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DCM Shriram Ltd
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Ladies and gentlemen, good day, and welcome to the Q4 and FY '22 Earnings Conference Call of DCM Shriram Limited. [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. Good afternoon, and thank you for joining us on DCM Shriram Limited's quarter 4 and FY '22 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. K.K. Kaul, Whole Time Director; and Mr. Amit Agarwal, CFO of the company.
We will begin the call with comments from the management, including 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 quarter-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 circulated earlier.
I would now like to invite Mr. Ajay Shriram to give us a brief overview on the company's performance and his views going forward. Over to you, sir.
Thank you, Siddharth. Good afternoon, everyone, and welcome to our fourth quarter and annual earnings conference call for financial year '22. Trust each of you and your families are keeping safe and are in good health. I will focus my thoughts on the strategic aspects of the business and the operating environment, and Vikram will share notable highlights of our performance.
We are pleased to report robust set of numbers during the quarter and for the year as a whole. The operating environment was challenging in terms of high input costs and supply chain disruptions. This was managed well by our businesses. And we have steady operations supported by higher product prices and demand.
Chloro-Vinyl, Fenesta and Shriram Farm Solutions businesses performed better. However, Sugar and Bioseed India business had lower earnings. Our capital expenditure plans for Chemicals and Sugar, aggregated to about INR 3,300 crore, are progressing well and will be commissioned within the next 12 months. These will drive augmentation in capacities, value addition through forward integration and cost optimization.
There are cost increases led by increase in metals and cement prices. However, we have reconfigured the projects to ensure that expected returns remain reasonably strong. Further, our Board has approved new projects amounting INR 92 crores in Shriram Farm Solutions, Fenesta and Chemical business at our Board meeting 3 days ago. These investments will position the business favorably for the long term with enhanced scale of business, making them stronger and competitive and enabling future growth. We expect our balance sheet to remain healthy during the current CapEx cycle as well as going forward.
I would now like to talk with you through the business-wise key developments. Chemicals. Global industry has witnessed regional output imbalances over the past year, resulting from factors like hurricanes in the U.S., dual control policy in China and COVID-19. U.S.A. and China have seen healthy recoveries in the medicine part. However, there are some near-term supply disruptions expected as a result of the lower operating rates in the U.S. and COVID-19 in China.
Geopolitical factors have driven the energy prices significantly higher and are expected to remain firm in the near term. Q4 financial year '22 saw the average import prices of caustic soda again going up to over USD 700 per metric ton post seeing some softening in December '21 and January '22.
Higher input costs were outweighed by higher product prices, and we expect similar trends going forward at least in H1 financial year '23. However, the margins, there is a little degree of uncertainty. Domestic demand has seen steady buildup during the financial year '22. Our capacity utilization levels have improved over the years from -- over last year from 84% in Q1 to 97% in Q4. Caustic demand is expected to remain stable. However, chlorine was oversupplied during the Q4 and continues to be impacted in the ongoing quarter. There are significant capacity additions of almost 1 million metric tons in the next 12 to 15 months, which may have an impact on capacity utilization levels as well as on domestic prices.
The good thing this year has been that exports has picked up a lot, and exports witnessed a 45% increase to 2.9 lakh metric tons from 2 lakh metric tons in financial year '21. We expect that exports will gain further momentum in the coming year.
I had mentioned that in our Chloro-Vinyl -- in our Chemicals business, our value-added projects and expansion projects are moving well. Our aluminum chloride expansion, putting up the plant for ECH, putting up a new plant for H2O2, our power plant -- additional power plant will be commissioned in the second quarter this year, and our caustic soda expansion of 850 metric tons per day is expected to be commissioned by first quarter of next year.
Vinyl. Momentum and demand has remained strong domestically and globally given the gains in consumption levels post easing of COVID-19, led by the construction industry. Pricing of PVC has been stable at around USD 1,550 after softness seen in the November '21 to Jan '22. Global supplies are getting restored and demand expected to get impacted by increase in interest rates, especially in the U.S., which may impact the product prices.
India PVC prices are driven by the global prices as almost 55% of India's demand is met by imports. Cost of key inputs is expected to remain firm in the coming months as well. The current geopolitical situation has led to an environment remaining volatile.
Sugar. Domestic sugar production estimate for sugar season '21, '22 is 35 million tonnes after considering diversion of 3.5 million tonnes of sugar into ethanol, with exports expected at highest-ever levels of about 9 million tonnes and consumption of 27.2 million tonnes. The closing stock of sugar by the season end is expected to come down to around 7 million tonnes from 8.3 million tonnes last season. The higher sugar production is due to the higher yields and sugar recovery in states of Maharashtra and Karnataka. With the higher production in India and Thailand, global prices are expected to remain balanced.
Our mills closed during the third week of April '22. Crushing days worked out at 163 days versus 162 days in sugar season '21. Total cane crushed during the sugar season '22 was 549 lakh quintals versus 553 lakh quintals during the sugar season '21. Recoveries on fine molasses came to -- came in at 11.3% versus 11.7% driven by late rains in the region.
There is a need for strengthening the policy support for UP sugar industry given that mills in Maharashtra and Karnataka have advantage in terms of lower sugarcane costs and proximity to the port. These 2 factors make it more viable for them to produce cane juice-based ethanol as well as to export. We diverted about 33 lakh quintals of sugarcane during the season to produce cane juice-based ethanol. However, returns were lower than sugar. This year, availability of C-Heavy molasses was low, leading to higher prices and, hence, lower margins on ethanol from purchased molasses.
Overall, the sugar diverted through cane juice and B-Heavy molasses stood at 11.4 lakh quintals versus 7 lakh quintals last season. Prices of ethanol during the current ethanol season were higher, reflecting continued government support and commitment to the blending target of 20% by 2025.
