India Glycols Ltd

NSE:INDIAGLYCO

Earnings Call Analysis

Strong Revenue Growth and Strategic Business Expansion Reported

India Glycols Limited (IGL) reported a robust 32% increase in net revenue for H1 FY '25, totaling INR 1,930 crores, with EBITDA rising 17% to INR 248 crores. Their biofuels segment soared 194% year-over-year, generating INR 500 crores, while portable spirits grew 21% to INR 551 crores. With a slight dip in EBITDA margins from 13.5% to 12.4%, PAT surged 31% to INR 250 crores. Management anticipates continued growth driven by the government's ethanol blending initiative targeting 20% by 2025, positioning IGL for sustained advancement in the biofuel sector.

Strong Revenue Growth in a Diversified Business Model

India Glycols Limited (IGL) reported a strong financial performance in the first half of FY '25, with net revenue increasing by 32% to INR 1,930 crores. This growth was driven by successful diversification into biofuels, chemicals, and portable spirits sectors, demonstrating the company's resilience and strategic direction. The company's overall gross revenue reached INR 4,433 crores, up 17% year-over-year.

Significant Contributions from Biofuels

The biofuels segment saw a remarkable increase of 194% in net revenue, growing from INR 170 crores to INR 500 crores for H1. This was complemented by a staggering EBIT growth of 281%, indicating operational efficiency alongside top-line growth. The installed capacity for biofuel manufacturing stands at 450 KLPD, aligning well with India's Ethanol Blending Program, which aims for a blend rate of 20% by 2025-26.

Robust Performance in Portable Spirits

The portable spirits segment also thrived, with revenues rising 21% to INR 551 crores in H1. The introduction of innovative product formats, such as Tetra Pack, has further enhanced market penetration, especially in Utrakhand where IGL maintains a strong manufacturing base. The country liquor sector has been particularly strong, driven by aggressive expansion and the ability to offer a competitive product range. Volume growth in certain segments reached 50%.

Margins and Future Prospects

While IGL reported a slight dip in EBITDA margin from 13.5% to 12.4%, its operational adjustments and strategic cost-cutting measures, such as green energy projects and improved feedstock evaluations, are expected to stabilize margins. The company aims to achieve significant savings exceeding INR 25 crores per year through these initiatives. Additionally, management expressed optimism about better performance in the second half, projecting continued revenue growth across all segments.

Investment in Specialty Chemicals and Joint Ventures

IGL is building its footprint in the specialty chemicals market, targeting a modest turnover of INR 100 crores in the current financial year. This segment is expected to yield significant growth, driven by partnerships and collaborations developed over time. In joint ventures, IGL's 49%-owned entity has delivered its best-ever results, with sales up 24% recently. This reflects the positive trend in their product mix, aided by improved raw material costs.

Strategic Actions Ahead

Management remains committed to fortifying its operational strategy by focusing on product differentiation and customer relationships. Their ongoing efforts in sustainability via green energy and technology enhancements are anticipated to not only maintain cost efficiencies but also promote long-term growth. The strategic decision-making surrounding product offerings and market expansion will play key roles in IGL's trajectory moving forward.

Earnings Call Transcript 2025-Q2

[Operator]

Good evening, ladies and gentlemen. I'm Somiya, moderator for the conference call. Welcome to India Glycol Limited Q2 and H1 FY '25 Results Conference Call. [Operator Instructions] Please note this conference is recorded. I would now like to hand over the floor to Mr. Rohit Sinha. Thank you, and over to you, sir.

[Rohit Sinha, analyst]

Good evening, everyone. Thank you for joining us on India Glycols Q2 and H1 FY '25 results conference call. I would like to thank the management for giving us this opportunity to host the call and congratulate them for a good set of numbers.

We are going to -- we are joined on this call with India Glycols' management represented by Mr. Rupark Sarswat, Chief Executive Officer; Mr. Anand Singhal, Chief Financial Officer; Mr. Rajesh Marwaha, Head Sales and Marketing, BSPC. Mr. S.K. Shukla, Head Liquor business. and Mr. Ankul Jain, Head, Legal and Company Secretary.

I would like to invite Mr. Rupart Sarswat to initiate the proceeding with his opening remarks -- post switch, we will have a question-and-answer session. Thank you, and over to you.

[Rupark Sarswat, executive]

Yes. Good afternoon, everybody. We had a small technical issue and excuse me, if the clarity of the voice is not so great, and thank you for bearing with us, and I hope all of you are doing well, slightly belated happy Diwali to all of you.

On behalf of IGL and my colleagues here, one our colleagues, Mr. Raju Gajrani, is also here whose name was -- who's representing the Portable Spirits business, particularly the [indiscernible]. So he will be available to give comments on the Liquor business. As you have probably seen, I'm happy to report a strong quarter in terms of sales, in terms of EBIDTA as well as in terms of profit performance. So we've had a strong quarter in terms of gross revenue, which at INR 2,144 crores is up 15% like-for-like compared to last year. Our net revenue at INR 961 crores is up 24% for the same quarter last year. Our EBITDA at INR 120 crores is up 13% for the same quarter compared to the same quarter last year. With a slight dip in percentage EBITDA margins, and we'll talk about it, which is from 13.5% to close to 12.4%.

PAT is -- for the quarter is also up INR 250 crores from INR 38 crores, which is up 31% from the same quarter last year. And I'll talk about the broad story behind the numbers in a little bit. So all in all, we've had good revenue growth in biofuels, which was a relatively newer segment for us, which has been picking up. Also very good growth in Portable Spirits and also good growth in top line in Ennature Biopharma. The Chemicals business, the numbers that you see a modest growth and however, I will talk about the breakup of the Chemicals business, which also includes some ENA, which also includes some sales which happened to the joint venture.

