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DCM Shriram Ltd
Earnings Call Analysis
Q1-2025 Analysis
DCM Shriram Ltd
In the first quarter of FY '25, DCM Shriram Limited reported a notable increase in net revenues, totaling INR 2,876 crores, compared to INR 2,780 crores in the same quarter last year. This growth, around 3.5%, was primarily driven by the Chloro-vinyl segment. The company achieved a significant improvement in PBDIT, which increased by 49% year-over-year, amounting to INR 274 crores. This reflects the company's resilience despite facing pressure in certain areas like sugar and ethanol businesses.
Focusing on the Chloro-vinyl segment, revenues surged by 15%, with PBDIT jumping to INR 177 crores from INR 33 crores the previous year. The Chlor-alkali business, a crucial part of this segment, saw an 18% increase in revenues thanks to enhanced volumes and significant savings in energy costs, which were bolstered by the utilization of renewable energy sources. The company also noted that while the effective caustic utilization (ECU) rate decreased slightly by 2% year-on-year, it experienced an 8% rise when compared to the previous quarter.
Despite overall growth, the sugar business faced significant challenges. Revenue remained on par with the previous year, but PBDIT plummeted by 57% to INR 38 crores, exacerbated by higher production costs due to unfavorable climatic conditions and an increase in the State Advised Price (SAP) in Uttar Pradesh. Notably, there were no sugar exports this quarter, contrasting sharply with the 200,000 quintals exported last year. On the ethanol front, however, volumes improved, rising by 15% year-on-year to 413 lakh liters, underscoring the contrasting trends across sugar and ethanol markets.
The company’s Shriram Farm Solutions division reported robust growth of 15% year-on-year, supported by rising volumes and prices across different verticals. The Fenesta Building Systems unit also showcased its resilience with a 7% growth year-on-year; however, PBDIT slightly decreased due to increased fixed costs from recent investments in capacity and revenue platform enhancements. The Fenesta order book grew by 20% year-on-year, signaling strong future demand and potential contributions.
The company has made strategic investments, notably with the commissioning of an 850 TPD caustic capacity and a 120-megawatt captive power plant. As the business scales, management anticipates improvements in both cost structure and capacity utilization. The EBITDA margins show promise, especially with energy costs being reduced. For the chemical segment, management expects continued performance improvement, driven by rising volumes and a better cost environment. Specific guidance suggests a capacity utilization for the new capacity in the caustic segment to reach 40% to 50% by the second half of FY '25.
Additional growth avenues are anticipated from new product launches and capabilities, specifically with the Hydrogen Peroxide and Epichlorohydrin plants starting trial runs and expected to begin commercial production by the third quarter. The company is committed to sustainability, integrating environmental and societal concerns into their growth strategies, positioning them favorably in a landscape that increasingly values responsible practices.
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Ladies and gentlemen, good day, and welcome to DCM Shriram Limited Q1 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Siddharth Rangnekar from CDR India. Thank you, and over to you, sir.
Thank you, Vaishali. Good afternoon, and welcome to DCM Shriram Limited's Quarter 1 FY '25 Earnings Conference Call. Today, we have with us Mr. Ajay Shriram, Chairman and Senior Managing Director; Mr. Vikram Shriram, Vice Chairman and Managing Director; Mr. Ajit Shriram, Joint Managing Director; Mr. Aditya Shriram, Managing Director; Mr. Amit Agarwal, CFO; and Mr. Sanyog Jain, Deputy CFO of the company.
We shall commence with remarks from Mr. Ajay Shriram and Mr. Vikram Shriram. Members of the audience will get an opportunity to post their queries to the management following these comments and during the interactive question-and-answer session.
Before we note, please note that some of the statements made on this call could be forward-looking. And a note to that effect has been included in the conference call invitation that has been circulated earlier and is also available on the stock exchange's website. I would now like to invite Mr. Ajay Shriram to give us a brief overview. Over to you, sir.
Thank you, Siddharth. Good afternoon, everyone. Thank you for taking your time and joining us today to discuss the company's performance based on our Q1 financial year '25 results. I'll commence with views on the industry dynamics and our strategic direction, following which Vikram will share the financial perspective.
The global economy has become more resilient and is growing at 3.2% despite facing geopolitical conflicts, high interest rates and climate challenges. There can be uncertainties arising in future as the economic and geopolitical events unfold. India continues to maintain economic momentum and the policy continuity, the growth is set to further accelerate. The union budget has laid out the growth agenda with focus on agriculture, employment, research and development and infrastructure, among other areas.
