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Ladies and gentlemen, good day, and welcome to Galaxy Surfactants Limited Q3 9 Month FY '23 Earnings Conference Call.
This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involves risk and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded.
We have with us Mr. Unnathan Shekhar, Promoter, Managing Director; Mr. Natarajan K. Krishnan, Executive Director and Chief Operating Officer; Mr. Abhijit Damle, Chief Financial Officer from Galaxy Surfactants Limited.
I now hand the conference over to Mr. Unnathan Shekhar. Thank you, and over to you, sir.
Thank you. A very good afternoon, ladies and gentlemen. It gives me immense pleasure to welcome you all, once again, for our quarter 3 FY '23 conference call.
Before we get into details, it is important for all of us to understand the journey, the story that has played out over the last 18 months. It was exactly a year back when we had reported one of our weakest quarters. This has come on the back of another weak quarter, we saw in our company report, it's just volume decline.
Questions have been asked on the inherent strength of our business model. And though we remain confident, we knew be our actions and performance could reimpose and reassure our investors.
As American author Robert Collier once said, success is the sum of small efforts repeated day in and day out. At Galaxy, we have practice and demonstrated the same over a decades now. It has been a small and consistent efforts putting by our team day in and day out that has ensured that we report our best quarter till day, in terms of operational profitability and record the best calendar year in Galaxy's history.
Truly a remarkable turnaround when compared to our performance 12 months ago, given the highly volatile macro backdrop. It is important that to understand the context here because on one side, we have an inflationary as well as a deflationary backdrop. And on the other, we had significant demand impacts and deteriorating economies. But despite the multiple challenges, we have consistently grown and achieved our FY '22 profit in the first 9 months of FY '23.
The consistency demonstrated by the team is worthy of praise, and I take this opportunity does much and thank them for the same. While numbers are large indicators, one of the lead indicators is the pushing the share with our customers.
It is immense pleasure to share with you all that we recently received the Clean Future Partner Award from Unilever. This award was only given to 6 suppliers globally, who have partnered with Unilever and through multiple innovations enable them in their journey towards a cleaner future.
As [ CB ] said, success is a journey and an audit destination. And for us, the journey of innovation, partnering with purpose, with all our stakeholders and delivering consistent performance continues. The inherent business model remains robust, and we have a strong current pipeline. We remain positive, confident and optimistic of our brighter future.
Moving on to the business performance, it is important that we understand, the structural drivers as well as the short-term factors influencing it. India continues to remain a bright spot for us, while the volumes have grown 12% in Q3 and 7.7% for the 9 months during December, the bigger picture is what pleases us.
Today, we are on course to cross the 100,000 metric tonne sales number for India. The same stood at 69 to 61 metric tonnes in FY '18, plus growing at 8% CAGR over the past 5 years.
There is this performance, we can safely conclude that the structural optic we witnessed during COVID has not sustained, but as inflationary pressures ease, we can expect further buildup in momentum. I would argue all to look at the bigger picture, which remains bright and healthy.
The Africa Middle East, Turkey region has been a point of concern. While volumes have declined 14.8% in December and 6% for the quarter, it is a macroeconomic volatility that is a point of concern.
This year, I have seen the Egyptian pound depreciate by 100% compared to December '21, and the Turkish lira by 71%. While the lira seems to have stabilized, the Egyptian pound in the last 1-month have further depreciated by 22%. As our performance in India shows a stable macroeconomic environment is a preconsolidated growth, stability insurance growth and it is through stability that has insured that on one hand, we have India crossing the 100,000 metric tonne mark annually. And on the other recording its lowest volumes since FY '17.
On an aggregate level as well as for the past 3 years, our volumes have remained flat, mainly due to the slowdown in AMET. Nearly 10% of our volume declined on an aggregate level has been contributed by the AMET market, which has, in turn, been recouped by the growing India market that ensures it will be remained flat on an aggregate level.
But like as we said, there's always light at the end of the tunnel. This quarter has seen AMET growth 11% sequentially with the bulk of the growth coming from the local Egypt market. While it would be point to observe for one more quarter, barring for any other currency depreciation, we do remain hopeful and the worst is behind us. Volume momentum and [indiscernible] should make a comeback and we remain optimistic about FY '24.
The rest of the world has been a mixed bag for us. The last 4 years have seen multiple challenges of varying magnitude, while in FY '20 and '21, our volumes were impacted due to the pandemic. FY '22 supply chain issues, further compounded the situation.
As supply side factors started improving, the contraction of demand in Europe and China this year adversely impacted our performance. While the challenges continue, we do see our performance improving significantly in FY '24.
The optimism is based on consumption making a strong comeback in Europe and developed markets warding off a recession. This in turn will aid our specialties, we've declined 9% in this year -- in this quarter and 5.6% YTD.