Our stated capital expenditure projects in Sugar business are on track and expected to be commissioned by Q3 of financial year '23.
Agri Inputs. This segment comprises Shriram Farm Solutions, Bioseed and Fertilizer businesses. Shriram Farm Solutions delivered strong growth in the year as a whole driven by wheat seed and specialty nutrition products despite climatic changes. With the country looking at a normal monsoon this year, the demand for key inputs looks healthy. We are geared to optimally drive sales of value-added inputs and research-based varieties in order to support this performance strength.
We are now proposing to develop manufacturing capabilities in value-added Agri Input businesses to enable continuous growth. To begin with, we shall start manufacturing water-soluble fertilizers and biologicals at Kota in Rajasthan. Bioseed has a limited season in Q4. If you look at financial year '22, Bioseed Philippines witnessed good performance with growth in paddy and cotton segment. Indian industry and our business witnessed lower volumes. This year, we have worked on revitalizing our Bioseed India business by making structural changes in terms of management structure, aggressively clearing up slow-moving inventory, building renewed sales and quality focus. These efforts, along with expected good response, our new products launched and strong product line, will help the business turn around over the next 2 years.
In Fertilizer business, natural gas prices have seen unprecedented increase throughout the year, and they continue to rise. The gas prices during the quarter have increased to USD 19.3 per MMBtu from USD 8.9 per MMBtu in the Q4 last year. Current prices are at USD 22.6 MMBtu. Subsidy outstanding as on 31st March '22 stood at INR 435 crores vis-a-vis INR 153 crores as on 31st March '21.
Fenesta. The business is witnessing good growth. The market size for uPVC windows is increasing and so is the competition. We have set up additional fabrication unit in [ Bhubaneswar ] to improve our coverage in the Eastern market. We have increased our capacity as well as product portfolio to continue the growth momentum. Today, Fenesta is present in 180 cities of India and all 28 states with 6 union territories. It has sales presence in 3 countries apart from India.
Ladies and gentlemen, if I look at the business environment today, it has become quite uncertain and fast changing, especially since the onset of COVID-19 and geopolitical issues. It requires us to have a higher level of digitalization, efficient operations with scale and value add, along with strong balance sheet. We are investing in growth with a focus on these parameters.
With this, I will now request Vikram to take you through the financial highlights. Vikram, over to you.
Thank you. Good afternoon, everyone. I will take you through the financial highlights of our Q4 and financial year '22 results.
During the quarter, net revenue came in at INR 2,796 crores versus INR 2,191 crores in Q4 financial year '21, up 28% year-on-year. This growth was driven by strong performance across Chemicals, Vinyl, Farm Solutions, Fertilizers and Fenesta businesses.
Chemicals business grew by 144% year-on-year to INR 865 crores, led by increased realizations and higher volumes. Higher prices had a positive impact of INR 437 crores on the revenue.
Vinyl business too recorded a healthy growth of 9% year-on-year in revenues driven by higher prices.
Fenesta business continues to record healthy numbers with revenues up by 30% year-on-year driven by project volumes and better margin. The order book also had a strong improvement of 36% year-on-year. Chloro-Vinyl and Fenesta businesses have also benefited from steady buildup in demand in the current year, reflected in improved sentiments post even at COVID-19.
The Sugar business revenues for Q4 financial year '22 were lower by 26% year-on-year at INR 755 crores. This is net of excise duty of INR 77 crores on country liquor sales. While the domestic sugar and distillery volumes were stable, overall revenues were impacted on account of lower export volumes due to removal of subsidy and non-allocation of quota.
Fertilizer revenues were up 108% year-on-year driven by higher prices and higher volume. Prices were up 90% year-on-year due to higher energy prices, which is a pass-through. Volumes were higher by 12% year-on-year.
Coming to profitability. In Q4 financial year '22, PBDIT stood at INR 663 crores, higher by 69% year-on-year, supported by Chemicals, Fenesta and Fertilizer segments.
Chemicals PBDIT was up 5x at INR 369 crores, primarily led by better margins due to higher product prices and higher volumes. Both power and salt prices continue to be high, which were more than offset by better product prices. Fertilizer PBDIT came in at INR 20 crores versus INR 4 crores during same period last year, led by higher volumes and better energy efficiency and energy saving rate. Fenesta PBDIT was up 2x at INR 32 crores driven by higher volumes in project segment and better margins.
Sugar PBDIT was down 19% year-on-year at INR 193 crores due to lower volumes and higher input costs. Bioseed PBDIT stood at negative INR 50 crores versus negative INR 38 crores due to India operations getting impacted by lower volumes, higher inventory provision and cleaning up of the business balance sheet and PL account and restructuring of the business, as discussed a little earlier.
Let me also share some of the performance for financial year '22 -- for the full financial year '22. Revenues were up 16% year-on-year at INR 9,627 crores, mainly driven by Chloro-Vinyl, Fertilizer, Farm Solutions and Fenesta segments.
Chloro-Vinyl and Fenesta growth were driven by both prices and volumes. Chloro-Vinyl and Fenesta businesses in Q1 financial year '21 were impacted by the pandemic and lockdown due to COVID-19, resulting in loss of production leading to lower sales.
Fertilizer business revenues were driven by higher gas prices, which are a pass-through. SFS revenues were driven by growth in wheat seeds and specialty nutrition.
Sugar segment revenues were down primarily due to lower volumes. Sugar volumes down by 41% year-on-year. Exports as well as domestic volumes were lower due to the regulatory framework. Ethanol volumes were lower by 4% year-on-year due to lower availability of C molasses in the open market and maintenance shutdown in Q3 financial year '22.
Bioseed revenues were lower, impacted by lower volumes in the India operations. Bioseed Philippines revenues were higher by 12% year-on-year driven by corn and paddy.
