Rossari Biotech Ltd

NSE:ROSSARI

Earnings Call Analysis

Earnings Call Transcript 2025-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to the Rossari Biotech Limited Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anoop Poojari from CDR India. Thank you, and over to you, Mr. Poojari.

[Anoop Poojari]

Thank you. Good evening, everyone, and thank you for joining us on Rossari Biotech's Q1 FY '25 Earnings Conference Call. We have with us Mr. Edward Menezes, Promoter and Executive Chairman; Mr. Sunil Chari, Promoter and Managing Director; and Mr. Ketan Sablok, Group Chief Financial Officer of the company.

We'll begin the call with opening remarks from the management, following which, we'll have the forum open for a question-and-answer session.

Before we start, I would like to point out that some statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the earnings presentation shared with you earlier.

I would now like to invite Mr. Edward Menezes to make his opening remarks.

[Edward Menezes, executive]

Thank you, Mr. Anoop, and good evening, everyone, and thank you for joining us on our earnings conference call. It's a pleasure to have you with us as we discuss our operational and financial performance.

We are pleased to report a strong start to the year, driven by healthy year-on-year growth in both revenues and profits. This performance is particularly commendable given the current environment and it was largely driven by the strong expansion of our HPPC business and a healthy uptick in our TSC division. While challenges in our AHN division persisted due to industry headwinds, we remain optimistic about the recovery in the remaining fiscal year.

Our commitment to R&D continues to drive our success, and we have seen many synergies emerge through our past acquisitions. A notable example is the development of a single component emulsifier last year for the agrochemical industry, particularly in enhancing the stability and dispersion of herbicides. The emulsifier simplifies the formulation process, improves long-term stability and ensures uniform dispersion of the active ingredient, thereby providing better coverage and absorption by target plants.

Such product developments are a key reason we have delivered strong success in the agro space despite the industry witnessing subdued demand. These innovations demonstrate our ongoin., dedication to offering advanced environmentally friendly solutions that meet the evolving needs of our customers. As we have mentioned in the past, R&D is the cornerstone of our growth and innovation strategy, strengthening Rossari's position as a leading solutions provider in the specialty chemicals sector.

Our R&D capabilities enable us to meet evolving market trends and offer bespoke solutions driving growth, creating value and enhancing our reputation for intelligent and sustainable solutions.

While commodity chemicals have benefited from global industry trends in recent years, we see a promising shift where solution providers and formulators with strong R&D capabilities like Rossari will lead the way in creating sustainable value for all stakeholders going forward.

The recent expansion at Dahej, along with increased ethoxylation capacity expected to be completed by year-end will help meet the growing demand in all key segments, including agrochemicals, specialty surfactants, oil and gas and performance chemicals.

As India emerges as a major hub for global chemical manufacturing, our R&D framework, solid financial base, enhanced manufacturing capacities and diverse product range position us well to capitalize on growth opportunities in both domestic and international markets.

With this, I would like to conclude my address and now I hand it over to Mr. Chari for his comments.

[Sunil Chari, executive]

Thank you, Edward, sir, and a warm namaste to everyone. The first quarter of financial year '25 has demonstrated our resilience and growth potential. We have had the best quarterly performance ever, both in terms of revenue and profits. We are especially pleased with the outstanding performance of our HPPC segment, which achieved a robust 21% growth.

Our Textile Specialty Chemicals division also performed well, registering a 21% growth. However, the AHN performance, Animal Health & Nutrition performance, remained flat due to industry headwinds. Our ongoing efforts to expand our domestic and international customer base have been instrumental in achieving significant year-on-year increase in both revenues and profit, which grew by 19.3% and 19.5%, respectively.

We are experiencing notable success in our export markets, which are growing faster than our domestic markets. This growth stems from our strategy of targeting new customers in both new and existing regions. Our participation in key industry events worldwide has significantly contributed to the success.

At ChemSpec Europe 2024, a key global event for the fine and specialty chemicals industry, we unveiled our latest innovations in specialty chemicals connected with industry leaders and showcased our commitment to cutting-edge solutions.

Similarly, our engagements at In-Cosmetics Korea, In-Cosmetics Global in Paris and CPHI South East Asia 2024 allowed us to present our advancements in beauty, personal care and pharmaceuticals. The positive reception at this events has helped us build strategic partnerships and stay at the forefront of the industry trends.

These strategic efforts underscore our dedication to pioneering innovative, sustainable and customer-centric solutions across diverse sectors worldwide. Overall, we remain committed to our growth strategy across all business regions with a particular focus on agro surfactants, the phenoxy series, the institutional cleaning, oil and gas and performance chemicals.

While our export markets have shown remarkable growth, our domestic market continues to be a key driver of our success. By developing new verticals within our core chemistries, we have laid a strong foundation for future expansion, both domestically and internationally.

This balanced approach ensures that we can capitalize on growth opportunities globally, while maintaining a robust presence and driving significant value in our home market.

