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GHCL Ltd
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Ladies and gentlemen. Good day and welcome to GHCL Limited Q4 and FY '22 Results Conference Call hosted by Emkay Global Financial Services. We have with us today. Mr. R.S. Jalan, Managing Director; and Mr. Raman Chopra, CFO and Executive Director of Finance. [Operator Instructions] Please note this conference is being recorded.
I now hand the conference over to Mr. Rohit Nagraj of Emkay Global Financial Services. Thank you, and over to you, sir.
Thanks, Bikken. Good evening, everyone. I would like to welcome the management of GHCL and thank them for this opportunity. I now hand over the call to the management team for their opening remarks. Over to you, sir. Thank you.
Thank you, Rohit. Good evening, and welcome to GHCL's earning call for fourth quarter and financial year ended on March 31, 2022. I have with me our CFO, Raman, along with Manu and Abhishek. Our results table and analyst presentation has been uploaded on the stock exchange and our company's website. Hope you all had an opportunity to look at that.
I'm pleased to share that we have successfully completed this investment of our home Textile business effective April 2, 2022, as planned. The total consideration realized was INR 608 crores, subject to customary adjustments.
Many of you track us and the underlying industry very closely. Let me present some of my thoughts on the same. Globally, soda ash demand has stayed strong due to revival of economy and strong growth in downstream segment and emerging applications like solar glass. However, on the supply side, we have seen a lack of flexibility for capacity to match this growth in requirements. There are a number of causes for this. For most, it is a closure of some capacity in China, then there is an issue of higher supply chain related costs; and at the base of it, the fact that no fresh investment has been undertaken in last few years anywhere in the industry. Thus, we are of the opinion that this situation will persist at least during this year.
Having said that, we need to be watchful on the global demand scenario going forward and monitor for adverse impact on business momentum due to high cost of energy. We have presented our vision in chemicals and are absolutely working towards accomplishment step by step. We continue our focus on the greenfield project in soda ash, the sodium bicarbonate expansion, product basket expansion on cost optimization and to build efficient coverage of raw material, and we will update you in the timely fashion.
Moving on, in the spinning business, there is a sign of slowdown in the demand due to very high cost of cotton. However, we believe that going forward, the demand situation will revive and some of the contributory factors supporting our convictions are the China plus strategy being followed by the key buyers and chains, the situation in Sri Lanka and in Pakistan and likely FTA that will be signed by India with U.K. and Europe.
Our focus on the spinning business is to expand our capacity gradually. This will be supplemented by investing in green energy to have a better control on cost of energy where we have a target to meet internally up to 85% of the power requirement. Our strategy, as we have said earlier, will also see us move this momentum share of premium offerings from 60% to 80% within sale.
Further to share the corporate update, our progress on the demerger of the chemicals and spinning business is as per schedule and we hope to complete it by the third quarter of this year. Thus, I have covered what I wanted to convey.
Now I would like to request Raman to share with you the performance of the quarter and for the year ended March 31, 2022. Over to you, Raman.
Thank you very much, sir. Good evening and a warm welcome to all of you in our Q4 earning call for financial year '22. I will share the financial highlights and segmental performance for the quarter ended March 31, 2022.
The results of the home Textile business had been disclosed as profits from discontinued ops business. Accordingly, figures for all prior periods have also been reclassified and disclosed separately.
Revenue for Q4 FY '22 came in at INR 1,279 crores as compared to INR 723 crores in the corresponding quarter of last year. This is a growth of 77% on year-on-year basis. On a sequential basis, revenue increased by 27% from INR 1,006 crores in Q3 FY '22.
EBITDA for the quarter stood at INR 411 crores, which is a significant increase of 113% from INR 193 crores in Q4 of FY '21 and by 64% from INR 251 crores in Q3 FY '22. This represents an EBITDA margin of 32.1% for the current quarter as compared to 26.7% in Q4 FY '21 and 24.9% in Q3 FY '22.
Profit after tax, including discontinued operations for the quarter stood at INR 260 crores compared to INR 104 crores in Q4 FY '21 and INR 153 crores in Q3 FY '22. This demonstrates a very strong performance across all financial parameters due to strong beat done by underlying business.
Let me now share the segmental perspective. In the inorganic Chemical segment, we have reported a revenue of INR 1,001 crores during the quarter, which is up by 89% compared to INR 531 crores in the corresponding quarter of last year. EBITDA for the quarter stood at INR 338 crores as compared to INR 142 crores in Q4 FY '21, which translates into EBITDA margin of 33.7% in Q4 FY '22 as compared to 26.7% in the same quarter of last year. The reason for this strong performance in the soda ash business is due to combination of volume growth and also due to price increase undertaken in the last few months to offset the inflation in cost. This led to better margin as increase in prices have more than offset the increase in input costs.
The performance of our Textile business continues to be robust. And as a result, revenue from the current quarter stood at is INR 278 crores as compared to INR 192 crores in the corresponding quarter of the last year and INR 241 crores in the last quarter. This translates into a growth of 45% on year-on-year basis and 15% on a sequential basis.