So if you look at the Chemicals business, which is the growth focus business for half our part of IGL, I think that has shown good growth, and I will talk about the sectors there in because [indiscernible]. So I think not only the quarter, but fortunately, we -- I can also report a good first half performance, which is INR 1,930 crores of net revenue up 32%. EBITDA at INR 248 crores, up 17% and PAT at INR 110 crores, up 24%. So the broad drivers behind the same that we talked about in terms of the quarter. And talking about the highlights for the quarter -- we spoke several times about our strategy to one -- derisk our business business, make the business more resilient, by expanding our footprint in various modes of [indiscernible] production or sourcing.

And as a result of that decision, which was taken close to 2 years plus before, we've seen now excellent growth in the biofuels business, and I will talk about that business and the dynamics over there in a little bit. And those capacities are serving us now to not only reduce our costs, particularly in the portable spirits segment, but also drive top line growth in the Biofuel segment as you may have seen. And as I mentioned, what can we call the focused operating Chemicals business has also seen strong sales growth and margin growth. So -- which is not exactly reflected in the overall sector numbers for Chemicals, but I must tell you that because that's going to drive growth in future as well.

And the Portable Spirits business was driven by several factors. I think we've had excellent growth, particularly in the branded Country Liquor segment in Utrakand and also in IMFL in Delhi and UP and IMFL in the paramilitary segments. Maybe we'll talk about it, segment price in a little bit. Another thing which we have -- let the market also know before is the introduction of several [indiscernible] plant, which IGL is going to manufacture as well as market in select regions, which is what we have got the rights for that we see as an important milestone for IVL's [ IMFL ] business.

In terms of the trust that [indiscernible] have shown in us and also collaboration with a highly reputed portable spirits manufacture. All in all, we have also talked about new value-added chemicals in the past. We've made investments. And as you know, about 6 months back or thereabouts, we started to commission our new plants. And we've seen orders coming in. Specialty Chemicals business takes time to build. Sometimes it take 3 years, 4 years working with the customers to build. I'm very confident of the pipeline that we've developed and that business will also continue to grow and show result. The other good news is that our joint venture, wherein IVL has a 49% share has also delivered an excellent quarter.

I think for the joint venture, this was the best ever quarter with sales up 24% and EBITDA also up in terms of very good numbers. I think supported -- [indiscernible] of things by improvement in raw material costs because one of the key raw materials that we supply to them is in ethane oxide. Also, they have been looking at their product mix and exports and so on. So that has been an overall story for the business. So I will talk a little bit about the segments and -- in terms of the quarter.

So our Biofuel business increased from INR 260 crores from INR 105 crores for the same quarter last year. And our Bio-based Specialty Chemicals business is at INR 369 crores. For H1, our Biofuels business increased to INR 499 crores from INR 170 crores last year. So you can see a significant contribution in terms of the top line coming from the Biofuels business. Our Portable Spirits business is up by 21% to INR 551 crores from INR 456 crores last year for H1, which is also a strong performance. Our Ennature Biopharma business is up by 19% in terms of revenue, INR 118 crores from INR 99 crores, and we will talk about the segments.

And before I talk about the segment, maybe I would request my colleague, Anand, to give you a quick snapshot of the financials, and then I will give slightly more granule commentary on the segment.

[Anand Singhal, executive]

Good afternoon. I will cover the financials for 6 months rather than the quarter. So for -- on the stand-alone basis, the 6 on results, the total income from operations is INR 4,426 crores vis-a-vis the last year, 6 months, INR 3,763 crores, up by 17%. The net sale is INR 1,936 crores, vis-a-vis INR 1479 crores in the last year, 6 months, which is up by 31%. EBITDA is INR 246 crores, which is INR 206 crores, which is up by about 19%. And PAT is INR 86 crores, which is against INR 76 crores, which is up by 13%. So I will say the overall performance for the 6 months on a stand-alone basis is very increasing. And the company is extremely doing good.

If I -- will give you the consolidated figure, the income from operations is INR 4,433 crores vis-a-vis INR 3780 crores in the last year, 6 months, which is up by 17%. EBITDA is INR 248 crores, which is INR 212 crores, which is up by 17%, again the same numbers, more or less, while PAT INR 110 crores vis-a-vis INR 89 crores in the last year, 6 months, which is about 23%, up. This includes the profitability from the joint venture which is about INR 10 crores. So what the CEO sir has said that the performance of the JV as shown a very good performance in the first 6 months.

So this is what -- brief about the results -- financial results of the company. We will cover more details on the financials when we will start our question-and-answer session.

[Rupark Sarswat, executive]

Thank you, Anand. So talking about -- I'll talk about some of the newer segments first because -- you probably want to care about that. As you saw in the Biofuels segment, we've seen net revenue increase of close to 194% from INR 170 crores to INR 500 crores in the first half and also a very strong EBIT performance from INR 8 crores to INR 32 crores -- which is an increase of 281% in H1.

So the overall -- the Biofuel story is such -- yes, Anand is showing me some numbers. So in case -- my numbers are somewhere wrong, please do correct me.

So we now have in installed Biofuel manufacturing capacity of close to 450 KLPD. That's in [ Kashipur ]. And overall, if you see, the -- All india Blending Program has been running quite well. So the government of India blending targets, which started from something like 5% in '19, '20. 2019, '20. And and the target for '23, 2024 was 15%. India is already clocking close 14% [indiscernible] until September, and this is expected to be 14.2% in the coming quarter as well.

