Deepak Fertilisers and Petrochemicals Corp Ltd
NSE:DEEPAKFERT

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Deepak Fertilisers and Petrochemicals Corp Ltd
NSE:DEEPAKFERT
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Price: 1 251.45 INR 3.02% Market Closed
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Earnings Call Transcript

Earnings Call Transcript
2023-Q2

from 0
Operator

Ladies and gentlemen, good day, and welcome to Deepak Fertilisers and Petrochemicals Limited Q2 FY '23 Earnings Conference Call hosted by IIFL Securities Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Ranjit Cirumalla from IIFL Securities Limited. Thank you, and over to you, sir.

R
Ranjit Cirumalla
analyst

Thank you, Nirav. Good afternoon, everyone, and thank you for joining us on Deepak Fertilisers and Petrochemicals Q2 FY '23 earnings conference call. Today, we have with us Mr. S C Mehta, Chairman and Managing Director; Mr. Amitabh Bhargava, President and Chief Financial Officer; and Mr. Tarun Sinha, President Technical Ammonium Nitrate; Mr. Mahesh Girdhar, President, Corp Nutrition Business; and Mr. Deepak Balwani, Head Investor Relations.

We will begin the call with opening remarks from Mr. Mehta, followed by comments on financial performance by Mr. Amitabh post which we will open the floor for an interactive Q&A session.

I now invite Mr. Mehta to share his opening comments. Thank you, and over to you, sir.

S
Sailesh Mehta
executive

Yes. Thank you. I hope my voice is clear, right?

R
Ranjit Cirumalla
analyst

Yes, sir. Loud and clear.

S
Sailesh Mehta
executive

Okay. Thank you. So very good afternoon to all of you, and I take once again, a lot of pleasure in welcoming all of you for this Q2 FY '23 earnings call of Deepak Fertilisers. I hope all of you have had a time to look at the financial statements and earnings presentation uploaded on the exchanges and our website. So at the outset, I'm quite happy to underscore the good news that our Q2 top line grew by 52% and the bottom line by 195% and similarly, the H1. Additionally, our H1 bottom line surpassed the whole of last year's profit.

So as you were thinking and as I was [ looking at it ] to try and see what do we see as a root cause or that delivered this positive play, and somewhere to look at it at an [ extent ] that what are the fundamentals that have been indicated to these results. So I was wanting to share 2 from the outside perspective and 2 from the inside out perspective. So from the outside in perspective, what we see is that despite the huge raw material price hikes that we have seen over the last now year, 1 year, 1.5 year, we have been able to establish a good pass-through in our finished products.

And somewhere the larger picture is that the finished product prices have now set a new norm for price affordability among all our segments, and this I see as a good sign over the long term, that the resilience that the downstream of our downstream is also somewhere, where the price affordability is of a new order, a much higher order.

The second perspective from the outside in approach if one were to take, I also see that the strong alignment with the India growth story that all our 3 businesses, the fertilizers, the industry chemicals and mining chemicals, all the 3 businesses, the kind of strong alignment that is being seen with the India growth story is clearly validated. And despite the price hikes, we have seen no demand destruction. In fact, it would be the other way. So these are the 2 at the fundamental levels that we'll see from an outside in perspective that seems to have been established, as we see the performance.

From the inside out, if I look at it, that number one that I see is that all the hard work that we have put in setting up good IT systems, systems and processes, those have -- the strength of those have been validated, as we -- we are in a position to withstand all the volatility that we saw, the geopolitical uncertainties, the waves of uncertainties in logistics, availability, price upheaval that the internal systems and processes have been able to withstand these, I would say onslaughts and yet take advantage of these aspects, which are reflected in the results.

And the second aspect that I see is the strategy that we had transformative strategy that we had been pursuing over the last couple of years on and on, on and on, which is the shift from commodity to specialty in each of our businesses. It does seem to be bearing fruit and does seem to be giving us the very strong, I would say, foundation to further build on. Especially, I'm happy to share that in our fertilizer business, as we move from commodity NPK to Smartek, which is a product, which enhances the nutrient use efficiency. And then from Smartek, as we are moving towards Croptek, which is a more crop-specific kind of a grain.

