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PCBL Ltd
Earnings Call Analysis
Q2-2024 Analysis
PCBL Ltd
The company showcased a solid quarter, overcoming geopolitical tensions and economic turbulence, with a commendable 14% year-over-year increase in sales volume reaching 130,111 metric tons. Revenue revealed a dip due to the falling crude prices, moving from an average of $112 to $88 per barrel. Impressive EBITDA growth of 25% to INR 240 crores demonstrated resilience, translating to a healthy EBITDA margin of 16%. Profit after tax (PAT) also rose, illustrating a robust financial standing despite external pressures.
The company has a positive outlook for its Specialty segment, witnessing its highest ever sales volume and expecting demand and margins to remain strong due to changes in global supply patterns. With a strategic shift to increase resources to this segment, the Specialty Black achieved roughly 2 to 2.5 times the margins of tire grades. As demand for higher-end products grows, such as in automotive, the Specialty segment volumes are expected to reflect this trend.
Significant capacity expansion was realized with the commissioning of a Chennai plant, boosting total capacity to 700,000 metric tons per annum and a co-generation power plant in Tamil Nadu, enhancing power generation and sales. The company foresees further ramp-ups and is actively expanding its global reach by setting up offices in Europe and focusing on high-potential markets to achieve high capacity utilization.
The company's international presence expands to over 50 countries, with strategic focus areas where market share growth is achievable. Despite the global trade disruptions, the business maintains its growth targets and supply chain capabilities. Importantly, around 70% of specialty volumes are traded internationally, with Asia Pacific remaining a substantial market.
Facing competition from Chinese firms, which no longer hold the competitive price advantage they once had, the company has successfully increased overseas sales volumes and margins, indicating an improvement in capabilities. With China undergoing structural consolidation, this competitive landscape development offers further opportunities for growth and expansion.
Innovation through R&D has led to new solutions, catering to a variety of industries beyond its traditional tire and rubber usage. The conductive segment, particularly in battery storage, presents an evolving business opportunity with a focus on global markets. The company's innovation strategy forms a bedrock for its ambitious goals, even as it increases specialty volumes across the globe and leverages its strong supply chain network.
In terms of capacity utilization, the company projects hitting full utilization in about four to six quarters, capped at 630,000 tons due to the diverse product mix. The expectation of a $1,200 to $1,300 contribution per ton for newly introduced patented products further strengthens the revenue outlook. With stable crude prices, top-line growth will be a direct reflection of volume growth. The long-term guidance remains promising with adequate potential for sustained growth.
The Indian market is experiencing rapid growth and remains a significant part of the overall opportunity. Although international sales predominate, the domestic market contributes lucratively to the business portfolio, with opportunities across various geographies including Europe and other Asian countries being actively explored and capitalized upon.
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Ladies and gentlemen, good day, and welcome to Q2 FY '24 results conference call of PCBL Limited hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sanjesh Jain. Thank you, and over to you, sir.
Good afternoon, everyone. Thank you for joining on the PCBL Limited Q2 FY '24 results conference call. We have -- PCBL management on the call are represented by Mr. Kaushik Roy, Managing Director; Mr. Raj Gupta, Chief Financial Officer; Mr. Saket Shah, Head, Investor Relations; Mr. Pankaj Kedia, Vice President, Investor Relations.I would like to invite Mr. Kaushik Roy to initiate the call with his opening remarks, post which we will have a Q&A session. Over to you, sir.
