Rossari Biotech Ltd

NSE:ROSSARI

Earnings Call Transcript 2025-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, Mr. Poojari.

[Anoop Poojari]

Good evening, everyone, and thank you for joining us on Rossari Biotech's Q2 FY '25 Earnings Conference Call. We have with us Mr. Edward Menezes, Promoter and Executive Chairman; 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'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. 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 steady quarter, showcasing the resilience of our business in a dynamic market environment. Our HPPC division continues to demonstrate consistent growth, while the Textile business is still navigating headwinds with the recovery expected in the next calendar year. The Animal Health & Nutrition business remained stable during the quarter.

Regarding our exports, we are proud to have expanded our global operations with several geographies emerging as key drivers of our future growth. In H1 FY '25, exports grew by 32%, providing strong support to our overall performance despite softer domestic growth. We have successfully targeted new customers across both new and existing geographies, while increasing our wallet share with existing partners. Looking ahead, we expect exports to outpace domestic growth further strengthening our position in the international markets.

In line with the growth trajectory, we have made key investments to support future expansion. Rossari Global DMCC, a wholly owned subsidiary has established Rossari Biotech Trading FZE in the Jebel Ali Free Zone, JAFZA, UAE. This new entity will focus on trading activities, managing the distribution and sales of chemicals and consumer products for export markets, further enhancing our international presence.

Additionally, Rossari Global DMCC has agreed to acquire 100% of the equity share capital of Unistar Thai Company Limited, a newly incorporated company that will focus on the manufacturing and sale of specialty chemicals related to our core chemistries.

Furthermore, we have acquired a 39,101 square meter plot of land adjusting to our Dahej facility, earmarked for future expansion and the development of our manufacturing capabilities. We continue to pioneer intelligent and sustainable solutions across industries, enhancing everyday life through our eco-friendly and technology-driven offering.

Our focus on innovation and customer-centric solutions enables us to stay ahead of industry trends, delivering value to products that are both high in quality and sustainability.

Alongside our eco-friendly product portfolio, we have implemented key sustainability initiatives across our operations. We have installed 5-kilowatt [indiscernible] of solar capacity at our plants, reduced water consumption by 12,142.5 kiloliters and responsibly treated and disposed 18,505 kiloliters of water. Additionally, we have planted 1,500 trees around our facilities to promote biodiversity.

Through our 3R waste management policy, reduce, reuse and recycle, we continue to minimize waste and optimize resource use, reinforcing our dedication to sustainability in every aspect of our business.

Lastly, we are pleased to announce the appointment of Mr. Gurudas Aras, as an additional director designated as a nonexecutive independent director effective October 19, 2024. With over 40 years of experience in the textile industry, Mr. Aras brings a wealth of knowledge, including expertise in advising of robotics and automation, which will greatly benefit Rossari as we continue to innovate and grow across our business verticals. As we continue on our growth journey, our focus remains firmly on sustainability, innovation and global expansion. We have laid a strong foundation for the future with our success in international markets new verticals in our core chemistries and a drive for creating long-term value for stakeholders.

While global expansion remains a key driver, we are also well prepared to capitalize on opportunities in the domestic market as recovery gains momentum, ensuring that we are positioned to drive growth across all regions.

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

[Ketan Sablok, executive]

Thank you, Edward, sir, and good evening, everyone. Let me provide you with a brief overview of the financial performance for the quarter ended September 30, 2024.

We have reported a steady performance in this quarter with revenues increasing by 2% to INR 498.4 crores. Our HPPC division saw a Y-o-Y growth of 6% with revenues reaching INR 390 crores, up from INR 367 crores in the previous year. The Textile Specialty Chemicals division reported revenues of INR 84 crores, down from INR 96 crores last year, primarily due to the ongoing headwinds in this sector, though we remain optimistic about recovery in the next calendar year.

Meanwhile, the AHN division remained stable with revenues of INR 24 crores compared to INR 20 crores in the corresponding period last year. In terms of the revenue contribution this quarter, HPPC accounted for 78%; textile specialty 17% and AHN at 5%. On the revenue split between domestic and export, our exports have outperformed our domestic sales. Y-o-Y, our exports have grown by 21% while domestic revenues remained flat.

