Sudarshan Chemical Industries Ltd

NSE:SUDARSCHEM

Earnings Call Analysis

Sudarshan Chemical Reports Improved Q1 FY25 Results

Sudarshan Chemical Industries experienced a favorable Q1 FY25 with a 4% year-on-year increase in total income to INR 634 crores, driven by a 10% growth in pigment business revenue. EBITDA rose by 15% to INR 81 crores, enhancing margins to 12.7%. Profit after tax improved significantly to INR 29 crores from INR 21 crores. The company also celebrated an upgrade in its long-term rating from AA- to AA by India Ratings, further solidified by achieving the EcoVadis Gold rating. This financial and operational performance demonstrates the company’s robust financial health and commitment to sustainability.

A Positive Start to Q1 FY '25

Sudarshan Chemicals kicked off the first quarter of fiscal year 2025 with encouraging results. The company reported a consolidated total income of INR 634 crores, marking a 4% increase year-on-year. EBITDA rose by 15% to INR 81 crores, with EBITDA margins improving from 11.5% to 12.7%. This positive trajectory was further reflected in the profit after tax, which grew from INR 21 crores to INR 29 crores. These figures suggest a robust operational performance amidst market fluctuations.

Strength in Pigment Sales

A significant portion of Sudarshan's revenue comes from its pigment business, which reported income from operations of INR 589 crores, a solid 10% increase compared to the previous year. This growth was driven by both domestic and export sales, with domestic figures reaching INR 287 crores (up 9%) and exports climbing to INR 302 crores (up 11%). Specialty pigments, an area of strategic focus, generated sales of INR 402 crores, up 11% from last year. The company’s ongoing commitment to innovation is visible as they capitalize on market demand for high-performance pigments.

Margins and Operational Efficiency

One of the highlights from the earnings call was a notable increase in gross margin for the pigment business, which reached 47.2%, up from 42.9% year-on-year and 320 basis points higher than the previous quarter. This improvement is attributed to the stabilization of raw material costs and optimized sales strategies in high-performance pigments. Despite some operating costs remaining flat, the company is optimistic about sustaining and potentially enhancing these margins as the year progresses.

Guidance for Future Growth

Looking ahead, the management expressed confidence in achieving capacity utilization within three years instead of the previously anticipated four, reflecting strong demand and customer engagement in the pigment market. The company sees a growing inquiry trend, particularly from the coatings and plastics sectors, which positions it well for sustainable revenue growth. The peak revenue potential from the new capital expenditure is estimated to be between INR 1,200 and INR 1,400 crores, underscoring the growth opportunities ahead.

Innovations and Strategic Focus

Sudarshan’s management emphasized their strategic direction towards enhancing product offerings and entering new markets. Recent environmental ratings improvements indicate a strong commitment to sustainability, which is becoming increasingly important to customers. The company's EcoVadis Gold rating places it among the top 3 percent in the chemical sector, which should enhance customer relationships and open new business avenues in the future.

Financial Health and Balance Sheet Strength

The financial health of Sudarshan Chemicals continues to strengthen, as indicated by a reduction in net debt from INR 395 crores to INR 375 crores. The net debt-to-EBITDA ratio improved significantly from 2.1x to 1.2x year-on-year, showcasing a robust capacity to manage financial obligations. The current ratio remained stable at 1.4x, further emphasizing good liquidity management.

Navigating Challenges and Competitors

During the call, management discussed the competitive landscape, particularly the impact of the Heubach situation on market dynamics. They noted a surge in inquiries as customers look for reliable suppliers amid geopolitical concerns and production shifts away from traditional markets like China. This has allowed Sudarshan to increase its visibility and attract new business while reinforcing its position in the market.

Conclusion: A Bright Outlook

Sudarshan Chemicals appears to be well-positioned for the upcoming quarters, with solid operational performance, a focus on specialty pigments, and an eye on strategic expansion opportunities. Investors may find the anticipated improvements in operational leverage and EBITDA margins appealing as the company continues to thrive amidst a changing market landscape.

