Q2 24/25

Oct 21, 2024

Summary

Q2 revenue, EBITDA and PAT grew, supported by exports and HPPC, while textile pricing, domestic demand and freight costs weighed on performance. FY25 revenue growth guidance remains 12%–13%, with EBITDA margin guidance of 13.2%–13.5%.

Ladies and gentlemen, good day and welcome to the Rossari Biotech Limited earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Anoop Poojari from CTR India. Thank you, and over to you, Mr. Poojari. Thank you. Good evening, everyone, and thank you for joining us on Rossari Biotech's Q2 FY-25 earnings conference call. We have with us Mr. Edward Menezes, Promoter and Executive Chairman, and Mr. Ketan Sablok, Group Chief Financial Officer of the company. We will begin the call with opening remarks from the management, following which we will have the forum open for a question and answer session. Before we start, I would like to point out that some statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. I would now like to invite Mr. Edward Menezes to make his opening remarks. Thank you, Mr. Anoop. Good evening, everyone, and thank you for joining us on our earnings conference call. It is a pleasure to have you with us as we discuss our operational and financial performance. We are pleased to report a steady quarter showcasing the resilience of our business in a dynamic market environment. Our HPPC division continues to demonstrate consistent growth, while the textile business is still navigating headwinds with a recovery expected in the next calendar year. The animal health and nutrition business remained stable during the quarter. Regarding our exports, we are proud to have expanded our global operations with several geographies emerging as key drivers of our future growth. In H1 FY-25, exports grew by 32%, providing strong support to our overall performance despite softer domestic growth. We have successfully targeted new customers across both new and existing geographies while increasing our wallet share with existing partners. Looking ahead, we expect exports to outpace domestic growth, further strengthening our position in the international markets. In line with this growth trajectory, we have made key investments to support future expansion. Rossari Global DMCC, a wholly-owned subsidiary, has established Rossari Biotech Trading FZE in the Jebel Ali Free Zone, Jafza, U.A.E. This new entity will focus on trading activities, managing the distribution and sales of chemicals and consumer products for export markets, further enhancing our international presence. Additionally, Rossari Global DMCC has agreed to acquire 100% of the equity share capital of Unistar Thai Co. Limited, a newly incorporated company that will focus on the manufacturing and sale of specialty chemicals related to our core chemistries. Furthermore, we have acquired a 39,101 square meter plot of land adjacent to our Dahej facility earmarked for future expansion and the development of our manufacturing capabilities. We continue to pioneer intelligent and sustainable solutions across industries, enhancing everyday life through our eco-friendly and technology-driven offerings. Our focus on innovation and customer-centric solutions enables us to stay ahead of industry trends, delivering value to products that are both high in quality and sustainability. Alongside our eco-friendly product portfolio, we have implemented key sustainability initiatives across our operations. We have installed 5 kilowatt peak of solar capacity at our plants, reduced water consumption by 12,142.5 kiloliters, and responsibly treated and disposed 18,505 kiloliters of water. Additionally, we have planted 1,500 trees around our facilities to promote biodiversity. Through our 3R waste management policy, reduce, reuse, and recycle, we continue to minimize waste and optimize resource use, reinforcing our dedication to sustainability in every aspect of our business. Lastly, we are pleased to announce the appointment of Mr. Gurudas Aras as an additional director, designated as a non-executive independent director, effective October 19, 2024. With over 40 years of experience in the textile industry, Mr. Aras brings a wealth of knowledge, including expertise in advising on robotics and automation, which will greatly benefit Rossari as we continue to innovate and grow across our business verticals. As we continue on our growth journey, our focus remains firmly on sustainability, innovation, and global expansion. We have laid a strong foundation for the future with our success in international markets, new verticals in our core chemistries, and a drive for creating long-term value for stakeholders. While global expansion remains a key driver, we are also well prepared to capitalize on opportunities in the domestic market as recovery gains momentum, ensuring that we are positioned to drive growth across all regions. With this, I would like to conclude my address and now hand it over to Mr. Ketan for his comments. Thank you, Edward, sir, and good evening, everyone. Let me provide you with a brief overview of the financial performance for the quarter ending September 30, 2024. We have reported a steady performance in this quarter, with revenues increasing by 3% to INR 498.4 crores. Our HPPC division saw year-over-year growth of 6%, with revenues reaching INR 390 crores, up from INR 367 crores in the previous year. The Textile Specialty Chemicals division reported revenues of INR 84 crores, down from INR 96 crores last year, primarily due to the ongoing headwinds in this sector, though we remain optimistic about recovery in the next calendar year. Meanwhile, the