We have aligned our strategy to focus on creating growth opportunities in businesses through capacity, capability, technology, new products and value addition. In order to address economic uncertainty, we continue to work towards making our operations more cost efficient. The initiatives that we have outlined are backed by a healthy balance sheet and are in line with our plan.
Sustainability is a core element of our philosophy, which is well integrated into our operational and strategic pathways. Water and energy conservation are the core elements of our sustainability journey along with social upliftment.
I shall now move to the discussion on industry perspective across our business lines. First is the chemical industry. Globally, the supply chain of caustic is balanced and the prices are stable, although on the lower side. There is an internal -- there was an internal price uptick in the month of March '24, led by maintenance shutdown in the U.S. that are now back in operation. India witnessed capacities coming online this quarter of more than 1,200 tonnes per day, including our taking the industry capacity to more than 6 million metric tonnes per year.
Indian industry continues to operate at a healthy rate of about 80%, excluding the recent capacity addition. This is resulting in an oversupply of caustic as well as chlorine in the market and, therefore, lower ECU. India continues to be a net exporter of caustic this quarter as well. Our performance has been better, both year-on-year and sequentially, mainly led by a reduction in energy prices and higher volumes due to capacity addition.
Prices have also been better during the quarter. We commissioned 850 tonnes per day capacity in May 2024. The capacity ramp up will be gradual given the oversupply in the domestic market. The 120-megawatt captive power plant also got commissioned in June and has started contributing towards better cost efficiency. We are positive on the caustic and chlorine outlook over the medium term given the steady growth in the consuming industry.
Our Hydrogen Peroxide Plant has started trial runs and is expected to be commissioned shortly. Epichlorohydrin Plant will start trial runs in the second quarter of this year.
As this round of CapEx nearing completion, we are actively working on starting activities on chlorine -- on epoxy and other downstream products, including chlorine downstream.
Vinyl. Global demand for PVC in key economies is still sluggish. International PVC prices have firmed up mainly because of elevated sea freight due to the container shortages and the ongoing Red Sea issue. The domestic demand for PVC in India is robust and estimated to have grown by about 17% in this quarter in the wake of agriculture and construction activity. PVC imports in India account for about 68% of the demand and has grown by 21% in Q1 financial year '24. Pricing improvement has been further supported by softening trend of input costs especially energy costs. The prices have reversed back gradually once the increase in ocean freight reverses.
Sugar and ethanol. Global sugar demand and supply, as sugar season '23-'24 is expected to be balanced with the surplus of 1 million metric tonnes, similar to that of the last season. Indian sugar season 23'-'24 is expected to end with a stock of about 8 million metric tonnes as compared to about 5 million metric tonnes in the last period. The increase in the stock is mainly attributed to restriction on sugar exports and limitations on diversion for ethanol production. Diversion of sugar to ethanol in current season is 2.5 million metric tonnes versus about 4 million metric tonnes last year.
Our cost of production has gone up due to increase in grain prices by UP government and adverse climatic conditions. While the price of sugar has increased, we are still not commensurate with the increase in the costs leading to margin pressure. On the ethanol front, Government of India is committed to a 20% ethanol blending target by 2025. For ethanol supply year '23, '24, there is a good progress in ethanol blending with current blending rate at 12.7% despite restrictions on sugar-based ethanol. The grain-based ethanol has surpassed sugar-based ethanol led by maize as the feedstock.
There is a need to have more rational and consistent government policy for sugar as well as ethanol which balances the feedstock, supports the farmer, the industry as well as the consumer. Sugarcane crushing capacity expansion at Loni and the PVC plant at Ajbapur Sugar unit are moving as per agreed timelines.
Fenesta Building Systems. The broad performance in the business remains encouraging with strong accretion in order booking. The elections in the first quarter had an impact on the real estate activity in the country, which slows the gross momentum in the business. We are expanding across geographies and SKUs. The business is investing in new revenue platform and capacity enhancement in order to deliver a healthy momentum on an expanded base.
