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Tata Chemicals Ltd
Earnings Call Analysis
Q3-2024 Analysis
Tata Chemicals Ltd
Tata Chemicals Limited faces a challenging soda ash industry due to various global market pressures. In Europe, the flat glass sector has been particularly hard hit, with a notable slowdown in Latin America's lithium segment. The company has observed a shift in soda ash exports from Europe to Asia, where demand in China remains robust, especially for solar glass, despite a slight impact on their flat glass sector related to construction and real estate. India's market growth has been marginal at 1%, with noticeable softness experienced by export-oriented sectors like textiles and ceramics. South Africa has also seen dwindling demand in the mining industry, with overall consumer sentiment reflecting a potential 12- to 18-month recovery period. These industry-wide issues have led to decreased company performance compared to the prior year, with lower volumes—especially in the United States due to operational disruptions—and pricing pressures across all regions resulting in reduced earnings.
Despite these challenges, Tata Chemicals has maintained stable input costs, prepaid a debt of USD 25 million, and is committed to preserving market share, sustaining stable contribution margins, focusing on cost management, and delivering high-value products. The company is also concentrating on on-time investment deliveries, cash preservation, and ongoing debt reduction. Rallis, a part of Tata Chemicals' domestic business, has demonstrated positive performance, indicating potential future profitability improvements in the upcoming quarters.
The company's revenue for the quarter experienced a 10% decline year-over-year to INR 3,730 crores. This decrease is attributed mainly to lower soda ash volumes and regional pricing pressures. Earnings before interest, taxes, depreciation, and amortization (EBITDA) dropped by 41% to INR 542 crores, while the profit after tax (PAT) fell by 55% to INR 194 crores. In India, there was an increase in soda ash volumes despite the pricing challenges, leading to lower realized prices due to import competition and pricing drops. However, salt and bicarbonate volumes held steady. In the U.S., a significant reduction in export prices impacted earnings, yet domestic prices and market shares remained unchanged, though physical volumes decreased. The U.K. business was similarly impacted by reduced soda ash volumes. Rallis saw a 5% dip in revenue compared to the previous year's third quarter.
Tata Chemicals reported capital expenditures of INR 402 crores for the quarter and a net debt position of INR 4,077 crores. The company has maintained a healthy cash position with INR 1,535 crores as of the end of December.
Looking ahead, domestic contracts for soda ash in the U.S. are expected to remain stable in terms of volume and price, whereas exports show a significant anticipated erosion of nearly $100 in contribution due to quarterly or semi-annual resets, and some materials are now being exported to China. In Europe, fixed pricing contracts imply the company has taken on more pricing risk, with an approximate erosion in prices of around GBP 100.
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Ladies and gentlemen, good day, and welcome to Tata Chemicals Limited Q3 and 9 Months FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Gavin Desa from CDR India. Thank you, and over to you.
Thank you. Good day, everyone, and thank you for joining us on Tata Chemicals Q3 and 9-month 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, the 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 proceed with the call.
Thanks, Gavin. Good evening, and welcome, everyone, to our quarter 3, 9 months FY '24 earnings call. I'm joined by my colleague, Zareer and Nandu, for today's call. I'll start with the discussion with key operating highlights across business geographies, following which Nandu will walk you through the financial performance of the quarter.
Firstly, an update on the overall soda ash industry. The market conditions remain challenging across all key regions and segments, especially flat glass has been impacted in Europe. Lat Am also is experiencing a bit of slowdown, especially in the lithium sector, which is more recent.
Consequently, there's been a surge in Turkish exports to Asian markets, which are pivoted from Europe to Asia market, especially India, China and Southeast Asia. China, while it grew overall, their flat glass was impacted in the construction real estate and the demand grew for solar glass. Solar glass also had a strong demand in Southeast Asia. Other sectors were flat.
