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DCM Shriram Ltd
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Ladies and gentlemen, good day, and welcome to the DCM Shriram Limited Q4 FY '23 Earnings Conference Call. [Operator Instructions] Just 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. Good evening, and welcome to DCM Shriram Limited's Quarter 4 and FY '23 earnings conference call. Today, we have with us Mr. Ajay Shriram, Chairman and Senior Managing Director; Mr. Ajit Shriram, Joint Managing Director; Mr. K. K Kaul, Whole-Time Director; and Mr. Amit Agarwal, CFO of the company. We shall commence with remarks from Mr. Ajay Shriram and Mr. Ajit Shriram. Members of the audience will get an opportunity to post their queries to the management following these comments during the interactive question-and-answer session.Before we begin, please note that some of the statements made on today's call could be forward-looking in nature, and a note to that effect has been included in the conference call circulated earlier.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 Q4 and financial year '23 earnings conference call. I trust each of you and your families are keeping safe and having good health. I will comment with the strategic imperatives of our businesses followed by Ajit with perspective on our business performance. India is growing steadily at a reasonable rate of over 6% in contrast to developed nations that are facing headwinds of high inflation, rising interest rates and slowing economy in the wake of unprecedented disruption over the last 3 years. So India is in a comparatively sweet spot. We have consciously planned for managing higher volatility in key business lines and have strategically lined up effective measures in the form of higher scale, efficiencies and diversification to create better value in our business. We continue to look at growth through already announced investment programs and more are expected to follow.Our CapEx projects of INR 530 crores has already been commissioned related to sugar businesses and other projects of about INR 2,900 crores, largely in chemicals likely to be commissioned over the next 2 quarters. Our less capital-intensive businesses of Fenesta and Shriram Farm Solutions are witnessing good growth. With this round of CapEx earnings completion, we are actively looking at opportunities in related and adjacent businesses for future growth opportunities.Our efforts on sustainability are gaining traction. We are already -- we are taking steps to enhance our share of green power while working actively on the circular economy. The 50-megawatt hybrid green power projects and the increase in biomarks in our coal-based power plant will increase our green footprint as well as help us in reducing our cost of production. The K2SO4 project fertilizer project will add value to our distillery ash and is an import substitution. The anhydrous sodium sulfate and carbonization of sludge will reduce waste and improve resource utilization. The energy and steel saving initiatives will further reduce our carbon footprint. Some of these benefits have already started accruing.With this, I would like to walk you to our views on various businesses. First is chemicals. Global capacity utilization, especially in Europe and China has picked up, although global demand remains subdued, driven by growth slowdown across large economies. This has put pressure on international demand and hence, prices of caustic soda. No major capacities are being added globally in the near term other than in India, which will keep the global demand supply balance over the medium term. Domestically, the demand trend was softer going to weaker momentum in end-use industries, especially alumina.We have seen stable demand for chlorine. New capacity additions are accelerating this situation. Product prices have softened over the last 2 quarters. Energy prices have started to decline, but are still quite high. Our capacity utilization stood at 89% in financial year '23. The country saw exports of 4.2 lakh metric tons during financial year '23, up from 2.71 lakh metric tons in the last year. Imports stood lower at 1.39 lakh metric tons in financial year '23, which was 2.34 lakh metric tons in the previous year.Our Bharuch facility is amongst the highest selling -- highest hydrogen selling complexes in the country with daily volumes of 2 lakh cubic meters and further being expanded to 3 lakh cubic meters per day. Our projects for developing downstream chemistries, including expanding scale are on track, and the plants will be commissioned during the next 2 quarters.Lower coal prices, efficient 120 megawatt power plant and access to green power will serve as a question on the margin in light of softer product prices. Chemical is becoming a large multi-revenue business with emerging growth platforms like epichlorohydrin and hydrogen peroxide.Vinyl. Globally, the dual impact of inflation and high interest rates is leading to slowdown of housing and construction in U.S. and Europe. Even