Now moving on to the agri businesses, which comprise of Shriram Farm Solutions, Fertilizers and the Bioseed Business. First, Shriram Farm Solution. SFS has maintained its growth momentum and its top line has grown in double digits. This growth is driven by all the business verticals, namely seeds, crop protection and specialty plant nutrients. During this quarter, we have launched 6 new products in crop protection and specialty plant nutrition vertical out of which 2 are from our own R&D and our first-time launches in India. Growth focus of the business is led by our own R&D collaboration and existing arrangements to bring new edge products and global technology to the Indian farmer.
Then Fertilizers. The urea business environment continues to be stable. Our business performance has been lower because of maintenance shutdown taken in the current quarter. The gas prices are similar to the last year. We continuously focus on improving efficiencies, including energy consumption.
Bioseed. India operations continue to expand with help of novel hybrid, the 3 key crops that we have introduced over the last few years. International operations have contributed well too. We have a robust pipeline of products. And with that, we are expecting to grow the business going forward. I'll now request Vikram to take this forward by covering the financials. Vikram, over to you.
Thank you. Good afternoon, everyone. Our financial performance during Q1 financial year '25 was in line with our expectations. Chemicals and vinyl businesses saw improvement by supporting cost environment. Sugar and ethanol businesses margins were under pressure due to cost increases that were not commensurate with the increases in market prices.
Shriram Farm Solutions and Fenesta Building Systems businesses continue to grow and deliver. The CapEx and Chemicals business is nearing completion. The 850 TPD caustic capacity and 120-megawatt captive power plant has been commissioned during the quarter. We are confident of adding scale, newer product platforms and bringing further improvements in our cost structure.
I will now highlight the financial performance of Q1 FY '25. The net revenues net of excise in this quarter were at INR 2,876 crores as compared to INR 2,780 crores in the previous year. The increase in revenues is mainly driven by Chloro-vinyl segment despite moderation in sugar business. Accordingly, PBDIT stood at INR 274 crores, which is up by 49% year-on-year.
Coming to Chloro-vinyl. The revenue in Chloro-vinyl segment increased by 15% and PBDIT was at INR 177 crores as against INR 33 crores last year. The Chlor-alkali business revenues were up 18% year-on-year, and PBDIT was up at INR 133 crores as compared to INR 36 crores last year due to higher volumes and significant savings in energy costs led by 44 megawatts renewable energy and lower coal costs.
ECUs were slightly down by 2% year-on-year however, were up by 8% quarter-on-quarter.
Vinyl business revenues increased by 6% year-on-year, and PBDIT was at INR 44 crores versus negative INR 3 crores last year. Volumes of both PVC and carbide increased. PVC prices were up by 4% year-on-year and carbide prices were down by 14% year-on-year. The input cost reduction during the quarter versus last year and sequentially, this has led to the better earnings.
Further, there was a onetime positive impact of INR 16 crores each in chemical and vinyl businesses on account of reversal of electricity duty on auxiliary consumption of power in our power plants.
Coming to sugar business. Sugar business revenues were in line with last year. Domestic volumes were also similar, while sugar exports were nil this year as against 2 lakh quintals last year. PBDIT has decreased by 57% year-on-year to INR 38 crores on account of higher cost of production, mainly attributable to increase in SAP in the state of UP and adverse climatic conditions and lack of exports of sugar this year.
Ethanol volumes have increased to 413 lakh liters, representing 15% increase year-on-year. The domestic sugar prices were at INR 3,900 per quintal, an increase of 6% year-on-year.
Fenesta Building System. Fenesta Building Systems reported a growth of 7% year-on-year. PBDIT slightly moderated to INR 36 crores as compared to INR 40 crores in the last year on account of higher fixed costs incurred due to setting up of newer revenue platform and enhancing capacities and also due to higher sales promotion and business development expenses. Order book was up by 20% year-on-year.
Shriram Farm Solutions revenues increased by 15% year-on-year, supported by both volumes and prices across the verticals. PBDIT for the quarter came in at INR 20 crores as against INR 11 crores last year despite higher marketing spend directed towards strengthening the Shriram brand and higher R&D expenditure.
In the Fertilizer business, the revenues declined by 13% year-on-year due to lower volumes, owing to maintenance shutdown taken between quarter 4 '24 and quarter 1 '25. PBDIT was at INR 23 crores, similar to last year. There was a onetime net impact of INR 15 crores positive on account of reversals of provisions. Fixed expenses were higher as a result of maintenance shutdowns. Outstanding fertilizer subsidies this year were INR 133 crores as against INR 83 crores in this period last year.
