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DCM Shriram Ltd
Earnings Call Analysis
Q3-2024 Analysis
DCM Shriram Ltd
The company reported a decline in net revenues for Q3 of financial year '24, reaching INR 3,035 crores, a 6% decrease compared to Q3 of financial year '23. Lower prices in the Chemicals, Vinyl, and Fertilizer segments primarily influenced this downturn. However, areas of growth included the sugar business, Shriram Farm Solutions, and Fenesta, bolstering overall results.
Profit Before Depreciation, Interest, and Tax (PBDIT) for the third quarter also saw an 18% decline year-on-year, dropping to INR 480 crores from INR 588 crores. This reduction in profitability was evident across segments, with Chloro-Vinyl and Chemical segments, in particular, witnessing significant drops in revenue and PBDIT, 31% and 29% respectively. Price deflation, combined with volume reductions in some cases, laid the groundwork for these developments.
On the brighter side, the sugar segment experienced a 22% year-on-year increase in revenue, driven by greater volumes and prices in both sugar and ethanol. A new distillery played a significant role in enhancing ethanol volume. The Farm Solutions and Fenesta segments also showed robust growth figures, with a 17% increase in revenues for Farm Solutions and a 20% uplift for Fenesta's.
Contrasting these positive results, the fertilizer segment faced a stark decrease, with revenues and PBDIT plummeting by 36% and 72% respectively. Still, the Bioseed segment exhibits a promising trend, with revenues marking a 29% increase year-on-year, potentially reaching breakeven in the current financial year.
Looking at a longer-term perspective, the company saw a slight dip of 3% in net revenues over nine months, ending December 2023. This was mainly due to lower prices in Chemicals, Vinyl, and Fertilizers. The overall PBDIT for this period experienced a significant contraction of 41%, solidifying the pressures felt across business segments.
Even amidst revenue contractions, the company managed to reduce its net debt, decreasing it to INR 314 crores as of December 31, 2023. The focus remains on maintaining a robust balance sheet and cash flows, which are seen as the backbone for future investments and growth in the evolving business landscape.
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Ladies and gentlemen, good day, and welcome to the DCM Shriram Limited Q3 FY '24 Earnings Conference Call. [Operator Instructions] Please note 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, [indiscernible]. Good afternoon, and welcome to DCM Shriram Limited Quarter 3 FY '24 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. Aitya Shriram, Deputy Managing Director; and Mr. Amit Agarwal, CFO of the company. We shall have remarks from Mr. Ajay Shriram and Mr. Vikram Shriram, today.
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 commence, 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 invite 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. Thank you for taking the time to join us for our Q3 financial year '24 earnings conference call. Here is wishing all of you a very healthy and happy 2024. I will share my thoughts on the business and industry dynamics, and then Vikram will share [indiscernible] on the financial and operating performance. The global context today is characterized by delayed economic recovery for major economies...
Ladies and gentlemen, the line for the management seems to have disconnected. Please stay with us while we reconnect with the management. Ladies and gentlemen, we thank you for your patience. We have reconnected with the management. Over to you, sir.
Thank you. Sorry for the disruption -- the central banks are grappling with the inflation, interest rates and growth paradox. There are also different trends around climate change, generative artificial intelligence that have led many countries to look at policies around these concerns more aggressively. 2024 will also be a year of election. 30 democracies, including 3 of the largest, which are India, U.S. and Indonesia will go to the poll, accounting for about 46% of the global population and nearly 60% of the global GDP.
This is likely to generate regulatory and policy uncertainties in the short and medium term. We, as an organization, are cognizant of these developments and keep preparing ourselves for possibly [indiscernible]. We have already taken [indiscernible] measures in terms of enlarging product portfolio as well as sustainability. This is a key focus area for all our businesses, and we will ensure that we keep growing along these lines. All our businesses continue to witness group growth, except Chloro-Vinyl, whereas we are witnessing price softening led by oversupply of caustic in India and import of the PVC into India. I would now discuss about the key industry dynamics across our [indiscernible] business.
First is Chemicals. Demand trends in major economies for key end user industries that utilized Chloro-Vinyl has been subdued, leading to a sharp decline in prices of caustic soda in Q4 of the last year, post which the prices have remained low [indiscernible]. U.S. has witnessed some capacity shutdowns in last couple of years, and Europe is looking at reducing production amid lower demand. Demand continues to be lower in China as well. However, we operated at a higher rate and exported purpose to contain all India domestic prices.