I would now like to invite Ketan, sir, to share his perspective.

[Ketan Sablok, executive]

Thank you, Chari, sir, and good evening to everyone. Let me provide you with a brief overview of the financial performance for the quarter ended June 30, 2024. As Chari, sir, said, we've had one of our best quarters and a strong beginning to FY '25 with revenue from operations growing by 19.3% to INR 489.7 crores compared to INR 410.6 crores in the same period last year.

Our EBITDA has improved by 12.5% to INR 64.9 crores from INR 57.7 crores, with an EBITDA margin of 13.3% compared to 14.1% in the previous year. The drop in EBITDA margin was primarily due to increase in other expenses, mainly driven by higher freight, travel, maintenance and selling and distribution costs.

We've reported a record PAT of INR 34.9 crores, an increase of 19.5% from INR 29.2 crores. Coming to our segment-wise performance. Our HPPC division saw a robust growth of 21% Y-o-Y during the quarter, reaching INR 365 crores compared to INR 301 crore.

The Textile Specialty Chemical division also grew by 21%, up to INR 98 crores from INR 81 crores. AHN division experienced muted performance with the revenues at INR 27 crores in Q1 FY '25 compared to INR 29 crores last year.

In terms of revenue contribution. This quarter, HPPC leads with 75%, followed by Textile Specialties with 20% and AHN with 5% of the revenues.

Moving forward, our expansion projects at Dahej are progressing as planned and are expected to be completed by the end of the current year. The expansion includes adding 20,000 tonnes of capacity for products related to HPPC in the specialty chemical space as well as producing ingredients for our subsidiary companies.

Additionally, to cater to the growing demand in the agro, home and personal care, oil and gas and pharma sector, we are adding ethoxylation capacities of 30,000 metric tonnes at Dahej facility of Unitop. The commissioning will happen in the phased manner within the current year.

These expansions still enable us to meet the growing demand across key sectors further driving growth. To conclude, we are confident about the opportunities in our business verticals and believe that our robust R&D framework, strong financial base and a diverse product portfolio will continue to drive our success going forward.

We remain dedicated to our strategic growth initiatives, consistently driving innovation, improving operational efficiencies and better capacity utilization. We are confident that these initiatives, coupled with our disciplined financial management and investment in our people, will enable us to deliver sustainable growth in the coming years.

That's all from my side. I would now request the moderator to open the forum for any questions which the participants may have. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of Ankur Periwal from Axis Capital.

[Ankur Periwal, analyst]

Congratulations for a decent set of performance given the current macro. First question on the revenue growth. Over the last 3, 4 quarters, we have been reporting around, let's say, 15% to 20%-odd year-on-year revenue growth. How has been the volume growth trend here, if you can highlight that?

[Ketan Sablok, executive]

Thank you, Ankur. I think a primary growth driver for the last few quarters and this quarter has been the volumes for us. Both in HPPC and this quarter, we also saw good volume uptick in the Textile Specialty Chemicals. So I would say the entire growth mostly is coming out of volumes. Prices are more or less stable now.

There are some places where we have taken slight price cuts just to get into the volume gain, but overall, prices seem to be stable now.

[Ankur Periwal, analyst]

Sure. So would it be fair to say that large part of the growth over the last, let's say, 2, 3 quarters is led by volume, which is, let's say, 15% to 18% of the volume growth year-on-year?

[Ketan Sablok, executive]

Yes. Correct.

[Ankur Periwal, analyst]

Okay, great. Now second question on the stand-alone and the -- separate performance for standalone here. If I go back, we used to do 15-odd, 17-odd percent EBITDA margin even higher than that, right, pre-COVID, and after that, the numbers had come down, and we have been consistently in that 12%, 13%-odd EBITDA margin range for the last 6 to 8 quarters. Would we go back to those 15%, 17% EBITDA margin there or this is the new normal that one should look at?

[Edward Menezes, executive]

Ankur, we now -- the major business is surfactants and Unitop, which is -- which was, of course, planned at Rossari -- the subscription earlier and I think we should consider this as a new normal in terms of EBITDA margins.

[Ankur Periwal, analyst]

Sure. So both on the subsidiary and on the stand-alone franchise?

[Ketan Sablok, executive]

Yes, Ankur, now since both the subsidiaries and the stand-alone Rossari, a lot of the ethoxylation and the products are going to go in a cross-selling mode, so it would be ideal to look at it at the similar levels. And even going forward, as some of the capacities which we are putting up in the Rossari facility of Dahej will actually manufacture ingredients, which will go in as inputs for the products, which are manufactured at Unitop.

So there'll be a lot of cross-selling now between -- as it is having a lot of cross-selling, this is only going to go up now over the year. So it would be ideal to look at the EBITDA margin at a consolidated level. And as Mr. Chari said this is around -- this is what, at least for the current year, this is what we are seeing, 13%, 13.5% we played between these 2 numbers.