Bioseed revenue is stable. PBDIT has improved to INR 29 crores from INR 23 crores last year aided by better product mix and prices.
On our overall, our net debt as on 30th June 2024 is INR 1,459 crores, as against INR 926 crores as on 30th June '23 and INR 1,434 crores as on 31st March '24. With a strong balance sheet and healthy cash flow, we continue to evaluate adjacencies in our core businesses to strengthen and enhance our portfolio and look for other opportunities for growth in caustic. That concludes my opening remarks, and I would like to request the moderator to please open the forum for the Q&A session. Thank you.
[Operator Instructions] The first question is from the line of Pratik Tholiya from Systematix.
Congratulations on a decent set of numbers. Sir, just a couple of questions. Firstly, in the Chemicals, sir, you said almost 1200 klpd of additional capacity has come in, which I think 850 belongs to you and in presentation also you mentioned, there is a good demand from [indiscernible] industry. So if you could just talk a little about which of -- any of these industries really seeing this kind of demand? And by -- in how many quarters can we expect the entire -- additional capacity to get fully absorbed?
Yes. So in Chemicals, actually, for caustic soda, as you may know, it is used across a wide variety of industries, including textiles, paper and pulp alumina, other organic, inorganic elements. So it's sort of linked with GDP demand. If the GDP is growing well, then the caustic demand also is expected to grow. So we are very optimistic that while there is some overcapacity in the short-term, in the medium term, this capacity will all be absorbed comfortably.
Okay. With this whole logistic issue, I think the costs also would have gone up for import, anyone who is importing caustic. So what would be the imported caustic price again, does that mean that Indian industry would slightly be better off. So our prices should also -- the domestic should also catch up with the imported price?
So Pratik, one, the imported prices are around $450. And frankly, the imports are not very significant. If you see in Q1 only about 40,000 tonnes of caustic got imported. So there is no significant advantage coming as of now from exports -- because see, the point is it's the freight. Freight is not being used either by the importer or the exporter.
Sure. Sure. Okay. And sir, secondly, I see that in the sugar business, we've kind of see a sharp decline in the profitability while sugar prices have also moved up and so just trying to understand whether it is the sugar business, which has seen lower profitability or whether there is something in ethanol, because, C-heavy, I think would have done last part of it would have done C-heavy ethanol. So because of that, there is a hit. If you could just explain within the sugar what has -- within the sugar division if it is a sugar segment or the ethanol, which has got hit?
So I've mentioned in the opening remarks as well, it is primarily in the sugar business, not ethanol. So sugar got impacted. One, because there were no exports last year same quarter, we had exported about 2 lakh tonnes. And the cost of production went up and the selling price increase would not commensurate. So that is the key reason.
And the increase in SAP was about INR 20. So to answer your question, it's primarily in the sugar division -- sugar business.
Sugar business, right. Okay. Got it. So, I'm not sure because some of the other competitors have not been experiencing similar sort of rate savages. Any specific costs other than the existing MSP anything also gone maybe the recovery rates are lower for or something like that?
I didn't get your question.
No, I was just -- some of the other competitors of your -- in the same businesses in UP, have not really highlighted a similar sort of cost pressure, which you have experienced in this quarter. So other than INR 20 MSP and 0 sugar exports, are there any other reasons which has led to a significant drop in the sugar profitability?
See, one is this. The other is the recoveries have been lower, and that has been across UP. Most of the mills and especially in our region, the recovery also has been lower. So that also led to a higher cost.
And sir, lastly, Fenesta also again over here, I'm seeing margin compression of almost 400 basis points Y-o-Y. Can you just explain what has really happened over here?
So see, one, if we look at contribution margin, they have been largely intact. Now I have again mentioned in the opening remarks, the growth -- the revenue growth has been lower than what we would have expected because of elections. And therefore, what we witnessed was that although our retail business grew even quarter-on-quarter, however, the B2B business, which is largely 2 builders, the [indiscernible] segment, -- that has -- I mean I would say that has degrowth, although sequentially, there's although quarters -- year-on-year, it has grown, but sequentially, there's been degrowth. So that is the reason, I think, which is temporary. It should get corrected, maybe we're still seeing some impact, but it should be corrected over the next 1, 2 months.
