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GHCL Ltd
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Thanks, and good evening, everyone. I hope all are in good health. I would like to welcome the GHCL management team and thank them for providing us this opportunity to host the Q2 con call. We have with us today the senior management team, represented by Mr. R.S. Jalan, Managing Director; and Mr. Raman Chopra, CFO and Executive Director of Finance; and the entire team. I shall now hand over the call to the management for their opening remarks. Thank you, and over to you, sir.
Thank you, Rohit. Good evening, everyone, and welcome to GHCL Quarter 2 Earnings Call. Our results and analyst presentation have been uploaded on stock exchanges as well as the company website. We have demonstrated a solid performance after safely mitigating through the second wave of COVID-19 pandemic. This performance was well supported by steep economic recovery across the country and validated by a further uptick in the demand cycle and positive pricing scenario. In addition, improved vaccination coverage and a growing sense of normalcy have also led to the enhanced consumption. Global demand of soda ash has recovered and the industry has almost reached a pre-COVID level. Due to strong focus on renewable energy, solar glass is now emerging as a new segment for future. There are a few supply-side restrictions such as lower production in China and supply chain disruption on account of availability of containers and high freight cost. This has resulted in tightness in the soda ash market. Indian market has also reflected this global demand supply dynamics and has resulted in a lower imports. With rising in the energy and the raw material prices, global soda ash prices has gone up. We have been able to pass on the impact of increased cost to the consumers. We expect the positive trend for soda ash business to continue through 2022. In the textile business, our outlook is good due to strong demand [ in ] China plus market sentiment. Arrival of first cotton has started in a small quantity and prices are much higher as compared to last year. We expect that, going forward, margin will taper down with the arrival of first cotton crop and industry inability to pass the increased cost to the ultimate consumers. The process of demerger is on track. Our second motion petition was held on 23rd of August 2021, in which order of admission of petition has been passed by the Honorable NCLT. The net date of hearing is fixed at 23rd November 2021. We remain on track to further cement our leadership position in organic chemical through modular expansion and debottlenecking. That said, our focus on product market expansion remains unabated. Going forward, we are confident of generating strong cash flow with a healthy balance sheet while delivering sustained healthy performance. I would now request Raman to share the financial performance.
Thank you very much. Good evening, everyone, and a very warm welcome to all of you in GHCL's earning conference call. I will share the financial highlights for the quarter and half year ended September 30, 2021, and also discuss the segmental performance. Revenue for Q2 FY '22 came in at INR 987 crores as compared to INR 779 crores in the corresponding period of last year. This represents year-on-year growth of 27%. For half 1, revenue increased by 51% year-on-year to INR 1,842 crores versus INR 1,222 (sic) [ INR 1,220 ] crores last year. EBITDA for the quarter stood at INR 201 crores, which is an increase of 24% from INR 162 crores during Q2 of last year. This represented an EBITDA margin of 20.4% for the current quarter as compared to 20.8% in last year. Softness in margin is due to lower realization of soda ash. For the half year, EBITDA came in at INR 390 crores as compared to INR 247 crores, thus representing a growth of 58%. Profit after tax for the quarter stood at INR 109 crores versus INR 78 crores in last year. For half 1 FY '22, PAT came -- more than doubled to INR 211 crores compared to INR 95 crores in the corresponding half year of last year. I will now share the segmental results. In the Inorganic Chemicals segment, we have reported a revenue of INR 572 crores for the quarter, which is 19% higher from INR 482 crores in the corresponding quarter of last year. This increase in revenue is on account of improved demand from end user segments, resulting in volume pickup of around 12% and also improved realization. EBITDA for the quarter stood at INR 106 crores as compared to INR 119 crores in the same quarter of previous year. As a result, margin dropped to 19% from 25% due to significant increase in energy costs and raw material prices. We have been able to pass the impact of these cost increases to customers through increase in prices, an impact which will be seen in the coming quarters. The performance of our textile segment has been very robust. Revenue for the quarter stood at INR 415 crores, which is an increase of 40% compared to INR 297 crores in the corresponding quarter of last year. The revenue growth is on account of strong demand and better pricing scenario. EBITDA for quarter 2 came in at INR 96 crores, which is a substantial increase from INR 44 crores in the same quarter of previous year. This translates into EBITDA margin of 23% for quarter versus 15% last year. This robust performance is across entire home textile and spinning business. For the half year, we generated a cash profit of INR 300 crores. We have been able to manage our leverage very well, and our net debt stood at crores INR 697 crores. This represents a net debt/equity of 0.26x.With this, I conclude my comments, and I'll now request the moderator to open the forum for question and answers. Thank you very much.