[Operator]

The next question is from the line of Abhishek Navalgund from Nirmal Bang Equities.

[Abhishek Navalgund, analyst]

So my first question is on the HPPC revenue. So could you clarify what sort of contribution would have come basically from the Buzil-Rossari segment here?

[Sunil Chari, executive]

Buzil-Rossari segment is a similar sales as last year in traditional chemicals business was INR 60 crores.

[Abhishek Navalgund, analyst]

Okay. The reason why I'm asking this is, I mean, we did around INR 160-odd crores last year, full year, and we are talking about, let's say, doubling the number. So just wanted to understand in this quarter also, I mean, the other expenses look a little higher. So just wanted to understand that business is like a relatively low-margin business. And any significant growth in that business would have contributed to this blended margins profile? That was the main question actually. So you're saying INR 60 crores for the quarter, right?

[Ketan Sablok, executive]

Yes. So Abhishek we've done INR 60 crores -- around INR 60 crores for the quarter. And I think we are in line with what we had talked about reaching the annual number.

[Abhishek Navalgund, analyst]

Sure, sure. But do you think because of this INR 300 crore number, I mean, ex-Buzil Rossari margins should improve on a consolidated level?

[Ketan Sablok, executive]

Yes. See, that way, if you see a lot of ex things margins will improve, but it's -- we have to see the business overall. So while this is a tough business to be in, but this is a business we want to grow. So even if it's currently a challenge on our margin percentage, we are okay to keep seeing this business for the next few years until it reaches a certain size.

[Abhishek Navalgund, analyst]

Sure, sure. Perfect. And last question from my side, regarding that GST penalty notice press release that you have put. So should we expect the provision going forward for that INR 25 crore number?

[Ketan Sablok, executive]

No, no, no. There won't be any -- that's an order which has been passed for some as per the department, it's an IGST refund, which they claim to be erroneous. We've taken proper legal views on the order which has come, and we are now on appeal against this order with the higher authority of commissioner appeal, and we are quite hopeful of getting a favorable order on this.

[Abhishek Navalgund, analyst]

This is very confident, so you're not going to provide for the same, right?

[Ketan Sablok, executive]

Abhishek, bhai. This notice has been given to practically thousands of exporters, who have taken refund on IGST trade on export trade, so it's an industry-wide and there's an big even cry and everybody is sure that this will not stand in the court of law.

[Operator]

The next question is from the line of Sanjesh Jain from ICICI Securities.

[Sanjesh Jain, analyst]

First, a clarification on textile revenue. Have you made any changes to the reporting? Because I think the base year revenue appears to be lower than what you have reported last year same quarter. I think the presentation is showing...

[Ketan Sablok, executive]

Yes. So Sanjeshji, yes, so that change actually we had done in quarter 2 of last year, we had done a reclassification of a product from textiles to HPPC. So if you see our Q2 presentation of last year, we had done this change and we had put in a note that we've regrouped...

[Sanjesh Jain, analyst]

What was the product?

[Ketan Sablok, executive]

I think it was -- I'll need to check that exact product what it was, but it was a HPPC product, which was grouped into textiles in the first quarter, and we have made that correction in Q2 of last year.

[Sanjesh Jain, analyst]

Okay. This was only for that 1 quarter that, that mistake happened?

[Ketan Sablok, executive]

Yes. Yes. So if you see our Q2 presentation, it's been corrected.

[Sanjesh Jain, analyst]

Okay. Okay. Got it. Got it. And just 1 more clarification on textile. If I look at overall 3-years trend, we have been hovering around INR 100 crores of revenue. While you look at the POS like Atul, Rodalf and all, they have reported quite a healthy revenue growth in the textile segment. Any particular reason why we are not able to grow, while the peers -- some of the peers who are listed and report the number have been growing faster than what we are growing, any particular reason? Or we are more focused on HPPC and hence, textile is taking a backseat?

[Sunil Chari, executive]

No, no. We have focused. Sanjeshji, Chari here, namaste. We are focused on the textile business. We have a bigger base...

[Sanjesh Jain, analyst]

No, no [indiscernible] base is now bigger than us. But just in terms of growth rate, are we losing any market share there?

[Sunil Chari, executive]

No, no, because our volumes have grown because raw material prices have fallen, [ every ] prices have fallen and volumes, we see better volumes in textile compared to last year.

[Sanjesh Jain, analyst]

Okay. So why then we are not able to transfer it and I thought Edwards, sir, also said that we are introducing a lot many products in the finishing side of it, which I thought were higher realization and hence would have grown faster. But if I look at the revenue, for last 3 years, we have stuck at that INR 100 crores kind of a quarterly run rate.

[Sunil Chari, executive]

No. Compared to last year, the finished good prices have fallen substantially. So -- which has translated also into higher volumes in the textile chemicals. So for us, we are steady, means we have grown. Now there will be other companies who would be on a smaller base and would have also taken share from our competitors.

