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Earnings Call Analysis
Q3-2024 Analysis
India Glycols Ltd
The company has showcased a strong quarter with a 39% increase in gross turnover at INR 2,119 crores. Net turnover surged by 63%, reaching INR 904 crores, while EBITDA rose by 40.3% to INR 107 crores. Profit After Tax (PAT) soared by 90% to INR 42 crores, and the PAT margin improved to 4.6%, up by 68 basis points.
The Chemicals segment experienced a robust 87% revenue growth. The growth for Potable Spirit was 30%, and Ennature Biopharma increased by 21.8%. The overall EBITDA growth for the company stood at 40.3%, with 9-month growth for BSPC and Potable Spirit segment at 15.4% and 23% respectively.
The company secured a biofuel supply allocation with an anticipated revenue impact of INR 1,100 crores for the year, indicating a significant opportunity in the biofuel space.
There is an optimistic forecast about new product pipelines and commercialization, with full commissioning expected by Q1 of the coming financial years.
The joint venture's revenue went up by 6%, with EBITDA skyrocketing by 118%. The growth in Bio-based Specialties and Performance Chemicals was notable at 88% for the quarter, with EBIT growth at 26.5%, suggesting a strong performance in these areas.
Indian Made Foreign Liquor (IMFL) saw growth led by sales expansion mainly in the Paramilitary Segment and sales in Delhi. Ennature Biopharma reported a 21.8% revenue growth and is focusing on value-added pharmaceutical customers for future results.
The company's position on raw materials like Thiocolchicoside and Colchicine remains strong, contributing to better margins. There is a continued focus on expanding Nutraceuticals in key global markets.
Finance costs have increased due to recent expansions, with a net term loan of around INR 650 crores. Capital expenditures and work in progress amount to approximately INR 400 crores, with an expectation of further expansion particularly in the grain-based distillery capacity.
The company is aligned with the government's vision to enhance blending up to 20% by 2025, confident in the strategic objective and potential of the biofuels business due to these policy directions.
Efforts to increase maize cultivation in the catchment area are underway, anticipating the cultivation of 50 to 100 acres, thereby integrating with local communities and potentially supporting future ethanol production requirements.
While part commissioning of new projects is done, complete commissioning is expected by Q1. The company has a strong pipeline and early business developments promising significant volumes from the new specialty units in the next financial year.
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Good evening, ladies and gentlemen. I'm Pelicia, moderator for the conference call. Welcome to India Glycols Limited Q3 FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand over the floor to Mr. Rohit Sinha from Sunidhi Securities Limited. Thank you, and over to you, sir.
Thank you. Good evening, everyone. Thank you for joining us on India Glycols Limited Q3 FY '24 Results Conference Call. We are joined on this call with India Glycol's management represented by Mr. Rupark Sarswat, Chief Executive Officer; Mr. Anand Singhal, Chief Financial Officer; Mr. Rajesh Marwaha, Head Sales and Marketing -- Head in Marketing and bio-based specific infra division; Mr. SK Shukla, Head of Liquor Business, and Mr. Ankur Jain, Head of Legal and Company Secretary.
I would like to invite Mr. Rupark Sarswat to initiate this proceeding with his opening remarks, post which we will have a question-and-answer session. Thank you, and over to you, sir.
Yes. So good afternoon, everybody, and thank you for joining us for this investor presentation. As we normally do, I will take you through a quick update on the performance of IGL so far in this quarter and month end by with my quick comments on that. And subsequently, we can take questions.
So as you would have seen, which was a strong overall performance with robust growth in revenue and profitability for IGL. A gross turnover at INR 2,119 crores was up 39% for the quarter. As you know, there is a very high excise component in our gross revenue. Our net turnover of INR 904 crores was up 63% for the quarter. Similarly, EBITDA, at INR 107 crores for the quarter is up 40.3%, and EBITDA margin at 11.8%. PAT at INR 42 crores, up 90% and PAT margin at 4.6%, up 68 basis points.
As I will talk about, we see a little a later. All 3 segments for us -- if we classify broadly as broad-based, bio-based specialities and performance chemicals.
Sorry to interrupt you, sir. Could you speak a bit louder, sir?
Okay. Can you -- is that any better?
Yes, sir, please go ahead, sir.
Okay. So I was saying that there has been a strong overall performance with robust growth in revenue and profitability in all 3 segments, delivering a strong double-digit revenue, as well as profit growth. And there also has been a strong margin growth in all the segments, particularly led by potable spirits compensate that.
If you look at the yearly performance, gross turnover at INR 5,882 crores is up [ 17% ] and our net turnover at INR 2,358 crores for the 9 months was up 16.6% as compared to the same period last year. Our EBITDA at INR 319 crores is up 45.6%. Our EBITDA margin is at 13.3%, which is also up 267 basis points and our PAT is also up 79% at INR 131 crores. So on a 9-month fee basis also, there is a strong revenue and profitability growth particularly led by good performance in potable spirits and bio-based Chemicals & Specialties.