Before we move on to the outlook, it is important to understand the nuances of our operational performance, which has been the best till date in this quarter. While multiple initiatives have been carried out in terms of product mix, operational improvements, our judicious price cost to capitalize on emerging opportunities, we need to acknowledge the decline in volumes as well as diversion of multiple supply added factors have also contributed towards the performance.
While some of these efficiencies will continue in the coming year, but for ensuring sustainable growth, volumes will be the key. While inflationary pressures have impacted the mass and the masstige segments that's impacting our performance products, using inflationary pressure will ensure volume growth, which will eventually result in correction of our EBITDA per metric tonne as and when the sale happens.
This is particularly true as the Africa Middle East, Turkey volumes recover. The recovery in Europe and China will lead our specialty volumes, thus ensuring volume growth for each of the segments. While the magnitude of recovery and period within which the same happens remains to be seen, we remain confident of complying with our cardinal principles that govern our business growth, which are, volume growth of 6% to 8%; EBITDA growth being higher than volume growth; and PAT growth being higher than EBITDA growth with return on capital employed in the 22% zone.
The structural framework that has enabled our growth over decades, remains of sale and the volumes are an integral part of it. Therefore, while we specifically would refrain from giving out an EBITDA per metric tonne guidance for FY '24, it is safe to assume that your company will aspire to grow in terms of volumes as well as EBITDA for the coming year.
To control, ladies and gentlemen, it is fact that success and business is all about building, building relationships, talent pipelines, great products and robust processes, consistently and passionately. At Galaxy, we have done that for the past 4 decades and ensure indicates will be no different.
Thank you, ladies and gentlemen.
[Operator Instructions] First question comes from the line of Sanjesh Jain from ICICI Securities.
I have a couple of one. One on your cardinal rule of 6% to 8% volume growth profit by higher EBITDA, and then even better PAT growth. Now considering that we are at an EBITDA per kg of close to INR 26, INR 27, and a volume growth of 6% to 8%. So if you want to comply with this growth there EBITDA normalizes, the volume growth requires to be significantly higher, and the contraction in the EBITDA requires to be significantly lower.
How should one see this in a very near-term? I can agree with you on a longer term that this may be established, and we have done it for the last 20-odd years. But for, say, next 1 to 2 years, how should we see this framework working for us? That's my first question.
Sanjesh, in any case, as far as the last 9 months is concerned, we need to understand that some of these EBITDA per metric tonne contribution has come from certain export benefits incentives, which we receive, which were accumulated for our previous period in Egypt.
It's a quite significant as far as the last year -- these 9 months were concerned because they were on the order of approximately maybe INR 20 crores or so, okay? So there has been a very important inflow.
We have also had certain sourcing gains, which came particularly because of a steep reversal in terms of raw materials during this particular period. And furthermore, as far as the freight rates, which were very adverse in the same time last year. Those -- with improvement in supply chain, those particular -- we are at -- reversals of those reversals.
So these are in the sort of significant contributors as far as EBITDA per metric tonne is concerned, as far as this quarter is concerned. So over a period of time, what we have done in terms of improvement EBITDA is, of course, focused on some significant mix as far as our entire product portfolio is concerned.
And again, chosen customers very, very carefully in the regions -- in the various regions that we operate. Now we remain optimistic about -- we want to remain optimistic about our volume growth, despite the various inflationary and the [indiscernible] maturing situations that we are experiencing in various parts of the world. We would like to remain optimistic as far as our volume growth is concerned.
And yes, for us, that particular cardinal principle of EBITDA growth being higher than volume growth is guiding principle, which we would like to not only ideal to follow, but even surpass that. Now that's it Sanjesh.
This INR 20 crores benefit in Egypt is for this quarter? Or is for the 9 months FY '23?
No, those are for a previous period. Because, as you know, we don't book any export benefit volume still in realized, okay? That is a policy that we have followed, which we have communicated many times before.
No, no, sir, that is fairly understood. This INR 20 crores has been booked for this quarter per se, or for the 9 months?
Yes, those booked -- basically, we book it on a cash basis...
And it was booked in this quarter.
And what is the same number for the 9 months?
I think more or less everything, I think came only this quarter only. I'm right?
Okay. Okay. Got it. Got it. Got it. My second question is volume growth. I do appreciate that you have a 6% to 8% volume growth. But considering a sequential 11% growth in the AMET region and from next quarter onwards, we will be on a much favorable base. Do you think next year could be an exceptional year, where we are normalizing for the last 2 to 3 years decline in the AMET? That's number one.
Number two, can Turkey become an incremental challenge for us given the situation in Turkey remains for very [indiscernible]. How do you see the AMET is a lens with Turkey is? And number three, are we doing anything for a longer-term protection of this volatility in AMET or we have to we have to view it considering that how those markets behave? These are my three questions on the volume.