We are also taking some share from our competitors because the textile markets assets have not grown. The home textile business is now on a upswing in India. Orders are good with our home textile exporters, especially for the USA market.

So we are confident of better sales in the coming quarters.

[Sanjesh Jain, analyst]

Fair enough. Fair enough. Second, on the HPP segment, if I just take out the [Technical Difficulty] part of it, it appears that quarter-on-quarter, there is a decline of 18% in a non-Unitop kind of a business. Any particular reason why -- Y-o-Y, we are still very healthy, I appreciate that. But on a sequential basis, it appears to be a much steeper fall. Any particular reason there?

[Ketan Sablok, executive]

Sanjesh, what you are saying, take out what?

[Sanjesh Jain, analyst]

That is HPPC ex of the consol minus stand-alone.

[Ketan Sablok, executive]

No, no, you cannot see it like that, Sanjesh. As I already just sometime back talked about it, there are a lot of products now which we are cross-selling. So we don't subtract -- I think we have talked about this earlier also that it's not a right way to look at the numbers now for Rossari.

So for Rossari -- because part of HPPC is done through stand-alone, part of it is done through Unitop and Tristar some of the customers of Unitop and Tristar which we have developed within the Rossari distributor network are actually routed through -- sales are routed through Rossari.

So there are lots of cross-selling that's going on, and that's only going to increase now with the new capacity is coming up both at Unitop and Tristar. So my suggestion would be to not simply subtract numbers even when the financials are [indiscernible], it would be better to look at it at a group level.

[Sunil Chari, executive]

Sanjesh, sir, to add to what Ketan, sir, is saying, quarter 1 financial year '24, we did [ INR 301 crore ] in HPPC. In last quarter, the quarter 4 of financial year '24, we did INR 344 crores. And in the quarter 1 of financial year '25, the last quarter, we did INR 365 crores. So we have consistently grown in HPPC segment. So please look at it holistically, sir.

[Sanjesh Jain, analyst]

No, no, I appreciate that. But the problem is that 1 of the product which is agrochemical has a seasonal product, and it has become fairly large. And I don't think it is an HPPC product. It's completely an industrial product. It's a B2B product. And hence, I just wanted to see, if I take it out, then how is our underlying actual HPPC product, which is our earlier stand-alone product looks like. But I appreciate that. I know there is a lot of cross-selling, so I don't read it very thoroughly because it was a sharper drop, hence I thought of asking it.

[Ketan Sablok, executive]

No, no, so Sanjesh, also, you must note that Unitop just not an agro. So today, I think we've spoken earlier also at the time of acquisition, Unitop's sales of agro products were 60%, 65% or is even higher. Today, the ratio between the agro and non-agro is almost 50-50. Maybe this quarter, it would have been 45% and this thing because of weak seasonal. But the non-agro business of Unitop has also grown significantly in the last few years post the acquisition.

[Sunil Chari, executive]

Sanjeshji, to add here, even in the non-agro business in Unitop grew by nearly 30% in this quarter. Agro did grew, but non-agro also it grew very well.

[Sanjesh Jain, analyst]

One small request [Technical Difficulty] product like agro, oil and...

[Operator]

You are not audible, sir.

[Sanjesh Jain, analyst]

Okay. Sorry, apologies for that. [Technical Difficulty] Ketanji, if we can have a separate segment for agro, oil and gas, and can we have one the Green HPPCs, so we can segregate the -- appreciate the growth in both the segment. That would be very helpful because agro is more seasonal product. It will create certain volatility, that's a small request from our side.

[Ketan Sablok, executive]

Yes. Okay. Go ahead, Sanjesh.

[Sanjesh Jain, analyst]

The other question is on the new product portfolio. Last time when Edward, sir, highlighted us there was new of product in terms of Green Chemistry in HPPC and all, including some of the pharma side. Can you just highlight which are the products being launched and other products were are they in the pipeline?

[Edward Menezes, executive]

So Sanjesh, in the HPPC segment, we have introduced a lot of esters in the last couple of quarters. So all these products, which were in the R&D stage, they have been launched both in the market as well as raw materials for Unitop. So most of these esters were being outsourced by Unitop.

Now they are being manufactured in-house at our Rossari Dahej plant. So that project has taken off very well, like the [ SMOs and SMLE and SMS ] as well as the MRO kind of products.

So that has already taken off. Then we have the cocoa amido propyl betaine, as well as the cocodiethanolamide, CDA. So there are many such other ingredients that have been -- that we have started at Rossari. These have been launched in the marketplace as well as they have been -- we are cross-selling to Unitop.

Like we said that last time that biosurfactant was pilot scale has been -- we have scaled up. Now this has gone into production, and we have taken action to increase the production capacity of our biosurfactant as well. Finally, also the silicon blast polymers are now completely made in-house, barring 1 or 2 products, which we still outsource.

