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DCM Shriram Ltd
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Ladies and gentlemen, good day, and welcome to the DCM Shriram Limited Q2 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, Mr. Rangnekar.
Thank you, Arvind. Good afternoon, and welcome to DCM Shriram Limited Quarter 2 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; and Mr. Amit Agarwal, Group 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 during the interactive question-and-answer session.
Before we begin, please note that some of the statements made on today's call could be forward-looking in nature, 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 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, ladies and gentlemen, and a very warm welcome to all of you, and I hope you all had a good festive season. I shall commence with views on the strategic imperatives for our businesses, following which Vikram will share the financial perspective.
The global landscape is currently marked by escalating geopolitical tensions and widespread instability. Since 2019, there has been a notable surge in trade barriers indicative of a growing trend towards protection measures. This shift, combined with efforts to mitigate risks, is promoting a significant restructuring of supply chain worldwide. India is in a sweet spot and stands poised to leverage emerging opportunities. India continues to maintain impressive growth rates while steadily improving its standing across various international rankings and indices.
In today's dynamic economic -- in today's dynamic business environment, operational agility has become a crucial strategic imperative. Our strategic approach is designed to foster growth in our core operations through integration, both upstream and downstream. We are consciously working towards having backward and forward integration as the strategy going forward. This strategy aims to bolster resilience, minimize risks and secure competitive edge along with growth in an increasingly uncertain and competitive landscape.
To this end, we have unveiled capital expenditure plans for -- and the company's plans focused on 2 key areas: Firstly, the downstream chlorine integration in our Chemicals division; and secondly, upstream integration for aluminum extrusion in Fenesta Building Systems division. Sustainability remains key for our operating processes and growth agenda.
Resource conservation is a core objective for us, along with positively impacting the communities and environment in which we operate. Accordingly, we are further adding renewable energy to the tune of about 74 megawatts. This strategic move demonstrates the company's commitment to reducing the carbon footprint and embracing cleaner energy sources.
I will now turn the discussion on key industry dynamics across our various business. First is Chemicals. During the quarter, global demand for caustic remained balanced and international caustic prices were stable. However, towards the end of the quarter, the prices have increased led by fears of supply constraints due to cyclone in the U.S. and increase in demand in China, led by fiscal stimulus. Pricing volatility is bound to persist, given the volatile geopolitical position.
India's caustic industry capacity is now around 6.2 million metric tonnes and is currently operating at a rate of around 75%. This is resulting in an oversupply in the market and therefore leading to a lower chlorine price and, hence, lower ECUs. India continues to be a net exporter of caustic soda. The sea freight remains elevated and this, coupled with ongoing Red Sea situation, continues to impact global trade and exports from India.
We commissioned our hydrogen peroxide plant in the last quarter. Our product is being well appreciated and accepted in the market, and we are now expecting a much speedier ramp up. We are nearing 50% capacity utilization. We have also commissioned a flexi-feed caustic soda breakup plant that will give flexibility to optimize costs and increase exports. The ECH plant faced some precommissioning delays, which have been addressed by our technology partners, and we are confident of commissioning the plant by Q4 financial year '25.
We have announced chlorine downstream projects of 100 tonnes per day aluminum chloride, and 225 tonnes per day calcium chloride in Bharuch with a CapEx of INR 310 crores at a new site near our existing plant. These projects will get commissioned by Q1 financial year '27 and will enable a chlorine sink of up to 225 tonnes per day. The marketing strategy for these products will involve tapping the export market, and business teams are already in tie up -- in talks for tie-ups for these products.
Then vinyl. Global demand for PVC in the key economies continues to be sluggish, given the underperforming housing sector, driven by elevated interest rates. Domestic PVC demand has picked up and recorded 20% growth in H1. However, amid structuring issues with the Chinese economy that is facing crippled local demand and surplus product availability, there is a sharp increase in low-priced PVC imports from Chinese suppliers that is being dumped into India. PVC imports account for approximately 70% of the total demand in India in H1 financial year '25.