India demand was a marginal growth of 1%. The softness was mainly felt in export-facing sectors in textiles and [ different ] ceramics. South African demand, there was a bit of a decline in mining sector, overall, the customer sentiment is bearish with approximately 12- to 18-month recovery period in our view, as we explained in the last call.
The company's performance is lower as compared to previous year, due to pricing pressure in all regions and lower volume. Especially in U.S., volumes were lower due to plant shutdown and railcar, which led to lower contribution, lower absorption of fixed costs and increase in fixed cost during the quarter. The shortfall is about 18-odd thousand tonnes.
Input costs continue to be stable. We prepaid a debt of USD 25 million. Our endeavor is to continue to maintain our share through customer engagement and have steady contribution margin with focus on cost and higher value-added products. Our focus will also be to deliver on investments on time, conserve cash and continue to deleverage.
We have seen good performance in Rallis amidst challenging external environment. Domestic business has registered growth. International business there, again, is taking challenges, but we do believe which will revive in a few coming quarters. Management there has undertaken steps in recent years to improve profitability of business. We expect that to translate in coming years.
We anticipate in the short term, current demand supply situation is likely to persist but should stabilize and improve over long term, driven by sectors, which we continue to engage with, which is sustainability sectors, which is solar and lithium, other related sectors. As we strategically expand the core business capability through cost effective debottlenecking, where we are equally committed to rivers cost management, debt reduction and posting of cash flows.
Our aim is to sustain market share through customer engagement and maintain stable margins with keen ion controlling costs. Going forward, we do expect next few months to be challenging, due to subdued pricing of soda ash. This is more so for the U.S. export markets, while domestic seems to be stable.
That concludes my opening remarks. I now hand over to Nandu, who will walk you through the financial performance.
Thanks, Mukund, and good evening, everyone. Let me walk you through the performance, after which we call the Q1 session. Starting with the headline numbers for the quarter, our revenue was there for the quarter was INR 3,730 crores against INR 4,148 crores last year Q3 or 10%.
Decrease in revenue was driven mainly on the lower soda ash volumes and pricing pressure in all regions. EBITDA for the quarter was INR 542 crores as against INR 922 crores in the last year's Q3 lower by 41%. The PAT for the quarter was INR 194 crores, lower by 55% compared to last year's Q3. Coming to India, revenues for the quarter were INR 1,003 crores. Soda ash volumes for 7% down compared to last year's -- sorry, soda ash volumes were up compared last year's Q3. The pricing pressure has been there because of which we had lower realizations on account of import also and drop in pricing.
Salt and bicarb saw steady volume during the quarter. the U.S. export prices saw a sharp decrease versus previous year. However, both domestic price and market share were stable, but absolute volumes have fallen. EBITDA margins was at 12% for the current quarter. In U.K. business, revenue was impacted as compared to last year's Q3 because of lower volume of soda ash, which led to the revenue being lower by 20% in the current quarter.
EBITDA was 10% for the current quarter. As far [indiscernible] is concerned, both volumes and of opening, which in turn impacted margins and profits for the quarter. As far as HDS and concerned, both the business had a stable performance in this quarter. In Rallis, our revenues were at INR 598 crores, 5% drop compared to last year's Q3. EBITDA of INR 61 crores in the quarter, higher 14% compared to last year's Q3 and of INR 524 crores.
Our cash at a is INR 1,535 crores in December ending. CapEx was INR 402 crores. Net debt was at INR 4,077 crores. With that, I close the comments and hand it over back to Gavin to open up for the Q&A.
[Operator Instructions] We have a first question from the line of Saurabh Jain from HSBC.
I have 2 questions. Number one, can you throw some light into what kind of contracts you must have entered starting of this year in both U.S. and Europe?
So I think the bigger issue is in the U.S., let me just highlight broadly. I think on the domestic front, I think contractually, we are more or less stable both in volume and pricing. On exports, what we do see because these are reset sometimes quarterly, sometimes semi-annually. There's been a sharp erosion in the next year. We expect a blend of -- because some of the material also is going to China now. And we expect a blended version of the approximately $100 of export contribution and realization.
