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Apcotex Industries Ltd
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Ladies and gentlemen, good day, and welcome to the Q1 FY '23 Earnings Conference Call of Apcotex Industries Limited. [Operator Instructions] Please note that conference is being recorded.
At this time, I'd now like to hand the conference over to Ms. Chaiti Gujarati of Valorem Advisors. Thank you, and over to you, ma'am.
Good afternoon, everybody, and a warm welcome to you all. My name is Chaiti Gujarati from Valorem Advisors. We represent the Investor Relations for Apcotex Industries Limited. On behalf of the company and Valorem Advisors, I'd like to thank you all for participating in the company's earnings conference call for the first quarter of the financial year ending 2023.
Before we begin, I'd like to mention a short cautionary statement. Some of the statements made in today's conference call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on the management's belief as well as assumptions made by and the information currently available to the management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's conference call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review.
I'd now like to introduce you to the management of Apcotex Industries Limited participating in today's call. We have with us Mr. Abhiraj Choksey, Managing Director; Mr. Anand Kumashi, Company Secretary; and Mr. Sachin Karwa, Chief Financial Officer.
I now request Mr. Sachin Karwa to give his opening statements. Thank you, and over to you, sir.
Thank you, Chaiti. Good afternoon, everyone, and welcome to the earnings conference call for the first quarter of financial year 2023.
I hope you had an opportunity to review the financial statements and earnings presentation, which have been circulated and uploaded on the website and stock exchanges. To brief you on the financial performance for the first quarter of financial year 2023, the revenue from operations grew 66% on a year-on-year basis to around INR 307 crores. EBITDA grew by 66% on a year-on-year basis to around INR 49 crores, with EBITDA margin reported at 15.86%. The net profit grew 53% on a year-on-year basis to around INR 33 crores with PAT margins at 10.9%. The growth in the first quarter was driven by strong volumes across all industries, geographies, product groups and also increasing the realization. On the CapEx side, we work on both the new expansion project is running on schedule and is expected to be completed in Q3 of financial year 2023. Lastly, I'm happy to inform you that company's Taloja plant has been awarded with Greenco Bronze award and Valia Plant received TPM Excellence Award during the quarter.
With this, I would like to open the call for question-and-answer question.
[Operator Instructions] The first question is from the line of Ankit Kanodia from Smart Sync Services.
Congratulations for a good set of numbers. My first question would be, so when we are looking at quarterly results of most of the company, they are seeing a lot of variation in margins when you compare it from Q4 of last year. So why we have almost similar margin? How much of that is due to product mix or cost control, maybe if you can elaborate a little on that, that would be great.
This is Abhiraj. So I don't -- obviously, I don't compare to other companies. And when you're saying other companies, obviously, there's a huge wide range in not only in the chemical space, but of course, overall as well. So I can't really comment on other companies. Our company, as I've told you before, and we have mentioned before that, look, we are trying to stay in this range of 15% plus/minus that we could have quarterly quarters where it's a little lower due to -- for various reasons. But by and large, we have been able to pass along our cost increases by and large. And therefore, you see the EBITDA margins staying at reasonably healthy levels.
Right. So basically, the main reason for asking this question was because we have already seen -- so crude is a big input for us, right? And crude has been very volatile in the last 6 months. So that was my main reason for asking this question because as you have rightly said that you can pass it on, then it's fine.
Just to correct you, crude is not our main input. Downstream petrochemical derived from crude are our main inputs. Sometimes they would follow...
I meant crude very, very well...
They would always follow crude exactly. So in the current context, for example, from last few weeks, we are actually seeing petrochemical prices come down quite quickly, whereas crude has been around the same levels, I would say, 10% here or there. So yes, I mean, it's -- our petrochemical prices is what we follow.
Right. And in our last call, you mentioned to one of the participants that due to inflationary pressure, you may have to look into some CapEx plan. Do you have anything extra to say on that or the CapEx planner as per...
No. So the CapEx that was already announced, the 2 CapEx projects that we announced one in our Taloja plant, one in our Valia plant, both for latex manufacturing. Those are already underway and almost ready to be commissioned in the next quarter or by the end of this quarter and next quarter. So those are on schedule. This was for future CapEx plans, which, yes, we have still not decided on the final decision on that. However, we are in the design phase for NBR Phase 2 expansion, which we are going to start -- or we have already started.
Okay. Great. And see, if one of the biggest risks for us was dumping. So what we faced in the year 2019. So is it fair to say that if something like that happens today, we are in a much better position compared to 2019 or we face the same kind of risk even today?
See, look, that's for the dumping antidumping that was there was -- or the antidumping case that was filed in the dumping that happened in '19/'20 was for NBR, which is about 30%, 35% of our business. Obviously, we're in a better position as a company than we were, let's say, 2, 3 years ago. We are stronger as a company. We have more products coming up. But obviously, that risk is there. Today, there is no antidumping duty on those products, but we feel quite confident that we can compete anyway. We felt it was fair to have an antidumping duty levied given what has happened every now and then. But we have learned to compete and we're going to continue to compete. Having said that, yes, margins can be affected from time to time, but we'll see. The matter is also a little bit subdued because we have appealed and it's going on. So I don't want to get into a lot of details about that.
Right. So no CapEx plan for NBR as of now?
There is a plan, but we have not started -- I would say we are in the design space, so we're going to invest some money only for designing, but we're not going to -- we haven't decided on actually starting the project yet. Although we have received all the environmental clearance, by the way, it's another one piece of news that we may not have covered earlier in the opening statement, but we have also received environmental clearance from MoEF for that project in this last quarter.