And I has mentioned we have a positive start in biofuel, which we expect to do better in the coming year as well. Amongst other things, as we have spoken about, our actions to put in [indiscernible] basis small plants was friendly and has helped us in mitigating the positive thesis. And we've also discontinued some low margin domestic business, which has also helped further outperformance.
If you look at business performance and will know a little bit more, our gross revenue is up 39%, our net revenue was 60% what I already said. For the Chemicals segment, which is BSPC, the net revenue grew by 87% in the quarter. For Potable Spirit, it grew by 30% in the quarter as the same quarter last year. And for Ennature Biopharma, it grew by 21.8%.
Overall EBITDA growth of 40.3%. And if you look at the 9-month fee basis, there has been a [indiscernible] supported as strong growth, particularly in BSPC and Potable Spirit segment, which is 15.4% and 23%, respectively.
As I mentioned to you, we have benefited from our actions really, we are in the fact that we're putting drain that it's on plan that helps us mitigate cost increases, which has been very useful. Ethanol prices have continued to be high, but they have come down compared to the earlier very high. I have broadly indicated to you that there -- for a long period of time, in total ethanol prices have covered around INR 35 or so, before during the COVID period and the energy crisis and everything coupled together. This went up to even INR 60 plus a liter. They are significantly down, and we have been looking -- okay. They are significantly down, and we have been looking imported ethanol for future requirement.
And we expect that those cost gains will start to come in Q1 onwards when we start to see deliveries at those loan prices. What it also means is that the grain-based ethanol that you are using for in-house fuels is something that we can divert to biofuels and use in-house imported ethanol for our chemical business.
Another small bit of satisfying update from my side is that we have completed start commissioning of the new specialties in it which is a relatively smaller investment, and we expect to commission the unit completely by around Q1 of the coming financial years. We are seeing a healthy pipeline and good commercialization of new products. And I'm sure in the quarters and years to come, you will see this business growing as well.
As a part of our strategy to diversify into the biofuel based segment, as we have kind of reported in the media as well, we have bought a biofuel supply allocation. I have mentioned order, but I think the correct word that indicate is allocation of this is -- 1,65,490 KL of ethanol, which is to be supplied between November '23 and '24. It has a potential revenue impact of roughly INR 1,100 crores for the year. We see this potentially as a growth area for us.
Even for the joint venture, there has been a strong recovery in margins driven by reduction of material costs. So for the quarter, the revenue for the joint venture is up 6% and EBITDA is up 118% essentially because the gap between [indiscernible] side price of, say, competition, which is crude basis in the pipe sold in India and [indiscernible] that we supply to the joint ventures has reduced. And we expect that this trend will continue in the subsequent quarters and hope to see further reduction.
Quick highlight by the 3 business segments. So talking about Bio-based Specialties and Performance Chemicals, Q3 revenue at INR 609 crores is up 88%. I must add here that in this top line, there is a significant contribution of what we are selling to biofuels and [indiscernible]. EBIT growth was up 26.5%. The 9-month revenue is at INR 1,518 crores, up by 15.4%. And we also mention that internally, we also look at businesses from a like-for-like perspective.
Participants, kindly stay connected, while we connect the management team back on the call. I welcome back the management team. Please go ahead, sir.
Yes. So sorry about slight disruption, which happened because of the audio system. I was talking to you about Bio-based Specialties and Performance Chemicals, where I said that some contribution in top-line growth has also come from the biofuels that we are selling now. I must also add that we look at our business also on a like-for-like basis.
And if, I look at the business on a like-for-like basis, taking away, particularly the manufacturing segment -- on a like-for-like basis, within BSPC, our sales for the quarter are up by something like [ 50% ] and for 9 months, they are up by something like 28%. So that is more to say that whilst we have discontinued some nonprofitable business, some of it does trading business, our core manufacturing business has seen additions for a very good recovery and growth in the chemical state as well.
As you know, we've developed a new biofuel portfolio, which we expect will continue to add to our top line and bottom line in the quarters and years to come. And we have also focused on reducing some gross profit domestic business. Our focus for the years to come will also be the new value-added product or the new specialties unit, which is in the process of getting commissioned. And in the quarter and years to come, we will start to see better numbers in this segment as well.
In the Potable Spirit space, there has been a very good quarter for us, with revenues up 30% to [ INR 144 crores ] and EBIT at INR 41 crores, up 49.9%. And with a good EBIT margin of 17%, up 224 basis points, which is essentially on the back of improved portfolio as well as a reduction in cost of ethanol packaging material, et cetera. 9 month revenues at INR 700 crores are up 23%. And the sales essentially have been driven by country liquor sales growth, which is excellent in Uttarakhand and UP being a big market for us has seen good steady growth as well.
IMFL or Indian Made Foreign Liquor, growth has been led by sales expansion, mainly in the Paramilitary Segment, where our business was selectively know, they know where we have expanded to 13 states and also IMFL sales in Delhi, which have been significant contributors in driving the IMFL sales for this quarter as well as...
In-house manufacturing of ethanol has not only helped us in the BSPC Segment, but also in the Potable Spirits Segment, both from a supplier perspective as well as from a cost perspective. We've also been focusing on premiumization and improvement in the width of distribution, which is also yielding well, both in terms of top-line growth as well as quality of the business.