And the other thing is on the fixed costs, which, as we mentioned, it's like investment, we have been investing for future growth. We had 2 new factories, which came up in last year. And we also have the [indiscernible] business, which was set up. So all these add to the fixed costs, along with the sales and business development costs. But I think once the revenue catches up, then it should be fine.
Understood. And sir, do you say that the project business was down. So does it mean the project vertical has higher margin within retail?
No, the retail business has a higher margin. But then ultimately there's a mix. So if the volumes don't catch up, then obviously, it will have an impact on the amount that is available to cover the fixed costs.
[Operator Instructions] The next question is from the line of Ahmed Madha from Unifi Capital.
My question was on the caustic volume growth. Can you give some sense where we have grown on volumes? Is it on domestic part or export side this quarter for the new capacity?
Yes. So it is largely on the domestic front that we have grown and exports as well, we have grown. So it's been on both, in fact, exports for us, including [indiscernible] last year in the same quarter was 0.092 million metric tonnes. This time, it is 0.12 million metric tonnes in this Q1 FY '25. So we have grown on both domestically and exports.
Okay. And can you mention the key countries where you are exporting as of now?
So it largely going to the Middle East, Africa and the Southeast Asian countries.
Okay, okay. Got it. And is there a sense on how much time it will take to ramp up the new capacity to optimum utilization? It will take more than a year or this -- by the end of this year, we should be able to do?
So I think we have -- our entire team is focused on these efforts only to ramp up the capacity. We are -- I think we are seeing a steady growth in demand as well. So we do expect that towards the end of the year, we will reach -- towards the end of the financial year, we will reach significant capacity utilization. And by next year, we will be able to reach optimum capacity utilization.
Okay. And on the cost side, it is -- energy cost has come down. Is there any decline in the salt prices for us?
Salt was only about 15% of the cost. So yes, there has been a decline, but the major impact are from the energy cost front.
Okay. Fair. On the ethanol side, how are you managing the feedstock availability for nonsugar whatever we need? Are we able to get the raw materials at a price where we can generate decent margins. So how are we managing it?
So one, we are currently -- we are running on maize. And we have a team, which is procuring and we are procuring at a reasonable price and which is giving us a reasonable margin.
Okay. Got it. On the epoxy, you mentioned that we will plan it now. So are we at the stage where we can give some guidance, how are we thinking about the business? Or is it too early?
So I think it is something which is being actively considered by the Board. And once the Board takes a final decision on it, we'll be able to share that publicly.
[Operator Instructions] The next question is from the line of Jignesh Kamani from Nippon Mutual Fund.
Just on the ECU realization, you mentioned that it increased around 8 percentage Q-o-Q, because...
We can't hear you. Can you kindly be a little louder please?
Just on the ECU realization you mentioned it's increased around 8 percentage Q-o-Q because of the stabilization in the prices and lower you can say the power cost. Now with the capacity coming up for you and you can say, industry close to around [ 1250, 850 ]. Do you think there will be pressure on the ECU or current level is sustainable and you can say, is the volume growth in the industry is also happening demand-wise? It can gradually improve from current ECU?
We'll give you pressure on ECU going forward.
So it's, of course, difficult to predict prices going forward. As we've shared, there has been significant capacity addition in the industry in the last 2 years. The capacity of the industry is now more than 6 million tonnes per annum. So we do expect that in the short-term, it will be range bound. The prices are on the lower side compared to earlier. But again, in the medium term, we expect with a robust demand growth that prices will move up.
Understood. And second thing on the in-house chlorine consumption, which you can see additional capacity coming up, what is our plan to increase the in-house chlorine consumption? And what is currently your percentage of the in-house chlorine consumption?
So along with our caustic soda expansion, we have also -- we are expanding epichlorohydrin. So that will consume a healthy amount of chlorine as well. We have expanded aluminum chloride also at our Bharuch site. That, again, is the capacity ramp-up is going on, and we are consuming chlorine over there.
So along with captive consumption, for us, a very important part is our pipeline customers. And their growth journey and our growth journey has been in parallel over the last 20 years. So they are valued customers of us. And in a way are the backbone for us as well. So we look at it as captive consumption, along with pipeline consumption. So the 2 put together, we'll be close to 55% chlorine consumption, and the remaining will be sold in the market.
So just purely our captive excluding pipeline, what is currently in a once all the capacity of the derivative will be up in place towards the end. And what will be the captive consumption can we go to?
Could you kindly repeat the question, please?