This -- these efforts and the work that we are doing at the pharma level was also noted by ADB and ADB has come up with a unique Blue loan kind of a thing for the first time in the country, where not just debt funding, but also certain grants for the efforts at the pharma level is something that they have signed up with us, and that gives a very warm acknowledgment of the fact that we are in the right direction and that somewhere it is making an impact at the bottom line at the pharma level. So that was something I thought I should share.

Now of course, Q2, otherwise typically -- is typically a dull kind of quarter because of rain sometimes impacting the chemical business or the mining activities. And this time, of course, the rains at some places were excessive, so which also impacted the fertilizer sector. But as you move out of this Q2 and look at the H2 going forward, we now see somewhere the settling down of some aspects of the price volatility between raw material and finished product despite the fact that there is still uncertainty on what will happen between Russia-Ukraine, but at least it is something that is getting factored. And as it settles down, we see that there will be some plus/minuses a month here and a month there, but it should then finally settle down at a decent level.

And we will continue to make further and further deeper inroads through our strategy of moving from commodity to specialty, and that is something, which we are now seeing further and further reflected in terms of somewhere we are looking at solar grade nitric asset, for instance, or in the mining sector, more and more PCO projects, total cost of operations, where one looks at not just products, but services, and then looks at the total impact in terms of the whole project, which gives a much better traction and a brand creation for the mining sector products, technical ammonium nitrate.

And similarly, on the fertilizer side, I see more grades of Croptek that has been approved by the government and gradually, it will be showing up in the marketplace and creating its own inroads specific to those crops.

Last but not the least, I'm also very happy to share that the ammonia project execution is going on full steam on a very good fast track. And it's now on to the final [ mode what ] -- final last 5 months or 6 months of commissioning, pre-commissioning and commissioning activity and very soon, that should be available to give a very strong foundation to all the downstream by way of available just across our [indiscernible], pipeline availability of ammonia for all the downstream that are there.

So with these broad thoughts, I hand you over to Amitabh, our President, Financial CFO, to take you through the details, and then, of course, share clarifications to all your questions. Amitabh?

A
Amitabh Bhargava
executive

Yes. Thank you, Mr. Mehta. Good afternoon, ladies and gentlemen, and thank you for joining the Deepak Fertilisers and Petrochemicals conference call to discuss Q2 FY '23 results. During quarter 2, FY '23, we reported a total operating revenue of INR 2,719 crores, an increase of 51.7% Y-o-Y compared to same period last year. Our operating EBITDA increased to INR 495 crores compared to INR 212 crores in quarter 2 of FY '22. Operating EBITDA margins increased to 18.2% from 11.8% during quarter 2 FY '22. Our net profit for the quarter recorded a growth of over 195% Y-o-Y to INR 276 crores with a margin of 10%.

During the quarter, our manufactured chemical business recorded a revenue of INR 1,533 crores, an increase of [ 55% ] compared to quarter 2 FY '22. Manufactured pharma chemicals recorded a revenue of INR 454 crores, an increase of 22% Y-o-Y. Manufactured mining chemicals, that is our TAN -- that TAN business recorded a revenue of INR 920 crores, an increase of almost 146% Y-o-Y during the quarter. On a Y-o-Y basis compared to quarter 2 FY '22, all the key indicators of TAN business such as coal and overburden production, cement and steel production recorded a healthy growth.

That said, as I'm sure you would notice that there was [ this year ] reduction in margins quarter-on-quarter, which was due to quarter 2 being a lean season, as is the case pretty much every year for chemical segment in general. That is both TAN and acid, they see reduction in demand due to monsoon effect. This year, availability of more acid in the market also came due to the extended shutdown of the downstreams of our co-producers in the market. This further reduced our volume and margins in acid.