EBITDA came in at INR 73 crores as compared to INR 51 crores in the same quarter of last year and INR 69 crores in the last quarter, translating into EBITDA margin of 26.4% as compared to 26.7% in Q4 of last year. This is due to strong demand for yarn and high spreads despite elevated cotton prices.
We have been able to achieve better utilization due to our focus on product basket expansion and value-added products. For the quarter ended, our net debt stood at INR 543 crore as compared to INR 722 crores at the end of last year. This represents a net debt-equity ratio of 0.18x.
With this, I conclude my comments and would now request the moderator to open the forum for question-and-answer. Thank you very much.
[Operator Instructions] We have our first question from the line of [ Vikas Kasturi from Focus Capital ].
Congratulations to you on a fantastic performance. Sir, my first question is how were the spot prices for domestic soda ash determined?
[ Vikas ], currently the spot prices are in the range of around INR 34,000.
Sir, my question was more like, so where is -- is it traded on MCX or some exchange like that where these prices are determined?
No, no, no, it's not like that. That is not something…
Okay. And what would be your mix between spot and contract? How much of your volumes would go in spot and how much on contract?
Yes, [ Vikas ], generally, it used to be around 30% of the fixed and 70% used to be the spot. Out of this 30% used to be a mix of yearly, 6 monthly and quarterly. Now over the period of last few months, I would say that we have moved from yearly to 6 months, and that's why we are shortening the fixed contract period, but that percentage of 30% still remains.
Okay. And last question, sir. What is the status of the anti-dumping duty on soda ash?
[ Vikas ], there is no anti-dumping duty at this point of the time in soda ash.
Okay. So does that mean that imports from say Turkey could come into India and would they be cheaper than the Indian prices, sir?
Not [ Vikas ]. At this point of time, the imports are costlier than the domestic prices.
Would you know what is the price of that, sir, per tonne, the import price?
So, it depends on the customer to customer and it depends on the contracts, when the contract has been done. And in India, at this point of time, not very large volumes are coming from any part of the world, except those volumes which are already been contracted long time back; otherwise, no.
We have next question from the line of Dhaval Shah from Svan Investments.
Congratulations on great numbers. Just one question from my side. By when will we receive the net proceeds of our sales to escrow account?
Out of that, 50% we have already received before March and the balance 30% -- 50% we have already received in the month of April. At this point of time, almost 90%, except some small amount which has been kept in escrow, around INR 10 crores, INR 11 crores, almost everything we have received.
Okay. So the 50% received -- the amount which is received so far will total how much?
Approximately around INR 600 crores.
Okay. So the tax will be after this, right?
Yes.
Okay. And so, we are at INR 560 crores net debt as per the presentation roughly. So what would be the figure by June end or September end, do we intend to repay this or keep the cash as it is?
No, at this point of time, it's very difficult to predict what is likely to happen by September 2022. However, let me give you some sense on this. As you know that overall the raw material prices has gone up, even the soda ash prices has gone up. So some amount of this resources will be utilized for the purpose of working capital also, because coal prices has gone up from $150 to $300 kind of thing. So some portion will get deployed there.
On the end of the year of 2022, means March '22, we had approximately around INR 200 crores in the balance sheet, cash balance, because we got this money from the account at the end of the -- in the last week of March '22. How the number will span out, that we will see going forward. And as you know that dividend also has to be saved.
Yes. Correct. Sir, my second question is about the CapEx. Now the greenfield CapEx for soda ash which they are going to undertake, can you share some time line in terms of how the cash outflow will be seen from the balance sheet towards the greenfield CapEx? And by when should we see the first output from the new plant?
See in terms of -- the large investment will happen only 18 months onwards and that too you can say in '24, '25 some portion will be there and the major portion will be '25. So, from that perspective, in this year '22, '23, only the margin is investment in the form of some small land or some basic engineering and things like that will happen. So not a very large sum will be in this year.
Okay. So could you quantify the CapEx for this year, like '23, '24, and '25?
Right now, I don't have a number. Raman, you have a number, if you can share?
See, for this year. If you are specifically asking about greenfield, this year will not be more than INR 50 crores. Next year, probably we can end up maybe around INR 300 crores and INR 350 crores kind of numbers. We can anticipate INR 300 crores kind of number, but that is for the green. But we have got other CapEx lined up for both soda and Meenakshi this year for more textile during this year.
Okay. So that would lead to how much total CapEx? And also, I want to know the cost of this first leg of 5 lakh tonne.
See, first leg of 5 lakh tonnes, the cost is approximately around INR 3,500 crores, which like, Raman had just said that the major portion of that will get spent 2 years from here.
Yes. So this year, FY '23, '24, total CapEx should be how much?
In '22, '23, the total CapEx will be something like around INR 550 crores. I'm talking about the outflow.
Yes, the CapEx outflow. Okay. So of that, INR 50 crores will be towards the greenfield and the rest will be towards the -- some sort of debottlenecking and textile including, right?
