Ladies and gentlemen, good day, and welcome to Rossari Biotech Limited's 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 this 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. Anup Pujari from CDR India. Thank you, and over to you, sir.
Thank you. Good evening, everyone, and thank you for joining us on Rossari Biotech Limited's Q2 and H1 FY 2024 earnings conference call. We have with us Mr. Edward Menezes, Promoter and Executive Chairman, Mr. Sunil Chari, Promoter and Managing Director, and Mr. Ketan Saboo, Group Chief Financial Officer of the company. We would begin the call with opening remarks from the management, following which we'll 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.
Good evening, everyone, and thank you for joining us on our Q2 and H1 FY 2024 earnings call. I hope all of you had the opportunity to go through our results presentation that provides details of our operational and financial performance for the second quarter ended 30 September 2023. This has been a record quarter for us, and we are pleased to report the best-ever performance, both in terms of revenues and profits. Revenues improved by 14% year-on-year to INR 483 crore in Q2 FY 2024, primarily fueled by our core HPPC segment, growing by 21%, and our textile division, that was up 5% on a year-on-year basis. In our AHN division, we encountered some seasonal softness, leading to a subdued performance.
On the profit front, PAT saw 38% year-on-year, reaching INR 33 crore in Q2 FY 2024, driven by the significant improvement in revenues. Such performance is especially noteworthy considering the current tough operating environment in the chemical industry. In the face of the challenges that marked the previous years, we are happy to see momentum in our core HPPC offering during the quarter. This positive trajectory is a testament to the dedicated efforts of our team on the ground. Coming to our growth plans and commitment to future readiness, we are excited to announce the expansion of our facility at Dahej by 20,000 metric tons per annum. This strategic move would enable us to enter new domains within the HPPC segment and then has paved the way for producing essential ingredients for our subsidiary companies.
In addition, to cater growing demand in sectors including agrochemicals, home and personal care, oil and gas, and pharma, we are augmenting the ethoxylation capacity at Unitop Chemicals. With our existing 36,000 metric ton per annum ethoxylation capacity already operating at optimal levels, the planned expansion of an additional 30,000 metric ton per annum aims to meet future demand. Looking ahead, our focus remains on diversifying our customer base and targeting higher-margin segments. We are confident that our strategic initiatives, along with our commitment to R&D, position us well for sustained operational and financial performance in the future. With this, I would like to conclude my address, and I now hand it over to Mr. Sunil for his comments.
Good evening, and a warm welcome to everyone. I would like to begin by underscoring Rossari Biotech's robust growth trajectory over the past three years, which has been driven by a blend of both organic and inorganic growth initiatives. To put the growth into perspective, our revenues for the year FY 20 for the first half was INR 350 crores. Interestingly, we already exceeded this milestone in just our first quarter and our first half of the current year, with revenues reaching INR 900 crores. So from INR 350 crores in the first half year to INR 900 crores, it is nearly three times growth in the last three years. Regarding profitability, the EBITDA and PAT for FY twenty stood at INR 105 crores and INR 65 crores respectively.
Notably, within the first half of FY 2024 alone, we will attain an EBITDA of INR 121 crores and a PAT of INR 62 crores. Overall, such performance not only highlights the company's commitment to driving growth, but also reflects our strategic focus on enhancing value to all stakeholders. While our recent strategic endeavors and investments have moderated our return ratios over the last 3 years, it is important to note that our balance sheet remains extremely strong. These investments were made very prudently, with a clear focus on driving future growth. As these initiatives begin to yield tangible results, we remain confident that a significant uptick in our return metrics will materialize in the future. On the organizational front, we have further strengthened our leadership team, reflecting our commitment to nurturing and elevating talent from within our rich in-house pool.