So domestic realizations, are they still closer to what realization we have delivered in the previous quarter?
Yes. They will continue to be almost same. Not a big shift to them. The contribution will remain almost same. Whether it's exports is where the erosion of contribution, approximately I would say, nearly $100. It's slightly less than 10%, but I would say the approximation.
Okay. Understood. So still -- it is still kind of a pricing on track for the domestic business for the 2004 in the U.S.
So far, 3, basically for the full year, which means for the large quarter of this year and 3 quarters of the next year.
Correct. And what is the situation in Europe? How is the contract structure over there for this year?
Europe is a bit of a different story. Let me just say this. I think there broadly, we are now -- while some customers are on the energy price investment and a longer-term division. Many customers have moved to what we call it a fixed pricing contract, where the risk is with us. And hence, we have been very cautious about it. Our bigger issue there is in terms of pounds, if you say, what is the erosion. And erosion and pricing is close to about GBP 100.
Versus 2023.
Yes. Compared to previous year, same period.
Average of previous year, right?
Yes.
So what kind of margins do you think are more likely to come through in U.S. and Europe for FY '25? Any sort of guidance on that will be helpful.
Yes. So I would say that in terms of broadly, the domestic should be stable in U.S. As I mentioned, the export margin -- I was given the contribution number in there was down approximately about $100. It may improve the contracts, if the pricing environment around the world improves. But these are the current situation. And in U.K., it's about, I would say, GBP 100 compression right across.
We have a next question from the line of Abhijit Akella from Kotak Securities.
One on the U.S. business. Would it be possible to quantify maybe the profit-loss during this quarter because of the 80,000 tonnes approximately of volumes that we lost? And also just to check, U.S. domestic volumes seem to have fallen a lot more than the export volumes this quarter. Any specific reason for that?
Yes. In terms of the -- while you were seeing the domestic as compared to the previous year. More or less, if you look at a trailing quarter, it is almost been flat so we haven't seen any major shift there. There is an overall reduction in the market volumes, which is reflected in our volume. In terms of pricing is stable. Your first question was on the 80,000 tonnes. Approximately, if you broadly take about an $130 or $150-odd dollar of contribution, we are seeing an erosion of close to about $10 million on that account.
Got it. That's helpful. And also one question on how much of China's demand for soda ash comes out of the lithium and solar segments? If it may be possible to shed some light on that. And also whether you would have some projections for it might be for India in the coming years.
Can we come back to that a little later? We'll just take the data and we'll flash it to you during this call itself.
We have a next question from the line of Vivek Rajamani from Morgan Stanley.
Sir, apologies if this was asked. But just in India, it appears that the implied pricing and margins appear to have improved sequentially. Could you just talk about what has been different this quarter because all the literature seems to point that it's been a tough backdrop for this part of the world?
So I think in terms of overall cases, I think it is absolutely fine. I think -- we -- because of our contract structuring, we have benefited other than the rest of the pack, what you must be putting in. So that's why it is. If you strictly go by the market position, I think we should be -- in the overall analysis shows compared to -- because the domestic industry is also into contracting structures, which are different. Through that, we've been able to sort of protect our annualized number of about, I would say, if you take we have priced it at import parity versus where there our contractual pricing is, there's a benefit of approximately INR 100-odd crores. That's an internal working, but I don't want you to go by that. But broadly, I think it's all the result of the contracting structures.
Sure, sir. So I wanted to just get a clarification. I mean, going forward, I mean, should we kind of look at it from a sequential perspective or maybe just look at it from an annual perspective that at the end of the full year, you'll probably be more stable, respective of what happens on a sequential basis depending on imports exports. Would that be a fair statement?
Yes. Sequentially, I think we should be there. I think that is a fair statement.