PBDIT for financial year '22 stood at INR 1,888 crores versus INR 1,244 crores last year, primarily led by strong performance in Chemicals, Vinyls, Fenesta, Farm Solutions and Fertilizer businesses.
Sugar business margin percentage was better than last year. However, profits reduced due to lower export volumes and lower availability of C-Heavy molasses in the market. Bioseed India business had losses because of lower volumes, which was an industry-wide scenario, and higher industry positioning and cleaning up.
Our direct tax payout was INR 264 crores versus the current tax charge on the PL accounts of INR 488 crores as a result of MAT credit available. The Board recommended a final dividend of 245% amounting to INR 76 crores. Total dividend for the year is thus 735%, amounting to INR 229 crores.
On the balance sheet side, net debt as on 31st March '22 was negligible or nearly 0. Capital employed net of capital work in progress and liquid investments came in at INR 5,067 crores versus INR 4,637 crores for financial year '21. ROCE for the period came in at 35% versus 20% for end March '21.
Overall, on a full year basis, our performance, despite several macro challenges and input cost pressures, has been quite resilient. We have reported strong growth across our key segments. On the whole, we have a robust balance sheet position and strong financial profile, which will allow us to continuously invest in growth to continue to add to shareholder value for the years to come.
This brings me to the end of the financial discussion, and we will be happy to take questions that you may have. Thank you very much.
[Operator Instructions] The first question is from the line of Riya Mehta from Aequitas Investments.
My first question is for the Chemicals division. So just wanted to understand, are we expecting our aluminum to arrive -- capacity to come up in this quarter itself?
Yes, additional capacity?
Yes. The new additional capacity, yes.
No. Additional capacity is about 850 tonnes a day. And that is expected to come up in this -- end of this financial year.
So all our downstream products will come when?
Just to add to your question here is that we are putting up an additional power plant also. That power plant is expected to be commissioned in the second quarter of this financial year, yes.
Okay. And what kind of cost escalations are we seeing in the total project cost for the Chemical division? I think the presentation mentioned that we are seeing some costs going up there.
That's right. Amit, do you want to please give that?
Yes, yes. You see the number that we have given, INR 3,300 crores as the current project cost. That includes whatever escalations that we're anticipating. But if we -- if I give you a sense of cost escalations, the cost escalations on account of higher commodity prices will be in the range of around 25%.
And then we -- because as was mentioned by the CMD in his speech that we've also reconfigured the project to ensure that this increase in project costs does not lead to a reduction in -- significant reduction in returns. So that would have added another 10% where we have gone ahead and done the reconfiguration. For example, if you remember the caustic project, which was earlier at 700 TPD, now it's about 850 TPD. And similarly, in some of the projects, we have done some changes to ensure that the returns are healthy.
Okay. Got it. Also, if you could elaborate on your plans with ECH because I understand that one of our peers would be commissioning their plant sometime soon and another copier has already announced. So how does the India demand/supply dynamics play by with so much of capacity? And how do we see ensuring high returns on ECH?
Amit?
Yes. So see, the Indian demand is about 80 to 85 kilotonnes per annum. Now the 2 projects which are essentially for sale -- in a sense, will go to sales externally, the other ones are more of internal consumption -- is what is coming with [indiscernible] and what we are bringing in, which will add up to about 1 lakh kilotonnes per annum.
However, this sector is also growing by 10%. So my sense is that by the time the 2 projects come in, we should be nearing about 100 kilotonnes per annum as the demand in the country. And therefore, the exports -- sorry, the imports, which are happening today, which is almost 100% imported, that will reduce drastically. And probably, we should be exporting a little bit as well. But largely, I think we'll become self-sufficient. I don't see any significant surplus coming into the country as of now.
Okay. And if you could elaborate a little bit on the outlook of our plastic division, especially with respect to realization. Given that we've seen the peak prices in October, November, how do we see this going ahead?
K.K.?
Yes. We expect that the prices of today are around [ $1,550 ]. So we expect these prices to remain in this kind of a range only largely because of the production shutdown being taken in many Asian and European plants. And also, the consumption is growing, they're also growing particularly in India and outside. So we don't see any softening of prices, but we expect it to be around a few dollars up and down, around [ $1,550 ].
Okay. Okay. That helps. My next question is on Sugar division. If you could just give us -- whether we've contracted any exports so far. And also how do we -- I just wanted to understand between the 3 quarters in which the crushing goes on, how does the cost of production vary between the 3, considering that we have 1 quarter where full crushing is going on and the 2 quarters that is partial days?
Ajit?
Amit, take it.
Yes. So see, essentially, I would say, the peak crushing happens in Q3 and Q4, right, and then in Q1 ideally the partial crushing. So it all depends on the recovery, the way recovery moves. It's difficult to give you a number, but yes, what happens is in Q3, the cost of production would be higher given the fact that recoveries to begin with are lower. And in Q4 and part of the Q1, which is, let's say, April types, then the cost of production is lower given that the recoveries are better. But -- so the way we look at it is what is the total cost of production for the season is how we look at it.
Okay. So is it fair to say that Q4 number is representative of what the cost of production would be for the whole season?
Can you -- pardon me, can you repeat?
The cost of production that we've seen now, which is INR 33, would it be possible to -- would it be a representative of the cost for the whole season?
Yes.
Okay. Okay. And how much have we exported or like contracted for exports so far?
So This year, we -- this season, I think, if I remember correctly, it would be about 2 lakh quintals is what we've exported or about to export. So it's that kind of thing.
Okay. And at what price would we have valued our inventory in Q4 versus -- and also last quarter?
So I -- frankly, I don't remember the number of December. But for March, we have valued the inventory at INR 33.2 per -- or INR 33.1 per kg.