Great. One last question regarding ApcoBuild, how has been the performance in terms of growth percentage this quarter?
No. Really good. Fantastic. We continue to grow quite well in high-double digits last quarter as well. Of course, in that market, the margins have been under pressure because it's a consumer product, we're not able to raise prices as quickly. So with the raw material prices having increased in the last 6 months, the lag effect is a little bit more. Now we have taken some corrections in the last couple of months, last month or 2. But overall, we're focusing on growth, we are adding new geographies and it's going quite well. We're quite happy with the progress.
The same 4 states or we have added more stats there.
No, same states, but within the states, we have added more territories.
The next question is from the line of Sandeep Abhange from Anand Rathi.
So I had a few questions. My first question is majorly towards the demand side. So as you mentioned in your presentation as well that you have seen 32% margin growth during this quarter. I just wanted to understand whether this kind of all-in growth is sustainable or not? And apart from that, what are the industry-wide trends like paper, gloves and textile, like, can you give a heads-up on growth in growth in these industries? How has been the demand trend in these industries as well as some growth numbers on your EBITDA per tonne which you cautiously sack? Is there a strong double-digit growth there as well?
Okay. So I'll take your questions one by one. So as far as growth of 32%, look, we were -- we did 2, 3 things. One is all the debottlenecking projects that we took up, which were commissioned or which we started last year between, let's say, July and September. Obviously, we are running at full capacity for the last couple of quarters. So between Q4 and Q1, we are at pretty much full capacity and full volume.
Now whether that growth continues for sure, not in the next quarter because we are still not in this Q2 because we are at full capacity, and we don't have more capacity in this quarter. More capacity will be added in Q3, which will slowly, obviously, it will take us time to ramp up 6 months, 9 months to ramp up slowly in both our plants, which we will continue to do.
Of course, the uncertainty levels now, as you all -- as everyone knows, going forward the next 6 to 9 months with a lot of issues, of course, the war as well as America recession fears and what's happening in China and the slowdown and lockdown. So obviously, normally there is a lot more pessimism. So we're not sure if this kind of growth will continue. But we're hopeful that will maximize the growth that we can, so that's overall on growth.
As far as industry-wide is concerned, look, every industry goes through ups and downs. And I think -- for example, currently, the glove manufacturing industry is going through a really tough time because post COVID -- I mean during COVID, the first 2 years, 2020, '21, a lot of gloves were manufactured and a lot of inventory was created. Now obviously, that's reversing. And at this stage, gloves as well as latex margins and supply-demand it's a lot more on the -- a little bit on the buy side so the buyers market right now. But that -- those kinds of ups and downs, and therefore, I think Apcotex is well positioned because we are in 7 or 8 different industries that we cater to. So that kind of up and down will happen.
And your last question was, I believe on EBITDA per tonne. Now as we don't EBITDA per tonne number, but again, between Q1 this year and last year, we have grown at a healthy double digits upwards of 25%.
One follow-up on the gloves, like in the gloves, you have also products in the construction gloves, so are you not seeing any good demand over there?
Look, I think industrial gloves, I think that's what you mean, industrial gloves is a much smaller portion of the overall glove market, it's less than 10%, right. So it won't have a major impact either way.
Okay. And one second question -- one last question I had was our trends in the prices of styrene, butadiene and nitrile, are you facing any supply constraint for importing these raw materials? Is there any indentures relative to that?
Not really, not at this. I mean it's okay, we do have some time often on some supply constraints, especially with shipping and all delays for imported petrochemicals. But by and large, I mean, it's been okay.
The next question is from the line of Aditya Khetan from SMIFS Limited.
My first question was on the volume part. So what was the quarter-on-quarter growth in volumes and realization for the quarter?
The volume growth was about 32%. And the rest of the growth is on...
22% was on Y-o-Y basis. On quarter-on-quarter basis, what was the growth, quarter-on-quarter?
I think, we are running at 100% capacity utilization, so it was fairly flat. Q4 and Q1, we don't have any more capacity. Yes.
So 10% of the revenue growth -- so that is contributed by the realization.
Absolutely.
Okay. And then secondly on to the nitrile latex CapEx side, so this CapEx of INR 1.8 billion to INR 1.9 billion, how much have we incurred total debt and how much is left to do?
INR 1.8 billion, INR 1.9 billion is between both factories. Valia is [indiscernible] and Taloja is a flexi mix manufacturing facility. Sachin, would you have approximate numbers out this INR 180 crores, INR 190 crores, how much would have been spent so far and how much is spending approximately?
Approximately, we have spent around INR 100 crores. Around INR 90 crores would be spent in the rest months coming.
Yes, next 3, 4 months, yes. So that's the cash outflow.
Yes.
Okay. INR 100 crores, you've spent. Okay. But when I look at your balance sheet for the last 2 years, including the CWIP, so we had done CapEx of roughly around INR 80 crores to INR 90 crores. So this also includes the NBR capacity as a function of 5,000 tonnes to that debottlenecking.
No. That's done, this INR 180 crores, INR 190 crores is only the 2 new projects.
Okay. So these expansion -- so when we started doing this expansion?
We started it last year in 2021.
Okay. And to the number side, like I was looking at the balance sheet so that number was what was resistible, okay no issues. I'll check again. So...