Thank you so much, and good afternoon, everyone, and a very, very warm welcome to each one of you to this call. First of all, I'd like to wish a happy festive season ahead. And additionally, I'd like to say that some of the points which -- and some of the statements made in this call may be forward-looking, and a disclaimer to this effect has been included in the Investor update shared with you.Now coming to the performance of the organization. PCBL reported a strong quarter with higher stable volumes and best ever quarterly financial performance despite the worsening geopolitical scenario and economic issues. During the quarter, our consolidated sales volume was 1,30,111 metric tons, which is up by around 14% on year-on-year basis, while consolidated revenue from operation was INR 1,487 crores. The drop in revenue is primarily on account of drop in crude price from an average of $112 a barrel to $88 a barrel year-on-year basis. EBITDA grew by around 25% year-on-year to INR 240 crores, translating to an EBITDA margin of 16%. PBT stood at INR 172 crores, while PAT increased to INR 123 crores.Consolidated EBITDA per metric ton stood at INR 18,427. We have already shared with you that we have commenced our commercial production of the final phase of Chennai plant, which is 84,000 metric tons per annum. With this, our total installed capacity of the company now stands at 7,00,000 metric ton per annum [indiscernible]. So we have also commissioned the cogeneration captive power plant at Tamil Nadu, right, having a capacity of 12 megawatt. With this, the total cogeneration power capacity stands at 110 megawatts.During this quarter, PCBL Tamil Nadu achieved production volume of 9,410 metric tons and a sales volume of 9,008 metric tons, which is roughly 50% of capacity available during the quarter. We expect further ramp-up of Tamil Nadu facility with approval from major customers expected over a period of next few weeks.Of the total sales volume, domestic sales volume stood at 82,276 metric tons, while international sales volume stood at 47,835 metric tons.Moving on to our segmental performance. Tire accounted for INR 79,793 metric tons, Performance Chemicals reported sales volume of 34,744 metric tons. We also achieved specialty sales volume of 15,574 metric tons, which is the highest ever in our history. We continue to expand our product portfolio and customer list.The volumes with our recently launched inkling brand is gradually picking up. Samples have also been sent to one of the major EV battery manufacturers for bulk trial purpose. We also achieved highest ever power generation and sales volume during the quarter. Power generation increased from 156 million units in quarter 2 FY '23 to 167 million units during the quarter with external sales volume of 103 million units as against 95 million units in Q2 FY '23.PCBL's average realization stood at INR 4.06 per kilowatt. With commissioning of 12 megawatt CPP at Tamil Nadu, power generation and sales volume would increase further going forward. PCBL also secured 2 patents in relation to oxidized and surface modified grades, which further strengthens the Specialty portfolio of the company. Oxidized grades have applications in ink and coating applications, while the surface modified grades improve fuel efficiency and tire life. Long-term profits of Specialty segment look very positive and we believe that there would be adequate business potential to sustain the growth momentum.Considering the changes in global supply chain and consumption pattern, demand and margins in this segment should continue to remain strong. Structurally, we are increasing resource allocation to this segment.Let me now talk about current market scenario and outlook. Domestic tire segment demand continues to remain robust on the back of healthy performance for both OEM and replacement segment. We expect the upcoming festive season to provide further boost to auto sales. Industrial long-term demand-supply scenario continued to look favorable. The feelers are that the industry is going to remain in a tight supply situation for years to come.Only one major concern that remains in the worsening geopolitical scenario. While we do not have much trade with conflicting countries, there may be indirect impact due to trade route disruptions, high oil prices and inflation. We remain watchful of the developing situation and continue to work on strengthening our supply chain, improvement in our product mix and cost optimization initiatives within the company.With this, I conclude and open the floor for your queries. Thank you so much.
[Operator Instructions] The first question is from the line of Aditya Khetan from SMIFS Institutional.
Sir, first question is, sir, on to the Specialty Black volume. Sir, on a quarter-on-quarter basis, there is almost a 30% jump into Specialty Black volumes. But sir, despite this, our gross spread has been almost flattish. Like I believe, sir, this is commanding almost 2x the gross margins as compared to the conventional grade. So this jump in volumes has not been translated into your gross spreads. So...
The gross spreads, Aditya, has gone up. So what you are looking at is the consolidated number. And Tamil Nadu still -- I mean, is not fully operational. Though we commissioned the line towards the end of September, I mean, we still don't have approval from major tire customers. That is more of spot market sales. And realization is a tad late than what normally we get in PCBL. So that is also kind of having a pulling down effect on the gross margin.But having said that, overall gross margin has gone up. On a stand-alone basis if you look at gross margin, PCBL, and which will be more reflective of the change in product mix, our gross margin per ton has gone up from roughly INR 33,700 to INR 34,700. So there is a INR 1,000 increase, improvement in the gross margin.
Okay. And sir, on quarter-on-quarter basis also the domestic sales volume has been flattish. So what is the reason for that?
Domestic market continues to remain a little oversupplied, a lot of capacity came up in last 2 years. And therefore, we are pushing more material in overseas market.
Any recent competitor, sir, which has expanded the capacity recently?
Any...
So like of ours in the last 2 years?
In last 2 years, most of the manufacturers added capacity. So Epsilon capacity came up, Continental added capacity, Himadri added some capacity, BKT added capacity, and we also added capacity. So if we'll take market -- domestic market, [Technical Difficulty] capacity. But if we look at our performance from overall capacity utilization perspective, we are almost operating -- if we leave aside the Tamil Nadu plant which recently got commissioned, most of our capacity -- if you look at all the 4 plants, we are operating at almost full capacity level.
Okay. And sir, on to the gross spread guidance. Like you had said earlier that, that could improve by INR 1 per kilo till FY -- so for the next 2 to 3 years. So does that hold right now, because currently only we are standing at a very high spread number? So that will remain constant? Or how you see that going ahead?
Long-term guidance remains as is. There is no change in long-term guidance. And we believe that we should be able to deliver.