Sure, sir. And the second question was, obviously, I think you've spoken about the new contracts on the pricing, and we've obviously seen some erosion or a meaningful erosion over there. Just wondering, given that we are in an environment of falling energy and all the other costs, would you be able to offset some of this ASP declines by their lower costs over the course of the year?
On export, I think what I did mention the erosion for U.S. exports is our understanding of where energy will land and the pricing in the market, the $100 erosions I spoke about. So it includes that. It's slightly lower than $100, but I'm saying for ease of discussion, we should just round off to $150.
The next question is from the line of S Ramesh from Nirmal Bang Equities.
So if you were to get some update on the Namongoria capacity addition, is there any update on that in terms of how much they've added and what is the progressed slightly on that 5 million tonne expansion there?
So I think the situation seems to be more or less static in the sense that the capacities which were supposed to come in have come on stream and -- there have been some challenges for them in terms of reaching that capacity to market and quality as we mentioned.
Overall, we think China market remains either balanced or slightly short which is why a lot of the -- I also mentioned this includes a blended sale to the Chinese market potato, but we think it will get balanced over a period of time. I think the real challenge for us has been coming from, again, as I mentioned in the last call in the Western Europe, where we've lost about 1 million tonnes of demand. And that 1 million tonne needs to find a home somewhere else, especially coming out of Turkey and which is what is depressing prices. So we need to work our way through that.
Okay. So second thing is if you look at your average inventory cost of coal, it would have got some benefit from the decline in coal from some April. But what is the impact of the current increase in freight because of the red related prices? And do you see your input costs, particularly coal going up, say, over the next 3, 6 months? And would that squeeze your margins further in India?
No. I think as I mentioned to the previous question, the margins sequentially is going to be stable. We have all the numbers. They are not impacting it overall.
Okay. So what about the other markets like U.S. and Europe? Would the freight would cause any additional strain compared to what you have mentioned in terms of the erosion in margins?
The erosion of margin includes part freight part energy -- benefit in energy and also includes the reduction in price just put everything together is what is the contribution number we just spoke about. So it's all embedded inside that.
We have a next question from the line of Riya Mehta from Aequitas Investment.
My first question is on the India business. How much percentage would be in the contractual basis, short or long?
Quarterly contracts in India would be approximately 50% of our volume.
50% of volume. And these are annual contracts? Or what would be the...
Quarterly.
Quarterly contracts. In India, how are we seeing the demand side scenario? So like you mentioned, we saw a 1% increase in the demand. Going forward in the month of January, how are things getting?
Yes, so I think the demand challenge is deep in there. And now because of the lithium prices in these Latin American markets. But otherwise, Asian market is not a demand problem. It is either growing or it is flat. But it's more a pricing problem here because of the excess supply coming in out of the lost demand in Western Europe.
What would typically be the consumption in Europe? And what has it reduced to, if we can get some numbers? Loss of demand in Europe.
6 million, right? Yes. It's about 6 million. I think it's 6.5 million. So it's down to, I think, about 5.5 million or so.
6 million tonne per annum loss of demand?
6.5 million, approximately. I mean -- and then it's down to about 5.5 million. So 1 million tonnes reduction.
Got it. Got it. And what will be the imports which are happening in India on that account, like increment? I think earlier, it was around 60,000 to 70,000 tonnes were imported from outside. What would be the current level of imports?
The incremental -- what would have been a normal run rate versus where we've ended the year -- calendar year. I'm speaking is about 600,000 tonne addition.
600 tonnes per annum incremental in India.
Imports, yes. About 200,000 or 250,000 I think we are close to about 350,000 approximately, current run...
Sorry. I couldn't hear the last line, could you repeat.
It is to be between 200,000 and 250,000. I think we ended the year with the calendar year with around 800 or some 850 somewhere there.
We have a next question from the line of Saket Kapoor from Kapoor & Company.
Just a data point. Firstly, sir, you mentioned about $10 million hit on the bottom line on account of the lower sales and from the U.S. facility?