So for the entire year. The target for '24, 2025 are close to 17% to 18% in '24', 25%. Are expected to be 20% in '25, '26. And if you see, we expect that demand for biofuels will continue to grow and our business, therefore, will be supported as has been the trend by India's Ethanol Blending Program. So that is something that is good. The government, as you know, revises biofuel rates from time to time based on the feedstock as well as various factors, which affect cost in order to support the business, and support the right mix of the business.

This was done in November '23. And as far as we are concerned, we expect that the allocated quantities to us in the subsequent 2 quarters will be met by us for the year and the trend in terms of the overall Biofuel growth that we have seen so far are expected to continue. So that is about Biofuels. Talking about the other segment, which has seen significant growth, and I will, in a minute, ask [indiscernible] to comment on it. So you have seen total top line growth of 20.9% -- for the first half and an EBIT growth of 26.5%. A lot of it has been delivered has been has come from various sectors.

It has come from Country Liquor in Utrakand. It has come from IMFL in Delhi. It has come from IMFL in paramilitary. Some of our brands I talked about, like [indiscernible] Macintosh is now available in Delhi and Utrakhand, and we have plans to introduce the same in UP.

In UP itself, in IMFL registered a good growth in volume terms of close to 50% in H1, which has been very good. We also plan to introduce different variants of [ Amrut ] in different state that we are operating in.

The Country Liquor performance for us has been exceptionally well in Utrakhand. There are several reasons for it. One of it is that we've got a strong manufacturing base in Utrakhand. The second is that we probably were the fastest movers to make the maximum variance in terms of tax sizes available, including being the only ones to -- and the first ones to introduce Tetra Pack. And some of our brands there are also very well received. In fact, some of them in -- the Country Liquor space are such that the Country LIquor space is also competing well with lower end of the IMFL space.

So that has also driven growth in the Country Liquor segment, and we continue to look at launching new brands and new products in these areas. So that is on the Portable Spirits front. But I'll just pause -- I'll give you -- I'll give you a very high-level comment, maybe a good idea to get a little bit from Mr. Gajrani on [indiscernible].

[Unknown Executive]

I'm [indiscernible] in particular. See, as our CEO rightly said, Utrakhand has been our home market. And our traditional business has been -- we have been leaders in most IMFL as well as Country Liquor. Now we have -- if I use the word monopoly or we are the only ones to do Tetra Pack which has been very well received. There was a ban on Tetra Pack in Utrakhand for a number of years.

And the government saw a reason for it to start Tetra Pack because largely Utrakhand is a mirror policy of UP.

We've been undivided same state and same culture and same eating drinking habits. So -- and no wonder, Utrakhand has very well accepted Tetra Pack. And we were the first one and while we talk, we are the only one to do Tetra -- which is giving us very good results. This is as far as the Country Liquor is concerned.

And we have made -- we have been a very innovative company in terms of in terms of packaging and in terms of flavors. We have been able to make our mark in various flavors and various price points in Country Liquor as well.

Now as far as IMFL is concerned, the -- our CEO talked about [indiscernible]. As you know, [Amrut] Distilleries is well known for Single Malts and Malts in particular. So about 6 months ago, when we had gone to Bangalore, and we will convince them that you don't have the bandwidth to do non-Malt because there is unmet demand for the Malts.

So whatever non-Malt brands are there. Some of them have been taken by us on a royalty basis. We have signed the agreement and the first brand -- the first offering, if I may say, as in Mackintosh, which is a 35-year-old brand, and very good quality brand.

Now, [ Amrut ] will not put a stamp on anything which is -- below par below a certain level of standard. It's like on the lighter side, and we will say it is the worth -- what maybe see -- cash market [indiscernible], but it is worth all the same. In other words, they will give their logo and only when they are sure of the quality. And what we have tactfully done and rightly done is the liquid is all supplied by [Amrut] , and we do not do any head mixing. We only bottle it, and we use our packaging standards and our, of course, most importantly, our extra-neutral alcohol.

Just for your knowledge, extra neutral alcohol we are possibly the best -- one should not make a strong statement that we are the best. No, we mean that. Bacardi -- which we go back more than 200,000 cases per month is all -- they all use our DNA.

Not only in Kashipur, that is for North and Eastern India for Bacardi. They also use our DNA for their mother plant at Nanjangud in Karnataka. Mind you, Karnataka is a surplus state for ENA, but they get it from Utrakhand -- that is Kashipur -- that is enough testimony of the fact that we have a 0 tolerance to any substandard quality.

And Bacardi being one the top 3 companies of the world. They are very -- so over 10 years, [indiscernible]. So considering -- it is a synergy. If I may say, we complement each other. We have in Kashipur -- excellent packaging standards, excellent quality of ENA. While [ Amrut ] has got its brand name. So -- and they maintain the quality -- the liquid quality. So it has worked well. The initial reports are very encouraging as our CEO rightly said, Delhi and Utrakhand has got very good traction. And we already have made our mark. We already have doubled market share in both these markets.

It has been only a few weeks that we launched. And very soon, we will be rolling out maybe next week -- itself in our home state of Utarpradesh -- where we have ideal Gorakhpur -- and Haryana is one market, which is -- it has huge, huge potential Haryana feeds -- Haryana is once we launch in Haryana, I will talk more on this. It's a very potential market for [indiscernible] because the MRPs are not there in Haryana.

Haryana perhaps is the only state in the country where there is no MRP with the results -- the consumers get a beautiful choice of fantastic competition in retail resulting into almost half of the MRP of adjacent state.So there's huge potential I can talk about -- but this is not the occasion.