Okay. And sir, last question from my side on to the export market. Sir -- I believe, sir, we are selling almost 15% to 20% to Europe and some of the quantities also into the United States. So currently also we are -- so we are facing some issues like -- so demand issues, or there are any sort of short-term hiccups which is like holding back your volumes over there and that could improve over the short term. Like how is the trend and demand into these international markets?
See, there will be -- this should be looked at from 2 different point of views. One is long-term strategy of the company. So in Europe, we did not have much of the market and structurally we are trying to become big in Europe. So going forward, if you are talking about next 4 to 5 years' perspective, Europe certainly has a lot of potential and going to become a big market for us.In short term because of all the volatilities which are there in the market, our objective is to ensure a high capacity utilization. So wherever -- whichever geographies offers scope and potential, we will move our materials there.
So currently, the markets are weak or...
Geography-wise, mixed in the interim I think. But structurally, we are focusing in a big way on Europe, and therefore, we have also opened up our own offices in a number of countries there.
The next question is from the line of Riya from Aequitas Investment.
Congratulation on good volumes, and Specialty up after a long time. My first question is in regards with the demand coming from the international market. We're seeing volume growth here. So which geography are we seeing this particularly? I suppose you just mentioned about Europe. So could you elaborate more?
We are present, Riya, in more than 50 countries now. Like I said, all geographies are important for us, but we are trying to focus more on markets which hold bigger potential and where our market share is still not as high as we would have wanted. So while -- like in the interim, till the time this global trade disruptions all slowdown -- it is continuing -- we'll have to ensure higher capacity utilization by looking at opportunities wherever it is available. And structurally, in some of the geographies, we see big potential where we are investing in our own supply chain capability, which will create foundation for larger trade volumes in these geographies for us.
Right. So this particular quarter no one geography contributed majorly for the...
So it's a mix of all the countries where we sell. And Asia Pacific still remains big for us.
Asia Pacific was the major...
Yes, it is major. It is almost accounting for almost 70% kind of market outside of here.
Yes. And in terms of Specialty Black newer capacity, additional 20,000 Phase 2, when do we expect that to come?
It should take, I guess, about a year's time.
So maybe October 24?
Yes, around I mean. So roughly 4 quarters time.
Okay. And do we see this kind of like 16 -- I think 16,000 tons quarterly run rate for Specialty to sustain?
We will hold on to our yearly guidance. I think we should be able to deliver that this year.
Okay. Because I think for Q4 we had guided for 16,000. So we've already achieved that. So just wanting to have a true sense on it.Hello?
Yes, yes. As I said -- I mean, we hold on to that guidance.
Okay. And in terms of margins, like Specialty since we have got new 2 new patents, could you elaborate more on that, what kind of process patents are there? And what kind of -- or any quantitative numbers if you could give across that, what kind of cost saving or something like that, value added it would give us?
So these are kind of newer grades in the market. And the potential for volumes in these grades would increase gradually. As of now, based upon our capability and all, we see maybe an annual volume of about 6,000 to 7,000 tons annually.
Initially, it would be...
Sorry?
Yes. So initially, it will be a little...
Hello? You're not audible. Hello?
Riya, so in terms of market potential, I'm talking about us specifically. So initially, it will be about 2,000, 3,000 tons. And in 2, 3 years' time, we expect it to be 6,000, 7,000 tons annually.
6,000 to 7,000 tons. Okay.
The next question is from the line of Jatin Damania from Svan Investment Managers.
Congrats on the good set of number. Sir, carrying over from a previous participant question in terms of the patented product -- now what seems to be indicated is that the volume would be 5,000, 6,000 per ton on a monthly basis. But can you help us in understanding what would be the margins or the EBITDA per ton as compared to the current product mix on the patented product?
I can give you an indication because it is a recently launched grade. So we just patented it and just introduced in the market. Our expectation is that it will be around maybe $1,200, $1,300 kind of contribution per ton.
So that means that it will be almost 4 to 5x in the -- at the current -- on the base? We can assume it, right?
Yes.
Roughly.
Roughly, yes.
Okay. Sure. And sir, second question. Now with the ramp-up of the Tamil Nadu and the Chennai process actually starting in October 24. So if one wants to look at the longer-term horizon of 4-year down the line, what are the volume growth drivers one should assume? Are we starting to look at some acquisitions or looking at some -- another round of expansion in Tamil Nadu or Chennai for the base grade and the specialty grade?
See, we believe -- I mean, with the kind of potential which is there in the market, we believe that we'll have to keep adding capacity every year. So yes -- I mean, sometimes it can be through brownfield, sometime it could be greenfield. And in terms of inorganic opportunity, if something comes up -- see, there's nothing available in the market as such. But if something comes up at a valuation which is acceptable to us and if the portfolio is right, we may also consider that.