in China, the rate has not picked up. This has led to lower demand for PVC globally and significant drop in international prices. Domestically, the economic activity is robust and so is the PVC demand, but imports are trending higher. The industry awaits government action in the form of antidumping duties and increasing customs duty. Prices for both PVC and carbide are under pressure. Costs of production stood higher due to coal and carbon material prices but has started correcting slightly as the pressure on margin in the coming quarter.Sugar. International prices have been formed on lower production expected from major producing nations and with prospects of additional exports from India also abating. World sugar balance sheet is expected to be marginally surplus in sugar season '22, '23. International prices are expected to remain firm. Indian sugar stocks are expected to end lower at 4.5 million metric tons for sugar season '22-'23, with sugar production estimated now at 32.4 million metric tons and consumption at 27.5 million metric tons. This, along with higher international prices should support domestic sugar prices in coming months. The states of UP increased the state advise price, SAP by INR 25 per quintal to INR 350 per quintal in '21-'22. The domestic sugar prices have been now not offset the increase in sugarcane prices done in the last season. We are on the verge of concluding crushing operation. our crush and recovery this season is expected to be higher than last season, led by better climate, commissioning of our Ajbapur expansion and conversion of Ajbapur and Hariawan sugar factories to refined sugar. Our domestic releases have been better this season, and we have already executed the entire export quota allotted to us.On the other hand, the government has achieved ethanol blending of 11.6% as of April '23 and is aggressive in meeting its target of 20% in the financial year '25. Around 408 crores liters is set to have been blended in petrol in the supply year ended November '22, and the contracted volume for the coming year is 505 crores liters already. We have produced 14.4 crores liters of ethanol and B-Heavy versus 11.56 crores liters last year. We have commissioned 120 kiloliters per day distillery on molasses feedstock as the 260 kiloliters a day grain-based distillery is ready. The approval for commissioning is likely in this quarter.Our other agri businesses comprised of Shriram Farm Solutions, Bioseed and fertilizer. First, I'll touch on Shriram Farm Solutions. The business has worked well in consolidating its leadership in wheat seeds. Its research and development has started yielding results with 4 new products introduced this year, including 2 in wheat seeds. All the products have been received well.Growth in this business will continue from the planned expansion of portfolio manufacturing of crop protection chemicals, which starts this year and should be further cemented by our foray into manufacturing of water soluble fertilizers and biologicals by Q4 of financial year '24. Our manufacturing of biological-based agri inputs is our conscious choice to work on new technologies and also promote sustainable and organic farming. This business is also increasing its geographical strength and is making inroads in Southern India.Bioseed, I would like to talk about that. BioSeed is on track to turn around its business. The losses have come down significantly. Product pipeline is more focused. Product basket or research activity is being rationalized, and we expect the business to do better in the coming year.The fertilizer business has seen a correction in urea prices during the quarter, led by lower energy prices. The government has revised energy loan with effect from October 1, 2020, till March 31, 2023, and our energy efficiencies have also been better. The subsidy outstanding as of March 31, 2023, stood at INR 310 crores as compared to INR 425 crores last year.The Fenesta Building Systems business is witnessing good momentum quarter-on-quarter. The project segment is driving good growth. As the core business expands, we are adding more categories, adding new offerings and increasing our geographic spread, including in the international space. We have added products in UPVC and aluminum windows in WPC and engineered wood doors and will be launching glass facades and also continue to add further to this range. In view of the rising demand, this year, we commissioned our Bhubaneswar factory and added one more factory in Hyderabad. We are commissioning an expansion at our Kota extrusion plant. The fabrication unit [indiscernible] is under construction and will be commissioned by Q2 financial year '24.Our growth strategy is underlying the well-executed initiatives towards business expansion and product diversification along with enhancing operating efficiency. We see our businesses of chemicals, sugar, Shriram Farm Solutions and Fenesta as a key driver for our growth going forward.I will now request Ajit to give you the perspective of the business performance. Ajit?