Yes, Sanjesh. Natarajan here. So with regard to AMET, if you see in terms of local Egypt volumes, we are seeing things are getting better. So we need to wait for one more quarter to know that it sustains. But that is really a good thing, despite discrete the steep 100% inflation, we're able to see things getting better.
Now Turkey, unfortunately, Turkey was also as we're seeing the inflation of almost 70%, but this earthquake has thrown things off guard. But yes, as of now, only this thing is to see that our customers and the families are safe, we probably have a better idea probably in the next 15 days, as to whether we see any impact because more than the demand, I think it's how do you reach the supply, so we are assessing that. So it's too early for us to comment on that.
With regard to the entire AMET volumes, Egypt, as I said, is getting better, okay? And the only thing is that what I can surmise is that with inflationary pressures coming down, both in from a commodity and food price. And we also see with the winter going off, the energy inflation also is going to be much better. So it only augurs well, okay, for -- volume growth to happen pretty well. This, I can conclude safely that the worst is behind us as far as AMET volumes are concerned.
That's fair enough, Natarajan. But just thinking -- can FY '24 be a year where we normalize all the last 2 years of decline where we can recoup, and market is also coming back. What are our customers telling in terms of their market share? Because I think they have lost a significant market share in the local market.
Yes, correct. So customers are also -- they're probably also saying that things are well for them in terms of the price is getting now corrected. We do hope we will expect that things should start getting better. So what I'm saying is a reflection of what my customers share with me.
Got it. Got it. My last question is on the competition.
One on the general competition within India, where we have seen a few certain companies like [indiscernible] have been coming back. And number two, on the phenoxyethanol, I think Rossari talking of expanding their footprint in the export market. How do you see competitive intensity coming out of India based?
So we have been -- Sanjesh as you know that in the last 4 decades, we have seen and managed a huge amount of competition. So this is nothing new. I don't see this as anything of great significance. So we know how to compete, and that's important.
And I hope that the market allows everyone to grow, but certainly, we know how to manage competition.
So we remain confident of maintaining and improving our market share, right?
Yes, yes, of course. Of course.
[Operator Instructions] Next question comes from the line of Rohan Gupta from Nuvama.
Congratulations on such a strong set of number. Sir, the question may be a little bit extension of the previous answer, which you gave to previous participant. Shekhar, sir, if I heard you rightly that you said that definitely, EBITDA margin per tonne this year 9 months have been phenomenally high, benefiting from the multiple sectors and product mix and also the export benefit.
But I think that you are still -- though you didn't give any guidance on margins certain, but if I heard you rightly, you said that you're still looking a absolute EBITDA growth next year. Am I right, sir, on that one?
No, the EBITDA per tonne, certainly -- as our cardinal principle say, we would be ahead of the volume growth. That is what is our striving will be, okay?
So if I speculate that, it means that we are still seeing EBITDA margins per tonne next year building much above than what you used to be give earlier guidance for INR 16,000 to INR 18,000 per tonne. If you are still looking...
Yes. So what I would like you to note is that this particular EBITDA per tonne is in terms of a certain proportion of performance on specialty, okay? So when the performance and specialty percentages normalize, okay? Then we would again see, but in the individual categories, our striving will be to grow the EBITDA per tonne at a higher rate with reserve volume growth rate, okay? But the overall growth rate is a mix of both specialty contributions as well as performance contributions.
Sir, fair enough. How come whatever competition combinations we applied, I mean, in terms of the change in the product mix, we understand that this 9 months has been tapping in terms of volume growth for specialty. And going forward, probably that the surfactants business will drive the volume growth that we fairly understand.
But it's still the volume growth in surfactants business and given the sticky nature of our business, it cannot be 30%, 40% in terms of the volume growth. So the volume growth has to be in a certain percentage range of maybe just 8% to 12% kind of growth in absolute volume. Also, we will see the price-led decline in terms of the -- because of the softening raw material prices.
So sir, probably a revenue growth, which you may be looking probably for FY '24 maybe as modest as maybe flat. With that top line growth, what I'm just concerned that if we are not able to protect our EBITDA margin per tonne and with a certain weakness, probably we should be seeing a decline in EBITDA -- absolute EBITDA should be declining in FY '24. That's what our numbers suggest. So -- but on the contrary, we still look at growing EBITDA. So that's something with no able to [indiscernible]?
Rohan, I'll answer this. Natarajan here. So I don't know that -- how -- what number -- how you are worked it. I can tell you in a simple way, how do we look at business.
First is, it is clear that the only way to sustain grow the business is to ensure that you grow your volumes out of the market. That's very clear.
In situations and if you see till the time that the volume, global macroeconomic headwinds resulted in a negative growth in volumes. We were actually growing our volumes pretty significantly ahead of the market. And even this year, we are, okay.
