Tata Chemicals Ltd

NSE:TATACHEM

Earnings Call Analysis

Tata Chemicals Q2 and H1 FY'24 Performance

In a stable yet challenging market, Tata Chemicals maintained market shares and improved cash generation, despite a 6% revenue drop to INR 3,998 crores. The reduction was mostly due to lower soda ash volumes in India and Kenya. EBITDA fell by 11% to INR 819 crores, while Profit After Tax (PAT) was down 28% to INR 495 crores, inclusive of INR 102 crores exceptional gains from a tax provision reversal. The company repaid USD 120 million in debt and continues its CapEx program, focusing on high capital efficiency. Rallis, one of their segments, saw a revenue drop by 12% with a 14% increase in EBITDA. Overall, they foresee a stable demand for soda ash, expecting steady contributions while focusing on debt repayment and cash flow improvements.

Stabilizing Markets Amidst Slower Demand: India and U.S. Holding Steady

The markets in India and the U.S. showed stability despite a general softening, particularly in the container glass segment. Although new supplies were announced from China, causing subdued prices, the company proactively engaged with customers to maintain market share. Their financial conservancy has allowed for significant debt repayment overseas, emphasizing focus on high-value-add products and operational excellence to preserve margins.

Financial Performance Highlights: Revenue and Profit Declines

The company experienced a 6% decrease in revenue compared to the same quarter last year, primarily due to reduced soda ash volumes in India and Kenya. Earnings before interest, taxes, depreciation, and amortization (EBITDA) fell by 11%, and profit after tax (PAT) dropped by 28%.

China's Market Dynamics: Stability Amid New Supply

New supply from Mongolia led to delayed purchases as customers expected price corrections that did not materialize, leaving China's market stable and inventory levels lower than anticipated. This unexpected stability meant that the anticipated oversupply did not disrupt international markets as much as feared, though close observation remains necessary.

Export Market Pressures: Price Decreases and Stable Domestic Shares

While the domestic market share was maintained, export pricing declined by roughly $50 to $60 per tonne from the previous quarter, but aligned with the same quarter the previous year. The U.S. domestic market faced some softness in container glass, and attention is directed towards the export market, particularly in Southeast Asia, for signs of change or stability in volume and price trends.

India's Performance: Battling Increased Imports

Despite robust demand side indicators in India, margins came under pressure from imports which doubled to almost 28% of total sales, primarily from Turkey, causing price reductions. This particular circumstance is viewed as a market-specific challenge that is expected to correct over time.

Kenya and U.K. Outlook: Adjusting to Market Conditions

In Kenya, margin reductions are expected to persist due to a significant proportion of exports to India and Southeast Asia. Meanwhile, in the U.K., profitability in bicarb and salt should remain stable, with ongoing negotiations determining future contracting periods for soda ash.

Sustainability and Market Demand: The Green Advantage

A key takeaway from a global soda ash conference highlighted the importance of sustainability efforts. Chemical companies demonstrating strides towards reducing their carbon footprint, like the improvements in U.S. and U.K. operations, gain more customer traction. India lags with a commitment to reducing carbon emissions by 30%. Additionally, there is optimism about growth driven by industries like solar and lithium carbonate, despite unexpected softening in the traditionally resilient container glass segment.

Earnings Call Transcript 2024-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to the Tata Chemicals Limited Q2 and H1 FY '24 Earnings Conference Call. [Operator Instructions]

I now hand the conference over to Mr. Gavin Desa from CDR India. Thank you, and over to you, sir.

[Gavin Desa]

Thank you, Rico. Good day, everyone, and thank you for joining us on Tata Chemicals' Q2 and H1 FY '24 Earnings Conference Call. We have with us today Mr. R. Mukundan, Managing Director and CEO; Mr. Zareer Langrana, Executive Director; and Mr. Nandakumar Tirumalai, Chief Financial Officer.

Before we begin, I would like to mention that some of the statements made in today's discussions may be forward-looking in nature and may involve risks and uncertainties.