Their expertise will be instrumental in spearheading our strategic initiatives in the future. Such additions to our leadership team over the years reflect our ongoing endeavors to build a professional team fully equipped to guide the company as we envision managing a substantially larger organization in the coming years. Looking ahead, our HPPC segment is well positioned to deliver healthy growth, especially with the underlying industries expected to pick up in the second half. While the textile sector outlook remain muted for now, we remain hopeful and committed to identifying opportunities within this space. Our AHN division has been slow because of muted demand. However, we are hopeful of a better trajectory for the rest of the year. In conclusion, we remain focused on delivering long-term value to all our stakeholders and remain confident in our ability to take advantage of existing and emerging opportunities.
Thank you again for being part of our growth journey. On that note, I would now request Ketan to share his perspectives.
Thank you, Sunil Chari, and good afternoon, everyone. Let me provide you with a brief overview of the financial performance for the quarter and half year ended September 30. On a consolidated basis, our company achieved a record revenue performance of INR 4,483.5 crore during the quarter, signifying a 14% year-over-year growth. This has been a marked improvement compared to our performance in the recent quarters, despite the ongoing challenges in the external environment. The HPPC division delivered robust growth of 20%-22% year-over-year for the quarter, again, led by strong contributions from agro, phenoxy, institutional cleaning, paints, and home and personal care. Textile Specialty Chemicals division performance improved by about 5% year-over-year, while AHN experienced a different performance, mainly attributed to the seasonal variations in demand.
We are pleased to announce our highest ever EBITDA and PAT performance this quarter. Our EBITDA improved by 13% YOY to INR 663.6 crores, up from INR 56.5 crores in Q2 FY 2023. Likewise, our PAT for the quarter surged by 38% to reach INR 32.9 crores, compared to INR 23.9 crores in the corresponding period last year. Even amid the fluctuating business environment, the company was successful in maintaining its profit margins on a YOY basis. I would also like to emphasize that Rossari's balance sheet remains remarkably strong. As of September 2023, our net debt-to-equity ratio stood at a low of 0.05. The working capital was higher as of this quarter end at 98 days versus 79 days in March, but this was in line with the growing size of the business.
We had a strong agro offtake in H1, and the payment cycle is generally long with these customers. Also, the major institutional sales activity in Q2 also had a long payment cycle. However, all the receivables are good and have a long relationship with us. There's been a slight increase in the inventory days also, but this is mainly as we purchased certain key raw materials of stock in September as part of our production planning for Q3. Coming on the expansion plans mentioned by Edwardji, we have allocated a CapEx of INR 50 crores for the Dahej expansion, while the ethoxylation capacity at the Dahej facility of Unitop has an outlay of INR 128 crores. These investments and projects will be executed in a phased manner, and we anticipate their commissioning by Q3 of FY 2025.
Our financing strategy encompasses a balanced blend of the company's internal accruals and external borrowings. Additionally, our ongoing focus on enhancing capacity utilization, adding new products in our chemistry basket, further strengthening our R&D and increasing our customer and geographical presence, will go a long way in further strengthening our business model for future profitability. To conclude, as the macroeconomic environment and the RM situation stabilizes, we remain confident in our capability to deliver a healthy performance across all our business segments going forward. Thank you for your continued support and confidence in Rossari Biotech. On that note, I come to an end and open the floor for Q&A. Thank you.
Thank you very much. We'll now begin the question and answer session. Anyone who wishes to ask a question, may press star and one on your 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'll wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question. The first question is from the line of Sanjay Jain from ICICI Securities. Please go ahead.
Yeah, good afternoon, sir. Thanks for taking my question. I got two of them. First, on the volume growth in the HPPC and the standalone, it appears to be super strong, considering that there was a significant fall in the raw material prices and the revenues on the standalone basis appears to have gone up by 81%. Can you help us understand what has driven this strong growth, both YOY and sequentially, there is again a 65% growth? W hat category within the HPPC is this be growing in the standalone basis, which is, driven such a strong, growth, and how sustainable is this? That's my first question. A related question on the subsidiary of the HPPC, which is a standalone minus consolidated, that appears to be softer quarter-over-quarter, while Q2 is seasonally very strong because of the agrochemical cycle now.