Maybe you can send an e-mail. Maybe there's some confusion in your mind, but maybe you can send an e-mail to our CFO and the finance team, they will revert with the clarification.
Sure. One more question on to the pricing part. So when we compare the nitrile latex pricing, so that would be at a premium as compared to our basket of the synthetic latex or the pricing would be same as well?
Right now pricing and margins -- so are you asking about margins or pricing?
Pricing.
Pricing. That is typically a little bit higher, nitrile latex is a little bit higher than the other latex product. Obviously, the rubber products being 100% solid, they are maybe more than double of latex products per kg.
Okay. So considering now that -- so on to the gloves part, so there are a lot of like tough tide, which is going on. Have you witnessed a pricing has pulled off from the peak like?
Absolutely. I mean last year was the absolute peak in terms of pricing, pricing and margins are considerably cooled off. And as I mentioned, obviously, yes, in a way, we are coming into the market in the not so favorable pricing environment and not so favorable economic environment for this product. But look, when we are investing in something, we look at the long run. We still believe in the long run, the medical gloves industry is going to grow at double-digit base. Nitrile latex is going one of the raw material that will be required for this industry. And this industry is going to be Asia. So we feel this is the -- for the long-term strategic growth of the company, it's the product, and we're looking forward to coming to the market.
Okay. So the guidance of INR 500 crore revenue, that would not trim down basically?
No, not really. I mean, look, as I said, pricing has come down somewhat, but it will be around INR 500 crores plus/minus, INR 5 crores, INR 10 crores, yes.
The next question is from the line of [ Ruchika Katju from IOL ].
Myself Ruchika. Actually my question was on the side of the capacity that you're putting for on this nitrile latex for gloves. So there is an article that I read a few days back, which has mentioned that the industry is promoting the use of natural rubber for gloves in place of synthetic rubber. So how much do you think this will impact our business and the capacity that we're putting?
On the contrary, it's exactly the opposite. So I'm not sure what article you have read, but the gloves were initially invented with natural rubber gloves or natural latex gloves. Over time, due to supply constraints, pricing constraints as well as certain allergy that natural rubber latex was causing, the -- over the last 15, 20 years, there has been a shift to synthetic latex, which is nitrile latex. And in fact, now, a majority of the gloves are made from synthetic latex. Of course, there are other types of latexes as well, not only nitrile latex, but the majority is made from synthetic latexes and a majority of that synthetic latex is nitrile latex, which is a market that we have entered. So I think the article is inaccurate.
Okay. Because I just read it like 2, 3 days back and I saw the release and do you see it or because in that article, they had clearly mentioned because synthetic rubber is already environment friendly. And in order to move towards that they were saying that you should be using natural rubber.
No. That's also a misconception. It is not that synthetic rubber is less environmentally friendly than natural, natural rubber latex. Natural rubber latex is also not extremely environmentally friendly. And there are -- everyone is working on how to make these glove biodegradable, what kind of materials use and so on. It's a longer-term project is there. But again, a misconception. And I think I know the article you're talking about. And I think -- I mean, while everyone is free to write what they want, but I think it's a little inaccurate.
Okay. So will this -- so the nitrile latex capacity that you are putting. So are we making it only for domestic market or it is for...
Look, domestic market Is very small for this. It is largely for the export market. I would say, 90% would be for the export. And another current content.
If you could just tell me the market size for this, like, what is the market size for this nitrile latex?
I mean, what we are coming up with will not be even 3%, 4% of the total market size. So you can just extrapolate that maybe 2% to 3%, so probably 50x what we are coming up with, 50, 60x.
[Operator Instructions] The next question is from the line of Dhiral from PhillipCapital.
What was the export contribution in Q1 and the growth on a Y-o-Y basis?
Export contribution in terms of revenue, I think, was 18%, 18% to 19%. And Sachin, do you have the numbers?
I think I heard it's about 20%, 27%...
Yes, 20%.
27% is the export growth in value.
27% growth on Y-o-Y basis.
Yes, in value terms, yes. Okay. And do you feel that nitrile latex incremental capacity, we can register any volumes in Q3 or it will come from Q4?
No, we will be able to register some volumes in Q3. But it will be a slower ramp-up, Q3 will, again, even though we have some approvals -- whenever there is a new plant in our industry, any new plant requires, I would not say approval from scratch from all customers, but customers would want because the way we are manufacturing in the new company is going to be different from the way we manufacture right with a better process and more stringent quality norms and such. So I think it will take us, as I mentioned before, 6 12 months to ramp up slowly, slowly. But yes, I mean, for all practical purposes, I think Q4, where we would see some numbers jump.
Okay. And lastly, how much pricing has come down in the nitrile latex from the peak that you are talking about?
Quite a bit, I think, about 15%, 20%. I don't have the exact numbers, but more than 15%, 20%.
So what is the current pricing?
You can look at -- this was published, I think, is frankly month-on-month. So it's all published, you can find it anyhow.
So now the current prices are sustainable going right, do you feel?
Yes. I mean -- I think all industries reports say, this is really the rock bottom. So yes, we should see sustainable and hopefully it should improve over the next 6 to 12 months.
So is it better than the pre-COVID level?
No. It's in fact worse than the pre-COVID level.
The next question is from the line of Karan Bhatelia from Asian Markets Securities.
Can you help me out with the revenue mix between rubber and latex?
I think it remains about the same. It's about 55% or so latex and 45% rubber.
Right. On average more than 2 quarters that we are running at peak utilization in the latex business. So any capacity expansion plan?