I now invite Mr. Mukundan to begin proceedings of the call. Over to you, Mukundan.

[Ramakrishnan Mukundan, executive]

Thanks, Gavin. Good evening, and welcome to everyone to our Q2 and H1 FY '24 Earnings Call. Let me start by first wishing all of you a festive -- greetings for the festive season and happy Diwali. I'm joined by my colleagues, as mentioned by Gavin, Zareer Langrana and Nandu. I will start the discussion with key operational highlights across business and geographies. After which, our CFO, will walk you through the financial performance for the quarter.

Overall, amongst the markets where we have sizable presence, India and U.S. were stable. There was softness in some segments of the market, especially in container glass. Our prices have remained subdued with new supplies coming from China or at least the new supplies being announced out of China. There has been a bit of a slowdown below from China into other markets. Overall, in the medium term, we look -- the outlook for soda ash remains stable, backed by demand from sustainability sectors like solar PV and lithium.

As far as our company is concerned, we have maintained our market shares in key markets through active customer engagement. Our cash generation was better with working -- better working capital. Our focus in some of the markets like in U.K. will remain that we focus on high value-added bicarb and [ farmer ] salt and we will continue to focus on operational excellence to ensure our margins are protected. We have repaid debt of USD 120 million in the overseas units in the first half of the year. Our CapEx program will continue as planned for the projects, which are already underway, and the future programs will focus -- continue to focus on debottlenecking with a very high capital efficiency.

Moving on to Rallis, their quarterly performance was better than previous quarters in spite of challenging environment. As compared to corresponding quarter last year, revenue did decline by 12% due to subdued performance of international market, but domestic market remained stable. EBITDA of quarter was higher by 14% and Rallis' approach to ensure right level of placements reflected in improved collections.

To conclude, we believe core fundamentals of our main business, soda ash continues to remain steady. We expect medium-term demand supply situation to remain stable. While we are scaling up capacities of our core business by almost 1 million tonnes cost effectively mainly through debottlenecking, we remain very much focused on management excellence, debt repayment and strengthening our cash flows. Our endeavor is to maintain our customer engagements at high level to ensure market position and continue to have steady contribution with focus on excellence.

That concludes my opening remarks. I now hand over the floor to Nandu, who will take you through financial performance.

[Nandakumar Tirumalai, executive]

Thanks, Mukundan, and good day, everyone. Let me walk you through the financial performance, after which we'll get to Q&A.

Starting with the headline numbers for the quarter. Our revenue over for the quarter was at INR 3,998 crores, down 6% compared to last year's Q2. Decrease in revenue was driven by lower soda ash volumes and contribution being impacted mainly in India and Kenya. EBITDA for the quarter was INR 819 crores as against INR 920 crores in the last year's Q2, 11% lower. PAT for the quarter was INR 495 crores, lower by 28% compared last year's Q2, which also has now INR 102 crores of exceptional gains booked in the quarter on account of a reversal of provision on account of a long-pending anti-tax issue we had [ with ] the government.

Moving to each business, starting with India. Revenue for the quarter was INR 1,066 crores. Soda ash volumes were up 4% compared last year's Q2. Pricing was lower because of which we had lower revenues compared last year. Salt business performed well and [indiscernible] volumes. Bicarb saw good volumes too as compared last year.

Moving to the U.S. Business continued to benefit from better pricing during the quarter. EBITDA margins [ 22% ] for the current quarter. In the U.K. business, revenue was impacted as covered last year's Q2 with lower volumes and led by lower -- revenue was 1% in the current quarter. EBITDA was 19% for the current quarter. As far as Kenya is concerned, both the volumes and realizations are softening, which in turn impacted margins and profits for the quarter. As far as Silica and Nutra is concerned, both the businesses have a growth market in front of them. With time and investments, we expect both segments to clock in consistent numbers going forward.