TAN lean season is -- in India, which is because of monsoon is also -- it coincides with the lean season in, say, other geographies like Russia and Brazil, which are the other major consumers of TAN, which also resulted in reduction of imported fertilizer, which is fertilizer grade ammonium nitrate, which also has an effect in terms of the margins in quarter 2.

Our crop nutrition business resulted in quarter 2 FY '23 revenues of INR 1,181 crores. an increase of 47.3% Y-o-Y, with segment margins of 7%, as cost of production had obviously gone up due to the sharp rise in the prices of raw materials. During the quarter, our IPA plants operated at a capacity utilization of 54% and both acids and TAN operated at 81% and 92%, respectively. In the crop nutrition segment, nitrophosphate and NPK plants operated with utilization levels of [ 66% ] and Bensulf plants operated at 74% utilization level.

Net debt as of 30th September was INR 1,921 crores with net debt to equity of 0.43x. ADB, as Mr. Mehta was mentioning, has recently granted a $30 million debt assistance and $0.5 million of technical grant for our farm efficiency initiative, which is -- which I think Mr. Mehta elaborated earlier. We have already spent CapEx of about INR 3,163 crores, as on September end on greenfield ammonia plant and INR 422 crores on the TAN project, as on September. And out of this, the Company has already infused equity of about INR 1,587 crores for ammonia, and the entire TAN project that has so far has been done through equity increase in our internal accruals.

Promoters pledge shares now are now restricted to only 2.67% and the non-disclosure undertaking obligations, which you must note that this is not the pledge, but non-disclosure undertaking is 3.66% of paid-up share capital.

With this, we would be happy to take your questions. Thank you.

Operator

[Operator Instructions] The first question is from the line of Nishith Shah from Aequitas Investments.

N
Nishith Shah
analyst

Yes. Sir, I wanted to understand how are the imports in technical ammonium nitrates now in terms of volume and pricing?

A
Amitabh Bhargava
executive

Okay. Is that your question? Is there any other question you have.

N
Nishith Shah
analyst

Yes. I have other 2 questions also. So the second question is, I want an update on the debottlenecking of the TAN facility? And the third question is, how are the key input prices trending now, like natural gas, ammonia, polypropene? That's it.

A
Amitabh Bhargava
executive

Okay. So on the first question, my colleague, Tarun is also on the call. Tarun, if you can just take the first 2 questions, and then I'll come in for the third one.

T
Tarun Sinha
executive

Yes. Absolutely. Thanks, Amitabh. Just to check with the moderator, am I audible?

Operator

Yes, sir, you are.

T
Tarun Sinha
executive

Okay. Thanks. Okay. So very quickly on the -- thanks for the questions, first of all. On the import of ammonium nitrate, so far this year has not been any unusual year compared to the prior years in terms of the quantum of imports that we have been seeing in the country. That said, the demand of ammonium nitrate in India, we've also seen growth year-on-year. So it is not unlikely that as we try to reach towards the end of this financial year, maybe the quantum of growth, maybe the quantum of imports of ammonium nitrate in this year could be slightly higher than in the prior year, and that is in line with the growth of demand in the [indiscernible], while the domestic [indiscernible] manufacturers are continuing to produce to their capacities.

And that links to your second question, which is about the capacity augmentation of ammonium nitrate. So as far as Smartchem Technologies Limited is concerned and hence Deepak Fertilisers is concerned, we have actually implemented some of the measures to increase the capacity at our Taloja, which is the mother plant at this stage for us. And there are some more initiatives being undertaken to increase the capacities further, again, in order to meet the ongoing growth of demand of ammonium nitrate in the country. And we have kept the various regulatory bodies and ministries informed of our intention and activities that are ongoing in relation to the capacity expansion at Taloja.

Amitabh, over to you.