Okay. Okay. Also my one question I had about how do we go about deciding a mix between C-Heavy -- I mean cane and B-Heavy. And I think we've taken a call that for C-Heavy, we are procuring our molasses from outside. It seems to be impacting our profitability. So just wanted to understand thought process here.
There are a couple of points that we need to understand here. One, see, my distillery capacity at 350 KLD is about 15%, 20% higher than what I crush, right, or what I can manufacture on B-Heavy business this way, right? So because I'm a little overoptimized and the objective at that point of time when we have settled this capacity was that we will have -- during the off season, we should be able to procure molasses from the market and optimize the profitability, which we will be doing.
So in terms of mix, I don't think there is any suboptimal mix that we're doing. We optimize B-Heavy, so we run maximum operations on B-Heavy. And then whatever is the shortfall, because we have a higher capacity, the intent is to use purchased molasses from the market, right, which we did not get this time because the capacities were too high and the availability was low.
Now in terms of our planning, how do we hedge that going forward? One is since we are putting up a grain-based distillery and wherein the grain attachment is of higher quantity, so we are putting up 260 KLD grain attachment, whereas the distillation capacity there is 120. So we should be able to manage the shortfall to some extent, although not fully. To some extent, we should be able to manage with grain, right? That's the point number one.
Second, to answer your question on the mix and the cane juice part, see, cane juice was more of -- like we wanted to hedge our sugar prices, and it breaks even at around INR 34.50 as the equivalent sugar price. So the objective of doing this was to hedge the sugar price. That is one.
Secondly, what also it enables is that since I'll be manufacturing B-Heavy also around that time when I'm manufacturing cane juice-based ethanol, there would B-Heavy [indiscernible] inventory, which we can use it during the off season, right? So probably it is shifting of profit to the next year, right?
But I think what we also learned given the process is probably C-Heavy cane juice-based ethanol may not be the best mix. To some extent, we realized that. But then we keep taking calls depending on what we feel the market is around that time. So that's limited. We crushed about 33 lakh quintals only out of total 550 lakh quintals that we crushed. Only about 33 lakh quintals we crush for cane juice. So that's the mix. So we keep optimizing the mix as we see the -- how do we optimize to get the best returns.
[Operator Instructions] The next question is from the line of Ahmed Madha from Unifi Capital.
My question is regarding the CapEx part. So earlier in press release, you mentioned a number, about INR 3,300 crores. If I look at our old press release and the announcement, the number is a little less than INR 3,000 crores. So is it fair to assume that the entire incremental CapEx is because of the whatever inflation we are seeing in steel and cement?
As I mentioned a while back, what you said is absolutely right, that this is an increased number. So this increase, as I mentioned, almost about 25% would be on account of increase in the commodity prices and around 10% would be on account of reconfiguration.
I also mentioned INR 92 crores additionally, which was approved by the Board 4 days ago. That is not included in the total of INR 3,300 crores.
Okay. Got it. And any increase in capacity related to what we had earlier planned in any of the products?
Amit?
Yes. So in case of caustic soda, where we had planned 700 TPD, and we had planned a 500 TPD flicker, now we are going with 600 TPD flicker and 850 TPD caustic capacity.
Okay. Got it. Got it. Got it. And all these capacities regarding caustic as well as the downstream will come by Q4 FY '23?
Between Q4 FY '23 and Q1 FY '24. So between these 2 quarters, we will have all the capacities coming in.
Okay. Got it. Second question is regarding the Chloro-Vinyl business profitability. So we are talking about a lot of energy inflation between Q3 and Q4, but we have retained the profitability -- rather, we have increased the profitability. So is it because of any change in fuel mix or we had lower coal cost inventory or anything? Can you just give some highlight on that?
I just compare quarter-on-quarter, so I mean quarter this year versus quarter last year. See, realizations are up by almost 118%, whereas if I see my cost in Chemicals, that is -- ballpark, my cost is up by almost 55% to 60%. So that is what is leading to increase in margins.
Can you explain quarter-on-quarter? Because quarter-on-quarter realization are about...
I think -- I mean the way -- what I'm trying to say is quarter this year versus quarter same period last year. Q4 last year versus Q4 current year.
Yes, but can you explain from Q3 to Q4?
Q3 to Q4, price increase would be more or less the same, about 4% to 5% price increase. And if I look at my cost increase would be -- just a second -- actually, costs have actually gone down a little bit.
Yes. So that is what I want to understand, what has driven the lower cost?
So I think what has also happened, if you remember, even the power costs, right, the coal cost, everything had boomed in the Q3, right? And then there were some softening, which we did see in the month of December and January where the power cost also came down. So I think that led to lower overall cost.
Got it. So going into Q1 FY '23, is it fair to assume there will be some increase in cost? Or will return at this time?
So it's early -- I don't have the number right now. But it should not go down definitely. It should be the same or increase a little bit.
Okay. Got it. Got it. And just on the Bioseed business, so can you just give some -- you have mentioned about the restructuring in the management team, et cetera. So can you just elaborate on what changes we have done? And second thing, regarding the profitability, do we expect to do breakeven in FY '23 on the Bioseed business?
K.K.?
In terms of restructuring the seed business is something what you do and the results come in a couple -- take a couple of years to come in. So in terms of what we had said about restructuring or cleaning some of our holdings and cleaning inventory, provisioning for that. And also in terms of strengthening our market reach, our market approach, and I would say largely strengthen our product pipeline. And the product pipeline in the last 1 or 2 years in new products have been good, but they also need to be taken right down to the market, to the farmers.
So that's what we are strengthening. We are strengthening our connect with the farmers. And we expect that this year, certainly, our product acceptance has been very good. We have good products. And we are largely a corn and -- cotton and corn portfolio, which is a larger and [indiscernible] portfolio. In all these 3, we have seen an excellent response from the market. And we hope that this year, certainly, we should be breaking in, just about breaking in.