Otherwise, all other products have been -- we have started manufacturing in house. So if you look at whatever projects we had taken up in the last couple of quarters, most of them have been introduced in the marketplace. And some of the green chemistries like the bio scouring agent, the green hydro. These also have been launched in the marketplace and some sales have started being developed for them too.

[Sanjesh Jain, analyst]

Very, very helpful, sir. Just 1 last question from my side. Any update on the cosmetic side of the business, which we were developing? How are we placed there? And how is that performing?

[Sunil Chari, executive]

Cosmetics, Sanjeshji, what kind of products you're referring to, sir?

[Sanjesh Jain, analyst]

So all the cosmetics, I think we started with Purple or somebody, right? And we wanted to expand that all cosmetic side of business.

[Sunil Chari, executive]

Yes. The Purple business is doing well. I think it has grown quarter-on-quarter also very substantially. But in the cosmetics also, we are developing a lot of polysorbates, which our surfactants is go into personal care formulations. On that sale even in export and domestic market is increasing very well.

We are introducing a lot of [indiscernible] in the personal care area and I think going forward, we should see good traction in that also.

[Sanjesh Jain, analyst]

How big has become for us now? Is it INR 25 crores, INR 50 crores kind of a top line for us now?

[Sunil Chari, executive]

I don't have -- we don't have figures because we don't bifurcate this and we give it as only HPPC segment.

[Sanjesh Jain, analyst]

Got it. Got it. One last question, sorry, before I come in the queue. Any updates on the exports? I think we were very optimistic on the exports, both on the textile side and Unitop side. Any further update on the textile business, particularly on the textile side?

[Ketan Sablok, executive]

Yes. So I think exports continues to be our main driver now, at least we've seen that in the last few quarters. This year -- this quarter also, if you see on the overall revenues, I think, close to 24%, 25% would be exports. So Y-o-Y growth is close to almost doubling on the export side.

And this has happened primarily in HPPC, but also now we are seeing the export revenue of textile is also slowly firming up. Some of the initiatives that we took in the last quarter in Bangladesh and Vietnam. We are seeing some of that playing out now in this quarter. We also now this quarter started initiatives in Egypt. So I think going forward in the next balance part of the year and majorly in the second half, we'll see some good traction in textile exports from these countries.

[Sanjesh Jain, analyst]

Got it. What is our expectation on exports as a percentage of top line we can reach, say, in next 2 years?

[Ketan Sablok, executive]

See, Sanjesh, if you see overall the business itself is growing. So it's growing both on the domestic as well as on the exports. But if you see till last year, I think last year, Q1 would have -- our exports would have been 20% of our revenues.

Today, it's -- this quarter, it's almost 24%, 25%. But if you see in value terms, it's almost doubled. So -- or at least not double, but at least 50% growth. So while the percentage is growing, but the absolute number is growing significantly. So I think we would be happy if the exports absolute number keeps growing. And it's within this 25% to 30% kind of range, I think for the next 2 years, that's what is our target number.

[Operator]

[Operator Instructions] We have the next question, which is from the line of Bhargav from AMBIT Asset Management.

[Bhargav Buddhadev, analyst]

Sir, my first question is continuing on the exports, especially on the Bangladesh front. How big can this opportunity be on the textile side, sir?

[Sunil Chari, executive]

Bangladesh is a market which is bigger than the Indian market and -- but there were also a lot of ForEx issues because which is now considerably eased. So we see that the opportunity in Bangladesh is bigger than the Indian opportunity. We have a team of people present there. We have now a new distributor. And we think that progressively, we should see better traction in sales to Bangladesh than in previous quarters.

[Bhargav Buddhadev, analyst]

Okay. Sir, second question relating to our institutional business. Sir at what level can we expect this business to become breakeven? And if you can share some insights into what could be your sort of 3-year plan to make this business much larger from here on?

[Sunil Chari, executive]

The Institutional Cleaning Chemical this year we're expecting it to be INR 250 crores. The first quarter was about INR 60 crores. So we are aligned and we have had a substantial growth in that product -- in that business. The focus would be on all products related to the Institutional cleaning, hygiene, disinfection and also food service. So we are going as a basket by providing not only chemicals, but a whole range of products together, which can go into the institutional cleaning and hygiene and disinfection line.

So airports, malls, food service hospitals, these are areas where we would want to focus for this end of next financial year. I think in terms of percentage of growth, because this is a smaller base from INR 150 crores to INR 250 crores we are growing, and we should see a healthy growth year-on-year on this segment, primarily because the market is big and the focus on cleaning and hygiene and disinfection is increasing.

That is why we are very bullish on this business. This business is a very difficult business because it requires a lot of service, a lot of people in the field and also a lot of equipment. For example, if you go to a laundry in the hotel industry, we need to have dispensers to dispense chemicals to the batch washing equipment. And even if you go to a kitchen and there's a big automated dishwashing line, we need to provide chemicals to dispense these chemicals in an automatic manner on big machines.