Thank you. Good afternoon, everyone. We will now go through the business performance for Q4 and FY '23. The net revenues, net of excise duty in this quarter were flat at INR 2,720 crores versus INR 2,796 crores in the previous year and PBDIT stood at INR 372 crores, down by 44%. Chlor-alkali business revenue was down 13% year-on-year and PBDIT was also down 53%, mainly due to lower ECU that declined 17%, though volumes were marginally higher. Higher energy costs impacted the margins. Also the electricity duty on auxiliary consumption had an impact of INR 11 crores related to prior periods during the quarter. Vinyl business revenue declined by 44% year-on-year at INR 168 crores, and PBDIT was at INR 1 crore versus INR 122 crores on account of lower product prices and volumes. PVC prices were down 35% year-on-year, and carbide prices were down 26% year-on-year.Overall capacity utilization was lower at 91% versus 96% last year. Higher cost of production -- sorry, higher cost of product led by power and carbon materials impacted margins. Also, electricity duty on auxiliary consumption related to previous years had a negative impact of INR 10 crores during the quarter.Sugar business revenue, net of excise duty was up 24% and PBDIT increased by 10% year-on-year on account of higher volumes of sugar and distillery coupled with higher realizations. Margins were lower since the last year's increase in SAP is not compensated by increase in product prices. In terms of crush, we are likely to close this season at about 650 lakh quintals versus 549 lakh quintals last season, attributed to better crop and commissioning of sugar projects. Sugar, the company till date on final molasses is better by about 20 basis points over last year.Fenesta Building Systems revenue reported a growth of 13% year-on-year and PBDIT was stable. There was volume increase in the project category. Margins were better in projects as well as retail categories. Both categories witnessed improvement in order book that was up 10% year-on-year.Shriram Farm Solutions revenue and PBDIT witnessed a decline due to seasonality factors for the year as a whole, the business witnessed growth. Fertilizer revenue declined by 4% year-on-year, driven by lower gas prices, which is a pass-through. Volumes were higher by 4% year-on-year. PBDIT witnessed a growth of 44%, owing to higher energy efficiency, energy saving rate and volumes. Fertilizer subsidy this year was lower as stated earlier.Bioseed revenue is better. However, Q4 is an off-season. PBDIT improved -- improvement was led by higher volumes and inventory provisioning in last year.Coming to the highlights of FY '23, FY '23 net revenues, net of excise duty was up 20% year-on-year at INR 11,547 crores and PBDIT down 9% year-on-year at INR 1,726 crores. Chemicals revenue at PBDIT were up 27% and 15%, respectively, due to better ACUs led by prices of lye in the first 9 months of the year, an improvement in chlorine prices and improved volumes of caustic. Margins were moderated by higher input costs.Vinyl revenues and PBDIT were lower by 31% and 84%, respectively, led by significantly lower prices. Volumes were also lower. Margins were further affected by higher input costs of coal and carbon materials. Product prices seem to have bottomed out, and coal prices are declining. This should help margins going forward.Sugar business revenues were up 21%, mainly on account of higher domestic and export volumes of sugar together with better prices across products. Distillery volumes were stable at 11.87 crore liters versus 11.95 crore liters. Production from distillery was higher as stated earlier. PBDIT was lower by 20% since the sugar prices increase that did not fully compensate for the increased SAP in the earlier season and nonavailability of purchase molasses from the market. Better export realizations added to the profitability.Fenesta also reported a good performance. Revenues in PBDIT increased by 32% and 70%, respectively. This was on account of a strong order book, which increased by 23% and growth in volumes and projects and margins across categories. Fertilizer revenues increased 50% year-on-year on account of higher gas prices, which is a pass-through and better volumes. PBDIT was up 62%, with energy efficiencies, better energy norms and a higher savings rate as a result of prices of natural gas.Shriram Farm Solutions' revenue and PBDIT were up 7% and 37%, respectively, aided by an improved product mix and better prices. SFS witnessed healthy margins across categories and remains the leader in wheat seeds.Bioseed revenues were up 19%, and PBDIT was at negative INR 2 crores versus negative INR 70 crores on account of better volumes. PBDIT was also better due to higher inventory provisions made in the last year.Our income tax payout was at INR 246 crores as compared to a tax charge of INR 502 crores as a result of matched credit available. With healthy cash flows across our businesses, our debt levels remained at comfortable levels despite the continuing CapEx. Our net debt as of 31st March 2023, is INR 681 crores as compared to INR 4 crores on 31st March 2022. Return on capital employed for March '23 came in at a comfortable level of 27%. The Board has recommended a final dividend of 180%, amounting to INR 56.14 crores in this Board meeting. The total dividend for the year is at INR 700 crores, amounting to -- sorry, 700% amounting to INR 218.32 crores.Despite the macroeconomic concerns and higher input costs, our company has had a good year. That concludes my opening remarks, and I would like to request the moderator to please open the forum for the Q&A session. Thank you.