But whenever we see that the volume growth is not going to be an opportunity, the volume growth is not going to be available. In fact, it's going to degrow. We -- smartly manage our operational -- our operations, okay, our product mix and our pricing. And which is what is, because ultimate aim is to deliver profitable growth.
Now when my volumes degrow, how do I deliver a better EBITDA growth is what we look at. Now when the volumes -- when we do see that there are good signs for us to start growing our volumes then we need to ensure, okay, then we need to prioritize our entire strategy in terms of getting the volumes back and participate fully in the volume growth.
So this is a result because early EBITDA per material only resultant of that. But we are very clear that we will continue to grow our EBITDA -- year-on-year EBITDA as well as. But on the volume growth is only something what the market will allow us, but we would -- once you ensure that grow our EBITDA year-on-year, okay, to ensure that we deliver on a profitable growth.
So it should also be implied that whenever the market picks up sequentially and there is an opportunity to gain market share in terms of volume growth. You may offer some price discounts to the customers to gain even slightly higher volume growth? Will that be the scenario?
Yes, that depends on the case to case. And obviously, is that typically what we'll do, because if the volumes are going to come back, that's what even the customers will do correct. They will start reducing price only when they say that it's going to result in volume growth, when they do that. And typically, any businessman will operate and that's what we would also do.
Right, sir. Sir just second question is on our -- we have always mentioned that our ROC profile when we look at is 22% plus before looking at any projects. But historically, we have seen in last 3 to 4 years, our margin profile has improved significantly in terms of absolute EBITDA per tonne. That used to be roughly INR 13,000 and now we are almost at INR 18,000 to INR 20,000 on a generalized basis on normalized basis, which is right now definitely is very high.
I don't see that there would have been any significant increase in asset term, our tax costs would have gone up so significantly, let's say that may be some marginal increase. Should we assume and then the ROC profile of the company in last 4 to 5 years have also improved. And now the projects which we undertake is on above 22% on maybe what it was earlier, but now it is roughly 26% to 27% if you look at the current margins...
ROC will continue to be at -- the threshold will continue to be at 22%.
Yes. So Rohan, it's like this. We are very clear in the way that we -- the direction of the efforts to deliver weighted average ROC of 22%. But how we look into the projects are very different, okay? So our -- this thing is to deliver 22%. That's how we work on.
Now depending on how -- depending on project wise product wise, see, the thresholds are very different, but we will be delivering. So typically, you can have times when the ROC can be EBITDA tonne, tonnes are bit lower, but it will always be with a very clear vesting of delivering a weighted average cost of return capital employed of 22%.
The third question, if I'm allowed. And if there's a long queue, I can come back in queue again.
So in terms of volume growth guidance, I know it's the volatile market scenario and the very efficient here in a global market, but you still -- you see that with the falling raw material prices, I mean, inflation is easing now.
What kind of volume growth for the simple market growth you can anticipate over the next couple of years? Can it be significantly higher than last 4 to 5 years average, which we used to guide 6% to 8%. Can it be in a 15% to 18% volume growth range over the next couple of years?
No, we would be happy if that happens. Certainly, we look forward to that happening. But yes, I don't think that we would be able to [indiscernible] any guess on what the volume growth will be with the inflation and the correction. We are very clear that our -- this thing value 6% to 8%, in line with the way the market grows.
And the market grows by 10%, we need to grow ahead of that. The market grows in by 4%, we'll have to grow ahead of that. That's the way it is. How it is -- the current price selections will start resulting in volume, we need to wait and watch, Rohan. I'm not be able to [indiscernible] any guess on that.
[Operator Instructions] Next question comes from the line of Rohit Nagraj from Centrum Broking.
And again, congrats on good set of numbers. First question is last time we had alluded that the inventory that customer and were higher. What is the scenario that we are experiencing now across our operating geographies?
Yes. So we do see that -- I think inventor reductions in many of the markets other than U.S. U.S. typically, I think there is still some amount of correction that is expected. That's what our customers tell us, okay?
Otherwise, I think in most of the other geographies, I think there is no inventory corrections to be done furthermore. It's only in the U.S., as I said, we expect some more to happen because the pipeline inventory is still not got corrected [indiscernible]
[Foreign Language]
Am I audible?
Yes. Did you hear my response, Rohit?
Sorry, [indiscernible] there was some disturbance.
We -- except for U.S., where we are informed by customers that there is some -- still some amount of inventory corrections to be done, okay, in the trade. Whereas in all the other geographies, they say things have got -- inventory corrections have been done.
Sure, sure. That's helpful. Sir, second question is again -- I mean, apologize for asking on again on the EBITDA per metric tonne figure.
So you alluded that there was a INR 20 crores onetime impact from the Egypt. Now a couple of questions to this. Is this a recurring in future as well? That is one part.
And second part, in first 9 months, what was -- any other onetime benefit that we have received beyond this INR 20 crores, because of which the number which is close to about INR 25,000 EBITDA per metric tonne for 9 months is probably inflated?