Yes. This includes both textile as well as chemical, so approximately INR 350 crores towards the textile, around INR 200 crores towards the chemical business.
We have next question from the line of [ Rohit Kumar ], an investor.
Compliments for recommending the special dividend to the investors. I just heard that you have announced that INR 3500 crores is the CapEx, which leads to roughly about INR 70,000 per tonne of capital cost. Does this include the backward integration infrastructure and sodium bicarbonate also?
No. It doesn't include the backward integration like captive salt and those kind of things is not included in this and neither the sodium bicarbonate.
So what would be a ballpark number attributable to that, sir, on top of INR 70,000 per tonne?
My guess is that if you look at in terms of the backward integration, if you go for the 100%, that number will be much higher. However, if the kind of size which we have for the backward integration, you can assume another INR 15,000 minimum to be to be added into this to have a backward integration. I'm giving you just ballpark number.
Obviously, sir. Obviously. So which means that will translate -- that our current capacity of 1.1 million tonne is almost INR 10,000 crores replacement value. Am I right?
That number, you can calculate. I can just give you the number what is the likely number which can we have.
Surely. And my second question is that in the presentation, we have sodium bicarbonate of 1.2 lakh tonnes going forward. What is the EBITDA per tonne for sodium bicarbonate if you can elaborate, sir?
There are 2 things in this. Sodium bicarbonate is more of a specialty chemical. So we are moving -- this is specifically as you know, the uses of this sodium bicarbonate is also being envisaged for the flue gas treatment. And the EBITDA percent if I would convert it into the soda ash number, it will be 1.4x to 1.5x, roughly around 1.4x of the soda ash contribution -- soda ash EBITDA.
So this is really happening that almost 10% of our volumes would be now contributed by a value-added or a specialty chemical product?
That's right.
What sales that we have to grow this segment in next 2, 3 years as a market and as GHCL?
See, like I said in the past also, the flue gas treatment is a huge opportunity in the sodium bicarbonate usage. However that because of the COVID, NTPC was trying this product into various of their power plants. But because of the cost pressure at this point of time, they have slowed down, but still some trial has already started there.
The moment this flue gas treatment is being stabilized, then we are seeing a huge opportunity in this, but still the growth into the sodium bicarbonate last 4, 5 years is more than around 8%. So I clearly see a very good opportunity in the sodium bicarbonate going forward. And here the CapEx is also -- not a very large CapEx is required. For 60,000 tonnes, we are just -- you can say approximately cost will be INR 30 crores, INR 40 crores only.
So there is a good ROC with that?
Yes, there's a very good ROC of this.
And my last question is, now with the greenfield on the cards in next 2 to 3 years, are we only content getting soda ash into that greenfield or any other chemical has also been added to it?
No, we have already said in the past also that we are working with some of the bulk chemical along with it and that bulk chemical will also get added to this basket over a period of time. Along with some of the other chemical, some of the other things also we are looking at and hopefully those things will add to the kinds of basket of the product on that project.
And these all new products will come along side soda ash immediately or that will take further time?
No, my understanding it should come immediately after the soda ash is coming. And there the investments are not going to be very large.
[Operator Instructions] We have next question from the line of Sarvesh Gupta from Maximal Capital.
Congratulations for a very good set of numbers. Sir, in the last call, you had said that the realization has increased by around 6,000 odd tonnes in soda ash. So has there been any further increase in realization? And against the cost, how is it panning out against the cost increase per tonne?
See, in last few months, I think the total increase in the soda ash price is around INR 11,000. And beyond that, during this quarter also, in the month of April, there is another increase of around INR 2,000. And in terms of the cost, of course, the costs are also increasing, particularly the energy. So my sense is that whatever the cost increase is happening, we have been able to pass on that cost to the consumer.
And this level of EBITDA per tonne, given the tightness, you said that at least for a year they should persist. So this level of EBITDA per tonne should persist for a year?
I think so, yes.
Understood, sir. And secondly, sir, I could not understand fully the CapEx plan. So INR 550 crores is INR 50 crores is greenfield. INR 500 crore is for the existing business; INR 300 crores, brownfield; INR 200 crore Textile. But this does not include your sodium bicarbonate and other things. So what is the exact plan over there? And also for the next 1 and 2 years, sir, what is the CapEx plan?
Raman, can you clarify this?
Yes, I'll clarify this for you. For this year, the CapEx plan is INR 550 crores, of which greenfield is around INR 50 crores, also sodium bicarbonate, that capacity expansion we are doing that is also included. In addition to that, there are certain projects in the chemical side, which are relating to salt yield improvement and some capacity enhancement in the lime kilns and all and some AI digitization initiatives. So those are the expenses which we are -- CapEx which we are doing on the chemical side. All put, together INR 200 crores, which includes sodium bicarbonate, which includes the greenfield INR 50 crore, and which includes some salt yield improvement projects also. So that is a part of INR 200 crore.