No. All business, even rubber -- yes, rubber and latex, we're running at full capacity.
So while we are evaluating CapEx on NBR and on the ex NBR latex, so anything on the legacy business of latex?
Yes. So the one that is in Taloja that we are -- we have invested in, out of the INR 180 crores or INR 190 crores, about INR 45 crores is in the Taloja facility, which is a multipurpose latex plant, so we can manufacture nitrile latex and -- or other latexes. So in the current environment, in the current context, we would sort of allocate that capacity to our sort of legacy emulsions that we make for paper, construction, corporate, textiles and a few applications. Our Taloja facility as of now is multipurpose, and we will use it for whatever make at the time.
Right. And we've done strong volume growth. So can you attribute that to a couple of industries? Or you think all the user industry is contributed equally?
Yes. Pretty much across the board, I would say, we have grown quite well, yes.
The next question is from the line of Anmol Grover from Albatross Capital.
I just wanted to understand your margin has been holding up pretty well. So how are you managing your raw material volatility, if you could shed some light on that?
This is nothing new. I mean, raw materials have been volatile for the last 15, 20 years. And so -- there's always something on the other, right? 2008, '09, there was a crash and then a sudden pickup after that. Then we had COVID in 2020, again, cash and a sudden pickup in between also there have been 2, 3 cycles. We manage it a couple of different ways. One is we have -- some of our customers are on formula-based pricing, in which case, whatever raw materials, however, volatile they are, they go up or down, where it's just a formula and the margin remains fixed for a certain period of time within 6 months or 1 year. For yet -- for some others, even though it may not be a formula-based pricing, it does follow these petrochemical norms and whole industry works on that. So our competitors as well will increase or decrease prices depending on what happens.
So we have not found it -- while the volatility, of course, is challenging to manage and sometimes -- especially when prices go up, very quickly, there is a time lag between which we get the price increase with the customer. So there is a time line, and therefore, I've always mentioned that quarter-on-quarter, we could see even when prices come down, sometimes they stuck with high-cost imported raw materials, especially in this scenario where everything is delayed, we are -- our inventory norms have increased. Consciously, we've increased inventory norms for many of our imported raw materials. In that case, if there is a crash we're stuck with some high-cost imported raw materials that may affect our margins. But by and large, in the long term, we always look at the long term and the things strategically. And then we don't worry about too much what happens quarter-on-quarter basis because that can happen in our kind of business.
Okay. Second question is, what is the -- where are you funding INR 180 crore CapEx from?
Partly internal accruals and partly debt.
Can you give us specific on the mix?
Approximately 50-50, I would say, yes.
The next question is from the line of Nikhil Chowdhary from Kriis PMS.
Congratulations on a great set of numbers. I wanted to understand in the nitrile latex, I understand we are -- I guess the only guys who are doing this in India. So wanted to understand has it got application medical or it has got application in the industry? Because I understand since the CapEx cycle, like probably if you -- we understand, if it is picking up, then probably the industrial gloves will be the one that will be picking up really fast? So if you probably focus there, we may have some stable demand coming from that end too.
Yes. Absolutely. So the grades that are there for medical gloves and obviously grades for industrial gloves as well, depending on thickness, application, there are a range of maybe 10, 12 different types of grades of this nitrile latex. Obviously, we have products for both applications. Having said that, the industrial gloves is a much smaller percentage of the glove market compared to medical gloves is much smaller. It's maybe in single digit, less than 10%. So obviously, the focus is on both, but the larger industry is for medical gloves, so we can't ignore that for sure.
Okay. And considering the economies that probably used to dump in India, so how has probably been the dumping lately like, any...
I would rather not talk about that. As I said, the matter is an appeal and it's subjudice. So I'd just like to pass on that question, please.
The next question is from the line of Keval Ashar from DSP Investment Managers. Sorry to interrupt, Mr. Keval, we're not able to hear you.
So NBR is contributing 45% of our total revenue?
No, synthetic rubber is contributing 45%. NBR is maybe -- NBR and allied products, which includes powder, polyblends, all that is about 35%, less than 35%.
Yes. If I see that the realizations have inched up significantly in FY '22. I need to see -- are the price cooling off in this or is it still at the same level, realizations?
Well, I think -- yes, I mean, you're right in that sense, for all our products, not only NBR, but the peak pricing, I would say, was in Q1. Since the end of Q1, we are seeing a reduction or not, I would not say a sharp decrease, but a consistent decrease in our raw material prices. When that happens, automatically, our finished goods prices also do come down. So I think -- I don't know what will happen tomorrow, but if this is more recent, I would say, last few weeks, things have been cooling off. So realizations are coming down as of today. But we have seen in the past that we think realizations are coming down for a few months, a few weeks and then suddenly, they go back up. So yes, it's hard to predict.
Okay, hard to predict. Got it. The second thing is that currently borrowings are at INR 50 crores at the end of FY '22. And what could be a peak debt? If you have any estimates?
What would be the what?
Peak debt. Peak debt levels?
Yes. I mean I think INR 50 crores probably includes our working capital as well, right? Is it?
Yes.
So working capital is a factor of what happens with our raw material prices as well. Obviously, due to the war, all our raw material prices have been much higher and our working capital requirement has been much higher than what we had anticipated, let's say, even 6 months ago, pre the war, right? I mean no one had predicted oil prices of $120 and plus. So it's hard to predict on the working capital front what would happen. But if I were to just take the term loan debt, I think the peak would be at about INR 110 crores, INR 115 crores. And with working capital, obviously a little bit more, which is hard to predict.