Recently, we are again witnessing increase in freight rates from China, which may positively impact prices in India. However, I'm happy to share that the Ministry of Commerce has recently recommended an interim antidumping duty on 7 countries, including China. We now expect the Ministry of Finance to prove it in the next 2 to 4 weeks. With the end of the monsoon season, domestic demand for PVC is expected to improve with the consumption of construction activities and agricultural demand.
Sugar & Ethanol. Global sugar supply and demand for sugar season '23-'24 is expected to be almost balanced with a surplus of 1 million metric tonnes. The Indian sugar season '23-'24 is expected to end with a stock of 8.4 million metric tonnes with production estimate of 32 million metric tonnes. For the next season, the sugar production estimate is about 31 million metric tonnes, and demand is expected to be around 29.5 million metric tonnes.
Prices are expected to remain range-bound for the financial year '24-'25 between INR 3,850 and INR 3,950 for quintal, which is not commensurate with the increase in the cost of production, owing to the increase in SAP and climatic conditions in the last season. Simultaneously, industry is increasing -- is pushing for the increase in MSP of sugar and pushing for export for the next season.
On the ethanol front, the government has achieved 13.8% blending as of December 2024, with 57% ethanol derived from grains and balance from sugarcane. Further, the government has also removed restrictions on ethanol production from cane juice and B-heavy molasses. We have commenced crushing for the current sugar season. The sugar expansion at the Loni unit and the CBG project; at the Ajbapur unit are progressing as per schedule.
Fenesta Building Systems. Fenesta continues to deliver growth, supported by volume and value in both projects and the retail category. Growth would have been faster but for the temporary sluggish market being faced by building material industry. The business is investing into setting up newer revenue platforms and enhancing capabilities and capacities to accelerate future growth.
The aluminum window sector has been experiencing robust double-digit growth. To capitalize on this trend, we are making an investment of INR 149 crores to establish an aluminum extrusion facility. The project is expected to be commissioned by Q4 financial year 2026. By integrating this process into our operations, we aim to enhance customer experience by providing end-to-end solution along with delivering reliable, high-quality and innovative products. This will improve our cost efficiencies, too.
Moving on, the agri inputs businesses portfolio comprises of Shriram Farm Solutions, Fertilizer and the Bioseed businesses. Shriram Farm Solutions first. SFS has once again delivered double-digit top line growth and continues to contribute significantly in overall operating profits of the company. This growth is driven by volumes across the business verticals, particularly research wheat seed.
Abundant rainfall has ensured sufficient water availability, providing a favorable and optimistic foundation for the forthcoming rabi crop season. Our continued emphasis on innovation and product development, leading to unique offerings to the farmers, has been instrumental in reenergizing this business and will continue to be our key pillar for growth momentum for the business.
Fertilizers. The urea business environment continues to be stable. The gas prices have inched up slightly. The company has been making continuous efforts towards improvement in energy consumption, maximizing urea production as well as controlling fixed costs.
Bioseed. India operations continue its turnaround journey with help of novel hybrids for key products that was introduced over the last few years. International operations have contributed well, too. We have a robust pipeline of products, and we are expecting to grow the business going forward.
I'll now request Vikram to take the conversation forward to cover the financials. Vikram?
Thank you. Good evening, everyone, and wishing you a very happy Diwali. I will now take you through the financial highlights of Q2 and H1 FY '25.
Net revenues for Q2 FY '25 were at INR 2,957 crores versus INR 2,708 crores in Q2 '24, an increase of 9% year-on-year, driven by growth across businesses. Chemicals, SFS and Bioseed have led the growth for the quarter. PBDIT for Q2 FY '25 was at INR 235 crores versus INR 136 crores in Q2 FY '24, an increase of 73% year-on-year.
Chemicals. The business reported an increase in revenue of 19% year-on-year, led by caustic soda volumes that were up 16% on account of the new 850 TPD facility that was operationalized in May 2024. PBDIT increased 128%, owing to lower input prices, particularly energy prices and efficiency from the new 120-megawatt power plant. The segment continues to see good demand for caustic. However, excess capacity in India is creating pressure on product prices of chlorine. There was a positive impact...