Just wanted to understand curiously why Unitop revenue appears to be, sequentially softer, despite a seasonally very high quarter.
Sunil, I'm here. What you asked for, the strong growth. The strong growth has come from across different segments within the HPPC. So home personal care, performance chemicals, including coatings, paint, water treatment, paper, ceramic. We have had sales in all this. Whatever was seen in the past has come through now. So we have also, home care also we have some good new customers for anti-repellent agents. So all in all, you know, whatever we have seen in the past has come up very well. Our capacity utilization at the base line now, it's nearly 77%-80%.
Our capacity utilization in Unitop and Tristar is nearly 100% in the last quarter. So we have had a, you know, it's very nice quarter in terms of demand, and that is why, you know, we have also taken up expansion with Unitop and also at the Dahej factory. Regarding the second question, secondary-
Sunil, what was your second question?
On the subsidiary performance, which is standalone minus consolidated. While for Unitop, this is a seasonally a strong quarter, right, Q2?
Yes.
While quarter-over-quarter, the revenue appears to be flattish on standalone minus consolidated number.
As you know, we discussed earlier also, we should start looking at these numbers on a consolidated basis. In standalone, it's not just simply subtracting the subsidiary minus that, because there are a lot of intercompany things that are happening.
Okay.
A lot of new businesses, some of them we are doing it through Rossari, some of them we are doing it through Unitop or Tristar, depending on the customer requirements and also depending on how we would like to, you know, position those sales. So ideally, it would be better to look at these numbers at a consolidated level.
But I thought that is more Unitop selling to Rossari than Rossari selling to Unitop, right?
There are intercompany sales within, between the two, because there are certain customers of Unitop who also take some products in textiles and also in Tristar, some in the home and personal care. So some of them is done through Rossari and then transferred through them. So that's how we are looking at it.
Okay, okay. Fair enough. Fair enough. But if you just want to talk on the Unitop results, except this intercompany, how has been the Unitop's growth on a Y-o-Y basis?
Yes, the Unitop has done well. As Mr. Chari said, the capacities are have not peaked in the first half. Y-o-Y, it is almost a growth of about 25% in Unitop, it's about 18-20% in Tristar. So both of them have done significantly well.
Got it. Got it. Got it. That's fair enough. Second, on the margin, while the revenue growth, we are positively surprised, but, on the margin front, Our assumption was that, the raw material has fallen, so optically, margins otherwise would have improved, plus a very strong operating leverage now that the utilization have gone from 50-odd% to 70%-75%, and margins are still at 13.1%, which indicates a much lower return ratio on an overall company now that, we are nearing peak and already doing the second level of investment to drive the growth. How should we see this, entire margin phenomena for us?
So I think this quarter, Sunil, our key has been to up our utilization levels across all our plants. That's what we had talked about in the last quarter also.
Correct.
We've seen that coming up very positively at Unitop and the Tristar plant and also at the Rossari plant at Dahej. Now, while we've done this, raw material prices have been generally stable over the last two quarters. Maybe some of these raw materials would have also seen a slight dip, but prices have seen some corrections on our front. And for us, I think this quarter we took some call in terms of increasing our overall offtake and increasing our volume, which has also impacted slightly on the pricing side. That's one. Second, if you see in this quarter, we've seen a significant drop in our AHN business.
AHN has been a slight dampener for us. The main reason was that there was a seasonal fluctuation and the demand was not there. And there are certain business which we used to do, which was with free retailers, which we have taken a call to overall reduce the business because we were facing some issues with the customers in terms of payments and payment cycles. So we have significantly downgraded that part of the business, so that has also impacted the AHN revenue. Now, AHN, as you know, is a high growth margin business for us. And that business, you know, dropping by 30%-35% on an annual basis has also impacted the overall margins.