Earnings Call Transcript 2025-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to the Sudarshan Chemicals Q1 FY '25 Earnings Conference Call hosted by HDFC Securities. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Nilesh Ghuge from HDFC Securities. Thank you, and over to you, sir.

[Nilesh Ghuge, analyst]

Thank you, Steve. Good morning, everyone, and welcome to Sudarshan Chemical Industries Limited Q1 FY '25 post result earnings call. The management team from Sudarshan Chemical Industries Limited will be represented by Rajesh Rathi, Managing Director; Mr. Nilkanth Natu, Chief Financial Officer; Amey Athalye, General Manager, Finance.

We will start the discussion with a brief management overview on the earnings performance, followed by an interactive Q&A session. Over to you, sir.

[Nilkanth Natu, executive]

Hello?

[Operator]

Yes, sir, please go ahead.

[Nilkanth Natu, executive]

Thank you, Nilesh and HDFC Securities for hosting our earnings call for the quarter 1 FY '25. Good morning to all of you, and thanks for joining us to discuss Sudarshan Q1 FY '25 financial figures. It's a pleasure to be with all of you. During the call, we could make forward-looking statements. These statements consider the environment we see as of today and carry risks and uncertainties that could cause our actual results to differ from those expressed in today's call. We do not undertake to update any forward-looking statements made on this call.

Let me begin with an important update about the changes in the constitution of our existing Board of Directors. Members from the existing Board, Mrs. Rati Forbes, Mr. Dara Damania, Mr. Padmanabhan and Mr. Sanjay Asher are retiring from 6th August. On behalf of the entire management team, I would like to thank them for their exemplary contribution towards growth of Sudarshan.

I would like to welcome Ms. Anu Wakhlu, Ms. Bhumika Batra and Ms. Sudha Navanda who joined the Board from 2nd August. We look forward to gain from their experience in our journey towards leading global pigment player.

There are 2 key achievements to highlight. I am happy to inform that the long-term external rating of the company has been upgraded by India Ratings of Fitch Group company from AA- stable to AA stable. While our short-term rating of the company remains affirmed at A1+. This rating upgrade demonstrates trimming of the business profile, improvement in the financial performance and healthy financial ratios. This long-term rating is upgraded in a span of 3 years rising from AA- to AA. Further more in the last 10 years, the long-term rating has been upgrade from A to AA, which is three-much up, while short-term rating is upgraded from even A1 to A+, which is the highest rating. This rating upgrade reflects testament of our prudent financial management practices and resilient business performance.

We also wish to update that the company has recently achieved EcoVadis Gold rating with 97 percentile. With this rating, we joined the league among the top 3 percentile company in the chemical sector. The upgrade from silver to gold is a reflection of our strong ESG value proposition and committed measures, which are taken by the company, which will be pivotal going forward during our customer engagements. We also achieved a score of B management band on CDP Climate Change and CDP Water Security Assessment 2023. This accolade reflects our strong focus towards ESG and our commitment towards sustainability.

I will now begin with the update on the quarterly financial performance. We have uploaded our financial results and investor presentation on the stock exchanges. Hope you have gone through the results.

Quarterly performance. On a consolidated basis for the quarter, total income from operations stood at INR 634 crores as compared to INR 608 crores for the same period last year, higher by 4% year-on-year.

EBITDA for the quarter stood at INR 81 crores as compared to INR 70 crores in quarter 1 FY '24, higher by 15%. EBITDA margin is at 12.7% as compared to 11.5% over the same period last year. Profit after tax is INR 29 crores as compared to INR 21 crores for the same period last year.

Now going into the details of our pigment business. For quarter 1 FY '25, income from operations stood at INR 589 crores as compared to INR 536 crores for the same period last year, growth of 10% year-on-year. Domestic sales for the quarter is at INR 287 crores, higher by 9% as compared to INR 264 crores in the same period last year. Export for the quarter grew to INR 302 crores versus INR 272 crores in the same period last year, higher by around 11%.