[Operator Instructions] We'll take our first question from the line of Riya from Aequitas Investment Consultancy.
[indiscernible] with Fenesta so basically, the order book has grown by 10%. However, in the past few quarters or going on a higher rent rates. So what exactly is the demand scenario panning out there and what is the situation for Fenesta [indiscernible]?
Can you just repeat the last part of the question, please? Can you just repeat the last part of the question on Fenesta.
So I want to know the demand scenario as well as the margin impact for the quarter by the margin goes with the lower raw material guide.
Yes. So the demand is pretty stable, right? Although in this segment, we are seeing competition coming up from larger players as well. But Fenesta continues to remain the pioneer and has a big brand value, that is point number one. Second, coming to the margin, margin has come off, I think, by about 1% from about 21% in same-period last year to about 20%. That's, I would say, very marginal. But fundamentally, as I also mentioned in my last call that business like Fenesta should ideally have a margin in the range of around 15% to 20%. So let's say, ballpark, 17%. That's the right kind of margin for this business.
Is it because of higher competition? Because since the raw material prices are getting lower, so we should see an improvement in margin on a Q-o-Q basis?
As I said, if there is a reduction in raw material prices, some part of it will be passed on to consumers as well. So I don't see margins improving from here.
So Q4 numbers are sustainable?
Yes, yes. And I said range should be around 17% plus/minus 2%. That's the right number. Because if you see in FY '22, the margin of this business was 16%. So that was closer to the right kind of number.
And with increasing competition, do you think we will have a price for a kind of a scenario where we have to reduce prices more?
It's difficult to say at this stage. It depends -- they have just started, so we'll see how it pans out.
But I'll just add that I think Fenesta's position in the market is fairly sound. We are a leader in the market. And the good thing is the market is growing. So I think there is space for everyone, but it depends a lot, of course, on the product quality plus the service. How do you take care of right from the time you book an order till the time you install and commission and hand over the door or window to the customer. So I think we have a good edge there. So that's a positive sign for us.
My second question is in regards with the sugar sector. So basically, what was the cost of production for us last sugar season? And what is the cost of production for us this sugar season?
Yes. So the cost of production last season was around INR 3,300 per quintal. And this year, March and were about INR 3,210 INR 3,220 per quintal.
It has reduced?
Yes, because as you mentioned that our production is higher and secondly, our recovery is better by about 20 basis points.
However, I was reading that in U.P. the wage norm has increased and there were a lot of ancillary costs, which has piled up. So what kind of impact is there on the cost of production? Is the cost of...
It can mean further lower has those being maybe put out -- I don't have the number exactly by how much, but marginally lower definitely, but that's our cost.
And in terms of production, what kind of acreage increase have we seen for the current year -- acreage or production in terms...
I don't have the acreage number, but the crush is 650 lakh quintals of sugarcane that we expect -- we are nearing that number by the time our mills close.
And when are we expecting our mills to close.
[indiscernible] versus 549 which we did last year.
And mills will close by May end.
So out of 4 wells, 3 mills were closed, 1 mill, which is operational, will close in next 3, 4 days.
And in terms of the current rainfall, which untimely rainfall does it have an impact on the crop?
I think it's a very positive thing. As far as the crop is concerned, in terms of -- we've had a very dry winter spell. So any rainfall is always welcome because this aids the farmer in terms of irrigation, free of cost, virtually.
My second question is in terms with ethanol. What is the kind of uptake are we seeing from the government? And what are the current volumes and the next year volumes we are wanting to do with the enhanced capacity from Q1 FY '24?
Yes. So one, in terms of uptake, you're talking about the industry level uptake?
Yes, industry as well as [indiscernible].
Yes. So industry level uptake as the CMD mentioned, the total contracted quantity this season already is about 505 crore liters. And for us, in the coming season, we have the capability to produce 18 crore liters. Last year, we had about 14 crore liters. Next year, we should be progressing towards 18 crore liters.
