Sudarshan Chemical Industries Ltd
NSE:SUDARSCHEM

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Sudarshan Chemical Industries Ltd
NSE:SUDARSCHEM
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Earnings Call Transcript

Earnings Call Transcript
2025-Q2

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Operator

Ladies and gentlemen, good day, and welcome to Sudarshan Chemical Industries Limited Q2 FY '25 Earnings Conference Call hosted by Dolat Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nitesh Dhoot from Dolat Capital. Thank you, and over to you, sir.

N
Nitesh Dhoot
analyst

Thank you, Steve. Good morning, everyone. On behalf of Dolat Capital, I would like to thank the management of Sudarshan Chemical Industries for giving us the opportunity to host their Q2 FY '25 Earnings Conference Call. From the management team, we have with us today, Mr. Rajesh Rathi, Managing Director; Mr. Nilkanth Natu, Chief Financial Officer; and Mr. Amey Athalye, General Manager, Finance.

Without further ado, I would like to hand over the call to the management for their opening remarks, post which we'll open the forum for the Q&A session. Thank you, and over to you, sir.

R
Rajesh Rathi
executive

Thank you, Dolat Capital, and Mr. Nilesh (sic) [ Nitesh ] for hosting our earnings call. Good morning, ladies and gentlemen. Welcome to Sudarshan's Quarter 2 FY '25 Earnings Conference Call. Our investor presentation has been uploaded on the stock exchanges for your ready reference.

During the call, we could make forward-looking statements. These statements consider the environment as 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.

I would like to take you through the financial highlights. On overall basis, there has been the robust growth in the top line and recorded highest ever pigment sales in quarter 2 as well as H1 FY '25. The robust performance is also reflected in higher gross margin as well as EBITDA margin.

Coming to the quarterly performance. On a consolidated basis for the quarter, total income from operations stood at INR 696 crores as compared to INR 601 crores for the same period last year, higher by 16% year-on-year. EBITDA for the quarter stood at INR 94 crores compared to INR 66 crores in Q2 FY '24, and EBITDA margin stood at 13.6% compared to 10.9% over the same period last year.

The half year performance. On half yearly basis, total income from operations stood at INR 1,330 crores versus INR 1,209 crores in the same period last year, a growth of 10%. EBITDA for H1 is at INR 175 crores versus INR 135 crores last year, and the margin is at 13.2% versus 11.2% over the same period last year.

Now going into the details of our pigment business. Coming to the pigment business, I'm glad to report that we have achieved highest ever quarterly revenue and EBITDA. This is the seventh consecutive quarter where top line has grown on a year-on-year basis, and EBITDA margins are now closer to 16%. Our go-to-market strategy has resulted in increase in the export revenue, and we also see growth across all the major international geographies. There is a strong traction in the new products business as well.

For the quarter 2 FY '24 -- FY '25, income from operations stood at INR 660 crore as compared to INR 522 crores for the same period last year, a growth of 26% year-on-year. On a sequential basis, revenue is higher by 12% compared to INR 589 crores of the quarter 1 FY '25. During the quarter, we have delivered robust export sales of INR 360 crores as compared to INR 250 crores, higher by 44% year-on-year. On a sequential basis, export revenue is higher by 20% compared to INR 302 crores of quarter 1 FY '25.

We have seen growth across geographies, with contribution coming from Europe, North America and Southeast Asia. With higher growth from the international geographies, the export domestic mix stands at 55%-45% compared to 47%-53% in the same period last year.

India sales for the quarter is at INR 300 crores, higher by 10% as compared to INR 272 crores in the same period last year. On a sequential basis, India sales continues to deliver consistent growth and sales is higher by 4% compared to INR 287 crores of quarter 1 FY '25.

Specialty pigment sales stood at INR 457 crores as compared to INR 362 crores for the previous year same quarter, 26% year-on-year growth. On a sequential basis as well, the revenue has grown by 13% as compared to INR 403 crores of quarter 1 FY '25. Non-specialty sales for the quarter stood at INR 202 crore, which is higher by 26% compared to the same period last year. And on a sequential basis, the revenue is higher by 8% compared to INR 187 crores of the quarter 1.