We have seen in Q1 -- what we have seen in Q1 is a normal demand increase and normally, Q4 is a seasonality effect and a strong quarter. We see current demand improvement in the overseas geographies. After the second pigment player insolvency filing in April, there is a clear increase in the customer inquiries for samples and product approval process getting momentum. With the recently commissioned CapEx, we are well positioned to capture the market opportunities in the domestic and export markets going forward.

Specialty Pigment sales stood at INR 402 crores as compared to INR 362 crores in the same period last year higher by 11%. Non-specialty sales for the quarter is at INR 187 crores, which was higher by 7% as compared to the same period last year.

Gross margin of the Pigment business for the quarter is at 47.2% as against 42.9% for the same period last year and it is higher by 320 basis points compared the sequential quarter. Year-on-year increase in the gross margin was due to softening of raw materials and ramp-up of sales in high performance pigments. EBITDA for the quarter stood at INR 90 crores in Q1 FY '25 as compared to INR 64 crores in the same period last year, higher by 41%. EBITDA margin stood at 15.3% as compared to 11.9% over the same period last year.

Now coming to the balance sheet. The balance sheet of the company as at June 30, 2024 has further strengthened. This is reflecting from the improving financial ratios. The net debt of the company stands at from INR 375 crores in Q4 FY '25, down from INR 395 crores in Q4 FY '24. With overall better results from operations, the debt of the company continues to reduce and placed in position, which strengthened balance sheet. Net debt-to-EBITDA stands at 1.2x as compared to 2.1x in Q1 FY '24. Debt to equity stands at 0.3x as of June 30 compared to 0.5x in Q1 FY '24.

The working capital cycle has been managed as per the plan, resulting in the cash conversion days at 73 days in Q1 FY '25 compared to 66 days in Q4 FY '24. Higher days is mainly due to planned increase in the raw material inventory. The current ratio is at the same level of 1.4x in Q1 FY '25 as seen in Q4 FY '24.

To summarize, I would like to thank our customers, partners, employees, analysts and shareholders who contributed to and stood by us during our growth journey. We continue to leverage our strength and remain confident in the company's potential to be a leading pigment solution provider to global players.

With this, we can now proceed for question-and-answer session. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of Nitesh Dhoot from Dolat Capital.

[Nitesh Dhoot, analyst]

Am I audible?

[Operator]

Yes, sir, you are.

[Nitesh Dhoot, analyst]

Congratulations on an encouraging pigment's performance. So my first question is, despite the gross margin jump of 320 bps, the EBITDA margin is flat sequentially. So as we understand sequentially the volumes would be lower, but why have the pigment overheads, that is, the absolute gross profit minus EBITDA remained flat or only increased marginally to around INR 188 crores from INR 183 crores in Q4. So is there any unusual or one-off increase in any cost item for pigments in Q1?

[Nilkanth Natu, executive]

Thanks, Nitesh. There are two points. One is, what we're seeing is increase in the gross margin of 47% compared to 44%-odd last year in Q4. However, as we mentioned earlier, the Q4 is seasonally strong quarter. And compared to the Q4, our sales were INR 590 crores, so the operating leverage to that effect in the quarter 1 will not get reflected though there is an increase in the gross margin. Second is also on the cost side, Q1, we normally see a kind of quarter wherein there will be a kind of pain which will be there on the exhibition, which will be there in the overseas geography. So we see that normalized G&A and the cost structure in the quarters to come, in the next couple of quarters.

[Nitesh Dhoot, analyst]

So what will be the cost there, sir? Anything that you can quantify? I get your point on the operating leverage bit, but only thing is that the costs have only increased. So I mean ideally it should have come down. But given the cause that you're explaining, any quantification you can provide that will be really helpful.

