantity sold. Fixed costs are largely constant in nature, and therefore, we have to keep in mind those aspects also. The variable component will move along with the volume of a level of activity. The fixed component is almost constant in nature. When you take the summation of that, this is where the number and therefore you are getting a 20 crores credit also in the inventory change. The fact of the matter is yes, activity is higher than the sales and there is an inventory buildup at the end of December.
All right. In the previous quarter, since there was a buildup in the previous quarter, which I just referred to, would it be correct to say that for Q3 production, you are not able to take the full advantage of the input cost reduction that happened in Q3? Would that be correct to say?
We moderated in such a way that we had to maintain the value addition per kg. That is what we did. We have continued to play this game of judicious mix of volume and pricing. We use that consciously and selectively to ensure that our overall value addition per kg does not drop.
All right. Just one last thing. On your earlier guidance of a healthy volume growth in this current fiscal 2025, where are we expected to end the year? That is one. Any early indications for FY 2026 in terms of volume guidance? That will be all from my side.
We have given some kind of an indication also in the investor presentation in terms of the expected volume growth, which is expected to be at least in the 8%-10% range. We hope to keep the same level going into the next year also.
Sure. Thanks a lot, sir, and all the best.
Thank you.
Thank you. The next question is from the line of Aditya Khetan from SMIFS Institutional Equities. Please go ahead.
Yeah. Thank you, sir, for the opportunity. Sir, my first question is into the opening remarks where sir has mentioned that the pricing pressures into the domestic market that has impacted the realizations. I believe the last quarter also, we had a discussion on the same, and you mentioned that more or less, higher pricing pressure was largely because of the imports which were happening, and that could have been the near bottom. In this quarter also, sir, we have witnessed again similar sort of a theme. That has actually impacted your EBITDA per kilo front also. In terms of guidance, sir, what you can give? You think the pressure would be relieved from here on because the cycle has nearly bottomed out.
Or you see this to continue for some few quarters while, as the demand in the international market picks up, then only we could see some uptake. Any sort of a broad sense if you can give how things are shaping up?
Yeah, you are right. At least our view at the last call was that we are close to bottoming out and we should not see significant further erosion. But we did see it play out the other way, that there has been further pressure on prices. I think this is also a result and outcome of what is really happening in the other markets in terms of demand and capacities that have come on stream in the last few years, which is continuing to play out.
I would be cautious as far as now looking ahead into the next quarters also, seeing that there is still a pressure on prices. But I am kind of looking at it and saying, okay, possibly it is getting close to the bottom. It should not go further. But like I said, the last quarter, I think I would like to be cautious this time. But that is the way we see it.
Okay. And sir, even so, sir has alluded to the fact that improvement in term cost control efficiencies can have some benefit, but it seems like the benefit could not be that substantial. Eventually it seems like the business effectively has weakened down. Any sense of how this business can revive to the older levels? Could it be the imposition of anti-dumping duty or a reduction in imports that could benefit or the tire demand globally that should go up? What are the levers which can change from here on?
So one is I was just going to come to that point that you mentioned. Given the fact that we see that the bottoming out is also not really kind of happening, there is significant pressure on prices. We have also moved on the anti-dumping duty front, and we have got the investigations initiated for a couple of products, and that is quite a bit underway now. I would say that on the other hand, the prices also moved with raw material prices corrections. Going forward, we see that while the market is still in terms of our approvals and what we want to take as business, that still is continuous, that is still happening. So that is the positive view in terms of the opportunity to grow further.
But just one last question, sir. In terms of weakening demand, is this also linked to the global rubber consumption, which has degrown by almost 2.5%-3% for the last three years? And now I think the global rubber consumption is standing at 2018 levels. Is this also one of the reasons why demand has weakened and how you see this trend to shape up?
So it has been, so I think we saw it go up post-COVID, then again come back down. So it is kind of like Srini was explaining initially. The growth is really coming from very few pockets in terms of overall rubber consumption, that is natural plus synthetic put together. But in the long term, we still see that 2%-3% growth globally, which was there, which will come back because rubber applications per se continue to hold sway and they will continue to be there. So we will see that it should come back to the standard 2%-3% global growth levels.
