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Tata Chemicals Ltd
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Ladies and gentlemen, good day, and welcome to the Q4 FY '22 Earnings Conference Call of Tata Chemicals Limited. [Operator Instructions]
I now hand the conference over to Mr. Gavin Desa from CDR India. Thank you, and over to you, sir.
Thank you. Good day, everyone, and thank you for joining us on Tata Chemicals' Q4 and FY '22 Earnings Conference Call. We have with us today Mr. R. Mukundan, the Managing Director and CEO; Mr. Zarir Langrana, Executive Director; and Mr. Nandakumar Tirumalai, the Chief Financial Officer.
Before we begin, I would like to state 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.
Thanks, Gavin. Good morning, and welcome to everyone to our quarterly and year-ended FY '22 earnings call. I'm joined by my colleague, Zarir Langrana, Executive Director; and Nandakumar, CFO, on this call.
Overall, I think when you start with the macro environment, we have seen -- while that has been good, broadly, I would say that we are pleased with the way we have ended the fiscal with Q4 witnessing strong growth in revenue and profitability. There's a context to this number that it's been done in a very challenging input and energy environment. And also, we set with some logistical challenges across our operating units. The teams have done well to keep our customers well serviced. And they've delivered this with agile execution and making sure that our customers are fully -- our customer commitments are fully met.
The numbers broadly are in line with the expectations, what we have mentioned, even at the beginning of last year when we said Q2 may be the -- Q3 may be the pinch point and Q4 will see the expansion, and that's really what has happened. And really, I think this is the performance on expected lines.
On supply side, the overall supply side dynamics remains tight. Most of the operating -- most of the plants are operating at high rates. We don't expect too much of capacity additions in the short-term. And when we mean short-term, our short and medium term is about broadly 18 to 24 months.
On the demand side, I think the growth has been strong. We are back to pre-pandemic levels fully now. Of course, we'll keep a close watch on this, given the fact that the customers are also -- our customers are also facing spikes in their energy cost and are having logistic challenges, but we do anticipate that going by the past trend that the markets are fairly well-positioned in terms of the -- in terms of demand-supply equation.
We do believe that we have further scope for expanding our operations on the back of growth of customer demand. So even while the Phase 1 of our execution -- the growth execution is coming to the final leg of operationalizing those operational plants, the Board has already cleared the Phase 2 of the expansion beyond what has been committed in the past. About 30% growth in soda ash and 70,000 tonnes of bicarb. And silica, we are now moving to implement a project in 2 phases. Overall, the number is about 5x of the current capacity, going from 10,000 to 50,000 tonnes to be done in 2 streams of 25,000 each.
In terms of individual business, India has witnessed steady performance. Our volumes were above last year, but we've also surpassed the pre-COVID level. Broadly, the overall markets have moved in line with the input cost increases. And that has been made possible because of the demand-supply situation and strong engagement with customers by working with them to make sure that our businesses are able to absorb the cost increase in a way that the customers are also fully serviced.
In terms of international business, TCNA has had a good bounce back, as we said, of export markets coming back. That volume-led growth has meant that the fixed costs are well-absorbed now, and that continues. And export pricing has also grown -- moved forward in the same direction. And that is reflective of the overall performance of U.S. operations. Magadi continues to do well. They are serving largely the Asian market, and that market continues to be in strong foot and continues to move forward.
As far as U.K. is concerned, I think the unit was certainly impacted in Q2, as you know, by a sudden sharp increase in carbon price and also energy costs. But over the period of last 2 quarters, and in fact, the third and fourth quarter, the unit has done well to sort of engage strongly with customers and make sure that the margin was protected, even though the margin did compress but was protected, and volume pickup continued.
In terms of salt, we've done well across U.K., India, and all these units will continue to do well. Bicarb also continued to do well, and we see the momentum continuing. Our new businesses, silica and FOS, as I explained, silica, the tire plant is fully utilized as of now at 5,000 tonnes. And keeping in mind a strong demand coming from that segment as well as in the food segment, we have -- and this is a small-scale, pilot-scale plant, so we have now gone into commercial scale of expanding it to 2 lines of 25,000 each.