[Nilkanth Natu, executive]

So Nitesh, another point also there is we have also seen -- so if you are looking at other expenses in the result, there is also the impact of the increase in the exports, correct? So there also has been some part of the variability, selling variability is also there. And in terms of the exhibition costs, these are event specific, case specific. I would not like to give the comment on the number. It is -- what I can say, it is front-loaded in the Q1. I don't expect that to come in the coming quarters.

[Nitesh Dhoot, analyst]

Understood. So sir, can we say that the 4 kg gross margin or the gross spreads was, so what we are currently witnessing, would be sustainable going forward or can even improve from hereon, given the improvement in the product mix side and maybe some price tailwinds also led by the industry consolidation?

[Nilkanth Natu, executive]

Nitesh, we expect this 47% gross margin will do impact. What we had also seen is the specialty pigment is growing. We have seen good traction to our high-performance segment. So I expect this gross margin in this range, subject to the raw material variability what we have already seen in the past. Currently, the raw material prices are more or less stable. And given the current market scenario, I expect this should range in the similar range.

[Nitesh Dhoot, analyst]

Sure. And sir, given your earlier outlook of being able to utilize the capacity in 4 years time. First, I mean, any revision in terms of the guidance that we are looking, given the kind of strong volume growth that we would be having. So any upgrade on the guidance side that we would be looking at?

[Rajesh Rathi, executive]

This is Rajesh Rathi. I think the guidance -- I mean, it's a little too early to give a guidance for that. But I think like we have seen, the engagement with customers, the inquiries, et cetera, we do feel that we'll be able to achieve this within 3 years instead of 4 years. But I think we'll be able to kind of give you -- as we progress through the year, we'll be able to give you a better number on that.

[Nitesh Dhoot, analyst]

Sure. And sir, just a follow-up on that. I mean, even if we take 4-year period, so say, by FY '27, you will be fully utilized. So by when do we need to start working on the next leg of CapEx for -- so if any color on that or if you have maybe evaluated or if you can give some sense?

[Rajesh Rathi, executive]

I don't -- we don't expect, sir, any CapEx in the current -- so the Board has not approved anything. We don't need any CapEx right now, we will -- currently, right? And anyway, everything will be brownfield expansion which will probably take 6 months to 1 year. So at that time, we'll evaluate that probably.

[Nitesh Dhoot, analyst]

Okay. Only about 6 months to 1 year would be required, fair. And sir, just one last thing. So are we evaluating or do we have any plan to acquire Heubach in any part or the entire thing? Any plans on that side?

[Rajesh Rathi, executive]

So there are two assets, sir. I think there are many -- I guess there are several indirect opportunities, which keep coming to the management. We do evaluate several of them. And given the sensitivity of the information, I can't speak anything more on this subject.

[Operator]

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

[Sanjesh Jain, analyst]

First on the Rieco side of it. This quarter looks like it was a challenging quarter for them. We had losses at the EBIT level and revenues on a Y-o-Y basis have also materially declined. While if you look at the general capital goods industry, it appears to be very buoyant as of today in India. What's happening with the Rieco, and how are we evaluating this as a growing concern entity?

[Rajesh Rathi, executive]

This is Rajesh Rathi. Sir, I think we are embarking now on the transformation of Rieco. We are working on that. We will -- we look at -- we feel we'll be able to build a good healthy business. Currently, there are a few challenges in the business, which has come to this point. Going forward -- this year, we don't expect to have a negative impact on the numbers. But going forward, we would definitely look at -- I guess, we should give it a 2 to 3 years transformation time. And the transformation we're going to start -- we're going to kick start in September, right? Natu ji, would you like to add anything more on Rieco, sir?

[Nilkanth Natu, executive]

Yes. Thank you, sir. Sanjesh ji, thank you for your question on the Rieco. So as Mr. Rathi has mentioned that the current quarter has been subdued in the performance compared to the last year Q1. So last year Q1, we had the large ULG order, which got exhibited in the quarter. So normally for the -- while the capital to the industry is also doing good, and we have seen the current order book, Rieco is having a healthy order book and also, the contribution on that order book seems to be comfortable. In the current quarter, the revenue has not been -- it has been more in line whatever has been projected for the quarter, but with the current cost, this kind of revenue will always have the challenge on the EBITDA.