Moving on to Rallis, the revenues for the quarter was at INR 833 crores, 12% down compared last year's Q2. EBITDA was INR 135 crores, 14% higher than last year's Q2. PAT INR 81 crores against last year, INR 71 crores, up 15%. Our cash position for cash [indiscernible] was INR 1,701 crores ending September. CapEx was INR 418 crores. Net debt was INR 4,347 crores on account of dividend outflow, CapEx, et cetera.

With that, I close the comments and hand it over back to Gavin to open up for Q&A. Thank you.

[Gavin Desa]

Yes, Rico. Please, go ahead.

[Operator]

[Operator Instructions] The first question is from the line of Vivek Rajamani from Morgan Stanley.

[Vivek Rajamani, analyst]

Two questions from my side. Could you just talk a bit about the U.S. Volumes have not recovered back to the normal levels this quarter, and it also appears that the pricing for exports which are more levered to spot have corrected quite a bit. So could you just give us some color of what's happening there and how we should think about this going forward?

And the second question I had was more specifically on China. Could you give us some color on what's the demand supply situation in China? I ask this because we did see a rally in spot prices in China a couple of months back. And recently, we've again seen a very sharp decline. So any color on what's happening on the ground would also be very helpful.

[Ramakrishnan Mukundan, executive]

I think -- let me first start with China. I think in China, the basic market issue was that there was a new supply coming in from Mongolia and which -- in anticipation of which, many customers have delayed their purchases, and they were hoping that prices would correct, but unfortunately -- or let's say, those disturbances did not happen in China. It seemed more stable than what the market participants would have thought should happen.

The China inventory actually fell to a very low level, from approximately 3 lakh tonnes, it has fallen down to something like 2.7 lakh tonnes, and it is now up a little bit. So really, the issue in China in our view is that the Chinese market has remained bit range bound. And really, the spillover in the international markets of volumes have not happened. That does not mean that it could not happen. We'll keep a close watch on this.

And the other angle in China was about the demand situation within China, which has remained slightly soft. A lot of measures by government, and you would be reading this across sectors in the general news, too. And the real impact of that, we will wait and watch and see.

If you look at broad numbers, we think China numbers in terms of volume compared to last year are about 3% up. That is the overall number, which we have done the calculation. But the reality is that we need to keep a close watch on China. So really, the news from China is the anticipated disturbance the market did not follow through. It was more soft than what we had thought it would be.

In terms of the -- your question was on the U.S. market volumes, right? Yes. So in terms of U.S. market volumes, I think in terms of domestic market share, I think we have more or less protected our domestic market share overall in the market. I think the pressure, as you rightly identified, was on the export market. where I think the prices have broadly trended down from the previous quarter. From previous year, the export pricing is more or less same. But from the previous quarter, they've trended down approximately by $50, $60 per tonne. And we anticipate that will be the stable number going forward. So it is back to what it was the previous year same quarter. So I hope that sort of explains the current market situation information, Vivek.

[Vivek Rajamani, analyst]

So just one small clarification before I rejoin the queue. Do you expect the volumes in the U.S. to go back to the 600 kilotonne level? Or you think this is going to be a more normalized number going forward?

[Ramakrishnan Mukundan, executive]

Actually, the domestic market in U.S. has been fairly stable, except for some softness in container glass. And the real impact in the U.S. has been the export market where -- I think the South American market, we do expect to remain stable, but I think the big issue we need to watch out for is the Southeast Asian market. So I don't want to make an immediate commentary. We are watchful. If things turn out benign, then I think it will be back to normal, the volumes we said. Otherwise, it will trend towards what we are having in this quarter.

[Operator]

Our next question is from the line of S. Ramesh from Nirmal Bang Equities.

[S. Ramesh, analyst]

Sir, in terms of the Mongolia capacity addition, what is the latest number we have in terms of confirmed capacity addition this year? And will we see the entire 5 million capacity being added in the next few months?

[Ramakrishnan Mukundan, executive]

So the public news is that the entire 5 million may come on stream this year. This -- and when I say this year, that is 31st March '24. But we think more realistically, it is likely to be close to about 3 million.