As far as the FOS plant is concerned, the utilization rates will increase during the coming year. And we expect that both these units will move to a steady flow of EBITDA positive performance. Overall, outlook for the businesses looks positive across all our applications, across all our customers.
As far as Rallis is concerned, it was a challenging quarter. The team has put in place several set of programs, and we do believe that quarter 2 of next year, the results of all the efforts the team has put in will start to show in Rallis also.
In terms of CapEx, which I broadly explained, all other -- Phase 1 CapEx is broadly on schedule. There have been some delays because of some of the equipment suppliers facing challenges, but they are not material for us to take into consideration. Overall, we have spent approximately INR 31,300 crores till date and a balance of similar number to be spent going forward. On top of that, the Board has cleared a INR 2,000 crore investment. That broadly tells you the kind of CapEx and growth momentum we have seen.
So in conclusion, I'd like to say our core business are well-positioned to continue to deliver steady growth. Business outlook looks promising despite the challenges on the cost side, which we think are seeing signs of stabilization in the last few weeks, but it's too early, so I will not make any commentary beyond that. And the commissioning of capacities would further accelerate growth, and the businesses are well-positioned to take benefit of the economy as it opens up albeit the challenges, which are there on the input cost side.
With this, I will hand over the floor to Nandakumar, who will take you through the financial performance. Over to you, Nandu.
Thank you, Mukundan, and good morning, everyone. Starting with the quarterly performance, our revenues for the quarter was 32% more than previous year, and PAT has moved from -- INR 29 crores from last year to INR 470 crores in the current quarter. For the full year, the revenues is 24% more than previous year, full year, and PAT is at INR 1,400 crores as against INR 430 crores the previous year. This is mainly because of the increase in volumes in -- mainly in U.S. led by soda ash across all geographies and also price movement due to absorption of the higher input cost of market dynamics.
For the India business, revenue was up 33% against previous year, and EBITDA margin has grown by 5% to 24.8% for the current quarter. The PAT was at INR 268 crores as against INR 120 crores in the previous year's Q4.
In the current quarter, we also had a INR 60 crores approximately on other income on account of interest coming from -- on the income tax refunds, which is more as a one-off event for the quarter. For the full year, the revenue was 24% higher than previous year and PAT at INR 787 crores, 64% more than last year.
Coming to U.S. operations, the volumes rebounded from the previous year, and the revenues were 35% more than last year. Consequently, the EBITDA has moved from INR 63 crores from last year to INR 275 crores in current year. The PAT swung back to profits to INR 174 crores during the quarter after suffering a loss last year's Q4. For the full year in the U.S., the revenues increased by INR 810 crores, a 28% jump. EBITDA improved from INR 351 crores last year and doubled to INR 787 crores in the current year.
Coming to U.K. revenues have moved from INR 383 crores to INR 576 crores. The PAT has improved in the quarter from a loss of INR 44 crores last year to INR 12 crores of profit (sic) [ loss ] in the current quarter. For the full year, revenues increased by INR 500 crores. The PAT has moved from a loss of INR 56 crores last year to INR 85 crores loss in the current year, mainly because of the carbon price impact in the current year.
Kenya, the revenues moved up for the quarter by around INR 50 crores to INR 171 crores. The PAT has improved from INR 10 crores profit last year's Q4 to INR 51 crores in the current year's Q4. For the full year, the revenues improved from INR 413 crores to INR 577 crores and the profit -- PAT has moved from INR 20 crores last year to INR 94 crores in the current year. We had very good cash generation in Kenya, especially in Q4, and we've prepaid some debt in Q4.
Rallis, the revenues have moved by around INR 30 crores in the quarter, and the PAT has moved from a profit of INR 8 crores last year to INR 14 crores loss in current year. And for the full year, the revenues have grown by 8% and PAT has come down by around INR 60 crores.
To summarize, as the Tata Chem group level, the revenues have moved up by INR 844 crores. EBITDA has expanded by INR 375 crores. Our JVs, especially in Morocco have done well quarter-on-quarter. The full year was much more than last year's full year. The PAT has moved up for the current quarter and for the full year. Overall CapEx spend was in similar lines compared to last year. And in this CapEx spend, INR 780 crores was in India and remaining is overseas. The gross debt has remained unchanged compared to previous years. And on a consol basis, we had INR 2,800 crores of cash at the end of the year. Overall, a satisfying end on the year on all financial parameters.