So what we, as a management, are focusing are two strategies. One is while the revenue growth we have seen in the last 4 years, how to have the sustainable growth also in terms of the EBITDA, and we are working on that particular transformation project. Going forward, you will see quarter-on-quarter, there will be an improvement in the Rieco performance. I expect the year-end should be positive going forward. So -- and then the years to follow, you will see the sustainable EBITDA improvement. That is what we are focusing as a management for the Rieco business expansion.

[Sanjesh Jain, analyst]

When you say you're looking at transformation, so what are we really trying to do? Are we changing the product segment? Are we changing the facility? Are we changing the go-to-market approach? What are we really transforming in the Rieco?

[Rajesh Rathi, executive]

So I think first is how do we get a healthy EBITDA, right, and a consistent EBITDA. So focusing on some of the core processes, right, where we can kind of jump up the EBITDA on the current business, right? And a little bit of a lean approach. We see the fixed cost has swelled up a lot, right? That's one. And the second is then can we really build a healthy business, right, a stronger top line in this. As I said, we are just launching this transformation, but these will be the top 2 directions. So first is focusing on the current and improving the EBITDA and then focusing on the top line.

[Sanjesh Jain, analyst]

Got it. And second, on the pigment side, when we say that we are looking at a very good inquiry, particularly from the international market, are these inquiries for the existing product, high-performance product or the new product which we have launched? And the demand is largely coming from coating, plastics or ink? Can you give more color on the inquiry which we are receiving?

[Nilkanth Natu, executive]

So I think the inquiries are, in general, more on the coatings side and plastics side. And of course, our plastics, we were already quite strong. So the coating industry is where we are getting several more inquiries and engagement.

[Sanjesh Jain, analyst]

Okay. And this will be for what, high-performance segment, the new product that we have launched?

[Rajesh Rathi, executive]

Yes. So these are mainly for the new products and the new CapExes.

[Sanjesh Jain, analyst]

Okay. Because I thought the new product is only 50% of the capacities, which we have put while the existing was remaining 50%. That's what we said in the earlier calls. How is the traction from the existing product? Are we seeing more demand coming in from the international market?

[Rajesh Rathi, executive]

Sorry, can you repeat your question?

[Sanjesh Jain, analyst]

So we said that out of the INR 750 crores of CapEx, 50% was for the new product, 50% was for the existing. When we say that there is a stronger demand which we are seeing for the newer product, how is the demand inquiry for the existing product, where we have enhanced the capacity?

[Rajesh Rathi, executive]

They're for both these -- both the lines, so the entire CapEx, new products and the existing products.

[Operator]

The next question is from the line of Ankur Periwal from Axis Capital.

[Ankur Periwal, analyst]

Congratulations on good pigment performance here. First question on the specialty portfolio. If I look at the last 4 or 6 quarters run rate, we have reported a double-digit revenue growth here, slightly ahead of the nonspecialty portfolio. This is expected to continue going ahead as well? And a parallel question to this will be, is this led by the existing clients gaining more business -- you gaining more business from existing clients? Or there is new client additions here as well?

[Rajesh Rathi, executive]

Ankur ji, great question. I think it's a combination of our -- it's kind of executing our strategy, right, which was based on these new CapExes, which we did, and changing our product portfolio to more of specialties, right? If you look at the health of the pigment industry, people with a broader portfolio and a specialized product portfolio are doing well, whereas as the other industries, whether it's phthalocyanine or the traditional other pigments, there's a big profit pressure, right?

So given our engagement on the new products -- on all these new products and the existing CapExes, which we increased volume, this is where the business is coming in. It's mainly where we -- it's mainly to similar customers, but with a broader portfolio because it's -- we had probably 1 or 2 product -- customer combination information, and now we -- that the same thing has expanded now to several products, which we are engaged with those customers. Sorry, did I answer your question, sir?