[Technical Difficulty]
Sir, you are not audible. Ladies and gentlemen, please stay with us while we connect with the management.
Okay. Vikram Shriram here again. Unfortunately, the line dropped, so we had to reconnect.
I'll restart my commentary of Chemicals business. The business reported an increase in revenue of 19% year-on-year, led by caustic soda volumes that were up 16% on account of the new 850 TPD facility that was operationalized in May 2024. PBDIT increased 128% owing to lower input prices, particularly energy prices and efficiencies from the new 120-megawatt power plant. The segment continues to see good demand for caustic. However, excess capacity in India is creating pressure on product prices, especially chlorine. There was a positive impact of about INR 20 crores on account of state government incentives received in relation to projects commissioned in financial year 2017.
Coming to Vinyl business. The business saw a decline in revenues by 8% year-on-year on account of lower volumes, mainly due to a planned maintenance shutdown in the current period. PVC and carbide prices for the quarter were in the range of plus/minus 2% over last year. PBDIT improved over last year, led by lower power and carbon material costs.
Sugar & Ethanol. Sugar & Ethanol revenues net of excise duty were higher by 3% year-on-year due to increase in prices of both sugar and ethanol. Domestic volumes and prices of sugar was higher by 6% and 3%, respectively. Volumes of ethanol were lower by 18%, owing to C-heavy operations in the last crushing season. Prices of ethanol was higher by 10% year-on-year. PBDIT for the segment was at similar levels as earlier.
Fenesta Building Systems. Fenesta Building Systems revenue increased 6% year-on-year, led by increase in both prices and volumes across projects and retail segment. PBDIT for the quarter moderated by 6% due to higher fixed expenses for future growth, mainly due to setting up of new product platforms, higher marketing expenses and enhancing manufacturing capacity.
Shriram Farm Solutions. Shriram Farm Solutions revenues increased by 33% year-on-year, supported by volumes across all verticals led by research wheat. Prices were higher in research wheat. However, there was a slight moderation in prices of other verticals. We expect research wheat to perform better than last year in this financial year. PBDIT for the quarter was higher by 64% on account of better margins in research wheat despite higher marketing expenses focused on strengthening of the Shriram brand.
Fertilizer revenues were higher by 5% year-on-year. PBDIT was also higher by 24%, led by increase in prices and volume. Outstanding fertilizer subsidy was INR 12 crores as against negative to INR 267 crores last year.
Bioseed. The Bioseed segment saw a revenue increase of 24% year-on-year and PBDIT was almost 6% -- 6x higher. The improvement is led by domestic business on account of higher volumes and prices in corn and hybrid paddy.
Coming to the highlights of H1 FY '25. For the half year ended September 30, 2024, revenues net of excise was at INR 5,834 crores, an increase of 6% year-on-year. This was driven by all the business segments, except Fertilizer, in which there was a planned maintenance shutdown in the current period. SFS and Chloro-Vinyl segments' revenue increased by 25% and 13%, respectively, largely driven by volume. PBDIT came in at INR 509 crores, an increase of 59% year-on-year, largely led by Chloro-Vinyl segment that saw its PBDIT increased by 218% on account of higher margins due to lower carbon material costs, energy prices and better efficiencies.
The company's net debt is at INR 302 crores as on September 30, 2024 as against negative INR 203 crores as on September 20, 2023 and INR 1,434 crores as on March 31, 2024. The year-on-year increase was because of capital expenditure over the last 1 year and higher sugar inventory. Over March '24, the decline is primarily because of reduction in sugar inventory as well as a reduction in the subsidy.
Return on capital employed for September '24 came in slightly lower at 15% as compared to 18.5% for September '23 since CapEx incurred on the projects will start yielding returns in the forthcoming quarters. The Board has announced an interim dividend of 100% amounting to INR 31.19 crores. Major investments in the Chemical segment and the strong balance sheet and cash flow, we are evaluating opportunities in value chain around our core. We look forward to a healthy and a sustainable growth going forward.