Thank you, and over to Gavin.
[Operator Instructions] First question is from the line of Abhijit Akella from Kotak Securities.
Congratulations on a great quarter. I have 2 questions. The first, I just wanted to get your sense on how you see the sustainability and maybe further improvement in these margin levels given the cost scenario that you alluded to across all fronts.
You want me to go and respond to that Abhijit or you want to ask the second question?
If you could please finish this first, I'll come back to the second.
Okay. The sustainability provides -- I think there are pockets where I think from the customer's side they would have challenges in terms of -- if input costs were to increase and we were to sort of also move our pricing in line with the input cost increase, which we intend to do. But broadly, if you look at demand-supply equation for soda ash, as I said, 18 months, supplies are very tight, customers are scrambling for the supply. We are trying our level best to meet the demands and meet that with sense of equity. But at the same time, I think they are also aware of our input cost issues. So it's a constant engagement with customers.
So really, I think while there could be pockets where there could be pressure. But I think, overall, we do believe that this entire trend is likely to continue, which is what we indicated beyond Q3, Q4 onwards, I think the trend will shift in the other direction, which is what has happened.
Secondly, as far as the margin levels are concerned, broadly, I think most units should hold steady. The improvement in margin is largely likely to come from U.S., where I think the export margins have still trailed the rest of the pack. And I think that is likely to pick up, and you are already seeing signs of that pickup. The export numbers are strong. And as I mentioned, Abhijit, always that in this business first volume starts to move then the pricing and margin starts to move, which is what really is happening. And we don't see any change or letup in that overall issue.
That's really helpful. And the second clarification I just wanted to seek was on the income from joint ventures. It's down to about INR 24 crores this quarter compared to, I think, INR 94 crores in the previous quarter, the December quarter. I was a bit surprised by that given that IMACID has been doing so well in the backdrop of strong phosphoric acid prices. So if you could please just help us understand what happened there and what we should expect going forward?
So there are 2 joint ventures, Abhijit. One is in IMACID tools, the Tata Industries, where we own about 9% of that company, and that company had a loss during the quarter, and that is what is the number coming in here. IMACID did well, offset by the loss in Tata Industries.
And so how should we think about the flow -- the run rate of this number going forward?
I think, Abhijit, broadly speaking, the run rate of 94 is high and the run rate of 24 is low. So I would take it somewhere in between because I don't think -- I don't expect this is a one-off item, which has happened in the unlisted entity where we are -- which is a joint venture company for us. So I think -- leave that aside. I think with a steady-state number, if you ask me clearly, I think it should be somewhere in the middle of these 2 numbers.
The next question is from the line of S. Ramesh from Nirmal Bang. [Operator Instructions] We'll move to the next question from the line of Rohit Nagraj from Emkay Global.
Congrats on good set of numbers. So the first question is in terms of the -- particularly U.S. and Kenya, where we have long-term contracts, that is, you earlier alluded that 80% to 90% volumes are long-term contracts. Is there any possibility of further increasing the prices given that the current environment of high cost inflation across the board in terms of logistics as well as on the fuel cost front? So is there a possibility that after a quarterly or a half yearly reset can be done in these prices?
So I think while Zarir can elaborate further, I would just certainly say that across our units, we have a very focused hedging as well as sourcing policy, which works. And in fact, we've been doing this now from a monthly review. Now, it's gone on to weekly review because of the dynamic situation which we face. So I think the risk of input cost is fairly well managed within the company. So I think that we should not see any open-ended issues. Q2 was very unfortunate, I must say, in U.K. because the hedging for the carbon price was not available, and we were caught off guard. And it's not just an issue for us, but it was issue for all entities, but that has settled now.
So I don't think we have open-ended issues anywhere in terms of our sourcing, contracting on the input side. So we know where we are headed on the input side fairly well. At least I can say right now very well up to October. But I think we are -- even as we speak, we keep covering every month, and I think we should be fully covered for the full financial year -- calendar year very soon and financially much after that because that's on the new contracting fixed input. As far as long-term contracts are concerned, Magadi is not on long-term contracts. Bulk of its contracts are actually now moved to quarterly or half yearly. As far as U.S. is concerned, U.S. domestic, which is about 55% of the volume or thereabouts, that is on annual contract. Whereas the export, I think we started to move them on -- again, on a quarterly basis in some places, even much shorter than that. Zarir, you want to elaborate further?