Also in this quarter, if you see, you know, we have a little bit of jump in our other expenses. Of course, part of it, you see it as a percentage of sales, it's almost at the same level. But on an absolute basis, we've had some maintenance expenses which we incurred at Unitop as well as at our Rossari plant. And with the increased sales volumes, there were increase in utility consumption, the freight and also all of them impacted the other expenses also going up. And some selling and distribution expenses also we incurred at a higher level in this quarter, in terms of some of the travels and exhibitions we incurred in this quarter.
So overall, if you see that side, the EBITDA are at, in this quarter, about 13.1%. But you can see at a half yearly level, it's at about 13.5. I think, given the current, you know, market situation, with things happening globally, we would be happy to, you know, push our volumes and grow our revenues. And of course, we will keep improving our capacity utilization. Margin is something which, you know, once we get the top line going, I think margin will become always come back to. But I think we should expect similar kind of margins, at least till the end of this year.
Fair enough. Fair enough. But again, just to follow Ketan on that, this is contrary to what Edward sir mentioned in his opening remarks about growing more higher margin business, while the margin trajectory is slightly on a downwards moment. So, when should we start again seeing margins improving, say, in FY 2025 and FY 2026?
Sanjeevji, Charlie here, what we have told in the past earnings calls also, and, you know, in the past answers to your questions in last three earnings call, we are now not focusing on margins as percentage at all. I think all of us should be happy, you know, that we at INR 63 crore of EBITDA, we have a highest EBITDA ever. I think we would only focus on, EBITDA as amount rather than EBITDA as a percentage. We will, we will not be looking at EBITDA as a percentage in the future.
No, no, I completely, in fairness to that, I agree to that, sir. What is happening is that our ROCE is now dipping below 20%, right? Our working capital has gone up. Margin, if you like, don't like, has an implication in ROCE, which is declining. We have a CapEx which is increasing, which is inherently making the return ratios, which at the time of IPO was close to 40%, now we are under 20%.
Sanjeevji, to see our ROCs, our ROCs have been constant at about 20, between 20 and 23%. That's what the ROCs have been. I think once these new CapExes come on stream, probably two years down the line when, you know, they get their substantial capacity utilizations coming through, I think the ROCs will again peak. They will pick, they will come back to their 23, 20%. We are already at 22%, so it's not that our ROCs have declined in any way.
Sanjeevji, to add here, our ROIC, which, you know, you would also mention in ROIC, has increased quarter-on-quarter to substantial levels. The ROCE is 23%, has not declined at all. ROIC has increased, and Ketan sir will share with you separately the ROCE before.
Fine. Fine.
Thank you.
One last question from my side on the CapEx. There have been INR 75 crore of CapEx in the first half. Can we help us understand where have we spent this INR 75 crore? What should be your CapEx assumption for this year as a whole, now that we are embarked on the capacity expansion in both Unitop and Bharuch?
So the CapEx has been divided into four different companies. So totally, you see consolidated figure of INR 75 crore, which is, you know, as per the approval from our, in the budget, in the annual results budget annual results board meeting. This is on different areas. So it has been on ETP expansion, you know, we, it is on dynamo project. There has been solar installation at, there is a transformer that is involved in debottlenecking, you know, at different areas there will be maintenance CapEx. And then we have some, you know, purchase of small some brands, and then also the VDFC affluent line, we have a product, you know, line. We are taking some packaging machines at Silvassa. So this has been spread, spread over four, five different sites.
I think we have a pool now from, you know, totally, INR 56.8 crore from, for Rossari, and about INR 150 crore in, INR 120 crore in Unitop, which we expect to complete in the next 18 months. So this is going to be ongoing, as we had a very, very good quarter last quarter, and we see, you know, things to be good.
Okay. What is the CapEx are we planning for this year and next year?
This year, we will be pay out of that INR 170 total crores of INR 178 crores of CapEx that we announced. We will spend, I think roughly about another INR 50 odd crores in this year.