So other than this, export inventory that we recommended, there has been no other significant onetime [indiscernible]...
Quarter was 20, but in 9 months, how much was?
9 months, it would be somewhere around -- I think INR 23 crores, INR 24 crores.
Okay. Yes. So I think you heard it?
Yes, INR 23 crores, INR 24 crores for [indiscernible].
Yes.
And will this be occurring in future as well, right? I mean, whenever we book the volumes?
That's the reason because there's uncertainty, we accounted on cash basis. Because it's only when the government releases the money that we can then, when they will release is anybody's guess, okay? So that's why. So -- we can only on any statement on what will be next quarter or 6 months -- next 6 months.
Next question comes from the line of Dhruv Muchhal from HDFC Mutual.
So the question is, again, coming back to the EBITDA per tonne or per kg. You mentioned part of the reason is because of the product mix. Some of these products are depending on the product mix.
But sir, if I look at the gap between the performance, the growth in the performance products and the specialty products, the share of performance products has increased in the last, say, this quarter, the last 9 months.
So based on your -- is it fair to then conclude that the EBITDA per kg that you earn on the performance product is probably higher than the specialty products?
No, no, no.
No. See, what I can tell you is that even within performance products, okay, there are products and certain segments where we are able to manage better realizations depending on how the market allows us an opportunity, okay?
So it's always the case where the specialty is higher in terms of EBITDA per metric tonne, okay? But even within performance, there are times that where we are able to get better pricing. And that's what we have been able to do over the last 9 months to 12 months.
Okay. Sir because otherwise, there is -- a clear picture is because if the share of performance has increased and EBITDA per tonne has increased on an overall basis, it seems you have EBITDA per tonne on -- EBITDA per kg on the performance product is better based on what your commentary is that it is the product mix, which is partly driving this EBITDA per kg increase.
Product mix within performance, product mix even within specialty. Even within specialty, there are certain products where we have been able to get -- they have been positioned well in terms of better realizations. So it's a combination of all this.
Okay. And is there also -- also, if I look at your MNC share has increased, your 51% was last year YTD, it is now 56%. Some of the other regional and local levels have declined. Volume used to think the MNCs have a better marketing power, so probably the EBITDA per kg will be lower there, but that seems not to be the case.
I don't think we can provide initial correlation, okay? One thing is that it is important what this probably should conclude from this is that the sort of strength of the ratio that we have. And obviously, in this market situation, you see that only the big players have been able to take up the inflation and are able to grow. So that actually is a demonstration of the sort of the business model that we have, this on business model that we have.
Next question comes from the line of Srikrishna Sonti from JM Financial.
The line of Srikrishna has been disconnected. We will go for the next participants, and that is Mr. CA Garvit Goyal from MS Research.
Am I audible?
Can you be a bit louder, please?
Yes. Yes, sure. Now is it okay?
Yes.
Okay, sir. Sir, most of my questions have been answered. Just one thing, whether your 9-month EBITDA per metric tonne is sustainable in FY '24? You mentioned it is around INR 23 crores because of export incentive. So if we exclude that impact then also it is around INR 23,700 per tonne? So can we achieve this INR 23,700 number in FY '24, sir?
So that's what we said. This EBITDA per metric tonne is only a final result of what -- the way that we connect our business. So that's what I explained.
Now whenever the first priority -- business priority is to ensure that we grow our volumes ahead of the market. If the market doesn't allow you to grow your volumes because of the macroeconomic headwinds. Then we need to see how we manage the profitability because finally our object is to deliver profitable growth. But delivering volume growth is priority.
So if the market now starts offering the opportunity to enhance volumes, after the -- when the prices start correcting the consumer demand starts coming back, we will then start prioritizing growing our volumes and then the EBITDA per metric tonne will be different.
So how would you plan, we are not able to guess, because that I cannot able to give you a guidance on EBITDA per metric tonne. But what we said very -- what Shekhar said very clearly in his address is that we will grow our volumes ahead of the market. And we'll also grow our EBITDA, higher of our volume growth and our PAT higher of the EBITDA growth. So that helps us to how we are structuring the way that we do our business.
The next question comes from the line of Bobby Jayaraman from Falcon.
Compared to last quarter, your volumes barely grew. Then how did you achieve growth in realization? The overall revenues had a degrowth.
Can you repeat your question? I couldn't hear properly. Can you please repeat your...?
Yes, the year-on-year volume growth for this quarter was flat. So how did you achieve your revenue growth given a following [indiscernible]?
See, the revenue growth is -- it has correspondence to the raw material prices.
Yes. So raw material prices start correcting, but then we also -- that there will be it always corrects the lag of 3 to 5 months, okay? So there will still be some pricing that have been done based on the raw material prices that was 3 to 5 months back. So you would not see an immediate corrects -- correlation between raw material price coming down and the revenue growth getting impacted.