In addition to that, we are going to have a plan of INR 350 crores on the spinning side, which will have our previous 40,000 spindle project is getting completed, a balance payment of that. And we have already got another sanction of 41,000 spindles spend on that. Both put together will be approximately INR 250 crore. In addition, we'll be putting our solar energy, which is around INR 45 crores. And then there are certain small debottleneck projects. That spend will be there. So all put together, in Textile, we'll be spending around INR 350 crores this year. I hope I have been able to clarify that.
Yes. What about backward integration? Is that included in INR 200 crores of inorganic?
When you say backward integration in this particular current location, we are looking at a salt yield improvement. So that is included in this. Salt yield improvement is a 3- to 4-year project. We spent some money last year. We'll be spending some money this year. And next year also we'll be initiating some money -- some spend on the CapEx. That will help us improving our salt yield at our captive mines, which will help the organization.
In addition to that, we'll be building or improving our capacity on the lime kiln area because our production has gone up. So that will also strengthen our -- the requirement after that. Expenditure is also included in that.
I just want to add what Raman has just said, a few things. One, captive salt yield improvement. We see a huge opportunity on this front. Almost the capabilities of producing the captive salt will just double in next 2 years' time. So that's a huge backward integration in the way you can say. The dependability of buying the salt from outside will significantly reduce. That's number one.
Second, limestone, we are looking at the possibility of Rajasthan limestone. This thing, of course, the CapEx requirement will not be very large there. But of course, that will not happen this year, but the work is going on in that to have a large reserve of the limestone into the Rajasthan State. So that's why we are trying to build that backward integration.
Understood, sir. And on the greenfield side, now we have been talking about greenfields in at least 4 years. So do we regret that we have moved on this at a very slow pace, and now when the markets have really turned up for soda ash, we do not have any excess capacity?
I don't think -- personally, I don't regret on the past. You see, ultimately, we have to take a judicious decision at the time that we are taking a decision. And regretting something after the time is passed, I don't think that's the right approach. At least we will not have that approach. Yes, gives us a kind of opportunity of expediting the process if we can do that.
[Operator Instructions] We have next question from the line of Rohit Sinha from Sunidhi Securities.
Yes. First of all, congratulations for a strong set of numbers. So 2 things. One is on -- what is the thought process in going for the downstream and forward integrated products? You were talking about caustic and chlorine business last time. So what is the development in that space?
See, so as the caustic and chlorine is concerned, as I mentioned in the past also, that expert has been appointed and they are working on this project. And we are going very closely with the concern. And hopefully, in the next 3, 4 months, we will be able to firm up our plan on the caustic and chlorine.
Like I said, the caustic and chlorine project will also be coming in to the current greenfield project which we are talking about, and that will happen along with the side-by-side of the soda ash.
Okay. Got it. And secondly, I mean, as we are talking about the price as you have also mentioned that in Q4 also, the close to INR 2,500, INR 2,600 per tonne price increases there. So would it be possible just know how many price hikes we have taken in Q4? And I mean, the number of price hikes which we have taken and do we believe that these prices will sustain in the near term, considering first of all, obviously, some lower supply on the import angle? And also, if you can just touch upon what is the current situation in the Turkey side considering the current situation there?
See, 2 things, Rohit. On one side, in terms of the Turkey which you have just said, we don't see any large volume is coming into Indian space, except those volumes which has already been contracted by the global players, be it Turkey or be it Europe or be it U.S. So therefore, the demand situation is going to be tight going forward. And therefore, the prices -- and if I say today -- I have just said that today, the domestic prices are cheaper than the blended price of the soda ash coming from outside India. From that perspective, I personally really believe that prices are going to be sustainable unless something drastically happens, which we cannot visualize at this point of time or there is a demand construction happens going forward, which probably in another 1 year or 18 months, at least, we don't see that. If that happens, then probably there could be a kind of a challenge. Otherwise, these kind of margins, these kind of prices should be sustainable for at least for 1, 1.5 years kind of thing.
Okay. And as you said that the domestic prices are cheaper as compared to the imports. So does that provide further upward revision in the domestic prices, possible?
See, at this point of time, difficult to say that because ultimately, we have to look at the customers' point of view also. And therefore, at this point of a time, I don't think I will be able to comment on this.
We have next question from the line of Rohan Gupta from Edelweiss.
Sir, this question is on this current scenario on soda ash, which is a favorable industry. And as you mentioned that the CapEx of roughly INR 3,000 crores for a 5 lakh tonne plant. So even in this scenario, also in the current scenario, do you see that the payback period will be lucrative enough to justify the current ROC? And do you see that with the rising soda ash prices, there may be more greenfield CapEx announcement may happen in the industry because that's always the case when the industry is favorable, companies go for the CapEx plan. So do you see that on both side that -- if you can share your outlook around that?
No, Rohan. Thank you very much for this. It's a very, very pertinent question which you have raised about the viability of a greenfield project. See, my personal view is that unless the margins are in the range of what we are at the margin right now, no project of greenfield project will be viable. So these kind of margins are required for a new greenfield project. And therefore, my personal belief is this kind of a margin will be sustainable for a longer period of time.