Understood. And the last question on latex...
Sorry, I didn't catch you. Your voice is breaking, Keval.
Are we going forward for the NBR CapEx for which we got the EC?
We have started the design phase already, and we have received the environmental clearance for NBR in the last month, in June. So we're excited about that. And for now it's up to us. And we have started the design phase, which should take a few months. And I think over the next few months, once the design phase is over, which is expected in the next 3 to 6 months, then I think by the end of this calendar year, we would perhaps take a call. And we are also conscious of the fact that our entire team is focused on commissioning these 2 significantly large projects of latex right now. And so we want the focus to be on that, and we will take it up after those 2 are commissioned.
And we also want to see the overall macroeconomic environment globally and in India, given the uncertainties that everyone is reading and talking about, we'd also have to see that. But we'll keep everything ready and then we'll take a call on when to actually sort of invest. And you'll see that, as I mentioned last time as well, we'll take a look at quickly the CapEx cost, which -- I mean just a few months ago, steel and a lot of the commodity prices were at its peak. And at that point, we felt that it was not a prudent decision to look at CapEx when commodity prices were there at absolute peak, I think it's expected to correct significantly. So CapEx costs also may be lucrative or maybe down to make the project lucrative. Yes, so we'll take a call over the next 6 months.
The next question is from the line of Alisha Mahawla from Envision Capital.
Sir, just wanted to check while you don't [indiscernible] participant with respect to our margins there, it has been slightly volatile especially because of the way crude is. What's the sustainable gross margin for our business? Because I agree the last quarter, we suffered some low-cost inventory, so those kind of numbers we're doing right now and how does it change when our product mix changes?
It's hard to predict. I mean, we focus on EBITDA margins. Of course, gross margins do change depending on overall macroeconomic environment, supply-demand and so on. But we feel very confident that our EBITDA margins would be around that 15%, 16% mark. And as I mentioned, you could have some quarters where it could fall, some quarters where it's even much better, you could go to 17%, 18%, 19% with the current volumes, yes. As we grow over the next 1 or 2 years, obviously this should hopefully improve further. And yes, and that's what we're looking at in terms of EBITDA margin. Gross margins can vary depending on several factors, yes.
If I just look historically, we move between 30% and 38% at gross margin level as it's a pretty high growth, so I just wondered what would be a more stable numbers you need to move this table? And with the kind of CapEx that you're doing in [ latex, nitrile latex ], what is the kind of sustainable number?
Yes. So I think, look, it will be a range around that range. Obviously, yes, it will be around that range, I would think. And hopefully, towards the higher end of that range, 35%.
Okay. And in the previous call, you were mentioning that there is some competition in your business shutdown. Just wanted to know, has that come back? What's the competitive intensity at a global scale? Are we benefiting with that?
I don't remember the context, but what was the [ competition ] for which products had this shutdown happened, because I know in the last year, that happened a couple of times for various reasons, but I'm not quite -- I don't recall. But as of now, all I can say is, it's working -- and I know last year, there was some -- a couple of competitors and a couple of product site shut down for some internal reasons for a couple of -- for 2, 3 months. But I think, as of today, everything is on again. Competitive intensity as of now is, as you can see from our margins, we have done quite well. So, it remains quite stable.
And just one last question. While the Taloja plant will be a multipurpose latex plant, the Valia plant will be dedicated for medical use?
That's right.
So the utilization would ramp up.
All kinds of gloves, medical as well as industrial.
Industrial, yes. So, maybe the ramp up over there could probably take some time depending on demand.
That's right.
We'll move on to the next question that is from the line of Manav Vijay from Deep Financial Consultants Private Limited.
So, a few questions from my side. First of all, like the way you mentioned that you have received the environmental clearance for your NBR project. So you are supposed to do a second phase in your Valia -- in actually your Valia plan for your XNB latex. Now, does this approval stands true for that expansion as well?
Yes, absolutely. Yes, that's true as well. But that decision we would probably take after maybe more than a year. First, you would have to see how the current once we commission and start selling from our current new plant. And once we ramp up and get closer to full capacity utilization, then we can add a couple of more reactors. I mean, it's obviously not as long a project, maybe a 6- to 8-month -- 8 months lead time, I would say. And the lead time is mostly because of our vendors not being able to get it -- I mean, get it done quickly these days. It's taking a long time. So 6 to 8-month lead time on that. Yes, but you're right, the EC covers both.
Okay, okay. Second thing is that -- so this expansion is -- will generate close to INR 500 crores for you. So, I believe that in last quarter call, you had mentioned that roughly 60% to 70% of sales will come in FY '24. So, does that statement still stands true or you believe that you could have some division from that?
Look, compared to last call and this con call, I would say, the only thing that has changed is the macroeconomic mood in the world. Obviously we are cognizant of that as well. We will continue to maximize our sales and try and make sure we are on budget. But having said that, we are cognizant of the current macroeconomic environment in the world. And so we'll have to sort of keep adjusting to those realities as well.
Okay. Okay. Okay. My next question -- so my question would be actually a couple of questions that I have from your Annual Report and plus one statement that you made even in your AGM. So, you mentioned in your Annual Report you are looking to install renewable energy sources and also exploring a direct feeder line for your Valia plant. Now, I believe that in Valia a couple of years back, once you acquired the plant, you had installed a captive power plant. And I believe that power plant became operational a couple of years back. So if you can explain this part and also the direct feeder, what does this lead to basically?