In Ennature Biopharma, we've had -- we visited a Q3 revenue of INR 51 crores, up 21.8%, EBIT of INR 12 crores, up 16.2%. 9 months revenues at INR 149 crores and an EBIT margin of 21.2%. We've had continued pressure, particularly on nicotine sales because it's becoming the competitive market with more and more players. However, our efforts have been on building value-added pharma customers, which we believe will start to see result in the times to come.
Fortunately for us, position on the raw material has been stronger, and there has been an upward trajectory in prices, but we had our bookings, which has resulted in better margins for Thiocolchicoside and Colchicine. Broadly, our focus also has continued to expand Nutraceuticals in the key global markets.
I will now hand over to my colleague, Anand Singhal to take you through the financials. Anything else you'd like to add?
So I think we will leave it for you to then ask us question, then we can -- on financials on all the business. We can then take them.
[Operator Instructions] First question comes from Bala Subramanian from Arihant Capital Markets.
Congratulations for good set of numbers. Sir, on the earlier call, the guidance was around INR 3,500 crores top line by end of this year. Is there any change in that guidance? And we got recently one order of INR 1,164 crores. Is that fair to assume around INR 300 crores revenue per quarter from this order we can expect because the order supply period is around November '23 to October '24. And like what's your view on that?
So on that 2 points, 1 is that we do not generally issue a specific guidance, when we're having some discussions. But my broad expectation for the coming quarter and for the year is that we expect the current business performance and the environment to continue, and that should guide you towards the kind of results that we would expect.
The other small correction I would like to make for the purpose of being precise is on biofuel, it is an allocation and it's not exactly [indiscernible] why? We expect that this allocation will translate into supply, which is what the big oil companies will do. But I must mentioned that it is an allocation and not a purchase order for that period.
However, from an allocation perspective, obviously, it is a contract. And it will be fair to assume, that depending on the macroeconomic environment, depending on the policies of the government and some other factors, which sometimes may affect biofuel blending from time-to-time. This kind of top-line growth is something that we would like to potentially see from this allocation.
Sir, on the second side, like on the Clariant side -- JV Clariant side like what would be the top line on the margin side, what kind of opportunities that we have in this business?
See we have discussed this before. The joint venture actually caters to several consumer markets, which includes personal cares, coatings and polymers, top care, [indiscernible] largely based on [indiscernible] candidate and we did face some challenges last year, like we faced in our business because of [ long-term ] cost for bio-based materials going up.
However, this -- the thickness in prices we include and bio-based materials coming down, we expect that the joint venture will continue to grow with the end markets, which is what we had mentioned. But it is difficult for me to give you a precise guidance on how the performance would be?
Obviously, the joint venture has been formed because these are growth areas in India, as well as in the world and we also supply bio-based products, which are considered premiums.
And on the whole, if I have to not call it a guidance, but feel what's happening in future, I think that the cost of materials coming down or the delta between [indiscernible] bio-based customer side that we supply reducing and reducing further in the quarters to come, we should see a better performance from the joint venture, not only in the quarter, which I just mentioned, but in the quarters to come, that is what we would expect.
And given the volatility that we have seen, I would hesitate from giving a longer-term guidance in terms of numbers. But qualitatively, the roughness of the business and the fundamentals of the business, I just mentioned to you. And we are optimistic about how the joint venture will do in the times to come.
Got it, sir. Sir, on that chemical business side, whether the growth is majorly driven by volume growth, volume-based or price-based, if you could fabricate like segment-wise, or like which are the segments are doing good, or if you could talk about demand environment on those segments. And like what are the things that are shaping up overall global levels, especially in China and like how the competition is there?
Okay. So if you look at the Chemical Segment for us because the way we have covered it, right now, it has biofuels which I talked about. We are looking at new value-added chemicals, which we talked about. We have a small segment in bio-polymers. We also have a segment in industrial gases, and we have segment in glycols and glycol ethers. So there are several factors...
So he had asked me a question on chemicals. As I said, when we talk about chemicals, our big top lines will be driven by biofuels business, will be driven by the glycols and glycol ethers business, mainly. Also, we have smaller segments, which is biopolymers and its industrial gases et cetera within chemicals. We believe that particularly biofuels and new specialty chemicals, value-added chemicals will drive growth in the near future, definitely. As you've seen, I've already given clarity on the biofuel segment in terms of bio-based ethanol which goes for blending.
We are just in the process of commissioning our new specialty unit, where we see that we've got a strong initial pipeline, but as you would realize, these are initial days for the business, I would rather have the numbers speak for them in the quarters, that we continue to drive not only in the next year, but hopefully in the next few years. We are quite optimistic about it. We have done some good work, particularly in, say, the oilfield segment, and we are looking at some other segments like bio-mines, [ casticizes ] or carbon smart products, et cetera.
On the glycols front, bio-based glycols, we expect that we will see a steady increase in growth of bio-based glycols. There was some challenge, not now, mainly because of our [indiscernible]. So there was initially some challenge because the prices of bio-based products had gone quite high, but we are seeing a slightly favorable shift as prices of bio-based ethanol are looking down. So we will continuously see steady growth there as well.