That concludes my opening remarks, and I would 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 Nirav Jimudia from Anvil Corporation.
I have two, three questions on the chemical side. So sir, when I see your presentation, particularly in terms of the production of caustic, I think we have clocked something around 19, 20 TPD of production this quarter. So if we do some math and do the calculation, I think our chlorine production was close to 1,700 TPD. Sir, if you can help us explain how much we have consumed internally for our SBP aluminum chloride plant, how much was the sales to the pipeline customers and how much we have sold in the spot market?
And sir, if you can also share the market of chlorine within our area of operations, predominantly in Jhagadia because I was doing some sort of readings, and my understanding suggests that the market of chlorine within that Jhagadia region is close to 1,100 TPD of chlorine. So if you can share your thoughts, that would be very helpful.
Thanks, Nirav. One, in terms of our captive consumption, see, we have 2 plants, one in Bharuch, Jhagadia, and the other is in Kota. Put together, our capital consumption is close to about 18%, and through pipeline would be another 35%, 40%. Now in terms of market in Jhagadia, I don't have the number in terms of size of the market there right now. But what I understand is that the market is growing, given that the industry around us, whether it's Aarti, KLJ and others, they are also expanding. And we see the market growing.
Sir, in terms of the integration project, what we have announced, I think that would further consume something close to around 235 TPD of chlorine. So eventually, when we will have -- be operating at close to 90% utilization, what sort of integration from current level of 18% of chlorine could go up to? Any thoughts?
That should go up from 18% to close to 32% at the -- pardon me?
On the 90% utilization, assuming we continue to operate our plant at 90%.
True. So see, the major delta will come in Bharuch business. Jhagadia will remain more or less the same. So therefore, overall, as a chemical business from 18% will go up to 32%. And pipeline, you can add another 35%, 40%. So more or less, for the business as a whole, we will have 65 virtual certainty of supply and rest, we are comfortable that we can supply in the market.
Got it. And sir, when we speak of selling our chlorine to the pipeline customers, how does the pricing work there? Because in the spot market, I think prices fluctuate a lot, and a lot depends upon the production of caustic also. So when we sell to the pipeline customers, how the contracts -- are there any fixed price contracts or other formula-based pricing which is there? And because of that, the volatility in the chlorine price is something like insulate us from sales to our pipeline customers?
So Nirav, it's more about giving exit to chlorine. I don't think it is so much about prices. And the contracts are of all kinds, but mostly they are on spot basis.
Got it. Sir, second question is, in the presentation, you have mentioned that though the capacities in India were increased and there were pressures on the realizations. But at the fag end of the quarter, I think there were some spike in the prices of caustic. So just wanted to under from you like in between the quarters, let's say, Q1 and Q2, the prices of caustic imported to India was close to $470. But our realizations have fallen. So our ECUs fallen from, let's say, INR 28,000 to close to INR 25,900 this quarter. So it is more related to the chlorine prices and whether the increase in the prices in the international market very recently, what you have alluded in the presentation. Similarly, do we have taken the price hikes also in the domestic market following the increases in the international market?
One, I think the biggest reason why the prices have not followed international market, I think, ECU is because the chlorine. Chlorine, if I remember correctly, Q1 was about INR 4,000 negative. And in Q2, it was about INR 7,000 negative. Currently, it is about INR 9,000 negative. And the other thing is there's always a lag in terms of international prices, and international prices went up only by September. September 2nd half is when we thought the price is going up. Ballpark they have gone up by about $70 over the last 2.5 months. And there is always a lag in terms of getting reflected in the numbers because there are always supply contracts for 1 to 2 months, which are fixed. So therefore, they have impact.
Got it. But sir, safe to assume that how much -- so the extent to which the chlorine has gone negative from, let's say, minus INR 7,000 to minus INR 9,000, that sort of price increases we have taken in order to maintain our ECU or slightly improve that.