[S. Ramesh, analyst]

3 million. Okay. The second thing is, if you see the India performance, the margins are under pressure. So what is the reason for the weak performance in India? Because rest of the world, I can understand. But India, without the individual segments, including property and automobiles are doing well. So how -- and we -- last time you told, sir, that there is certain amount of overhang from increased exports from Turkey and the [indiscernible] in China. So how much of that is still persisting in terms of channel stock and [ big ] consumption and when do we see this recover?

[Ramakrishnan Mukundan, executive]

So really, the issue in India is not so much the demand. Ramesh, I think you rightly pointed out, India is actually probably the bright star in demand side. So Indian market, we don't think it is a demand -- we don't see it as a demand issue. But certainly, Indian market has suffered from heavy increase in imports. Indian imports, which were broadly around, let's say, 13% or 14% of the total sales, that has doubled to close to 27%, 28%. So the real change has been the imports landing in India, mainly from Turkey, and that has impacted the pricing because they've landed at -- let's say, it's pretty low prices, and that has tended to pressure the market prices overall.

So we do think this is a phenomenon which is, let's say, very specific for this market. And we do think that over a period of time, it will correct itself. If you ask me, as it reads the bottom, in my view, whether we read the bottom or not, very clear to me, but we are very close to bottom.

[S. Ramesh, analyst]

And last question on U.K. and Kenya. Kenya margins have really come down sharply. So is this the margin which we can expect going forward? Or is there some scope for recovery in the Kenya margins? And similarly in U.K.?

[Ramakrishnan Mukundan, executive]

I think in Kenya, the way we would certainly say is that the current margins we are trending would probably be the normal margins going forward because bulk of their exports is to India and Southeast Asia, and those numbers, more or less, would tend to be around the same figure going forward.

[Operator]

Our next question is from the line of Saket Kapoor from Kapoor & Co.

[Saket Kapoor, analyst]

Sir, as earlier alluded by you that U.K. will be moving to now the per tonne profitability structure. So current numbers for U.K., can we penciling in this is now the new normal for the U.K. numbers? Or what should be our understanding?

[Ramakrishnan Mukundan, executive]

Certainly, I would say in bicarb and in salt, these numbers would reflect themselves. In terms of soda ash, while we have tended to maintain constant margin, and that probably will hold true for Q3 of this fiscal year and Q4 of the calendar year, you have to wait for a commentary from us exactly where the margins will settle for us the next contract period next year.

So we are still in the process of going through the negotiation. So I'm not able to sort of comment whether it will remain stable or move around a little bit up or down, but we'll come back to you on that. But bicarb and salt will remain more or less stable. So it is really the soda ash one which we need to sort of manage for the new contracting period starting from Jan to December.

[Saket Kapoor, analyst]

And sir, for the CO2 program, which we have conducted through the aid of the U.K. government, the benefits of the same are now fully accrued, and this is going to be pertinent now?

[Ramakrishnan Mukundan, executive]

Yes. I think the bicarbonate plant actually completely utilizes the carbon capture unit. In fact, it is the -- it has zero -- really close to net zero next kind of a situation for our bicarb production. So it is a green product and it is finding very good customer traction.

[Saket Kapoor, analyst]

Sir, as you mentioned rightly that the contracts will be renewal, the annual contracts for -- in the next month. So the outlook for U.S. also you would be able to share post the Q3 numbers. That will give us an -- as I stand how the next year is going to shape up. That would be a better understanding for U.S. markets also since there's lot of volatility currently in the soda ash market. So that will have an impact on our contracts with -- we have annual contracts for U.S. also?

[Ramakrishnan Mukundan, executive]

Correct. I think we'll be able to share with you in Q3. I can only tell you that the teams are working hard to close out all contracting and it is moving in the right direction.

[Saket Kapoor, analyst]

Okay. So last point was on the global conference on soda ash, sir, that happened in the month of October. If you could enlighten us with what's the global scenario shaping up currently? And what's the feedback in terms of the demand outlook globally? If you could give some more color on the same, and then I'll join the queue, sir.