So right now, what is our pure captive consumption...
There is an airy disturbance from your line. Could you please use your handset.
Sure what is the pure captive consumption excluding pipeline because pipeline will carry negative realization depending on the chlorine price movement. And once our epichlorohydrin and other derivative products will also commence in the next 2 years and ramp-up, what would be the in-house chlorine consumption there?
So our -- so we have -- in Kota, we have a PVC and stable bleaching powder as well. So in Kota, captive chlorine consumption is close to 30%. And in Bharuch, our captive chlorine consumption would be close to 20%.
And what it will increase once all the derivative capacity or epichlorohydrin and other will be utilized?
So this is including those capacity additions. But in parallel, we are also evaluating other chlorine downstream opportunities as was mentioned in the opening remarks. And once the Board approves those, those will also be commissioned in due course.
[Operator Instructions] The next question is from the line of Parth Kosani, an Individual Investor.
My first question is regarding the ECH. When are we expecting it to get commission, any timing or date?
So towards the end of this quarter, we will be ready with the trials for the plant. And early next quarter, the plant will be commissioned.
Okay. And by when do we expect it to reach optimum?
So typically, the process is for ECH, we have to get approvals from the customers. So after the plant is commissioned, that process of approvals from the customers will begin. So we expect that towards -- towards Q3 and into Q4 of this financial year, the plant will be running steadily. But the ramp-up will still take some time. So a lot of the material benefit we expect will come in the next financial year.
And one bookkeeping question that I have is because we consume coal in our power plants. So that comes under the power and fuel cost or is given the raw material cost in the P&L?
Power and fuel cost.
Power and fuel cost consumes the coal that we purchased for running our power plant, right?
Yes.
The next question is from the line of Rohan Gupta from Nuvama.
First question is further in chlorine downstream. So even in the current plan which you have, you mentioned 55% max, including the pipeline, -- we will go in a captive consumption, 45% kind of number still have to be sold outside, but it still remains a larger number given that including many more capacities are also coming. So over the next 3 to 4 years, if we -- do we have plans -- any internal strategy to go to 100% kind of chlorine internal consumption? And if so, then what kind of investment you think that will be required apart from epoxy, which other product lines you will be evaluating?
So to answer your question, yes, we are evaluating other chlorine downstream opportunities of various sizes and scales. So it would not be appropriate to comment on it until we have the approval from the Board. But definitely, we are evaluating those actively. And directionally, we will look to increase our captive chlorine consumption. It might not reach 100% because we do want to remain in the market as well, but it will be -- we will be increasing it continuously.
Okay. Sir, last year, many of the industrial chemicals plant were facing disruption and under pressure because of China. So your chlorine consumption and -- was also -- would have also been impacted. How is the scenario now? Has the chlorine demand picked up? And in the current ECH realization improvement, I think it is primarily driven by caustic soda only. So chlorine prices still remains negative or lower and when you expect them to improve?
Yes. So the chlorine prices, Rohan continue to be negative. And in terms of -- see, what we are seeing is that chlorine demand in the country over the next 2 to 3 years, we see it improving. Right, with a lot of chemical facilities coming in downstream, we ourselves are going to do a lot of downstream, and we are seeing a lot of chemical capacities coming in, which should be consuming more and more chlorine. So I feel this [ value ] should improve over a period and it will take time.
So you saying that chlorine is still in demand negative and so ECH may remain under pressure unless we see chlorine going into positive or a sharp improvement in caustic prices?
I'm not too sure why should ECU gets impacted...
We're talking about sorry, ECU, yes, yes.
So yes, to that extent, ECU may have an impact, definitely. And that is the reason we've been saying that for next few quarters, we do see the ECUs to be suboptimal. But what is important is that our cost side, we have taken steps ourselves in terms of investing on improving cost and efficiency and energy costs are lower, which we expect to remain sustainable, and therefore, we should see reasonable margins.
Okay. And sir, next question is on our seed business. So this year, we have heard that there has been a shortage of seed availability, especially in cotton with the lower growing by the farmers. So but we have seen growth and even further margin expansion in our business. So do we also face any challenges in terms of the lower availability of seed and some outlook on that business for the current year?
Yes. So see, the cotton seed even on the demand side, there has been issues because the acreage of cotton seed -- cotton planting has been lower this year significant fall in the acreage of the cotton seed.