So we do see our ECU to be better in Q3.
And sir, last bit from my side. So when I was just going through our annual report, what we have clocked in terms of PBDIT particularly the Chemicals business was close to INR 190 crores. So sir, safe to assume that last year, because of the pressure on the ECU and other cost, was it more from the value-added products like hydrogen and aluminum chloride and SBP and less from the caustic chlorine business?
See, from last year's perspective, what you're saying is right. But from this year's perspective, hydrogen will continue to add value. It is the cost side where there is a significant reduction in costs. And therefore, caustic also is going to be profitable. On top of it, there are more volumes.
The next question comes from the line of Jainam Ghelani from Svan Investments.
Sir, my first question...
Sorry to interrupt, but your audio is not very clear and loud enough.
Can you hear me now?
Yes, this is much better. Please go ahead, sir.
Sir, my first question is on the antidumping duty. The antidumping duty is with the Ministry of Finance. So if it is approved, how much benefit can we see in our profitability on the PVC segment?
The antidumping duty ranges country to country. The way the government has approved or the Ministry of Commerce has approved -- one second. I'll give you the figure actually. See, the antidumping duty ranges in U.S., Thailand, Taiwan, Korea, Japan, Indonesia and China from the range of about $51 in Korea to China between $82 and $125. So China would be on average, I would say, about $100. So it is ranging between this level. The highest band is in China, second is in U.S., $64 to $104. So I think with all these coming in, it is now with the Ministry of Finance, and this was just issued on the 30th of October. So it is very early right now. So we've gone to the Ministry of Finance and the industry is pursuing it with the Ministry of Finance.
Okay, sir. And sir, since our ECH plant would be commissioning in quarter 4, we would need approval from the customers. So how long would the approval process be for the same?
The approval process ranges between, for domestic consumers, it will be anywhere between 2 months -- 1 to 2 months. For overseas customers, it will take a little longer because it depends on application to application, but that's about the range.
The next question is from the line of Parth Vasani, an individual investor.
My question is more related to CPVC resin. I just wanted to know, is there any plan to make that special PVC, which is required to make CPVC resin, which I believe most of the companies import?
No, we actually have not talked about making CPVC resin in our company.
Okay. So you are not planning to enter into the CPVC resin manufacturing?
No, no.
The next question is from the line of Saket Kapoor from Kapoor Company.
First, a small clarification. Sir, you mentioned that the average negative for the second -- for the quarter was INR 5,000 and currently it is trending at INR 9,000. Is this what you alluded to?
Chlorine. Chlorine, the negative pricing, yes.
Okay. So exit of September, the negative has increased significantly. What causes have led to this? And will this lead to lower utilization levels for caustic?
So Saket, there is other way around. One, this negative increase has happened more recently. INR 9,000, I would give you the number as on date. For the quarter ending, quarter ending September, which is second quarter, it was close to about INR 6,700 to be precise, average negative. And to answer your point that it impacts caustic utilization, it is the reverse. The more chlorine -- today, what's happening -- what is leading to lower prices is more chlorine is being produced. As new capacities have come out, prices are better for caustic. Hence, people are improving -- increasing their pacity utilization leading to more chlorine, and therefore, lower prices of chlorine.
And for the uptake of chlorine, sir, I think you did allude to the -- our steps we are taking for increasing the portfolio of value-added products. Where are we, sir, in terms of the current captive use of chlorine and the external sales? And what should be the numbers, say, for H2 and next financial year?
So if I look at captive consumption, including pipeline for the business as a whole, located in Bharuch as well as Kota, I am at about 48%, including pipeline. And going forward, once these capacities come up, which is ECH, calcium chloride and enhanced aluminum chloride, then I should be about 65% to 70%, including pipeline.
Sir, we have also heard about Reliance coming up with a big PVC complex. They've made this announcement sometime in their AGM in the month of August. So what should -- how should the dynamics of industry going to change with this huge 1.5 million tonne PVC complex this day of light? What's the thought process? And how are caustic players aligned to this huge PVC and also the PVC market itself? Your thought on the same, sir?