So you will see that Jan, Feb, March revenue growth will be much lower than the previous quarter -- this quarter because the prices -- corrected price will start reflecting in Jan, Feb, March.
Okay. Got it. And the -- how would that impact your EBITDA?
Impact, our?
No, we did mention that we had certain sourcing gains because of the reversal of raw material prices, okay, that also added to our EBITDA perfectly.
So the next quarter, likely when the revenue normalizes for like I think the lower RM environment your EBITDA would come down too, correct? That's what you're saying?
Yes. So what we are saying is that there are opportunities out in the market to manage your positions in a way that your able to get better valuations that's what we will do. Now as I said, in the next quarter -- okay, more important is the priority our volume growth.
So whether -- there are 2 things. One is in terms of whether we will be able to get the volume growth with keeping price reductions and whether my raw material scenario would allow me to be able to get certain efficiencies.
Now this is something that we'll have -- that we'll be able to see only after the quarter ends because our day-to-day way of doing business to ensure that we are able to get our volume growth and manage our RM positions in a way that we are able to get better realization. So that's why I'd like to put it.
Okay. So it looks like there are too many moving pieces here, right, essentially?
There are. You got it right.
My next question is, you -- I remember in the -- some of the earlier Concalls, you had mentioned that during the COVID days, so we have seen a lot of business in the e-commerce whether it's the new e-commerce those that have been sell -- those trying to selling consumer goods. Is that still on? Or is that just a...?
That trend continues. I think a number of e-commerce players have strengthen themselves grown pretty well. There have also been cases where some e-commerce plays have fallen base as we said, okay? So the good guys are getting better and better and growing.
Okay. So there will also be a driver to your volume growth, right, given it will between exist before [indiscernible], correct?
Yes, they do offer opportunities for volume growth. But as you know, the e-commerce segment is a very, very small portion of the overall size of the market.
Next question comes from the line of Bhargav Buddhadev from Kotak Mutual Funds.
Congrats on a good performance. A couple of questions. One is what would be the contribution of Turkey in terms of our overall revenue?
Turkey, approximately 9% to 10% above our overall.
Okay. Okay. And that you mentioned you'll come to know the exact assessment only in the next 10 to 20 days?
Yes, yes. Because Bhargav, what's happening is that right now, when we are assessing whether -- first is whether any of our shipments have gone into trouble. So we have realized that that's not issue there. And then the second is we are now only talking to all the customers and asking about their well-being. Now the impact on business is we'll probably wait, right. So it's not the right time to ask them. So we'll address that probably in the coming days, okay?
Yes. But do you think there is a significant risk to this business maybe in FY '24? Or too early to [indiscernible]?
It's not -- I'd say -- if you ask me, I'm not able to comment in terms of whether very clearly that this will not have any impact. But yes, the probabilty looks lower. We need to wait.
There will be some impact. But -- there is some impact.
Yes, short-term. Because more in terms of the demand sentiment getting impacted there. Which you'll see, but we don't see it to be prolonged [indiscernible] are adjusting to the new normal.
Yes. Sure. And my second question is out of our 1,800-odd customers, how many of them would still be under [ LIBOR 1 ]? And obviously, your endeavor would be to graduate them to [ LIBOR 2, LIBOR 3 ], et cetera, et cetera?
You're right. See, obviously, the topmost stepping a ladders takes anywhere between 25 to 30 years, okay? So this timing is gradual, deliver it and compounded and cumulative. So a majority of our customers is in 1,800 will all be in the first step of the ladder, okay? So as we have always mentioned, the number of customers in -- the topmost step of the ladder you can count on fingers.
So would it be fair to say that 80-odd percent would be LIBOR 1 or maybe more?
Even more.
So, even more.
Even more.
Even more. Okay.
Yes. But the important that we get them into LIBOR 1 and keep them there and then move them to the subsidies. That's also an important job for us to do, which we are doing pretty well.
And as they move up the ladder, obviously, effort increasing disproportionately in terms of engagement, right?
You're right. Obviously, how much -- also the opportunities increase manifold, okay? For the engagement increases, the opportunity also increases because you are able to deal with them a wider package of your products.
And would it be fair to say that we would have 100% share of them as they move up the ladder? Or they go to some other supplier?
No, no, no. Normally, we have seen that all customers in their own risk metrics don't like to have only one supplier in their procurement. They always have one more supplier to ensure that they're building their risk criteria as far as their organization is concerned.
Next question comes from the line of Anubhav Sahu from [indiscernible] Research.
A couple of questions. One is on your comment on the benefit arising out of sourcing gains from due to reversal in raw material prices. So when you mentioned that you mean to say that you could get some better deals in getting some of the input prices, which is otherwise in the normal course of operation, we don't do. Is that the case?