For H1, the export grew by 32%, while domestic saw 5% growth. Exports now constitutes almost 25% of our overall sales. Our gross margin improved by 253 basis points this quarter on the back of our product mix and our efforts to optimize operation. The improvement comes despite higher costs associated with new growth verticals, including the institutional cleaning capital business.

Our overall EBITDA remained at -- increased by 3.6% to INR 65.9 crores, up from INR 63.6 crores last year with EBITDA margin of 13.2%, stable despite the additional investment in these emerging segments. In terms of profitability, PAT for the quarter rose by 7.3% to INR 35.3 crores compared to INR 32.9 crores in the same period last year.

Our CapEx initiatives announced last year are progressing well at both Unitop and Rossari Dahej facility. In the Unitop CapEx, the Board has approved additional investment of INR 18.25 crores, enhancing the budget of the project to up to INR 146.25 crores. The additional budget is required on account of some design modifications, which are necessary to meet the revised project specifications and structural integrity. These projects will be commissioned in a phased manner over the next coming months. They are expected to significantly enhance our ability to serve high-growth segments such as agrochemicals, home and personal care and specialty chemicals, providing a strong growth lever for the company.

Both the projects are being executed efficiently on ground and are expected to deliver asset turns of 3x to 4x. This aligns with our ongoing commitment to sustainably strengthen our return ratios. On the balance sheet front, the net working capital days are maintained at similar levels as March 2024. Inventory days has gone up with some RM level being increased for strategic reasons. Receivable levels are slowly coming down.

In conclusion, we are confident that these investments, coupled with our strong operational framework, we are well positioned to capture opportunities as the business environment continues to stabilize. Our focus remains on enhancing capacity utilization introducing new products and expanding our customer and geographical footprint to drive future growth.

That's all from my side. Just for informing the participant, Mr. Chari has been traveling, so he would not be able to attend the call today. And now I would like to request the moderator to open the forum for question and answers. That will be great. Thank you.

[Operator]

[Operator Instructions] Our first question is from the line of Pavan Kumar from RatnaTraya Capital.

[Pavan Kumar, analyst]

Sir, can you give us the quarterly breakup of exports Q1 and Q2 and the same portion last year Q1 and Q2? And also secondly, I wanted to understand on domestic side, what has been weak? Is it the textile component? Or is it the agri home care component or the non-agri home care component? I would just like to understand what is the portion where the growth was limited?

[Edward Menezes, executive]

So the exports, you wanted the quarterly export numbers?

[Pavan Kumar, analyst]

Yes, quarterly numbers. Q2, how much was the export. And Q1, how much was the export, and same numbers if you can give for last year also of comparison?

[Edward Menezes, executive]

So exports for this quarter was about INR 130 crores. In Q1 INR we done 118 crores and Q2 last year was about INR 107 crores.

And on an H1 basis, our total exports is INR 248 crores vis-a-vis INR 187 crores last year H1.

[Pavan Kumar, analyst]

Okay. And can you just underline what went wrong on the domestic side? Was it on the textile side or on the home care side? If it was on the home care side, was the problem on agri or non-agri business?

[Edward Menezes, executive]

So on the domestic front, if you see in the HPPC, I think the FMCG Home Care, the volumes were pretty flat. And with the RM prices coming down, we also had some pressures on softening our prices to pick up some volume. So that's where the HPPC growth has been a little softer than what we would have expected.

Also, the fact that our availability of EO and the capacities of the ethoxylation currently running at almost peak capacity. Our primary driver was that we should push more material into the export market because that's one area where we are constantly looking for growth, keeping in mind the future plans that we have. So material while domestic demand was also not picking up, we concentrated more on pushing products in the export market.

In the textile side, I think domestic, the volumes were pretty good, good in the sense since the volumes were better than last year. The volume growth was about, I think, 6%, 7% volume growth. But we had a pressure on the pricing side and the prices had come down by about 6%, 7%.