We can understand that from some of the competitors, which have -- they have mentioned that there is the nonavailability of cotton seed in the market, though demand is strong. So that's what I just wanted to clarify from you because you have shown growth as well in seed business?
So we have not -- at least, I can talk about our company. We have not encountered that. And what we'll start on the industry is -- that the planting will be lower. So there has been no shortage. So that is one. And our performance has been good primarily because of the product mix, and we are seeing good realizations for the seeds.
Sir, last bit from my side. On ethanol business, you mentioned that it's because of your capability to procure the raw material grain base at a complicative pricing, that is giving you still positive margin or profitability in it, not otherwise, it's now would have been under pressure. So just wanted to know that -- I mean, you say basically procurement area by benefit you have within your nearby 30 to 40, 50-kilometer whatever, is there or any other benefit or there is surplus availability of raw material in your area that is driving the profitability in ethanol because otherwise, we are hearing that the current grain prices and all, ethanol is under pressure and not making money?
See, Rohan, I'm not too sure about the competition. But as far as we are concerned, one because maize -- maize-based ethanol prices also have gone up. And we are procuring from in the most competitive or most efficient way, I would say, not competitive, its more about procuring efficiently at the right time, which is helping us with reasonable margins. It can be better, but we are reasonable.
So can you just give us a catchment area for maize or the procurement of grain for our refinery?
So it will come from, let's say, MP, Bihar, partly UP.
So all across. I mean -- nothing like that within -- or maybe 30-kilometer, 40, 50-kilometer catchment area nothing like that?
Around...
We'll take the next question from the line of Vignesh Iyer from Sequent Investments.
Congratulations on great set of number. My first question would be, sir, I wanted to know what is our total electricity that is power and fuel that is consumed for the quarter coming from captive consumption. I mean coming from captive power, sorry.
So majority of our power is captive.
Okay. I mean this. Sorry. Go ahead, please.
Yes, please carry on.
Yes. So that excludes the 120-megawatt that has been commissioned in June? I mean, would that 120-megawatt create a surplus like situation in quarter 2?
No, it doesn't create a surplus. It's about balancing the various power that we have. So -- see the 120-megawatt has been put up once all the capacities that we are bringing in, once all of them are fully operational, at 90% capacity utilization. So we will be fully integrated on power, right. But as of now, yes, we will see which set is more efficient and run the sets accordingly. So 120 being the most efficient set, we will have the maximum utilization. And maybe another set, we have that capability because we have set of 50 megawatts, 60 megawatts. We'll see whichever is efficient, we will reduce the load on that side.
Okay. I mean -- okay. So this 120-megawatt, what is the nature of the power, I mean, the plant that is commissioned?
So it is a thermal power plant. The raw material is fossil based, so that is coal and lignite and also biomass based. So it's a combination of these fuels.
Right. So sir, if I get it right, I mean, say, in a non-rainy time probably prefer for the renewable power since it is more efficient and less cost compared to having to use coal, right? If I get it right, the idea is that?
No, no, I'll just put it this way that we already have a contract to get 44 megawatts of renewable power. But when you look on a 24-hour basis because we can't get renewable power 24 hours, so on an average decade about 24, 25 megawatts of renewable power based on banking and getting it back. So we are already using renewable power. We are exploring, can we get more renewable power also. But the coal based power plant also, especially 120 the new one. That price is also very competitive in terms of cost of production of power.
Okay. Okay. Got it. Got it, right. Also, sir, coming on the PVC side of it, how has the price panned out in July as compared to June?
Yes. So the current prices are around INR 84,000, INR 85,000. So the international price also come off -- so let's say in June, they were around $980. Currently, we are about $910 per metric ton. And the domestic price was around 83 -- INR 84,000, INR 85,000.
Okay. And all this movement from May to June and June to July has been primarily because of trade early, right?
Yes.
[Operator Instructions] The next question is from the line of Deepika, an Individual Investor.
So my question is relating to the power cost. Would you be able to quantify what are the cost savings due to power in the Chemicals business this quarter?
So it's difficult to give you that number right away. Maybe you can contact us separately to Investor Relations cell, they will give you the details.
Okay. And what would be the outlook for the Chemicals business for the remaining part of the year?
So like we shared earlier as well, in the last year or so, the chemicals industry at an overall level has been under pressure. But now we are seeing that there should be a bottoming out. So we expect it to be steady or gradually improve in the coming quarters.