And industrial uptake last year would be around?
I don't have a figure -- yes, 404. I think that's what CMD sir said, it's about 404 crore liters.
And then on the diversion on an industry perspective, I think 4 million tonne is the amount we are seeing this...
Yes.
This was last year around 3, 3.5 right 3.4 or something.
3.5.
And for ethanol, what would be a transfer price, molasses? And are we doing juice-based or how is it?
We are producing primarily on [indiscernible] BAV. We have done a small experiment on juice base as well, but primarily it is being heavy ethanol. Transfer price, I think when you look at overall, if you have sugar as a business, every business, every company might have their own transfer pricing mechanism as per the accounting standards. But I think we look at it as a -- the sugar business as a whole because it's dynamic, whether we produce B-Heavy or we would C-Heavy or different feedstock mix.
In terms of the ECH demand that we are hearing about the epoxy we are hearing that the demand is decreasing and you are a little sluggish outlook on the entire space. So what is your opinion around it?
I think these businesses we are getting into, which will come in the next couple of quarters. It will take a little while to stabilize the plant. But our way of looking at business and industries, we're not in it for the short term. We are in it for the long haul, and our objective is to come up with a class product and supply to customers who are satisfied with our product. So market ups and downs are part of the ball game. We've seen that in every industry, I talked about. So we are quite bullish on the long-term positive medium-term positive impact of ECH and H202 as our growth plans go forward because of the plants we are putting up, the technology we've got and the team of people we have, who will make sure that the plant runs efficiently, and we have a good relationship with our customers.
By when do we expect the plant to be commissioned or stabilized?
Before the end of Q2.
[Operator Instructions] Take our next question from the line of Ahmed Madha from Unifi Capital.
My first question is on the cement business. So this has reached close to INR 50 crore loss. I know that we set up this facility about 30, 35 years back. So I just wanted to understand rationale how this business has relation with our chlorovinyl business. Does any pipe products are used as a raw material for this? Can you give some clarity how was this business initiated.
So see, cement business is essentially a waste utilization solution. Yes, pollution control mechanism in a way because the sludge that gets generated on when we manufacture PVC through carbide route. That sludge goes into cement for conversion, right? So I think one has to -- we at least look at it like that. Yes, there have been times and cement has given us reasonably good profits. And now because we are on a wet process, our cost of production is higher vis-a-vis our peers. And therefore, the realizations are not commensurate with cost. I think the way one has to look at, at least for us, the way we look at it, it's a pollution control of waste management mechanism.
And is it fair to expect that with the coal prices coming down and even the cost of production for vinyl business coming down, the losses will reduce going forward.
One, the chemicals and the vinyl business are not into losses, whether they will -- the margins will improve or reduce will also depend on how the prices move. But yes, the costs are expected to come down definitely, going forward.
I have a few questions on the sugar business. So number one, how much exports we are supposed to do in April or even Q1 quarter. But -- I mean, I think we have done about 8.5 lakh quintal till Q4. So how much is left for Q1, April month?
There'll be some -- obviously, one we have completed everything by April. That is point number one. And I think we -- I don’t have the exact number 1 to 2 lakh, 1.2, 1.3 lakh quintals is what we exported in April. That ends our export quota.
And this was at what prices?
Around INR 40 a kg.
And another question on the ethanol side, so we did production of more than 14 crore liters, and our sales was 11.8 crore liters. So what explains this difference? And for the next year, how should we look at the ethanol total production with the greenway facility also coming up?
So one you do the timing differences based on tenders and things like that. So that gets covered up over -- I mean, this quantity will get sold. So it is all committed contracted kind of thing. These are timing differences, as I said earlier. That is one. Second, when the distillery coming in. So our capacity to manufacture goes up to 18 crore liters. So we'll try to maximize that.
And how much sugar production we have done so far in Q1, roughly?
In Q1. You can -- okay, I don't have the Q1 numbers, Q1 you think for this month, like let's say month of April, right?
Yes, correct.
I don't have the Q -- the month's number right now. I'll share it with you, Ahmed after the call.
