Rossari Biotech Ltd

NSE:ROSSARI

Earnings Call Analysis

Earnings Call Transcript 2024-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to the Rossari Biotech Limited's 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, sir.

[Anoop Poojari]

Thank you. Good evening, everyone, and thank you for joining us on Rossari Biotech Limited's Q2 and H1 FY '24 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 will begin the call with opening remarks from the management, following which we 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]

Good evening, everyone, and thank you for joining us on our Q2 and H1 FY '24 Earnings Call. I hope all of you had the opportunity to go through our results presentation that provides detail for operational and financial performance for the second quarter ended 30th September 2023. This has been a record quarter for us, and we are pleased to report the best ever comments, both in terms of revenues and profits.

Revenues improved by 14% year-on-year to INR 483 crores in Q2 FY '24, primarily fueled by our core HPPC segment growing by 21% and our Textile division that was up 5% on a year-on-year basis. In our AHN division, we encountered some seasonal softness leading to our subdued performance.

On profit front, PAT surged 38% year-on-year, reaching INR 33 crores in Q2 FY '24, driven by the significant improvement in revenues. Such performance is especially noteworthy considering the current tough operating environment in the chemical industry. In the face of the challenges that marked the previous year, we are happy to see momentum in our core HPPC offering during the quarter.

This positive trajectory is a testament to the dedicated efforts of our team on the graph.

Coming to our growth plans and commitment to future readiness, we are excited to announce the expansion of our facility Dahej by 20,000 metric tons per annum. This strategic move would enable us to enter new domains within the HPPC segment as well as pave the way for producing essential ingredients for our subsidiary companies.

In addition, to cater growing demand in sectors, including agrochemicals, home and personal care, oil and gas and pharma, we are augmenting the Ethoxylation capacity at Unitop Chemicals. With our existing 36,000 metric tonne per annum Ethoxylation capacity already operating at optimal levels, the planned expansion of an additional 30,000 metric ton per annum aims to meet future demand. Looking ahead, our focus remains on diversifying our customer base and targeting higher margin segments. We are confident that our strategic initiatives along with our commitment to R&D, position us well for sustained operational and financial performance in the future.

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

[Sunil Chari, executive]

Good evening, and a warm welcome to everyone. I would like to begin by underscoring Rossari Biotech's robust growth trajectory over the past 3 years, which has been driven by a blend of both organic and inorganic growth initiative. To put this growth into perspective, our revenues for the year FY '24 for the first half was INR 350 crores. Impressively, we already exceeded this milestone in just in our first quarter and our first half of the current year with revenues reaching INR 900 crores. So from INR 350 crores in the first half year to INR 900 crores, it is nearly 3x growth in the last 3 years.

Regarding profitability, the EBITDA impact for FY '24 stood at INR 105 crores and INR 65 crores, respectively. Notably, within the first half of FY '24, alone, we will attain an EBITDA of INR 121 crores and a PAT of INR 62 crores.

Overall, such performance not only highlights the company's commitment to driving growth, but also reflects our strategic focus on enhancing value for all stakeholders. While our recent strategic endeavors and investments have moderated our return ratios over the last 3 years, it is important to note that our balance sheet remains extremely strong. These investments are made very prudently with a clear focus on driving future growth.

As these initiatives begin to yield tangible results, we remain confident that a significant uptick in our return metrics will materialize in the future. On the organizational front, we have further strengthened our leadership team, reflecting our commitment to nurturing and elevating talent from within our rich in-house pool. Their expertise will be instrumental in spiriting our strategic initiatives in the future. Such additions to our leadership team over the years reflects our ongoing endeavors to build our professional team fully equipped to guide the company as we envision managing a substantially larger organization in the coming years.

Looking ahead, our HPPC segment is well positioned to deliver healthy growth, especially with the underlying industries expected to pick up in the second half. While the textile sector outlook remains muted for now, we remain hopeful and committed to identifying opportunities within this space. Our AHN division has been slow because of muted demand, however are hopeful of a better trajectory for the rest of the year.