No, absolutely right, Mukund. Just to reemphasize that Kenya has for a number of years now been on quarterly, so -- and the kind of strong numbers that you've seen from Kenya tend to reflect that. As far as North America exports are concerned, which is through our export arm ANSAC. Those are a mix of annual and quarterly, but even as we speak, a lot of the annual contracts are being renegotiated on to a quarterly basis. And I think you'll begin to see that as you move from quarter to quarter.
Sure. There is a second question, is on the soda ash. So earlier, Mukundan sir explained that, at least for the 18 to 24 months, there will not be any new capacity addition. And if someone probably comes out with greenfield project, that is like another 36 months. So is it possible that over the next 3 to 4 years, there will not be any meaningful capacity addition which is happening. And under such circumstances, what can be the optimum capacity utilization globally that the plants can operate?
See, here the issue, I think, is not focused on the supply side. Supply side, we have a good understanding. Your understanding what we mentioned is fine. I think the demand side is what we are looking at now so that the demand side holds up. Our view, when I mentioned that the supply-demand equation remains actually fairly good, at least for next 18 months is on the basis that we don't anticipate the demand side erosion to -- if these high elevated prices were to continue, the demand side issues will have any impact at least for 18 months. Beyond that, we need to be agile. We need to be tracking our customers.
Our understanding of utilization rates, they are running in highs of about 95%, 98% today. And even if a COVID like event were to happen to suppress demand, in the current context, that would probably drop by 8 percentage points overall. So from 96%, broadly, it will probably go to about 88% demand -- sorry, utilization, which is actually a fairly high utilization rate even then, so -- which is why we have said that we are willing to sort of say that at least 18 months we are sure. But beyond that, we have to keep a watch on the way the markets move, the demand situation with various end customers and applications of our products. We track that very closely now.
All I can say is that this is an environment where the only thing you can do rather than predict is to stay close to your customers, look at your customers, customer demand profile, and just continue to watch them and support them and engage with them. And that's what we are doing. And the teams are fairly confident in terms of doing -- continuing to do that going forward.
We'll move to the next question from the line of [ Arjun Khanna ] from [indiscernible].
Congratulations on a great set of numbers. Just a few questions from my side. The first is, sir, you've talked of the further Phase 2 expansion, which is planned. This INR 2,000 crores over 5 years. Just wanted to understand would this also follow a philosophy of a 20% IRR for new projects? Or would this also qualify there?
Yes, it's all our projects to meet the requirements. And there is a -- we follow a principle of weighted average cost of capital and premium on that for approval, and we continue to work with that broadband.
Sure. Just wanted to understand that a bit, especially on silica, we're going from 10,000 to 50,000. So do you have a sense of who are our customers? Have we -- are our samples approved for products essentially before going for this CapEx expansion?
Yes, we have the customer approvals on hand, which is why we are moving strongly. I think the industry -- the consuming industry, both tire and food grade are very, very clear that they need this product. In fact, we have got further variants of -- various grades of this product, which have gotten prequalified. So because of strong pull, I think we are just moving forward because this is something which is in line with the sustainability commitment of those sectors broadly.
Sure. Sure. That's good to hear. Sir, just a last bit in terms of the nutraceuticals part, we haven't quite seen historically the ramp-up. Probably in the annual report, we'll get a sense of what revenues were from the nutraceuticals segment. But how do you see this business move in the future? Could it be a sizable bit over a period of time?
See, I think broadly the FOS is the product we have launched shortly in prebiotics. These are very good products in terms of the application in various food and pharma sector. We are in the process of getting all the customer approvals and customer qualifications done. But the utilization still is not up to the mark, which we need to have in that unit, which is why we've not announced an expansion as of now, but we will certainly come there.
But the way to look at the Nellore plant is not just to say it's an FOS unit, it is a completely different process of biochemistry. It is a process of fermentation. It is not the normal chemical synthesis reaction. It is a biochemical reaction. And it is a process we will continue to persist whatever may be because in our view the future of chemistry will be at some point also be needing a very strong grounding and understanding of biochemistry. So let me leave it there.