Okay. And do we expect exports to open or we have no comments on that for sugar?
For sugar right now, there are extensive talks taking place with the government for allowing exports because as I said in the opening remarks, last year, our sugar stock at 30th of September was 5 million tonnes, and this year, it's going to be between 8 million and 9 million tonnes. So we are trying to push for exports and our constant dialogue is on with the government, the old government and the new government.
[Operator Instructions] The next question is from the line of Aditya Sen from RoboCapital.
Sir, when do we expect to commercially commence the hydrogen peroxide and the ECH plant? And what would be the optimum revenue potential from both the plants?
Yes. So as we mentioned, that the trials for hydrogen peroxide plant has begun, and we expect the hydrogen peroxide plant to commission in this quarter itself, which is Q2. And for epichlorohydrin, we should commission the trials in this quarter, which is Q2, and commercial production should start in the Q3, maybe hardly Q3, we should start commercial production.
Okay. And what would be the revenue potential for both the plants?
See, for epichlorohydrin, as I mentioned earlier, epichlorohydrin will takes time to stabilize and to get the confirmations from the customer. We will not see a very significant revenue coming or significant contribution -- the bottom line coming in this financial year, and most of it will happen in the next financial year.
Hydrogen peroxide, my sense is -- if we look at second half of the year, we should have close to about 40%, 50% capacity utilization.
Okay, okay. And regarding that 850 TPD caustic capacity that we commissioned in May '24. So that led to a dip in the overall capacity utilization. So for the entire year FY '25, what capacity utilization do we see in this segment?
So see, the contents are, as you've seen the overall production has gone up given the additional -- it will all depend on how much capacity utilized depending on market conditions and the new capacity is coming in. So we do expect that the additional capacity that has come, that's about 850 TPD for let's say second half of the year, we should reach close to about 50% -- 40% to 50% there as well.
Sir, the participant has left the queue. [Operator Instructions] The next question is from the line of Shantanu Naik from HCMR.
Congratulations on good numbers. So I wanted to ask what would be the ECU pricing for this quarter?
Sorry, sir, to interrupt, your audio is not clear.
Congratulations on good numbers. So I wanted to ask what would be the ECU pricing for this quarter?
So it's always hard to predict the pricing going forward. Currently ECUs are in the INR 27,000 to INR 28,000 range, and we expect it to be range bound or improve gradually.
Okay. And second question is, what would be the current contribution of chlorine derivatives in our revenue?
So there would not be any general number, which applies to all. It is [indiscernible] basis. So any time we evaluate any product, we look at it giving you a healthy return and then we move forward with those decisions.
Okay. But still any ballpark figure in your mind?
So as I said, it will depend product to product. So it's hard to give a number like that in general for chlorine downstream.
Okay. And I just wanted to ask are we looking at the margins for SFS verticals. So why they are on declining sequentially? Any specific reasons for them?
That is because of seasonality. This is the -- and I don't think there is a decline, frankly, sequentially, if you see March is not the season or the March quarter is not the season for that business. So that's not going to [ reflected ] either. And actually, the margins have not declined for that business sequentially.
Okay. Okay. But if we see a previous year where 11% of previous quarter were 11% before that, it was 14%. So I mean, I was just confused on that. So I asked?
No, I think this is a more specific question. So maybe we can -- we have to go vertical by vertical as you can connect with our Investor Relations Department, and they will give you the details.
[Operator Instructions] The next question is from the line of Aditya Sen from RoboCapital.
I got dropped accidentally. So I was asking that because of the addition of 850 TPD caustic capacity, the total capacity utilization gone down. So for the full year FY '25, where do we see the capacity utilization for this segment, caustic soda?
So as I mentioned that in the second half of the year, the expanded capacity, you should see a 40% to 50% capacity utilization, and the existing capacity, which is close to about 1800 tonnes per day, we should be utilizing about 80%, 85%.
Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Ladies and gentlemen, thank you very much for your participation in our earnings conference call. We continue to be guided by our philosophy of growing through capacity, capability, technology, new products and value addition. Further, with our commitment towards the environment and society, we keep sustainability integrated into our business practices. We strive to create long-lasting value for our stakeholders along with delivering better earnings and growth.
Thank you very much once again for participating in our conference call today. Thank you.
Thank you, members of the management. Ladies and gentlemen, on behalf of DCM Shriram Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.