Secondly, the export plan for Textile also took a hit during this quarter with both Bangladesh and Egypt, our exports were very, very slow compared to what we had anticipated. Bangladesh, in fact, in the last 2 months, the offtake was very, very less. While there were orders but given the conditions that were there and the LCs, et cetera, are not coming through a lot of the banking issues cropped up.

So we took a little bit of a back seat and did not supply any material until things got stabilized. Currently, we expect, I think, over the next month or 2 Bangladesh should start coming back in terms of order placement. And in terms of better banking line coming through so that we are safe on all the products that we start supplying.

So these were the primary 3, 4 reasons of the volumes and of the top line mix not growing as per our expectation.

[Pavan Kumar, analyst]

Okay. On the home care, you were saying -- which is the non-agri part which was the problem or both were the problem, agri or non-agri?

[Edward Menezes, executive]

No. It was more the non-agri partners in HPPC, the FMCG home care, that's what I talked about. And anyway, the quarter 2 agri season is a little softer than what it is in Q1. Q1 seems -- is the peak season for agro.

[Operator]

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

[Sanjesh Jain, analyst]

Yes. I have 3 of them.

[Edward Menezes, executive]

Sanjay, could you be a little louder, please?

[Sanjesh Jain, analyst]

Can you hear me now?

[Edward Menezes, executive]

Yes, now it's better.

[Sanjesh Jain, analyst]

First, on the textile side, I just wanted to understand whether it's a problem on the ground or we are also losing market share to any of the competition. That's #1. Because I can see some of our listed peers have been outperforming us now for probably 2 years and we have been struggling not for just this quarter, but for the last 2 years or so, we have been struggling in the textile segment.

Again, on the AHN side of the business, we expected in FY '25 to double our revenue, but the run rate seems to be much more softer than what we thought. So what's gone different than what we estimated at the start of the year on the AHN?

[Edward Menezes, executive]

So Sanjay, on the domestic front in textile, we haven't lost any market share. In fact, year-on-year, volumes grew like Ketan, sir, just now reported that year-on-year, our volumes grew by 6% to 7%. However, since you know that the prices of certain raw materials drop like acetic acid, butyl acrylate, styrene or silicons because of which there was pressure on the finished good product pricing. And that is where you see a loss in revenue basically. Whereas in volumes in domestic, we have grown.

And again, Ketan, sir, also explained that Bangladesh and Egypt because of the geopolitical issues, we do degrew by 4% to 5% in volumes in these 2 countries also. So that's where you see a negative revenue growth. But having said that, our marketing teams as well as the R&D work very hard on the product mix offering, and we saw an increase in gross margin across the product groups, helping us to maintain our EBITDA margins. And going forward also, we are looking at expanding our footprint in newer geographies and add sustainable products to our overseas offerings to grow this vertical in 2025. So in effect, the textile business has remained steady as or in volume terms, where it has grown by about 6% to 7%.

Coming to the Animal Health & Nutrition, we are pretty steady here. Yes, I agree that we had expected a higher growth. However, in the last year, we changed a bit of strategy. We -- in the previous year, we had a focused a bit on the feed component itself, not only on the additive but also on the feed components. But we found that, that strategy was not working out well for us because we're taking hit on the margins. So we dropped that strategy of going in for selling the feed part of it.

Instead of that, we focused more on the additives part of it. And so you can see, on a year-on-year basis, we have grown 20% in the specialty additives, whereas quarter-on-quarter, quarter 2 is the festive season. And hence every year, this is the weakest quarter for Animal Health & Nutrition business. So going forward, quarter 3 and quarter 4 are traditionally the strong quarter for Animal Health. And we expect, like our marketing say, 1.5x the normal sales for the quarter 3, quarter 2 or quarter 1.

So I think AHN is in line. We show healthy growth in this year. And even in the Animal Health & Nutrition, we have taken actions to add consultants into our infrastructure. As we had informed in the past, we are setting up a premix plant, and we are going to launch products in the therapeutic category as well as gut health improvers using our bioprocess technology.