And the last question on the caustic business. So with the caustic prices coming down further in March and then in the April month, the -- it is expected there obviously the realization if you will go down. So I have 2 questions on this. Number one, how is the chlorine pricing as of now in the market? And number two, with the coal prices also going down. How should we look at the profitability for the caustic business? Do you expect that there will be from Q4 way there will be further significant decline? Or do you see that the decline in the caustic prices will be offset by the decline in the coal prices and then our power plant coming up.
The situation is very dynamic right now, Ahmed. We do expect prices to improve from H2, right? At least that's what the -- our marketing team estimates, at least in H1, we expect them to be under stress. Costs are coming down, but we've seen coal prices, they were low in March; in April, actually, they picked up marginally. So it's really a dynamic situation. So it would be difficult to give any comment. We also have to just watch the trend for 1 or 2 months and then we'll be able to give better guidance.
And any comments on the chlorine pricing?
Chlorine is still negative, but it's not that bad. Like in Q3 last year, it was almost INR 10,000 a liter. Now it's about INR 3,000, INR 4,000 a liter.
And how much exports were you in for caustic in Q4?
How much export for us?
Yes, for caustic, for this year.
I won't have that export number for this quarter. I won't have that number right now.
[Operator Instructions] We take the next question from the line of Vivek Ramakrishnan from DSP Mutual Fund.
My questions are on the CapEx. I'm sorry, I joined a little late, if I missed the number. What is the balance CapEx in terms of amount that is to be paid off, which is there in the current year? And where will your peak debt level be? That's my only question, sir.
Yes. You see the total CapEx program that we had was for INR 3,500 crores. Now out of this, we have already commissioned close to about INR 600 crores, INR 530 crores in sugar and about INR 60 crores, INR 70 crores in chemicals. So we're left with INR 2,900 crores. Now what we've spent till date is close to about INR 2,000 crores, INR 2,500 crores, approximately INR 2,000 crores and on projects. So we have another INR 1,500 crores to go in the next financial year, which is FY '24. And our see debt, as I see, net debt by March will be in the range of around INR 1,500 crores to INR 1,800 crores, INR 1,900 crores. That's the range.
We take your next question from the line of Saket Kapoor from Kapoor and Company.
Just to clarify the last numbers once again. Sir, when we look at your capital work in progress, it stands at INR 1,600 crores. So -- and I think the INR 550 crores sugar CapEx will be accounted for -- as compared to the first quarter. Can you based in relation to the number of capital work in progress, how is this number going to shape up?
Yes. Saket you read it correctly, Saket. As I mentioned, we have spent close to about INR 2,000 crores, right? And INR 600 crores is what got capitalized. So balance is close to about INR 1,500 crores. Which is standing in season.
So sugar, we have capitalized in March itself.
In Q3 and in Q4.
So that INR 550 crores has been capitalized. So sir, this INR 550 crores CapEx, how is it going to contribute going ahead? Or what would be the turnover ratio?
See the INR 530 crores of CapEx should give us a ballpark return of close to about 20%. I think we should live with that.
The turnover will be at what INR 550 crores or what will be the asset turnover ratio?
Turnover is because there are some measures where our refinery capacity has gone up. There are some measures where our feedstock has improved. I mean the feedstock is a bigger feedstock on grain, right? So there are some dynamics which will support cost, and there are some dynamics which will support sales.
[indiscernible] also they have mentioned about 120-megawatt power plant is also mentioned. So what would be our annual savings and at the commissioning of the same?
So this 120 megawatt power plant total project cost is close to about INR 500 crores, INR 550 crores. And we expect this to give a savings in the range of around INR 100 crores to INR 125 crores. On annual basis.
So we will be getting the benefit for the entire full year? Or has this power plant has been commissioned or what is the update?
So as CMD mentioned, the power plant is expected to be commissioned by Q1 end.
For 9 months, we will be getting the benefit of the [indiscernible].
It's time to ramp up any large measures [indiscernible]
So on a full year basis, it will be INR 100 crores savings that we'll be expecting from next year in totality.
Yes.
In the opening remark, MD sir, you mentioned about some hydrogen production part. I missed your comment on the same. What were you trying to convey for the Baruch unit, if you could elaborate more, sir?