Other than that, even in facility management, for example, to airport, we need also because it's manpower is unskilled, which are contract labor, which is coming to the facility management companies, we need to provide dispensers, so that dilution happens.

We supply chemicals which are concentrated. So for example, you have to add between 5 ml to 20 ml per liter. So this is a service concept rather than only chemicals, there are other products which we go as a basket for this industry. And we are happy to not only focus only on chemicals, but to go as a basket we're planning to launch products based on kind of Povidone iodine. We are the common big brand is Betadine and a lot of other products in the near future.

Hospital hygiene also is something which we think could grow in a big way in the future. So year-on-year, we should see much higher growth than the consolidated growth that is what we foresee in the future. And sir, any gross margin guidance or working capital guidance, which we can give once the business crosses maybe INR 400 crores, INR 500 crores?

[Ketan Sablok, executive]

I think the business itself is a higher gross margin business for us. While there is a little stretch on the working capital currently in the business, so we'll probably understand a little more of the working capital size, once we reach that INR 500 crore number, I'm sure, it will be much healthier than what it is as on date. But currently, to give you a guidance on what the working capital would be a little difficult for us. And in terms of people on ground, maybe more than 200-plus people on the ground?

[Sunil Chari, executive]

Yes, yes, more than 200 people on the ground we have already.

[Operator]

The next question is from the line of Dhruv Muchhal from HDFC Asset Management.

[Dhruv Muchhal, analyst]

Sir, what's the CapEx that you're planning for this year, cash CapEx?

[Ketan Sablok, executive]

It's -- the cash outflow will be only for these 2 large CapExes, which we have announced with Unitop and Rossari, so that's only the major CapEx outflow that's going to happen. Apart from that, we have additional fall CapEx of AHN, which is a vitamin premix and minerals facility.

So overall, we'll have an outflow of close to about INR 100 crores.

[Dhruv Muchhal, analyst]

And sir, secondly, on the sea freight issue, the container sea freight issue, what's the implication for us, basically the domestic market would probably benefit, probably some impact on the export market, but if you can provide some context here, please, sir?

[Sunil Chari, executive]

So right now, [Foreign Language]. Right now, all our contracts, we are going on FOB and we are calculating the freight available today and then telling them that we have arrived at a CI price based on this much amount of container freight.

Now at the time of actual dispatch, if the freight is lower, we will share the price. If it is higher, we increase the share price and we will be open and transparent that we do not want to earn from the freight. The freights are now nearly 2x to 3x more than what it was.

But they seem to be stabilizing now. Last 1 week, we did not see too much increase in what we had the week before. But also, we are also seeing a shortage of containers primarily because our freight agents are saying that the whole China is diluting all the business to shipping of electric vehicles there's also delays because vessels are not available, containers are not available, so normal shipping times have increased.

Now what is happening is when our containers reach late to a customer, they get consumed late, and then we have the next orders get delayed. And as customers want to try some other suppliers, which also prefers [Foreign Language]. Overall, I think the whole world is graping with this problem. So it's a new normal till it stabilizes.

[Dhruv Muchhal, analyst]

All right. But sir, domestic market, which is about 75%, that should ideally benefit because for the competing products have become more expensive now, at least whatever was getting imported?

[Sunil Chari, executive]

No, if you see our 3 segments, so our HPPC, Textile and Animal penetration, we have a lot of domestic customers because in all the 3 segments, all the multinationals have local manufacturing facilities. So even in our imports, if you see imports, we are very less imports compared to our exports.

So if you see exports is, on an average, INR 120 crores, the imports should be INR 20 crores, INR 25 crores in a quarter. So I think similar will be the case for our competition because domestically now, a lot of raw materials in the segments we work in are available.

To give 1 more example, for example, asset-lite asset or neutral [indiscernible] were primarily imported earlier. And now domestically, BPCL practically imports [Foreign Language] Similarly, acetic acid [Foreign Language] acetic acid, this month, we are buying only from GNFC. Because the GNFC prices are much better than import prices.

So India is coming of age in terms of a lot of raw material availability and pricing also has become very competitive.

[Operator]

The next question is from the line of Chetan Thacker from ASK Investment Managers.

[Chetan Thacker, analyst]

Just 2 questions. One was what is the contribution of agrochem to this current quarter revenue and the same number last year. So just to get a sense of what has been the growth in agchem per se. And second was on working capital. How has that played out this quarter? Have you seen some release of funds from there?

[Sunil Chari, executive]

Chetanji with the agro, we do not have exact figures but -- because we don't bifurcate, revenues based on such segments in the HPPC segments. But this season has been better than last season and we are seeing sales better than last season. So the monsoon has been very good and our all agrochemical formulators and the big agrochemical manufacturer formulation manufacturers foresee a good uptake in the next 2 months.