Gross margin of pigment business for the quarter is at 47.8% as against 44.8% for the same period previous year and compared with the sequential quarter, gross margin have marginally gone up from 47.2%. EBITDA for the quarter stood at INR 105 crores as compared to INR 67 crores for the previous year same quarter, and the EBITDA margin is at 15.9% as compared to 12.8% over the same period last year. On a sequential basis, EBITDA is higher by 60 basis points.

In H1 FY '25, the total income from operations for the pigment business stood at INR 1,249 crores versus INR 1,058 crores in the same period last year, a growth of 18%. EBITDA for H1 is INR 195 crores versus INR 131 crores last year, and the margin is at 15.6% versus 12.4% over the same period last year, thereby increase of 3.2%.

Now coming to the balance sheet. The balance sheet of the company continues to strengthen with healthy business operation. The net debt of the company has reduced further to INR 359 crores in quarter 2 from INR 445 crores in quarter 2 of FY '24 and INR 375 crores in quarter 1 FY '25. This has also resulted in improving the leverage ratio to 0.3x in quarter 2 compared to 0.4x in the quarter 2 last year.

The working capital cycle continues to be managed efficiently. The cash conversion cycle is down to 2 days to 80 days in quarter 2 FY '25 while it is higher by 7 days compared to the sequential quarter Q1, mainly due to planned increase in the inventory.

To summarize, the CapEx, which we have built over the period has started showing the results and getting reflected in the financial performance. We have now positioned ourselves to provide wider basket of the product to the customer globally. We are confident in our growth journey, and we are committed to deliver long-term value to our stakeholders.

With this, we now open the floor for question-and-answer session. Thank you.

Operator

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

R
Rohit Nagraj
analyst

Congrats on a good set of numbers. Sir, first question is on the engineering business. Now given that the pigment business has been showing robust growth in terms of both top line as well as margins, do we have now plans and given that we are now going for acquisition of Heubach, are there any plans of hiving off the engineering business, given that's driving the overall margin performance?

R
Rajesh Rathi
executive

Sure. Thank you for your question, sir. It's a great question. We -- the Board has taken a strategic view of building this business, right? So the transformation journey for this has been launched as we speak. And give us 1 year, and I think this business will also show good robust numbers.

R
Rohit Nagraj
analyst

Sure. Fair enough. Sir, second question is on our -- in our presentation on Slide 19, we have given the outlook for FY '25 and beyond, where in the first column, we have talked about the CapEx program to drive future growth and bring in EBITDA improvement. Just a clarification, will there be any incremental CapEx or the ones that we have done that is going to drive the incremental improvement?

R
Rajesh Rathi
executive

Rohit, thanks for the question. So the clarification here is there will not be any new incremental CapEx. The CapEx program, which we had initiated in the past and completed in FY '23, as I mentioned in my opening remarks, we are seeing a good traction for our new products, which has been in the market, and we see that this new product and the CapEx will contribute going forward.

Operator

The next question is from the line of Rajesh from AlfAccurate Advisors.

R
Rajesh Kothari
analyst

Congratulations for good set of numbers. I'm just trying to understand that with what I would say, consolidation in the number of industry players, do you expect that the pricing power, which has been hit significantly, because if I look at the global companies' P&L, most of them are operating at 0 margins, do you think now there is some pricing power which will prevail, and that can lead to better profitability? That's number one.

Number two, considering that you have issued now -- a lot of time has been spent in getting the approvals, do you expect the CapEx which has been done, the asset utilization to improve and the asset turn can improve over the next 12 to 18 months?

R
Rajesh Rathi
executive

Thank you for your question, sir. I think the first thing is that most of the pigment companies have not been doing well or is not is because I think we've been -- some of them and Sudarshan have a different position in the market, and one of the most value-creating companies, I think, in the pigment segment, and that was because of some of the principles we follow, right? And I think it's going to be important that we continue and build the new organization based on these principles.