A
Amitabh Bhargava
executive

Yes. So as far as the raw material price trend is concerned, while we've seen some early change in H2, that is phosphoric acid, for example, prices have come down significantly. But the prices of other commodities, particularly ammonia, gas price depends on what we are going to see in terms of Russia, Russia-Ukraine situation and how Russia also reacts to it because one of the other news that we have been gathering is also certain restrictions that Russia may put in terms of -- certain additional export tax that Russia may put on various fertilizer and commodity.

So it's difficult right now to gauge what will happen to the fertilizers in general, and also to gas price because gas price -- spot prices of gas, obviously would also have a bearing depending on how the winter in Europe because we are still in the early stages, how that would pan out in the next couple of months. So with the commodities other than [ phos acid ], where these -- where we are very clearly seeing the trend -- downward trend, the other commodities may have to see what comes out in coming weeks and months, depending on how U.S. -- the real Russia-Ukraine situation pans out.

N
Nishith Shah
analyst

This is [ the usual sir ]. Sir, I have one follow-up on our debottlenecking [ plant ]. So how much of the capacity have you already added? And going forward, how much can you add from debottlenecking overall?

A
Amitabh Bhargava
executive

So we have added nearly 33,000 tonnes. And the second phase is on, and we would be able to come back in terms of the exact increase once we've completed that process.

Operator

[Operator Instructions] The next question is from the line of Sanjay Shah from KSA Shares & Securities.

S
Sanjay Shah
analyst

Sir congrats on a good set of numbers. Sir, my question was on the fertilizer side, a new government rolled out a new fertilizer policy, 1 nation, 1 fertilizer. So can you highlight upon how that can impact us, as a Company on our margin side. And the -- can you even help us to know the modalities of this policy?

A
Amitabh Bhargava
executive

So my colleague, Mahesh is also online. So I'll request him to take this question.

M
Mahesh Girdhar
executive

Yes? Am I audible?

Operator

Yes, sir.

M
Mahesh Girdhar
executive

Yes. Sanjay, good afternoon. See, the 1 nation, 1 fertilizer circular have been received, we are also trying to understand how finally it will be implemented. In terms of policy provision, it says that, that some part of the fertilizer bag will help [ to contain ] certain government communication, which is related to subsidy and certain part of that can used [indiscernible] to bring about [indiscernible] brand. So this policy was announced recently and certain products have been started with that, and we are trying to understand implication on other products at the moment.

S
Sanjay Shah
analyst

So prima facie is that we are coming under, under control of government for the pricing of these?

M
Mahesh Girdhar
executive

See, the prices of phosphatic fertilizers are governed by NBS Scheme. So as you may know that there is a Nutrient Based Scheme by the government, whereby the government announced this nutrient subsidy price for NPK and various micronutrients and sulfur on an annual basis. And in the last year, this was done twice for khariff and rabi separately. And depending on the moment of the prices, companies can fix the price. Basically, the nutrient based policy [ whereby], nutrient subsidy is fixed. That's the policy. Policy for urea is different, whereby it is on a process based and the government decides one price for the [indiscernible] farmers.

S
Sanjay Shah
analyst

Sir, my second question was regarding ammonia plant? Deepak sir, can you highlight upon the project, as you said, it is on schedule. So how about the cost, is there any overun in the cost and [indiscernible ] next year, we'll be able to start the production of the same.

A
Amitabh Bhargava
executive

Yes. So we've been, I think, now consistently for last couple of quarters, again, given the details even in our investor presentation on the total project cost and how much has been spent during the quarter. At the end of September, so while total project cost has remained the same in terms of what we've been sort of announcing for last couple of quarters, that is INR 4,350 crores. By end of September, we've already incurred INR 3,163 crores and balance [ INR 1,576 ] crores is to be incurred. We are expecting the commercial operation somewhere in quarter 1 of FY '24.

S
Sanjay Shah
analyst

So what about TAN? How is the capacity ramping up? And how is the demand right now?