Your question is on caustic or PVC?
Both sir.
Both. So see, on caustic, the way we understand, is that Reliance as well as ANIL, both are coming up with their caustic project largely to feed the chlorine into their PVC. Now both of these projects will be in the coastal regions. And looking at the global demand, which is about 106 million tonnes and growing at about 2%, we expect that the caustic wedges that they're going to manufacture will largely be for the export markets. So that is point number one on caustic. It may cause some interim disruption domestically, but it is the intent, what looks like.
As far as PVC is concerned, see, the total domestic market size in PVC is about 4 million tonnes. And today, what we manufacture is only about 1.4 million tonnes. So there's a huge gap. And they, I think, if I'm not wrong, are coming up with about 225,000 kilo tonnes of capacity, which is only a partial capacity. So we don't see any stress coming on PVC. In any case, we are based out of North, and these 2 plants are coming up in Western region, so we don't see any challenges as far as PVC is concerned.
Sir, for caustic as a whole, there are issues with demand globally also, to account PVC on the European...
PVC, I don't see any demand. PVC in India itself, as I mentioned, there is a big gap on demand and supply. And on top of that, it's growing at about 10%, 11%.
Right, sir. And for caustic globally, sir, it has -- yes. Caustic soda globally, sir, we find demand disruption, especially for the European economy, wherein the big players have also mothballed their capacity. That was my thought. Am I correct in that thought process?
See, there are two things happening here. One, Europe, yes, they are closing down capacities because of their overall cost structure. And they are probably looking at more value add. That's an opportunity for India to export. And other thing is globally, the demand is increasing. One example is new paper capacity, pulping capacity is coming up in South America. In India itself, the aluminum capacity is increasing from about 4.1 million tonnes to about 6 million tonnes. So I think there is -- demand is getting created. But yes, it's only a matter of time when this new capacity in India gets absorbed.
And lastly, on the P&L part, sir. We find that the power and fuel cost for the quarter is up significantly to INR 428 crores. If we take the Q-on-Q increase from INR 373 crores to INR 428 crores, if you could just explain the key reason? And I think, sir, we have also taken a maintenance shutdown. So what is the cost that we have incurred? And what is the update on the realignment of the capacity post-shutdown?
So now we have taken a maintenance shutdown in chloro -- in vinyl business. So all that is back on track. We are operating at near 100% capacity. And increase in cost of power and fuel is primarily led by volumes.
And sir, the benefit for our power plant -- yes, sir, please. You were telling...
Please Carry on.
And sir, the benefits of the new power plant at Kota, are we now accruing the benefit of the same completely?
The new power plant is at Bharuch. And yes, we have started accruing the benefits.
Okay. And what was the annual saving we envisaged from the same?
I think it's reasonable. I would say -- I don't have the number right away. But it is something which we are happy, and it's closer to what we had targeted as a benefit.
Right. And sir, what is the thought process of the outlook for the sugar and bio-ethanol story from us? How are we going to pursue the opportunities there? Just throw some more light on this.
So I think on sugar, see, bio-ethanol is very futuristic right now, right? We are also evaluating where these technologies are because the technology itself are not very mature. The market is not really mature. And therefore, the impact -- they are very expensive fuels. So we'll keep a watch. But yes, we are looking at how best we can make sugar as an ecosystem, right, where there are multiple products. But they all will depend on how the technologies mature.
[Operator Instructions] The next question comes from the line of Falguni Dutta from Mansarovar Financials.
Sir, I just had one question. That's on sugar. What is the cost of sugar production for the season that just ended in September, if you can tell me?
So Falguni, our cost of production was close to about INR 3,600.
INR 3,600?
INR 3,600, yes.
So sir, does this include the interest and depreciation also?
Yes.
Okay. And is it possible to say -- tell me the number before interest -- after depreciation, but before interest, if it's readily available?
Falguni, I don't have that number right away.
The next question is from the line of Surabhi from NV Alpha.