So sir, with the current land bank -- yes. So with the current land bank, what is the brownfield expansion we can do in both -- I mean, the higher carbon and specialty one?
Would you repeat? Your voice is not clear.
So with our -- sir, with the current land bank that we are having it, what is the incremental expansion which can carry on in the base grade and the specialty grade?
Okay. I'll tell you both about Rubber Black as well as specialty. In down south in Tamil Nadu, we can add another 90,000 tons of brownfield capacity. It will be mostly rubber grade for tire application and industrial applications. As far as specialty is concerned, we are already working on this additional capacity in Mundra, which will be ready within a year's time.And in parallel, we have started working to look at the possibility to add something more over there. But we have still not decided on the exact capacity of the reactor design. So can't make any comment beyond that at this point of time on specialty.
Okay. So as of now, we can probably work with the 20,000 tons of the specialty which will come in October 24, and the Rubber Black of incremental 90,000 whenever we decide in the future, right?
90,000 additional Rubber Black facility over a period of, say, next year or 2 years' time maximum.
The next question is from the line of Sanjesh Jain from ICICI Securities.
Starting with our Energized (sic) [ Energia ]brand, which is a battery chemical, earlier, I think a quarter or 2 back, you said that we are very close and now we have supplied the sample. Can you elaborate more particularly in battery chemical? What is the component we are looking at it? What is the present opportunity? How critical that element is? And what does our internal assessment talks about our ability? And what are the other opportunities within the battery, if at all, we are looking beyond this product?
Okay. So Sanjesh, there are -- in market, currently there are 3 types of battery technology. One is the old technology, which is called dry cell. The second one is lead acid battery, which is second-generation battery technology. And the latest one is lithium-ion technology, which is the high-end batteries with high power storage and all.We already had grades which were catering to the first-generation battery, dry cell. What we have developed now is going to cater to the second generation and the third generation batteries, right? And in terms of where we have reached in terms of capability, see, there are different kind of grades which can be manufactured, and we are targeting grades with more capacity. So the grades that we have launched is kind of a inkling capacity or little less than where we would have wanted the conductivity to be in these particles.So while this will cater to lithium-ion batteries also, but this will be like low end of lithum-ion batteries, not the really high-end Tesla kind of batteries. Those grades are still at the lab level in our R&D lab. And this Energia grades that we have launched, we have already given the samples to one of a very large EV manufacturer, who also is into the dry cell manufacturing for -- based -- I mean, at lab testing level, it was successful at their end. And now, they are testing it at industrial stream.
Fair enough, fair enough. That's quite useful. The second one is on the specialty. There has been a sharp acceleration in the volumes. And what is driving it, more of a coating or pigment, which is rubber? What within the specialty is driving this growth? And what has been the catalyst, because it has been a very smooth and steady growth, but it looks like there is a step-up jump this quarter. Can you elaborate more on that?
See, one is we got recent capacity on these during the quarter with Mundra specialty line getting commissioned. That gave us this capacity cushion. Second, generally, demand for high-end things have gone up, be it fabric, be it automative and all. So that's where specialty gets consumed more. And also -- I mean, our market penetration has also increased. We have added a number of customers, which is -- and I mean, therefore, foundation was already laid. I mean, when we gave the annual guidance about the volumes, et cetera, most of the work was already done. So now that we have capacity, we are able to sell more volume.
No, the guidance was that we will sell 10,000 metric ton more versus previous quarter. And in one quarter, we have sold 5,000 more. It appears that we way ahead of our guidance...
Our annual guidance, Sanjesh, was for 50,000 to 55,000 tons of specialty for the year, and we remain on track. So first half -- if I recall, 6 months' volume is close to that, 27,500 tons.
Fine, fine. I got it. No, I mean, I remember it as 10,000 traditional, but got the point. And number three, on the operating cost particularly. Now that the Tamil Nadu has come in, but our total operating cost sequentially has come down. Can you explain that drop? How is that?
No, our operating cost structure remains very lean. And the cost structure -- I mean, cost factor, if you were to discuss, not only operating, but overall cost structure, we expect about INR 45 crores of depreciation on a full year basis, roughly about INR 30 crores, INR 35 crores of interest cost. And plant maintenance cost plus manpower, et cetera, the -- and all of...
No, if you look at other expenses, last quarter was INR 149 crores, this quarter is INR 144 crores. While we have operated first phase of Chennai plant for the whole quarter in this quarter, which was not there for the last quarter. And yet our other expenses has declined by INR 5 crores.
Okay. You're talking about other expense...
Yes. Yes.