[Operator Instructions] So our first question is from Resham Jain from DSP Investment Managers.
Yes. So I have my first question on the soda ash business, which has been consistently going up. Are you -- and it seems that the current demand is much better than what we have seen in FY '19, '20. Given the context and at the same time, cost also is going up, are you able to improve your overall EBITDA per tonne, which you were like this has come down in the last [ 3 ] years, 18 months. Are you able to recoup the past level?
Yes. Recently, first question of yours, in terms of the overall demand, we are definitely seeing globally, the demand as very robust. Whereas on the supply side, there is restriction on the supply. So overall, there is a tightness -- significant tightness, if I can say so, significant tightness at this point of time in the overall demand-supply situation. And because of that, there is a significant price increase, which has happened. Even in the month of October itself, a significant increase has been done globally and that's all India also. In terms of the margin percent, definitely, you will see from third quarter -- from fourth quarter onwards, as you know, there are some contracts which are on an annual basis. You will see the improvement in the percent of soda ash margins significantly going up from fourth quarter onwards and '22 is going to be much better than what we have seen in this year.
Okay. So currently, the price hikes, whatever we are taking is just compensating for the increase in the coal prices and the salt prices, is that fair understanding, at least, in the near term?
Not -- I would say that the increase which we have taken will improve the margin going forward. Means, like I said, in terms -- if you look at all the price increases which we have taken, when that gets fully implemented, you will find that the margin expansion will take place and that will happen from January onwards.
Okay. And sir, my second question is on textiles. Given that cotton prices are significantly high at around 50,000, 55,000 level, what is your strategy going to be this year? And are you also paring some of the old cotton inventory in quarter 3 as well? So those are the 2 questions on the textile side.
See, recently in terms of the textile, like I said, a few things: one, our strategy in terms of the cotton coverage will be not as aggressive as it has been in the past. We will be -- because of the cotton prices are significantly higher. And therefore, we will be slightly more conservative on our coverage -- of the cotton coverage. In terms of sum of the fiber which we are importing from U.S. or from the Egypt, that coverage, we have been able to do at a much cheaper cost and that we have covered for a significant period of the time, and that will definitely give some advantage in the next few quarters. Overall, like I said in my opening remarks also, yarn prices are also on the front side. However, some margin drop in overall on the textile business, you will be able to see across the industry because the gap of the advantages that industry has got at a lower price cotton coverage, now that will not be there. And maybe third quarter and more significantly from the fourth quarter, some margin drop will happen. However, the volume -- recently, volumes will be very robust. So maybe to some extent the people will be able to compensate that loss of the margin by better volume.
So our next question is from Mr. Riddhesh Gandhi from Discovery Capital.
Just had a couple of questions. So how much of a price increase we have taken in Q2? And of that, effectively, how much has actually reflected in Q2? And how much of that will reflect in Q3? And how much price hikes have we taken in Q3 and how much we reflect in Q3 and how much in Q4 because of the [ length of the ] contract? And in view of the path, how much first time has our [ cleaning ] costs also gone up. So we can get some sense on how margins will be going ahead.