So, the captive power plant was for a certain amount of production. At some point, our plant teams have worked out that the captive power plant will not be sufficient for our total power requirement in our Valia plant. As a result of which, we will have to rely on -- also after that, we will have to rely on power from the grid. And so, we are investing in a direct feeder line because we are in a rural area. So what was used to happen from the grid power is, it used to go down quite a bit. There were a lot of trips in a month, there were quite a few trips. And in a continuous plant, it's very difficult to manage if there are multiple trips every few days.
So, as a result of it, this direct feeder line will eliminate or significantly reduce the trips, and this is for our future power requirements. This direct feeder line, we can also invest in renewable power elsewhere in the state. -- and then use that power through this direct fee line. So, yes, the feeder line is just for security of power for the future beyond 2024.
Okay. Okay.
And even power, we are looking at more from just being a responsible corporate citizen, yes, currently the power that we use largely is not renewable. We do have a windmill and we do have some solar panels on all the rooftops at our Taloja factory. But going forward, we're looking at investing in sort of larger renewable projects, which will mean that a significant -- or we would like to, over the next 4, 5 years, is a much more longer project. Over the next 4, 5 year, a significant portion of the power that we are consuming should come from renewable resources. And so that would be our longer-term target. It's part of our ESG targets as well. So that's what we meant by looking at renewable sources for the long-term.
Okay. Fair enough. Now, in the AGM, you mentioned about -- actually looking at a third land for expansion because once you are done with your NBR, our expansion in your Valia plant, so you will not have any space. So any thought process that you can share on third land?
I mean, again, this is a longer-term thing. We believe that with these 2 latex projects that we have undertaken and then when we do undertake the NBR project, this should be enough for the growth for the next 3 years or so. And beyond that, if we want to grow, we have to really -- of course, we want to grow beyond that. We have to start thinking from now because, as you know, in India acquisition of line takes time, followed by environmental permissions, preparing the land for use could take -- the road project would take up to 3, 4 years. So, we are looking ahead and sort of exploring different options for future growth.
Okay. So nothing on table as of now, concrete that you can share?
No.
Okay. My last question is, in your Annual Report, did the INR 3.45 crores of actual export incentive that forms part of your sales. I have not seen this number ever in the Annual Report at least of last 5, 10 years or so. So was it a one-off something of that sort? Or am I reading too much into the numbers?
I will have to check. But from what I understand, there is an RoDTEP scheme that the government has introduced just last year. So that is what maybe is INR 3.45 crores. Sachin, Suraj, would you guys have anything to add to this?
No. So, the scheme which is introduced by the government. So also our export turnover is going up. So you'll see this number better than the last financial year.
Yes. So my only point is that this was not a one-off. It will continue as our export sales moves up?
Okay. One last maybe, I mean, a very broad question. So, a few days back actually BASF released their numbers in Europe. They mentioned that the direction they are witnessing, the demand slow down and directly witnessing more prominence of that in Europe. And for the fact that the way energy prices have moved up in the entire Europe, they might look to shut down some plants. Now we have seen instances of dumping happening, let's say, from Europe and India. You believe that, let's say, if BASF or other, let's say, industries were to face this kind of an issue in Europe at a very broad level, this is positive for you or negative for you in both SDR as well as your NBR latex.
Hard to say. So, first of all, as far as exports is concerned, Europe makes up a very -- as you know, 80% of our sale is in India. 20% is all over the rest of the world, but Europe is obviously a smaller percentage of that remaining 20%. So as far as exports is concerned, slowdown in Europe, while it may affect us, it's not going to have a significant impact. Number 2, as far as competitors shutting down, any time a competitor shuts down, I guess, theoretically it's a good thing for the other competitors, but we focus on our own business and we build on our own strength. -- external environment favors us so well and good, but we have not factored that into any of our business plans. We have assumed business as usual. And I frankly don't know whether it will benefit us. I don't think it will negatively impact us in any way, but I don't know if it will benefit.
The next question is from the line of Archan Pathak from Centra Advisors LLP.
A large part of my questions have already been covered. Just one question. I just wanted to know on the revenue front, would it be possible for you to say that what percentage of revenues will be coming from the automobile segment or tire segment in general?
Automobile, maybe 10% to 15% of our revenue -- 10%, 12% -- 10% to 15%, somewhere between 10% to 15%, I would venture to guess. And I'm just guessing because NBR is about 35% of our business and maybe 1/3 of that is auto. So that's why I'm saying 10% to 15%. And then, tires is about 10%, 12% of our business, which is tire cord. We have supplied the tire cord manufacturers who in turn to apply to tire companies.
The next question is from the line of [ Anubhav from MCPro Research ].
One question, related to what is happening in Europe regarding the energy crisis and all. I think broadly you covered on the export opportunity and all. Wanted to understand that what kind of impact you're seeing on the entire value chain for us in terms of pricing as well as the realization for the end products. Is there any impact or is it already in the market or anything that you are anticipating?
I'm sorry. Can you repeat? I'm not sure if I understood the question properly. If you can just repeat it one more time?
Yes. Because of the energy crisis in Europe, and given the likelihood that some of the plants probably operating there may not be running at full capacity, you may have to go for [indiscernible]. I want to understand that is there an impact already been seen in the market with respect to the entire value right now to the final product price?