I wanted to know more about Shriram Farm Solutions. I have been seeing that we consistently do like 17%, 19% margins in the last couple of years. So what exactly is the hero product? Is it the crop protection? Is it the soluble fertilizer? And also what is the capital employed in this business? Should we take the Bioseed plus the Fertilizers as the real capital employed?
No. I think Shriram Farm Solutions actually have 3 verticals. One is the business of seeds, whether hybrid seed and research wheat and other products. Second, there were crop-care chemicals, which is a vertical -- subvertical within SFS. And third is where they have plant nutrients, which is the third vertical. So we are focusing on all three. And there is a focused research going on in all these areas to try to get products, which are unique products, which are effective with the crops products, which the farmers want to buy. So the focus is very strong over there. We don't really -- the manufacturing we have is for specialty nutrients, et cetera, at Kota, which is not that large. So I don't know, Amit, maybe how much money is involved there. But the working capital requirement in the business is not too much.
It's negligible.
Yes, it's quite small. It's not really large at all. And SFS is a separate vertical in our group, Bioseed is a separate vertical in our group. And they both have their own management teams. They both have their independent CEOs, and they manage the business independently and manage their own cash flows independently.
So SFS, is it fair to assume that it is only [Technical Difficulty] of the business, so with the...
Sorry to interrupt, Surabhi, but your line keeps breaking up in between.
Am I audible?
No, not really, you're not audible still. Could you please move to an area with better network?
I just did. Hello?
Yes, please go ahead.
Please go ahead.
[Technical Difficulty]
Sorry, Surabhi, but it's still not clear. We are not able to hear you clearly. May we request that you reconnect with us on this conference.
Is this better?
This is better. Please go ahead.
Yes. What kind of ROCEs do we make in the SFS business? And also would like to know, Q3 is seasonally the best quarter for SFS, correct?
Could you kindly repeat the question because there was a little disruption. Could you kindly repeat the question, please?
Q3 would be the best quarter for the SFS, the Shriram Farm Solutions business, correct? And also the ROCE for this business?
Yes. So one, yes, Q3 will be the best quarter for this business because of...
Presale.
Yes, because of research wheat. That's the most profitable business in Farm Solutions. So I think that is one reason. And on your point of the ROCE, see, given that their capital employed is negligible and their EBIT will be an excess of INR 200 crores, so it's like normal numbers. So yes, it's very high.
Got it. And just last question. Within seeds and nutrients, what is the top-selling product within the SFS segment?
Research wheat in the seed segment. But I think your question is also on the plant nutrition, is it?
No. So like overall, because I see that in the footnote, it's written plant nutrients, water soluble and seeds. So which of that is the higher contributor amongst the three?
Seeds.
[Operator Instructions] We have a follow-up question from the line of Nirav Jimudia from Anvil Corporation.
Sir, one question on the urea side. So when I see the numbers, I think our EBITDA per tonne is close to around INR 2,000, INR 2,100. I just wanted to understand from you, like are the numbers lower just because of the fixed cost absorption or the compensation from the government has not been revised from last so many years? And because of that, there is some under-recoveries so far as the fixed cost compensation is concerned? Or our energy consumption GKL per metric tonne is higher, and because of that we have been not able to materially improve our EBITDA per metric tonne in the urea side.
See, one, Nirav, I think we need to understand that our 4 focus businesses are Chemicals, Sugar, Farm Solutions and Fenesta. Farm Solutions and Fenesta are the consumer-facing businesses currently, and the four businesses that define the future of the organization. Now in terms of Fertilizer, I think it's performing reasonably well. Last year, if you see, the EBITDA was -- the EBIT was about INR 53 crores, almost capital employed was not very high, given the subsidy situation resolved. So we feel -- and it has a ROCE of close to 60%, 70%. Now that's very reasonable. Yes, our fixed costs are a little higher given their size, but our efficiencies are reasonably good. So I think overall Fertilizer and the manufactured urea, which is in a pretty good shape.