The Indian scenario did not change much from last quarter and operated at lower capacity with sluggish demand growth and new capacity additions. We expect this scenario to continue for a couple of more quarters. We are cognizant of the imperative and a consistently matched capacity augmentation with deficiency initiatives. Our [indiscernible] costs have come down and our new 120-megawatt power plant will further support lowering energy costs from Q4 financial year '24.
The sourcing of green energy that started in June '23 is helping us in costs as well as in the endeavor towards sustainability. However, given the industry scenario, we expect the businesses to be under pressure for a few quarters. The other initiatives, ECH and H202 projects are expected to come online in Q1 financial year '25 and expansion of caustic soda capacity is expected to be operational in the current quarter.
These are aimed at making the overall business more resilient, more efficient and more diversified in terms of the product range [indiscernible] high interest rates have meant that housing sector continues to underperform in the major economies, including China, thereby impacting previously demand and prices globally. The disruption of logistics clients in Panama Canal and the Red Sea may put the freight cost and increase prices in consuming countries. India is registering a healthy growth in demand but the prices continue to be subdued due to excessive imports from China.
And therefore, the margins are negative for PVC in spite the cost savings in terms of lower energy prices. [indiscernible] prices have also declined, but margins continue to be positive, and we are maximizing [indiscernible] sales. Sugar. Globally, sugar demand and supply is expected to remain balanced and it is supporting for sugar price. Domestic sugar production estimates have been revised to 31 million metric tonnes with impact of [indiscernible] in Maharashtra and Karnataka. Sugarcane prices have been increased. [indiscernible]. There is a significant gap in margins between Maharashtra and Uttar Pradesh. Policy intervention will be required in this regard.
Ethanol industry received 2 setbacks this year, firstly, with central government restricting sugar erosion for ethanol commercial to 1.7 million metric tonnes. And secondly, Uttar Pradesh government increasing the country liquor obligation on [indiscernible]. The positive side was that the central government has increased the ethanol price by INR 6.87 and INR 5.79 per liter for [indiscernible] corn-based ethanol, respectively. In spite of this, we feel that feedstock availability with the [indiscernible] will be challenged this year and blending will be a decline from about 12% blending achieved this ethanol year. We feel that there is a need for consistency of direction from central government and state government.
We started sugar operations in this quarter and have planned majority of our operations on 3 heavy routes. The crop is looking good so far. Our expansion initiatives at [indiscernible] projects are proceeding as the time line. Our potash fertilizer project commissioned in January 2024. The CBG as well as potash fertilizers are part of our initiatives on sustainability through circular economy. Fenesta, consistent measures to enhance the portfolio has translated into better performance metrics for this business. During the quarter, we have delivered healthy growth [indiscernible] in volumes and pricing.
The trend remains positive and order bookings are also up at 9%. We have commissioned our fabrication units for [indiscernible] facility recently. We have also increased the [indiscernible] to enable growth and better service. Strategy-wise, we are accelerating presence in new territories and product categories, and this is translating into better performance.
For the last few years, Fenesta has become a significant contributor to our earnings. The agri business portfolio comprises our Shriram Farm Solutions, fertilizers and bioseeds business. Shriram Farm Solutions has seen good growth given better volumes in feeds, especially research wheat. The new varieties that we introduced for the research wheat last year has received a positive response from the farmers as they are [indiscernible] for higher yields and enhanced seed products. Our production facility for what is soluble fertilizers and biological under the subsidiary was commissioned during the quarter.
Over the last 2 years, Shriram Farm Solutions has become a significant contributor to our earnings. Fertilizers. Lower gas prices that were pass-through impacted both top line and profits. Also last year, we have received earlier on account of revision in energy now. Just in the outstanding as on December 31, 2023, stood at a negative INR 21 crores as compared to INR 461 crores in the same period last year and INR 310 crores as of March 31, 2023.
Balance sheet. The business saw improvement in volumes both in India and Philippines. This is on the back of the new high-performing hybrids that have been introduced by us in corn, cotton and [indiscernible]. Our pipeline for the coming season remain attractive as our team is focused on developing newer and promising variety. Frequency of economic volatility, degrees of climate and the impact on business has increased in the recent past, and these have become a part of business.