A
Amitabh Bhargava
executive

So capacity, if you are talking about the new Gopalpur capacity that we have -- we are now implementing, that would add additional 376,000 tonnes and it is expected to be completed by quarter 2 of the financial year '25. That project is nearly about [ INR 2,200 crore ] CapEx project, and we've already incurred [ INR 420-odd crores ] by the end of H1 this year. Overall, I think demand, my colleague, Tarun just mentioned a little while back that this year, we are seeing an increase in demand because the overall year-on-year coal production and overburden production from public sector coal particularly, which is the largest consumer of TAN has seen improvement. And that's the -- any specific number, Tarun, you would want to mention over and above that.

T
Tarun Sinha
executive

Not at the moment, unless there are any specific questions around the numbers, can -- we can certainly speak about those. But broadly speaking, as you rightly said, the entire demand is being driven by coal sector at this stage, followed by the other minerals that India has got plenty of in terms of the mining activities of those minerals. And then certainly, this growth is also underpinned by the infrastructure growth under the various schemes and policies of the Government of India, which have been announced to build infrastructure in the country. And in most of those cases, there's a lot of rock blasting to be done, which requires explosives [ enhanced ], technical ammonium nitrate. So all these sectors are [ combinedly ] driving the demand in the country.

A
Amitabh Bhargava
executive

For us, as you would have already noticed in our presentation, the year-on-year growth in volume in TAN in quarter 2 was about 14%, which is in a sense, reflective of what's happening in TAN sector year-on-year.

Operator

Next question is from the line of Chetan Thacker from ASK Investment Managers.

C
Chetan Thacker
analyst

So the question is on the TAN business, from a more medium to long-term perspective, how should we view the profitability per tonne from the TAN business?

A
Amitabh Bhargava
executive

So as I was mentioning that as far as Q2 is concerned, it is a lean period in -- not just in India because of monsoon effect, but even in other large geographies, which consume TAN. And as you know, TAN or the substitute of TAN, which is fertilizer grade ammonium nitrate is essentially a fertilizer. And therefore, the -- it's relative, so I would say consumption vis-a-vis other nitrogenous fertilizer, it kind of decide the prices of fertilizer grade ammonium nitrate. And therefore, the import substitute that we see in TAN in India also, in a sense, get governed by that price at least partially.

There is also, obviously, the other domestic producers, who also depend on demand supply, which is the domestic demand supply. They kind of -- kind of set their prices. So a combination of all of this will decide the prices going forward. But I think that one larger aspect in TAN, which we were also -- I was just mentioning that there is also a level of impact that we are likely to see from what happens in Russia-Ukraine situation because the prices of gas, whereby the prices of overall cost of production of TAN, as well as shutdown of some of these TAN plants in Europe because of the high raw material prices will also have bearing on TAN prices.

The third thing that I was mentioning which -- very early, we've just picked up the news that Russia is given that the season is coming back, demand season or consumption season is coming back, Russia, in general, is looking at imposing certain export taxes on export of fertilizer, where TAN or [ TAN ] also one of the products. We'll have to see the combined effect of all of that. But Q3, Q4, in general, I would say should be -- should -- from a demand perspective at least that, we are very clear that the domestic demand would again pick up after a lean period. And we are -- given that, that dimension of the overall margin, we should see, hopefully see better quarters in Q3 and Q4.

C
Chetan Thacker
analyst

[ If I can say ], this question is largely coming from historically the per tonne profitability that we witnessed for the TAN business, our current numbers appear to be significantly better. So I just wanted to get a sense on that, would it start to reverse to that over a more medium term? Or is, again, a play of what happens globally in terms of energy costs in Europe and that on the margin will decide the profitability for TAN business.

A
Amitabh Bhargava
executive

So I didn't get the first part of your statement that you seem to suggest that TAN margins are -- have come down. Is that what you were alluding to?