[Ankur Periwal, analyst]

Yes, sure, Rathi ji. Just a follow-up there. We had expanded our distribution network, right, so to Japan, South America, other countries as well, so -- and plus we had the distribution tie-up in Europe. So those benefits have started coming in. And we -- if I recollect right, we were waiting for product approvals from newer clients as well. So has that benefit started coming in, in this quarter or it is yet to come?

[Rajesh Rathi, executive]

So this quarter, we are seeing a normal demand coming. So we don't -- we haven't seen any demand still coming in due to the turbulence because, as I mentioned last time, it takes some time to get the approvals and then get the products going, right, which is happening. And we expect, as we ramp up through this year, we will see the numbers stepping up, right? So to answer your question, sir, Q1 quarter was our normal demand, right? We had a lot of -- but a lot of groundwork done on engagement with customers. We would see some results in Q2. But as we keep ramping up the quarters, we will see much better numbers coming in. Sorry, I didn't answer your question fully. Our proven strategy, sir, on Japan is a slow market. It will take some time to ramp up, but we're getting into more, I would say, demanding fields likes digital inks, et cetera, which we are getting good success, but to ramp up the business takes time. Our European distribution -- the distribution, which we had appointed, it still needs to ramp up and our South America strategy, South America is doing well for us.

[Ankur Periwal, analyst]

Great, sir. That's helpful. Lastly on the freight rates rising. Historically, we had seen some impact of increasing freight rates on our margins as well, given there was no passive arrangement, especially in terms of export. What its the scenario now with respect to our client contracts, incremental for the existing business as well for the older ones?

[Rajesh Rathi, executive]

Generally, the cost -- generally, what is not -- what we are not able to passthrough is any utility on, I would say, indirect cost increases, right? But freight cost, raw material cost, it's a little easier to pass on, right? And so we will be able to pass on the increase in costs. We had to absorb certain costs, but going forward, we will be able to pass on the increase in freight costs. We don't see that as a challenge for margins.

[Operator]

The next question is from the line of Madhav from Fidelity.

[Madhav Marda, analyst]

I have two questions. Firstly, on the pigment business margin. Quarter 1, obviously, isn't the strongest quarter for Sudarshan from a seasonality point of view, but we have crossed 15% in quarter 1, which I thought was quite encouraging. And given the earlier commentary that gross margins at these levels also seem sustainable for us, so would you think as we move ahead and our CapEx is ramp-up, EBITDA margins should move ideally closer to the 17% to 19% range for the company? Would that be a fair assessment? Like without giving the numbers, just directionally, is that the right way to think?

[Rajesh Rathi, executive]

Absolutely, sir. Directionally, you're on the right area. I would say, whether the gross margin would be in this area or slightly here, but the main advantage would be through operational leverage, right? So as we ramp up our volumes, et cetera, we should be able to gain -- improve our EBITDA margins.

[Madhav Marda, analyst]

Understood. And what would our capacity utilization be currently on the expanded capacity?

[Rajesh Rathi, executive]

Sir, we don't give out capacity utilization numbers currently here.

[Madhav Marda, analyst]

Understood. Sir, my second question basically was that I think you had mentioned that next round of expansion for the company will likely be brownfield in nature, which again basically means that operating leverage benefits should keep coming through for us not just in the next 2 years, but significant 3, 4 years out. So is that -- just how much is there scope for brownfield expansion? Like if you are at, let's say, our capacity is 100 today, how much can we add via the brownfield route, like over the next 5, 6, 7 years for the company?

[Rajesh Rathi, executive]

Whatever expansion -- we have enough land, enough scope to improve, to add on capacities on our existing sites, and that's what I meant by brownfield expansion. So too early to comment, sir, on how much we can do and how much would be needed. But whatever is required, I think we should be able to expand in these areas.