On glycol ethers, we have faced some challenges. Okay. Coming back to glycol. See, I would like to add a few things that our glycols business just about 5 years ago, I'm talking about was quite different from how it is today. It is because our bio-based glycols was largely being sold to 1 customer, which was Coca Cola and which was a high volume and largely 1 customer dependent. The good thing is that now we are engaging with 15-plus customers, which we are supplying in various parts of the world.
And whilst our volumes may have come down, we have [indiscernible]. I think there are some people who are speaking...
I'm sorry, sir, disturbance is from Bala Subramanian line, he got dropped. Shall we move to next question?
Yes, please.
Next question comes from [ Saket Kapoor ] from Kapoor & Co.
Sir, I just missed some part of your remarks as to the previous participant. So, pardon me, if I'm repetitive. Sir, firstly, we're taking into account the current scenario with respect to the raw materials, we may expect an increase in margin for our Bio-based Specialty and Potable Spirit going ahead? That is a good understanding?
I think that's a fair expectation based on how we, at this point in time, see imported bio-based ethanol prices coming down. However, I need to say that with caution, as far as, Biofuels and Potable Spirits is concerned. And the reason I'm saying this, I'm not so concerned about the top line. The reason I'm saying this is that the dynamics of the 2 is different. Whilst for chemicals, we can use imported ethanol as well as ethanol produced here in India either by ourselves or purchased domestically by us.
However, for Potable Spirits, we can only use ethanol, which is produced in India. And for biofuels, there is a predetermined price by the government from various feedstocks. The C-heavy molasses, B-heavy molasses, cane juice and damages [indiscernible] there is a price rise in maize cetera, which means that our profitability can get affected based on price movements of 2 or 3 things, which is the grain that we buy or the molasses that we buy as well as sale price of one of the byproducts, DDGS, which is a protein into the market. So while it is a reasonably fair assumption for bio-based chemicals. And however, it is not something that I can exactly predict for Potable Spirits as well as for biofuels.
Within Potable Spirits, there is a cost factor, which involves cost of ethanol. Yes, this year, it has benefited us because instead of buying, we have been producing grain-based ethanol. But grain-based ethanol costs can be variable in the future as well. But the larger focus in the Potable Spirit space for us is about expanding 1 to select the new markets and also improving our product mix.
So does that answer your question, Saket?
Yes, I got the understanding. So my next question was also pertaining to this policy's framework pertaining to both our potable alcohol, as well as bio-ethanol segment. In terms of -- I think, for this sugar season, the [ levy ] molasses percentage has also been increased by the Uttar Pradesh government. So how does that gel for us as a company in terms of the purchase of molasses as levy molasses percentage goes up.
See, this is the good part in UP because government is giving the full security in the raw material -- availability of raw material as well as the price board to the manufacturer of potable liquor. So this year also, the -- as compared to the last year, when the reservation percentage was around 19%. Now the government has increased from 19% to 26%.
So we -- as you knew that next year will be the very comfortable year for the potable spirit manufacturers in UP as far as the raw material is concerned. So we -- hoping that margin should be fair in the coming months from the Potable Spirit sector.
[Foreign language] so that will add to our margins only going there, since the cost is not going to go up?
Yes, certainly, we are hoping that. And now this year, new segment of the grain ethanol this government is added in 36 degree. So we hoping that for coming years will be the more good months for just evaluating, just increasing our potable production for the grain, in UP [ ML ] category in the 42.8 and 36 degree. So these 2 [ excise ] is good for the industry.
And sir, my question to Rupark, sir. When we look at our number for the company sequentially, we find that for the bio-based specialty performance and also for our potable alcohol, we see a dip in margins there. You were alluding to the fact that margins have improved year-on-year, but how -- please correct me here, when we look at our September quarter performance with December quarter, for both the segments, it is only the Ennature Biopharma, wherein we have seen an expansion in margin.
Both the other segments, there is a dip in margin. With the commensurate revenue, the margins have taken a hit. So if you could explain the key reason why these 2 segments have not performed with the increase? Why there is a reduction in margin?
You mean in margin percentage?
Correct, sir. On a top line of INR 508 crores for September quarter for bio-based, we posted an EBIT of INR 40 crores, whereas for this quarter, on a revenue base of INR 610 crores, the EBIT is INR 39 crores. And simultaneously for Potable Spirits also [Foreign language]?
See as far as this quarter for bio-based chemicals is concerned, [Foreign language] for the business, all the margins are not only coming from Ennature Biopharma, that is a relatively lower contribution. So if you see, there has been a margin expansion in BSPC at an EBIT level for this quarter from INR 30 crore to INR 38 crore and for 9 months from INR 80 crore to INR 121 crore, right?
[Foreign language] overall absolute margin. But in terms of percentages, let me just have a look. I have the numbers. In terms of percentages, there is a slight drop for the 9-month period for chemicals and it has also happened because of grain prices going up quite sharply. And for the time being, there is a lag between this before the government acts to revise the prices et cetera, which also as far as I understand, there is rise of course. So that eluded some margins. That impacted the percentage margin for us.