Right? So last quarter, there were some fees, et cetera, also which was paid during the quarter and which appeared here, which was more of a one-off.
Got it, got it. So this INR 144 crores is a steady state from here on? Or because of Phase 2, there will be a little bit more increase?
So the current quarter is reflective of the annual run rate.
This will be for the full operational plant, right?
Yes.
And we were supposed to commission 24 megawatts of power and we have started with 12. The other 12 should commission soon?
It should take us about 3 to 4 months more.
Okay, okay, okay. That's fair. And one last question on the global market. Europe is supposed to go to -- remove that quota of buying from Russia starting, I think, if I remember it right, July of next year. Are we in active discussion with the large player, Europeans who have a long-term contract for buying Carbon Black, and hence, ramping up Chennai facility faster than what we thought? I think even in this quarter, we are already at a 50% utilization, which I think is a very good run rate to start with. Do you expect this ramp-up to be much sooner than what we have earlier anticipated?
Tamil Nadu ramping up -- see -- I mean, the major hurdle now in terms of capacity utilization I would say is approval from major tire customer. And it is more of this process, I mean, which is taking time, not any problem as such which is delaying the process. So it's a normal process. It will take about 2 to 3 quarters' time for all the approvals to come by. And tire accounts for almost 65% of volume uptake, right?And we believe in next 3 to 4 quarters time, we should reach 80% plus capacity utilization. But we expect gradual ramp-up from here on. So whatever volumes we have been able to do in current quarter, next quarter volumes should be better from the current quarter and fourth quarter should be even better.
So the emphasis is what, more domestic customer or more European customers? Tamil Nadu is a sweet spot for us, right, considering the port. We are very close to the port.
Mix would remain -- geographical mix, Sanjesh, would remain more or less similar. So maybe about 2/3 -- 1/3 -- 2/3 domestic market, 1/3 European market. That's how. For the interim till the time we have approvals from all the tire customers in domestic market, we are just trying to utilize capacity by selling more in the overseas market.
The next question is from the line of Dhiral from Phillip Capital PCG.
Sir, in next 3 to 4 quarters, you talked about Tamil Nadu plant will reach 80% utilization. Am I right?
Yes.
So this is overall 1,47,000 tons you're talking about?
See, with product mix and all, the real capacity would be somewhere around 125,000 to 130,000 tons, or roughly 10,500 tons a month, roughly.
Okay. Got your point, sir. And sir, any debt reduction plan in next 2 or 3 quarters since you have generated a very good cash flow in the first half?
Very sorry. Would you please...
Debt reduction.
Sir, any debt -- any...
If you look at our debt equity ratio, leveraging is already there. Hardly there it is, I think, 0.22 on a stand-alone basis.
No. So going ahead our working capital, which is there at our short-term borrowing, which is around INR 550 crores, that would remain same? Or we would like to use from the internal accrual?
In working capital -- I mean, if you look at total debt, I mean, we had -- on a net basis, we had just about INR 700 crores -- INR 650-odd crore of debt as of 30th September And the cost of debt is also very competitive. Our average borrowing cost is sub 8, I mean long term, short term, all included. And like -- we mentioned that we are in a high-growth path now. Next 5, 7 years, we expect to add capacity almost every year. So some debt would remain on book, but philosophy-wise, we want to go down on debt. Maybe once we are through with our capacity expansion program, then we will pay our debt completely.
Okay. And sir, just last one question, sir. For the domestic market particularly, do we expect any higher volume growth at least for next few quarters since the capacity has been added even by the other peers as you talked about? So what kind of volume growth we are expecting in domestic market?
I would not say domestic or international, but our focus would be to ensure high capacity utilization. And the guidance that we gave for the full year, we are on track to achieve that.
The next question is from the line of Sailesh Raja from B&K Securities.
Sir, I have 2 questions. So you're saying only gradual ramp-up in production from Chennai facility. But due to lower tax rate and also expected better production yield in Chennai facility, is it possible to shift the production from existing to new Chennai facility? And also I need to understand basically how easy to get the customer approval for shifting the production? And how long it will take to get customer approval for change in production facility?And also with each customer we will be taking approval for all our facilities or a particular customer we will be taking approval only from the particular facility we will be supplying? So how this will work in our industry? Can you explain, sir? It will be helpful.
You are right, Sailesh, that Tamil Nadu from tax point of view is more efficient. But when I said gradual ramping up of volume, it is only because of the process involved in the grade approval, right, the quality approval by the major tire customer. So even if we vacate PCBL capacity, it doesn't mean that we can utilize Tamil Nadu capacity. And we believe in next 6 to 8 weeks time, these approvals should start coming in. And once we have these approvals, then the ramping up would be faster. When I say 4 to 6 quarters, it is really conservative. Maybe we will be able to achieve higher ramping up, but in my mind it is like -- I mean, we feel that there can be some things which we may not factor in now, and therefore, it is better not to create expectations of full capacity utilization before that time. But our focus would be to ensure -- to get those approvals faster and utilize capacity to the maximum extent possible.