So I think for us, quarter 3 and quarter 4 really will give you strong results in the Animal Health & Nutrition.

[Sanjesh Jain, analyst]

Got it. That's clear. Second, on the margin side of it on the operating leverage. Now if you look at our EBITDA margin sequentially has dipped by 10 basis points, while we have increased our gross profit smartly.

[Edward Menezes, executive]

A little bit louder, please.

[Sanjesh Jain, analyst]

Now is it fine?

[Edward Menezes, executive]

Yes.

[Sanjesh Jain, analyst]

So quarter-on-quarter, we have improved the gross profit margin by 120 basis points, while the -- our EBITDA margin sequentially has declined by 20 basis points. And if you look at on a Y-o-Y basis also, we have increased our gross profit by 250 basis points while the EBITDA margin is up only 10 basis points.

Forget about operating leverage, our entire gross profit margin improvement is also not getting captured into EBITDA. What is leading to this sharp improvement in the cost? And when should this stabilize?

[Ketan Sablok, executive]

I think, Sanjesh, part of this is also what to do with the expense -- the other expenses, if you see has increased during this quarter. They are almost INR 59 crores in this quarter compared to INR 55 crores in Q1.

So given that now we are focusing or at least the export piece is growing, the impact of freight expenses is showing up significantly in these numbers. The freight forwarding cost in this quarter has been significantly high while we've also had some professional expenses, which we -- which have come up in this quarter, this is more resulting from some of the global restructuring that we are planning to do. So we've hired some people. Also, in the [indiscernible] business, there has been an increase in the number of employees in the last 6 months. So all this has actually led to a like good increase in the other expenses and in the employee costs. Part of the gains that we got through the gross profit improvement has got negated with these expenses going up.

[Sanjesh Jain, analyst]

So Ketan, bhai, is it fair to say that export business because freight cost is borne by us, will always be a lower margin than our domestic business?

[Ketan Sablok, executive]

So see the way it is that now we are trying to -- we are just growing the export business. So with some of the existing customers, we are in a much better position to bargain for the freight, et cetera. And some of the new geography and the new customers that we are entering into, there are at times where the freight expenses we need to bear. I think it's just a question of time when these things will even out.

Our target is that while we bear the freight expenses, we should build them on actual freight even if it's CIF whatever is the actual freight we should build them. That's what we are talking to most of our customers. And the freights have actually gone up a little unprecedented during the last 6 months. So that's actually hitting us.

But I think slowly, we'll be able to push most of the freight expenses back to the customer. Some of it is already built into the pricing and the expense part is in the coming here under the others.

[Sanjesh Jain, analyst]

Got it. Just one last question on the domestic business, which appears to have declined. I thought we were also in the process to launch so many new products. Are they not helping us to offset some of the underlying weakness and decline is completely. I don't think the consumer business in India is declining. What has led for us, for a such a sharp reversal in the growth for the domestic business?

[Edward Menezes, executive]

Yes. Actually, there is no great decline in the domestic business. What we've done, like Ketan, bhai, already explained in his opening remarks, opening question. See, there is limited ethylene oxide availability, right, and we also have limited capacity for manufacture of the ethoxylates.

We saw an opportunity to gain market share in exports and also realization in exports was quite healthy. And that is one of the reasons why we have focused a little bit more on the export where we could get -- we could grab some market share in certain geographies, whereas domestic has grown by, say, only 6% to 7% domestically. There has been a little bit muted demand from FMCG as well as other verticals, home and personal care. But it is a very conscious decision to push our products more in exports.

The same products would have been also pushed in local -- our domestic market, but I believe that we would have got lower gains. So the marketing team really worked very hard on the product mix offering, both in the domestic and the local market -- domestic and export market. So I think it's a game which we well played. It was well played by Mr. Chari and his team, who look after the sales and marketing and even help from Ketan, bhai, on the numbers front.

So with the limited EO availability and the limited ethoxylation capacity, as you said, that we are at peak capacity. This going forward will not be a problem, is in -- is our opinion, because we have already invested in the -- in expansion -- expanding our capacity there. So the loop reactors will become functional by, I think, in end November or early December.