In conclusion, we remain focused on delivering long-term value to all our stakeholders and remain confident in our ability to take advantage of existing and emerging opportunities. Thank you again for being part of our growth journey. On that note, I would now request Ketan to share his perspective.

[Ketan Sablok, executive]

Thank you, Chari, everyone. Let me provide you with a brief overview of the financial performance for the quarter and half year ended September 30. So on a consolidated basis, our company achieved a record revenue performance of INR 483.5 crores during the quarter, signifying a 14% Y-o-Y growth. This has been a marked improvement compared to our performance in the recent quarters despite the ongoing challenges in the external environment. The HPPC division delivered a robust growth of 22% Y-o-Y for the quarter, again, led by strong contributions from agro, phenoxy, institutional cleaning, paints and Home and Personal Care.

Textile Specialty Chemical division performed -- performance improved by about 5% Y-o-Y, while AHN experienced a deepened performance mainly attributed to the seasonal variations in demand. We are pleased to announce our highest ever EBITDA and PAT performance this quarter. Our EBITDA improved by 13% Y-o-Y to INR 63.6 crores, up from INR 56.5 crores in Q2 FY '23. Likewise, our PAT for the quarter surged by 38% to reach INR 32.9 crores compared to INR 23.9 crore in the corresponding period last year.

Even amidst a fluctuating business environment, the company was successful in maintaining its profit margin on a Y-o-Y basis. I would also like to emphasize that Rossari's balance sheet remains remarkably strong. As of September '23, our net debt to equity ratio stood at a low of 0.05. The working capital was higher as of this quarter end at 98 days versus 79 days in March, but this was in line with the growing size of the business. We had a strong agro offtake in H1, and the payment cycle is generally long with these customers. Also, the major institutional sale that we did in Q2 also had a long payment cycle. However, all the receivables are good and all of them have a long relationship with us.

There's been a slight increase in the inventory days also, but this is mainly as we purchase certain key raw materials are stocked in September as part of our production planning for Q3.

Coming on the expansion plan mentioned by Edward jee, we have allocated a CapEx of INR 50 crores for the Dahej expansion, while the Ethoxylation capacity at Dahej facility of Unitop has an outlay of INR 128 crores. These investments and projects will be executed in a phased manner, and we anticipate their commissioning by Q3 of FY '25.

Our financing strategy encompasses a balanced blend of the company's internal accruals and external borrowings. Additionally, our ongoing focus on enhancing capacity utilization adding new products in our chemistry basket, further strengthening our R&D and increasing our customer and geographical presence will go a long way in further strengthening our business model for future profitability.

To conclude, as the macroeconomic environment and the [indiscernible] situation stabilizes, we remain confident in our capability to deliver a healthy performance across all business segments going forward.

Thank you for your continued support and confidence in Rossari Biotech. On that note, I come to an end and open the floor for Q&A. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of Sanjesh Jain from ICICI Securities.

[Sanjesh Jain, analyst]

First on the volume growth in the HPPC and the stand-alone it appears to be super strong considering that there is a significant fall in the raw material prices and the revenues on the stand-alone basis appears to have gone up by 81%. Can you help us understand what has driven this strong growth, both Y-o-Y and sequentially, there is again a 65% growth. What category within the HPPC is this be growing on a stand-alone basis, which has driven such a strong growth? And how sustainable is this number? That's my first question.

And a related question on the subsidiaries of the HPPC, which is a stand-alone [indiscernible], that appears to be softer quarter-on-quarter while Q2 is seasonally very strong because of the agrochemical cycle now. So just wanted to understand curiously why Unitop revenue appears to be sequentially softer despite a seasonally very high quarter?