Riddhesh, if I can give you in terms of the percentage, whatever the price increase which we have taken in the month of -- in the last quarter, in Q2, 50% only the benefit we got in that quarter. Obviously, that balance 50% out of that balance, 50%, we will be getting that advantage in this quarter. In the quarter 3, which is currently running in the month of October, we have taken the price increase out of that, again, approximately around 50% will get generated in this quarter and the balance 50% will get generated into the fourth quarter. So overall, I would say that at this point of time, the full benefit of the price increase which we have taken, the full benefit will be in the fourth quarter. And you will see a significant improvement in the margin in the fourth quarter. Maybe this will come back to the original level of '19, '20, that kind of a level you will be able to see in the fourth quarter.
But again, just to understand broadly because -- I mean, what I understand is about INR 3,000 price hike was taken in Q2, another INR 4,000 hike has already happened in October. And obviously, from what some of your competitors are speaking about on their call was that similarly only 50% of the implication has been there and the RM has been up at about INR 1,800. So actually, from what we are reading is that at least even from Q3 onwards, we should see a reasonable amount of actually uptick. And Q4, given it has the implication of the INR 4,000 crores and the INR 3,000 crores, should actually lead to north of -- I mean, really like 23% to 24%, maybe even higher profit margin.
You're rightly you are saying that in terms of the overall the numbers -- specific number at this point of time will be difficult. But I can only tell you that the margin -- significant margin expansion will happen from the fourth quarter. And I've given an indication that '19, '20, the kind of margin, we will be able to achieve that. And based on that, maybe '20 fourth quarter as well as '22 because the way we are looking at the outlook for '22, we are seeing a very bullish outlook of soda ash in the '22 across the globe. Because on one side, there is a lot of supply restriction. In China, there is a lot of plants at 1.3 million tonnes of the plant that got stopped. China will become -- instead of an exporter -- net exporter, China will become a net importer. And that will create a kind of a huge opportunity for the soda ash producers to come to a normal profitability, which has not been there for the last 2 years. And second...
Just a clarification, you said in 19 into 20, you are talkings on levels of profitability in the year '19, '20 or you're talking about 20% EBITDA margin?
No. No, 20% EBITDA margin probably you're talking. I'm talking about the per tonne margin. Per tonne margin will definitely be -- will be closer to the '19/'20 numbers.
[indiscernible]
No, what I'm trying to tell you is the per tonne margin. I'm not talking about the percentage. .
Per tonne margin, okay, okay. [indiscernible]
One thing I just want to clarify here is, as you know, there is a lot of volatility in the overall commodity space. And therefore, this -- what we are talking right now is based on our current understanding of the entire commodity space volatility.
Got it. And sir, there is tightness in soda ash, is there a linkage in your view between price of soda ash and your commodity, which is why the price is being pushed up? Or you would expect high prices, even in perfect commodity prices [ or stopped coal, ] et cetera, correct, would soda ash prices still remain robust in your view?
Soda ash prices will remain robust in spite of that, whatever happens in the commodity space. Because like I said, overall demand-supply situation itself, there is a kind of mismatch: demand is more than the supply, and that is primarily because of China, number one. Number two, there is a new opportunity of a solar glass. There is a huge requirement of solar glass even in India. It is likely to happen in [indiscernible] as well as in China and other parts of the world.
And a last question on the textile side, where do you see things going forward? Do we potentially see a similar level of EBITDA? Or is it sort of...
No. Like I said, overall EBITDA percentage will go down, primarily because of the input/output ratio, which was there in the last 2 quarters has been -- had a benefit of a lower cost of cotton versus the selling price, which probably will be kind of a -- gap will come down. And because of that, the margin definitely will be lower. But it should be a healthy margin from [indiscernible] Overall textile, I see China as -- an overall demand of the product remains. And therefore, the volume may go up, number one, on the other -- as you all know that some expansion is also happening in our business. So keeping everything into account, I would say that margin percentage will go down, but overall margin -- overall, the profitability will be good.
The next question from Mr. [ Rohit Sinha ] from Sunidhi Securities.
So some of my questions have been already asked. Just could you give us the breakup or some clarity on what was the volume mix or sales mix for the industry for soda ash in this quarter with regards to last year or...