[Ramakrishnan Mukundan, executive]

I think one big theme from all customers in that conference was from the focus on sustainability. I think all customers are looking to the carbon reduction program, the big ones, the global ones, I think that that's one of the key themes running. So the chemical companies, which are able to demonstrate and move towards a lower carbon footprint, would continue to benefit with greater customer traction. To that extent, our units in U.S., which has a lower carbon footprint as well as the one in the U.K., do benefit. Kenya has also a very low carbon footprint. It is in India we need to address that by what we have committed, which is 30% reduction. That's one broad trend right across.

The second trend is there is a continued belief and bullishness about the applications like solar and lithium carbonate. They're going to continue to be the drivers of growth. The other traditional sectors, I think we have to wait for the macro economics to correct. So fundamentally, how the real estate market behaves and how the, let's say, the automotive sector behaves, which will drive the flat glass.

In terms of container glass, it has been a bit of a surprise for all of us that the market demand has softened. Traditionally, this segment has held up. So we'll have to wait and watch what has led to this, especially in terms of both wine and beer consumption usually should hold up, but it is seeing a thing -- there's been a reduction in the container glass demand. But we don't have clarity on what the way it will trend. So I think we will want to watch very closely.

So these are the broad lessons to glean from the soda ash conference. Certainly, I think in terms of supply side, all the companies are focused on improving their core offering to customers by reducing carbon and most companies are also focused on making sure that their cost competitiveness continues to improve, more supply. That is what they are focused on.

[Saket Kapoor, analyst]

Right. Right, sir. Sir, for the finance cost, sir, we see that on a consolidated basis, our finance costs have gone up by INR 100 crores, whereas you have also alluded to the fact that we have reduced our debt on the U.S. unit by $100 million. So what's the debt on the U.S. counterpart currently? And why have the finance costs gone up?

[Ramakrishnan Mukundan, executive]

Actually, the borrowing cost is almost the interest rates have increased dramatically. They've more than doubled. Nandu, you want to clarify?

[Nandakumar Tirumalai, executive]

Yes. So you see, we have loans in the U.K., Singapore and U.S. So all our U.K. and Singapore debts got refinance over the years back in December last year. So those came at a much higher rate than what we took earlier. So last year's Q2 had an earlier rate taken long time back at 1% LIBOR fixed -- so therefore, this rate difference or 5% on the loans in Singapore and U.K. is reason for the increase in interest rate. Otherwise, we're repaying debt, and therefore, that has resulted in a lower increase over last year. So broadly, it is refinancing done multi -- having entered debt in the U.K., Singapore last year, in December. And this is -- the rates will be high.

[Saket Kapoor, analyst]

So what is the debt on U.S. currently after the repayment?

[Nandakumar Tirumalai, executive]

U.K. -- U.S. would be around [ INR 200 crores ] -- just hold on.

[Saket Kapoor, analyst]

And sir, next point would be on sodium bicarbonate used for flue gas treatments. What kind of incremental demand are we anticipating with the implementation of flue gas treatment at the power plant, I think. So Tata Power is also contemplating a lot of initiative on this business. So how is this going to shape up, and the outlook on the same?

[Ramakrishnan Mukundan, executive]

It's a growing sector, and we are very much focused on that sector, too. Zareer, you want to add?

[Zarir Langrana, executive]

Yes, I think you're right. Certainly, in India, we've seen over the last 12 months increased demand from this sector, primarily from one of the PAN India here. You're right, Tata Power is also looking at it. Our estimate is that it will continue to grow at about 10% per annum, but in a phased manner as each utility takes up each of the plants separately. So it's certainly moved from a pilot phase to a commercial phase as far as the utilities are concerned.

[Nandakumar Tirumalai, executive]

And on previous question, in terms of the debt in U.S., there's $258 million in U.S. Overall, $728 million is our overall debt we have on the whole. $258 million is U.S. and GBP 150 million is in U.K., $182 million is in Singapore, but that's the breakup.

[Operator]

Our next question is from the line of Mithil from Unlisted India.com.