[Sunil Chari, executive]

Sunil Chari here. What you asked us for a strong growth. The strong growth has come from across different segments within the HPPC, so Home, Personal Care, performance chemicals, including coatings, paint, water treatment, paper, ceramic. We have had sales in all this. Whatever we have seen in the past has come through now. So we have also -- home care also, we have some good new customers for [indiscernible]. So all in all, whatever we have seen in the past has come up very well. Our capacity utilization at Dahej plant now is nearly 77% to 80%. Our capacity utilization in Unitop is nearly 100% in the last quarter. So we have had a very nice quarter in terms of demand. And that is why we have also taken up expansion at both Unitop and also at the Rossari Dahej factory.

Regarding the second question, Ketan will...

[Ketan Sablok, executive]

Sanjay, what was your second question?

[Sanjesh Jain, analyst]

On the subsidiary performance, which is standalone minus consolidated, while for Unitop, this is a seasonally strong quarter, right, Q2?

[Ketan Sablok, executive]

Yes.

[Sanjesh Jain, analyst]

While quarter-on-quarter, the revenue appears to be flattish on stand-alone minus consolidated number.

[Ketan Sablok, executive]

So Sanjesh, as we've discussed earlier also, we should start looking at these numbers on a consolidated basis. In stand-alone, it's not just simply affecting the subsidiary minus that because there are a lot of intercompanies sales that are happening. So a lot of new businesses. Some of them, we are doing it through Rossari, some of them, we are doing it through Unitop depending on the customer requirements and also depending on how we would like to position those sales. So ideally, it would be better to look at these numbers at a consolidated level.

[Sanjesh Jain, analyst]

But I thought there is more Unitop selling to Rossari than Rossari seeling to Unitop, right?

[Manasi Nisal, executive]

There are intercompany sales between the 2 because there are certain customers of Unitop who also take some products in textiles and also Tristar, some in the Home and Personal Care. So some is done through Rossari and then transferred through them. So that's how we are looking at it.

[Sanjesh Jain, analyst]

Okay. Okay. Fair enough, fair enough. But if you just want to talk on the Unitop results ex of this intercompany, how has been the Unitop's growth on a Y-o-Y basis?

[Manasi Nisal, executive]

Yes. So Unitop has done well. As Mr. Chari said, the capacities have not peaked in the first half. Y-o-Y, it is almost a growth of about 25% in Unitop of about 18%, 20% in Tristar. So both of them have done significantly well.

[Sanjesh Jain, analyst]

Got it. Got it. That's fair enough. Second, on the margin, while the revenue growth we are positively surprised, but on the margin front, our assumption was that the raw material has fallen. So optically, margins otherwise would have improved less a very strong operating leverage now that the utilization has gone from 50-odd percent to 70%, 75%, and margins are still at 13.1%, which indicates a much lower return ratio on an overall company now that we are nearing peak and already doing the second level of investment to drive the growth.

How should we see this entire margin phenomenon for us?

[Ketan Sablok, executive]

So if you see this quarter, Sanjesh, our key has been to up our utilization levels across all our plants. That's what we had talked about in the last quarter also. We've seen that coming up very positively at the Unitop, Dahej and the Tristar plant and also at the Rossari plant at Dahej. Now while we've done this, raw material prices have been generally stable over the last 2 quarters, maybe some of the raw materials would have also seen a slight dip. But prices have seen some corrections on our front.

And for us, I think this quarter, we took certain cost in terms of increasing our overall offtake and increasing our volume, which has also impacted slightly on the pricing side. That's one. Second, if you see, this quarter, we have seen a significant drop in our AHN business. AHN has been a slight dampener for us. The main reason was that there was a seasonal fluctuation and the demand was not there. And there are certain business, which we used to do which was we feed the business, which we have taken a call to overall reduce that business because we were facing sudden issues with the customers in terms of payments and payment cycles.

So we have significantly downgraded that part of the business. So that has also impacted the AHN revenue. Now AHN, as you know, is a high gross margin business for us. And that business now dropping by 30%, 35% on a Y-o-Y basis has also impacted the overall margins. Also in this quarter, if you see, we've had a little bit of jump in our other expenses. Of course, part of it you see it as a percentage of sales, it's almost at the same level. But on an absolute basis, we've had some maintenance expenses, which we incurred at Unitop as well as at our Rossari plant.