No. [ Rohit, ] in terms of the -- you're talking about the consuming industry, how the percentage has been?
Yes. Yes.
No, I do know that we...
Exactly. I mean the end user industry mix how we have done in -- I mean the overall sales, we have seen in [indiscernible]
If you look at -- in terms of the growth, I would say the glass industry is doing very well. And there is a big improvement into the glass industry. Even I -- even in the bottle glass also, there is a significant improvement. However, in the detergent segment, there was because of the rainy season, which is a normal part of it and some of the -- some part of the country has been kind of badly impacted because of the flood and other things. The detergent industry was slightly on the lower side. But now after this rainy season, the demand will also pick up in that area. So overall, I would say that demand growth is across the segment.
Okay. And as you mentioned that on the solar glass panel segment, we are seeing some good opportunity. So any thought on how big it could be for us and overall industry?
I can just give you one number, which is more of a global number because ultimately, the soda ash scenario will entirely depend on the global scenario, okay? In global scenario today, the soda ash consumption as a percentage of the total is only 1%. That means 70 million in the total -- [ 7 ] lakh tonnes of the soda ash has been consumed in the solar industry, glass panel at this point of a time. At 2 years, that will become 3%. That means there is a 1.4 million tonnes of the extra demand will be required only for the increment -- that 1.4 million is a significant number. As I said, on one side, China is raising the production. China is becoming less importer of the soda ash whereas no new capacity has been coming in the last 2 years. And as you know, [indiscernible] 1 or 2 years. It cannot be ramped up -- so therefore, overall, I would say that the demand and the supply mismatch should at least continue for 2 years going forward, and that will create a soda ash price from -- for at least '22 and '23. That is what, at this point of time, our judgment says.
Okay. Okay. And lastly, on just this -- we are just looking, I mean, how we are placed and when we are basically expecting anything for the final output outcome?
23rd of November 2021, the final hearing before the -- under NCLT. And there, we should expect some orders from the NCLT. And after that, the process of filing of the demerger [ will start ] and all those things will happen.
So earlier, you said like by March or April it would be possible. So are we on track or maybe it can extend for the whole year?
Yes, we are on track. We are on track.
The next question from Shanti Patel from Shanti Patel Advisers.
As far as soda ash division is concerned, what is the capacity utilization by our company?
In this quarter, we had 95% plus, which is the highest capacity utilization we can say. [ We have tremendous capacity ahead. ]
And where do we stand as far as the [ safe ] concern, I mean, #1, #2, #3 in the capacity -- strong capacity also...
See, this quarter, I don't know what is the capacity utilization of the previous competition because we don't -- that data we don't have. But overall, if you look at the global basis, the capacity utilization across the globe is around 80%, 82%, 83%.
What is the market share in Indian market?
In the Indian market, we have approximately around 25% market share, and then we -- our competition has the balance. And the import is also around 23% to 25%. The balance 50% goes to the competition.
The next question is from Mr. [ Tejas Shah ] from Unique Stock Broking.
The soda ash prices I think has gone up from 2,000 to 3,600, that's nearly doubled our cost. Hello?
Yes, listening.
So how much we are able to increase the price? And does it happen on a spot basis like you have annual contracts, but that would be how much will be the ratio that you are contracted for annually or roughly monthly? And how much spot do you sell?
See, basically, overall, the price increase, which has happened in last, I would say, 4, 5 months is approximately -- is roughly around 30% or more than 30%, roughly around 35% on one side. In terms of the your specific question on the contracted volume, this contracted volume normally been around 30% to 40% of the volume each on the contracted basis and then the various segments, some are annual. Some are 6 monthly and some are quarterly as well. You have it...
A question. so [ 50% ] would be year on year?
Yes, 50% to 60% is on this spot.
Okay. And now since internationally the prices have gone up so much, are we still looking at price hikes or the competition is not allowing you to increase the price?