AHN division remains stable with revenues of INR 24 crores compared to INR 20 crores in the corresponding period last year. In terms of the revenue contribution this quarter, HPPC accounted for 78%, Textile Specialty 17%, and AHN at 5%. On the revenue split between domestic and exports, our exports have outperformed our domestic sales. Year-over-year, our exports have grown by 21%, while domestic revenues remain flat. For H1, the exports grew by 32%, while domestic saw 5% growth. Exports now constitute almost 25% of our overall sales. Our gross margins improved by 253 basis points this quarter on the back of our product mix and our efforts to optimize operations. The improvement comes despite higher costs associated with new growth verticals, including the institutional cleaning chemicals business. Our overall EBITDA remained at, increased by 3.6% to INR 65.9 crores, up from INR 63.6 crores last year, with EBITDA margins of 13.2%, stable despite the additional investment in these emerging segments. In terms of profitability, PAT for the quarter rose by 7.3% to INR 35.3 crores compared to INR 32.9 crores in the same period last year. Our CapEx initiatives announced last year are progressing well at both Unitop and Rossari facilities. In the Unitop CapEx, the board has approved additional investment of INR 18.25 crores, enhancing the budget of the project to up to INR 146.25 crores. The additional budget is required on account of some design modifications, which are necessary to meet the revised project specifications and structural integrity. These projects will be commissioned in a phased manner over the next coming months. We are expected to significantly enhance our ability to serve high-growth segments such as agrochemicals, home and personal care, and specialty chemicals, providing a strong growth lever for the company. Both the projects are being executed efficiently on ground and are expected to deliver asset turns of 3x-4x. This aligns with our ongoing commitment to sustainably strengthen our return ratios. On the balance sheet front, the net working capital days are maintained at similar levels as March 2024. Inventory days have gone up with some RM levels being increased for strategic reasons. Receivable levels are slowly coming down. In conclusion, we are confident that with these investments, coupled with our strong operational framework, we are well-positioned to capture opportunities as the business environment continues to stabilize. Our focus remains on enhancing capacity utilization, introducing new products and expanding our customer and geographical footprint to drive future growth. That's all from my side. Just for informing the participant, Mr. Chari has been traveling, so would not be able to attend the call today. Now I would like, request the moderator to open the forum for question and answers. That will be great. 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 their touchtone phone. 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. Again, if you would like to register for questions, please press star and one. Our first question is from the line of Pawan Kumar from RatnaTraya Capital. Please go ahead. Sir, can you give us the quarterly breakup of exports Q1 and Q2 and the same portions in last year Q1 and Q2? Secondly, I wanted to understand on domestic side, what has been weak? Is it the Textile Specialty Chemicals component or is it the agri home care component or the non-agri home care component? I would just like to understand what is the portion where the growth was weak. On the exports, you wanted the quarterly export numbers, sir? Yeah. Quarterly numbers. Q2, how much was the export and Q1, how much was the export? Same numbers, if you can give for last year also for comparison. Exports for this quarter was about INR 130 crores. Okay. Q1 we have done INR 118 crores and Q2 last year was about INR 107 crores. On an H1 basis, our total export is INR 248 crores, versus INR 187 crores last year H1. Okay. Thank you. Can you just underline what went wrong on the domestic side? Was it on the Textile Specialty Chemicals side or on the home care side? If it was on the home care side, was the problem on agri or non-agri? On the domestic front, if you see in the HPPC, I think, the FMCG home care, the volumes were pretty flat. With the RM prices coming down, we also had some pressures on softening our prices to pick up some volumes. That is where the HPPC growth has been a little softer than what we would have expected. Also, the fact that our availability of EO and the capacities of the population currently running at almost peak capacities. Our primary driver was that we should push more material into the export market because that is one area where we are constantly looking for growth, keeping in mind the future plans that we have. Materials, while domestic demand was also not picking up, we concentrated more on pushing products into the export market. In the textile side, I think domestic volumes were pretty good. The volumes were better than last year. The volume growth was about, I think, 7% volume growth. We had a pressure on the pricing side and the pricing had come down by about 6%-7%. Secondly, the export plan for Textile Specialty Chemicals also took a hit during this quarter with both Bangladesh and Egypt. Our exports were very slow compared to what we had anticipated. Bangladesh, in fact, in the last 2 months, the off take was very less. While there were orders, but given the conditions that were there and the LCs, et cetera, not coming through, a lot of the banking issues cropped up. We took a little bit of a