So then again, the ethoxylation capacity will not be an issue. And therefore, I think things will then average out there. And this was a great opportunity to grab the export business, whereas the local business was very, very competitive during this quarter.

[Sanjesh Jain, analyst]

No, but EO was not even part of our core 4 chemistries. So we have this acrylic where we were launching [indiscernible] of product then we add surfactant silicon, so enzymes, right? So EO was never even been part of the core chemistry if it came with our acquisition to Unitop and we had a lot of launches planned in these 4 chemistries. So EO problem, I completely appreciate, and I know that, that capacity ones come in, that will drive additional growth. What are the 4 key chemistries of our and all the products that were supposed to get launched in these chemistry lines?

[Edward Menezes, executive]

So Sanjesh, I would like to beg your pardon to correct you. Surfactant was 1 of our 4 pillars and ethoxylate is the major part of surfactant that Rossari used to use. And therefore, the acquisition of Unitop, the logic behind acquiring Unitop was surfactant, basically.

So I would like to correct you there, that it is not our core chemistry. That is #1. But however, having said that, if you look at the production at Rossari, as we said that we have introduced a lot of new products there. So what has happened is in the last 2 quarters, we have produced the large number of esters like CAPB, CDA, [ SNO, SML, esterquats ] as well as resin. But these were consumed internally, and therefore, it is knocked off -- in the intercompany sales, you cannot see this sale. If you add both these together, then you will see that all these new products have been introduced now. Now That these new products are introduced and have been consumed internally because these are all the hydrophobe and the products that go into Unitop.

So first, we focused on producing these new products, consuming them internally. Going forward, we'll increase our -- as in the opening remarks, Mr. Ketan has said that we have added capacity both at Unitop as well as at Rossari. These additional capacities, when they come up then these products will be available for sale to the domestic market as well as to the export content. So that's how it goes.

[Operator]

[Operator Instructions] The next question is from the line of Rohit Nagraj from Centrum Broking.

[Rohit Nagraj, analyst]

Sir, the first question, again, delving on the ethoxylation part. So you said the loop reactors will be functioning sometimes by the month of November. How is the progress from Reliance front in terms of your availability? And are we going to coincide the EO availability with our commissioning? Or is there any other plan for the same?

[Ketan Sablok, executive]

Yes. So Rohit, currently, the way we plan is the EO availability we've already talking to Reliance for additional quantity of EO at least starting of Q4. That's what indication we have said that they will start providing us additional volumes of EO. So we'll have to wait and see, which is -- these capacities will come up by the end of maybe November, December. So assuming we start off from January we will start at least some part of production to take some time for it to reach its peak capacity, but we should have EOs to start the functioning of the loop reactor.

[Rohit Nagraj, analyst]

Right. Second question on the exports market. So particularly which subsegments or user segments are we trying to tap? And how has been -- I mean which all -- are there particular geographies or countries where we are getting this traction from?

[Ketan Sablok, executive]

So sectors, I think majorly home care, personal care, cosmetics and also on the agro side, these are the key sectors and in HPPC. And the key geographies, I think, continues to be Europe, South America. We are also now exploring some countries in the Middle East, so Turkey is one of them.

On the textile side, again with given our current mix of products, we are looking at, of course, on expanding in Bangladesh assuming that business comes back at least probably towards the end of Q3 is what we are given to understand. And then, of course, Vietnam, Egypt. We are also looking at a few markets in North Africa for the textile business. We got some good feedback from there. And so that will help us there.

Turkey again becomes a market for us and also for textile. So these are probably the geographies and the segments that we are looking at to drive growth in AHN, again, we are looking at growing the exports in Bangladesh, Nepal and Sri Lanka, a little bit in Philippines also. So these are the close countries that we are looking at for AHN.

[Rohit Nagraj, analyst]

All right. One last question. In terms of the guidance that we had given earlier and looking at the first half performance, are we likely to stick to the guidance in terms of the top line growth and the margins front? Or do you want to reassess it?