The next question is from the line of Nirav Jimudia from Anvil Research.
Sir, with reference to the earlier participant call, so I was just doing some of the math. So if we see the increased ECU realization, which is like INR 2.5, and if you multiply it by 1 lakh 55,000 tonnes of volume, what we have reported, this translates to almost INR 37 crores. But what we have reported sequentially in terms of improvement in PBDIT is around INR 82 crores. So was this because of some of the profits getting added through the value-added products? And if you can just explain those maths, that would be helpful, sir.
So see, if you see my revenue in Chemicals, which was INR 738 crores and it went up to INR 865 crores in Q4 -- you're talking of quarter-on-quarter, right?
Yes.
And my profit went up from INR 286 to INR 369 crores. One, my realization if you see, what I averaged, if I remember correctly, had around -- was higher by about INR 2,500, right? And my cost, as I mentioned, has come down by about another INR 2,000. So that's the kind of delta which is there. So even -- and even the volumes were higher. If you look at our volumes, we were a little higher on overall volume by about 15,000 tonnes more than what we did in Q3 because the utilization level were higher. Q3 utilization level was 87%. And in Q4, our overall crushing level was 96%. So I think that also will add to the profitability.
Correct. And sir, if you can just break it down our PBDIT between the pure caustic business as well as the value-added business. So what you mentioned last quarter was like 10% of the PBDIT was coming through our value-added products. So what was the mix this quarter?
More or less same, I would say. Nothing -- because we don't -- nothing much has changed because prices have been more of the same. Therefore, it remains the same.
Okay. And sir, my second question is on the chlorine side. So we are having a capacity of 1,350 TPD of caustic, and now we are expanding it by almost 850. So in combined, after the expansion, we'll be handling almost 2,000 TPD of chlorine after the caustic expansion. So how do use this chlorine, so in terms of, let's say, downstream products or sell to the merchant customers outside or to your pipeline customer? So how do the mix would look like from the current utilization levels?
What we are doing here is that one is, as I mentioned earlier, aluminum chloride capacity we were expanding. So that will take up additional chlorine. ECH will pick up additional chlorine. And we already are supplying direct pipeline chlorine to 5 or 6 customers, which we are discussing with them to supply direct pipeline, increase their capacity by their expansion happening, which really impacted our customers. So that will also help us in liquidating and getting the chlorine out of our factory to be able to run at optimal capacity.
And of course, the market itself is something which is chlorine in tunnels also has been sold. Plus, we are looking at some new products, which we've not yet taken a 100% view on. We are looking at some more products which will also be chlorine users. So we are looking at the chlorine utilization also very actively. And that's how these 4, 5 avenues are coming in for utilizing the chlorine.
Got it. But sir, how the mix would look like for our internal consumption of chlorine? So what is it currently? And when will take up the additional products? How the mix would look like?
Amit, would you know that?
Yes. So see, currently, if I see at Bharuch -- so let's put it this way, Kota facility, which is about 500 tonnes per day or 530 tonnes per day of caustic, that is almost 40% of consumption is captive there. Now at Bharuch site, which is currently 1,350 tonnes per day, there, if I exclude hydrogen -- hydrochloric acid, right, so then my captive is around 4%, 4.5%. And I supply 40% through pipeline. Okay.
Now this 4% after the aluminum chloride coming in and ECH coming in, this should jump to around 15% of the total expanded capacity. And this 40%, what we are supplying to the industries nearby, we expect this to increase because they are also expanding their capacity. So their volumes should also increase. So I think that's the kind of mix that we will have. And the rest will be through tunnels in the market.
The next question is from the line of [ Meherwan Kotwal ] from [ GNK Securities ].
Some questions on the Chemical...
[ Mr. Kotwal ], I would request you to come on the handset mode. Your audio is not very clear.
Is it better now?
Yes.
Yes. So I have some questions on the Chemicals business. So firstly, what is our reading of the overall caustic soda market currently? Because on one hand, current realization seem to be fairly firm. But on the other hand, we also have this looming fate of a lot of capacity coming in over the next 12 to 15 months, as you correctly pointed out in your initial remarks. So are we seeing probably the recent high prices have been peak? Or do we see further upside in prices also possible as we move ahead?
Second question is that how do we see this extra capacity getting absorbed? So are we seeing much that traction in export, especially what's happening in Europe currently? And do we also see the industry adhering to some kind of discipline with respect to capacity utilization?
Okay. I'll answer to caustic soda demand. As of now it's growing up a regular what's been going about 5%, 6% a year. So that's moving quite stable and moving ahead. And a couple of the additional plants which are coming up in Grasim, et cetera, they have a lot of it for the captive use. So that's some of the material is going to go in over there. So that's not all going to come to the market.
And factually speaking, we have seen in commodity business of any type, you move in a step ladder type of a thing. When the prices are good, when the market is good, new capacity comes in, then it stabilizes over 1 year or 2 years, it jumps that way for 2, 3 years, then it moves up again. Good thing is the Indian economy is growing. And I think the demand is growing at 5%, 6%.
Secondly, the international prices are quite stable. As I mentioned earlier that the exports of caustic soda had jumped up by almost 50% this year, 65% compared to last year. We expect the prices to keep -- the exports to keep going up more and more of caustic soda, lye and flakes, both. That's why, for instance, in our case, we are putting up 850 tonnes lye capacity, but we're also expanding 600 tonnes flakes capacity. So that gives us flexibility to move ahead.