back seat and did not supply any material till things got stabilized. Currently, we expect, I think, over the next month or 2, Bangladesh should start coming back in terms of order placement and in terms of a better banking line coming through so that we are safe on all the products that we start supplying. These were the primary 3, 4 reasons of the volumes and of the top line not growing as per our expectations. Okay. The home care, you were saying it was the non-agri part which has caused the problem, or both were the problem, agri and non-agri? No, it was more of the non-agri part. Actually, it's the FMCG home care. That's what I talked about. Anyway, the quarter 2 agri season is a little softer than what it is in Q1. Q1 is the peak season for agri. Okay, thank you. I will come back in the queue. Thank you. The next question is from the line of Sanjesh Jain from ICICI Securities. Please go ahead. Yeah. Thanks for taking my question. I have a few of them. First- Sanjesh, could you be a little louder, please? Oh, can you hear me now? Yeah, now it's better. Yeah. Thank you. First, on the textile side, I just wanted to understand whether it's a problem on the ground or we are also losing market share to any of the competition. That's number one, because I can see some of our listed peers have been outperforming us now for probably two years, and we have been struggling not for just this quarter, but for last two years or so, we have been struggling in the Textile Specialty Chemicals segment. On the AHN side of the business, we expected in FY 2025 to double our revenue, but the run rate seems to be much more softer than what we thought. So what's gone different than what we estimated at the start of the year on the AHN? Sanjesh, on the domestic front in textiles, we haven't lost any market share. In fact, year on year volumes grew like Keshansinh just now reported that year on year volumes grew by 67%. However, since you know that the prices of certain raw materials dropped, like acetic acid, butyl acrylate, styrene, silicones, because of which there was pressure on the finished goods product pricing. That is where we see a loss in revenue, basically. Whereas in volumes in domestic, we have grown. Ketan also explained that Bangladesh and Egypt, because of the geopolitical issues, we do see growth by 4%-5% in volumes in these two countries also. So that's where you see a negative revenue growth. But having said that, our marketing teams as well as the R&D worked very hard on the product mix offerings, and we saw an increase in gross margin across the product groups, helping us to maintain our EBITDA margins. Going forward also, we are looking at expanding our footprint in newer geographies and add sustainable products to our overseas offerings to grow this vertical in FY 2025. So, in effect, the Textile Specialty Chemicals business has remained steady as are in volume terms, it has grown by about 6% to 7%. Coming to the Animal Health and Nutrition, we are pretty steady here. Yes, I agree that we had expected a higher growth. However, in the last year, we changed a bit of strategy. In the previous years, we had focused a bit on the feed component itself, not only on the additives but also on the feed components. But we found that that strategy was not working out well for us because we were taking a hit on the margins. So we dropped that strategy of going in for selling the feed part of it. So instead of that, we focused more on the additives part of it. So if you see on a year-on-year basis, we have grown 20% in the specialty additives. Whereas quarter-on-quarter, quarter 2 is the festive season, and every year this is the weakest quarter for Animal Health and Nutrition business. So going forward, quarter 3 and quarter 4 are traditionally the strong quarters for animal health, and we expect like our marketing sales, 1.5 times the normal sales for the quarter 2 or quarter 1. So I think AHN is in line, will show healthy growth in this year. Even in the Animal Health and Nutrition, we have taken actions to add consultants, improve our infrastructure. As we had informed in the past, we are setting up a premix plant and we are going to launch products in the therapeutic category as well as gut health improvers using our bioprocess technology. So I think for us, quarter 3 and quarter 4 will give you strong results in the Animal Health and Nutrition. Got it. That's clear. Thanks for that elaborate answer. Second, on the margin side of it and the operating leverage, now if you look at our EBITDA margin sequentially has dipped by 10 basis points while we have increased our gross profit smartly. A little louder, please. Now, is it fine? Yeah. Quarter on quarter we have improved the gross profit margin by 120 basis points while our EBITDA margin sequentially has declined by 20 basis points. If you look at on a year-over-year basis also, we have increased our gross profit by 250 basis points while the EBITDA margin is up only 10 basis points. Forget about operating leverage, our entire gross profit margin improvement is also not getting captured into EBITDA. What is leading to this sharp improvement in the cost and when should this stabilize? I think, Sanjesh, part of this has also got to do with the other expenses which you see we have increased during this quarter. They are almost INR 59 crores in this quarter compared to INR 55 crores in Q1. Given that now we are focusing or at least the export piece is growing, the impact of freight expenses is showing up significantly in these numbers. The freight governing costs in this quarter has been significantly high, while