It depends on the overall market scenario. At this point of time, we have already taken the increase what we could visualize. And of course, how does the market shape up in the going forward, we will evaluate based on that and depending upon the opportunity.
The next question from Mr. [ Jatin Gain ] from Alpha Capital.
Sir, congrats for a good set of numbers. Sir, you are saying that since we have some contracts for long term, we cover price increases [ and build ] that good years compared to spot. So going forward in FY next year, say, next year, '22, if, let's say, soda prices as -- prices fall, then also then we will get the benefit, this benefit?
Yes. Definitely, when we have a contracted price, obviously, if you -- that price will remain valid through the contract period.
Okay. And sir, on -- from -- you're saying from Q4, we'll have better margins for soda ash. Can you please -- would you like to quantify what kind of margins can we get?
No. At this point of time, it's difficult to quantify. Like I said, volatility in the raw material prices and things like that. Like I said, overall, it will be much better as compared to what you are seeing right now.
Sure, sir. And sir, on cotton side or yarn side of the business, given higher cotton prices, how much will that be hurting us going forward? Any quantifications for that possible, please?
Again, quantification, I think it will be difficult at this point of time because at this point of a time, very small parcel of cotton -- new cotton started coming in. 15 days back, the prices of cotton were INR 59,000 per tonne, now it's INR 65,000. And how does this change? Maybe in the month of December, the cotton prices can fall also. And -- but like I said, guidance is more on margin definitely will be lower than what you have been achieving in the last 2 quarters. Margin pressure will be there, but volume will be better. Overall, demand will be better.
[Operator Instructions] So our next question is from Mr. Saket Kapoor from Kapoor Company.
If I could just sum it up of what the conversation has been, the EBITDA margins in soda ash for this quarter has hit a bottom of 18.5%. And here onwards, with the price revision which we have taken place, this inflationary impact will get mitigated and we will be returning to the higher margin bracket from the fourth quarter onwards. Is this understanding correct, sir?
Yes. Saket, this understand is correct.
Okay. And sir, you have -- in the presentation, it has been mentioned that we are exploring some new product additions, sir. What are we trying to express there, sir? And when can we see this new product addition happen sir?
If you remember our last conversation, even on the last quarter call also, I have said a few things. We are evaluating various opportunities and a lot of experts have been engaged -- some outside experts has also been engaged. We are waiting for those reports to come in, and we have -- we want to have a deliberate -- detailed deliberation on that. And I said, very clearly, our philosophy is we don't want to rush any investment in any of the segments. Still we are fully convinced that, yes, this is a journey which we want to pursue for a longer period of time. And just for the sake of entering into the new field, we don't want to go for that. We will evaluate those opportunities where we can become a larger player. We don't want to be in a smaller bucket of that segment -- where the volume growth or the buildup of the revenue could be possible, where the, what you call, return on capital is respectable. And also that has a future of that business. A lot of opportunities in the bulk chemical, a lot of opportunity in the specialty chemical, we are exploring. And surely, once we finalize that, we will definitely be happy to share those details with all our investors.
Sir, in the home textile part for this quarter, are these numbers totally on the operational front, the PBT number of INR 83 crores or any other income component is also there?
No, there is no assessment income. This is 100% operating net income.
Okay. And as been articulated by you, these are sustainable over the next 2 quarters before the higher raw material prices kick in going forward?
No, I have not said that, Saket. What I said is now since you know that the crop starts from October, the new purchase has started happening. You will see the tapering down of the margin in the textile business. Going forward, some impact will be there in the third quarter and some impact will be there in the fourth quarter as well.
Because you used the word that some coverage from U.S. on the fiber, I missed that part. That is their program for the longer term. Yes.
No, that Saket, only certain percentage of the total product market. To that extent, some advantage will be there. Sorry, go ahead.
That means these are the peak margins for the home textile segment. This is what -- because you have always been guiding for a sustainable margins, and these margins are on the home textile segment are not sustainable.