So India continues to show buoyancy and iconic growth led by infrastructure development and investments across various industries, some impact of these events cannot be ruled out in the coming year, and we see our investments directly to enhance sustainability, business mix and efficiency in operations will help our sales through these challenging times. We continue to have a healthy balance sheet, and this will support further growth initiatives. I'd now like to invite Vikram to cover the financial -- over to you.
Thank you. Good afternoon, everyone. I will now take you through the financial highlights of Q3 and 9 months financial year '24 results.
Net revenues for Q3 financial year '24 were at INR 3,035 crores as compared to INR 3,236 crores in Q3 financial year '23, a decline of 6% year-on-year. Revenues were impacted by prices in the Chemicals, Vinyl and Fertilizer segment. Growth for the quarter was driven by sugar, Shriram Farm Solutions and Fenesta. PBDIT for Q3 financial year '24 was at INR 480 crores as compared to INR 588 crores in Q3 financial year '23, a decline of 18% year-on-year. The revenues in Chloro-Vinyl segment declined 31% year-on-year to INR 663 crores and PBDIT was at INR 56 crores as against INR 237 crores in the last year.
The Chemical segment reported revenues of INR 535 crores, a decline of 29% year-on-year. GCU prices were lower by 40% year-on-year, which were partially compensated by caustic volumes being higher by 6% year-on-year. PBDIT declined 71% to INR 63 crores. However, hydrogen sales along with lower energy costs have helped to mitigate this to some extent. The Vinyl business noted a decline in revenue of 37% year-on-year at INR 128 crores, mainly on account of the decline in prices and volumes of previously by 12% and 29%, respectively, and lower carbon prices and volumes by 20% and 16%, respectively. Volumes declined on account of partial shutdown in Q3.
PBDIT was at negative INR 7 crores as compared to INR 19 crores led by subdued prices of PVC and carbide as well as volumes. However, this was partially offset by lower energy and carbon costs. Sugar statement revenue, net of excise duty was at INR 891 crores and increased 22% year-on-year due to higher volumes and prices in both sugar and ethanol business. Domestic sugar volumes were up 24% year-on-year at 14.7 lakh [indiscernible] due to higher domestic releases. Although last year, there were exports of 2.3 lakh [indiscernible] in the same period. Volume of ethanol was at 349 lakh liters versus 231 lakh liters, supported by the commissioning of the 120 KLD multi-feed distillery. PBDIT came in higher at INR 188 crores as against INR 102 crores led by better prices and lower costs versus the same period last year.
[indiscernible] volumes from the expanded capacities at Ajbapur were also higher. Revenues of Financial Building Systems increased by 20% year-on-year to INR 214 crores and PBDIT grew by 8% to INR 43 crores largely on account of higher volumes and prices. The order book was up by 8% to 9%. Shriram Farm Solutions revenues grew 17% year-on-year at INR 596 crores as compared to INR 512 crores last year. The segment saw higher volumes and prices in seeds, especially research wheat. PBDIT for the quarter came in at INR 180 crores as against INR 143 crores, a growth of 26% year-on-year due to higher volumes and margins in research wheat.
Segment revenues of fertilizers declined by 36% year-on-year at INR 418 crores and PBDIT declined by 72% year-on-year at INR 26 crores, attributed to lower gas prices, which is a pass-through. This led to lower energy savings rate and hence, impacted the earnings. Also, in the previous year, Q3 saw a onetime positive impact of INR 49 crores due to revision of energy norms of the earlier period. The Bioseed segment saw a revenue increase of 29% year-on-year at INR 138 crores.
This was primarily led by domestic revenue increased by 29% year-on-year at INR 95.5 crores due to higher volume. The international revenues increased by 30.8% year-on-year at INR 42.2 crores, owing to higher volume in the Philippines. The Bioseed business is improving and is expected to reach near breakeven in the current financial year. For the 9 months, December 31, 2023, revenues net of excise duty were at INR 8,523 crore, reporting a marginal decline of 3% year-on-year. This was mainly on account of lower prices in segments of Chemicals, Vinyl and Fertilizers, which saw lower ECU, PVC carbide and gas prices. Our business segments of sugar, which was aided by the commissioning of the 120 KLD distillery, Fenesta, SFS and Fertilizers saw higher volume year-to-date.