we have also had some professional expenses which have come up in this quarter. This is more resulting from some of the global restructuring that we are planning to do. We hired some people. Also, in the building business, there has been an increase in the number of employees in the last six months. All this has actually led to a good increase in the other expenses and in the employee cost. Part of the gains that we got through the gross profit improvements have got negated with these expenses going up. Ketan, is it fair to say that export business, because freight cost is borne by us, will always be a lower margin than our domestic business? You see the way it is that now we are trying to just grow the export business. With some of the existing customers, we are in a much better position to bargain for the freight, et cetera. While some of the new geographies and the new customers that we are entering into, there are at times where the freight expenses we need to bear. I think it's just a question of time when these things will even out. Our target is that while we bear the freight expenses, we should build them on actual freight. Even if it's CIF, whatever is the actual freight, we should build them. That's what we are talking to most of our customers. The freights have actually gone up a little unprecedented during the last six months. That's actually hitting us. But I think slowly we'll be able to push most of these freight expenses back to the customer. Some of it is already built into the pricing, and the expense part is coming here and under the others. Got it. Just one last question on the domestic business, which appears to have declined. I thought we were also in the process to launch so many new products. Are they not helping us to offset some of the underlying weakness? Decline is completely, I do not think the consumer business in India is declining. What has led for us, for such a sharp reversal in the growth for the domestic business? Yeah. Actually, there is no great decline in the domestic business. What we have done, like Ketan already explained in his opening question, see, there is limited ethylene oxide availability, right? We also have limited capacity for manufacture of the ethoxylates. We saw an opportunity to gain market share in exports. Also realization in exports was quite healthy. That is one of the reasons why we have focused a little bit more on the export where we could grab some market share in certain geographies. Whereas domestic has grown by, say only 67% domestically. There has been little bit muted demand from FMCG as well as other verticals, home and personal care. But it is a very conscious decision to push our products more in export. The same products could have been also pushed in the local or domestic markets, but I believe that we would have got lower gains. The marketing team really worked very hard on the product mix offering, both in the domestic and export markets. I think it is a game which we well played. It was well played by Mr. Chari and his team who look after the sales and marketing, and even help from Ketan on the numbers front. With the limited EO availability and the limited ethoxylation capacity, as you said that we are at peak capacity, this going forward will not be a problem is our opinion, because we have already invested in expanding our capacities there. The loop reactor will become functional by, I think end November or early December. Then again, the ethoxylation capacity will not be an issue. Therefore, I think things will then average out there. This was a great opportunity to grab the export business. Whereas the local business was very competitive during this quarter. No, but EO was not even part of our core four chemistries. We have this acrylate where we were launching series of product, and we had surfactant, silicon, enzymes. EO was never even the part of the core chemistries. It came with our acquisition to Unitop, and we had a lot of launches planned in these four chemistries. EO problem, I completely appreciate, and I know that that capacity once coming, that will drive additional growth. What about these four key chemistries of our and all the products that were supposed to get launched in these chemistry lines? Sanjay, I would like to beg your pardon to correct you. Surfactants was one of our core pillars, and ethoxylates is the major part of surfactants that Rossari used to use. Therefore, the acquisition of Unitop, the logic behind acquiring Unitop was surfactants, basically. I would like to correct you there, that is not our core chemistry, that is number one. However, having said that, if you look at the production at Rossari, as we said that we had introduced a lot of new products there. What has happened is in the last two quarters, we have produced a large number of esters like CAPB, CBA, HNO, HML, Esterquat, as well as resin, but these were consumed internally and therefore it is marked up. During the intercompany sales, you cannot see this sale. If you add both these together, then you will see that all these new products have been introduced now. Now that these new products have been introduced and have been consumed internally, because these are all the hydrophobes and the products that go into Unitop. First we focused on producing these new products, consuming them internally. Going forward, in his opening remarks, Mr. Ketan has said that we have added capacity both at Unitop as well as at Rossari. These additional capacities when they come up, then these products will be available for sale to the domestic market as well as to the export market. That's how it