I have always said that in the past also over the last 7 years, I'm maintaining on that, that margin business has to be a respectable number. Peaks and valleys will be coming in. And therefore, longer-term margin which we have already guided in many times in the last 7 years, we should expect those kind of margins. Yes, what we should be looking at is, what is the growth which is happening, that is number one. Second, like we are focusing on high value-added products. In our business, we are focusing on high value-added segments. We are looking at how can we increase our -- what we call gap of input, output [indiscernible] or per dollar, which we sell. So those are the areas. And we are -- to a great extent, we have been successful in that also. Those kind of a margin expansion will continue and will sustain. So that journey will continue. Volume growth certainly will continue. However, margin will definitely be -- percentage margin will definitely be -- will be more sustainable on a longer-term basis on a reasonable basis.
In the presentation, I just concluded 2 points. In the presentation you also mentioned that we are augmenting backward integration of raw material for cost control activities. I think the last quarter, you spoke about the coal contracts also being delayed as we were expecting lower prices going forward. So what is our current -- our sold [ recovered ] percentage, [ the 6 month percentage to activate ] and how have salt prices behaved?
At this point of a time, when we say the augmentation of the resources, we are talking about more on a long-term investment into these areas so that for the longer period of time, we have a control under raw material. Because as you know, in the soda ash business, the control on the raw material is very, very important. So that's one. Of course, at this point of a time, few discussions are happening with where we are looking at an opportunity. Same thing applies for the limestone. So we are -- both these opportunities are being pursued from our side. Now when it comes to the salt prices, at this point of time, too early to say that because the new crop has not yet started, up until now. By end of November, we will get a clear picture of how the salt season is going to be. And based on that, the pricing for the next year will get determined.
Right, sir. And sir, lastly, sir, we have seen this -- talk about some M&A activity globally, whether it is from Turkish firm or even the Tata U.S. capacity coming -- being on[ block. ] Sir, what is your understanding of the M&A activity? And anything that it brings up and anything that may conclude going forward, that would lead to some rebating or some revaluation of the existing [ stress test ] going forward? Any benchmarking that we can expect or is it different altogether?
At this point of time, we are not pursuing any activity on the chemical side to pursue which is outside India because that we don't see at this point of time is our focus area. Definitely, we are looking at -- because the demand growth is primarily in India. So our focus -- and as you know that the supply chain cost is a very, very significant portion of the total cost of chemical of soda ash. Keeping that into mind, our focus is entirely on building the infrastructure or building the capacity within India itself so that we have a longer-term advantage in terms of supplying to the growth market, which is India.
Our next question is from Resham Jain from DSP Investment Managers.
Sir, just one more question on our new soda ash plant. Any update in terms of the progress on the land part and the project [indiscernible]?
Yes. Resham, there is some improvement or some progress has happened in the last quarter. Where what we have done is now we have applied to the government, and we got some approval on the land which we have identified. We have got an NOC from the government. And now those lands are in the process of getting registered in our name. So that's one exercise. We have applied to the government for the land, which is government land we have applied for acquiring that land also. That process is also on. On the other side, we have applied and we got and told from the Ministry of Environment. We got an approval on the [ 3rd. ] We have also applied to the various approving authorities on various licenses and like we have to apply to the Forest Department, we have to apply to the GMDC. All those things, a lot of applications have been made, and good progress is happening on the approval side. And I can say that, yes, progress has happened. And hopefully, things would become under control. And one more thing I just want to add here is we are also, like I have been telling always, we are looking at how to go in a modular form so that large capital is not committed in the initial year and we gradually make an investment. So that is also -- that exercise is also happening. Also, the technological selection of the -- technological partner selection, that process is also very seriously being done. So good progress is there on that side.
So FY '23, our original plan was actually to start somewhere in FY '22 in terms of actually spending on that project. So that will start in FY '23 now?