Yes, approximately. I think that's what it comes to. I think our contribution broadly is about, let's say, $125, $130 per ton. 80,000 tonnes is about $10 million.
And despite -- and the part about the European part, what is exactly -- what has exactly led to this contract? I mean demand in terms of the Western Europe, which you are articulating to earlier reply. And how are things going to shape up in terms of the -- this demand is permanently launched or what is the nature of this contraction in demand, if you could explain?
I think most of the consumption industries are in stress test. And I think just in our view, is the current energy environment if the current European environment continues. It is you could say, in the medium term, it is lost. So effectively, I think the European -- I don't want to use the word, but European supply has to rationalize itself.
Okay. So they are just the part, we will be seeing further personalization of capacity going ahead to even the market -- to balance the market.
I see many of the capacity is not being able to survive with the current pricing and demand environment. So I think it is going to be challenging for them. So there will be certainly natural -- but I can't speak for the industry to only see the numbers ahead.
Right. And then the next question is pertaining to the solar demand that is expected domestically in the country for our country, India. So what are we currently anticipating? And what are the pillars in terms of the solar lines that are envisaged to be set up in, say, 2, 3 years down the line? And the incremental demand in terms of million metric tonnes that is expected out of this solar initiatives taken by the government of India.
So I think if you don't project too long, we just say, what is the demand -- incremental demand is going to come on stream on the announced client and the line, which are currently under build and will be operational in about 18 months or 24 months. It's about 0.25 million tonnes, 250,000 tonnes.
250,000 tonnes.
And in China, the lithium plus solar demand is about 2 points -- somebody had asked it before. It's about 2.75 million tonnes.
Sir, here it is 250,000 tonnes you have mentioned?
India solar demand on the basis of announced projects, which are under implementation, which will get commissioned in the next 24 months, in our estimation, is about 200,000 to 250,000 tonnes.
So this unabated import, which is routing from Turkey, will create more price distortion money. There will be -- the prices will be trending, will remain lower for a longer period of time. This should be a better understanding going ahead?
Yes. I won't comment about pricing, but all I can say is that I think if you really say the -- on an overall basis, if the European rationalization of capacity is in other state, I think it will be shorter. It will depend fundamentally arising out of that. because that's why some material will get absorbed. So we have to just make for those positives to continue during the year.
[Operator Instructions] The next question is from the line of Santosh [indiscernible] from [indiscernible] Finance.
My questions are already answered. So I can pass it on to someone else.
We have a next question from the line of Sumant Kumar from Motilal Oswal.
You talked about the slowdown in lithium demand. And we have seen a slowdown of EV sales in developed countries. So the way we are talking about lithium is going to have a more contribution in glass, in the battery side and sort of uses of soda ash. So do you think the near-term or maybe midterm challenges of slowdown in EV is all because of slow -- because of current scenario or there be structural changes?
So see, the projects which are already commissioned, they continue to get run at whatever capacity we need to run because we're really on stream. So we don't see a reduction in demand because these are continuous process plants. And the current pricing of lithium, I think new capacity is coming on stream. We will find it challenging because the return environment will be subdued for some time. So they may just postpone. But we think this is a long-term trend. We really don't believe it is a permanent situation.
Any alternate commodity, which is going to replace lithium or some changes happening in the market?
For mobility application today for passenger vehicles or light commercial vehicles, and light vehicle, the region be first solution. We know for the commercial segment, heavy cost segment, hydro and distributions. And for stationery, there are many solutions including sodium and some China has started to see some sodium forestry compost, but these are in early series.
Okay. And last, what is the sustainable EBITDA per tonne for U.S. business we can see going forward [indiscernible] and as to $100. So what is the sustainable EBITDA per tonne in this current scenario for you?