So to sum it up, Amrut offers a lot of potential for our company because we follow the highest staggards, in terms of packaging and ENA. And I'm sure in another year or so or maybe 2, this will -- Amrut will be a very big part of the pie of our total IMFL business.

[Rupark Sarswat, executive]

Thank you, [indiscernible]. I'll also take the opportunity to talk a little bit about the Chemicals business, last but not the least, also has been a bread and butter business for us.

So talking about the Chemical business, I mentioned to you that our core growth business in terms of some of -- the core businesses other than what we supply to the joint venture and ENA has actually been doing quite well, and I'll talk about some of the subsegments. So our new product, which we track separately within Chemicals, largely from the new plant, but also some other new products have been doing quite well, starting from almost scratch.

We expect that to be INR 100-plus crore business already having grown by 225% this year with a very healthy growth in margins as well. But as you know, these are businesses which will take time. But the good thing here is that we have identified, and I think we are running very good collaborative partnerships with a number of global diluted names, which include names like [indiscernible], these are companies which have been known, BSF, Dow, et cetera.

And we expect that this business will continue to grow in many areas, of course, in several areas life bio-base [indiscernible], ethyl ester, oilfield chemicals, carbon smart products and so on. And we are looking at newer categories as well.

Glycol has been a very important category for us, which has also, despite the challenges that it has faced over the last few years has done quite well in terms of both value as well as margin growth. A few things there that we see is -- that we've focused on some new value-added segments. One of them is trying to develop a market in the bio-deg space. Now what we commercially heard a lot about his MEG, which is mono ethane glycol.

But we've also tried to develop a market for DED, which is for applications in greener claims -- for polyurethane and some other products. So we are working with some companies there. Also, there are people, as you know, one of the significant outlets for [MEG] for us is best, which goes for manufacturers of polyester and two major components of that are NET and PTA.

So price, we are able to supply green energy. The world is also working on green PTA. And there is a consortium, which is working on, on international companies and IGL being the only supplier of bio-based chemical in the world. We are a partner to that. Hopefully, some of those partnerships will translate into good business in the times to come.

The good news overall, and I have mentioned this several times -- is about in 2017, roughly all of our Bio-based MEG business, not the MEGs that we sold in competition to the [indiscernible] business. That, of course, was separate -- was largely with one company, which was Coca-Cola, 95%-plus.

Due to the mandate on [indiscernible] in the U.S., that business totally went away from us. However, I think we are happy that we've been able to build that business up. And despite loss of what was 95% of that business, we've recovered 85% of the contribution. Good thing is this is no more from one customer. It is from 15 different customers. So that, I can also be [indiscernible] -- also hopeful that this time this business will continue. We also have business in glycol ether and acetates, which are green resolvents which we've had a good growth and contribution this year, whilst there have been challenges in terms of lower cost alternatives available particularly imports from China and Russia, but we've been able to hold on to the market.

One area which is reported within the Chemical segment in ENA, which you heard [indiscernible] talked about, which is the [indiscernible] alcohol. And this ENA, when I talk about, I mean the ENA that we sell to people outside, not the ENA that we consume in house. So that sale is completed under [indiscernible] chemical, which has shown -- it is consumed. That -- that, however, has dipped and and that's a conscious decision because we are able to utilize our own ENA in better ways for our own Portable Spirit.

So that is something -- and also exports in markets have been a little challenging because of lower prices from countries like Patna and Brazil, whose currencies have also depreciated. So that has helped them. So area, gases has also been doing well for us, steady growth. We are in -- as you know, we are in gases because gas is something completely separate, because we manufacture gases as one of the raw materials for our products. So we also sell gases. So demand and the -- so demand for industrial CO2 has been decent. So that has contributed to growth.

Also, as you know, one of the gases that we manufactured, argon has had good demand, good uptick, good price increases this year. So that has also helped the gases business. Our EO and CO2 mixtures, which are sold for various applications, mainly for sterilization, that's also been good. So that's the overall segment price commentary for our performance in Q2 and H1. I'm sure you -- of you track our business in a more detailed fashion than we do with a lot of more number crunching and I'll take a pause, and we'll take your questions.

[Operator]

[Operator Instructions] Our first question comes from Kashvi from JRK Stock Broking.

[Unknown Analyst]

I think that there is long-term debt that you have taken during the quarter to fund the CapEx, which I could understand. Can you give us an outlook on asking what is the repayment settlement for this deck on your 2025 d for '26?

[Anand Singhal, executive]

The repayment period is from 7 to 8 years -- for which we have taken recently. The average maturity is around 4, 4.5 years on this debt -- whatever fees based.

[Unknown Analyst]

Okay. sir, also regarding your working capital like that you have taken. So how much of it is like to be supported for working capital?

[Anand Singhal, executive]

Your voice is not clear. So I'm not able to understand your question.

[Unknown Analyst]

Okay. Sorry. Is my voice audible now? Sir, what are the current changes that we are expecting for the remaining half of the year for net working capital?

[Anand Singhal, executive]

Net working capital will become positive in the next 6 months and the current ratio will improve.

[Unknown Analyst]

Okay. Has there any outlook and guidance for the remaining half of the year and the next [indiscernible]?

[Anand Singhal, executive]

We expect that the next 6 months will be better, since the first 6 months performance is already with you, and is very good. So the 6 months, I expect that the performance will be good for the company.

We can't hear you at background.

[Operator]

Shall we take the next question, sir?

[Anand Singhal, executive]

Sure, sure. We are raeady.