And lastly, sir, for Ennature Biopharma in your presentation, you have articulated about nicotine sales continue to face pressure and -- but also, you have pointed out to strong raw material position and upward trajectory in Thiocolchicoside, and another [indiscernible] you have used. So if you could give us the trajectory of what the likelihood should be because we are flat on the Ennature Biopharma for the 9 months. So is segment [Foreign language] depending upon the business environment?
Saket, [indiscernible]. So as far as nutraceutical is concerned, first 2 quarters was in a stretch no doubt. But in the third quarter, we are like -- have recovery, not only in margin, but also in sales volume. And thus the fourth quarter is going to be remain same as third quarter or it could be more than the third quarter. So we are going to end the whole of the year, as far as the nutraceutical is concerned at par with the previous year, at least it's not less.
And with respect to the next year guidelines, so in nicotine no doubt, it is in under pressure as far as the export is concerned, so we are now developing the nicotine derivatives for which we have already backed some very good orders from the local manufacturing of the tobacco-related and the nicotine pouches related companies. So I hope that nicotine will recover somewhere in the second quarter of the next year.
And Thiocolchicoside right now, the prices are very good, and we are having a quite -- raw material is already available with us with the lower margin -- in the higher margins with respect to the [indiscernible] prices. So I think the first 2 quarters would be same as the third and fourth quarter of this year.
Again, If you get the split between nicotine and thiocolchicoside out of this INR 50 crores, what should be the percentage or even for the 9 months, if you could give the split between the 2?
So as far as thiocolchicoside, there is a very much price difference in that. Like thiocolchicoside, it is a very high value items like INR 4.25 lakh per kg and on the other hand nicotines hardly INR 7,000 per kg. So the value comparison would not be there. As far as the EBITDA percentage is required to maintain the overall EBITDA, thiocolchicoside is certainly going to give some very good margin to us and nicotine, we are trying to recover and try to increase the margin by adding new derivatives in the nicotine segment, not pure nicotine.
And last point to [indiscernible] is about the finance cost part. If we look at the number, again, for Q-on-Q also and I think year-on-year also, there is a significant increase from INR 26 crores to INR 32 crores. So, [indiscernible] if you could give me the -- first of all, our current debt number, what is our net debt as on 31st December? And what has led to this increase in the finance cost?
Saket, finance cost has increased because of the recent expansion for which we have raised some term loans , which is [indiscernible] and we are -- that is in our radar to reduce the finance cost for which we are taking some majors, as far as the term is -- sorry, net term loan as of 31st December, it is around INR 650 crores.
And our working capital, sir?
Working capital, fund-based working capital is INR 350 crores and non-fund-based pension limit is INR 850 crores.
And sir, for the 9 months CapEx [Foreign language] indiscernible], how much have we spent?
Till 9 months, the total work in progress in our group is around INR 400 crores, INR 414 crores and hopefully, the CapEx is for about INR 300 crores will be completed by 31st March which will be capitalized. And the rest of the funds will be shown under CWIP and which will capitalize in next year when the CapEx will be complete.
If the time permits, just a small observation, we have found that this time, [indiscernible] has shared the meeting. Any particular reason or we generally find Mr. [indiscernible] there? Anything to be mentioned in succession planning or what could be -- anything to [ read ] about it, sir?
Don't make any speculation like that because that Mr. [indiscernible] was not well at that time. So I think his cheered the meeting. It's -- that's only. It's a normal [indiscernible]. Not just [indiscernible] you have noticed, we have not noticed.
Okay, sir. I wish him speedy recovery.
[Operator Instructions] Next question comes from [ Bala Murali Krishna ] from Oman Investment Advisers.
First of all, I would like to say that I've gone through annual report and it's very well described product-wise and category wise this is one of the best annual report I came across. So and regarding this distillery segment, I have 3 questions. So as of now, we have around 340 KLPD capacity, and we are going to add 700 KLPD in the coming maybe 3, 4 quarters. Is it right?
Right. Right now, in Kashipur, we have 400 KLPD grain based distillery, which we are further increasing to 500 KLPD. In Gorakhpur, we have 110 KLPD, which is working right now and adding 180 KLPD more in Gorakhpur, this will be completed, say, in '24, '25.
As for the recent expansion in funding cost report in I think showing that existing capacity as 140 KLPD?
That is biofuel, not distillery.
Okay. Understood, sir. So my question is regarding this biofuel only?
I think it will just be good to understand that we produce ethanol. This ethanol basically is produced using various feedstocks, which include grain and molasses, both at Kashipur as well as Gorakhpur. This ethanol is then used for potable spirits, biofuels as well as potentially as an intermediate for chemicals, right? So with inter-linkage it is good to keep in mind. And sometimes, if we understand that, we will be aligned in terms of our understanding.
Yes. So regarding capacity additions. So are we planning to sell all the ethanol to OMC's or do we have any plan to use for capital consumption also?
Look, it is a dynamic situation for us, where we evaluate what is the best mix for us to sell into -- put it into potable spirits, which obviously give us good returns for liter of ethanol, to use it as an intermediate for chemicals or to sell it into biofuel segment. The reason I'm saying this is that for example, when imported ethanol was very expensive, we diverted significant quantities of our grain-based ethanol produced in-house as an intermediate to the Chemical segment.