And sir, when are we expecting the outcome of anti-dumping duty?
See, the investigation has started. As per the law, there is a time of probably 9-12 months is what they will conclude the investigation, and then thereafter the recommendations will go. So I think it is subject to the government authority. I think we have to wait for them.
Thank you, sir.
Thank you.
Thank you. The next question is from the line of [Gargi Singh] from [Value Investment]. Please go ahead.
Hello, am I audible?
Yes, ma'am, you are. Please go ahead.
Yes. Sir, my first question was that, looking at the import data, so in October there is a significant increase in antioxidants imports. My understanding on the company was that antioxidant is our strength and NOCIL has an advantage with respect to antioxidant products because of the backward integration that we have and also better quality over the Chinese. Last two years, the imports were happening mostly in the accelerators, but now there is an increase in antioxidants as well. This indicates that there will be a loss of market share. Please help me understand these numbers, sir. What is your take on this?
So, like I mentioned also on the pricing front, and obviously with antioxidants being the largest component in the rubber chemicals, as the prices drop, there is going to be an incentive for players domestically to also import, to see that the delta in pricing is taken advantage of. In terms of quality, I would say we're comparable. When you look at imports from both China and Korea also coming with very aggressive pricing. We see that is playing out, but it's also kind of at the same time come at a time when the production itself has dropped a bit. From that point of view, I don't see a significant loss in market share. I don't see that, and I think it's a correction that's expected to happen again in the next quarter or so.
The quality of the products that we are making in antioxidants is comparable with the quality that is coming in from the Chinese?
Yeah, I would not comment to say that one or the other is superior or inferior. I could say they are all comparable.
I see. Thank you.
I am sorry to interrupt. Ms. Singh, we are unable to hear you. Your voice is breaking. Can you please check?
Hello. Is it better?
Yes, please go ahead.
Yes.
Yeah. With the higher-end tire customers like MRF or BKT or other, the higher-end products, these antioxidant products when we supply to the high-grade tires, still sir, even in those products, it will be replaceable with the Chinese and Koreans?
Yeah, the large share with all tire customers still continues to be with NOCIL due to the supply reliability and the support that we provide at the local level. In terms of what makes they use it for, we will not be specifically able to comment there.
No, sir. I understand that we have the largest market share, but just wanted to understand with respect to the quality perspective, with the higher grade tires, is the product comparable in the antioxidants?
Yeah. Like I said, Gargi, every tire company, the application and the way they use it is quite different. It would be very difficult to kind of generalize to say which of the product they use for higher or for lower-end tires. We would not be in a position to comment.
Okay, sir. Second question was that you mentioned that there is an inventory liquidation happening on the tire side. Again, my understanding here was that the tire ancillary companies would normally have an understanding of the inventory position and the production schedules of the tire companies at least one quarter in advance. Considering that we already had higher inventory in last quarter, and we would definitely would have the production schedules of the tire companies for this quarter as well. Considering all these factors, it was surprising that we saw still a higher closing stock for this quarter and then the last quarter, so for two consecutive quarters. Any comments on that?
Gargi, Srinivasan here. Actually, please look at the tire companies' results. At least three or four of them are released and all of them, if you see in their own income statement which has been released for the quarter, they also have a stock change credit, which means the production is more than the demand. What is happening is in a situation where the demand is downside, and see, a tire company plans its activity in advance. We understand what you are saying, three months in advance. It is very nice. Exactly correct. But when they source, they source from multiple sources. There could be domestic source, there could be an import source. Whenever the production activity is moderated during the quarter because of the demand schedule, the way business is operating, the local player will generally suffer because the import is already committed.
The shipment has already come to the country, he has to clear it. Therefore, the domestic suppliers will go through that crisis. Conversely, in a situation where the demand suddenly picks up, the domestic player will be the beneficiary.