But we have set ourselves a task to come back and report that at least it's EBITDA positive during the year. We have set ourselves a task that we should ensure that plant utilization rates move up. We will work on that. But at the same time, we are also mastering a new chemical process for biochemistry, which is very critical for us to learn now, so that at least 5 to 10 years from now, we are not caught on the wrong foot on this issue.
No, perfect. Just last -- just to clarify, when we talked of 95% utilization, that's for us, right, multi-industry? Or is industry at 95% in soda ash currently?
Yes, it's a broad industry number. See, everybody is trying -- some people may be running at 100%, some people may be having shut down. So I'm just saying at any given point in time various plants will be in various stages of operation. But overall industry will be close to about 95%, but most plants were running -- will be running full steam right now.
The next question is from the line of Akul Broachwala from IIFL Securities.
Congratulations for a very good set of numbers. Two questions from my side. First of all, this CapEx approval of INR 2,000 crores, just wanted to understand whether this also includes CapEx pertaining to U.S. business? Any sort of value-add products that we would like to add?
No, U.S. business, in fact, is -- the CapEx is -- this CapEx is mainly for our unit in Mithapur and Cuddalore. And U.S. is doing its regular CapEx, which they do. And they are pretty much confident of working at full utilization rate with the current CapEx they've had. I think as and when we reach a steady state of operation there, we will review what we need to do. As of now, there are no specific plans.
Our first task in U.S. is fundamentally that there is a $300 million debt in U.S. plus there is a $12 million debt in Singapore. We just want to pay that down as quickly as possible even as we generate cash flow. So our cash flows are going to be good in U.S. So our idea is to sort of pay at least part of that. And over next 3 years, a substantial amount of this debt should be paid out of the U.S. operation. So we really like to take this opportunity of next 18 to 24 months to further take our debts in the books down. And India will fund itself out of its own operations and the cash on the books. That's the broad plan.
Understood. I think, yes, you also answered my second question regarding that.
The next question is from the line of S. Ramesh from Nirmal Bang.
The first question is when we discuss these prospects for the future capacity utilization, if there is a slowdown or underutilization in the event of the current [indiscernible] challenges for consumers to spend [indiscernible] segments. What could be the impact on the global demand for soda ash over the next 6 months to 1 year? While we understand that the long-term prospects is on the silica, which is good, what would be the downside? Would it still be in that 85%-88% range or it will dip further?
So your guess is as good as mine, but let me tell you what we've done when we modeled this so that you can run the same model yourself. We've taken the last 2 downturns, which happened in soda ash industry, one in 2008, other one in 2019. 2008 was financial crisis. 2019 was the COVID crisis, which came out of COVID. We have gone segment by segment. What we have done is we have taken the worst of the fall by sector. So if container glass fell higher in 2008, we took that as a number. If flat glass fell higher in 2019, we took that number. We took it by consuming industry.
So we've gone by the worst of the -- the steepest of the fall across sectors and modeled it. The number is somewhere around 8% or 9% broadly. That is all I'm saying as we understand. The fall is -- so if it were to be -- if the fall is likely to be closer to what COVID had, COVID had about 6% fall. And I think similar 7% was the fall in 2008. The worst of the worst takes you to about 8% to 9%. That's the proper modeling. Zarir, you want to explain because it's something you've done.
No, I think you've explained that well. So we have a range within which we believe in the worst case demand can drop. Obviously, if it drops more than what we've historically seen in the past, which means if it gets even worse than the financial crisis and the COVID crisis and the worst effects of those, then we'll have a new set of numbers. But otherwise, the range is exactly what you mentioned, Mukund.
Okay. That's helpful. And the second part is, do we have any sense in terms of how the Chinese capacities are moving given that they are also having somewhat of these challenges in COVID? And is there any potential for increase based on that in 6 months or earlier?
I didn't catch the question. Zarir if you caught it...