Yes, EBITDA figure, I think we have usually should be delivering anywhere around $35 or $40-odd and if times are good, it' will be higher. Times are bad it can trend turn down from there. I mean we've always maintained the U.S. business should deliver an EBITDA of about $100 million of the file capacity. So the we've been looking lower or a little higher depending on if the market environment is very positive it'll deliver very high.
And -- but the range around which we tend to examine the U.S. operation is around that.
We have a next question from the line of Ankur Periwal from Axis Capital.
Just a clarification. For the U.S. business especially domestic, you did mention that there are quarterly contracts there, while the governance export business is largely on sport, as I understand. Typically, we take a repricing of these contracts in December or in the month of January. A clarification here, whether the repricing has already happened or probably we'll see another repricing happening this quarter, which is generally onwards.
So U.S. domestic is annual. It runs for the calendar year, which is starting Jan to December and the pricing has already happened. And what I mentioned was the average rate within U.S. is almost stable. Minor changes here or there. If you adjust for energy and all of the benefits the unit is going to have all of the changes, I think we will have a -- it is an export, which I mentioned that the current quarter, the coming quarter is likely to see $100 erosion. But going forward, it depends on quarterly movements, which you have to wait and watch in the market.
Okay, sure. And we have lined up our capacity expansion in U.S. as well. Any change in the time lines there?
I think we have mentioned earlier on 1, 1.5 years for those capacity to come up, but given the macro any changes there?
No. I think let me just to explain overall capacity expansion in India, I think the power plant is already commissioned and it is already delivering steam and power to the system. So the solar should be finished by May of this year. So those volumes -- additional volumes will come. And salt also, we expect additional volume.
Overall, we expect about these capacities during the year will yield incremental numbers for the next fiscal year. And in India, we have started the detailed engineering and examining of another 300-odd tonnes, which the work will commence shortly. In U.S., similarly, the basic engineering has -- in India, the basic is complete for the next day. We are going to go through details in there. In U.S., the basic main work has commenced for their 400,000 tonnes. And then can you have the details in moving lots of comments for their 200,000 tonnes of 1 million tonnes two sites, the detailed engineering will be commencing now that we have the support of the Board. And U.S. has just moved forward with the basic.
The next question is from the line of Rohit Nagraj from Centrum Broking.
Sir, first question, you mentioned that there has been demand side challenges. How has been the capacity utilization across different geographies? And is there any issue in terms of excess inventories in the global system for soda ash?
So there is inventory in soda ash. I'm not going to say they're exactly it is. But I think if you see the capacity utilization of the industry as a whole, it is somewhere close to 90% utilization.
That's -- I mean aggregates all across the geographies we are considering, right?
Correct.
And the second question in terms of different region-wise demand challenges. So are there any specific challenges in certain regions that the user segment demand getting countered? Any...
Action in terms of demand side, the challenge is mainly in Western Europe. And what you call is Europe. I think that's why the demand sharing highest. Rest of the world, demand is rather flat or the sentiment is flat. I mean, we're probably at the bottom end of the curve anywhere. It's in Europe, we need to be more on.
The next question is from the line of Abhijit Akella from Kotak Securities.
Two questions from me. One is just to clarify the U.S. export price erosion that we are in about $100 -- the reference point for that or the base is basically the third quarter, the quarter has just gone by? Or we're referring to last financial year as a whole.
This is referencing what you would have seen in the previous year, fourth quarter.
Okay. Understood. Got it. And the other thing was just given the fact that U.S. domestic prices -- contract prices seem to have corrected far less than export prices are. Is that because basically the year ago period, exports are at a significant premium versus the domestic market and how that gap is normalizing? Is that how we should read it?
Yes, you could say that. I think last year, the export numbers were at a premium. But this year, they are at a discount going forward.
We have a next question from the line of Vivek Rajamani from Morgan Stanley.
Just 2 small clarifications. Just on Europe, when you mentioned Europe is also seeing $100 per tonne erosion compared to last year. This would be across the board? Or does Europe also have a concept of contracted and spot?
I did mention that U.K., our business will see GBP 100 probably.