Accordingly, the PBDIT is at INR 800 crores, a decline of 41% as compared to INR 1,354 crores last year. The company's net debt is at INR 314 crores as on December 31, 2023, as against INR 681 crores as of March 31, 2023. Return on capital employed for December '23 came in lower at 16% as compared to 27% for the financial year 2023 due to the reasons mentioned above.
In summary, our balanced performance is anchored on a diversified portfolio, commitment to smart investments and sustainability and a strong financial foundation as can be seen by our balance sheet and cash flows. As we embrace the future ready mindset with a focused approach on growth, we are strategically positioning ourselves for long-term viability and growth in the evolving new business segments also. This brings me to the end of my 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 [indiscernible] Capital.
I just have 2 questions. First is on caustic soda volumes, which in the presentation, it shows that there has been flattish growth for 9 months in caustic soda [indiscernible]?
Okay. And the second question.
And second one is on epichlorohydrin, the new capacity that is coming up. So one of your competitors is also adding new capacity. So wanted to know if what is the demand-supply scenario and would that lead to an oversupply in the industry?
Okay. Yes. Just answering your first question on caustic soda volumes. So actually, our new capacity is yet to be commissioned. So these volumes are with the same capacity as were there in the previous year.
So we have marginally moved up on the sales from the existing capacity. And this quarter, we will be commissioning the new capacity. And after that, the volumes, would see an increase. With regards to your second question on epichlorohydrin. You're right. There is one other player who has commissioned capacity, and we would be the second one to commission capacity in this space.
But there is -- I think with all products and chemicals, we are seeing growth in demand in parallel, so we do expect that in the coming quarters as we ramp up our capacity rate, the material would be absorbed in the market, and we'll be exploring markets all over, whether it's domestic or international. So we do expect that in the coming quarters, this capacity would get absorbed.
Okay. And thank you so much for this answer. Just one more on ECH, what would be the payback period for our CapEx? And how much CapEx would you initiate?
So the payback should be in the range of around 4 to 5 years, 5 years ballpark. And the CapEx will be in the range of around INR 500 crores to INR 600 crores. I don't have the exact numbers right now, but that should be the range.
Okay. And the CapEx in caustic soda new capacity that we are coming up with and what will be the capacity sense?
Yes. So the capacity there is about 850 tonnes per day. And they also [indiscernible] of about 600 tonnes per day. Put together, the CapEx is again in the range of around INR 800 crores to INR 900 crores.
Sir, to the numbers you said, 50 tonnes per day?
850 tonnes per day.
[Operator Instructions] The next question is from the line of Pratik Tholiya from Systematix.
Congratulations on [indiscernible] especially in your sugar, Agri and Fenesta. And I think even your chemical has sequentially done better. So just firstly, on chemicals on your -- so what was the ECU realization for the month of January, I mean, average price during January?
Average price.
For January, Pratik, the average prices are around INR 25,500.
Okay. And sir, this is ECU level. So chlorine is still negative?
Chlorine is still negative.
And that would be how much?
Around INR 4,000, INR 3,000 to INR 4,000.
Okay, sure. And what is the slightly medium- to longer-term view on the caustic demand front because of the overcapacity that you are seeing. So how do you -- when do you expect the entire capacities to get fully absorbed -- and then we can expect the prices to go up?
Yes, you're right that in the short term, we are seeing an increase in supply. And demand, as we've already shared earlier in the call has been subdued. But we put up capacities with a long-term horizon.
And we do expect that in the coming quarters, with the robust demand for a country like India, across sectors that this capacity will get absorbed.
So it's hard to put an exact timeline or a price in the future, and we normally don't give forward-looking statements. But we expect that with our chlorine integration as well that we are focusing on that this capacity will get absorbed and running fully in the next financial year, that is FY '26, it will be full.
I'll just add that, as mentioned by Amit earlier, we are also installing a 600 tonnes per day [indiscernible] plants. So that gives us the flexibility for exports. That puts up another value [indiscernible] of selling our products if the pricing is too big.