is. Got it. Thanks for answering all those questions, and best of luck for the coming quarters. You are welcome, sir. Thank you, sir. Thank you very much. Thank you. A reminder to all the participants, if you wish to register for questions, please press star and one on your touchtone phone. The next question is from the line of Rohit Nagraj from Centrum Broking. Please go ahead. Thanks for the opportunity. Sir, the first question again, delving on the ethoxylation part. So you said the loop reactors will be functioning sometimes by the month of November. How will we progress from Reliance front in terms of EO availability? Are we going to coincide the EO availability with our commissioning, or is there any other plan for the same? Thank you. Rohit, currently, the way we plan is the EO availability, we are already talking to Reliance for additional quantities of EO, at least starting of Q4. That is what indication they have said that they will start providing us additional volumes of EO. We will have a wait and see, because this capacity will come up by the end of maybe November, December. Assuming we start off from January, we will start at least some part of production. It will take some time for it to reach its peak. I think that we should have enough years to start the functioning of the loop reactors. All right. Second question on the exports market. Particularly which sub-segments or user segments are we trying to tap? Which are all other particular geographies or countries where we are getting this traction from? Thank you. Okay. Yes. Sectors, I think, majorly home care, personal care, cosmetics, and also on the agro side, these are the key sectors in STPC. The key geographies, I think, continues to be Europe, South America. We are also now exploring some countries in the Middle East. Turkey is one of them. On the textile side, with given our current mix of products, we are looking at, of course, expanding in Bangladesh, assuming that business comes back at least towards the end of Q3, is what we are given to understand. Then, of course, Vietnam, Egypt. We are also looking at few markets in North Africa for the textile business. We have got some good feedback from there. That will help us there. Turkey, again, becomes a market for us also for textiles. These are probably the geographies and the segments that we are looking at to drive growth. In Asia, again, we are looking at growing maybe exports in Bangladesh, Nepal, and Sri Lanka. A little bit in Philippines also. These are the core countries that we are looking at for Asia. All right. One last question. In terms of the guidance that we had given earlier, and looking at the first half performance, are we likely to stick to the guidance in terms of the top-line growth and the margins front, or do you want to reassess it? Just another question, any issues in terms of getting the payments from Bangladesh and for the exports market, is the working capital cycle higher than the domestic market or comparable? Thank you. Rohit, I think on the forecast that we have given, I think I said that we will be on a low double digit kind of top line growth. I still expect that we will grow at that number between around 12%-13%. I still anticipate that growth is going to be there. Because if you see the H1 numbers, we are already around 11% top line growth. I think second half, yeah, second half should be better than that. So I still expect that 12%-13% is what we will do. On your second question in terms of payments from Bangladesh, I think as I said, we faced issues in Bangladesh, and that was precisely the reason why we went slow. 2 months, actually, we didn't dispatch much material into Bangladesh, keeping in mind the payment situation. It's still a little sketchy over there, but from what our teams in Bangladesh tell us, I think probably another month or so, and we anticipate December onwards, it should be much better. In terms of the receivables cycle, I think the first half is generally higher given that we just passed the agro season where the payment stretch is a little longer. Probably towards the end of the year, by March, I think we should be much better than what we are as on September. What do you think? Right. Just on the operating margins front, whether we will be able to keep the same margins similar to last year, or do we expect a slight dip given the operating expenses have been going up in the last couple of quarters? Thank you. I think we will stick to what we've done till now, within each one term of 13.2, 13.3. So we'll be around that, between base and 13.5. Sure. That's helpful, and all the best. Thank you. Thank you. Thanks. Thank you. The next question is from the line of Dhruv Mochan from HDFC Asset Management Company. Please go ahead. Yeah. Sir, thank you so much. Sir, from your comments, it seems that the pricing pressure driven by RM has intensified in this quarter, hence the pricing, you mentioned there is a drag because of the pricing. Should we expect this to continue for the next few quarters until the raw material prices probably increase, causing some drag? Probably there will be volume growth, but the pricing will have some offsets in the growth for the next few quarters. Yeah. Dhruv, I think, sitting today, we can expect that this trend will remain around the same level. That is why we are trying to focus more on the export side, where we see that these kind of issues on pricing and all are much lesser than what is there in the domestic market. Also given that now we have capacity where we can play around within either domestic or export. Our focus continues to be to cater