And with the increased sales volume, there were increase in our utility consumption, the trade and also all of them impacted the other expenses also going up. And some selling and distribution expenses also we incurred at a higher level in this quarter in terms of some of the travel and exhibitions we incurred in this quarter.

So overall, you see that's why the EBITDA are at -- in this quarter at about 13.1%. But if you see, at a half yearly level, it's at about 13.5%. I think given the current market situation, the things happening globally, we would be happy to push our volumes, grow our revenues and, of course, keep improving our capacity utilization. Margin is something, which once we get the top line going at in margins, we can always come back to. But I think we should expect similar kind of margins at least till the end of this year.

[Sanjesh Jain, analyst]

Fair enough. Fair enough. But again, just to follow, Ketan jee. on that, this is contrary to what Edward sir mentioned in his opening remarks about growing more higher margin business, while the margin trajectory is slightly on a downwards movement. So when should we start again seeing margins improving, say, in FY '25 and FY '26?

[Sunil Chari, executive]

Sanjesh jee, Chari here. What we have told in the past earnings calls also and Past answers to your questions in the last 3 earnings calls, we are now not focusing on margins as percentage at all. I think all of us should be happy that we at INR 63 crores of EBITDA, we have the highest EBITDA ever. So I think we would only focus on EBITDA as an amount rather than EBITDA as a percentage. We will not be looking at EBITDA as a percentage in the future.

[Sanjesh Jain, analyst]

No, no, that I completely fairness to that I agree to that. But what is happening is that our ROC is now dipping below 20%, right? Our working capital has gone up, margin, if they like, don't like, has an implication in ROC, which is declining, and we have a CapEx, which is increasing, which is inherently making the return ratios, which at the time of IPO was close to 40%. Now we are under 20%.

[Ketan Sablok, executive]

Sanjesh, you can see our RCC have been constant at about 20 -- between 20% and 23%. That is what the ROCs have been. And I think once these new CapEx has come on stream, probably 2 years down the line when they get their substantial capacity utilizations coming through. I think the ROCs will again peak, they will come back to the 23%, 24%. We are already at 22%. So it's not that our ROCs have declined in any way.

[Sunil Chari, executive]

And Sanjesh jee, to add here, our ROIC, which you would also be measuring ROIC have increased quarter-on-quarter to substantial level. So ROC at 23%, has not declined at all. our ROIC has increased and Ketan will share with you separately the ROC figures also.

[Sanjesh Jain, analyst]

One last question from my side on the CapEx. There has been a INR 75 crores of CapEx in the first half. Can you help us understand where have we spent INR 75 crores? And what should be your CapEx assumption for this year as a whole now that we are embarked on the capacity expansion in both Unitop and Dahej?

[Sunil Chari, executive]

So the CapEx has been divided into 4 different companies. So total you see a consolidated figure of INR 75 crores, which is as for the approval from our -- and the budget in the -- annual results budget -- Annual Board meeting. This is on different areas. So it has been on ETP expansion. It is on the [indiscernible] project. There has been solar installation at Dahej, farms have been [indiscernible]. There is debottlenecking at different areas. There would be maintenance CapEx. And then we have some purchase of some brands and then also the [indiscernible] affluent line. We have [indiscernible].

We have taken some packaging machines at [indiscernible]. So this has been over 4, 5 different sites. And I think we have approval now from total INR 56 crores, INR 58 crores for Rossari about INR 158 crores -- INR 120 crores in Unitop, which we expect to complete in the next 18 months. So this is going to be ongoing as we had a very, very good quarter last quarter, and we see things to be good.

[Sanjesh Jain, analyst]

And what is the CapEx are we panning for this year and next year?

[Ketan Sablok, executive]

This year, we will be out of that INR 170 total crores of -- INR 178 crores of CapEx that we've announced, we will spend, I think, roughly about another INR 50-odd crores in this year.

[Sanjesh Jain, analyst]

So basically, INR 70 crores -- INR 75 crores plus INR 50 crores, so this year, we will end with INR 125 crores?