Okay. Great, sir. Sir, my second question is for the incremental volume growth for the next 2 years. So how much you are betting on new customer wins and how much it will come from increasing share of business from existing customer? In percentage terms if you give us, then it will be very helpful. And also, in Europe -- so we are expecting orders from new customers? Or -- again, there, increasing share of business in existing customers?And also, can you share what is the landed cost there in Europe versus Russian Carbon Black? So by next 2 years, how much volumes you are expecting from Europe market due this ban on Russian Carbon Black from next year? Sir, can you explain this?
Okay. So Sailesh, so far as tire customers are concerned domestic or international, we are already there. We have existing dealings with most of them. And therefore, in that space, new customer addition will not be many. I mean, there will not be too many numbers. New customer addition is finally happening in the area of performance and specialty grades, where we are also launching newer grades every year.In terms of potential in Europe, like I said, that we look at Europe as geographies with large potential. And we have been -- last 3, 4 years we started investing in our supply chain capabilities there. So that holds potential. Our aspiration is to increase our volume from the current level to at least 2x in 2 years' time, right? And it is growing rapidly. Like as I said, 2, 3 years back, we were hardly doing any volume. Our share of Europe in overall international volume was just about 3%, 4%. And from there, last year we clocked 14%.Currently, it's going through a slowdown now. So therefore, this year may not be the right year to track performance in terms of volume growth, et cetera. But structurally, it holds a lot of promise. And that's how we are looking at this geography. We are building up relations with setting up our own offices, investing in distribution capability, like including...
Okay. Sir, what is our landed cost difference between PCBL or any Russian Carbon Black?
We are competitive, Sailesh. I mean, landed cost would also depend on what grade we are supplying. In terms of logistics costs, we incur just about $40, $50 a ton, which is not much because even when we are supplying in domestic market to tire customer, our average cost works out to around INR 2,500, INR 3,000. So if we are incurring $40, $50 for overseas chemicals, it is not a -- it doesn't have impact on the margin of the business.
The next question is from the line of Balasubramanian from Arihant Capital.
I'm new to this company. Sir, I just want to understand how much we have invested for this Chennai and Mundra plant? And what kind of asset turn we can expect in these investment?
Mundra -- so there are basically -- this capacity addition is happening in 2 phases. One is already commissioned and the second will come up in a year's time. Between these 2 lines, we estimate a capital outlay of about INR 330 crores, INR 340-odd crores. A good part of that is already spent, about INR 220-odd crores is already spent, because a lot of infrastructure is common. Tamil Nadu we expect the overall project cost to be about INR 950 crores to INR 1,000-odd crores. But then -- again, I mean, the spending that we are doing will also kind of have some kind of civil infrastructure creation for the next phase of brownfield expansion.
Sir, what kind of asset turn we may expect, sir, in those investments?
So on a full capacity utilization basis and at current crude prices, we expect to generate about 1,400 kind of revenues, INR 1,400 crores kind of a revenue on a full year basis on Chennai.
So including both the investments, right, sir, this INR 950 crores and another INR 340 crores...
No, that INR 200 crore is Mundra. This is not Chennai. So I'm talking about Chennai. And on Mundra side, we should be able to generate about roughly -- roughly about INR 200 crore kind of revenue, annual revenue from that facility.
It's incremental revenue, right, sir?
From the Phase 1 facility, right. From the Phase 1 facility.
Overall sir, in Phase 2, Phase 1?
Would you please repeat?
So overall, sir, in Mundra plant capacity like asset turn or incremental revenue -- around INR 200 crore incremental revenue from Mundra facilities or -- it's only for Phase 1 or it's included for both?
Phase 1.
Phase 1.
The INR 200 crores is from Phase 1.
Okay, sir. What about the Phase 2, sir?
Phase 2, the line is still under designing. So it will also depend on the product mix and all. We expect a similar kind of revenue from that line also.
The next question is from the line of Deepak Poddar from Sapphire Capital.
Hello? Am I audible?
Yes, sir. You can go ahead.
Sir, first of all, I just wanted to understand. I mean, this quarter our EBITDA per ton was around INR 18,200 odd. And I think the mix of specialty was also high in this quarter. So just wanted to understand what sort of sustainable EBITDA per ton we are looking at maybe this year or next year as we also, I mean, tend to increase the share of specialty volume? Yes.