Just now I have said, if you want to set up a plant along with what we call a backward integration, the kind of a project cost we are talking about, unless you have this customer margin, you will not be having any ROC or good ROC. And obviously, you are looking for some decent ROC for a new investment.
Second, even if somebody decides to set up a plant -- you know that the last competition which has come, took 7 years. Even in our case, also almost 2 years has already been spent on land acquisition and various approvals. The minimum requirement of any plant for coming requires 5 years in Indian scenario. So you can visualize that how the scenario will look like going forward. I hope I was able to answer your question on this.
Yes. So sir, you mentioned that -- I just want to understand dynamics a little bit more of a greenfield plant, INR 3,000 crores is without any kind of backward integration. I'm talking about -- I mean, up to the mining stage, it doesn't include that. It's only for the plant, including power plant, right?
Yes. Like I said, overall, the total cost which we are talking about, INR 3,500 crores , is primarily the soda ash plant. We are not talking about captive salt or we are not talking about limestone and things like that. We are not talking about that. That will be over and above just investments.
And sir, if you can just put some numbers, I'll come back in queue further. With the INR 3,500 crores CapEx and right now I think that EBITDA per tonne will be in the range of INR 10,000 to INR 12,000 per tonne if you don't expect that soda ash prices will go up further. So with this INR 10,000 per tonne, sir, and INR 3,500 crores, the ROC will be still low single-digit number, right? So as you said that the margin should be in line with the current margins. So how you see that the dynamics of this new project will work, I am still not able to understand, sir.
Rohan, I'll just try to answer this in a way I understand this. Overall, if you look at the soda ash industry, if you're looking at an ROC for the next 1 or 2 years or 3 years after the plant is set up, surely what you rightly said, the numbers of ROC will be on single digit. But you have to look at this business more of a slightly longer term. If I look at the business for 10 years, 5 years, that kind of a number, this number will be good. And IRR, what number we have calculated, Raman is it around 17%?
Yes, IRR is 17% and even ROCE or a longer period of time will be 20% kind of number. So we have got -- and that we have done not on current margins. That we have done on a conservative margin, lower than the current margins. We can share this number -- if you want, we can share with him offline.
No, no, Raman, basically what Rohan was talking about is to understand that how the dynamics look, right? The broader number we have given -- on a longer-term basis, IRR will around 17% and return on capital will be in the range of around 18% to 20%, and it's slightly longer term. But yes, if you are talking 1 or 2 years, then definitely, this number will be lower.
We have next question from the line of [ Jatin Kumar from Alpha Capital ].
Congrats on very good set of results. Sir, you said spot prices are currently around INR 34,000 per tonne. So I just wanted to check, in Q4 what was our realization in Q4? Was it similar to this number, or was it a bit less than this?
No, it was lower than this number in Q4 because like we know that there are some contracts which were on a 6 monthly or 3 monthly. So obviously, the increase which has happened during the entire quarter will happen.
So can you please quantify that number, please?
No, I don't think I will be able to give you the numbers of…
Sure, sir. And we have taken a price hike in April…
Yes.
Sure, sir. And any increase in -- any more increase in electricity price and other things, which can be hurt for margins? Or do we think margins will even improve from the Q4 from Q4 numbers?
See, my understanding is the margins -- the current margin what we have achieved in Q4 will be a sustainable margin. On one side, the raw material prices has also gone up. On the other side, the soda ash prices has also gone up. So overall, maybe slightly better than the Q4 number, but ballpark numbers should be in the same range.
Sure, sir. And any more color on demerger, when can that -- how is the time line going on that front, sir?
It is going as per the schedule. CCI approval and the stock exchange approval has come in. And now during this week, we will be filing with the NCLT. And hopefully, by third quarter of this year, we will be in a position to have both the companies separately listed.
Sure, sir. And in the next year, any kind of volume growth you would like to guide us?
See the Textile definitely, the volume growth will be there because there's 40,000 spindles will get commissioned in the third quarter. So that volume growth will be there. In soda ash, sodium bicarbonate, some volume growth will be there. And overall, soda ash marginal growth of volume may also happen.
We have next question from the line of Saurabh Jain from HSBC.
I have 2 questions on the global soda ash. Sir, can you help us understand there were some discussions of some capacity in the U.S. coming on stream with Grainger. Any update on that? Is it coming? Or is this not coming? How is it?
No. We have also heard that new capacity is coming in U.S. and even we have heard some of the capacity is coming in Mongolia, in China, okay? But all these capacity, any likely color of this capacity will be beyond 2 years down the line. Secondly, must understand that on the other side, there's a huge demand of the solar glass across the globe and particularly now because of this geopolitical system, geopolitical conflict, a lot of focus has also started asking about the green energy and solar is one of them.