[Ketan Sablok, executive]

Yes, around INR 125 crores. INR 130 crores, that's the plan.

[Sanjesh Jain, analyst]

Okay. Okay. And next year, we will be doing a similar amount of CapEx?

[Ketan Sablok, executive]

Yes. The balance will go in the next year.

[Sanjesh Jain, analyst]

Fair enough. Just last 1 on the Ethoxylate, it is largely to support the growth in the [indiscernible] or we are looking at expansion of the product even in the HPPC category for the cleaning segment?

[Sunil Chari, executive]

So [ Ethoxyx ] is growing into -- we are at 100% capacity utilization in Unitop. So the existing markets in July and August, we had nearly 40 days of waiting for orders. So we lost some orders in fact, in July and August in Unitop and Tristar. So we do not want to have the same situation that customers are happy. So existing all the segments are doing well, and it is for extra production of the existing segments.

[Sanjesh Jain, analyst]

And it will come next to the same interesting plant?

[Sunil Chari, executive]

Yes.

[Sanjesh Jain, analyst]

And do we have tie up for you for this expanded toilet, I think last year, we had a problem with low...

[Sunil Chari, executive]

Reliance has adequate capacity, so we do not foresee any issues on that.

[Operator]

Next question is from the line of Rohit Nagraj from Broking Limited.

[Rohit Nagraj, analyst]

And congrats on a Q-o-Q improved performance. Sir, first question is in terms of the capacities picking out in Unitop, Tristar. So I understand based on the CapEx plan, probably new capacities will be coming 1 year hence. So how do we foresee growth in these 2 subsidiaries over the next 1 year?

[Ketan Sablok, executive]

So Rohit, these CapEx and we've announced will come up in a phased manner. So some of the phases will start coming up over the next 6 months. And then the Q4 or whatever we said, the Q3 of FY '25 is when the entire project will get capitalized. So I think the plan is that slowly we will start putting up the Ethoxylation capacities in Unitop in a phased manner. And then by the end of the Q4, the entire thing will come from.

[Rohit Nagraj, analyst]

Sure. And the second question, in terms of the availability of further expansion after the capacities are put up in units, do we have further scope for expansion? And just one clarification. So the INR 70 crores CapEx in first half excludes the INR 50 crores plus INR 128 crores of additional CapEx. Is that right assumption?

[Ketan Sablok, executive]

Yes, yes. That's right. And so -- and then on the first question about availability of -- you were talking about in terms of availability of space?

[Rohit Nagraj, analyst]

Right, right.

[Ketan Sablok, executive]

Yes, I think we'll still have some space because our -- the major CapEx is coming up at the Unitop facility at Dahej. The CapEx at Rossari's Dahej facility is a smaller one. So we'll have a space for expansion.

[Sunil Chari, executive]

So to add here, Rohit, we have 90 acres land in the unit of site, and we have space for expansion there. We are also trying to acquire the neighboring land, but we are not still successful. So the INR 128 crores also includes some land approvals -- land, which we have planned and may happen or not happen. But at the moment, whatever we plan, we have adequate space for the expansion in both Unitop and the Rossari.

[Rohit Nagraj, analyst]

Sure. And just 1 last clarification. On the raw material side, so how has the import and domestic mix changed over the last 1 year? And incrementally, how do we foresee given that probably we'll be further scouting for domestic supplies?

[Sunil Chari, executive]

So if you see Acetic acid is now practically mostly domestic, which comes from the PCL plant. Acetic acid is a thing, which we continue to balance between GNSC and imports. Other than that, we have a lot of raw materials now which have in unit of, which is manufactured products, we have manufactured, which are imports. But if you see our exports to imports, our exports are nearly 1.5x of imports. So the ForEx is, we have a natural hedge in -- on ForEx fluctuations.

[Operator]

[Operator Instructions] Next question is from the line of Aditya Chheda from IncadAsset Management.