And what is also good to see is, if you get, that aluminum capacity is going up in the country. Vedanta is increasing their capacity. There are all these plants which are large users of caustic soda. So overall, we see that commodity of this -- product of this type, little supply/demand mix-match happens occasionally. But as a longer-term basis, it is a primary requirement for any economic growth, and we are wanting to be a good player at it with a larger capacity, our cost of production is lower, our efficiencies are better. And with the new power plant coming in, again, our cost of power will come down compared to our older power plants. And technology we are getting world class. So we will be competitive across the board. And we are quite positive on the outcome of this expansion.
Just a follow-up on this expansion. So coming up with 850 [indiscernible]...
Sorry, we cannot hear you. We can't hear you.
[ Mr. Kotwal ], your audio is not very clear.
Yes. So we will be coming with 850 TPD expansion in 1Q FY '22. Will this entire expansion be one shot? Or will we be like commissioning the unit in phases?
So it will be actually commissioned in phases, means over a period of 2, 3 months, it will be commissioned. We are putting up the whole thing together. So by the entire 850 tonnes, it will be full expansion capacity which we are installing.
Right, sir. Right, sir. Sir, just couple of questions. What the unit cost of power be for the current quarter?
I think the unit cost of power is something which is flexible because of the international prices of coal. Coal prices have gone up, which has created a lot of disturbance in the price of power. I don't remember the price now. But of course, the price has gone up because coal prices have gone up 2, 3x. Freight has become an issue. I mentioned a little earlier what is the price of gas. Gas prices are going up. So we are also optimally seeing and sourcing our coal from anywhere in the world, and they have an advantage. We have a tie-up also with SECL, Coal India. We get coal from there also. So we are optimizing our sourcing of coal across the board.
Sir, and finally, what would our current realizations be as compared to the average which we achieved last quarter on an ECU basis? Better?
Amit, do you have that?
Yes. So see, current for our Bharuch plant, the realization will be in the range of around -- issue would be in the range of around INR 49,000, INR 50,000. And for our Kota plant, it will be a little lower.
A little lower, but it's still better than what we did last quarter?
Yes. INR 1,000, INR 2,000, it's going to be a little bit better, yes.
The next question is from the line of Anurag Patil from Roha Asset Managers.
Sir, in our cottonseed business, can you share your view on the issue of illegal cottonseeds for this season?
K.K.?
So it's very difficult to estimate how much it is, but the industry post that it's pretty high, it was pretty high last year and it's likely to increase this year also. So -- but the numbers I can't put. Yes, it's affecting the overall cottonseed business, but -- and it's growing. It's growing year-on-year. The illegal [indiscernible] cotton cultivation is growing.
But the good thing is that the cotton crop itself, the acreage is growing because of the good cotton prices and good commodity prices. So there would be some effect of this illegal cotton, but that should be overcome more or less -- overcome and even better by the larger acreage of cotton.
Also, I'd try to add one more point on -- this is Vikram Shriram here -- regarding the cotton business. Can you hear me?
Yes, sir, sure.
Yes. So I was just saying that there was a standup between Monsanto and the government for several years. And because of that, partly the illegal cotton came in and a lot of the problems in the industry took place. What is good is that since last year, there has been some better understanding. Monsanto was bought over by Bayer. And there seems to have been some better understanding because Bayer has filed for approval of newer varieties of GM. So hopefully, that looking in the future, there will be some -- this illegal cotton and other things is not going to be an immediate solution. But as there is some understanding between Bayer and the government and some newer genetics gets approved, hopefully, the future scenario, this confusion and the legal business will come down.
The next question is from the line of Saket Kapoor from Kapoor & Company.
K.K., as you were mentioning, the ECU realization post the March exit is up by INR 2,000. Am I correct on that one?
Approximately, yes.
Okay. And it was in the vicinity of INR 49,000 for March, for the month of March.
See, what I think the -- for the month of March -- only for the month of March?
If you could provide us for the month of March.
I don't have it upfront. Yes, I don't have the figure for the month...
But the average is up by INR 2,000, that is one. And there has been an increase in the cost part also, cost element for this quarter?
Yes. As I mentioned, it should -- because we are only halfway into the quarter, we have to see how this pans out. The situation is dynamic. I don't see costs coming down. They might remain same or increase marginally.
Right. And sir, how have been the chlorine spreads currently, sir? And for the last quarter, how was the mix, whether it was positive or negative?
Can you repeat the question?
I was asking for the chlorine prices, whether the chlorine spreads were positive or negative. And how are they trending currently, sir?
They will continue to be negative.
Okay, sir. Sir, as we have seen that a lot of caustics would also get imported in the country, so when we are speaking about exports, could you please clarify on a net basis for the last 12 months what has been the movement of goods -- of caustic in the country on a net basis?
I don't now if anyone -- I don't think we have the figure of the imports. Do you have it, Amit?
Yes, sir. As mentioned by CMD, the exports were about 3 lakh...
9.
3 lakh metric tons, and imports were about 2 lakh metric tons. So imports have actually been coming down and exports have been going up.
Okay. So, sir, net and net, there is a gap of -- 1 lakh additional quantity has been exported.
Absolutely.
Okay. And this has happened due to the capacity constraint at China in particular or because this scenario was very different post -- pre-COVID? A large quantity used to be imported to meet the demand of the country only.
See, there has been significant supply chain disruptions. What is to come from China was largely on the East Coast. The exports are happening primarily from the West Coast, right? So I think it also go with disruptions that have happened in U.S. and Europe where they have not been able to supply. Their gas prices have gone up. Energy prices have gone up. Therefore, some of the plants have closed down capacity in Europe as well. So multiple reasons why these exports have gone up.
And sir, in the likelihood this scenario is not going to change in a jiffy right now, this is not that this is going to be the scenario in the next quarter or even 2 quarters down the line. This is -- the new capacities or the curtailment will not come up -- new capacities globally are coming up. In the near future, in 1-year time, any new facility?