[Madhav Marda, analyst]

Sir, some of the costs will get shared is what I was wondering. Like at the existing sites, you can share some of the costs as we add these new lines for the next round of expansion.

[Rajesh Rathi, executive]

Sorry, did you mean that -- yes. I mean with the -- while we would want to do a brownfield is that you don't incur a very large CapExes and fixed costs, right? So your fixed cost gets leveraged going forward, too.

[Operator]

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

[Chetan Thacker, analyst]

Am I audible?

[Operator]

Yes, you are.

[Rajesh Rathi, executive]

Yes, you are.

[Chetan Thacker, analyst]

One question, when I look at the numbers, it appears that the international subsidiaries on the pigment side, they have not performed too well in this quarter, particularly both on the revenue and profitability side. So anything in particular that you would like to highlight? Is there some one-off or something sitting there?

[Rajesh Rathi, executive]

I would let Natu ji answer this. But basically, sir, I think I do not know how your interpreted that because there's a lot of transfer pricing which happens, right, and transfer pricing rules happened. But I think our international business is doing well, right? And we've seen a good growth. Natu ji, would you like to add?

[Nilkanth Natu, executive]

Yes. Am I audible?

[Chetan Thacker, analyst]

Yes, sir, you're audible.

[Nilkanth Natu, executive]

So Chetan ji, as Mr. Rathi had mentioned, our sales at the overseas subsidiary is normal rather. If you have seen the export sales for the quarter is also on higher side compared to Q4 also. So what we have seen in the current quarter that there has been an intercompany sales, anticipating the demand in the quarters to come. So if you really see, then the stand-alone profitability was -- consolidated profitability in the pigment business -- in the segment, you will find that delta but as our overseas subsidiaries sales and EBITDA and all the margins are intact. It is just as we have done some stocking of the stock at the subsidiaries, which will get reflected in the coming quarters.

[Chetan Thacker, analyst]

Got it. Sir, because I didn't see too much difference between increase in inventory, both at conso and stand-alone levels, so both those numbers are nearly similar. So that is what I was trying to understand where has this impact come from.

[Nilkanth Natu, executive]

No. These are the inventories in stand-alone.

[Rajesh Rathi, executive]

Natu ji, I think Amey would like to comment.

[Amey Athalye, executive]

Chetan, I'm not sure in terms of global versus stand-alone inventory because in June, we do not publish the balance sheet figures. So just to get a reference, which is the data point you're referring to?

[Chetan Thacker, analyst]

I was just looking at the increase/decrease, which is the change in inventory, which is INR 30 crores both at conso and stand-alone. So while stand-alone, I understand you've explained there is a buildup of raw material that has happened, and to some degree, finished goods. So I just wanted to get a sense if I see the same number on conso. So the only thing I wanted to clarify is that there is inventory that is sitting on the international subsidiaries where sales are yet to be made, which is impacting this quarter number.

[Amey Athalye, executive]

Okay. This number is mainly from a stand-alone perspective. I think whatever sales are routed through subsidiary, it directly impacts the COGS. So it is not part of the change in stock line, which you are referring to.

[Chetan Thacker, analyst]

Sir, I'll take this offline once with you.

[Rajesh Rathi, executive]

Yes.

[Operator]

The next question is from the line of Kaustav Bubna from BMSPL.

[Kaustav Bubna, analyst]

Wanted to understand more about the Heubach situation. So we are saying that inquiries are coming in, and it may -- and gradually, we'll see demand shifting for players like Sudarshan. My question is kind of different. It is, so what happens if someone else comes up and takes this asset off? Because I mean the company is doing badly, it's open to acquisition from other players and then this opportunity goes away. So how does -- how do you see the sustainability of this Heubach opportunity present to us? And what are we doing to capitalize on it? And do you see the risk that it's a very short-term opportunity, given that some resolution happens on their side or someone acquires them? And then all those capacities come back on track?