[Aditya Chheda, analyst]

So my question is on the asset turn. So earlier today, in the interview highlighted that the new CapEx of INR 180 crores should contribute roughly INR 400 crores in top line. However, historically, Rossari has been at least 3x of gross asset turn. So would you like to comment anything? Would the sales potential be higher than INR 400 crores here?

[Ketan Sablok, executive]

Yes. So Aditya, the potential for these projects is definitely going to be far higher. The INR 400 crore number, which we talked about would be the number probably in the first 1, 1.5 years is where we would reach. I think, at a peak revenue, we would be closer to 4%, 4.5% kind of an asset turn. We should probably come around the fourth year, around the 4 years, yes, around the 4 mark, we should be there.

[Aditya Chheda, analyst]

Fair. And on the CapEx of INR 75 crores in H1, what was that spent on?

[Ketan Sablok, executive]

I think as Chari just said, so that was spent across all our group companies. So there were spends on the fluid treatment expansion. In fact, that was done in all the 3 plants of us in Tristar, Unitop and Rossari. There were some more spends on the NMMO old project, which we had talked about in the last quarter. So that was a smaller project, and then we further expanded that. Some spending on various warehousing facilities we have put up. We put up a solar facility, and there were some other GIDC requirements. Tank [indiscernible] with these requirement of EU going up at both Tristar and Unitop, we had to put in additional tank farms. And the EU tanks are quite a big tank in terms of the spend. So apart from this, there are a small maintenance CapEx and some -- in BRPL, we bought in some IPs across various products.

So all this was a spread of about INR 70 crores, INR 75 crores in the 6 months.

[Aditya Chheda, analyst]

Got it. And my last question is on the gross margin. So of course, AHN was lower, textile has still not made a comeback, and we have sort of focused on volume over margins. So is it a right inference that this should be the bottom margins in terms of gross margins and the only direction is up as AHN makes a come back and textile cycle also comes back. Would you have an outlook on how the -- how you're looking at gross margins overall?

And in other expenses, if you can sort of break us down what was -- so the delta which I see from Q1 to Q2 is roughly INR 10 crores more. So if you can help us understand what the exhibition expenses, et cetera, were, and where do you sort of see a broad run rate? I mean if you want to qualify some of these one-offs, if that would sort of correct to buy some number if you want to put some comments there.

[Ketan Sablok, executive]

So I think on the EBITDA, I already talked about it. I think the current levels are where around that level, we should be by the end of the year. We -- as I said, our emphasis has been like from the start of this year to fill up capacity, increase our volume uptakes and that we've seen in the first half. We continue with that strategy going forward. So even if it's a little bit of cost of the margins, we will keep leveraging our facilities and the capacity that we have.

So we should -- I think it will be better if we should be around the same kind of margin numbers in the second half. And on the other expenses of INR 10 crores, I would not say there is any major onetime kind of an expense. These are expenses in line with the growing size of the business. If you want to take up, I think, the half yearly number, if you see at about INR 88 crores. I think that would -- that run rate will be a better run rate to stick to.

[Operator]

[Operator Instructions] Next follow-up question is from the line of Aditya Chheda from InCred Asset Management.

[Aditya Chheda, analyst]

Sir, just wanted to know your view. You mentioned that it will be funded by both internal accruals and debt on the future CapEx. So how are you looking at the debt levels for FY '24, if you have any number worked out as there is some cash stopping what happened here.

[Ketan Sablok, executive]

So I think, the working capital, as I said, in my opening commentary itself is 98 days is slightly on the higher side, more to do with the seasonality of the business. I think this will -- should even out a little more. But we -- the way the business is growing and the size and the customers, I think the working capital would be between 85 to 90 days going forward. I think that's what our targeted working capital days would be. And on the CapEx front, I think we will as I said, these CapEx are going to happen over the next year, 12 to 18 months. We'll have enough time on the spread of the cash flows. We will go in for some debt depending on what our cash results are and our cash levels are. Nothing has been worked out as of now. But I think the way we are structure in terms of debt to equity, we are very, very comfortable. And any kind -- even if we borrow the entire amount, I think we'll be quite comfortable in terms of our paying ability and the overall balance sheet trend.