more to the export market. In Textile Specialty Chemicals also, I think we would have surely seen a good growth in the quarter had the situation in Bangladesh not Yes. It just not happened the way it has turned out to be, because we had good set of orders for Q2, where we actually took a voluntary decision not to do it given the issues around with collection and thing. I am sure once that evens out, we will have the textile exports also doing pretty well. We expect that the pricing issue which you see in the domestic side will ease out once we have a good export potential to push our products. Got it. I understand your product mix is very different and changes regularly, but some sense on what is the pricing, RM pricing or whatever pricing impact on a quarter-on-quarter basis for your product, across product baskets? A rough range. Sorry, I did not understand your question. What was it? I am just trying to understand what is the pricing impact on a quarter-on-quarter basis across our portfolio. It will be very difficult to say that different vertical, because it is very, very varied. Sure. No worries. Sir, the second question is it possible to share what is the share of EO based products in our overall sales? No, but finally, it is all ethoxylate is the major chemistry for surfactant. So everything linked to surfactant. HPPC. When the HPPC will be. HPPC is all EO based. 70% EO. 70% is all EO based products. Okay. Of the HPPC, 70% roughly is EO based products. 70 should be. Sir, you mentioned about backward integrating into, I think, esters you mentioned, which goes into the EO based products. So if you can give us some sense of what was the external purchase earlier, how much it backward integrate now, and how much of the value are you capturing through this backward integration? We don't have the numbers handy, but actually, if you can get in touch with Keshav sir Yeah he can give you all these things because Sure we used to do a lot of job work or rather Unitop and Tristar would do a lot of job work for all these raw materials, which have been completely 100% produced at Rossari now. So that has been a big change within the group itself, yeah. Sorry, Mr. Ketan can give you the Sure, I'll get in touch. Okay. Thank you so much, and have a good day. Thank you. You are welcome. Thank you. Participants, you may press star and one to ask a question. The next question is from the line of Parth Mehta from Vallum Capital. Please go ahead. Yeah, hi sir. Thank you for taking my question. Just wanted to know what would be the sales for institutional cleaning for this quarter? On the qualitative side, how was the institutional side for the quarter? Institutional sales during this quarter is about INR 70 to INR 73 crores, around that number. Okay. About the annual guidance that you had given around INR 250 crores for FY 2025. Do we stick to it? Any updates in the institutional cleaning during this quarter? Have we launched any new products or something? If you see, for the first half, we have done about INR 130 crores in the institutional business. Our take-off to INR 250 crores, which we had said, I think we are in line with that. What was your other question? Any new product that we have launched or any other update for the institutional cleaning? No, in the institutional cleaning, we have not launched anything new, but we have got a new customer base. Also, what we have done is we have a lot of new brands which have been rebranded. We have rebranded our own old brands. Those are now taking shape. Mainly, we have got a lot of the government laundry business. We have got a lot of institutional cleaning business in airports, as well as in the railway. That is the new business that we have got. As far as new products are concerned, I do not think we have launched anything, any new molecule. There may be new formulations for the particular cleaning application, but we have not launched a new molecule. Only one product that is new is the cleaning in nuclear facilities in India. I think our product there has been approved in about 25 facilities, and we hope that that's a good product to be in that category. Okay, great sir. On the animal health side, last quarter, you have indicated that there were some pricing pressures in the integrated and premium segment on the margin side. Is there any improvement on that side? Sir, I'm sorry, I'm not able to hear you properly. Can you just speak up, please? Yeah. In the last quarter, you had indicated that there are some margin pressures in the animal health side in the integrated and premium segment. You are facing some headwinds there. Is there any improvement over there? Yeah. First, I think we expect the second half now to be a much stronger half for us in terms of the animal health. Yes, there have been improvements there. The issue there was more in terms of collectibility of the sales. We have been a little strict on that, going a little slow, but now I think things are much better. We hope, and we anticipate that the second half of this year will be much better than what we've done in the first half. Okay. Thank you. Thank you. Thank you. The next question is from the line of Ravi Singh from Cosmic Horizon. Please go ahead. Hi. Thank you for this opportunity. Sir, the majority of our RM costs come from acrylonitrile, which is basically crude linked. Crude prices have already started to come off, and in a scenario where the wars kind of come to an end and crude price settles back to, say, the $55 to $60 a barrel. In other words, say crude prices correct by another 20%-25%, will our guidance of doubling revenue on the FY 2023 