One is customer centricity. So how do we be not inward looking and be more customer focused, and what are the areas where we want to kind of focus on. And the second is a very lean organization based on first principles, right? And what are the -- and very much looking at what are the overheads we are building, how do we streamline our the SG&A costs, et cetera. So I think the first in building a profitable company, I think it will be more on focusing on the cost side rather than on the pricing side, sir.

R
Rajesh Kothari
analyst

Okay. But in last 3 to 4 years, do you think the pricing by and large would have reduced?

R
Rajesh Rathi
executive

No, sir. I don't think the pricing with -- there are always segments of market, but the segments which we play in, I don't think the pricing has reduced.

R
Rajesh Kothari
analyst

Okay. And can you answer what is my second question, which is about the asset turn, improvement in asset turn?

R
Rajesh Rathi
executive

As we had mentioned, our CapEx plan to achieve the goal was 4 years. If the going -- so anywhere between 3 and 4 years was our plan, and that's what we will kind of try and achieve.

R
Rajesh Kothari
analyst

So where are we in that -- I mean, so it seems that has been -- some time has been already passed, am I right? Almost, I think, 24 months has been, and CapEx was happening every year, correct, from FY '19, FY '20, '21. So I'm saying in that journey, where are we in terms of...

R
Rajesh Rathi
executive

I think we are in the -- we are about, let's say, between 1 and 2 years, right, in that journey. So we are in the mid 18 months, right?

R
Rajesh Kothari
analyst

Understood. And by when you think you'll be doing the QIP to this resolution, which was passed through to fund this acquisition, by when do you think that will be done?

R
Rajesh Rathi
executive

So the QIP-related -- the procedure will be followed as per the regulatory guidelines.

R
Rajesh Kothari
analyst

Okay. Okay. Got it. Basically, my question was by when you think the raising will be done. That's what my question is.

Operator

I'm sorry to interrupt, Mr. Rajesh, could you please come back in the question queue for further questions.

The next question is from the line of Archit Joshi from B&K Securities.

A
Archit Joshi
analyst

I have two questions. Firstly, on the reported exports growth, which has been quite robust for this quarter, I just wish to ask if this growth is driven by any product-related or customer-related issues that Heubach might be facing at the global level? And there has been a natural shift towards us in terms of garnering that market share from them because you are going to be a unified entity sooner or later? Or is there any other green shoots in a particular industry or segment that we are witnessing, which is the reason why there has been a strong exports growth?

R
Rajesh Rathi
executive

Exports, this was a planned growth, right? Given the new CapExs, these were all oriented more towards the international markets, and that's where you see this growth coming.

A
Archit Joshi
analyst

Sure, sir. Any particular industry that is aiding to this strong growth in exports? And just clarifying that this is not because of Heubach issue, right, not any market share gains coming from Heubach to us?

R
Rajesh Rathi
executive

So this is mainly coatings and plastics market, which we are gaining. And there are headwinds in the general industry, which has also helped building this. Nothing very particular to, I would say, Heubach, but general, I think, headwinds in the industry, which are favorable for us.

A
Archit Joshi
analyst

Got it, sir. Sir, my second question is on the capital structure. I think from what we heard from you all during the last con call is that we'll need somewhere close to INR 900,000 crores of incremental CapEx for refurbishment, legal costs, et cetera. And we have obviously made an announcement towards raising INR 1,000 crores plus INR 250 crores with the green shoe option. That leaves us with another INR 1,000-odd crores left, right, to fund the entire acquisition along with further CapExs.

Are there any plans beyond what we have announced on the QIP? And would we be looking to sell maybe the EPC business or maybe any spare land at our disposal or would this be entirely funded through debt? If you can just help us outline the capital structure for this fund raise?

U
Unknown Executive

There will not be any further plan to increase the equity beyond what we had mentioned as far as our QIP issue is concerned, that is point one. Second is, as Mr. Rajesh Rathi mentioned in the opening question, we are -- as a management, we have taken the decision to transform the Rieco business and build this business. So currently, there is no plan right now of monetization of that particular asset. And there is no spare assets like land, et cetera, available for monetization.

A
Archit Joshi
analyst

so would it be fair to assume the balance amount will be all funded through debt, if one were to build in some numbers, if you can just give some clarity on that account?