[Operator]

Our next question comes from Apurva Mehta from KSA Shares Securities.

[Unknown Analyst]

Wanted an update about our Specialty can we compare the current workinng run rate -- we are currently. What is the run rate for the current quarter? And what do you see for the next 6 months and we year-ahead?

[Unknown Executive]

I mentioned those broad numbers that we expect these are businesses, new businesses being developed. Sometimes they move a little faster, sometimes they move a little slower. We expect to do a modest turnover of INR 100 crores plus in this financial year.

It is very difficult for me to give a projection. However, I'm confident that significant growth can be -- we are expecting and targeting significant growth much ahead of growth in other segments in new value-added Chemicals. Now of course, this is contingent on projects going through trials getting approved. So there is always that element in Specialty Chemicals, because these are collaborative projects. Some of them are new products. And I mentioned to you that we are working with reputed reliable partners. And there is reason for us to feel confident that this business will grow well, though given the nature of the business, as you know, it is time consuming to set businesses.

The other good thing is that these businesses are, of course, based on chemistries that we are good at. But at the same time, they are not hugely dependent on merely ethnocide or ethanol cost of prices. which means that wherever possible, we take advantage of the green U.S. sector, but it is not so high that it is impacted by the cyclicality there, which has been the case of some of our other businesses like MEG. That has also been in terms of diversifying our product portfolio to make it a little more resilient has been our focus. And I believe that will strengthen our business in the medium to long term.

[Unknown Analyst]

Sir, can you just brief on what is the opportunity on the kind -- of what you are doing -- what can it be? And where we stand today? And if our products get approved, what kind of -- you can see that the growth can come. Can we double or triple the requirement of the product or what kind of thing? On the competitive side also, if there are -- that we have -- we face any competition on this side or no? There is no the other thing than the product has to be approved?

[Unknown Executive]

See, first, let me give you my understanding of developing a Specialties business. Actually, 80% of the value creation in the specialty business is not from the product

It is from the knowledge capability of understanding the applications, solving problems that you bring to the table. So we move from a journey of making products to making a good product, to making a differentiated products. So then moving on to -- not from our side, but having the good grant of customers' applications. So then we start to provide solutions or value to applications, -- when the customer starts to say, come solve my problems or meet my need, then you start on to move to collaborative projects and when you develop a confidence there, you move to strategic products.

So what I can tell you is that with some of our customers, we have traveled that path quite fast to start to work not only a collaborative, but even talk about strategic projects, and these are global customers. And as far as the size of the opportunity is concerned, I must be conscious of the fact that I'm speaking to investors, I'm talking about the potential and the size of the opportunity, and please don't take it as a prediction. And from my end, I think the size of the opportunity is many times the numbers that you are talking about for this year.

So in a matter of years. It can be 5x, it can be 7x. It can be 10x. As I said, this is a size of opportunity, not a projection from my side. Keeping that in mind, we are focusing on this business. Of course, it is contingent on -- and you also talked about competition.

Now of course, there is some competition. But these are not products which once developed with a customer, somebody else will give a sample and next day, they will say somebody is INR 10 cheaper so i'll ship to them. Even the shifting is, in some cases, a 6-month or a 1-year process, because of the amount of work that is involved. So there is an inherent you can say, transition threshold, which is there.

And I believe if there is reliability and trust and faith on the work that we are doing in terms of the knowledge that we've bring to table -- in terms of the quality that we bring to the table, we should be able to continue to grow this business despite competition. So some customers may continue to work with us. Some customers who may continue to work with competition. So it's not a case where you will say, okay, suddenly prices of this commodity will drop, so I will become less competitive.

In fact, I try to kind of say that we've looked at these value-added products to make the business resilient, and not kind of dependent on cyclicalities of say raw material prices, et cetera. So there are -- for different [indiscernible], there are different people who compete in different areas. For example, that we talk about carbon smart product. There is no direct competition because there is nobody else who does that. However, these products tend to be significantly more expensive, so expensive for the adoption rate is [indiscernible].

In Europe, we supply, carbon smart products nobody else supplies. We could be the first supplier of Bio-based [indiscernible] in the world. But the thing is that like it was for solar panels -- say, 20 years ago. It is about making sure that, on one hand, costs come down. And on the other hand, there is greater adoption of those products. So those are the kind of challenges more than somebody who will come in and take our product away by being on [indiscernible]. It because some people may continue to use cheaper non-sustainable alternatives. So those are the kind of -- that is how we look at the competition scenario.

[Unknown Analyst]

On the green chemistry side, are these products or where the application or -- are on the green chemistry side where we are working with the [indiscernible] line? Or they are [indiscernible] product?

[Unknown Executive]

So what -- let me try and answer that question slightly differently. The point is what are the pillars of creating a competitive advantage for a Specialty Chemicals business for IGL. One is delivering sustainable products, which are either sustainable may mean many things. There may be plant base. That is one part of sustainability. They will deliver a lower carbon footprint that is another part of sustainability. They may be less toxic that is another part of sustainability. So that's a sustainability pillar.

The second pillar is delivering them cost effectively. Now why did I not say cost of product? I think -- it is in -- it is cost and performance and use, which is in the entire cycle of the value that is delivered to the end customer.

For example, if I am delivering a product which goes for a particular oilfield application or a crop application. It is not necessarily -- the cost of the product, which is important. It is, for example, can it increase the shelf life of the product by 6 months. So while the product is maybe 10% more expensive, but if it is able to deliver a self size increase of 6 months, the value delivery to the customer, and therefore, cost in use becomes much more efficient. So it is not that [indiscernible]. The other, of course, is our ability to become reliable suppliers to customers, reliable from the point of view of quality, standard, our ability to solve their problems and so on.