No, just to clarify, when we make caustic soda chlorine, another product, which is made automatically in the process is hydrogen. So today, we make about 2 lakh cubic meters of hydrogen per day. Now once we commission our expanded capacity at our Gujarat factory, we will come to almost 3 lakh cubic meters of hydrogen per day, and we are selling this. So that is also a good source of revenue for us.
Just turnover wise in can you give a number for the same, but what has been the contribution from the sale of hydrogen?
Last year, we had a turnover of about INR 155 crores on account of hydrogen, and our sale was close to about 2 lakh NNQ per day. And EBITDA on account of that is about INR 129 crores, INR 130 crores.
On a scale of INR 150 crores.
Yes.
One more point about the ESOP part. If you could explain to us why did we chose this route of creating that trust and then buying the shares from the market and then rather than going for directly. So what has been the differentiation sir?
So Saket, this is an old policy, existing policy that we have, which we had framed in 2013. The policy is continuing. We already have shares under this policy, which is reflected in our balance sheet as well. We are just adding share for the benefit of the employees. Right, sir. But the other route of direct soft credit coming -- because .
Saket, I think -- I don't think I can do the discussion here because either longer discussions to explain what is the difference between the ESOP and ESPS. What are the benefits?
I conclude with my last question, sir. So taking into account the commentary and the type of CapEx that we have ended, going ahead for this year, we will be starting to reap the benefit of the entire CapEx for the chemical segment? Or it will take another 1 year for the entire thing to capitalize? And I just missed your -- I want to understand the figures for FY '24. How would the -- what are the key figures for the same.
As I mentioned earlier, Saket, we expect all our chemical expansions to be completed by the end of Q2 financial year '24. I will appreciate whenever an expansion is done, especially new product line company, I can't say one can't expect that within 1 week, you come to 100% capacity utilization. It doesn't work that way. So it will take a little while to get stabilized, to get the market growing, which we are already working on the market in any case. So it will take some time. We will not get the full benefit of this financial year '23-'24, but we will definitely get the full benefit of that in the year '24-'25.
And on the caustic market, sir, your take, I think you mentioned that globally, there has been no any big capacity addition. It is only the Indian market where 1 million tonne capacity was added. So taking into account the expanded capacity, what have been the average utilization for the country as a whole, sir?
I think the utilization in the country as a whole is running at about 72%, 73%, which is very good. Ours was a little higher, which is beneficial because we have a lot of our chlorine supply, which go directly by pipeline to many customers around our Gujarat factory and our caustic soda factory at Kota. We use almost over 50% of our flooring ourselves for making PVC and stable bleaching powder, et cetera. So our utilization was higher. But with the capacity coming in, you're right, if you take a couple of quarters to stabilize, and we hope international economy also picks up or stabilizes, so the demand from there also picks up a little bit. But because ultimately, end of the day, today, whether it's caustic, you can just import it. There's no issue. So our objective is how do we actually have, going down the line, a little balance in the capacity in India and international prices going up.
I think just for the textile sector, there was a bit that dampen in the demand from them. So how is the textile sector looking at for the month, which has gone by, has the textile sector opened up post the corrections in the yarn and the cotton prices, the inventory written down, and also I think getting adjusted for the year. What's the outlook from the textile sectors? Any pillars you can share?
Textile sector discussions we've had and our people have had and the textile sector, as you rightly said, has gone down a little bit. And in the textile sector is important because of use in the textiles also as well as in dyes, et cetera, which are used in the textile sector -- used in both. So we hope down the line with the Indian economy moving at 6% plus the textile sector also picks up over the next few quarters, which should give us a little positivity.
And lastly, on the power and fuel costs. If you could explain once again, sir, what led to this increase in power and fuel cost Q-on-Q basis also? Year-on-year, there is a significant jump of INR 100 crores. Even on Q-on-Q, there is INR 40 crores, INR 45 crores change on even lower turnover. So if you could explain the mix that led to the explanation in power and fuel costs?
So Saket, the power cost has been going up, right? It is only in, let's say, by February, March when the spot prices of coal started coming down, but the company carries inventory for its operational safety. So that inventory by March, we have more or less liquidated the high-cost inventory, which we had bought in the month of November, December, January. And now we are seeing our fuel prices or the coal prices coming down. Consumption is coming down.