Globally, we're not seeing any new capacity coming up. But rather, we are seeing capacity coming down. And therefore, as CMD mentioned, that we do see exports going up further in this financial year.
Okay. And what has been our export number for this year, sir, as a percentage of sale and volume also?
I won't have that number right away.
Currently, I think our company exported about 45,000 tonnes of caustic soda.
Okay. And taking into account the current scenario, sir, do you have any plan or it depends on the market dynamics when to get the better price, better cost...
It's a dynamic situation, but we are very aware and open to exports. And we expect too that exports this year will be more than last year.
Right, sir. Sir, coming to the steel business part, sir, as being articulated by the management that [indiscernible] projected a road map for 2 years down the line wherein things would look very different. So just to have an understanding on the -- I mean thought process what kind of working capital requirement is required to run the business on an annual basis? And when we are going to grow this business going forward, what will be the future requirements?
Amit, can you take this?
Yes, sir. See, the total capital employed in the business is close to about INR 400 crores in the Bioseed business. In terms of growth, you see we'll have to keep a very close watch. Generally, the ballpark is in terms of -- if I took a look at my capital employed to revenue, it will be around 1 to 1.2x, right? And essentially, because when we look at capital employed, you look at the year-end. And on year-end, you have to actually stop for the entire next year's sales, right, or the season sales, and essentially Bioseed has even for Kharif. Therefore, capital employed is higher at the year-end or the average will be lower. And I don't see it significantly rising at least in the near term.
Right, right. And the last point is on the investment in mutual funds, the treasury book, what is the size of this book and this number as on 31st March?
As on 31st March, our total investment, not necessarily mutual funds, it is a mix of mutual funds and safe deposits, it will be close to about INR 1,500 crores.
Okay. And for this year, what would be the CapEx, sir, the amount to be spent for FY '23?
So this year, ballpark would be close to about INR 2,500 crores.
And that will be totally from the internal accruals and the treasury book on this? Or are we expecting any borrowings to take place?
We will take some borrowings.
Okay. And sir, currently, what is the cost of funds we are anticipating? Or do we have any arrangement as such for the long-term borrowing, which is undrawn?
No, we don't have any undrawn facility right now. But out of our total gross debt of about INR 1,500 crores, almost about INR 1,000 crores is long term.
The next question is from the line of Riya Mehta from Aequitas Investments.
Just wanted to confirm one thing that you mentioned that for breakeven between sugar and ethanol based out of juice, the number is INR 34, right, INR 34.50. That's what you mentioned, right?
Right.
So at like a current realization for sugar were INR 34.90, and so we've basically lost up on certain opportunity, right?
Which is true. So which is a call that one takes -- there is that -- it's a call that one has to take at the beginning of the season if you'd like to hedge sugar at a particular price, right, expecting whether it will go up or go down. So we did hedge it at INR 34.50.
Okay. Okay. Sir, going ahead, since crushing will -- like going ahead, I think the mix would be higher considering crushing will -- crushing has ended right now.
Yes. I mean majority of the ethanol would be B-Heavy based.
Got it. Understood. Also, just one question on Fenesta. So do we have any margin differential for project segment versus retail segment?
Yes. The retail segment will have higher margins vis-a-vis the project segment.
Okay. And are we facing any input cost pressures in this segment as well? How do we see margins -- like what would be stable margins going ahead in Fenesta business?
Yes, we do see stable margins in this business going forward. And largely, we have been able to pass on the cost to the consumer. They can be large effect because you take the orders, you review over a period of time and then cost increases happen. But then largely, we have to be able to maintain the margins.
So FY '22 is sustainable?
Yes.
The next question is from the line of Aasim Bharde from DAM Capital Advisors.
Just had a couple of questions on the PVC supply situation. So firstly, if you could just comment on global PVC capacity addition. What can be expected in the next 2 to 3 years? And if you can give a similar outlook for the domestic side.
K.K.?
Yes. As far as global capacities are concerned, I don't have the numbers as of now. But we don't see any significant capacity coming in at least in the next year. But in terms of the domestic capacity, some capacities have been announced. And when they are likely to come up at least the next 1 year, I don't see them coming up. Maybe later.
Okay. So on the domestic front, basically, it's the status quo. So I think even in the last quarter, most industry players said that there have been announcements, but no work has happened. So is that the same case right now?
That's right. That's right. There's been announcement but no work as well.
Okay, sure. And on the recent PVC price weakness, could industry lockdowns in Shanghai and the other industry zones there, could those have played a part?
To an extent yes because the industry lockdown in China, there have been some pressures coming from the Chinese material coming into India. But we're also seeing that it's not very significant. The domestic consumption is also going up, and the imports from other Asian sources, premium sources like farmers and all that are also coming down because of some planned shutdowns that they are likely to take in this quarter.
And the materials from India has also not come -- there still are bottlenecks in terms of the freight and container issues. So there is some temporary impact being made by the Chinese material, but we don't -- it's not very significant.
So just assuming that these lockdowns go away over there, that should ideally drive consumption and, hence, higher PVC prices maybe in the next 6 months.
That's right. So their own consumption should go up and we should see them also not offering prices which are lower than the current market price.
Okay. Because I think one of the large pipe manufacturers have mentioned that they expect PVC prices to fall from now to July given the PVC import bookings that they have seen so far. But as per you, I think you would expect this to be very near term. And as you had commented earlier, notch a few dollars up and down, that prices should hold if not rise.
It does. As I said, Chinese quantity which has offered lower prices to as low as $1,300 -- $1,700 to $1,400, it's not a very significant quantity, which can impact the overall. And the consumption -- I mentioned this, next quarter also, the consumption in India should also grow, which has been less than the pre-COVID time. So this will also likely to go up, and it's going up now.
When you say next quarter, are you talking about this quarter, Q1?