So it's not a -- one point answer that I can tell you. Sustainability in some products is a stronger differentiator for idea. But we are saying that is one differentiator. In some cases, it is performance. It is -- in some cases, it is our ability to work very closely in terms of doing product chemistry process development, et cetera.

[Unknown Analyst]

And when can we see a jump in our -- on the turnover? Or can we see a substantial plan coming in like from [indiscernible] to maybe on the that type of term.

[Unknown Executive]

You are asking me for a projection?

[Unknown Analyst]

No, no, Just telling you, is there a possibility where on that type of business is there or not?

[Unknown Executive]

I answer your question that in terms of the potential that we are targeting, I think the growth opportunity which can come through the product ranges and the customers that we are working with depending on success of projects is in several multiples. So it's very difficult for these kind of project for me to say, of course, we have these discussions with our partner that say -- companies supplying say, a product for a completely new applications which we are introducing -- therefore some applications. And they are putting it in the market. So it depends on what is the uptake.

So far, we see the uptake in some of these products has been good. and I am quite confident of the pipeline. Now what happens is sometimes it takes 1 year, sometimes we say 2.5 years. So we'll have to go through that journey. And it's not that we don't discuss numbers within we discuss numbers. But it's just that I have a slightly different role to play when I'm talking to in an investor call.

And I think it should be -- at this point in time, I can say that the opportunity in a matter of few years is actually multiples. Now that whether that multiple is 3x or 7x or more, we would all like to be very high.

[Unknown Analyst]

And on the buyer [indiscernible].

[Operator]

Sorry to interrupt you, sir. Could you please join back the queue for more questions?

Our next question comes from Saket Kapur from Kapur & Co.

[Unknown Analyst]

I'm referring to our wholly owned subsidiary formation for the Spirit business, IGL Spirit has been constituted. So if what should one read into it? And is it a precursor to what ENY has been given as per our notification dated 21st September, we should put things in order in that sequence itself?

[Unknown Executive]

See. Let me put it this way. We have different areas of doing business. So there are certain interlinkages. At the same time, these businesses have their own different dynamics.

So broadly, -- it is a part of the promoter strategy, which we keep evaluating, reevaluating to maximize value creation and look at various options. One thought has been to make sure that these businesses which have slightly different businesses, can possibly be looked at to be run with greater focus independently, may continue to remain under same ownership may potentially make it easier for driving greater value. Now there are various possibilities of driving each value, which includes inviting strategic investors or strategic investors taking investment, et cetera, et cetera, et cetera.

So those are not answers that are up on the table right now. But the thinking is there are businesses which need to get possibly more focus and therefore, have a neatly carved out P&L, what happens afterwards can be several things depends on what works best. These are these are a matter of conjecture as to what happens, what's the best fit, et cetera tera.

But yes, ENY is also helping in doing that evaluation.

[Unknown Analyst]

Sir, when we look at the performance for the Ennature Biopharma, it has been a cause of concern for -- for the company, because of the reasons explained earlier. So you could just allude the factors that have resulted in a flat to lower profitability for the segment? Now for being consistently -- for over the last 2 quarters? And what is the way ahead for the -- for H2?

[Unknown Executive]

So Saket, Manish this side. Yes. So the -- whatever the turnover we have like secured in this quarter would remain on the upside in the next few quarters also, but the margin would be remain same almost like whatever we have achieved in this quarter, because of the continuous pressure in the nicotine prices, worldwide. And the main USP product is [indiscernible] though we are now holding the 50% share of the total export from the India but the margins are in the stress till now.

So we are trying to make it more viable and to have more contribution by cutting our costs and all. But more or less, these are remain going -- to remain same as this quarter.

Yes. So if I understand correctly, you've said right for this quarter, I think -- as we said, there are price pressures on [indiscernible] side as well as nicotine. But those cycles happen. The focus of the business has been and that is that the business has successfully -- is continued to show without getting too impacted by cyclicality. So that it remains -- we remain [indiscernible] in the market and retain market. [indiscernible] ways to get cost down because when prices are [indiscernible] costs down to the expected [indiscernible].

The other two strategies which i followed. And I think the business is very conscious of it and following it very meticulously is to look at high value-adding derivatives and also look at the segment of branded [indiscernible]. We are for focused and also, I must say, confident that it requires work. We are doing that work and also pointing ourselves in terms of getting the certifications from various international regulatory bodies -- to be able to bring the digital market, U.S., Europe et cetera.

You are right that margins have been under pressure. But part of the strategy as you see, the good thing also is that despite margins being under pressure, I think this was also the best ever quarter for [indiscernible] Bio-Pharma [indiscernible]. So we understand this is the nature of the business. There are challenges we have to deal with -- and we've given you a flavor of what a business is trying to do.

[Unknown Analyst]

And even for the Biofuel segment, sir, we found there also the margin has been on the lower side Q-on-Q basis. So is it only the grains higher cost of grain that has affected the number and how should the margins [indiscernible] for the [indiscernible] segment going ahead?

[Unknown Executive]

So Rakesh, you are a very good friend [indiscernible] The glass is half empty and the glass is also half full. We've had a decent quarter based on everything that we've been telling you for the last 2 or 3 years. You may say that to some extent, -- by and large, we had some understanding in the business. We've been able to -- we have to present a reasonable foot.

Yes, to your point is right, the [indiscernible] that we have to. So the chances of the biofuel business are there. So the challenge is that there -- is there is an overlap that it has with the full segment because it uses grain, it uses sugarcane. And if, for example, they were to be -- I hope there is not -- sometimes the focus for the country will obviously be food.