U
Unknown Executive

Yes.

Operator

The next question is from the line of Noel Vaz from Union Asset Management.

N
Noel Vaz
analyst

So in the presentation, it is mentioned that you have a market share...

Operator

Sorry to interrupt, sir, your voice is coming very low.

N
Noel Vaz
analyst

Yes. So it's mentioned that the current market for the pigments is about $8.6 billion, so -- relevant to Sudarshan. So with the potential acquisition from Heubach, are we looking at market share being closer to about 30-odd percent or 25%? How should we think about that?

R
Rajesh Rathi
executive

So I think the organic pigment market is about, I would say, $5 billion. And the balance, you would kind of include the inorganic micas, et cetera, right? Given -- so from that perspective, if you look at the market share, we would be -- it would be about 20% going forward.

Operator

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

S
Sanjesh Jain
analyst

First is on the operating leverage in the pigment business. You said that there is a 400 basis points Y-o-Y improvement in the gross profit, and there is another 400 basis point improvement at the EBIT level. We are not seeing the operating leverage at -- playing out in the margin. And even if I look at the other expenses, that inflation remains quite steep. Can you help us understand what is driving such a sharp increase in the other expenses?

R
Rajesh Rathi
executive

Sanjesh, thanks for this question. So if you look at the other expenses, it is a combination of two, three cost levers. One is the manufacturing-related costs. Second is the selling variable related cost, and the small portion remains is on the admin or fixed cost. Predominantly, this other expense has been on a higher side as far as the manufacturing and selling variable cost is concerned.

With the increase in the sales and with the increase in the volume, it gets also translated into the production-related costs going up, which is in line with the manufacturing volume, and the sales increase gets reflected in the selling variable cost. So with this, we see that this percentage should be more or less in this line. And that is the reason how we are looking at EBITDA margin increasing in line with increase in the gross margins.

S
Sanjesh Jain
analyst

You are telling that there is absolutely no operating leverage because you say that the percentage remained static, and it has been static till now as well. You are telling that there is no operating leverage in the business on the manufacturing side. I thought ETP and all we run continuously, that cost should not rise equivalent. Again, utility costs should not be proportionate. Admin cost should drive certain operating leverage, but clearly, none of them are visible. Why would sales and marketing costs will go up similar to the gross profit?

U
Unknown Executive

So Sanjesh, sales and -- sales cost will go up due to the freight, correct, the freight and the commission, which is related to the domestic sales part. So to that extent, those will be in line with the increase in the sales.

S
Sanjesh Jain
analyst

Okay. Got it, got it. Okay. The second is on the Rieco. Can you help us understand when you say we are in the process of transformation, what actually we mean in terms of transformation? Does it involve more investment? What are we really trying to achieve when we say we are in a transformation of Rieco?

R
Rajesh Rathi
executive

I mean, there's no investment envisioned. We are strengthening the organization, the business processes so that the numbers are more consistent, and we improve the numbers.

S
Sanjesh Jain
analyst

No product changes, no product improvement, where are we really focused on? We are telling the only organizational is a problem right now in Rieco and rest of all in the place?

R
Rajesh Rathi
executive

So it's our whole go-to-market strategy. I mean there are a lot of levers in how the transformation takes place. To answer your question, obviously, there is no new investment we need. I think what we need is to execute our projects well and the entire process. It's a project-based business, so ensuring that any cost runs, et cetera, are adhered to, et cetera.

So there's a lot of -- there are several levers which today I can't tell you. But basically, it's more on the execution areas. We believe that Phase 1, whatever business we have, how do we deliver better and get better value, even if -- and then look at -- looking at any other diversification in that business.

Operator

The next question is from the line of Dhavan Shah from AlfAccurate Advisors.

D
Dhavan Shah
analyst

My question is on the export side. I think you mentioned that because of the better growth in the coating and plastic, we did some good revenues in the export business. So I just wanted to understand, I mean, is this largely because of the inventory filling in the system due to restocking? Or is it like the genuine demand in the end segment? And how do you see inventory and the demand situation for our type of pigment in the export business?