No, no. See, no combination of many things, okay. It also the way we manage our procurement, which we have said is an area which we are very, very particular about and careful about, given that the raw materials are highly subject to ups and downs.
Great. Okay. Okay. And is there a way we can -- you can quantify this benefit which happened this quarter, which, otherwise, is not a normal course of operation?
No. That we will not be able to comment upon, Anubhav.
Okay. Okay. Okay. And sir, you did mention about the channel inventory, and I think the inventory at the customer at the U.S. operation probably it's on a higher side.
I had a question regarding potion our own inventory. I mean, it looks like as far the results for Q3 is concerned, we probably did not impact much on high-cost inventory. How do you see this thing, are we passed that channel because there has been a quite a good playing down of the fact alcohol prices? So how we are positioned as sort of the high-cost inventory is concerned?
So we ensure that we are always flowing in line with the market. So it will start reflecting -- the buying prices will start reflecting on the lower prices as the months move on. But as I did answer a question earlier, that the prices do not start to [indiscernible] immediately. The alcohol prices are correcting say 4 months back, it again went up, it again has come down. So it's a combination.
So you see a relational trend in terms of my raw material inventory prices coming down very clearly.
Okay.
Yes, you will see my prior Jan, Feb, March will be lower than what it was October, November, December. Logically, because the corrections majorly started in June, July came on again went up. It's come down again. So we see that.
Next question comes from the line of Malay Sameer from Breakthroughs in Stock Market.
Sir, you've been sharing with us that the EBITDA margin will lead the volume growth. We can see the EBITDA in absolute term, will grow much more than the volumes. And on the other side that you're sharing with us that you will sacrify the pricing for the volume growth. So aren't these 2 statements contradictory?
We didn't say any of those things.
I'll tell you what we said was volume growth is the priority. And then if the market affords us, it tells us clearly that there's a volume of possible with a judicious pricing approach, we'll do that. That is what is important.
If the market tells us that there is no possibility of a volume growth. There is our job to ensure that we get the right pricing. So that's how we have to manage. But finally, we said that we need to grow our volume ahead of the market, grow our EBITDA ahead of the [indiscernible] and the PAT ahead of the EBITDA growth. That's what we said.
So if you were to take a scenario, where the volume does not grow hypothetically in FY '24, right? Then your EBITDA in FY '24 will be lower than FY '23 because when you [indiscernible] priority on the term fee?
So I did tell you that finally, the EBITDA per metric tonne is a derivative of how the macro-economic situation is and how we ensure that we are able to grow our volumes.
What we are clearly telling is we do not know what the situation in terms of demand is going to be 6, 9 months from now. If it is going to grow by 10%, we better ensure that we grow at 10%, minimum, correct? If that requires us to do judicious price corrections, we need to do that.
If they are changing on the volume deals and if we do not there the benefit of export from -- you said [indiscernible] we got this time and if volume is the leading focus for us, our EBITDA in FY '24 to be substantially lower than what it is in this quarter?
Not necessary.
You very well know -- you will know how EBITDA gets higher rate, right? Revenue minus cost, right, minus various costs.
So how do you view to manage your cost -- judiciously, how do you manage your RM [indiscernible] judiciously? How do you manage your pricing appropriately some sort of all that is now is EBITDA per metric tonne. So various levers available, correct? So we need to use appropriate levers to be able to deliver profitable growth.
Next question comes from the line of Divyata Dalal from Trident Capital Investment.
I wanted to understand a little bit more on the statement that you made that in terms of performance acceptance, we are able to manage better realization because of the product mix. So one, I would like to understand which are the geographies where we are able to get a better product mix? And second, are these trends sustainable?
First question, we cannot answer with geographies. That's very clear, okay? Second question, we want the environment to enable us to sustain that, okay.
But as I said earlier, okay, we're not going to be -- it requires that we need to price it appropriately to gain volumes. If the market allows us an opportunity, we'll do that. So that will be the answer, but we can't make any specific statement on that right now.
Okay. No, my question was more pertaining to -- see, since we've seen that the India market is also growing well. So are you seeing a structural range where the mass -- in the product mix where the mass or lower realization products are lesser as compared to people moving towards premium products like [indiscernible]?
Kindly note that the quality when we talk about is always what has happened. We are only telling you what has happened. But our effort is always to grow in all categories and all segments, okay?
Now what has happened is that in the last year because of the highly inflationary pressures, okay? The market -- say choose us to choose us to certain product categories, these are the some of the product categories. This can of course change once normalization happens, okay? And our job is to respond to this market and respond of these opportunities.
Okay. So you mean to say that this is not a normal situation and probably once normalization happens...
Yes, kindly note that we don't define our business on the basis of EBITDA per metric tonne.
Right. Right, sir. I understand that.
[indiscernible] is always a derivative.