Yes, expenditure will definitely start after a year, but the significant portion of that investment will happen only after because the project completion is approximately around 2.5 years roughly, 2 to 2.5 years. The moment we get all this control on the land and the approval and everything, and by the time we will do that, definitely the bulk of what you call of the technological partner selections and detailed engineering and all those things will get completed. After that, it will take 2 years. Initially, some advances and other things that will be required. And later part, it will be more CapEx will be required. Like I have always been giving the guidance, we will never cross our, what we call, risk appetite from 1:1 debt equity ratio. And within that, we will may be lower than that. We'll try to manage our -- in our debt equity ratio.
Okay. Sir, now we get capacity coming in for the next 2 years now. Other than the 50,000 tonne debottlenecking capacity which is going on, you may get that capacity by the end of this year. So considering in terms of volume, maybe in '23 and '24 and will be available to us in '25?
First of all, foremost, recently, we are expanding our sodium bicarbonate production, and that will get completed next year and that will have an advantage. We are going for around more than 100,000 tonnes of the extra production of sodium bicarb. That will increase our revenue, number one. Second, as you likely said, some volume growth will be there because of the debottlenecking. And overall, yes, top line will increase, but that top line will not increase because of the quantity that will increase beyond these 2 points. It will increase because of the overall per tonne realization will improve. Overall, significant improvement will happen in the top line, but driven by more on the pricing side.
The next question is from Mr. Rishith Shah from Dhanki Securities.
So the question is actually regarding sodium bicarbonate. So we have been intently reading about the application of DSI system in the [ Dadri, ] which is kind of more so already applied in 2 of the plants of NTPC -- actually, one of the locations. So can you just explain the opportunity there, the kinds of plans that are currently using this technology? If you can just elaborate things?
So I have been mentioning this point that there is a new opportunity which will be coming of uses of the sodium bicarbonate in the fuel gas treatment. Globally, it is being used. However, in India, not yet started and -- NTPC, was planning to start but because of the COVID, there was some delay in that. Now they are in the process of finalizing the plan. Once that happens, and we got some market research done sometime back 3 or 4 years back, and we found that there is a huge opportunity of the sodium bicarbonate because of this usage. The way the environment -- but I think globally is happening and across India is also happening. This can create a kind of a good opportunity for the sodium bicarbonate [indiscernible].
The next question from Mr. Hiten Boricha from Joindre Capital.
My -- most of my questions have been answered. I have only 1 question left, that is on the textile segment. So you mentioned the cotton prices are going up in last 15 days. And in parallel, the demand is also going up. But as you mentioned, the margins will go down in Q3 and Q4 in this segment. So as prices as well as demand is going up, so are we not going to be able to pass the prices to the end customer? Why will the margins will go down, if prices and demand both are going up?
So very valid question, Hiten. Basically what has happened is that the cotton prices has been going up in last, I would say, 6 to 8 months. But some of them like us, we had old inventory, and we have been able to get that benefit of that pricing already in our selling price. Now the cotton prices are going up, that inventory for us is, to a great extent, has been consumed. So now we -- our raw material prices will go [ up with it ], whereas the benefit of the price increase has already been factored into the -- in our -- this quarter's realization. Second, overall, there is going to be definitely for the home textile or particularly for the carbon sector also, buyers will not be able to take the load off the entire increase. And therefore, some -- like I said, this kind of a margin is not sustainable margin for the textile business in any case for a longer period to time. So I'm always saying that the margin will be good, but margin will not be at the same level what we have achieved in the second quarter. That's the only thing I'm saying. But margin will be healthy.
Right, sir. So you mean, sir, if cotton prices go further up in Q3 or Q4, is it possible we can further pass this price to the end customer -- or do we have any cap on that side?
No, there's no cap on -- but we see ultimately, it's a commodity market. And in that commodity market, how much the customer will observe so that demand will remain, that has to be seen. And based on the competition on how the competition is doing and how the price is getting absorbed by the customer, this price mechanism will happen. You may be right that the prices of the yarn can further go up from here, we don't know. I'm just telling you that based on my experience, some margin pressure or some margin drop will definitely -- should happen. But I don't know how the scenario will pan out.