C
Chetan Thacker
analyst

So earlier TAN profit per tonne used to be significantly lower than what it appears to be today. So just wanted to get a sense on do we start to revert towards that towards the more medium term? Or is this profitability here ear for some more time before we start to see anything happen on that because prices have obviously gone up, and we've seen our spreads also increased significantly compared to [ historically ] last 7 years, 8 years of [ per tonne ] profitability?

A
Amitabh Bhargava
executive

So see overall margins are a function of both the finished good prices and raw material prices. Raw material prices have as much as finished good prices have gone up in the last few quarters, so have the raw material prices. But we have seen a better pass-through of raw material prices in the finished good prices. And as long as the demand in Indian context, as well as the demand for fertilizers, overall nitrogenous fertilizers in particularly, the fertilizer consuming geographies is -- remains strong.

As fertilizer grade ammonium nitrate also, which is essentially a fertilizer would continue to have [ variance ] as far as the prices are concerned. But we have to see, I mean, there are [ too ] many factors right now at play, meaning the prices of natural gas, prices of ammonia, and then, of course, the nitrogenous fertilizer. So a combination of that and also some external factors like what Russia does in terms of export and the export policy may also play some role. So I think it's within -- I would say, while from a demand perspective, we remain quite bullish. We'll have to see how all of these factors would play out in terms of the future margins in TAN.

C
Chetan Thacker
analyst

And sir, just the last question on the ammonia commissioning. So [ once this ] commissioning happens, what is the strategy in terms of locking the contracts for natural gas? And how should we view that?

A
Amitabh Bhargava
executive

So we are looking at both domestic gas, as well as a part of it LNG. Domestic gas, as you know, that there are some gas options are -- had -- in fact, come in, in the last quarter as well, and there are some more expected in the coming couple of months. So we look to tie up a part of that gas from domestic sources and the balance, we are in discussion with the LNG suppliers. So it's a combination of the 2.

C
Chetan Thacker
analyst

And sir, total requirements for natural gas would be how much, actual utilization of this one?

A
Amitabh Bhargava
executive

About 1.2 million to 1.3 million cubic meters per day.

Operator

[Operator Instructions] The next question is from the line of Smitesh Sheth from Raedan Securities.

S
Smitesh Sheth
analyst

Sir, this ammonia project is entirely for the sales transaction only, sir?

A
Amitabh Bhargava
executive

Yes.

S
Smitesh Sheth
analyst

So suppose if say if the project is on schedule, so in May, then it will take how much time for test and trial run?

Operator

Sir, sorry to interrupt you, but your voice is breaking.

S
Smitesh Sheth
analyst

One sec. So how much time will it take for trials and test run, and then, full production capacity ramp up, when do you think, sir [indiscernible].

Operator

Smitesh, sorry to interrupt you, but once again, your voice is still breaking. May I request you to rejoin the queue, please?

S
Smitesh Sheth
analyst

Yes. Sure. I'll rejoin the queue.

Operator

The next participant is [ Amarjeet Gupta ], Individual Investor.

U
Unknown Attendee

I wanted to know what is the total import of ammonia we do in a financial year?

A
Amitabh Bhargava
executive

Yes. [ I mean, just ] give you the numbers, any other questions you have?

U
Unknown Attendee

And then how are we going to supply ammonia to our Gopalpur project?

A
Amitabh Bhargava
executive

Gopalpur project, we have as part of the project, we have a tie-up with Gopalpur Port, where they would be an import terminal for ammonia and then we would have ammonia tank at our project site. So it would be essentially imported. What the Taloja ammonia project would essentially do is cater to the requirement on our western part of -- that is Taloja and Dahej.

Operator

Amarjeet, do you have any follow-up questions?

U
Unknown Attendee

No. No. Actually I was waiting for the figures of the import of ammonia?

A
Amitabh Bhargava
executive

Yes. So roughly about 300,000 kt. And then, of course, we have our own old capacity.

U
Unknown Attendee

So is there any some surplus ammonia [ from ] this plant?