[Rajesh Rathi, executive]

Sir, good question. Firstly, I think there are two points, right? So we are playing in the market on our strength, right? And that's where we've been preparing Sudarshan in the last 3 or 4 years for this while building the product portfolio, setting up a world-class site and clearly posing ourselves as a global reliable supplier to our customers, right? And that's how customers now see us. So that's what our strength is.

What is getting accelerated is the turbulence in the pigment market. I would say, turbulence in terms of several factors, so one of the factors maybe Heubach, but there are several other factors. So people -- and these are long-term turbulences which people are looking to kind of whether it's the geopolitical situation that people want to move out of China, right? It's the high cost of production in Europe and India being favored. So playing on our strengths, playing on the external areas, these are long-term advantages which we have, right?

So customers when they engage with us, is not looking at a short-term view, right? We've -- it's not a question saying that it's the favor of the month now and the situation is bad, they'll come to us and then we'll go away. So that's how we've been kind of -- that's how we've been seen by the customers, and that's how we've acted in the market.

[Kaustav Bubna, analyst]

All right. So just last question. I was just trying to understand the variance between quarter 4 numbers and quarter 1 numbers, given also that -- understanding that there's seasonality. So in quarter 4, just wanted to get my understanding right, did the company see any advantage from the Heubach issue? Or it was just strong seasonal sales?

[Rajesh Rathi, executive]

Q4 is the strongest quarter, and we did -- the only thing probably we saw a little bit of is, because of the Red Sea crisis, there was some stocking up by customers, right, but that was a minor one. So that's what we saw. But going forward, we do see a better -- we would see better trajectory in our numbers.

[Kaustav Bubna, analyst]

All right. So there was no Heubach benefit in quarter 4?

[Rajesh Rathi, executive]

No, no, too soon to -- yes.

[Operator]

The next question is from the line of Jatin Sangwan from Burman Capital.

[Jatin Sangwan, analyst]

Sir, my first question is what is the peak revenue in the pigment business that we can do at full capacity utilization?

[Rajesh Rathi, executive]

I think for our new CapEx investment, which we've done, as we've been maintaining, our peak revenue on the new CapEx would be about INR 1,200 crores to INR 1,400 crores.

[Jatin Sangwan, analyst]

On this new CapEx, at current prices?

[Rajesh Rathi, executive]

Sorry. Yes, new CapEx.

[Jatin Sangwan, analyst]

It's for the new CapEx at the current prices.

[Rajesh Rathi, executive]

Yes.

[Jatin Sangwan, analyst]

Got it. My second question is around power cost. If I look at power cost, let's say, in FY '19 and FY '20, they were used to be 4.5% or so. Now they have increased to 7.5% in FY '23. Of course, it came down to 6.7% in FY '24 for the pigment business. So how should we see the power cost going forward because gas prices and oil has started reducing.

[Rajesh Rathi, executive]

So firstly, we don't use gas. We have wind energy, and we do have coal for our boilers, but I'll request Amey to kind of comment on this.

[Amey Athalye, executive]

I think the FY '19 or '20 level, if you see, it is pre-COVID. Coal was at much lower rate than it is today. And normally, we have own in-house boilers, where we are producing big power. So to that extent, I think there will be impact in terms of the power cost because that's the input into generation of power in-house. Compared to FY '23, if you refer, you will see that the overall cost has come down in terms of percent also because now the coal rates have come down, but not to a level of FY '19 or FY '20.

[Jatin Sangwan, analyst]

Got it. My last question, sir, what kind of volume growth we saw in this quarter year-on-year?

[Amey Athalye, executive]

Sorry, we are not disclosing the volume growth. We won't be able to answer that question.

[Operator]

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

[Nilkanth Natu, executive]

Thank you. Thank you, Nilesh, and thank you participants for your time and interest in Sudarshan Chemicals and putting forth business questions. We remain confident in the long-term prospect of our business, and we look forward to engaging with you again in the future. Thank you.

[Operator]

On behalf of HDFC Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.