So this is sustainable. See, the market is not in best of the situation currently. Domestic market remains oversupplied. And in international, we all know there are problems. There are geopolitical issues, there are growth issues with the global economy right? And therefore, whatever we have made is not only sustainable, but we expect that next 3, 4 years because of changing product mix, increasing efficiency and operating leverage, we can further increase on it.
So 20,000 -- would we look to target 20,000 kind of a range in the next 2 to 3 years?
See, our guidance was 2027 we expect it to be around that level. It may happen before that also.
20,000. Okay, okay. Fair enough. And in terms of volume, I mean, overall at the company level, what sort of growth you are expecting over next 2 years? I think we were at about 4,50,000, right, in FY '23. And we do look to improve our capacity utilization, as you mentioned in one of the comment.
We believe that next 5, 6 years, we can grow at lower double digits, maybe 12%, 13% kind of growth.
12%, 13% volume growth CAGR, right?
Yes.
The next question is from the line of Vallabhee Rungta from RoboCapital.
Sir, so the other day I was reading this article like which says that some of your clients are talking about switching to silica instead of using Carbon Back. So I would like to have your view on this? And what drives this [ difference ] between silica and Carbon Black per kg or per metric ton that you are seeing? If you could guide on that.
See, silica already has been there since ages. It is not a new discovered material. But -- while Carbon Black has both filler and binder ability, silica its own doesn't have that adhesive capability, and therefore, it requires to be mixed with some other additive for it to be used in tire compounds.Also, it is very corrosive for tire equipment. And therefore, even now most of the tire companies are using only very small fraction of silica in their tire compound, and that too from showing that they are adopting green practice there. So I mean from that perspective, it is not a replacement in real terms.
The next question is from the line of Omkar Kamtekar from Bonanza.
So first question is, say, about 3 or 4 quarters down the line what will be the blended capacity utilization of all -- so our total capacity currently stands at 770 metric tons. So what would be the 1 year down the line blended capacity utilization?
I guess in a 4 to 6 quarters time, we should be reaching our full capacity utilization. But then this 770 is the infinite capacity, which can be achieved only if we were to manufacture one grade all the time. With the [ stat ] mix that we have, we can go up to maybe 625,000, 630,000 tons. That's maximum that we can achieve. In 4 to 6 quarters time, we should be reaching the full capacity.
Okay, okay. And sir, would it be possible to give a segment-wise capacity breakup as to how much of the total capacity is for specialty like Rubber Black and others? Is it possible?
Specialty, as of now, we have 92,000 tons. And in a year's time, we will have another 20,000 tons, right? I'm talking about in terms of the gross capacity, right, the breakup of 770. And rest is capacity which is fungible between tire grades and performance grades.
Okay, okay. So 92% is the current Specialty Black, plus 20 which will be coming about in a year's time, and the rest is fungible. That is correct?
Yes.
Okay. And finally, sir, with respect to -- from a longer-term horizon -- I think this was covered to a certain extent by the comment in the previous question. So 20,000 could be achieved, say, by FY '25 and it will be an optimistic thing on basis of the crude oil being benign and our growth being in double digits. So we can reach, say, a quarterly run rate of revenue closer to INR 1,600 crores or INR 1,700 crores. Would that be a fair assumption?
Yes, that's possible. So if crude were to remain stable, then volume growth will reflect on the top line. So if we are saying 12%, 13% CAGR volume growth, that would also reflect on our top line if crude price were to remain same and if there was no change in our product mix.
Okay, okay. So the product mix would also play a big role. Yes, you are right on it.
Our product mix is also improving every passing day.
Right. On the product mix, the Specialty Black -- what is the EBITDA per ton on the Specialty Black? Can you disclose it?
We roughly make about 2, 2.5x of our tire grade margins in...
Okay. Okay, 2, 2.5x.
The next question is from the line of Harsheel Mehta from Mehta Vakil & Company Private Limited.
Lately, we've been reading a lot about the chemical industry being affected in general by dumping by Chinese companies. Is this something that affects us for our portfolio of products? Or is it something that the Chinese industry is no longer as competitive for Carbon Black and Specialty Black?
See, in our space -- I mean, what we are witnessing is that their cost structure is adversely challenging for them. And therefore, in our side -- it means they have not been very prominent in terms of pushing the material in India and surrounding geographies. 30% to 35% of our volumes we are selling in overseas markets, which is a level to increase. Even in India, there is no antidumping now. But besides that -- we could not only increase our volumes in overseas markets, but also we could improve our margins. So that's a reflection of either improvement in our capability and also simultaneously some problems at their end.What we understand is that their cost structure is now not supporting this industry. And therefore, there is a structural consolidation which is taking place there. So while they still hold largest capacity globally, but in terms of price competitiveness, they are not where they were 5 years back.