And just another question. Any issues in terms of getting the payments from Bangladesh and for the exports market? Is the working capital cycle higher than the domestic market or comparable?

[Ketan Sablok, executive]

So Rohit, I think on the forecast that we have given. I think I had said that we'll be in a lower double-digit kind of top line growth. I think I still expect that we will even grow at that number which is around 12%, 13%. I still anticipate that, that growth is going to be there. Because if you see the H1 number, we are already around 11% top line growth. I think second half is always better -- yes, second half should be better than that.

So I still expect that 12%, 13% is what we will do. And on your second question in terms of payments from Bangladesh, I think, as I said, we faced issues in Bangladesh, and that was precisely the reason why we went slow in 2 months, actually we didn't dispatch much materials into Bangladesh, keeping in mind the payment situation. It's still a little sticky over there, but from what are teams in Bangladesh tell us, I think, probably another month or so, we anticipate December onwards, it should be much better.

In terms of the receivable cycle. I think the first half is generally higher given that we just passed the agri season where the payment stretches a little longer. Probably towards the end of the year by March, I think it should be much better than what we are as on September.

[Rohit Nagraj, analyst]

Okay. All right. Just on the operating margin front, whether we will be able to keep the same margins similar to last year? Or do we expect a slight dip given the operating expenses have been going up in the last couple of quarters?

[Ketan Sablok, executive]

I think what -- we will stick to what we've done till now in the H1 [indiscernible] of 13.2%, 13.3%. So we'll be around that between this and 13.5%.

[Operator]

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

[Dhruv Muchhal, analyst]

Sir, from your comments, it seems that the pricing pressure driven by RM has intensified in this quarter. And hence, the pricing, you mentioned there is a drag because of the pricing. So should we expect this to continue for the next few quarters until the raw material prices probably increased. So causing some drag, probably, there will be volume growth, but the pricing will have some offsets in the growth for the next few quarters?

[Ketan Sablok, executive]

Yes. So growth, I think, looking today, we can expect that this trend will remain around the same level. And that's why we are trying to focus more on the export side, where we see that these kind of issues on pricing and all much lesser than what is there in the domestic market.

And also given that now we have capacities where we can play around within either domestic or exports. So our focus continues to be to cater more to the export market.

In textile also, I think we would have purely seen a good growth in the quarter as the situation in Bangladesh not -- and Egypt, not happened the way it has turned out to be because we had a good set of orders for Q2 where we actually took a voluntary decision not to do it given the issues on now with collection and things.

But I'm sure once that eases out, we'll have the textile exports also doing pretty well. So we expect that the pricing issues which you see in the domestic side will ease out once we have a good export potential to push our products.

[Dhruv Muchhal, analyst]

So is it -- I understand your product mix is very different and changes regularly, but some sense on what is the pricing RM pricing or whatever pricing impact on a quarter-on-quarter basis across product baskets, a rough range?

[Ketan Sablok, executive]

We didn't understand your question. What was it?

[Dhruv Muchhal, analyst]

I was just trying to understand what is the pricing impact on a quarter-on-quarter basis across our portfolio?

[Ketan Sablok, executive]

It will be very difficult to say that different verticals because it's very, very varied.

[Dhruv Muchhal, analyst]

Sure, sure. No worries. Sir, the second question is, is it possible to share what is the share of EO-based products in our overall sales?

[Edward Menezes, executive]

Finally, see it's all ethoxylates in the major chemistry for surfactant. So everything linked to set surfactant...

[Dhruv Muchhal, analyst]

When HPPC will be...

[Edward Menezes, executive]

HPPC is all EO-based, 70% is on EO-based products?

[Dhruv Muchhal, analyst]

Okay. Of the HPPC, 70% roughly is EO-based products.

[Edward Menezes, executive]

60% to 70% should be EO.

[Dhruv Muchhal, analyst]

60% to 70% products. And sir, you mentioned about backward integrating into, I think, esters, you mentioned, which goes into the EO-based products. So if you can give us some sense of what was the external purchase earlier? How much it backward integrate now? And how much of the value are you capturing through this backward integration?