Second, you know that lithium battery also there's very huge requirement likely to happen in that area also. So I don't see supply increase will have any major impact on the new capacities coming in. At least for next 2 years, I don't see that. Only concern which I have personally each one, whether because of the very high commodity prices, including soda ash, including all other commodities, and because of that inflation increase, whether some demand complexion happen, to what extent it happens, that will only to be seen. But at least for the near term of around 16 -- maybe around a year's time, I don't see that having a very significant impact. But going forward, we don't know.
That is helpful. And can you also quantify how much will be these capacities in Mongolian granite, any numbers on that?
See, they are talking about a very large capacity, but probably in '24, '25, some volume can come in from that Mongolia. And they are talking about almost around 5 million tonnes. But that will take some time. It will take at least 6, 7 -- and second thing, even if the global demand grows by 2%, you need 1.5 million tonnes of soda ash consumption. I'm not taking solar glass, I'm not taking lithium battery. In the normal demand of 2%, you require approximately around 1.2 million to 1.4 million tonnes of the extra requirement every year.
Second, some of the noncompetitive plant, as you know, in China has also been stopped. So overall, like I said, overall, I don't see any major threat company because of this new captive coming in, which will take at least 3, 4 years from now.
So I mean just to continue on this, like you say, there is no new capacity which will be added over the next 2 years and probably utilization rates also running quite high. So do you see a scenario of globally there is big shortage of soda ash. I mean that had to happen, which end use segments might kind of face these shortages?
See, some marginal capacity definitely will come in, some here and there. But I don't see any major capacity coming in. And today, I see one of the challenges I see in Indian space, at least for the detergent side. Because detergent, the people have not been able to pass on the cost to the consumer. As for the industry like glass or the bottle glass have been good. So I don't know how that will shape out to the glass. But detergent, definitely feeling some of high prices of raw material, including soda ash and other chemical as well.
Yes, fair point. And lastly, in China, this capacity that has gone away, what's the probability of this coming back into the market when you start to face the shortages or the…
That has been permanently set. And at least for the next 2 years, we are not seeing the capacity coming in. After 2 years, they may relocate to some other locations, and then it may come, but not for next 2 years.
Okay. And if I may -- this is my last question. How much is the demand for solar glass as of now, for soda ash?
Sorry. Can you repeat your question?
What is the demand of soda ash into the solar glass segment?
Solar glass?
Yes.
Right now I don't have a ready number.
We have next question from the line of Sangeeta Purushottam.
This is Andrey, Sangeeta's partner. First of all, congratulations for the absolutely growth results to you and congratulations to you and Raman-ji.
My question really was a follow-up question on the global demand and supply situation. So my first question was if the demand without solar glasses and lithium batteries around has been globally growing at about 2%, what additional percentage do you anticipate coming from these 2 areas? And the second question is, could you tell us a little bit more about the supply and demand situation in specific geographies in China, Southeast Asia, South Asia and Turkey?
See, my understanding at this point of the time is the demand has just recovered to the pre-COVID level. And when we say 2% of the demand growth, obviously, that some of the countries where we see a major increase, which is one is India, and second we are seeing in China. And to some extent, we are seeing in the South America as well.
My question was that how much does demand get augmented by the new uses versus with lithium batteries and glass?
No, when I say 2% of the demand, which I am not talking about the lithium battery or this solar glass. I'm talking about that demand will be in addition to this 2%. This I'm talking about 2% more than a normal demand growth into the various, what you call, traditional uses.
Yes. I understand that. So my question really is, if 2% is for traditional users, do you have some idea as to what it could go through with the addition of glass and lithium batteries?
Anybody's guess. At this point of time, I have been told that this could be in the range of around maybe, I don't know, that the number in terms of the percentage, but probably depending on how the solar gas investments happen in India and China, probably this number could be much higher. But a specific number, I will not be able to tell you.
Okay. And is the supply and demand situation in Southeast Asia, China and Turkey?
Everywhere the demand/supply situation is tight overall, any part of the country, any part of the world.
Okay. So there is no immediate set of any supply impacting India in the near future, right?
No, we don't see -- at least for the next 1 year, we don't see any supply increase into India from any part of the world. Whatever we can do, increase the production here, that will be the only thing.
We have next question from the line of Anurag Patil with Roha Asset Managers.
Sir, if you can share your outlook on the spinning margins for the next couple of quarters, that will be helpful.
Thank you very much. This is a very pertinent question. Like I said, in soda ash, we are very firm that going forward at least for 1 year, the scenario will be positive. On the other side, on the spinning side, though the demand looks to be good, which I've said in my opening remarks as well. However, the margins definitely are going to be lower than what we have achieved last year, primarily because last year, we are in advantage of lower cotton prices and higher realization. But this year, the cotton prices have gone up very significantly higher, and that will definitely have an impact on the margin of spinning going forward.
Last year, you've seen the number is around 26%. Probably this year, our numbers would be in the range of around 20%, 22% kind of a number we should be achieving. But one thing which we are doing probably will help us, one, like I said, investment in a solar glass that is really helping us because you know that energy price has gone up because of the power shortage have gone up. But we are almost now around 70% of our power requirements are met through the green energy. That will have an advantage.