So, so far, we have not seen any impact. We do import some raw materials from Europe, and we have not heard from any of our vendors about anything. And of course, in many of those cases, we always have a second supplier from another part of the world. That's something that we've been working hard on for the last year or 2. So that's on the raw material front. And on our finished products as well, we have not seen any impact, positive or negative, as I told the previous caller as well.
And Q3, you would be choosing acrylonitrile from Europe?
Not really. No, no, there are some specialty products. Otherwise, most of the other major raw materials like acrylonitrile, styrene and such, all come from Asia, mostly come from Asia.
Okay. Okay. Another question on the NBR thing, although I understand that there's a bit of a delay you're anticipating because of macro as well as the calculation on the IRS side given the CapEx cost cannot, wanted to understand, is there a clarity that directionally we are going for an NBR project? Because I think in one of the calls, you also alluded that given the supply level and possible demand impact in the auto space due to any function also that is something you will have to evaluate if you have to go for it. So, are we right to clear on that business prospect?
Look, I mean, we're staying ready. Let me put it that way, staying ready. We are moving ahead with the design phase as well, which is obviously a small cost. But we have not taken the final call yet on it. Yes, we're going to watch it from the macroeconomic environment, raw material environment, CapEx, costs, all that and then take a final call at the right time.
Okay, okay.
But as of now, we have our hands full with our current 2 projects. So I think for the next 3, 4 months, that's going to be the focus anyway.
Yes, absolutely. Absolutely. And my last question is on -- how much of your metal gloves will be contributing to our total sales as well as to exports now?
It's in single digits still. It's probably -- I don't have the exact number, but in the current context, we have sort of modified our current reactors to manufacture nitrile latex for gloves. Once the new plant comes, obviously it will be significant. But as of today, it's still in the single digits, 6%, 7%, I think.
Okay, okay. And largely, it is for export, right? I mean, whatever we are...
That's correct.
Okay, okay. Got it.
The next question is from the line of Aditya Khetan from SMIFS Limited.
Total margin, quarter-on-quarter basis, we are witnessing that the EBITDA margins are flattish. But our gross margin, there has been a quite -- so there is a dip of almost 3%. Sir, can you quantify what is the dip, so majorly because of the employee cost and other expenses. So is there a one-off in this quarter, which you have taken?
Sorry, you're talking about gross margin dip. What are you talking about?
EBITDA margin has expanded. So this I want to know, so there is a one-off which we have taken into employee and other expenses for this quarter?
I'm not sure I've understood the question. Sachin, do you understand the question and whether you can answer it?
No, sir. So the costs are in line as such.
Yes, that's what I though.
Gross margin has that dip, but the EBITDA margin has been almost flat. So this is led by the decline in employee cost and other expenses.
Gross margin, yes, that could have dipped a little because of overall raw material prices going up, sometimes there's a lag, margins could have come down a little. Yes, maybe there is some -- Sachin, do you know this question? I'm not sure. I don't have the numbers in front of me. I don't know if I can answer this question.
I'll answer it through right now. So one is, compared to last quarter, the employee cost has come down, but it is primarily because last quarter has been the year-end quarter, a bit more of provision getting in. And now this quarter is perfect. So, in terms of volume, yes, in terms of material cost, there is increase because obviously increase is because of the product mix also because the material cost is changing. And yes, we have improved on efficiencies along with that. So other expenses and everything, we keep a check on. So, as rightly said that we focus on EBITDA per margin and that what our focus is on.
So maybe Q4, we had some employee bonuses and all paid out, which may have been a little higher. But -- yes.
Okay. Does that answer your question? I hope, Aditya.
Yes, yes.
Okay.
The next question is from the line of [ Tej Kumar Pandya ], an Individual Investor.
Firstly, I would like to -- that in the last virtual meeting, which -- it was pointed out that outstanding payments have increased substantially. Now what is the situation? Have you -- these outstanding payments are under control? First question.
You may have misunderstood this. I don't think outstanding payments have -- when payments to vendors or payments from customers?
Payments from customers?
No, overall, I don't think the payments were delayed or anything. I think overall realizations have gone up. So, therefore, what used to cost 100, let's say, a year ago, is now costing 150, right? So as a result of which the total outstanding the receivable numbers look big, but in fact, number of days, we have done a reasonably good job in reducing those number of days outstanding.
What is that probably -- suppose if you raise an invoice, so how many days does it take for it to get back the money?
Sachin, do you have the average number? But I think it's about -- between 50 and 60 days, right, Sachin?
Right.
How much is it, Sachin, you now the debtor days?
Yes. So, it's right, Abhiraj. Between 50 to 60 days depending on the term.
But what is the average? Some 51 or 54 or something, right?
So, yes. So, last year, it was 62 and now they've come down to 56 in this quarter.
56, yes. So it's between 55 to 60.
Do you think it's okay for the industry because if you calculate the interest cost for 50 to 60 days, that means too much interest. Do you work it that way or you do not work it that way to find out the cost the capital, which is relying with the customers.
Yes, absolutely. Look, we would love to make this 0 as well, but this is sort of industry standard and a lot of our competition offer similar terms. So, I would say, we would be a little better off than most of our competition, given how we collect and some of the incentives you offer customers to pay faster. So in fact, I would say, the industry norm is 60 to 90 days, and we are under 60 days.
Okay. And the second question is, the market size of the construction chemicals is estimated to be INR 5,600 crores. How much of this percentage of this market is expected by Apcotex? How much market share would you think you will be able to get? And a similar question related to it, how much capital expenditure will be required to develop the production facility and when would this facility be completed?