However, those are cyclical things, but look at the macro picture. The macro picture is. And that's why I said, if you look at '19, '20. The blend target was 5%. In 2021, the blend target was 10%. In '22, '23, the blend targets was 12%. In 2024, the blend target is 15%. We are nearly 0.75% short of the [indiscernible] blend target, which has been -- over the last year. So there are reasons for me to believe.

And that is a well-articulated strategy by the government. Through a proper document that has been published and reiterated that we will do 20% blending by 2025. There are strategic reasons. There is a reason to make sure some sector incomes improve. And this action, for example, has made sure that payments through sugar mills are happening much faster. So that's one, the strategic decision is also that, for example, you know that sometimes a lot of food grain go away. It rots in warehouses, whatever, that gets utilized properly. The imperative is also in a relatively volatile world. We have good backups for energy security.

So the government is working on several fronts. They are both on green energies. They are working on bio-fuel blending. The imperative is also -- that we use foreign exchange outflow. So if you look at the macro strategic picture, there will be ups and down. So far that there has been -- there have been ups and down. But by and large the biofuel blending story is intact. And there is no reason for us to believe that's going to be certainly very different over the next couple of years.

Now what happens in 5 or 6 years you and I cannot say. So I'm not unduly [indiscernible] on that front. There will be these ups and downs. If you look at the government, the reaction to this, the government reaction to this is, how can we [indiscernible]. how can we encourage better utilization of [indiscernible]? How can we encourage better pricing? And how can we encourage making sure that the supply chain costs do not increase further? So all of that is happening. I don't know whether I answered the question, but I think in order to address your concern, it's not your question you need to get that macro picture.

[Unknown Analyst]

No, sir, your point is correct, macro picture is also correct, but margins have taken a dip. That was the reason I just spoke about. And these are cycles where in the prices and the ability to get factor in, but we need to continue with the project that is what you have alluded to.

My last question is for Anand, the first half purchase of property plant is to the tune of INR 264 crores and the closing balance for capital work in progress is INR 200 crores. So sir, if [Foreign Language].

[Anand Singhal, executive]

We have only 2 CapExs, One is for 100 KL plant in Kashipur. And second is plant in Gorakhpur. So the total cost of both the projects will be about INR 260 crores to INR 270 crores. The Kashipur plant has completed that understand, while the Gorakhpur plant will be completed fully by 31st March, although their grain distillery will start working in this quarter, the third quarter. Okay. So whatever will be there, will be capitalized by the year-end. And after that, there will be no big size CapEx.

[Unknown Analyst]

And the closing balance [Foreign Language] long term debt [Foreign Language]

[Anand Singhal, executive]

Long term debt in this year as on 31st March will be around INR 1,200 crores.

[Unknown Analyst]

And next year, [Foreign Language]

[Anand Singhal, executive]

So if I can say then, yes, I will target only [ INR 2 crores ]. But yes, if we are having a cash flow -- additional cash flow that will be utilized for the prepayment of the -- and the company is not planning to raise any debt since there is no expansion.

[Unknown Analyst]

And our cost of funds?

[Anand Singhal, executive]

Our cost of fund is slightly on the higher price, it is around 9.8%. We are working on that, how to reduce it.

[Operator]

[Operator Instructions] Next question comes from Bala Subramanian from Arihant Capital.

[Unknown Analyst]

And sir, my first question regarding -- your wholly owned subsidiary. So what was the strategic kind of your next 4, 3 years for spread business? And for this, right now, we are around 20% kind of margins for portable spreads. So further adding capacities, what kind of margin improvement we can expect in coming years? And one more thing, Amrut, how much your loyalty in terms of sales as per the contract?

[Unknown Executive]

For obvious reasons, this is not in the public domain. But these are two separate companies and the -- I can only say that it's a long-term arrangement. And IGL has gone for quality of ENA and packaging standards while group being a non-listed company is a private lean company. So they are concentrating on non premium products like single Malts. We synergize very well. And long term, we will be -- it is not fair to -- we managed to talk about royalty because it's a partnership between us.

[Unknown Analyst]

Okay, sir. Sir, for the new subsidiary for Spirits business, what is the strategy point of view?

[Unknown Executive]

So look, the strategy are timely evolving. It is an evaluated exercise. Some part of it is normal -- that want to look at the P&L in a crystal-clear manner and bring the necessary focus to businesses. That part is clear.

Now subsequently, what happens after they've looked at it, how to maximize value, whether to building strategic strategy partners, et cetera, et cetera.

After all, these are companies which have promoters, they have their own long-term thinking in terms of [indiscernible], et cetera. This is all in terms of readiness to be able to run the businesses much more effectively and do what is right for maximizing value creation. And that plan is not on the table right now. There's an exercise in order to what -- said, I'm repeating what is clear. We understand that there are businesses with different dynamics. It will be good to run them with specific cohorts.

It will be good to have a clear P&L, which is well designed. That strategy is clear. After that, with that structuring, what will happen in 5 years, Honestly, that is work in progress, and that is -- that will get evolved over a period of time. There's no clear answer for that. And my apologies, I'll not be able to give that to you because I don't have it.

[Unknown Analyst]

Okay, sir. Okay. Regarding Tetra Packs, like we have seen good response in Uthrakhand. Like if you could share detailed support cost and the price point of your normal bottle, liquor and tetra packs? Basically liquor bottles -- the costs were between INR 10 to INR 30, while Tetra Pack i don't know. Is it -- like if you could share in terms of consumer behavior and after cost and the price point of view?