Now that imported ethanol prices are correcting, it makes sense for us to start importing ethanol for intermediate use in chemicals and divert higher quantities into biofuels. So it is a combination of demand and allocation that we have got, the price of imported ethanol, the realization that we are getting in potable spirits and what we find is that given the scenario that I more or less see for the year ahead, based on how we see our business is going, we will have -- we will be able to place all our excess feedstock in terms of ethanol into the biofuels market.
We should not have a problem in filling up our plants there. And that is obviously based on allocation that the government has decided, making some assumptions with respect to grain availability, making some assumptions with respect to imported ethanol, we believe going forward for some time, we will be buying -- getting back to buying imported ethanol for chemical and releasing more and more capacity of grain-based ethanol for biofuels, obviously, after covering for our potable spirits.
Okay, sir, understood. So sir, regarding this suppose 700 KLPD normally 200 KLPD can contribute approximately INR 500 crores of revenue on an annual basis. So those 700 KLPD can contribute around INR 1,700 crores of revenue with EBIT margins of around 16% to 18% as compared with the price impacting them also. So is it a fair assumption, sir, in your case also?
See, I have already indicated to you the biofuel part of the [indiscernible]. I also mentioned to you that it is not as based upon calculation for us to a est turnover for our case because that ethanol can go into intermediates use, it will go into potable spirits, where it can go as intermediate.
Now you are probably making an assumption for a plant, which only produces ethanol [indiscernible] all the ethanol that it produces. And also, you may -- you also need to take your numbers based on the cost which can be very variable in terms of margins, which as per as I understand, that is not the margin that industry is making on selling biofuels at this point in time. It was the case earlier but not at this point in time.
Okay. And regarding the feedstock for the new capacity, which feedstock we are preferring and are there any sourcings already happened like the long-term contracts of your [indiscernible]?
Can you please repeat your question? I'm not very clear.
[indiscernible]
Okay. Regarding grain. I think you are asking about grain supply, no? So as of now, government is not giving any sort of guarantee for long-term supply of grain. So they are very curious and wanted to divert all the ethanol, grain based ethanol manufacturer to the [indiscernible] raw material.
And for that, the different types of it's schemes, policies are going to be amended by the central government for promotion of this maizes, cultivation of maizes. And we are also aggressively working on that. So as of now, the distillery are free to take the grain from the open market without any support from the government. Hope this is clear.
Yes. So, if we assume that there will be no [indiscernible] resumed then do you have any major [indiscernible] to ran the -- on maize, based on maize?
Yes, certainly. So now the central government has already involved the method for the procurement and supply of -- control based maize to the distilleries, but it will take another 2 to 3 years because it's required [indiscernible] of our the whole supply chain management. I'm talking about the history of corn. It is not -- right now, it is not available. So it will take certainly 2 to 3 years. But certainly, industry has a better hope and they were -- the government is giving incentives for the supply of ethanol from the maizes. So we still -- it will take another 18 to 20 months to get the sufficient corn in India. But certainly, the corn will be the future.
Sorry to interrupt, I request you to join the queue, sir. I request participants to stick with 2 questions in the initial run and join back the queue for more questions. Next question comes from [ Prashant Shah ] from AM Investments.
Just want to understand in our JV, with Clariant, what is our pricing strategy for selling ethylene oxide, whether it is cost plus basis or it's a dynamic?
So it is not dynamic. I think the kind of agreement that we have, there is a nominal margin, which has been built and it is done on that basis. So as a part of the agreement.
Okay. And sir, recently, we have commissioned the solar plant. So what type of savings can we expect on the energy cost?
So look, it is something, where we are in agreement with ReNew Power for hybrid power, which is solar and wind power. It is something that initially was expected to start delivering power to us in a period of 2 years. I think there have also been certain policy changes, et cetera, et cetera. So that is something that needs to be reviewed. However, the expectation at the point of the contract was that it will get started early next year, which is probably 2025 and it had a [indiscernible] and we had a payback of close to 2 to 5 years.
I must add here that there is some ongoing discussion based on some policy changes. And I'm not in a position to completely update. And neither have we built in those savings into any of our future projections as of now. Yes, we did announce that, and we are hopeful that, that starts based on the original plan at the original terms. But it is something that we are reviewing based on some policy changes and the way the supplying company is looking at it.
Next question comes from [ Ram Mohan Rao ], an individual investor.
I just wanted to check whether for potable branded icon, do you have any plans for expanding your network beyond UP, Uttarkhand and Delhi?
Yes. Certainly, we are seriously looking to expand our brands in [ PMT ] and Paramilitary and Rajasthan. So we are very keen and we are looking sizable increase in the next financial year.
[Operator Instructions] We have a follow-up question from Saket Kapoor from Kapoor & Co.
Yes, sir. Ashish ji, as you mentioned that we are keenly looking to reduce our debt. So I think so, sir, noncore assets, we have already disposed off. So it is from the cash flow only? Or what steps are in the annual? Well, if you could give us some understanding what kind of debt reduction are we going to undertake going ahead, sir?