R
Rajesh Rathi
executive

Just to clarify, sir, I didn't say that the markets are growing. I said our CapEx projects aim to deliver. This was what we aim to deliver through our CapEx projects, right, and transformation of our sales area, right? So that was the crux area. And our CapEx program has now started delivering which was focused mainly on the coatings and plastics area, and that's where we are seeing growth.

D
Dhavan Shah
analyst

Exports were for the products which were -- we were not manufacturing earlier and the competitors were there in the international business. So we are getting the market share of those products. Is that correct?

R
Rajesh Rathi
executive

Absolutely, this was the synthesis of the whole getting into more specialties and doing the whole CapEx program, right, the whole...

D
Dhavan Shah
analyst

And what is the market size of this coating and plastic in the international business? And how much would be our addressable market? And based on INR 750 crore of CapEx what we did, how much revenue do you expect from these two verticals in the export business?

R
Rajesh Rathi
executive

As we've been giving guidance to the market, we expect the INR 750 crores to deliver about in 3 to 4 years, but a potential of about 2x, right, about INR 1,500 crores, right?

D
Dhavan Shah
analyst

Okay. And how much of that have we already done -- I mean at what -- this INR 360-odd crores kind of the revenue denotes how much asset turn at this moment if you annualize it because there was earlier base business also was doing some revenue, right?

R
Rajesh Rathi
executive

Like we said, we are into this process to acquire the 100% capital utilization. It would take 3 to 4 years. We have crossed -- we are on the mid mark. We have completed about 18 months in this journey.

Operator

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

R
Rohit Nagraj
analyst

In our -- there is an exceptional item regarding the fees related to a transaction. So have we accounted for all the fees or will it be carried forward over a period of time till the entire transaction is not consolidated? And what could be the quantum for this?

R
Rajesh Rathi
executive

So, Rohit, the exceptional costs, which we have reported, these are the costs which are incurred in quarter 2 for this particular transaction, majorly on account of legal fee and the due diligence cost. And we don't comment on the quantum till the time the transaction is closed.

R
Rohit Nagraj
analyst

Yes, but there will be incremental cost which will come as and when the transaction is culminated, right?

R
Rajesh Rathi
executive

Sure. Yes, yes. There will be incremental cost as and when we move ahead in the transaction. Yes.

R
Rohit Nagraj
analyst

Right. Just second question, I'm not too sure whether I should ask it from the Heubach perspective. But given that we had also explained in an earlier call that for domestic business, we will not be doing any investments given that it has already been done. So given that Heubach is also probably operating at relatively lower utilization levels, can we expect that for the next maybe 3 to 5 years there may not be material investment from capacity increase perspective? However, it could be primarily because of maybe some refurbishment and maybe some maintenance costs associated to Heubach facilities?

U
Unknown Executive

Actually, well said, sir, at least 3 years, we don't see any major CapEx coming in. And as we've mentioned, some of these CapEx would be -- whatever CapEx in the 3 years would be regular in nature in terms of maintenance, et cetera.

Operator

The next question is from the line of Jignesh Kamani from Nippon Mutual Funds.

J
Jignesh Kamani
analyst

Just on the specialty segment. So if you think about the export grew by almost 44 percentage. And generally, export is slightly more heavy on the specialty segment versus domestic. But if I look at the specialty and the non-specialty growth, both is around 26 percentage. So why export higher growth is not reflected into higher growth rate in the specialty? So we are selling more of a non-specialty in export, this happen?

R
Rajesh Rathi
executive

Yes. So can you repeat your -- can you please repeat your question, sir, once?

J
Jignesh Kamani
analyst

So export grew by almost 44 percentage for us. And generally, export is very heavy on the specialty compared to the non-specialty mix. But when I look at the specialty and non-specialty growth, it is almost 26 percentage. There's no additional higher growth in the non-specialty. So I just want to understand, are we seeing more of the commodity grade in the export, you can say? Because specialty growth is not reflective of your export growth.

U
Unknown Executive

No, sir, I think the specialty growth for exports is good, too, because it's all CapEx-driven.