Sure. Sure, sir. And then secondly, could you just share some details on your agri business because I see your agri is an exceptionally well in kind of a challenging quarter because of the other companies that are reporting numbers, especially the agri seeds on front are including a top line degrowth when margins for most of them have been better, but you reported agri top line growth as well. So if you could just share something on the product details or even...
Yes. I think in our Farm Solutions vertical, we have a [indiscernible] segment, we have 3 verticals, the crop care, plant nutrition and seeds. Now crop care and plant nutrition has been flat in terms of top line, and bottom line also is largely flat. And for the reasons that we have mentioned that the industry is going through a rough patch. But our seeds vertical has done exceptionally well. And December quarter, Q3 is also rabi seasons where the wheat seed will be the market leader that is sold and that has done exceptionally well. So that is the key reason for the growth that you've seen for this segment in this quarter.
Sure, sir. And what can we expect going forward the trajectory in terms of for the upcoming [indiscernible] season?
So as I mentioned, so in [indiscernible] also, there should be growth is what we are expecting across the verticals. We are seeing this...
I mean in terms of any product launch that we are anticipating for the [indiscernible], which can add to further growth?
Yes. There are launches which are lined up. But these launches take time to mature. So it would not happen that we launched in this financial year and immediately we see [indiscernible] to mature. And in the past, whatever launches we have made, we are contributing about 10% to 20% of the top line are coming from the launches we have done in last 2 years. So it'll time to pick up. So this business will overall, as we mentioned in the past, will grow at about 15% year CAGR. So we do expect that manufacture -- and also, as a pivot for the business is the manufacturing, where in nutrition, we have started manufacturing, which will mature overbuild of maybe about 1 to 2 years. And also in crop care, where last year, we started our own manufacturing. So I think these are steps to help the business growth.
[Operator Instructions]
The next question is from the line of Riya Mehta from Aequitas Investment. Sorry to interrupt, ma'am, the line for you is not very clear.
Am I audible?
This is better -- please go ahead, yes.
Yes. My first question is in terms of cost take. So you're seeing in resi expense and so basically [indiscernible].
I'm sorry, we can't understand what you are saying, ma'am.
Hello?
Now it's better. Now please carry on.
Sorry to interrupt, Riya, once again, the line for you is bad. I request you to please move to an area with better network.
Sure. Is it better?
But the line again for you is going bad. May I request you to please get to a better network area and return to the queue?
Ladies and gentlemen, we will proceed with the next question, which is from the line of [indiscernible].
A couple of, I have -- so with respect to this new power plant that you said 120-megawatt that is likely to get commissioned in quarter 4.
So how much of cost saving will come from this? That's one. Secondly, this caustic soda plant, which is going to get commissioned in quarter 4. What are the other CapEx basically, which will probably come in quarter 4 or H1 '25. That second and third, what will be our CapEx for '25?
So to answer your first question in terms of savings from Q1 '20, that should be in the range of around INR 10 crores to INR 12 crores a month. That's the kind of -- once it gets commissioned and it's fully operational. So that's point number one. Speaking in terms of CapEx, as we mentioned, that our [indiscernible] that will get commissioned in this quarter. And [indiscernible] will be commissioned in the next quarter.
Okay. Okay. And the CapEx that is announced for '25.
That we haven't announced any new CapEx as of now. Already -- Yes. What was already announced is what we are completing. And then there is anything new that comes up in the Board meeting next.
How much of this is pending out of the announced CapEx?
The majority of it is spent [indiscernible] because we are nearing completion. About 70%, 80% is already being spent in terms of cash outflow for these CapEx.
So this net debt figure of [ 314 ] December and not likely to go up much from here?
300 and?
I think the December end net debt figure is [ 314 ]. 3-1-4.
See, net debt will go up. So by March, I'm expecting the net debt to be around INR 1,900 crores to INR 2,000 crores. The reason for that, there are 3 key reasons. One is it sugar season, therefore, debt goes up as the inventory per sugar build-up. Point number 2 is the urea subsidy, which is very abnormal right now, which is negative 20, which means we have to pay. So if there are certain modifications which are pending there. If they come, then probably there will be outflow of about INR 350 crores there. So that will add up. And obviously, there will be some outflow on CapEx as well.