[Mithil Bhuva, analyst]

Yes, my first question is like for the additional capacity that's going to come on stream, do we have the contracts ready for it like to take away for the new stream?

[Ramakrishnan Mukundan, executive]

Yes. I think the first traditional stream is going to come as -- the salt capacities are coming on stream. I think that, that more or less is fully booked with our contract with Tata Consumer. And on the soda ash, about 0.25 is -- 250,000 tonnes is coming on stream, which we are very confident the Indian market with its growth would take that. I think there's the -- we have full confidence on that. The additional capacities we are bringing on in Makadi, about 200,000-odd tonne and in U.S. about 400,000-odd tonnes. I think those we are very confident because of the cost competitiveness of both these sites. But they are about 2, 2.5 years away. And the current year, the capacity is coming is only in India.

[Mithil Bhuva, analyst]

Sir, my second question is on the growth front. Like what is Tata Chemicals planning to have a -- to be on a very high growth front like our sister companies, our Tata Power and Tata Motors. So if we see in solar ash and salt, the capacity expansion is also very moderate. So what is Tata Chemicals planning to have grow average [ this year ]?

[Ramakrishnan Mukundan, executive]

Yes. So in terms of the organic growth, Mithil, our plans are exactly what I mentioned that we will be bringing on about 30% more capacity in our silica unit, 300,000 tonne -- 3,000 tonnes, and it will further go through doubling of capacity in Phase II for which we are -- we should start the process of construction in about a month's time after getting the consent to establish from the Tamil Nadu government.

As far as the soda ash is concerned, it will go to 1 million tonne in India and salt will go to 1.5 million. Beyond that, the next phase, it takes the salt capacity to 1.8 million tonnes. And also the soda ash capacity to 1.3 million tonnes in India. That is about 2.5 years away. And in U.S., about 400,000 tonne additional and in Kenya about 200,000 additional. Those capacities will be also around 2.5 years to 3 years away. So we will be adding capacities in a lumpy manner, but they have to go through execution phase, and that's the way the business is.

[Mithil Bhuva, analyst]

Anything on inorganic [ platform ]? Because these don't -- look very small actually in the overall context of things, sir.

[Ramakrishnan Mukundan, executive]

Yes, we will continue to look for opportunities. If anything thing fructifies, we'll come back to you. The sector is having interesting opportunities. We are on the lookout for this. Thank you.

[Operator]

Our next question is from the line of S. Ramesh from Nirmal Bang Equities.

[S. Ramesh, analyst]

So if we were to look at the current consumption, what is the current consumption in million tonnes? And what is the kind of growth you expect in consumption of soda ash over the, say, next 1 to 2 years? And what is the visible capacity addition you expect in the next 1 to 2 years, other than the Inner Mongolia capacity?

[Zarir Langrana, executive]

So over 1 to 2 years. Other than Inner Mongolia, we aren't seeing anything substantial on the horizon. Anything substantial that's been talked about has been talked about in the 2027, 2028 timeframe. So capacity-wise, we don't see too much coming up other than some usual debottlenecks. Demand side, historic global demand growth rates have been in the region of 2.5%, 3%. Today, it's much softer -- if the traditional sectors go back to their original growth rate, we should see those kind of numbers appearing once again.

[S. Ramesh, analyst]

No -- yes, if you look at the glass, sir, like in the Asahi Glass has reported very weak numbers. So is there a challenge on -- while you said that the demand is okay, is there a kind of a similar trend in terms of Indian glass sector? How is the demand trend in India?

[Zarir Langrana, executive]

So Indian glass sector, I think the demand trend is good. Perhaps the domestic players are...

[Technical Difficulty]

[Operator]

Ladies and gentlemen, please stay connected while we reconnect the management. Thank you. Ladies and gentlemen, we have the management line connected.

[Ramakrishnan Mukundan, executive]

Yes. So Ramesh, I was only addressing, but I don't know whether you heard what Zareer mentioned that in glass, the main issue -- volume growth is continuing. There is no issue on that. It's mainly the pricing pressure and pricing pressure mainly coming from imports from China and from Malaysia. And in -- with Malaysia, India, the free trade agreement, and that does create issues for glass players from time to time.