J
Jignesh Kamani
analyst

And second, on the operating leverage, which earlier, you can say, Sanjesh has asked. So if you take it forward, based on the EBITDA margin and the gross margin you mentioned on the pigment division, we used to have close to around INR 160 crores kind of quarterly cost or you can say or overhead I can say, last quarter, which increased to close to around INR 210 crores this quarter on the pigment division? So almost 26% growth in the overhead cost, you can say. And even if you compare Q-o-Q, it is almost 12% increase in the cost. So why the overheads and everything is increasing drastically in pigment division?

R
Rajesh Rathi
executive

So first of all, it is not the overhead. So if I see the quarterly numbers, the consolidated number for the other expenses, which I mentioned, which is the combination of the manufacturing, selling and other costs, is at INR 176 crores compared to INR 158 crores. So it is not the number which you are referring. And as I mentioned, that majority of this part is linked with the manufacturing production activity as well as the sales activity. Since we have seen growth in the sales number, which also gets translated in our production volume and the utilization, we see the cost getting increased in that line.

J
Jignesh Kamani
analyst

But like your pigment sales has grown up by around 26% Y-o-Y, while your overhead has grown by 26% Y-o-Y. So there's no benefit of leverage, you can say.

R
Rajesh Rathi
executive

So, sir, it is not overhead again. So it is the expenses which are related to the freight, commission, the manufacturing cost-related expenses. So it has been in line with the increase in the sales there.

J
Jignesh Kamani
analyst

So incrementally, also, whatever the growth in the revenue, we will see similar kind of growth in this cost item also, right?

U
Unknown Executive

To some extent, yes, what you are saying is to some extent.

Operator

The next question is from the line of [ Aditya ] from Security Investment Management.

U
Unknown Analyst

Sir, this 26% growth which we've witnessed in our pigment division, what would be the share of volume and price mix for this 26% growth?

R
Rajesh Rathi
executive

So the prices have been quite stable, but we don't split up the volume, et cetera, right now in a public forum. But direction I'll just give you saying that the pricing has now been stabilized.

U
Unknown Analyst

Understood. But sir, last year, there was raw material deflation and the market was also not doing good, and the prices, I believe, were at rock button. So why haven't we seen increase in pricing of our end products?

R
Rajesh Rathi
executive

We're not able to follow your question, sir.

U
Unknown Analyst

Sir, last year, there was raw material deflation, which was impacting the end prices and the market was also not doing that great because of which the end product prices for our products were quite low. So we haven't seen any improvement from these low prices?

R
Rajesh Rathi
executive

The prices of raw materials remain to be the same, sir. I've not understood why are you assuming that the prices have increased.

U
Unknown Analyst

This strong growth which you have witnessed is majorly due to volumes only.

R
Rajesh Rathi
executive

Yes.

U
Unknown Analyst

Understood. And sir, this strong volume growth, this is majorly because of we have gained market share from our competitor or the end market has also started improving in the export market?

R
Rajesh Rathi
executive

As I explained earlier, sir, that our whole CapEx investment was for specialty products targeted towards the global coatings and plastics market, right? And that -- and we are -- and that's playing out now, right? So I think that's the question which -- yes.

Operator

The next question is from the line of Tejas Sonawane from Asian Market Securities.

T
Tejas Sonawane
analyst

I have two questions. Firstly on the exceptional item reported in our quarterly numbers, so the notes which are there mentioned below the quarterly result, it kind of is the net amount which you have kind of recorded, which is net of the gain which you have received from the sale of freehold land and the expenses which you have incurred. So correct me if I'm wrong over here. So the expenses which you have incurred for our Heubach transactions are close to INR 325 crores, net of which you have reported close to INR 11 crores of loss for this quarter?

U
Unknown Executive

Tejas, if you see the exceptional item line and the note number 7 and 8, so note number 7 gives the reference to the exceptional gain on account of the land sale, which we had done in the last year April '23, and that is during the financial year '24. So that transaction of INR 315 crores is different. And currently, the INR 11 crores, which is reported for the quarter under consideration is related to the costs in relation to this definitive agreement entered for Heubach. So these are two separate transactions.