Okay. Okay. Okay. And with respect to your business outlook for Fenesta, I mean -- can you say some outlook? I mean I can understand that the order book has gone up this quarter by some 9%. Can you throw some more color on the same business with respect to the other prospects of this?
There's some more light on the Fenesta business.
Fenesta business, yes.
Broadly speaking, the Fenesta business was established and has a long history and is a market leader in uPVC windows and doors. The aluminum window and doors were established or launched about 18 months ago and have gained good traction and are moving at a fast rate. And I think the order book has exceeded over INR 100 crores in a pretty quick period. As far as the third new business, which is the facade business, that has just been launched. So in fact, now it is the first launch sort of post-launch trial facade that are being put up for builders or on their building.
We've got orders for those trial facades. So the process is in the facade business, you put trials first and then you get the approvals of the technical specs and then you get the commercial and then you get the orders. It's a bit of a longer gestation, but that's the nature of the business cycle of facades. So the facade business will really take off maybe in terms of some meaningful volumes, maybe 9 to 12 months from now because then it will be market leading and development. [indiscernible] factory, then you put up the trial, then you put the -- get the approval of the product at the customer end and then you get the orders.
We have the next question from the line of Riya Mehta from Aequitas Investments.
Thank you for the opportunity. I hope my line is clear now. My first question is in terms of the cost of demand to a big part of the user industry 20%, 25% is at excise and we've seen a revival in the textile industry, so what's your outlook on the demand on the caustic front?
So yes, the textile industry is one of the drivers for caustic demand. I think it will be slightly lower than the range that you had mentioned, but yes, it is one of the important drivers for demand. So the advantage with caustic actually is that there's multiple industries, which lead to the demand.
Even if one of the industries is slightly down, the other industry, consuming industry can support. So we do expect that in the medium term, the demand will grow and will be robust. And in the long term, it is likely to come back fully. So we expect the next one or 2 quarters to be tight, but we are optimistic that going forward after that, then there will be a good demand.
All right. And in terms of the overcapacity situation, which we are looking at, what kind of oversupply are we looking at?
What sort of oversupply?
Yes. So I think a lot of the competitors have also come up with capacity with [indiscernible] also having same capacity. There is a lot of supply in the market.
So that's right. The supply, there has been a significant increase in supply, and it will be going from 5.6 million tonnes per annum to approximately 6.7 million tonnes per annum. So we are seeing a significant increase in supply in the short term. One of the key factors with caustic is usually chlorine. So evacuation of chlorine is often a constraint as well. So we are working actively on plans to integrate there and mitigate the impact of that. So do expect that it will take some time for our capacity utilization, therefore, to ramp up. So FY '25, it will ramp up gradually. But FY '26 onwards, we expect it to be robust.
So our incremental [indiscernible], which will come up in maybe, say, the quarter end. By then, do we expect to have a capacity utilization as compared to 80% -- 75%, 80% like for the current [indiscernible].
[indiscernible].
80% utilization.
I think [indiscernible] project which comes up in this quarter. In FY '25, we should be around 50%. And FY '26 is when it should reach the levels of 75%, 80%. And by end of that year, we should be around 90%.
[indiscernible] caustic life project that would also have similar ramping up frequency?
That's the 600 [indiscernible] plant. So that's like a subset. So you have [indiscernible] coming up, 600 [indiscernible] doesn't add to the capacity. It's only subset to drive the liquid [indiscernible] so that gives us flexibility, as Chairman mentioned, flexibility to export and the company SKU.
Got it. Also, you're seeing a lot of Chinese players dumping PVC into our market. So apparently, what is the situation in January? And do we see any improvement? Also, exports from India for PVC has reduced because of the Red Sea crisis. So is there [indiscernible] what is the scenario there?
Yes. So in PVC, the issue is the imports coming from China, where also the antidumping duty was removed about 1, 1.5 years back. So although the demand is very robust in the country, there is oversupply because of imports. And unless we have the demand getting improvement -- seeing improvements in China as well as in the Western world, the prices are expected to remain in that range where they are right now.
Do we export PVC and caustic and how is that being for us?
So PVC from India is generally not exported because Indian manufacturer only need about 45% of the demand and 55% is imported. As far as caustic is concerned, we do [indiscernible] lower. The information is mentioned in our investor presentation. There are exports happening from our -- from the country for caustic soda.