[Operator Instructions] So the next question from Mr. Saket Kapoor from Kapoor Company.
Sir, we have also spoken about the NCD issuance of INR 150 crores. So if you could dwell more into it, what is the end use of the same, sir? And what kind of interest percentage -- the coupon rate for the sale?
See, we have taken an enabling provision from the Board. And what we are looking at is that an opportunity -- because you know that our rating has been improved. Now we are entitled for -- we have a rating now AA-. So now we are entitled for the NCD. But keeping it as an opportunity, as you know, the interest rates are also on the rising side. So we are evaluating this at the right time, we will be placing that, and this will be used for the funding of the CapEx, mainly.
Raman, what is currently our cost of funds, both on long term and the short term and what has been the reduction? And then I have a question about the cash flow part on direct tax rate.
Yes. See, our long-term cost of borrowing is approximately around 8%, 8.5%. But the new loans which we are getting are in the vicinity of around 6.5%. But those MCLR, there is an increase by RBI, then they will also get increased. But we are getting current loans at 6.5%. And our short term, approximately, my cost -- all told costs will be around 5.5% as of now currently.
We have also seen an investment in the inventory part in the current [ state of ] 42 crores...
On the 30th of September, there were some money which was there. So we had to make some payment and the subsequent fee. So we have passed that money on a short-term basis in the fund -- in the mutual fund.
Okay. So there will be a reduction in the overall debt in the next 5 quarters? Yes.
So because of that -- yes.
Sir, on the direct tax -- I'll just conclude, I'll conclude. On the direct tax paid, we have made -- we have made a payment of INR 50 crore in the cash flow. So as per our advanced tax understanding, this is 45% of the total tax that is to be paid annually. In that case, are we looking for the next 2 quarters being possibly lower than what the first half is? Because if I do the back calculation, this is what the 18% we have paid on a profit of around INR 550 crores for the full year. I was just trying to work out of the rationale of INR 50 crores as direct debt being paid, which is 45% of the total, yes, total tax...
This was paid based on the projections which we had made at the beginning of the year, which were revised after the first quarter. Now as we said, there has been changes -- and there is such a volatile market there have been changes both in soda ash pricing as well as in the textile. So the balance figure really based on that, the revision will make the payment on 15th of December. So this is -- as you're right, this is -- the numbers will be much higher than what had been projected here.
The next question from Mr. [ Rohit Sinha ] from Sunidhi Securities.
Yes. Sir, could you just give us a number for CapEx for our IFRS '22 and '23? And same for the -- I mean what level we should expect for FY '22 also?
So far as '21, '22 is concerned, our capital outlay will be something around -- next year '22, '23, as of now, whatever CapEx we have considered as of now, it will be in the vicinity of around INR 200 crores, which has been frozen. So this does not take into account the allocation on account of our greenfield or any product basket expansion or the backward integration projects, which is -- which numbers will come once we close those opportunities. But based on the confirmed projects, whatever we are undertaken, the number will be in the vicinity of around INR 200 crores.
INR 200 crores for FY '22?
FY '22 will be INR 400 crores to INR 425 crores.
Okay. And what sort of debt level we should be expecting?
See, at the beginning of the year, we added debt of around close to INR 75 crores. So we will be more or less in the same range. So whatever CapEx we are doing, we should be able to finance through the internal accruals. So that is where we are as of now.
Okay. So no major debt reduction is expecting?
Yes.
Ladies and gentlemen, that was the last question. Now I hand over the floor to the management for closing comments.
Thank you. Thank you, everyone, for participating in our call. And as we have been saying always, we are doing our best to make sure that we create value for all our stakeholders and our endeavor towards that will continue. Thank you for participating.
Thank you, sir. Ladies and gentlemen, with this, we conclude our conference call for today. Thank you for your participation and for using [ Telus-supplied ] conference call service. You may all disconnect your lines now. Thank you, and have a good evening, everyone.