Sorry, GBP 100. So that would be across the board, across all the volumes. Would that be fair?
Across the U.K. business and the U.S. business would be -- U.S. export will be $100.
Got it, sir. And just a second clarification was in the presentation, you've given a figure of INR 2,000 crores of CapEx F '24 to F '27. I just wanted to double check if this also includes the expansions that are coming up in India, U.S. and Kenya?
This is mainly India, which has been clear. The U.S. is going through basic engineering. We will come back to you with those numbers shortly. And Kenya, we have mentioned it is a CapEx of about $20 million to $25 million, but we will come back to this the detailed engineering is underway there. This number is infective of India, which we have [indiscernible] .
The next question is from the line of S. Ramesh from Nirmal Bang Equities.
Yes. So in terms of follow-up, if you look at your future expansion once the detail engineering is on, when do you expect to incur the CapEx, would it be from FY '26? Or will it start from FY '25, second half? Any time line you can give on how you approach the [indiscernible]?
See, this is been -- so I would say given the its peer at the team wants to we expect the execution time of either 24 to 30 months broadly.
Okay. And the second thing is you booked some savings in the power and the fuel cost in the Asia business. So is that run rate which you see in third quarter likely to sustain in the fourth quarter? And can it sustain for FY '25, given the current cost structure for your core inputs?
This is -- you're referring to consolidated?
No the India power...
Yes. India, I think we more or less would be having the same run rate because our contracts are more or less. Yes.
Okay. Just one last one. On the U.K. specialty salt -- pharma salt and other specialty sold. Any indication have been given in terms of the volumes and the kind of pricing or well time margins you can expect and when you can expect to see that in the U.K. P&L?
The U.K. salt the pharma is under commissioning or close to getting commission fully. We expect the U.K. salt volumes, which used to be around 75,000 a tonne, probably will keep up to 80,000, 85,000 tonnes.
Okay, this is per annum?
No, I'm talking per quarter.
Per quarter. Okay. There's a 10,000 tonne per quarter.
Part of it will be pharma, part of it will get sold as technical because we have to develop the market. So the pricing will come back to activity maybe in the next call.
The next question is from the line of [ Ramana Mulpury ] from [ Ramana Mulpury and Company ].
Good presentation. A lot of my issues were clarified. I have 2 points to ask. One is this consumer-related business of Tata Chemicals has been more to Tata consumers. Now what elected with the subsidiary sectors. Are there any plans to consolidate the domestic operations, meaning the subsidies merging with the Tata Chemicals as a part of cost specialization.
Second question is value side remained a small compared to competition. So are there any plans to expand Rallis as an individual company? Or are any plans to merge with Tata Metals to make a slightly bigger company because part of the business has already moved to come related to data consumers. So therefore, are there any plans to further consolidation that catechetical. That's what is my question. This will help the company to grow and reduce the costs.
Yes. So on the -- any listed, unlisted subsidiary, I think the Board takes a call from tax time. As far as Rallis is concerned, our intention is to support the management to grow the business. and we'll continue to support the Rallis to achieve its true potential. That's all I can comment sitting on the Board of the company.
We have a next question from the line of Bhavin Soni from Anand Rathi.
Just need to -- a clarification on the capacity utilization figure that you have mentioned about, if you can just repeat it?
I think broadly, they tend to be closer to 90%. I think whether it was 89% or 88%. We expect by the year, solutions will be close to that number. And next year also, we expect a similar sort of number.
And this is on a whole like each and every geo combined basis, right?
This is on a global basis.
The next question is from the line of Riya Mehta from Aequitas Investment.
My first question is in regards to the current expansion. We are doing around 1.85 lakh metric tonne in India for solar by H2 FY '24. And over and above that, we are planning for another 300,000 tonnes. Is my understanding right?
No. In terms of the expansion, what we are doing is close to 250,000 or 230,000 tonnes. And we will be -- so it is basically 250,000 tonne an additional stream of about 300-odd thousand tonnes, which is under plan. This is under execution.