As a percentage or value, we do not have exact figures to give to. Collections have also been better. But I think it is nearly the same as in the past. So it is not worsened, that is a good news.

[Chetan Thacker, analyst]

Understood. And sir, working capital, we've seen some release or nothing materially in this quarter?

[Ketan Sablok, executive]

So working capital is pretty much same as what it was in March, we are taking some steps now. So we hopefully, by September, we should see some release of funds coming out on working capital.

[Operator]

The next question is from the line of Aditya Chheda from InCred Asset Management.

[Aditya Chheda, analyst]

Sir, first question is on the other expenses. We've seen a sharp increase sequentially. So would you highlight if there is a one-off or just in detail what these increases in other expenses?

[Ketan Sablok, executive]

Yes, this quarter, we have about, I think, INR 3-crore, INR 4-ish crores of one-off expenses that has got booked. One of it is on the maintenance side. In Tristar we had a planned shutdown for about 12 to 15 days. So that's where the maintenance costs have gone up. Apart from that...

[Operator]

Ketan, sir, sorry to interrupt, I request you to please come closer to the mic, sir.

[Ketan Sablok, executive]

So we had a shutdown at the Tristar facility. So we have some expenses booked on the maintenance side during this quarter. And we've also initiated in the last quarter some consulting work for restructuring on our HR front, now with so many multiple businesses and a lot of new people joining in.

So we had taken some professional health and restructuring, reorganizing, bringing in new performance management system, job description, et cetera. So some of those bills have got expensed out in this quarter. Apart from that, I think partly freight expenses have gone up. There have been long spend in the last 3, 4 months on a lot of exhibitions some of which Mr. Chari talked about in his opening comment and the overall travel expenses have also gone up during this quarter.

So the, I would say, the selling and distribution-related expenses have gone up in this quarter. So that pretty much makes up for the increased other expenses that you see in the numbers.

[Aditya Chheda, analyst]

Got it, sir. And my second question is on the CapEx, which is coming up in a phased manner. So at current revenue run rate, we are looking at a high single-digit implied revenue growth. But if you could talk more about how this CapEx will come on board, if you can give some more details whether it is from Q3 or Q4, et cetera, that will be great.

[Sunil Chari, executive]

So most of the expansion is based on ethylene oxide as our raw material. And as we had announced in earlier calls, we are expecting our expansion to be completed by March 2025. Now we should -- we are waiting for the expansion of Reliance for ethylene oxide to happen simultaneously.

And the first -- because the customers will be big giant companies, both in home and personal care, in oil and gas, in pharma, so we would take some time for approvals. But I think as we have said -- Ketan, sir, had said in earlier calls also, FY '26-'27 should be the right year for us to see 100% utilization of those capacities.

[Operator]

The next question is from the line of Rohit Nagraj from Centrum Broking.

[Rohit Nagraj, analyst]

Sir, first question is on the institutional business. So we have a target of INR 250-odd crores. And I believe that in terms of margins, probably it's lower margins than our company-wide margin -- so what could be a critical revenue level from where the operating leverage will start kicking in and probably the margins would be at a company-wide level?

[Ketan Sablok, executive]

So Rohit, as I talked a little earlier also. So I think this business now, at least for the next 2 year needs to show a strong growth prospect. So we are investing in terms of people and other resources quite heavily in this. Some of the new additions in terms of people on the ground, if you see mostly happening in this businesses.

So currently, as we said, we've done 60, we are expecting to close this year closer to 250-odd kind of a number. I currently don't have the exact number then, but I have a feeling that this number needs to at least double in the next 2 years.

And maybe 2 years down the line, we will start seeing some operating leverage flowing in. So maybe closer to INR 500 crores, INR 600 crores kind of top line is when this business really start showing some positive traction. And then post that, I think it will really bump up our margins.

Currently also, we -- it's not that this business is not giving us, but the level of margins are slightly lower than what the company averages are.

[Rohit Nagraj, analyst]

Right. Got it, sir. Sir, second question is in terms of the textile chemicals business, on the exports front, Bangladesh and Vietnam. So if you can just let us know in terms of what is the size of employees that we have currently in terms of maybe 3 years or 5 years down the line, what is the kind of revenue that we are looking from these markets given the investments that we are currently making in terms of manpower and keeping local professionals out there. So just a broader perspective would be good?

[Sunil Chari, executive]

See, Bangladesh, we have about 6 people working in the Bangladesh office in the sales. We have -- because our sales are low, we are gradually scaling up this thing. The textile exports, as a whole, we are expecting it to grow primarily because destocking has happened in the American market.

And we -- our customers are having in India and as far as Bangladesh other countries are having good orders for the current financial year.

[Rohit Nagraj, analyst]

Sure. Sorry, just 1 last clarification. We have incorporated a subsidiary in Dubai. So what's the strategy behind it?