If you could share the mix, sir, what is the coal part and how much is the direct purchase from grid?
So about 38% we purchased from the grid for our chemicals complex in Baruch and as well as Kota.
The balance it should be coal based, coal and gas because I think for fertilizer it will be gas.
But then we are also using biomass now in a big way. So we are using almost 20% biomass in Kota and nearing over 10% biomass in Baruch.
So grid pricing, can you share, sir, how are the grid pricing shape up for Q1 on a year-on-year basis?
Grid pricing that also keeps changing with the coal prices. So there's a fuel surcharge, but that range is between INR 7 to INR 8.
Because I was just trying to make sense of this 9% to 10% increase Q-on-Q basis. It is only because of the inventory cut, sir, is that offline purchase.
We will discuss that offline.
We take next question from the line of Riya from Aequitas Investment Consultancy.
This is just in regards with the cost of production for sugar, you said that last year was season, it was INR 33 and this time it's INR 32. This includes the INR 25 incremental per quintal SAP increase?
Yes. So even last year, this INR 25 was there. So this increase in SAP happened in the last season. So what the -- what CMD sir mentioned was still saying that the increase in SAP in the last season, which is '21-'22, the sugar that is produced in that season is sold in the next season. So that is where the cost increase has happened, but we didn't get the benefit in terms of the price equivalent benefit in the price increase and therefore, the margins were lower. This year in case, as we know, SAP increase, but because of production and recovery, the cost is lower.
So can I learn the cost of production to sugar season '21 on the year before the high increased?
That was close to about INR 2,950. The value will off by INR 10, INR 15, but ballpark.
We'll take the next question from the line of Ahmed Madha from Unifi Capital.
I have 2 questions. First on the epichlorohydrin realization. So we see that the prices of Oxy and CCS both have come down significantly. So in FY '24, as we progress for CapEx will be based on the spreads which are on the spot bases, will we breakeven for ECH, I know that we have the plans for long term and the business will be very supportive for long term, but how should we look at the near term should we break even or no?
See, Ahmed, I think what you're looking at is -- and if I'm not wrong, you're looking at the prices, which you right over the last 1 year, it has come down from about INR 200 per kg to now about INR 120 per kg. But then even the leasing price, has halved like the crude leasing is from INR 65 that has come down to INR 32 a kg, right? So ballpark my spread. So if I look at my margin, my EBITDA margin is still in the range about 20%, 24%. Yes, absolute number is lower and therefore, quantum will come down. I don't deny that. But it is not under too much of pressure. I would say it is fine.
And second question, the Bioseed. I know that, I think this year, we have done efforts to turn around the Bioseed business. So can you give some outlook, how should we look at FY '24-'25? And how does the product pipeline and product launches look for the Bioseed business?
FY '24, we are looking at the same kind of growth that we have seen in a few even more because of the products which have been accepted in the market and because of some new good products which we have in the pipeline. And we are having products in almost all the crops that we do in cotton, corn or paddy or even vegetable. So I think FY '24 should be even better than FY '23, and we should be coming over in terms of turning around.
And over the long term, beyond FY '24, FY '25, how should we look at the business and the viable margins in the business?
Now, the long term looks good, but it has to be seen year-on-year. So because the market also -- somebody else comes with a better product, but we also have very good then -- products. So we do see in the next 3, 4 years, we should be growing and doing better.
[Operator Instructions] As there are no further questions from the participants, I would now like to hand the conference back over to the management for closing comments.
Over to you, sir. Thank you. Ladies and gentlemen, thank you very much for your participation in our Q4 and financial year '23 earnings conference call. We are committed to deliver better earnings and growth. We are making efforts in that direction by growing our economies of scale, new product lines, increasing efficiency, fostering innovation and promoting a circular economy and focus on sustainability. We also prioritized maintaining a strong financial position and continue to look for new avenues of growth. Thank you once again for joining our call and wish you all good health always. Thank you.
Thank you very much, sir. Ladies and gentlemen, on behalf of DCM Shriram Limited, that concludes this conference. Thanks for joining us, and you may now disconnect your lines.