Yes, I think the question was on Chinese capacity increases or Chinese capacity. So as far as we know and our visibility into China today, I don't think there is any fresh Chinese synthetic capacity of substantial scale that is likely to happen. We've not heard of any announcements. We're not seeing anything on the ground. In fact, as we probably mentioned on the last call, in January of this year, 1 million tonnes of synthetic capacity in China permanently shut down, one of the large plants.
The only announcements that are coming out of China today in terms of soda ash capacity increases are announcements about a natural soda ash plant in Inner Mongolia. We've been hearing this for the last 6 to 7 years. There seems to be maybe some work that will probably commence on this sometime this year. But as somebody earlier mentioned, 36 months -- 24 to 36 months is what's required for a greenfield plant. So we are watching that a little closely. But otherwise, we don't see any fresh capacity in China.
So in terms of the current capacities in China, we don't see any increase in operating rate?
I think the Chinese plants today are operating like plants all across the world at maximum capacity utilization. I don't think today anybody is throttling back on capacity because customer demand is strong. And Chinese demand, particularly in the domestic market continues to be strong, especially driven by the demand for solar glass.
Yes. I think just to supplement to what Zarir said, I think certainly, there are no spot quantities available right now. So it's really a tight market. And I think while some sectors may have had a bit of challenge, I think other sectors have stepped up, like solar glass, lithium carbonate, many sectors have stepped up to fill that gap.
The next question is from the line of Trilok Agarwal from Dymon Asia Capital.
Just wanted to check from the U.S. pricing perspective, last quarter and this quarter obviously has changed. Obviously, you had alluded last time with regards to the export mix being poor. So, a, obviously, should we expect this steady-state mix going forward? And b, with respect to the power and fuel cost, particularly in the U.S. and Europe, should we assume that the peak of that is already in the numbers? Or -- you could just mention on these 2 points.
Zarir, you want to take the U.S. pricing?
Yes. So let me first start with the export mix. Export volumes are fully back, and that's reflected in the numbers. We are, as mentioned earlier, contracted for volumes in U.S. domestics. And our first priority is to meet customer requirements that we've committed to in the U.S. domestic market. But obviously, we will continue to also push our commitments in the export market, which is why you are seeing U.S. production running fully flat out. They're not just by us, but by other producers as well.
So in the short-term, I don't think you will see any change in the mix, but you will certainly see a change in the pricing dynamics. As Mukundan mentioned in this business, volume leads pricing. We have seen increased volumes. And in the export markets, as contracts get renegotiated, you are seeing also the effect of the increased pricing in those deep-sea export markets. The U.S. domestic market where we are contracted, you'll probably see changes in that coming in from Jan of next year. Mukund, the second one was on energy cost I think.
Sorry, can you -- second one, can you just -- yes, I think broadly, if you look at energy, I think we -- as I said, we have hedging policy. I don't want to sort of specifically highlight how we manage it. As of now, as I said, we seem to be fairly covered comfortably up to October. And even as we speak, the teams are working to cover up to the calendar year, that is the period of most of the annual contracts. Next year, contracting will depend upon the kind of numbers we are going to get. But I see that we have what is known as an approach of laddering, which means as the time progresses, we keep covering the forward period. So I see no change in our approach and our ability to sort of secure as well as protect our cost side of the equation.
The next question is from the line of Bharat Sheth from Quest Investment Advisors Private Limited.
Congratulation on good set of numbers. Now, when we are talking of resetting the annual contract to quarterly, so particularly from U.S. export, we were facing ocean freight as also one of the challenges apart from energy costs. So ocean freight is also passed through? And how is the availability of ocean freight container?
Zarir?
Yes, sure. Very good question. Obviously, the attempt is obviously to pass through to customers the increased ocean freights wherever possible, and that's something that's constantly in progress. I think the second part of your question is the more important one, which is actually availability of vessels. So from Kenya, we export in containers. And there, we are facing some pressures in terms of delayed shipments because container lines sometimes get support from where we export, which is Mombasa or there are delayed shipments. All our North American U.S. exports are done on a break bulk basis, so they are not containerized. So there, the pressure is a little less in terms of availability, but obviously, there is a pressure on freight rates.
In general, I think break bulk rates are up by about 2x compared to historical levels. But container freight rates on many lanes are up maybe 7 to 8x on our Kenya to Southeast Asia. Indian subcontinent, it's a little less than that. But in all cases, I think when our sales teams engage with customers on pricing, this is a factor that certainly they put on the table as well.