[Edward Menezes, executive]

We don't have these numbers handy. But actually, you can get in touch with Ketan, sir. He can give you all these things because we used to do a lot of job work or rather Unitop and Tristar will do a lot of job work for all these raw materials, which have been completely 100% produced at Rossari now. So that has been a big change within the group itself, yes. Sorry, Mr. Ketan can give you the...

[Operator]

[Operator Instructions] The next question is from the line of Parth Mehta from Vallum Capital.

[Parth Mehta, analyst]

Just wanted to know what would be the sales for institutions cleaning for this quarter? And on the qualitative, sir, how was the institutional side for the quarter?

[Edward Menezes, executive]

Institutional sales during the quarter is about INR 70 crores, INR 73 crores, around that number.

[Parth Mehta, analyst]

Okay. And about the annual guidance that you have given around INR 250 crores for FY '25. So do we stick to it. And any updates on the institutional cleaning during this quarter as we launch any new products?

[Edward Menezes, executive]

If you see for the first half, we've done about INR 130 crores in the institutional business. So our take off INR 250 crores, which we have said, I think we are in line with that. And what was the other question?

[Parth Mehta, analyst]

Any new products that we have launched or any other update for the institutional cleaning?

[Edward Menezes, executive]

So in the institutional cleaning, we haven't launched anything new, but we have got new customer -- a new customer base. So they are -- also what we've done is we have a lot of new brands which have been rebranded. We have rebranded our old brands.

So those are now taking shape. So mainly, we've got a lot of the government laundry business, we've got a lot of institutional cleaning business in airports as well as in the railways. So that's the new business that we've got. As far as new products are concerned, I don't think we have launched anything -- any new molecule. There may be new formulations for a particular cleaning application, but we haven't launched a new molecule.

Only one product that is new is the cleaning in nuclear facilities in India. And I think our product has there has been approved in about 25 facilities, and we hope that that's a good product to be in, basically, in that category.

[Parth Mehta, analyst]

Okay. Great, sir. And on the Animal Health side, so last quarter, you have indicated that there were some pricing pressures in the integrated and premium segment on the margin side. So is there any improvement on that side?

[Edward Menezes, executive]

I'm sorry, I'm not able to hear you properly. And can you just speak up, please? .

[Parth Mehta, analyst]

Yes. So in the last quarter, you had indicated that there are some margin pressures in the Animal Health side in the integrated and premium segment, we are facing some headwinds there. So is there any improvement over there?

[Edward Menezes, executive]

Yes. So I think we expect the second half now to be a much stronger half for us in terms of the animal health. Yes, there have been improvements there. The issue there was more on in terms of collectability of the sales. So we have been a little strict on that going a little slow. But now I think things are much better. We hope and we anticipate that the second half of this year will be much better than what we've done in the first half. .

[Operator]

The next question is from the line of Ravi Singh from COSMIC Horizon.

[Ravi Singh, analyst]

Sit, the majority of our RM costs come from acrylonitrile, which is basically crude linked. Now crude prices have already started to come off. And in a scenario where the war has kind of come to an end and crude price settles back to, say, the $55 to $60 a barrel. In other words, say, crude prices correct by another 20% to 25%. Will our guidance of doubling revenue on the FY '23 base hold? Or will there be a significant deviation?

[Edward Menezes, executive]

This is quite an assumption, Ravi. If the crude prices go down to 50%, 55%, prices are going to come down. I mean, it's very logical that the prices will fall -- selling prices. Then the focus will be more on the volume than the margins that we can get from there rather than just the revenue top line.

[Operator]

The next question is from the line of Pavan Kumar from RatnaTraya Capital.

[Pavan Kumar, analyst]

Sir, can you just outline the capacity CapEx for this year. You are talking about some modifications in existing capacity. So I just wanted to understand the quantum of capacities that are coming online in the next 3, 4 months, how much is the investment? And what is the potential return optimum?