Second, I was shifting from a commodity of spinning to more towards the value-added segment or the premium customers. And that is also happening. That's why I'm saying around 20% to 22% as of a margin, we should be clocking next year.
Okay. And sir, on soda side, what was our utilization level in Q4?
It is almost around, I would say, at the peak 98%, 99% kind of.
[Operator Instructions] We have next question from the line of Yogesh Tiwari from Arihant Capital Markets.
Congratulations for a good set of numbers. I had one question on the global scenario. So if you just look at Europe, it's like 12 million tonnes of production for ash. What do you think -- are you seeing any disruption in production in Europe because of the problems in energy. For example, if I take Polish manufacturers, [ CHIECH ] or Russian manufacturers, are you seeing any disruption in Europe for soda ash?
Very valid question. And fortunately, Poland as well as Bulgaria, which we have heard the news that the Russian gas supply has been stopped, they are mostly on the coal, both the plants, soda ash plants in Poland and Bulgaria are on the coal. So we don't see -- at this point of time, we don't see any production disruption or any consumption disruption into the Europe.
Sure, sir. And finally, just one off shoot like. There are some Russian players as well like JSC Soda and other players. So any disruption on their side for production?
No. At this point of time, we are not seeing any disruption in the soda ash production or the consumption across the globe, including Russia.
We have next question from the line of [ Rohit Kumar ], an investor.
Just one question. What is the value-added segment in the spindle percentage to the overall revenue? And what was it maybe a year or 2 later or earlier?
No, you're right. [ Rohit ], thank you again. We have moved in a very significant manner in the value-added segment in the last 3 years. At this point of time, we are approximately around 60% of our products are in the value-added segment, which we had a plan to move to 80% going forward.
Sir, what was it, maybe 2 years back?
It must be something around 20% or less than 20%.
That's a remarkable achievement. I am sure the value-added segment is much higher margins compared to the normal margin?
Yes. Look, there are 2 advantages we see that. One advantage is your margin fluctuations gets reduced because when you are dealing with a premium customer where you have a high-quality expectation as the type of product, automatically, you are not leading with the market fluctuation into those growth products. That's one is one that you get. And second, obviously, each product has a better margin than the commodity space.
Also, as we are growing almost 80,000 spindles, there is enough market for value-added segment going forward that these 80,000 spindles can also be on value added segment?
Yes. That's where we are focusing on. Margins are -- the volumes are in the value-added segments that are large. And we are also adding the new products like the 40,000 spindle which we'll have in third quarter of this year, we are all we are talking about different products, which are more sustainable, more of synthetic and cotton base, which are different uses. So those kind of things we are doing, we are seeing a clear a uniqueness in our products. So definitely that will have unique advantage to us now in the margin as well.
We have next question from the line of [ Saket Kapoor from Kapoor & Company ].
Yes. Commendable set of numbers and also the dividend payout and the special dividend, all going very well for investors, sir, and thanks a lot to the team for the hard work. [Foreign Language].
Sir, you have very specifically mentioned about the solid improvement part. What kind of a fixed cost reduction can we expect going forward? And I mean how is the bottom line going to the benefit from this salt deal, if you could dwell more on it? And when will this get into commission phase for our existing capacity?
[ Saket ], if I can say in one line, the moment we will achieve this stream, we will have a bottom line debt of around INR 200 crores.
Bottom line gain of INR 200 crores annually.
INR 200 crores of the bottom line gains can be hit to the bottom line. And that probably will take another 2 years' time. Hopefully, next year, some gains will be there, not '22, '23, because salt yield, the season starts from the month of November, December. So some benefit may happen this year, but maximum benefit will happen next year and year after that.
So that means in the next 2 years, we will have an advantage unless the weather conditions become so bad. Otherwise, we should have approximately in 2 years' time, we will have a hit of around INR 200 crores into the bottom line.
Gain of INR 200 crores, not hit. We will be gaining INR 200 crore advantage?
Yes, advantage, advantage.
[Foreign Language] Sorry to correct.
[Foreign Language]
No, no, sir. That is what I'm correcting, sir. Out of this project, we are going to gain INR 200 crores just on the implementation of this salt yield improvement part. And sir, what is the CapEx we are spending on it, sir?
It is hardly -- approximately around -- my guess is around INR 100 crores.
INR 100 crores, okay. And we have spent how much, sir?
Right now [ Saket-ji ], I don't have ready numbers.
Raman, we have a exceptional item of INR 25 crores for the stand-alone number. Can you explain what is it account for?
This is basically our investment in Grace Home Fashion, an U.S. subsidiary because now we have liquidated our home Textile business. So whatever investment is lying there that is being written off. Because on an overall basis, we have gained as compared to the books. So all the investments are liquidity. So there is an exceptional item we have taken in the gain.