Sir, apart from now in soda ash demand, underlying industry apart from traditional demand, so if one can, I mean, divide between traditional demand driver and these new 2 industry, which has come, solar panel and other usage. So how are we seeing that, the growth in both the new sides?
Traditional demand tends to grow in single digits. But if you look at the new sustainability-led applications, those are certainly growing much faster than the legacy applications, and we are seeing growth in that happening in double digits today, especially solar glass, which is really picking up, and we believe will pick up even more as for example, Europe makes its commitment to move away from gas to more renewables. We see an increased demand coming for solar.
And of course, electric mobility and electric storage is driving the demand for lithium carbonate. So you can extrapolate those numbers, and we're seeing much higher growth rates in those 2 markets.
That really gives some kind of a confidence of underlying industry demand to remain little positive side, correct? Is that fair enough, Zarir?
Absolutely, yes. That's -- as of now, but as Mukundan mentioned, it's something that we are keeping a very, very close watch on.
And coming to U.K. business, I mean we were moving towards more bicarbonate and carbon capture also. So any update on that side?
Yes. So carbon capture is fully operational. The bicarb plant is running at full steam. So I think these numbers capture some of that, and next quarter, we will capture it, everything...
Okay. And in FY '22, we had some kind of a slowdown. I mean, production was affected in the salt capacity. So now -- and we were also looking for expansion. So when the salt capacity in India is likely -- and how much additional first season, which were affected last year, so this year we'll be able to grow salt capacity? And second, when our expansion is coming into the place?
Salt capacity expansion, as I said, is part of the Phase I, which is already under investment, and it is going from, as I said, from 1 million to 1.5 million. And I think that is on -- the expansion is on schedule. So you will see that, and we will be able to supply fully whatever the market demands. I think we have built in adequate safeguards to meet our customer requirements and customer demand as the demand grows. So we see no issues there at all.
Sorry. And second question, sir, is in FY '22 because of the monsoon and cyclone, our salt production were affected? So how much -- any quantification is possible?
No, I think we can't say that, but I think our plant responded well. They've ensured customers are delivered fully. We have not lost a single tonne of sales.
Okay. And sir, coming to the silica, so how are we seeing the demand of silica growing? And is it a total replacement of a carbon black or it is a mixture of carbon black and silica or it's a different grade of application, different kind of a tire silica is required? So if you can give some more sense on the demand side and which kind of a tire? And apart from tire, which are the other industries silica usages are there?
This is early stages, as I mentioned, 5000-tonne plant is fully utilized in tire, and food plant also is nearly full utilization. As the new capacity comes up, in one of the quarters, we sort of highlight that a bit more, what grades are there. We'll circulate that. There's time for that to be circulated as of now. We just got the investment approval. So we will do that as we move forward with our investments in that business.
[Operator Instructions] The next question is from the line of Chirag Jain from Catamaran.
Sir, yesterday in an event the group mentioned that they will be manufacturing batteries locally. So just wanted to understand in the value chain where -- what plans does Tata Chemicals have? And have you taken any approvals for doing any CapEx?
So the approved CapEx, I've already highlighted. In terms of the group strategy, group certainly will be looking whatever is mentioned yesterday at the Tata Motors function. But broadly, our role, if at all, I can see at some point will be just on the area of the chemicals which go into it. I don't see us doing anything beyond that. I would restrict myself to that. But that depends on the main units starting up and then us then working with them to engage on the supply chain. So I hope this clarifies our approach.
The next question is from the line of Dhavan Shah from ICICI Securities.
I have a question on the U.K. business. So I would like to understand about -- what kind of challenges are you facing right now because of the Russia-Ukraine crisis? Maybe any kind of challenges you persist -- I mean, you may foresee, which can come over the period of time if the escalation happens over that, if you can share thoughts on this thing?
Yes. As far as U.K. is concerned, one of the challenges, which I think Continental Europe, in general, what we hear in the news is that the gas supplies and energy supplies from Russia are the ones they are dependent on. But fortunately for us, as far as our operation is concerned, the gas supplies are mostly from North Sea gas fields and partly from Qatar. So we don't have that kind of dependency at all.