The next question is from the line of [ Mahesh Atal ], [ Atal Associate ].
Sir, congratulations on a good set of numbers. My question would be that coming to the masterbatch industry, what is the current, I mean, scenario that we are looking at? Like are they -- I mean, we stand to be, I think, a top player supplying the Carbon Black to that particular segment. So can you just please throw some light on how that industry is operating currently? And are we also looking at some other channels? Has there been like -- like we are supplying to tire industry and existing and all, but are you also looking at some other new channels all together which are opening up for us as a company? If you can just elaborate on this.
Would you please repeat your question? I couldn't understand.
Sir, the thing is that -- first thing is -- hello? Am I audible, sir?
Yes.
So basically the thing is that what is the lookout for the master -- I mean, the masterbatch industry? I think we are the biggest supplier to the masterbatch industry. And all -- I mean, lately, we are saying that there is a huge demand of Black masterbatch coming in the market. So are we -- what is the growth coming from there?And also, I was just wondering like we are already supplying to tire industry and all that industry since a long time. Are there any new channels opening up for us as a company where we are seeing that there is huge demand? Maybe in future it may come up? Or are you also in talks for -- as an industry, we are able to supply to entire industry assets. I'm talking about the opening up of new channels. So if you can elaborate on this.
See, in terms of new channels, I mean, there are lot of...
Sorry? Sorry, sir. Hello?
Yes, Mahesh. In terms of opening up of new channels, see, there a lot of new solutions that we have been creating through our R&D initiatives. And earlier, like, primary use of Carbon Black was on tires and rubber. And now, it caters to all sorts of different industries.In terms of the latest evolving opportunity, it is the conductive segment. The battery storage industry is growing very rapidly, and that to us is a large opportunity. And that's where currently our company is focused upon, right? So a lot of work is happening on that front.In terms of your question of -- on masterbatch, honestly, I'll not be able to comment on that. Maybe I'll revert to you. As I have spoken with our Specialty Marketing Head, maybe he will have some view on that.
Also, sir -- okay. Just to add on to this. So when you say that there's a -- this conductor industry itself is so big that you're also working in that direction. So can we just -- are we just looking at domestic market? Or we are opening up the entire world markets for this particular segment?
No, Mahesh. So we don't consider India as our only market. We are a global company and we consider entire globe to be of our market. Even now almost 70% of our specialty volumes are sold outside India. And we have a very strong customer connect and supply chain network outside India, globally in fact. So the opportunity is everywhere, not only in India.
And do you see that Indian markets growing in this particular segment?
Yes, India is also growing rapidly. But it is, I think, this opportunity is evolving across all geographies, most of Europe, even Asian countries and India included.
The next question is from the line of [ Radha ] from B&K Securities.
Congratulations on good results. Sir, I wanted to ask on the patented products. You mentioned that we could do 7,000 to 8,000 tons. Now every year in specialty, we wanted to increase our volumes broadly by 10,000 tons. So is that included in this 10,000 or it will be over and above that?
See, when we give long-term guidance, Radha, it is like something where we have a very high level of confidence, right? And this is usually a conservative guidance. Now the grades that we have launched and we got patented is -- there are some grades which got developed in our R&D lab. But having said that, every year we are launching some 8 to 10 new grades. So it is just part of those new innovations or products which we are developing every year.So I would not say whether this will be outside that guidance which was given to you. Our effort will be to obviously maximize the opportunity which is there, right? But we believe that 10,000 tons incremental volume every year is something that we should be able to achieve.
And the production of this will start from?
Production has already started. For these 2 grades, production has already started.
Okay, sir. And sir, I wanted to understand. Now that all the capacities that are expected to be commissioned for this year is done, so what would be the maintenance CapEx expected from this year onwards?
See, we incur about roughly INR 12 crores, INR 13 crores of maintenance CapEx per plant every year, right? So now that we have 5 plants, it should be around INR 60 crores, INR 65-odd crores annually.
Okay, sir. And sir, lastly just wanted to confirm if I heard it right. Sir, Chennai plant volumes for first half FY '24 would be 14k tons, which is 5k in in 1Q and the remaining in 2Q.
Correct.
Okay, sir. And lastly...
Corret. And...
Sorry, sir?
Yes, please continue.
Okay, sir. Sir, lastly, in Mundra, we do have some extra land. So for that extra land just wanted to know whether we are looking in future if we do expand after Phase 2. So will we be expanding in specialty products? Or are we looking for some other new opportunities?
In all likelihood, it will be a specialty line only.
Thank you. Ladies and gentlemen, that was the last question for today. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us. And you may now disconnect your lines.