[Aditya Chheda, analyst]

Got it. And my last question is on the Animal Health segment. There was an element of seasonality, but nothing very major concern there, right? It should sort of make a comeback in the H2. Is that the right inference?

[Sunil Chari, executive]

No, there's nothing we were cautious on total outstanding in the market. And as I said in the clinical, there was a double [indiscernible], and we are mostly into poultry industry. We continue to hold that the AHN industry is something which we will focus upon and should do well in the future.

[Operator]

[Operator Instructions] Next question is from the line of Aashish from InvesQ Investment Advisors.

[Aashish Upganlawar, analyst]

Sir, I wanted to lower thoughts on textile chemicals segment [indiscernible]. How are you reading the coming 6 to 8 months for the business, both in terms of top line and margin?

[Edward Menezes, executive]

So I'm Edward here. So the textile chemical business, we had seen headwinds in the last 2 quarters. Now we've taken a lot of steps from our side to focus on certain markets and especially the Bangladesh market. where we have strengthened our team with 2 very senior leaders. And also Bangladesh, Rossari Bangladesh is also incorporated now. So we believe that there will be an uptick in the Bangladesh business for us if the ForEx problem, et cetera get solved. So in the coming years, we see a pretty good demand from this area.

Apart from that, we've also had some reshuffling within the organization itself and we have a new leader for textile within the organization. And I think this will -- this has inducted fresh energy into textiles. So the focus will be domestic market and the Bangladesh market. And we're also looking at other markets like Turkey and Egypt, but with the new issue -- geopolitical issue, I do not know how that will pan out. But we've gained market in the textile area, and we've become stronger. So we are very positive for textile business in the next year coming from Jan 1, 2024.

[Aashish Upganlawar, analyst]

So would you say that -- I mean what we are hearing from most of the inventory issues would take kind of a pause there and inventory refilling won't happen, [indiscernible] demand markets, developed markets. And that's what could that the demand [indiscernible] maybe a quarter to go for that. So would you [indiscernible] that things might get you to look up maybe 3, 4 months after?

[Sunil Chari, executive]

So are you asking us about -- I'm Chari here Sunil Chari. You have seen us about the inventory levels that our customers in at the textile customers in?

[Aashish Upganlawar, analyst]

No, no. What I'm asking is, since the -- your customers will be supplying to developed markets probably, right? And that on the inventory destocking that happened over the last 3 or so quarters [indiscernible] U.S. and Europe. That probably -- or certain level of correction has already happened and, again, it will come back to normalcy maybe 3, 4 months down the line, that's what we are hearing in the second half some time.

So concurrently, the chain, which is your customers in Bangladesh, et cetera. And again, your business would be taking some upturn. Is that reading correct, maybe in the second half, sometime should that happen?

[Sunil Chari, executive]

Yes. Aashish jee, when we talk to our customers and they tell us the discretionary spending of U.S. consumer on textiles has not increased in the past few months, and they are not still sure of the future. It is because higher interest rates have translated into higher EMIs and the amount of income they have left for spending on textiles and other things has decreased plus there was subsidies during the port from the U.S. government, where per month, there's some money coming. So things are all not clear on what will pan out in the future.

But we hope the domestic demand is picking up and for textiles now, if you see what was Bangladesh, we are at least at 1/3 because we choose to be safe than sorry later. We did not supply to anyone on open terms in Bangladesh. And even in countries like Egypt and Mexico and Argentina and even Turkey, these are our big markets. All these areas, we faced -- our customers face currency and there's other [indiscernible], we said no. We are prepared to forgo business rather than discover capital. We do not have bad debts in our systems for the past 2016, we do not want in the future also. So the Bangladesh business is now nearly 1/3 of what it was last year. And we are happy. We are happy not to do that business. until we have shift you on the money. If the Bangladesh business picks up and the local demand, which we think should do well in the future, we would do better than textiles.