So as far as construction chemicals are concerned, we supply to some of these construction chemical manufacturers that have the brand. We have, a few years ago, started our own brand ApcoBuild, and I think that's what you're referring to. We are not looking -- ApcoBuild, we are not looking to compete in the larger big space and become -- compete directly with the brands. We have certain niche products in waterproofing and repairs that we are focusing on, where we are backward integrated and focusing on a few geographies in the Western part of the country so far in the future. This is really building the business from there. So we're not really looking at market share. It will be a very small percentage of the market. If you are saying it's INR 5,600 crores, I've seen different numbers being thrown about depending on what...
So, if you say, standardized, it has been said in the Annual Report.
Okay. So, INR 5,600 crores is approximately one number. But yes, but we are very small. As you know, our whole company turnover is only INR 1,000 crores -- closer to INR 1,000 crores last year, out of which most of it is B2B sales. So we would be a very small percentage.
One second, one second. This is a very important question. [Technical Difficulty] I just want to know that before the nitrile latex, have you applied for patents, because that's been developed inhouse?
It has been developed in-house, but it is a product which has been around for many years. So it's already off-patent. It has not been invented by us. It was already there also in the market.
The next question is from the line of Amar Maurya from AlfAccurate.
So I have one question. Basically what I can see is that from last 3, 4 quarters, on an average, we are maintaining a very strong EBITDA per kg kind of a number. And given that now the new product which we are launching is likely to be a better margin product. So, I mean, first thing is that, are we confident to maintain this kind of EBITDA per kg? And secondly, can we see some interest from here on, let's say, once the new product get launched?
It will depend. As I said, in the current context, if you were to see the latex products that we currently already manufacturing margins are reasonably strong or stronger than what they were earlier. And that I think will continue for some time, subject to the whole macroeconomic situation in the world. I'm not sure what will happen in the next 3 to 6 months because the gloom and doom talks everywhere else in the world [indiscernible]. As far as nitrile latex for gloves is concerned, obviously the margins peaked last year when COVID was, I would say, sort of pre or around the time the first vaccination happened. Post the first round of vaccinations, in fact, demand has come down significantly, which has led to lower margins.
So as I said, look, those kinds of cycles will happen from time to time. And in fact, we look at the long-term, we think it's a good market for the long-term, and we believe we can add value in this market. So therefore, we are in it. So it's very hard to predict what the margins will be quarter-on-quarter or month-on-month. But if you look at more long term, we are trying to maintain margins of 15%, 16% and slowly grow them as well. And as volumes grow, what happens in our kind of business is the fixed cost gets divided it in larger volumes. So even if constitution margins drop, you could still see EBITDA margins being quite healthy.
Okay. But then, like -- do you look margin as a thing or you look EBITDA per kg as a thing?
Well, we focus on both, I would say, obviously, but EBITDA per kg is what would be our primary sort of focus on...
Primary sort of focus?
Yes.
But then that is what my question is like whatever the current EBITDA per kg we are maintaining, I mean that is likely to be maintained like from here on or do we still some hiccup?
We don't look looking statements, it's hard to say, but obviously our endeavor would be to maintain it, right?
Okay. Okay. Okay. And second question is, in terms of the new capacity, which we are putting up for the latex in Valia for the gloves, I mean, how the utilization would be like it would be gradual, let's say, if it comes in third quarter. Should we expect like third and fourth quarter, what would be the kind of utilization and how the utilization would move in '24?
So as I told in the previous call, I cannot predict quarter-on-quarter exactly what would happen because it would -- we are dependent on customer approvals. Under the current context, I mentioned this is quite a challenging environment, but we are going to try and push to the customer approvals in Q3 and hopefully start seeing some sales in Q4, but it would take us 6 to 12 months to ramp up slowly. Now exactly at what pace that would happen is very difficult to predict.
Okay. Okay. So, are you saying...
Sorry to interrupt, sir. Sir, this is the last question that we could take.
Let's finish one question. He was in the middle, and then we'll, I think, end the call, right? It's already 3:10. Finish that question, Aditya (sic) [ Amar ].
So, sir, basically, what I was trying to understand, like approval time, I believe already you are with the same -- dealing with the same customer. So, once this new plant come, you have to again send the product for the approval or the product is already approved, right?
Well, there are 2 things. Well, the product is already approved, but the new plant, the way of manufacturing is different. It's not going to be exactly the same. And customers do want to feel comfortable for any new plant that comes up. Even for any of our competitors, if they were to start a new plant in the same facility or in another location, there will be some sort of approval process, maybe a shorter one, not a longer one that has to start right from scratch, but some kind of approval process has to go through.
Also, please keep in mind that we have only got approvals from a certain set of customers. A lot of customers we could not get approval because we didn't have material. So when we approach them for approval, the first thing was, look, you're not able to give us material in limited capacity. So come to us closer to the time when your plant is commissioning.
So now over the next 2, 3 months, you will approach them, start with the lab approval and the plant will commission and then we will get some bulk approval. So that takes time. So there are a few customers where we do not have full approval, but we feel fairly confident that given some time, we will get approval from them over 6, 8 months or so. The ramp-up will be 6 to 12 months, right?
Thank you. Ladies and gentlemen, that is the last question. I now hand the conference over to the management for the closing comments.
Thank you all for participating in our Q1 FY '23 conference call. We look forward to seeing you again in Q2, and thank you once again.
Thank you. Ladies and gentlemen, on behalf of Apcotex Industries Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.