So basically 70, 75 + 50, so this year we will end with 125.
Yeah, around 125, 130, that's the plan.
Okay. Okay. Next year, we will be doing a similar amount of CapEx?
Yes, the balance will go on the next year.
Fair enough. Just last one on the ethoxylate, it is largely to support the growth in the Unitop, or we are looking that, expansion of the product even in the HPPC category, for the cleaning segment?
So, the ethoxylation is growing, and we are at 100% capacity utilization in Unitop. So the existing markets, you know, in July and August, we had nearly 40 days of waiting for orders. So, we lost some orders in fact, in July and August in Unitop and Tristar. So, we do not want to have the same situation for customers and people. Existing, all the segments are doing well, and it is for extra production of the existing segments.
It will come next to the same existing plant. Do we have tie-up for EO for this expanded ethoxylate? I think last year we had a problem with EO availability.
We have adequate capacity, so we do not foresee any issues on that.
Got it. Got it. That's it from my side. Thank you, sir. Thank you for answering all my questions and the questions from the company.
Thank you.
Thank you very much. Next question is from the line of Rohit Nagaraj from Centrum Broking Limited. Please go ahead.
Yeah, thanks for the opportunity, and congrats on a QOQ improved performance. So first question, is in terms of the capacities of picking out in Unitop and Tristar. So I understand based on the CapEx plan, probably new capacities will be coming one year hence. So how do we foresee growth in these two, subsidiaries over the next one year? Thank you.
Rohit, so these CapEx that we have announced will come up in a phased manner. So some of the phases will start coming up over the next six months. Then the Q4 or whatever we said, the Q3 of FY 25 is when the entire project will get capitalized. So I think we, the plan is that, slowly we will start putting up the ethoxylation capacity that Unitop in a phased manner, and then by the end of the Q4, the entire thing will come through.
Sure. And the second question, in terms of the availability of further expansion, after the capacities are put up in Unitop, do we have further scope for expansion? And just one clarification: so the INR 70 crore CapEx in first half excludes the INR 50 + 128 crores of additional CapEx. Is that right, Avensu?
Yes, yes, that's, that's right. And on the first question about availability of, you were talking about in terms of availability of space?
Right. Right, right.
I think we still have some space available, because our major CapEx is coming up at the Unitop facility of Dahej. The CapEx at Rossari's facility is a smaller one, so we have space for expansion.
So to add here, Rohit, we have 19 acres land in the Unitop site, and we are also trying to acquire the neighboring land, but we are not sure if it will fit. So the 120 acres also includes, you know, some land approvals land which we have planned and may happen or not happen. But at the moment, whatever we have planned, we have adequate space for the expansion in both Unitop and Tristar.
Sure, sir. Just one last clarification. On the raw material side, so, how has the import and domestic mix changed over the last one year? And incrementally, how do we foresee, given that probably we'll be further scouting for domestic supplies? Thank you.
So, if you see, acrylic acid is now practically mostly domestic, which comes from the BPCL plant. Acetic acid is something which, we continue to balance between, GNFC and imports.
Other than that, we have a lot of raw materials now, which are in Unitop, you know, which is manufactured products, we have manufactured, which are imports. But if you see our exports to imports, our exports are nearly 1.5 times of imports. So the products is, you know, we have a natural hedge, in, on, products, fluctuations.
Sure, sir. Thanks for answering all the questions, and best of luck.
Thank you, Rajeev. Thank you.
Thank you. Participants, you may press star and one to ask a question. Next question is from the line of Aditya Chheda from InCred Asset Management. Please go ahead.
Yeah, hi. Good evening, sir. So, my question is on the asset turn. So earlier today, in the interview, highlighted that the new CapEx of magnetic growth should contribute roughly INR 400 crore in top line. However, historically, Rossari has done at least three weeks of gross asset turns. So, would you like to comment anything? Would the sales potentially be higher than INR 400 crore here?