[Anand Singhal, executive]

So Bala, I think you are asking right question in the wrong forum because I could not disclose the pricing comparison and all so for obvious reasons. But I can assure you that we have gone to tetra and the government has gone to Tetra because of the certain reasons of like no alteration in that -- and the bottles got refilled. This used to remain [indiscernible] than all. And some mixing [indiscernible] and all. So all these things have been eliminated by introducing Tetra pack. [indiscernible] very good. And I can tell you broadly that we are holding around 80% share of the [indiscernible].

[Operator]

Our next question comes from Rohit Sinha from Sunidhi Securities.

[Rohit Sinha, analyst]

So a couple of questions from my side. One is on this ethanol side. Last year, I mean recently, what we have win the tender to supply to [indiscernible] because it was somewhere around [ INR 1,130 crore kind of tender ]. So just wanted to understand for the next phase, whenever this new tender would be out what maximum function we have to bet for? And how confident we are to at least continue to have this kind of run rate for ethanol [indiscernible]?

[Unknown Executive]

So at this kind of run answer -- is very confident. What is rated watch, evaluation of opportunity is how much is the growth rate? What kind of margins can we look at. What are the situations on raw materials and therefore, how much new capacity will be at. If we will add anywhere? So I think based on my understanding, and that's the reason why I took a little bit of time to show what the trend has been in terms of what over the last few years, what the government has been doing. How the pickup has been, how the government has been responding in terms of price adjustments in terms of permissions, we use different raw materials, [indiscernible].

So that is the information. Plus now having done this for a couple of years, we also have a track record. The government has a track record. And based on that, it is for us to assess, based on that, I say that we are confident that this run rate will improve unless the government wasn't sizing [indiscernible] completely tomorrow. And there's no reason for us [indiscernible]. There is a proper paper that they [indiscernible] in. They are repeatedly talking about this program. Now the [indiscernible] now if they start to look at a 24% blending by '26. Then what happens?

Then would you put up for capacity? Well, we look at how the raw material prices are, how soon tells, what the government price is, where do we have land, what can we put CapEx at what cost, those are business evaluation. So for this way, confident beyond that, we continue to monitor and do business case valuations.

[Rohit Sinha, analyst]

Okay. And secondly, on Ennature side [, the new chemical unit side, what kind of return right now we are seeing and I believe more than INR 130 crores, INR 150 crores kind of CapEx has been done there. So how we are seeing the progress there? And what would be the outlook going forward in terms of margin as well as the revenue growth?

[Unknown Executive]

On Page 10, we'll -- so I have broadly outlined. What I will refrain from giving you a projection. By and large, I painted the picture going forward that we are looking at -- we are targeting, we are working towards. There has been a good start we are expecting targeting to INR 200 crores in this financial year.

And I also told you that somebody asked us what's the potential, where the potential is in multiples. We are working with good recruited partners. And since you nearly ask that question again, I nearly briefly repeated that answer.

[Operator]

Our last question comes from Sujal Shah, an individual investor.

[Unknown Analyst]

One which I had, which is more on a medium-term basis, considering the amount of CapEx that you are doing and possibly the amount of R&D that is going into the enhanced chemicals that we are kind of talking. So I just wanted to understand if everything works out well, how do you see the peak EBITDA margins work out for the firm? And approximately in the medium term, what would be the driver taking us to that kind of margin? You could help me understand in terms of what could get us there more qualitative? And less quantitative should also be fine.

[Rupark Sarswat, executive]

So I think what you're asking that is, what are we doing to make sure that the business continues to get or build on and get better debt margins, right?

[Unknown Analyst]

That is right.

[Rupark Sarswat, executive]

So we had two things. I told you the NSU story. I told you we -- it is value more than costs. So we are focusing on that so that we can bring something more to the table than just product, which is differentiation, which is knowledge, which is the application know-how. Once we strengthen those relationships, customer tend to stick with you and pay you. So that's one thing that we do.

We are continuously working on strategic cost reduction projects. We have done significant cost reduction projects, and I will give you -- an order of number. we have identified a cross-functional team to look at a whole house of energy projects using significant technological advancements, including multiplying operational efficiency to drive technology task force. And of the order of savings that we are starting to realize is well in excess of INR 25 crores per year.

So that is also reflected, and we are doing more -- we are also looking at green energy projects, which could be from various sources, which could be win, which could be solar, it could be hybrid, which would be best, which could be. So these are on the cost front. On the alcohol technology front, we are continuously looking at evaluating feedstocks. We are looking at whether how, when we should introduce on. We are looking at various things to reduce cost there that will help us improve margins.

And the biggest thing, [indiscernible], we are looking at minimization of our Liquor. So we talked about [ Amrut ], we talked about doing it well in terms of good branded liquor. We are -- so those are things that we're doing. So there is moving up the value chain -- on the finished product end, and there are actions to secure feedstock. There are actions to reduce cost in manufacturer broadly.

[Operator]

Now I hand over the floor to the management for closing comments.

[Rupark Sarswat, executive]

So no, nothing else. Thank you very much for coming, taking out time to listen to us and also asking us questions, which helps us not only in clarifying to yourself who are teamed investors. But through your questions, we also gather ideas, areas for improvement and prepare ourselves better. So thank you for all of that. Have a good evening and a good weekend all the best. And on behalf of my colleague here, Bye-bye.

[Operator]

Ladies and gentlemen, this concludes the conference call. Thank you for your participation and for using [ [indiscernible] conference call service. You may disconnect your lines now. Thank you, and have a pleasant day.