But have they reduced, considering if we were exporting to European regions and there is [indiscernible] logistics sector?
They have marginally come off in the 9 months period.
So what would that number be? If I want to see Y-o-Y?
If you look at yes, so in terms of 9 months, our exports as a country or as the industry were about 2.98 lakh metric tonnes versus 3.08 lakh metric tonnes.
Got it. And my second question is in terms of sugar. So within new [indiscernible] what would be the capacity [indiscernible] coming in? Incremental?
So our total sugar capacity is now about close to 550, 520 [indiscernible].
And that would be -- and how much of that would be grain based?
120 -- 250 now. 250 is grain-based now.
250 is grain based. Are we looking at -- so like for that?
Pardon me.
Grain based [indiscernible] et cetera. So are we also kind of looking at alternative feedstocks?
Yes.
But then lesser profitability. So what would be a major [indiscernible] in grain based treatment?
So we are looking at that, we're looking at both rice and maize. And the margins are more or less the same in both the products. Sorry, please go ahead.
No, I was just talking of Bioseed versus the overall outlook?
So for Bioseed, as we mentioned in the Chairman speech, we are expecting to breakeven or near breakeven in this financial year. Over last 2 years, if you see the businesses seeing improvement based on the new products introduced in the market and better marketing activities as well, so we do expect the trend to continue -- and we are working actively on certain research things as well. So we do expect it to improve, but that improvement will be gradual.
This a decrease in fertilizers prices? Do we expect losses anytime soon?
So there would not be any losses in our fertilizer business. The reduction in revenue, as you mentioned, is because the cash prices came down significantly from about $22 last year for MMBtu to about $15, $16 per MMBtu in the current quarter, which gets reflected in the revenue and has some impact on profitability as well, but we don't see any losses in this business in the near future.
The next question is from the line of [indiscernible]. Your line has been unmuted. You may proceed with your question.
Sir, firstly, if you could give the import number for caustic soda for the quarter, and also for the 9 months, also net of export if that number you can give?
So those numbers are mentioned on the investor presentation that is there on our website as well as on the stock exchange.
Okay. The important number, I'll go through them. And sir, how are the user industry trading currently? How are the consumption rates from the user industry for this quarter? And what's the trend going ahead?
So the user industries was for caustic. It includes textiles, paper and pulp, alumina, other chemicals, et cetera, et cetera. So the growth rates of each of these industries varies. In the short term, like what we've seen for many chemicals, not just caustic, there has been a reduction -- or not a reduction, a slowdown in the growth in the month. But we expect that in the coming quarters, the demand is going to pick up and therefore, the demand overall for caustic will be robust.
So if you take the current realization, the ECU realization, sir, how profitable are the global companies also and our company and domestic companies also, so where is the breakeven point from where with the things start turning -- go forward but going ahead, where if you could throw some light on the same?
So see, breakeven point [indiscernible] number because it depends on what the costs are and energy costs being the biggest contributor, it all depends where the coal costs are moving -- so I don't think it's feasible to give a number on breakeven price. And therefore, how others globally, whether they are profitable or not, it's very difficult.
And our business has been profitable, as you can see from the numbers. And -- but yes, the profitability has been low. It has come off significantly from last year. So let's see how it pans out. It will be a function of cost and prices. Although we have worked on costs, so our visible cost has come off, but prices have declined more.
Right. And sir, on the utilization level, sir, I think, what [indiscernible] levels for us for this quarter and Q-on-Q, how would the utilization levels play?
Around 80%.
Okay. 80% is for Q3. What was the number for Q2 and 9 months?
It will be around the level 80% to 90% range that we have been operating.
Okay. And we will be expecting to exit the next quarter also in the same vicinity?
Yes. I think there is -- we should be at this level in the Q4 as well.
And for the Vinyl segment, sir, how are the utilization levels currently?
So currently, they are close to about 90% to 100%.
Right, sir. And for the last point on the capacity that we are going to augment in this quarter -- when you have explained, I think, so how the ramp-up will happen. So what should be the ramp-up for the next year and also for this quarter, what kind of capitalization will happen for Q4?
That is what Mr. Ajay Shriram had explained that the utilization levels will be peaking by end of FY '26.
[Operator Instructions]
The next question is from the line of Riya Mehta from Aequitas Investments.