Right, sir. And for this year, sir, for FY '20 -- 31st March 2023, any new capacity for soda ash that is 50,000 tons more will come in on stream for our existing facility or every downtrend expansion is on track and has been commercialized?
So everything has been already completed. As Mr. Jalan has mentioned in his remarks, with some efficiency improvement and something you may have some improvement in volumes coming in. But major improvement will come in the RBC side, which is a sodium bicarbonate.
We have next question from the line of [ Amish Shah with Dollars Corp. ]
Sir, congratulations on a great set of numbers. Sir, can you share some light on the volumes during the fourth quarter and the full year, sir?
Like I said, we have given you the indication of approximately around 98%. So that kind of numbers are there in the year as a whole. And our volume this quarter is up by -- as compared to the last quarter of same -- same quarter last year. Our volume is increased by something around 13%.
13%? Okay, sir. And sir, about the debt position that you have, are we comfortable with the existing debt? Or are we planning to take it down further, sir, given the cash flows?
See, we have at this point of time, we have only a net debt of around INR 550 crores. It is very small in terms of the numbers. And we are definitely comfortable with these numbers.
We have next question from the line of Satyan Wadhwa with Profusion Capital.
My questions been answered.
We have next question from the line of [ Vignesh Iyer from Sequent Investment ].
Congratulations on a good set of numbers. I have 2 questions. First, pertaining to the internal -- as in the captive power part. So you mentioned to a member or the investor who asked you a question that 70% of the total requirement is being fund -- is in captive power, right? So and I went to your presentation. So here it has written that there is 6.5 gigawatts renewable energy projects for inorganic chemicals and 10 megawatt under implementation for Textile. And for year ended FY '23, total renewable energy at 57 megawatts catering to 75%. So is this a 10 gigawatt and 6.5 megawatts included in the 57 megawatts?
Raman, can you answer this?
See, there are 2 parts to this. For our Textile business, what we have mentioned is -- we are -- with our exit, we are expanding it by 10 megawatts. Last year, we have invested 20 megawatts of solar energy. Now with that, we have reached almost 65% of our entire spinning requirements, any energy requirement is led to green initiatives.
Now with this new 10 megawatt, we'll be reaching around 75%. And our ultimate objective is to reach around 85% through green or renewable energy. That will be one initiative. So that is -- I hope that is clear.
Now in our Chemical business, we -- there is entire energy of how is produced through the captive sources. So there is a -- we produce team and with steam we generate power. So that is used. However, to go green there, we are implementing one more initiative in our chemical business where we are going in with a 6.5 megawatts of renewable energy, which will be a mixed project. It will have solar as well as it will have wind. So that is the new initiative which we are taking in the chemical side. I hope I have been able to clarify that.
Okay. No, fine thing. So I understand 85% for the spinning section. But inorganic, as of now, traditional plus renewable 100% is from inside the company only?
Yes, yes, 100% is captive.
Okay. Fine. And one more question. This net debt position of your company, which is around INR 500 crores, is it after taking into consideration the INR 600 crores we are going to receive from ICIS or that net debt is without that?
This net debt, as I said, we have received 50%, around INR 300 crores before 31st March. So that is included there. The remaining money which has come post 31st March, it's not part of this.
We have next question from the line of Rohit Nagraj from Emkay Global.
Sir, the first question is what was the soda ash March exit price? And was there any coal cost impact during Q4? And have you witnessed the same in current quarter, ongoing quarter?
Raman sir, please take this question.
Can you repeat the question? You said selling price -- what is the exact selling price? As I said, we'll not be in a position to disclose the exact selling price. So far as the energy cost is concerned, yes, there has been an increase in the new purchases of the energy cost. But please understand that we have -- we will be booked -- we do the forward booking of the coal. So during the quarter, there has not been any major significant increase in overall cost. But going forward, there will be definitely be a increase in the cost because of the new coal cost or energy price is expensive, but that whatever increase happens, will be neutralized by the increase in the selling price.
Right. No, I was not asking the average price. I was just asking what was the exit price at the end of March for the industry, not for us.
What is that energy…
Exit soda ash price. So in April, you indicated that INR 34,000 has been there.
At the end of 31st March, probably the price would be in the range. Now we have taken [indiscernible].
Ladies and gentlemen, that was the last question. I'd now like to hand the conference back to the management for closing comments. Over to you, sir.
Thank you. Thank you, everyone. Thank you for your appreciation for the performance, and that keeps us always driving. Our focus at this point of time in the business is 3. 1, to expedite our greenfield project; look at the growth of other chemicals, like I said, some of the product basket expansion; and on the spinning side, focus on the volume growth and also the green energy, along with the moving from a commodity space, which I said from 60% to 80%, 85%. And in the soda ash, one initiative which I just said, salt production and the backward integration of limestone. So these are the initiatives to maintain -- that we will be in a position to maintain our leadership into the margin and return to the shareholders the return on their investments.
Thank you very much, sir. Ladies and gentlemen, on behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining with us. You may now disconnect your lines.