It is very difficult to give you the numbers right now but only thing is whatever we are planning that is in process, and most of the debt repayment will happen out of the cash flows.
Okay. And sir, probably JV part [Foreign Language] that we have received or how much is due from them?
I think that number is around INR 90 crores, which will come in the current year. So that will also be used for the debt reduction.
Okay. By March '24, we will be receiving the INR 90 crores?
I'm not aware whether they will get till March or '24, '25. But this year, yes, we will get that.
Okay, sir. And current maturities [Foreign Language] as of March? [Foreign Language] in terms of the borrowing?
We have to pay in February and March, the total liability for term-loan payment is around INR 45 crores.
INR 45 crores. And that will go from the cash accrued?
That will go out of the cash accrual.
Okay. And lastly, sir, Rupark ji, about the allocation part for ethanol, have we factored in our expanded capacity in terms of the ethanol allocation that we have got? Or...
When we get an allocation, there is a commitment from us to supply and we have factored in capacities that we have. And our assessment is that if that allocation is translated to us in terms of concrete orders, which we hope so are -- we should be able to supply. And that is why we spoke about further expansion we are required as well.
Okay. So our expanded capacity will be fully utilized with this allocation for the period mentioned in terms of the deliverables.
I think broadly well utilized. Obviously, it's a function of several factors, including whether we are diverting or whether we are not diverting to intermediary use. But we will be operating and utilizing our capacities going ahead.
Correct. [Foreign Language] and all the best to the team.
[Foreign Language], you can call me after the concall.
Next question comes from Rohit Sinha from Sunidhi Securities.
Just 1 clarification, I would be looking at, in last call, we have announced this thing on the CapEx side that our capacity, then -- that it would now be expanding from 300 KLPD to 400 KLPD and then probably by another INR 100 crores -- another 100 KLPD in 6 months. So this Gorakhpur addition is included in that or this is a new one which we are talking and with this biofuel pricing for Kashipur, how we should see this as a different as compared to the ethanol -- blended ethanol price.
Rohit, Kashipur, we are making this capacity to 500 and Gorakhpur 180 is over and above that 500, okay? And whatever costs you have taken from us, that doesn't include the cost of 180 KLPD definitely at Gorakhpur. Regarding the biofuels, there is not much investment that is hardly INR 10 crores, INR 15 crores investment, which will be taken care by the company itself.
Okay. Okay. And one thing on this tender thing -- from this tender signed, just to understand that how much incremental revenue we should be considering from this tender? And going forward as we have, I think, a recurring base or listing through that we will be product -- again next year also, it would be a continuous process. So how to make it sure that this size will continue to us or there will be only addition to this kind of tender size?
Rohit, there are 2 questions that you've asked. One is future growth and how assured do we feel about that? And second is, what is the top line this will deliver to us broadly. So I think we -- just in my presentation as well in terms, and I shared that the contract is on allocation. We estimate potential revenue based on the allocation of close to INR 1,100 crores in the year is already mentioned. And as far as the business going forward is concerned, I would say that in a business environment, obviously, there are certain uncertainties. But broadly for us to understand whether we are in the right place and whether this is the right investment, I would like to consider the following.
The government has clearly articulated a plan to move up to close to 20% blending by 2025. And there was hardly any blending by 2014. The track record has been that the government has by and large been able to meet its target [Technical Difficulty] Okay. So if you see, we have moved from nearly very little blending to close to 12% blending and the government has met its blending targets year-on-year. And they would like to meet the blending targets going forward to 20% and maybe even higher going forward because that's the strategic objective. The strategic objective is to increase farm sector income is to find a way out for sometimes excess grains, to reduce ForEx dependence and dependence on oil for very -- many other companies.
So that strategic objective stays. We can only say that so far, the blending program has been on track. And by and large, some ups and downs, notwithstanding, it should be on track in the years to come as well. And that is what I would like to believe, gives us an assurance that this is a good business to be in. Sometimes, there may be some hiccups. Sometimes, there may be some issues with respect to raw material availability, price, et cetera, et cetera.
But the broad policy direction on this government is very clear. In fact, they have a proper paper on this in terms of what they want to do with the blending program. And that I think there is no other way except to look at that to get an assurance that this is a business which should, by and large, continue to grow.
Next question comes from [ Makharan Tilo ] from [ Makharan Tilo ] Investments.
Hearty congratulations for excellent number and as well as excellent website upgradation, displaying company's potential.
Thank you very much.
And now my question is, we have seen that this expansion of capacity of bio -- natural ethanol plant, the costs are meagerly INR 14 crores. But whether it will in -- so it will increase our profit margin in future?
INR 14 crores how you are calculating [ Mr. Tilo ].
So investment required they have returned...
That INR 14 crores is biofuels.
For biofuel only. So it is INR 14 crores. But with this, our capacity is going to expand very much. So whether it will increase our margins also.