[Ketan Sablok, executive]

We've incorporated the subsidiary in Dubai, primarily for any global expansion that we plan going forward. So rather than holding it through India, we've currently incorporated subsidiary any new setup, which we will plan to do in any other country, we would like to do it through this Dubai subsidiaries. So that's the plan as of now.

We are looking at -- some of the geographies is still in the planning stage, where we would like to set up some small facility. So we'll do that under this company in Dubai.

[Rohit Nagraj, analyst]

So will it be a manufacturing setup or will it be purely marketing or selling...

[Ketan Sablok, executive]

It will be a mix of both. We may start off with a marketing facility. And then maybe as the business grows and as we see some traction in the customer base, we may even set up manufacturing facility.

[Operator]

The next question is from the line of [ Pradeep Rawat ] from Yogya Capital.

[Unknown Analyst]

So I have a couple of questions. First of all, on working capital. So over the years, our working capital days has been constantly increasing. So why is this happening? And what should we expect in future on this one?

[Sunil Chari, executive]

If you see our business before our acquisitions and now, now the acquisitions is mostly based on the surfactant business. The surfactant business like Unitop and Tristar is also where we had to buy EO and also the hydro [ foam ] which reacts with EO like Lauryl alcohol or Nonylphenol or Tri Decyl Alcohol or any fatty acid, these were all purchased in advanced terms and we have at the normal standard 90 days terms with our customers. So we cannot compare apple to apple what Rossari was 4 years ago before the acquisitions happened and what it is now. And as we said in the last 2 earnings call, this -- between 90 to 100 days is a new normal, which we should consider.

[Unknown Analyst]

Okay. And with regard to demand dynamics. So how are you seeing the demand dynamics unfolding for textile and HPPC segment? And what growth should we consider for FY '25?

[Sunil Chari, executive]

So both the markets, we see healthy demand, both domestic and in exports. As I said earlier, the textile home textile markets, especially on the U.S., the orders are full with our current customers in India and also in Bangladesh.

So we should see higher sales in both these countries with other countries also. In the HPPC segment, again, we see exports and domestic market both having good demand. So we see both the segments should continue to do better than what it was last year on a quarter-to-quarter basis.

[Unknown Analyst]

Yes. And 1 quick question about utilization. So what is our current utilization?

[Ketan Sablok, executive]

So [ Pradeep ], in the side our utilizations are at 90% plus at both the sites of Tristar and Unitop.

[Unknown Analyst]

Okay. Sir, our peak utilization is somewhere around 65% to 70%, and we are operating at [ 19% ] of that 60%, 75%, right?

[Ketan Sablok, executive]

No, no. See, we have capacities of ethoxylation and we have the other capacities of reaction, et cetera. So on the ethoxylation, which is our core activity, we -- our plants are working at almost 90%. And overall, if you take an average, we are at about 55% to 60%.

[Unknown Analyst]

Okay. And the other one is that we are doing CapExes -- 2 CapExes that we are doing. So what would be the revenue opportunity from those CapEx?

[Ketan Sablok, executive]

So at the peak, we will give an asset turn of about around 4.

[Operator]

We have the next question from the line of [ Bhavin Soni ] from Anand Rathi Share Stockbrokers Limited.

[Unknown Analyst]

Sir, I just wanted some clarity on the freight expenses. You mentioned that other expenses as one-off with respect to the exhibitions and travels and sales and distribution. But can you just give a breakup of how the rate increase on a Q-on-Q and Y-o-Y basis?

[Ketan Sablok, executive]

No, Bhavin, offhead I don't have those numbers, but freight is an -- increase is almost -- I would say about -- if you see Y-o-Y, it would have definitely increased about 35% to 40% of what it was in Q1 of last year.

[Unknown Analyst]

Okay. And how do you see it going forward like for -- now you have said that it's stable since last week, but for this quarter and next quarter?

[Sunil Chari, executive]

In terms of freight, we see at the same levels, as we said, now based on June and the first half of July, we don't increase destination-wise too much increase in freight. The container and the shipping freight availability -- ships vailability also is a little better, not the same as like in January to March quarter, but I think this is a little better than previously.

[Unknown Analyst]

Okay. And sir, any one-offs or spikes in employee expense because they also increased by around 17% Y-o-Y and 14% Q-on-Q?

[Ketan Sablok, executive]

So that's not a one-off increase. There we have [indiscernible] people through the year between last year and current year and of course, there has been a general influence that has happened.

[Operator]

We have no further questions, ladies and gentlemen. I would now like to hand the conference over to the management for closing comments. Over to you, sir.

[Sunil Chari, executive]

Thank you, everyone. I hope we have been able to answer all your questions satisfactorily. Should you need any further clarifications or would like to know more about the company, please feel free to contact our team or CDR India. Thank you once again for taking the time to join us on this call. Have a good evening.

[Operator]

Thank you. On behalf of Rossari Biotech Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.