A
Amitabh Bhargava
executive

So like I said, we have our own ammonia that we produce, which is about which has a capacity of 128,000 tonnes. So we produce some ammonia from the -- our own plant. We have imports, which I just mentioned, and we also procure partly from other domestic players. And as you know that we are -- our fertilizer capacity is on a ramp-up.

Our capacity utilization and fertilizer are currently at about [ 67%, 68-odd percent ], as that would ramp up our -- basically, the Taloja production would largely get consumed in the -- in our West Coast plants, basically Taloja and Dahej. But as you know, that -- as part of the capacity is at surplus at any stage, we are also in a position to sort of sell it domestically because India is a significant importer of ammonia. And in the past, we have sold surplus ammonia in the market -- domestic market also.

Operator

[Operator Instructions] Next question is from the line of [ Hardik Shah ].

U
Unknown Analyst

My first question was on the ammonia plant, when the plant had initially been like planned and announced, you were expecting about $230 per tonne, $230 per tonne, [ $240 ] per tonne of benefits versus current import -- versus import costs back then on the plant. So just in terms of numbers and given that the plant is just 4 months to 5 months away from commissioning and given the current industry scenario, are we still expecting similar benefits? Or are these going to be significantly higher than before? And if so, then how much?

And my second question was on the solar grade nitric acid capacities, how much of overall volumes would these constitute or even other specialty nitric acid constitute? And what would be the margin accretion due to these move towards these products?

A
Amitabh Bhargava
executive

So as far as ammonia -- our margins are concerned based on current prices of ammonia and the likely gas prices that we are looking to tie up, the margins are likely to be significantly better. But I think it will be fair to say that a much better estimate or more accurate estimates can be -- can be assessed on our end, and we can inform also the stakeholders once we have clarity on our gas prices.

As we speak the gas paces are at current prices of ammonia to get, let's say, $230, $250 of delta, we can afford significantly higher prices of gas. But our tie up likely -- likely tie up is going to be at much better prices, as we are discussing with the suppliers. We'll give a better estimate maybe by next quarter. I think we'll have a much better estimate.

As far as your other question is concerned, what was the question? Solar grade.

U
Unknown Analyst

On how much of the solar grade. Yes.

A
Amitabh Bhargava
executive

Yes. Solar grade, as of now, we are looking at roughly about 6,000 tonnes, 7,000 tonnes a year kind of volume. But depending on as the demand picks up, we have the ability to expand the capacity. Pricing wise, also a little early for us to -- we've just done a trial run. And therefore, pricing wise also maybe by next quarter, we should be in a position to give you a better estimate on additional margins coming out of this grade.

Operator

[Operator Instructions] The next question is from the line of [ Prashant Pani from DCS ].

U
Unknown Analyst

So sir, like I recently [ heard ] some protests in the Odisha project, which is near to Ganjam District. So still that the protest is going on or the work is resumed and it is going -- continuing?

A
Amitabh Bhargava
executive

So we have -- I think we've also reported and we've given some photographs also as part of our investor presentation, the piling work has started. There were some, I would say, local traders, there were certain issues, which were more linked with the overall SEZ and earlier, I think are issues -- compensation issues, which were there. I think those, those government has sorted out. So these -- the protest that you would have picked up are not specific to our project, but are to a larger, the SEZ there. And as far as our project is concerned, we are getting support from local administration and our work has commenced, and we have already, in fact, shown some progress through photographs also in our presentation.

U
Unknown Analyst

Sorry like [ I had ] protested, but I -- as I am from Odisha, I saw like [indiscernible] some protest was there.

Operator

Thank you very much. As there are no further questions, I now hand the conference over to Mr. Amitabh Bhargava for closing comments.

A
Amitabh Bhargava
executive

Well, thank you, everyone, for your participation. For any further queries or clarifications, please do get in touch with our Investor Relationships team. Have a good day, and thank you so much.

Operator

Thank you very much. On behalf of IIFL Securities Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.

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