[S. Ramesh, analyst]

Okay. And lastly, can you give us the CapEx for FY '25 and '26 and '27 since you have lined up all the expansion?

[Ramakrishnan Mukundan, executive]

Yes. Just hold on. We'll just give you the number. Can we go to the next question? We'll get you the numbers.

[Operator]

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

[Rohit Nagraj, analyst]

Sir, first question is on Turkey. So what is the differential in terms of the imports from Turkey and the local prices. And a like question to that, given that China demand is relatively lower, so are there any exports happening from China?

[Zarir Langrana, executive]

So let me take the second question first. China was exporting until about 4 months ago. The market then suddenly tightened domestically and Chinese exports came down. At the moment, it is not back to the historical levels. But as the Inner Mongolia production starts appearing into the market and into the domestic market primarily to start with, you might see exports increasing out of China, but we'll have to see how that plays out.

The second question, the differential between domestic pricing and Turkish import pricing. I think, vary market to market and customer to customer. Obviously, domestic pricing is at a premium to import pricing. And we believe that differential we'll continue to see.

[Rohit Nagraj, analyst]

Right. And any specific reasons for high imports coming from Turkey? I mean are the prices in terms of the energy costs, et cetera, have come down dramatically and/or there is constraint from the economic side, and they are just pushing the volume. So any thoughts on this?

[Zarir Langrana, executive]

Yes, I don't think energy costs have come down. In fact, energy costs may have gone up. I think really, the large impact may be, we believe, due to the fact that some of the core markets in Europe, especially Southern Europe, has seen a decline in demand, and they are finding new home for product now.

[Rohit Nagraj, analyst]

Right. And just a second question on the U.S. pricing front. So in your opening remarks, you alluded that on a Q-o-Q basis, prices have gone down by about $50, $60. So will the prices prevail when it comes to the renewal of contracts in the month of January?

[Zarir Langrana, executive]

I think the market is still fairly volatile and in a state of flux. And as Mukund mentioned, we'll probably get a better idea when we talk again Q3 as to where the prices might settle. But as we also mentioned, I think the team is today focused on making sure that all of the contracting is closed as soon as possible.

[Rohit Nagraj, analyst]

Right. And if I can squeeze in one last one. In terms of all the different geographies, which are the segments which are doing well and which are the segments which are lagging behind?

[Zarir Langrana, executive]

So I think across the board, sustainability-driven segments like lithium, solar, glass are doing well and are continuing to grow, in fact, growing in double digits. Within the more traditional segments, I think the one that's been impacted is certainly float glass, primarily due to slow housing and residential starts and construction activity in most of the geographies. And as Mukund mentioned, there's been some recent softening in container glass demand, but that we believe might bounce back, perhaps faster than what we'll see in the float glass segment.

[Ramakrishnan Mukundan, executive]

On the Saket broadly, just to address the question which was there, beyond the current cycle, what we mentioned, the expansion of salt from 1.5 to 1.8. Broadly, we expect that number is about INR 400-odd crores. The soda ash number in India, from 1 to 1.3, is about INR 1,000-odd crores. And the Kenya and U.S. put together, which is broadly 0.6 expansion million tonnes will be about 200 -- broadly $200 million. So you could take all, put together, about INR 3,000-odd crores spread over next 3 years, for the expansion beyond the current cycle.

[Operator]

Our next question is from the line of Saket Kapoor from Kapoor & Co.

[Saket Kapoor, analyst]

Sir, as you mentioned that our contracts, we are working with the contract for the next year for both the U.K. and the U.S. market. So taking into account the current average prices which are prevailing the spot prices, and our contracted value for last year, what's the current differential between the 2? And what can we read from this data?