base hold, or will there be a significant deviation? This is quite an assumption, Ravi. If the crude prices go down to 50, 55%, prices are going to come down, and it is very logical that the prices will fall, selling prices. Then the focus will be more on the volumes and the margins that we can get from there, rather than just the revenue top line. Right. Thank you. That is all from my side. Thank you. The next question is from the line of Pawan Kumar from RatnaTraya Capital. Please go ahead. Sir, can you just outline the CapEx for this year? You were talking about some modifications in existing capacities. I just wanted to understand the quantum of capacities that are coming online in the next three, four months. How much is the investment, and what is the potential return optimum? Sir, we already have two projects going on, one at Unitop, the other at Dahej. We have already spent, I think, about INR 60, 65 crores in this CapEx. I think similar amounts will be spent over the next six months. Some of these projects will come up in Q3 and Q4, and some of them will come up in the first quarter of the next year. That is what the plan is. How much would be the potential, revenue potential? Yeah, so we should do an asset turn of roughly between three to four. Okay. I just wanted a clarification. Are we saying this quarter or in H1, to the answers to some other participants, I guess you mentioned saying there were new products that you have actually developed, but they are being used as raw materials to your existing products. Is it the case that there has been some margin compression because of increase in your freight expenses and stuff, which is not allowing the new product contribution to show up in the margins. Is that the right understanding or is there something wrong with my understanding? Yeah. In a way, you can say, yes, our freight governing, our overall expenses have gone up in this quarter compared to what it was in Q1. A major part of it is to do with freight governing, especially on the export side, as our export market is increasing. A lot of the new customers that we are bringing on board in the export side, we are, to start with, bearing some of the freight expenses. Our plan is that over a period of time, once we have a better partnership, better relations with the customer, to build up all these freight related expenses into the pricing. You must appreciate that in the last few months, the freight expenses have gone up very significantly, and it is not possible for us to immediately pass on the freight increases to the customer. It takes time. It is a relation that we are building. It will happen over a period of time. Mr. Kumar, you have any other follow-up questions? Yeah, just this. So what does our overall guidance remain for the year since I think we were talking about 15%-20% kind of revenue growth. So does that still hold or how are you looking at that? I am not sure when we spoke about a 20% revenue growth. We always I think it was 15. always said that we do make low to mid double-digit kind of growth given that the half year has gone, I think we should be around that number of 12%-13% kind of top line growth. That is what we are Okay. That is what is the realistic expectation. Yeah. And one more thing. When these other expenses and everything settle down, because of the new product contribution, do we expect an increase in gross margins? What can the gross margins be once this whole core EBITDA margins, once this whole thing settles down? What I'm trying to say is on a normalized freight cost, what can the potential be? See, Pawan, as of now it is very difficult for me to give any number onto that. My only submission is that in the current year and maybe half of next year what we see is, we need to start the utilization of our capacities, all the new products, the new initiatives that we are taking. That is the key for us to wait and within that, those we target for the EBITDA are, if we are at the levels that we have done in the first half, around that number plus or minus a few basis points, I think we will be happy with that. Then probably once we scale up and we reach a certain product and revenue size, then we can look at further improvement in the overall margin. But currently the 13.2%-13.5% is what we are looking at. Okay. Fine. Thank you. Thank you. Thank you. The next question is from the line of Rohit Nagraj from Centrum Broking. Please go ahead. Thanks for the follow-up. Just one question. Do we also have propoxylates in our portfolio? Yes. We also make propoxylates. You mentioned about 60%-70% ethoxylates. Is there any similar numbers for No, I mean, PO together will be 60%. Okay. All right. In terms of PO availability, are there any challenges given that I think it's completely imported? Yeah, if you don't plan well enough, there are some storage issues also because we are not a very large consumer of propylene oxide. There are some challenges. But once we become large enough, probably then we can have some storage at the ports. Sure. No, that's okay. Thank you. Thank you. As there are no further questions, I would now like to hand the conference over to the management for closing comments. Okay, thank you everyone. I hope we have been able to answer all your questions satisfactorily. Should you need any further clarifications or would like to know more about the company, please feel free to contact our team or CDR India. Thank you once again for taking the time to join us on this call and good day to all of you. Thank you. Thank you. On behalf of Rossari Biotech Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.