Yeah. So, Aditya, the potentials of this, these projects is definitely going to be far higher. The INR 400 crore number which we talked about would be the number probably in the first 1.5 years, where we would reach. I think, at a peak, beginning, we would be closer to 4, 4.5 kind of an asset turn. It will probably come, you know, around the fourth year, yeah. Around the 4-year mark, we should be there.
Fair. And on the CapEx of INR 75 crores in H1, what was that spent on?
Yeah, I think Chari just said, so that was spent across all our group companies. So, you know, they were spent on, you know, the effluent treatment expansion. In fact, that was done in all the three plants of ours, in Tristar, Unitop, and Rossari. There were some more spent on the NMMO old project, which, you know, we had talked about in the last quarter. So that was a smaller project, and then we further expanded that. Some spending on various warehousing facilities. We put up a solar facility and, you know, some other GIDC requirements, some tank farms. You know, with these requirements of EO going up at both Tristar and Unitop, we have to put in additional tank farms.
And these EO tanks are, you know, quite a big tank in terms of this tank. So apart from this, there were other small, maintenance capital and some, you know, in the R&D, we bought in some IPs, across, various products. So all these projects spread of about INR 70-75 crores in the six months.
Got it. And my last question is on the gross margin. So of course, AHN was lower. Textile has still not made a comeback, and we have sort of focused on volume over margins. So is it a right inference that this should be the bottom margins in terms of gross margins, and the only direction is up as AHN makes a comeback and textile cycle also comes back? Would you have an outlook on how the gross margins, how you are looking at gross margins overall? And in other expenses, if you can sort of break us down what was. So the delta, which I see from Q1 to Q2, is roughly INR 10 crore more.
So if you can help us understand what, you know, the execution expenses, etc., et cetera, were, and where do you sort of see a broad run rate? I mean, if you want to qualify some of these as one-offs, if that would sort of correct to, you know, by some number, if you want to put some comments there. Thanks.
So, I think on the EBITDA, I already talked about it. I think the current levels are there around that level, which should be by the end of the year. We, as I said, our emphasis has been from the start of this year, to fill up capacities, increase our volume of it, and that we've seen in the first half. We'll continue with that strategy, going forward. So even if it's a little bit of cost of the margins, we will keep you know liberating our facility and the capacities that we have. So we should I think it will be better if we should be around the same kind of margin numbers in the second half.
Got it.
The other expenses of INR 10 crore, I would not say there is any major one-time kind of an expense. These are expenses in line with, you know, the growing size of the business. If you want to take a, I think, the half yearly number, you can see at about INR 88 crore. I think that would, that run rate would be a better run rate to stick to.
Fair. That's it from my end. Thanks.
Thank you. A reminder to all the participants, you may press star and one to ask a question. Ladies and gentlemen, you may press star and one to ask a question. Next follow-up question is on line of Aditya Chheda from InCred Asset Management. Please go ahead.
So just wanted to know your view. You mentioned that it will be funded by both internal accruals and debt on the future CapEx. So how are you looking at the debt levels for FY 2024, if you have any number worked out, as there is some cash stuck in working capital?
So I think, actually, working capital, as I said in my opening commentary, that in 90 days, it's slightly on the higher side, more to do with the seasonality of the business. I think this will should even out a little more. In fact, the way the business is growing and the size and the customers, I think the working capital would be between 85-90 days going forward. I think that's what our target is, working capital days would be. And on the CapEx front, I think we will, you know, as I said, these CapEx are going to happen over the next year, 12-18 months. We'll have enough time on the spread of the cash flows.
We will go in for some debt, depending on, you know, what our cash flows are and our cash flow is. Nothing has been worked out as of now, but I think the way we are structured in terms of debt to equity, we are very comfortable. And any kind, even if we borrow the entire amount, I think we'll be quite comfortable in terms of our paying, paying ability and the overall balance sheet strength.