So by H2 FY '24, we will be around that or we are currently well [indiscernible] ...
Will be slightly upward of 1 million tonnes.
We got 11 lakh tonnes, right, right now?
We were at about [indiscernible] effective utilization capacity as in [indiscernible].
By H2 FY '24?
That's correct, yes.
Got it. And are we planning any further price erosion in India business since the demand is like in low single digits and we are planning for expansion as well?
No. I told already that the margin is expected to be maintained.
We have a next question from the line of Saket Kapoor from Kapoor & Company.
So when we look at the power and fuel line item on a Q-on-Q basis, that has gone up from INR 650 crores to INR 700 crores. Is this better in the U.S. shutdown? What explains this increase?
Sorry. The...
Sir, I'm looking at the power and fuel line item. On a Q-on-Q basis, it has gone up by INR 50 crores.
Yes, correct.
So if you could explain this increase, sir. What are the factors that have attributed to it?
I think this is just in terms of the gas pricing and the oil consumption in Makadi and some bit of [indiscernible] and energy costs in -- this is where I think the hedging of these commodities have come off and now in the full marketplace.
Okay. So this will be the run rate going ahead also, keeping the capacity utilization levels at the current level?
I think so. I think broadly, we should track in that range between the [indiscernible].
We have a next question from the line of Saurabh Jain from HSBC.
One clarification that there was a disruption that you mentioned in the U.S. business for Q3. Are all the disruptions sorted in the fourth quarter? And would it be a more normalized quarter from volumes going to be?
Only thing which we are clear is that our shutdown got extended over 3 or 4 days more than what we planned, which was accounting for 50% of the lost revenue. The balance, 50%, has been because of the rail car shorter is action. We are working with Union Pacific and other logistics service providers to improve. So that's as always a challenge because it is not fully within our control, but we are also hopeful it will not -- they've also done the needful to sort of support the industry.
And also, can you give some comments around how is -- how the headwinds in the bicarb business, if at all, in terms of demand absorption? And also how is the profitability, how does it look like in the bicarb business? Some comments on that side will be helpful.
In bicarb and salt, we are not seeing any such challenges. It is mainly in the soda ash industry.
We have a next question from the line of Rohit Nagraj from Centrum Broking.
So the seen last year, China has coming out with capacity in Mongolia, and they have further plans to expand the capacity next year as well. So will that reflect in terms of benign price environment in 2024 and '25? So any color on the same.
As I mentioned, even in the last quarter, I think we are actually focused on what's going to unfold in Europe, and we remain focused on that because the challenge part of the world is actually [indiscernible]. And hopefully, the issues are addressed there as the world probably should rationalize.
Sure. Second question is in terms of the lithium battery space. I think earlier a couple of years ago, we had indicated that we will be putting up a [indiscernible] recycling plant. Any progress on that front? And beyond that, do we have any other area which we are looking at from a battery space, except for supply in case dash from the lithium carbonate manufacturing prospective.
Yes. We are engaged with our group company, [indiscernible]. And as I said, as and when we have any finalized plans, we'll come back.
Ladies and gentlemen, we'll take that as the last question for today. I now hand the conference over to the management for closing comments. Over to you.
Thank you. So I just wanted to say that we did face a fairly challenging quarter this quarter. And most of the challenges have been met positively by the management team, but we remain focused on our long-term strategy. We think -- while the short-term challenges remain the long-term future of all, the parts of our businesses are positive. So our growth plan are continuing at pace as planned before.
And fairly, I just want to say that even though we know that the next few quarters will be challenging, we will continue to focus on what we can control, which is our customer engagement, fixed cost and cost competitiveness and pay down of debt. At the same time, remain focused on long term. Thank you.
On behalf of Tata Chemicals Limited, that concludes the conference call. Thank you for joining us, and you may now disconnect your lines.