Derivative. I completely understand that my question was just to understand the trends in the market, whether in performance acceptance, whether the demand is that, that it is moving towards more premiumization product as compared to mass products. I just wanted to understand the trend in the market.
I think the trend is...
So -- see what's important to understand is that all markets are a combination of mass masstige and prestige, what we mean by premium, okay?
Now particularly in the last year, there was a significant impact with respect to prestige products, which in a way, reflected in the decline of specialty products as far as last year is concerned, okay?
Now again, as far as these markets, which have had an impact because of inflation in terms of the volume, our customers very obviously, recheck their particular portfolio to ensure that they respond to the ultimate consumers requirement and demand and need, okay?
They accordingly calibrate their own offerings. To give one example, you would have seen some of our multinational customers saying that customers in the last year preferred a lot of smaller packs. They prefer to buy a lot of smaller packs because of the inflationary situation. In which case, the entire mix of offerings that they offer differs from previous. However, they may create a different tune when the situation comes back to normal, okay?
So these are the sort of changes which happened in the market, and our job is to fundamentally respond to these changes with agility and with ensuring that we are able to meet our service requirements of our customers very, very promptly and properly.
Got it, sir. Got it. Got it. Perfect. And one bookkeeping question on the CapEx. What is the CapEx that we have shown for FY '24? And what CapEx have we done through 9 months FY '23?
As we said, we have always indicated that our CapEx per year approximately will be INR 150 crores. And it will be there even for the next maybe 2 to 3 years.
We have already crossed about INR 120 crores within 9 months.
Yes, we have already crossed INR 120 crores in the 9 months.
The next question comes from the line of Dinesh Pathak from [indiscernible] Asset Management.
Sorry, this is Dinesh Pathak from [indiscernible] Asset Management.
Sir, what is your market share in the covered category and the geographies, maybe you can [indiscernible]...
We could not be talking about these numbers.
We don't talk about margins.
We don't talk about these numbers.
So what I want to understand is that you said that we will grow volume out of the market, but market like -- from my understanding, there will be various markets where you're not present in that. Are you let maturing new markets? Can you talk a little bit about that?
No, in the various -- see, we are already present in about 76 to 80 countries. All we are saying is that in terms of the products that we operate in those particular countries or geographies. And with respect to those particular products, we grow ahead of the market.
Okay. When you say Turkey is 10% of the revenue. This is total revenue? Or just in that revenue?
Total.
Total revenue.
Total revenue. Okay. Sir just lauryl alcohol would be what percentage of your raw material price?
Is about 60% of our raw material price.
Okay. This is important only for performance and specialty, there is not much lauryl alcohol, right?
Yes, there will be not much of lauryl alcohol in performance -- in specialty products. Yes.
Okay. How much of the -- like tonnage being exported from India, where you -- and how do you account for this rate, you'll book it both in revenue as well as in other expense split?
I didn't -- we didn't understand. What is question?
So how much of the tonnage that you sell every year, is excluded from India and also, let's say, exported from the plan that you have in Egypt and...
International sales constitute approximately 2/3 of our total sales, okay? So as far as India is concerned...
Revenue?
Export. 50-50 approximately. Approximately 50-50.
So what you produce in India, 50 consume in India, 50 sell in [ abroad and Ladakh ]?
Yes.
Okay. For the 50 that you sell in abroad export, you -- like raw material, I have an understanding of the pass-throughs with some of the clients. For freight, if you can explain the 50% of this is exported from India. How is freight accounted for? And is it pass-through which is you know exposure to freight volatility?
No. It's not like that. It's not as simple as that, whether it's finally freight was still the last year the way it went up was a very small component of the overall pricing. So typically, freight moves with some places where we do a 3-month rate contracts for customers. We have some freight, where we do a 6-month contract. It's not one freight fits all sort of situation.
So the objective is to ensure that we take the right service, deliver volumes, customer schedules very well on time, and then ensure that we make right price decrease, that's how it has worked on. So there's nothing that we try to manage our freight positions in a very different way.
Okay. What would be our capacity utilization, sir?
Approximately 66, 67.
67. It can go to maximum of what?
We normally -- when it goes -- when it almost near 80 to 85, we start thinking about increasing the capacity for that.
So the CapEx that you're doing INR 150 crores is what, is it just maintenance CapEx, there is no growth?
It's a combination of maintenance...
It's a combination of maintenance and growth.
Okay. How much capacity are you adding? Can you just talk about that as well?
Combination of what we do in both performance and specialty. So we typically wouldn't be able to comment on that.
Due to time constraints, we have reached the end of question-and-answer session. I would now like to hand the conference over to the management for closing comments.
Thank you. Thank you very much. Thank you, ladies and gentlemen. Thank you for your presence. Have a good day, and see you in the next quarter.
Thank you all.
Thank you. On behalf of Galaxy Surfactants Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.