Got it. My last question is on the animal aid segment. There was an element of seasonality, but nothing very major concern there, right? It should sort of make a comeback in the H2. Is that the right inference?
No, there's nothing. We were, you know, cautious on total electronics in the market, and as I said in the pre-call, there was a double strain, and we are mostly into poultry industry. We continue to hold that the AHN industry is something which we will focus upon and should do well in the future.
Great. Thanks. That's it from my end.
Thank you, Aditya.
All the best for your future. Thank you.
Thank you. Next question is from the line of Ashish, from InvesQ Investment Advisors. Please go ahead.
Yeah, thank you. So I wanted to know your thoughts on different chemicals segment parts. How are you reading the coming 6-8 months for the business, both in terms of top line and margin?
So I might go here.
Ashish.
Ashish, yeah. So the textile chemical business, we have seen a headroom in the last two quarters. Now, we've taken a lot of steps from our side to focus on certain markets and especially the Bangladesh market. There we have strengthened our team with two very senior leaders, and also, Bangladesh, Rossari Biotech Bangladesh Ltd. is also incorporated now. So we believe that there will be an uptick in the Bangladesh business for us if the forex problem, et cetera, gets solved. So in the coming years, we see pretty good demand from this area. Apart from that, we've also had some reshuffling within the organization itself, and now we have a new leader for textiles within the organization.
I think this has inducted fresh energy into textiles. So the focus will be domestic market and the Bangladesh market. We're also looking at other markets like Turkey and Egypt, but with the new issue, geopolitical issue, I do not know how that will pan out. But we, we've gained market, market in the textile area, and we've become stronger. So we're very positive for textile business in the next year, coming from January to 2024.
So would you, would you say that what we are hearing from most of the textiles is that the inventory issues would take a kind of a pause there and inventory refilling might happen in the demand markets, developed markets, and that's what could get the demand on track, maybe a quarter to go for that. So would you concur with the team that things might get look up, maybe three-four months after?
Are you asking us about, I'm Sunil Chari here, Sunil Chari. Are you asking us about the inventory levels at our customer end, at the textile customer end?
No, no. What I'm asking you is, see, since the, your customer would be supplying to developed markets probably, right? And, and that, and, and the inventory destocking that happened over the last three, four quarters, it means a lot of, that, probably, certain level of correction is already happened and again, it will come back to normal soon, maybe three, four months down the line, that's what we are hearing, second half sometime. So, so concurrently, the chain, which is your customers, in Bangladesh, et cetera, and again, your business would, be taking, some upturn. Is, is that reading correct? Maybe in the second half sometime, should that, should that happen?
Yeah, I think we, when we talk to our customers, and they tell us, you know, the discretionary spending of US consumer on textiles has not increased in the past few months, and they are not so sure of the future. It is because higher interest rates are translated into higher EMIs, and the amount of income they have left for, you know, spending on textiles and other things has decreased. Plus there was subsidy during the COVID, when the US government, where government, you know, there was some money coming. So we-- things are still not clear on, on what will pan out in the future. But we hope, you know, the domestic demand is picking up.
For textiles now, if you see what was Bangladesh, we are at least at one-third, because we choose to be, you know, safe than sorry later. We did not supply to anyone on open terms in Bangladesh, and even in countries like Egypt and Mexico and Argentina, and even Turkey. These were big, big markets. All these areas we face, our customers face currency, and they ask us to supply on open terms. We said, "No, we are prepared to forgo business rather than risk our capital." We do not have, you know, bad debts in our system, for the past 26 years, and we do not want in the future also.
So the Bangladesh business is now nearly one-third of what it was last year, and we are happy. We are happy not to do that business, till we are safety on the money. If the Bangladesh business picks up and the local demand, you know, we, we think should do well in the future, we, we will do better in textiles.
Okay. Thank you so much.
Thank you. A reminder to all the participants, you may press star and one to ask a question. Next question is from the line of Vishal Biraia from Bandhan Mutual Fund. Please go ahead.