T
Tejas Sonawane
analyst

Okay. Understood, understood. And secondly, just wanted to ask you if you could provide us at least some sense as to whether the Heubach Group, whether their EBITDA operating profit is on the positive side or the negative side for CY '23? Any sense which you can provide on that front?

R
Rajesh Rathi
executive

So from a confidentiality and anti-trust perspective, we can't comment on the numbers, sir, currently.

Operator

The next question is from the line of Rohan Patel from Turtle Capital.

R
Rohan Patel
analyst

Yes. I just want you to share me the data points related volume growth that for quarter 2 as well for half -- first half for domestic and export and specialty and non-specialty, if you can provide that?

R
Rajesh Rathi
executive

So, Rohan, from a competitive perspective, sir, we don't provide these numbers.

R
Rohan Patel
analyst

Okay. So if you can just give us an idea that for the domestic revenue for half year, which has grown 10%, and export revenue, which has grown 27% year-on-year, how much would that be from volume and how much would that be from price? Like it would be more dominated by volume, if you can give us any idea? .

R
Rajesh Rathi
executive

Yes, it's the same question, sir. We can't give you volume. But like I mentioned, prices are quite stable now and -- prices are quite stable now.

R
Rohan Patel
analyst

Okay. And you don't see that now is -- so you are just referring that now it has bottomed out and now it's stable. Now we cannot see any more going down. .

R
Rajesh Rathi
executive

Yes.

R
Rohan Patel
analyst

Okay. And can you share your perspective regarding phthalocyanine market? Like what are the trends and how the market is on a year-on-year basis?

R
Rajesh Rathi
executive

I think as a company, we do have that business, but we are spread across. Phthalocyanine business is a very competitive business. There is overcapacity in that business.

Operator

The next question is from the line of Sabyasachi Mukerji from Bajaj Finserv.

S
Sabyasachi Mukerji
analyst

Two questions. One, on the export side, we have seen a very good growth this quarter. And last few calls, you were saying that there is an increase in customer inquiries and a good possibility of shortening of approval cycle and all. Any update you can share? Have there been conversations, any progress? Anything on this thing, if you can share?

R
Rajesh Rathi
executive

So the progress is seen in our numbers. And as I mentioned that our CapEx program has started yielding results, and that's how we are seeing this growth.

S
Sabyasachi Mukerji
analyst

How do you see the rest of the year pan out? I mean is the momentum continuing? Or do you see -- do you foresee any challenges ahead?

U
Unknown Executive

So I think we -- going forward, we don't see any major challenges, but whatever our average growth so far has been, I think we should be able to deliver those numbers on the half year.

S
Sabyasachi Mukerji
analyst

Okay. Second question, on this fund raise, will the promoters participate?

U
Unknown Executive

So I can't comment on that currently. I think we're going through the process right now.

Operator

We have a next follow-up question. It's from the line of Sandeep Abhange from LKP Securities.

S
Sandeep Abhange
analyst

Can you hear me?

R
Rajesh Rathi
executive

Yes, we can hear you.

S
Sandeep Abhange
analyst

Sir, I wanted to understand the overall growth in the exports. So how is the market looking overall? What is your view on the exports? So do we see this kind of growth on a sustainable basis because we have done the kind of CapEx, and we are kind of trying to achieve our targeted growth majorly in the specialty market. So do you see this growth sustainable going forward? Or how do you see -- if you can comment on this particular export growth?

R
Rajesh Rathi
executive

So I think, sir, the question is that -- as I mentioned, the new CapEx program -- there is some echo in the line.

Sandeep, can you hear us?

S
Sandeep Abhange
analyst

Yes, yes, I can hear you.

R
Rajesh Rathi
executive

Okay. So I think the CapEx program is yielding good results. I think a lot of our customers are looking at -- have been very -- initial trials are over. We have commercialized a few businesses. Going forward, we do expect growth in terms of, I would say, in the -- between somewhere in the teens, in the mid-teens numbers going forward too. And I think that's how we should be able to...