[Ramakrishnan Mukundan, executive]

See, in terms of the data, as Zareer has explained, I think the domestic contracting in U.S. and in -- U.S. and U.K., I think this more or less, I think, should be stable. That is a lot of conditions to tell us. In terms of exports, there is a bit of volatility, which Zareer has explained, and the volatility is fairly more acute in Southeast Asia than in South America. And on that, the contracts are still getting closed and getting closed underway. And we do know that some of the low-end prices we've seen may not prevail in the market for these contracts. But where they will settle, we'll be in a better position to highlight to all of you in the next quarter when we come back for the facts.

[Saket Kapoor, analyst]

And sir, in Indian operations, we are seeing there's this decline in margins, and we are trending lower. So is this attributed mainly to -- due to the unabating imports and the lower realization only? Or why are the margins trending lower for Indian operations now?

[Ramakrishnan Mukundan, executive]

Yes. The main issue in India is not demand. The main issue is the high level of imports of low-priced material, which hopefully will update and reduce going forward. But I think we have seen a major increase in imports. And as I said, the share of imports have jumped from broadly 14% to 28% over the last 4 quarters. And that, too, happening at a fairly very low price, and that has depressed the local market conditions. And we'll have to wait and watch whether this will continue or we would claw back some of these changes.

[Saket Kapoor, analyst]

And sir, do you have the import data for the month of October? This trend has continued for the previous month also?

[Ramakrishnan Mukundan, executive]

No. October month, it has reduced. Actually, it has come down by more than half. But we will watch the trend really going forward, whether this trend will continue or not. So it has come down, which is why we said it is standing down. But if for a couple of more months, the same trend continues, then we can say there is -- the pressure would have eased. So it probably is closer to 14%, as we speak, in October.

[Saket Kapoor, analyst]

Okay. And on the realization front, sir, how are the [indiscernible] trends currently month-on-month for the spot market?

[Ramakrishnan Mukundan, executive]

I think spot market, there's no change. I think spot market is continuing at the same level. I think if there's any change, you'll hear that through the circulars we send out to our customers.

[Saket Kapoor, analyst]

Right, right. Right, sir. And lastly, on the solar demand part, sir, you were alluding to some facts about the demand from solar and the BPM. So taking into account the solar manufacturing, the pipeline, plus the fact of the investment pipeline in the solar segment, what is the anticipated demand especially from solar for domestically and also if you could give some color on the same.

[Ramakrishnan Mukundan, executive]

So I think we can look at while the segment is still small in India, it has seen 60% growth. And there are more investments lined up as they come. Obviously, they will need soda ash. And broadly, I would say that we expect at least 0.5 million tonnes of additional demand coming through that segment over a period of time. But these are early days. As of now, it is, within India, it is one of the fastest-growing sectors.

[Saket Kapoor, analyst]

Correct, sir. And sir, your outlook on this on silica and other segment currently? And what's the -- how would that segment shape up for the next half?

[Ramakrishnan Mukundan, executive]

We are very confident about silica. We are fully booked out. We are expanding, I think, the market needs. So we will be expanding renewals 3,000 tonne additional quickly. And then that's the simple debottlenecking. The next phase of addition of doubling the capacity will take 18 months, but we are doing everything we can to speed that up because market demand is good.

[Operator]

Ladies and gentlemen, that was the last question of our question-and-answer session. As there are no further questions, I now hand the conference over to the management for closing comments.

[Ramakrishnan Mukundan, executive]

Thank you, everyone. As we mentioned that the market conditions, while they look challenging at the beginning of the quarter, there are some positive signals, but this is too early to comment about it. And we do expect the medium-term outlook for this business, the soda ash business to be stable. Our businesses in salt and bicarb are continuing to trend up. The new business in silica is shaping up well. And also Rallis' performance is back on a bend in the positive direction.

With this, we remain positive about the strategic direction we have set ourselves, which is to focus on core and ensure that we have very capital-efficient expansions going ahead and continue to grow the business along with the market growth.

With this, I want to thank all of you and wish you all a very happy Diwali, and see you next quarter.

[Operator]

Thank you. On behalf of Tata Chemicals Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.