[Edward Menezes, executive]

So we already have 2 projects, around 1 at limit of Unitop the other at Dahej. We've already spent, I think, about INR 60 crores, INR 65 crores CapEx -- in this CapEx. I think similar in amount will be spent over the next 6 months.

Some of these projects will come up in Q3 and Q4, and some of them will come up in the first quarter of the next year. That's what the plan is.

[Pavan Kumar, analyst]

And how much would be the potential -- revenue potential?

[Edward Menezes, executive]

So we should do an asset turn of roughly between 3x to 4x.

[Pavan Kumar, analyst]

Okay. Okay. I just wanted a clarification. So are we saying this quarter or in H1 the answer to some other participants, I guess you mentioned saying there were new projects that you have are actually being -- actually developed, but they are being used as the raw materials to our existing project -- for our projects. So is it the case that there have been some margin compression because of the increase in your freight expenses and stuff, which is not allowing the new product revenues -- sorry, new product contribution to show up in the margins. Is that the right understanding or there is something wrong with my understanding?

[Edward Menezes, executive]

Yes. So in a way, you can say is our freight forwarding -- our overall expenses have gone up in this quarter compared to what it was in Q1. A major part of it is to do with freight forwarding, especially on the export side as our export market is increasing.

So a lot of the new customers that we are bringing on board in the export side. We are to start with bearing some of the export -- the freight expenses. But our plan is that over a period of time, once we have a better partnership, better relations with these customers, so build up all these freight expenses including pricing. You must appreciate that in the last few months, the freight expenses have gone up very, very significantly and it's not possible for us to immediately pass on the freight increases to the customers. It takes time. But it's the relation that we are building, it will happen over a period of time.

[Operator]

Mr. Kumar, you have any other follow-up questions?

[Pavan Kumar, analyst]

Yes. So what is our overall guidance remain for the year since I think we were talking about 15% to 20% kind of revenue growth. So does that still hold? Or how are we looking at that?

[Edward Menezes, executive]

I'm not sure when we spoke about a 20% revenue growth.

[Pavan Kumar, analyst]

I think it was 15%.

[Edward Menezes, executive]

We always said that we do make a low to mid double-digit kind of growth, given that the half year is done, I think we should be around that number of 12% to 13% kind of top line growth. That's what we are.

[Pavan Kumar, analyst]

Okay. That is what is the realistic expectation. And one more thing. So when these other expenses and everything settled down, do we -- because of the new product contribution, do we expect an increase in gross margins? What can the gross margins be once this whole core EBITDA margins be, once this whole things settle down? What I'm trying to say is on a normalized -- the freight cost, what can that potential be?

[Edward Menezes, executive]

As of now, it is very difficult for me to give any number on to that. My only submission is that in the current year and maybe half of next year, what we see is we need to start full utilization of our capacities, all the new products, the new initiatives that we are taking. That's the key for us to kind of meet.

And within that growth, the target for the EBITDA, if we are at the levels that we've done in the first half on that number, plus minus a few basis points, I think we will be happy with that. Then probably once we scale up, and we reach a certain product and revenue side, then we can look at further improvement in the overall margin. But currently, the 13.2% to 13.5% is what we are looking at.

[Operator]

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

[Rohit Nagraj, analyst]

Just one question. Do we also have propoxylates in our portfolio?

[Edward Menezes, executive]

Yes. We also make propoxylates.

[Rohit Nagraj, analyst]

So you have mentioned about 60% to 70% ethoxylates. So is there any similar number for?

[Edward Menezes, executive]

No. I mean, EO together will be 60% to 70%.

[Rohit Nagraj, analyst]

All right. And in terms of EO availability, are there any challenges given that I think it's completely exported or imported?

[Edward Menezes, executive]

Yes. If you don't plan well enough and there are some storage issues also because we are not a very large consumer of propoxylate -- I mean, propylene oxide. So there are some challenges. But once we become large enough, probably then we can have some storage at the port.

[Operator]

As there are no further questions, I would now like to hand the conference over to the management for closing comments.

[Edward Menezes, executive]

Okay. 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, and good day to all of you. Thank you.

[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.