Hi, good evening. Audible?
If you can speak a little louder, please.
Yeah, yeah. So my question was on the agro perspective.
Sir, sorry, but you're sounding very distant. May I request you to speak through the handset?
My question was on the agro perspective, how demand? First quarter was very good for this. So how is, how was it for second quarter, for the summer quarter, and how is the outlook? And so that was one. The second was on the pricing front. Have the prices more or less stabilized?
Good evening, Vishalji. The prices stabilized, in normally, in fox rate, you have a key regulatory for agro surfactants. In season, we have, I think, 10, 12 days of no, very low fox rate because the supply from plant is, you know, shut down. Then we do not have enough, you know, EO available in those season and in the second quarter. The agro season has not been good for the agrochemical customers, the ones who make the agro formulation, because we're not so good, which you would know can, you know, stocks with all the agrochemical companies. We have done very well, you know, sustained the demand in, in the agro surfactants. We are looking at, you know, growth in the export markets also for Agro Surfactants.
Vishal, do you have any follow-up question? Vishal, can you hear us?
Thank you. I'm through with my questions. Thank you.
Thank you, Vishal.
Thank you. A reminder to all the participants, you may press star and one to ask a question. Next question is from the line of Siddharth Purohit from InvesQ Investment Advisors. Please go ahead.
Yeah. Hi, sir. So just to wanted to understand what was the CapEx for, couldn't understand properly. Will it result in direct incremental revenue, or it is some backward integration, you said?
We're talking about the CapEx which we have announced?
The Dahej one. You mentioned, INR 50 crore and INR 150 crore incremental at the Dahej. What was it regarding?
Yes, so those are all capacity expansion projects. So one at Unitop is for the ethoxylation and related products, and the one at RBM is for products which will go into the HPPC division of ours.
To add to where we could be adding, you know, on an incremental scale of about INR 600 crore, if and if we reach the peak capacity in the next 2, 3, 4 years.
Okay. Now, the reason I was saying that, you know, probably in the previous call you had mentioned, we are still at a lower utilization level. So is it some new product or how is it then? That's my understanding.
If you see the last project at Unitop, the ethoxylation capacities are all almost met. So in fact, in the last quarter, we were at 90% capacity utilization. So as a future plan of action, that CapEx has been put forth and it will happen over the next 12-18 months in a phased manner. So we are overall, then the capacity availability in on the ethoxylation front will go up by about 30,000 metric tons.
Gladly to add here, you know, when we came for IPO, we were INR 600 crores, and we had promised four, four, double growth in four years. This quarter, we were INR 332 crores, you know, and this translates already to nearly double the revenue we have crossed in within three years. We were, we were at a very healthy 78% utilization at Dahej, and with Tristar and Unitop, we were practically 100%. The CapEx which we used in the past six months, for example, in Thrissur, we changed like a lot of automatic flow meters to increase production without adding to big capacities, but also we had to, you know, put in a lot of new tanks in Unitop just for storage of raw materials and finished goods after we do ethoxylation. We did some debottlenecking.
If you see in the Rossari business, we have probably close to 5,000 products, and you cannot have 100% capacity in a multi-product manufacturing facility because there's changeover, there is washing, there are small batches.
Eighty percent capacity at Dahej and, you know, ethoxylation time also we have been able to ethoxylation at Silvassa and Unitop, we've been able to get nearly 100%. Our teams worked extremely hard, you know, to cater to demand which we had. Vishal Biraia of Bandhan asked us a question. We lost some orders because we did not have, you know, adequate capacity to service those orders. Otherwise, our quarter would have been more stronger.
Thank you. So the line for the participant dropped. Ladies and gentlemen, anyone who wishes to ask a question may press star and one. I now hand the conference over to the management for closing comments.
So thanks to all of you for giving your valuable time. 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.
Thank you very much. On behalf of Rossari Biotech Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.