Just to follow up, what would be our current cost of power for us, considering we have so much built captive power in for many years?
Riya, we generally don't share our cost of power. And -- but as I mentioned, it's been coming down, the lower coal prices as well as with the green power that we started closing in Q2. And with the 120 megawatts coming up, it should further decline.
What would be the quantum of decline if you could just quantify with the new capacity coming of 120 megawatts?
Yes, for INR 10 crores, INR 12 crores will be the savings on account of 120-megawatt coming on power.
INR 10 crores to INR 12 crores of savings?
Per month.
Per month, right? Okay. And in terms of coal prices, how much are we importing and how do you have with the Coal India?
So for Bharuch plant, we largely import. But again, it's very dynamic. We actually try to follow whatever the pollution control guidelines are. So in Bharuch [indiscernible] to reduce costs. We also use biomass. Similarly, at our Kota factory also, where the coal is primarily domestic. But then also a large component is biomass.
Large component has biomass.
About 14%, 15% at Kota is biomass in terms of energy.
Are you seeing a decrease in coal prices in the imported coal?
Yes, we are seeing a decline.
The next question is from the line of [indiscernible], an individual investor.
Sir, I have 3 questions. First, our new cost plant of [indiscernible] in terms of annual capacity, there'll be about 100,000 tonnes, right? Or I just wanted to reconfirm my math.
This is which plant?
The new caustic capacity which is coming up this quarter?
So the capacity of the new plant is 850 tonnes per day, which is approximately 300,000 tonnes per annum.
Okay. And you mentioned the overall industry is increasing from 5.6 million to 6.7 million tonnes in India, the supply -- so beyond that, what are the new capacities that have been announced over the next 2, 3 years?
So these are the capacities that we are aware of at this point in time. Beyond this, we don't have any clear announcement. And as they come in the public domain, we'll be aware of them.
And it will take approximately 2, 2.5 years to set up a new capacity for you?
Yes. It depends on case to case, but it can take up to 3 years also depending on land acquisition, environment clearance and then execution.
Okay. Got that. My second question is on your capital allocation. In your presentation, you mentioned that you're looking for more opportunities, especially in the Chemical segment for fresh projects. So what type of chemicals are you looking at? Would it be commodity chemicals or similar stuff that you're already in or less cyclical commodities? What's your thought process there?
So as you would be aware, we are expanding our core, which is caustic soda chlorine. We are also expanding a couple of adjacent things, which is epichlorohydrin and hydrogen peroxide. Both those plants are expected to be commissioned in Q1 FY '25. And we are always exploring opportunities across the spectrum, whether it is in a commodity chemical or intermediate chemical or even specialty chemical. So we are continuously evaluating opportunities -- and as the Board approves, we will improve them. And specifically also exploring opportunities into future [indiscernible], including green chemicals, et cetera. So we're exploring all these opportunities.
Okay. So bulk of your fresh projects are expected in the Chemical division only, right? In terms of capital allocation and the bulk of capital deployed, that's what was mentioned in the presentation as well rather than the other divisions.
For us, the capital-intensive businesses are 2, chemicals and sugar. And the other 2 growth businesses, which is Farm Solutions and Fenesta are not so capital-intensive. And therefore, majority of the capital allocation will happen in chemicals followed by sugar.
The next question is from the line of [indiscernible] well, an individual investor.
Whether you have any plans of demerging and listing separately the Fenesta and the Shriram Farm Solutions business, given that both the businesses have become sizable and significant, as you mentioned in the presentation as well?
So the Board will take a view at appropriate time. As of now, we have not had any discussions with the Board on that.
Ladies and gentlemen, we have no further questions. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Thank you. Thank you, ladies and gentlemen, for your participation in today's call. Navigating a challenging global business environment, our domestic landscape remains [indiscernible]. Despite the business challenges, we are diligently implementing efficiency enhancement and sustainability initiatives within our operational framework, acknowledging the pivotal role of driving efficiencies across diverse business segments.
We are confident in our ability to deliver a robust overall performance over the medium term. Through strategic resilience and our commitment to adaptability, we are well positioned not only to navigate challenges but also to capitalize on emerging opportunities in the dynamic business landscape. Thank you very much once again. Goodbye.
Thank you. On behalf of DCM Shriram Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.