And this is Gargi. So third and last question, sir. I appreciate how the company is being run both operationally and financially. But at the same time, what I wanted to understand from the management team is regarding the plans for diversification. While the efforts have been taken by the company to increase share of business with the overseas customers, in this quarter specifically, we have seen that those efforts are getting nullified due to higher dumping in India. This issue has been there for the last two to three years. On the balance sheet front, we have around INR 550 crores cash and investments on books, but we have not done any product diversification to combat this.
While other chemical companies are diversifying and entering into new businesses where there is high growth potential, this part of diversification has not been seen in the company. What is the plan for diversification and utilization of cash to grow the business going forward?
First, let me kind of respond on the rubber chemicals itself. The rubber chemicals, as you have seen that we have also announced investments to further expand our capacities because we see that there is potential and long-term growth possibilities given the market share and the market share that we can also gain over a period of time with the China Plus One playing out also. So that's on the rubber chemicals. And we also look at innovating in the rubber chemicals space, like I briefly mentioned, looking at products that we can add to our portfolio. That is also a work in progress. But also we're actively looking at what other areas to look at beyond rubber.
There are some adjacencies that we can look at based on similar chemistries or the expertise that we can take into other industries that we have in quite a few areas. So both are underway, Gargi. I would say we have been also talking about this in the last couple of years at the calls. There have been quite a few cases where we were quite close but didn't kind of work out the way we would like it to. So we're still on it. That's an active process that is underway.
Just a follow-up. Four to five years back, we have expanded the capacity, and at that time we had projected to reach full utilizations much before than what the current performance is. Now with your current guidance to the previous participant, with the current capacity that we have, it would take around another four years to reach full utilizations. Still you have planned for INR 250 crores CapEx to expand the capacities in the existing products itself, wherein we are seeing dumping and also there is an issue from the demand front. Is there any plan to defer the CapEx or what is the near-term capital allocation plan with respect to that?
While we'd also mention that the capacity which we mention is for a basket of products. And these basket of products are at different utilization levels. While we have mentioned that for some of the products, still the utilization level has some way to go and we will take time to fill it up. On some of the products, they're already at 95%, 100%, 90%, that range. So it takes time to bring these capacities on stream, and we feel that there is growth opportunity. Only for those specific products, we first start with debottlenecking. We look at what we can do to get additional volumes just from that. And only if all those are exhausted, we look at going in for brownfield, from what we have announced. So it is for that specific product where we are already completely out on capacities.
How much would that product contribute to the revenue, sir?
We haven't announced details of this product as yet in the public domain. We will do that as we get closer because the product is getting more on stream only in the second half of next year.
With the current capacity, by when do you expect to reach full utilization?
Gargi, I would refrain from giving a certain guidance on this given the uncertain external environment. But, I think we should get there in the next short to medium-term.
Okay, sir. Thank you for answering all my questions and all the best to you.
Thank you.
Thank you. The next question is from the line of Renjith Sivaram from Mahindra Manulife Mutual Fund. Please go ahead.
Yeah. I just wanted to understand that-
Sorry to interrupt you, Mr. Sivaram. We are unable to hear you, sir. Can you speak a bit louder?
Hello, am I audible now?
Still you are sounding a little muffled.
Okay.
Can you please connect on your handset mode?
One minute. Hello. Is it okay now?
Yes, better. Please go ahead.
Yeah. Hi, sir. Just wanted to check with you, like, we were believing that a lot of these Japanese tire companies were previously buying from China for our chemicals. Given our capacity additions there and they were also looking at China Plus One, we will be one of the biggest beneficiary of the alternate sourcing that is being looked up by these Japanese tire companies. In that also, there was a lot of activities happening. They were also checking our quality. A lot of tests were going on. In that aspect, what traction have you made into making inroads into these Japanese tire companies? Hello?
Yeah, yeah. It was a bit muffled, but I think I got what you were trying to ask, Renjith. Let me give it a shot. Yes, the China Plus One is playing out, it's not limited only to Japanese. I think you could broad base it a bit more. That traction is happening in terms of what I mentioned, in terms of product site approvals, samples, commercial lots, and then larger bulk lots going. That is underway. Albeit, at a pace, in some cases fast, some cases not so fast. It's a mix of both, Renjith. Yeah.