Correct. And sir, second question is, given the production -- on the Chemicals side, given the production of close to 19 TPD, 20 TPD of caustic soda this quarter, if you can share the mix of power between renewables, captive? How is the mix? And let's say, when we will ramp up our production, how this mix would look like?
One, our production was close to about -- I think at Bharuch, it was close to about 1,400 tonnes per day. And at Kota, it was close to about 500 tonnes per day, right? So that's about 1,900 tonnes per day ballpark for the quarter. Now coming to renewables, see, out of the total power requirement, currently, our total power requirement is close to about anywhere between 125 to 150-megawatt at Bharuch. So out of that, about 25 megawatts on an average basis is coming from renewable energy.
Okay. And rest is from captive?
The rest is from captive, yes.
And Kota entirely...
My contract is about 25 mega -- I mean, peak is about 44, 45 megawatts, average is 25 megawatts, so that will remain. We are just adding on the 6.6 megawatts, which will start coming from next quarter. So peak, we'll have -- in Bharuch, we'll have about 50 megawatts. And Kota in another 1 year, 1.5 year time, we will add other 68-megawatt peak.
All right. But entirely -- so currently, Kota is entirely on coal-based captive plant?
Yes. The only thing is we are also using almost 15%, 20% biomass there. So to that extent, we are using green fuel.
Right. And how the things would look like when we keep on ramping up our volumes of caustic soda?
We are quite focused on seeing that how do we improve our green footprint. As of now, we don't plan to increase our capacity there. There will be ramp-up happening at Bharuch from, let's say, currently, we are about 1,400 tonnes, 1,500 tonnes, and we'll go up to about 2,200 tonnes. So that will largely be met by captive sources. And there also, what we are looking at is the options of increasing our biomass. So our boilers are capable of taking 30%, 40% biomass, especially the new boiler. So to that extent, we would like to reduce the carbon footprint.
Sir, last two clarifications. One on the flaker plant of 600 TPD, has it started operating?
So out of the total planned expansion of 600 tonnes per day, 300 tonnes per day has started operating.
Correct. So that would help our exports, possibly in order to improve our utilization, right?
Yes. That's what the Chairman mentioned in his opening.
Correct. And last clarification is on the PVC plant at Kota. So there, possibly we may be converting chlorine to HCL for our PVC or chlorine directly goes to the PVC plant?
We convert chlorine to HCL. And then HCL goes into PVC.
The next question is from the line of Vignesh Iyer from Sequent Investments.
Am I audible?
Yes. Yes, we can hear you.
So just one clarity that I needed. Again, on the power side of it, so if I understand it right, you are spending INR 76 crores to increase your peak capacity from 44 megawatts to 68 megawatts. That is the addition of 24 megawatt, right?
No. Let me just clarify here. We are investing close to about INR 73 crores, INR 74 crores, that is, we are doing a new tie-up for our Kota facility, where we are tying up 68 megawatts.
Okay. That is above -- over and above the 44 megawatts already that you have in...
Yes. Exactly. That is over and above. See, 44 megawatts is at our Bharuch facility, which is Gujarat. This is a tie-up...
Okay. And what would be like -- so if I understand the average -- you've done around 25 megawatts in your Bharuch facility. What would be like the average that utilized in possible out of the 68 megawatts?
So just to add here, one in Bharuch, we are currently at 25 megawatts. We will go up by about 2 to 3 megawatts because we have tied up another 6.6 megawatts in Bharuch. So that is one. So there, we are spending close to about INR 3 crores as our equity participation. Now out of this 68 megawatts, I think it is about 32, 33 megawatts average.
Thank you. Ladies and gentlemen, that was the last question. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Thank you. Ladies and gentlemen, thank you very much for your participation in our earnings conference call. Our growth strategy reflects our commitment to adopting and sizing in a complex global market while strengthening our core business capabilities and the value chain. Sustainability remains a cornerstone of our business philosophy, reflecting our unwavering commitment to environmental stewardship and social responsibility. Thank you very much once again. Goodbye.
Thank you. On behalf of DCM Shriram Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.