[Operator]

[Operator Instructions] Next question is from the line of Vishal Beria from Bandhan Mutual Fund.

[Unknown Analyst]

Audible?

[Operator]

if you can speak a little louder, please?

[Unknown Analyst]

Yes, yes. My question was on the [indiscernible] perfect and First quarter was very good for this. So how is -- how was it for second quarter, September quarter? And how is the outlook? And so that was one. The second was on the pricing front, how are the prices more or less stabilized?

[Ketan Sablok, executive]

The prices of states normally in Ethoxylates, EU is a key raw material, as you know, for agro susceptance in the [indiscernible] season, we have at least 10, 12 days of no -- very low [indiscernible] because the supply [indiscernible] plant is shut down. And then we do not have enough EU available in those season and in the second quarter. The agro season has not been good for agrochemical customers, the ones who make the agro formulations, it has been not so good, which you would know from talks with all the agrochemical companies.

But we have done very well -- sustained the demand in the agro susceptance. And we are looking at growth in the export markets also for agro susceptance.

[Operator]

Vishal, do you have any follow-up question?

[Unknown Analyst]

I am through with my question.

[Operator]

[Operator Instructions] Next question is from the line of [ Siddhart Brohit ] from InvesQ Investment Advisors.

[Unknown Analyst]

Yes. Sir, just wanted to understand what was the CapEx for the -- couldn't understand properly. Will it result in direct incremental revenue or it is some backward integration on your side?

[Ketan Sablok, executive]

We are talking about the CapEx which we have announced?

[Unknown Analyst]

The Dahej one, you mentioned INR 50 crores and INR 150 crores incremental at Dahej, what was it regarding?

[Ketan Sablok, executive]

Yes. So those are all capacity expansion projects. So 1 at Unitop is for the Ethoxylation and related products. And the 1 at RBL is for products which will go into the HPPC division of ours.

[Sunil Chari, executive]

So to add here, it will be adding on an incremental sale of about INR 600 crores if you reach a peak capacity in the next 2, 3, 4 years.

[Unknown Analyst]

Okay. Now the reason I was saying that probably in the previous call, you had mentioned we are still at a lower utilization level. So is it some new product, or how is it then, that's what I was trying to understand.

[Ketan Sablok, executive]

If you see the large project at Unitop, the Ethoxylation capacities have almost peaked. So in fact, in the last quarter, we were at 90% capacity utilization. So as a future plan of action that CapEx has been put up. And this will happen over the next 12 to 18 months in a phased manner. So the -- our overall then the capacity availability will -- on the Ethoxylation front will go up by about 30,000 metric tons.

[Sunil Chari, executive]

Siddhart jee, to add here, when we came for IPO, we were INR 600 crores, and we had promised 4 -- double growth in 4 years. This quarter, we were INR 332 crores. And this translates already to nearly double the revenue we have crossed in within 3 years. We were at a very healthy 78% utilization at Dahej and the Tristar and Unitop, we were practically 100%. And the CapEx we used in the past 6 months -- for example, in Tristar, we changed and automated a lot of flow meters to increase production without adding to big capacities, but also we had to put in a lot of new tanks in Unitop, just for storage of raw mats and finished goods after we do [indiscernible]. We did some debottlenecking.

If you see in the Rossari business, we have probably close to 5000 products. And you cannot have 100% capacity in a multiproduct manufacturing facility because there's a changeover. There's washing. There are small batches. So 80% capacity at Dahej and Ethoxylation time also, we have been able to -- [indiscernible], we've been able to get nearly 100%. Our teams worked extremely hard to cater to demand, which we had.

Vishal jee of Bandhan asked us a question. We lost some orders because we did not have adequate capacity to service these orders. Otherwise, our quarter would have been more stronger.

[Operator]

[Operator Instructions] I now hand the conference over to the management for closing comments.

[Edward Menezes, executive]

So thanks to all of you for giving your a valuable time. 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, and good day.

[Operator]

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