What phase are we in with some of these customers? It takes six months to one year for them to approve our product and then they will start giving us orders. We understand that it takes almost one year. So where are we with these large companies in terms of how many of these companies they have approved our product and they can give us the production order?
Quite a few have already begun. It's again, even within the same company, there could be products at different stages. Depending on the needs, some of them are prioritized accordingly. Some of them have already flowed into the numbers that we see today, and some are still on the way at different stages. That's ongoing.
Okay. Currently, what will be our utilization, and with these companies coming up, how confident that we can reach to optimal utilization in how many years? That will give some advantage in terms of our operating leverage. Just wanted to understand that.
Yeah, I think that's clearly our endeavor that the utilization with the volumes, and that's why we are quite positive that we will stay on the volume growth path. With the pricing situation, it has to be a judicious call from a quarter to quarter. That's the balance we are continuing to play. I think today, we are at about 65%-70% utilization.
We are operating leverage.
Yeah. We see that we should keep pushing it up from quarter to quarter.
This excluding the INR 250 crores of additional capacity, right?
Sorry. Can you repeat the question, please?
This utilization that you spoke about is excluding that INR 250 crores of-
Mr. Sivaram, your voice is still sounding muffled. It is not very clear.
That is right. Yeah, I got what you are asking. Yes, is the answer.
Okay. The INR 250 crores of additional capacity when it kicks in, there will be further room for volume growth, right?
Yes.
Okay, sir. Thanks.
Thank you. Ladies and gentlemen, to ask a question, you may press star and one now. The next question is from the line of Muskan Rastogi from B&K Securities. Please go ahead.
Hi, sir. Thank you for the opportunity. Sir, wanted to ask you, in U.S., the U.S. has an AD on China for rubber chemicals. With Trump, has the AD been extended on China? With tariffs on Mexico and Canada, do you see the gain in market share in the U.S. market, sir?
Muskan, AD is not only limited to China, but a few other countries also that the application is for. As you know, and all of us know that the overall tariffs that were announced in the last week seems to be so dynamic. Some of them do present opportunities which are there. We see some inquiries also increasing on that front. But I would really keep my fingers crossed on how that whole thing develops, Muskan. Yeah.
Okay.
But there will be opportunities, I at least
Okay. Sir, in terms of cost, we are the best when compared to the peers. The power cost is less, depreciation is less, interest is less. However, I wish to understand where else do we spend most of our time during board discussions and internal meetings? Basically, I want to understand the future growth and diversification plans that you mentioned, one of the past strengths. Apart from that, what else do we discuss in these board meetings?
I think a lot is about, it's clearly how do we expand our market presence? What is it that we need in terms of competitiveness and the kind of plants that we operate? I would say there is always scope for us to continue to work on operational efficiency. We're also now looking at digitalization to help us in our operations to leverage that more to bring in operational efficiencies and improve our cost position. A lot of it is that, and you mentioned it, to look at what are the areas that we can do beyond rubber. That's also a discussion, Muskan.
Okay, sir. Sir, and the last question. What is the delta that NOCIL would have in terms of margins when compared to companies that make rubber chemicals who do not make intermediates?
We don't have data right now, but what we can find out. But what we can say is we have compared with China Sunsine. China Sunsine, with their volume of activity on a much higher scale than NOCIL, and with the subsidy, what they are getting from the government on their export of rubber chemicals, we can say that our margins per kg is marginally better than China Sunsine.
Uh-huh. Okay, sir. Okay, sir. Thank you.
Thank you.
Thank you. Ladies and gentlemen, as this was the last question for today, I would now like to hand the conference over to Mr. V.S. Anand for closing comments.
Yeah. Thank you. I would like to take this opportunity to thank each one of you for joining the call today. I hope we have been able to address all your queries. For any further information, kindly get in touch with me or Strategic Growth Advisors, our investor relations advisors. Thank you once again, and have a nice day.
Thank you. Ladies and gentlemen, on behalf of NOCIL Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.