S
Sandeep Abhange
analyst

Okay, okay. That's helpful. And secondly, I wanted to know, the kind of revenue target which you had earlier given during your CapEx plan and you will be achieving between INR 3,200 crore to INR 3,600 crore kind of a revenue for the next -- by '26 and '27. I just wanted to understand, you're already almost inching up towards INR 3,000 crores kind of a revenue for Sudarshan. So are we expecting a like faster reach towards that target in the next coming 1 or 2 years? How do you see -- only on the Sudarshan side, like standalone business?

U
Unknown Executive

On the standalone basis, sir, our guidance was that the INR 750 crores revenue should give us about INR 1,500 crores between 3 to 4 years of our time since the Europe market and some of the other markets are recovering slightly, somewhere between 3 and 4 years, we should achieve it.

S
Sandeep Abhange
analyst

Okay, okay. And just last question I wanted understand, when would we expect the integration of Heubach and Sudarshan in terms of the financials by when we can expect that?

U
Unknown Executive

I think the closing should happen somewhere in our Q4 quarter, right? And after the closing, the integration process will begin.

Operator

The next question is from the line of Dhavan Shah from AlfAccurate Advisors.

D
Dhavan Shah
analyst

So my question is, again, on the export side. You mentioned that we did CapEx of INR 750-odd crores and peak revenue would be INR 1,500-odd crores. So out of that, what would be the share of this coating and plastic in the overall pie? And if you can share the global market size, out of this $5 million (sic) [ $5 billion ] of the global market, addressable market, what would be this coating and plastic market? Or maybe what could be our addressable market for our products in those two segments?

R
Rajesh Rathi
executive

So I think the majority of this INR 1,500 crores should come from coatings and plastics, right? And the rough number, I don't recall, but about, I would say, $3.5 billion should be the market for the coatings and plastics.

D
Dhavan Shah
analyst

And the products what we are selling right now, out of this $3.5 billion, what could be the market? I mean there are other competitors are also selling, right? So if can tell me a bit of what would be the market of those products which you are selling right now?

R
Rajesh Rathi
executive

As I mentioned, sir, overall basis, this would be -- there are a few chemistries, which we don't do for the coatings and plastics. So -- but I mean we are covering a majority of the spectrum of the market. There will be exceptions, but overall prospective.

D
Dhavan Shah
analyst

So out of this $3.5 billion global market...

Operator

Mr. Dhavan, sir, could you fall back in the question queue for further questions.

The next question is from the line of Noel Vaz from Union Asset Management.

N
Noel Vaz
analyst

Just one follow up on the acquisition that can happen. So the thing is that as it currently stands domestically, we have over 35% market share. Will there be some potential issues that could pop up because of anticompetitive rules in any specific geographies or even domestically?

R
Rajesh Rathi
executive

So we are going through the antitrust filings, but I think we have quite a complementary product portfolio from that perspective. So -- but the process is being followed vigorously currently by our regulation.

Operator

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

R
Rohit Nagraj
analyst

Again, on the Rieco front, sir, we have done in the last 4 years from the revenue front, it has done extremely well. And you said that there is a strategic focus on the same. Just one clarification. So the margins of -- EBITDA margins of Rieco had been sub-10%. So is it possible that once it attains a particular size and based on our strategy, it can reach the margins of the pigments business? Or will it be always a lower-margin business than the pigment business?

R
Rajesh Rathi
executive

So the first phase is to get into the low teens and have it consistent, right, so that our processes are robust. So I would kind of look at it from a first phase of this. The second phase, whether we can go in the mid-teens, et cetera, I think that answer, we can't give today, sir. But first focus would be that to reach there.

Operator

Ladies and gentlemen, that was the last question for today's conference call. I would now like to hand the conference over to the management for their closing comments.

R
Rajesh Rathi
executive

Thank you, Steve. Thank you, Nitesh Dhoot and Dolat Capital, and thank you participants for your time and interest in Sudarshan Chemical. We remain confident in the long-term prospects of our business, and we look forward to engaging with you again in the future. And we also wish all of you a very happy and prosperous Diwali. Thank you.

Operator

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

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