At least this quarter, I'm sure. Next quarter, I hope it will be in the similar line, but I can't be exactly sure about commenting on Q2.
Sure, sure. But still, you have seen at least some demand improvement on PVC consumption in India at least for the month of April. And I'm assuming you have some clarity on the month of May as well.
It should be -- generally, there are the seasonal months for the PVC consumption to grow. Before the monsoons, it does grow because the pipes -- picks up large quantities, the pipe manufacturers.
The next question is from the line of [ Vignesh Ayan], an individual investor.
Congratulations on a good set of numbers considering the pricing such as the industry basis. I would like to know about -- sir, you told me -- told one of the investors that the total CapEx would be around INR 2,500 crores, right, for FY '23?
Yes. Right.
So can you just give me a division of like how would this INR 2,500 crores will be spent? Because the investor presentation only broadly gives about the projects that are approved. That's right.
Right. So see, in Chemicals, out of this is INR 2,500 crores, close to about of INR 2,100 crores, INR 2,200 crores will go into Chemicals and rest will go into Sugar.
So INR 2,100 crores, INR 2,200 crores for this 850 TPD, right?
No. So in Chemicals, that we have 4 projects going on in Chemicals. So we have ECH, we have H2O2, and we have caustic soda. So these 3 projects will take a maximum amount. And as far as power project is concerned, which is getting commissioned in Q2, a large part of the CapEx is already done. So about INR 100 crores, INR 150 crores we're spending there. I think the last part of it, as I said, in terms of expenditure will go into these 3 projects.
Okay. So H2O2, caustic soda and the first one, what did you say?
ECH, epichlorohydrin.
Okay, okay, okay. Yes. Okay, okay. And other...
I missed another project, which is aluminum chloride. That is -- although that's a small project, that's about INR 100 crores. There also, we've incurred close to about INR 25 crores, INR 26 crores we already incurred. So that also, we'll expend.
Okay. So except Chemicals, the rest is the INR 400 crores, right -- INR 300 crores, INR 400 crores.
Which is sugar, yes.
The next question is from the line of Saket Kapoor from Kapoor & Company.
Sir, just a request in your slide going forward, if you could mention for the caustic and PVC the global capacities also and what kind of utilization levels the global players are running, so we would have a better -- further understanding of how the global market for both the commodities are -- have here for the quarter.
I think if you want to get in touch with our CFO, and he can give you the data.
Yes, sir, I will get the data. But going forward in the presentation also, we can go ahead with it. So it will be...
We'd be happy to do that. Thanks.
Sir, currently, what is the installed capacity in our country for caustic soda and the addition for this year? And how are the utilization levels, the average utilization that was being thought the last year?
So the current capacity that we have in the country is about -- for Chemicals, it's about 4.8 million metric tons. That's the caustic soda capacity in the country. And as with utilization levels for the current financial year FY '22 has been around 80% and wherein the West has been around 90%.
Right. And the additions which are going to happen for this year is around?
Yes. So that's close to about 900,000 metric tons. If you talk of this year, it should be around 800,000 to 900,000 metric tons.
Closer to 1 million?
Yes. Yes.
And that is expected to come up in the next about 14 to 15 months.
Okay, in a [ fresh ] manner. And these capacities are also coming in the Western Coast countries or other part of the geography, sir?
It will be distributed. Yes, a large part will come in the West, but there are capacities coming in the East and some capacity coming in North as well.
Correct.
Sir, as you have told that there has been some capacity curtailment in the U.S. and also the freight -- the higher freight price charges have also resulted in imports being a nonviable option. So if you could give some more color when these things get normalized. Is it a capacity curtailment a permanent part that has played out globally? Or these can come up once the trade normalizes?
So see, these are very dynamic, Saket, how things pan out going forward, how [ major ] prices will move, how the freight will move, what will happen, it's very difficult in commodities to comment on how it will pan out. But yes, one thing we're sure that there is no capacity addition happening globally. In India, the capacity issues are happening. And globally, caustic soda market is growing, chlorine market is growing. And therefore, there will be more exports happening from India.
Right. No, the capacities which have been shut down globally, have they been mothballed or as they sell down because of the higher energy and the higher logistic prices that's not shaping up? What are the reasons...
[indiscernible] in U.S. has happened because of the [ oral diaphragm ] based on monthly basis. So they won't come back. But in Europe, I'm not too sure whether they'll come back or not because a lot of shutdown has happened -- not a lot. Some capacity have shut sent down because of higher energy costs.
And can you specify the capacity by 1 million tonnes, what had been the curtailment for Europe?
Europe, I don't have the exact number.
Right. Sir, investors have always requested for having housing all the businesses under one roof. And if you see that it is the PVC part and the caustic soda as of now contributing to the highest of the revenue as it is in profit. So going forward, taking into account the restructuring which we are looking into the seed business and also the fertilizer business having its own, what to say, advances, whether in logistics or subsidies or the higher energy costs, can things now be contemplated with the increase in size from the contribution will -- going to improve or increase on the -- from the Chemical segment. So can we look forward for a separate division going forward? Do we think that the time -- things are there that it could be looked into, sir?
We keep debating. The Board keeps considering about this issue, but we have not taken any view on this as of now.
Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments.
Thank you. Ladies and gentlemen, thank you very much for supporting us and your continued presence on our Q4 and financial year '22 earning conference call. We believe DCM Shriram will be poised towards realizing sustainable gains through well-executed CapEx, improved efficiencies and better integration. The endeavor will be to drive our growth with a strong balance sheet and robust cash flow generation.
I would also like to take this opportunity to thank you for joining us again. And I'd also suggest please take care of yourself and your family and follow all the precautionary advisory by the government, including proper vaccination. We wish you all good health and safety always. Thank you very much once again for joining us. 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.