See, you have to -- just to -- I think we need to clarify here. There is a cost which goes in putting up the distillate and there is some cost will go into further processing of ethanol if I'm not wrong to convert it into biofuel, which is increasing its purity and when you look at evaluating the CapEx and its profitability, actually, this may be how we do our CapEx, but we have to take into account the entire cost. A lot of it is actually in the distillate -- okay, I hope I am correct as far as I explained.
Yes, I got it now. Now the second question is that how much maize we are currently utilizing for producing ethanol. Because we have seen on Facebook that we are promoting maize's cultivation in nearby districts also.
Yes, we are [ starting ] to increase the cultivation in our catchment area. We have started this journey in the last November and probably in the next month, I think in March and February showing, we are putting our efforts to increase the maize production in our catchment area. So we are very ahead and hopefully, this year, next coming year, our catchment in -- we will develop around 50 to 100 acres maize farming in our catchment area.
Okay. And currently, we are looking at utilizing how much of capacity of -- by maize?
Not much. I think most probably 1,000 to 1,015 tons in the last couple of months.
Okay. But yes, when maize will be utilized more. For that purpose, do we need to have additional -- some cost for that?
Not too much. Some cost may be required for the enzymes and nothing else. So it may be hardly INR 0.10, INR 0.15, but not much. Because certainly, the output of DDGS, I will get more and prices of DDGS will reduce as compared to the rice DDGS.
Okay. That means whenever maize will be more available, our margin expansion will be more also, correct?
Correct. Correct. Correct.
Okay, sir. And now the second point is, sir, in that you have written that NSU, there is a growth potential, part commissioning is done. Can you elaborate more on that, sir?
See I have mentioned to you that part commissioning is done, we'll have complete commissioning by Q1. We have a good pipeline. We have -- commercial supplies have started, and we are already doing -- starting to do close to 250 metric tonnes of business per month. And we see this, we have further -- I would not say contracts, but we have got further business development done with a few customers. And largely, they are in several spaces in the oilfield chemical space, they are in the carbon smart space, and we expect that we will have significant volume coming from the new specialty units in the next financial year, definitely.
Let me -- you may be wondering why I'm not giving you the number. In a new business, our approach has been kind of entrepreneurial. For a business where you are developing the initial pipeline, trying to get the initial contracts going, we are very happy with the pipeline. We are very happy with some of the order indications which have already come for a plant which has relatively just been commissioned starting to do 150 to 200 tonnes per month is a good start.
But as you can understand for a new business, like it is not an ethanol business or a cement business, that you can say, I have this much capacity, I will start selling that into the market. Once you have the plan to start working, you start working with your customers and you start having in application and development project and this is a business which has a gestation period. And every product is customized and that is how you build this business. It is very different from biofuels. In biofuels, we have already told you capacity and what kind of potentially top line we can expect. But I can only tell you there is a good pipeline. I'm happy with that. The fact that we are supplying 150, 200 tonnes per month is a good start for a new project with not that much investment.
Fantastic. So if this is customized, then whenever the orders will be fixed, from the customer, you will get more orders in future also, correct?
We are very much hoping so. Our salespeople obviously have internal targets. We obviously have internal numbers as to how we would like to see this year and next year's standing out. But it is something that I would like to go ahead and give a commitment here. I would rather have a set of numbers that will give you confidence and for you to see the growth.
Correct. Sir, last question is that internationally, MEG prices are again increasing, correct?
Yes, I heard.
So whether it will also help us bio MEG?
In a small way, yes. We are not so dependent on MEG prices to some extent, yes. See, what happens is that our customers are already paying a significant premium for bio MEG, okay? And sometimes, when they are using MEG, their shift -- green shift is affected if the crude-based MEG prices are much lower. So if MEG prices or crude-based MEG prices goes up, the incentive for them to invest in products is higher in that sense, yes. So the bigger is the gap, the bigger is our challenge.
Okay. So in future, their offtake will also increase if the regular MEG prices are increasing?
I think the viability of our business, new businesses will be better, but it is very difficult for me to immediately start saying that you'll see volume pick ups. I think we'll be better positioned. And hopefully, it will translate into more sales.
And all the best to you. Within 2 years, we hope to see the company INR 5,000-crore mark on net basis.
Great. Thank you.
There are no further questions. Now I hand over the floor to management for closing comments.
So thank you, Rohit, and special thank you for Saket, he does so much reading up on our company that we more well informed than many of us in terms of numbers. So Saket, thank you for taking that much interest. That's what I'd like to note. I think it feels good if there are people who are taking that much interest in everything that is happening. And many of you do, not only in terms of what the company is doing, but I'm also very impressed to see how you have a good idea of what is happening in the marketplace.
I was thinking how much really you do on the Potable Spirits space, how much you do on the biofuel space, on the blending space, international MEG prices, et cetera, considering you are covering so many chemical companies. So it feels good to have your interest. It is also good that so many of you have come to attend our investor call. Some of you encourage us. Thank you for that. Some of you congratulate us and then ask us difficult questions. That's also fine. Hopefully, we've answered them.
So with that, and on behalf of my colleagues here, I would like to thank you and wish you a good day and a good week ahead.
Thank you. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using Door Sabha's conference call service. You may disconnect your lines now. Thank you, and have a pleasant day.