Of course, we are impacted by the -- because the gas markets are linked between U.K. and Europe in terms of pricing, so pricing does spike up, but it has come down. It has gone as much as up to GBP 7. It is now back to GBP 2 a tonne, so -- and -- but we don't play in those numbers. We actually have a hedging process, which keeps us well covered and well protected.
And secondly, about the segmental unallocable income, which is roughly INR 66.5 crores. So this includes the INR 60 crores income tax refund, right?
That's correct.
Yes, that's the one-off. That INR 60 crores is a one-off, which should be [indiscernible]. But that should be balanced with that one-off hits we have taken in terms of -- in the JV income.
The next is from the line of S. Ramesh from Nirmal Bang.
So looking at your [Technical Difficulty]?
Sorry, come again, the line was breaking up. Silica expansion, I heard. What else was it?
[Technical Difficulty].
Your line is not clear. So I think what I suggest you is probably take it next time because, Ramesh, the silica approval has come in now. We'll give further more color and details as we progress it. And I just wanted to say that our return profiles are about the same, broadly 20%, which was mentioned. It is in that range. So we don't see any difference in the return profile as we look at it. But more specific, I think we will sort of give it next time. We've got the approval just now.
Yes. And if I may squeeze in 1 more question. In terms of the potential addition to soda ash demand from solar panel and lithium carbonate any [Technical Difficulty] soda ash is consumed in these 2 sectors?
Zarir, I couldn't hear it. If you heard it, could you respond?
No, unfortunately, it's breaking up. It is something about lithium carbonate and solar panels, but maybe if somebody else picked it up.
Yes, basically, I was asking whether we can get a sense in terms of the demand for solar panels and lithium carbonate.
Yes. So that question was asked by a previous speaker. We are seeing double-digit growth there. First, for lithium carbonate, it's about 2 tonnes of soda ash per tonne of lithium carbonate produced. So our estimate is that market is close to about 1 million tonnes, maybe it's slightly shy of that. In the case of solar panel, the number is much higher, so the growth rate -- and the growth rate is much higher. But it's a dynamic market, yes.
The next question is from the line of Rohit Nagraj from Emkay Global.
Sir, 1 question is on the soda ash pricing. So given that the new projects are coming at higher costs and there are other operating costs as well, which are going up. What would be a threshold price at which the new projects will be viable for -- particularly for the synthetic soda ash?
See, we have done broadly on a certain range of project estimation. Our previous capacity expansion, which is the Phase 1 has come on. I think we were benefited certainly by the lowering -- let's say, cost of steel and cement and elements like that. The current one has been costed at our best understanding of where these are likely to be, and they still are meeting a threshold. So I'll just leave it there. And I think the current pricing regime and the current margin structure actually is reflective of the cost increases we have seen in the day-to-day operation.
So overall, my own estimate is that the return profiles needed for soda ash and other chemical businesses haven't changed substantially. Maybe they have moved up by a percentage here or there, maybe 2% here or there, but it's not changing the dynamic too much.
Right. My question was more from a global perspective. So if someone wants to put up a capacity, probably today's pricing is what they are looking at as a benchmark pricing, and so this becomes a lowest level pricing for soda ash player to come in and put up a capacity?
So we can't understand the question. Rohit, can you just rephrase the question?
Right. Sir, if a global player wants to come up and put up a new capacity. So today's pricing, what we are in terms of the cost structure as well as the product pricing, is that the benchmark that will decide whether to go ahead with a project or there could be a slightly lower pricing at which the project is still viable and makes a decent amount of returns?
Okay. What you're saying is with the current pricing is it going to be okay for a new player to put up a greenfield or not. Is that the question?
Right. Right, sir, absolutely.
Yes. I think the current prices will make it actually fairly more attractive than before, certainly to put up a greenfield site. Brownfield was what we found as attractive in the past in terms of return profile compared to greenfield. Certainly, the current pricing regime would reflect that, that greenfield could also have become attractive. But we don't have exact numbers to say that because we are only doing brownfields. We have not kept track of the other one.
But having said that, I think this would also need a very clear view of the pricing levels, which will remain beyond 24 months and cost levels, which will remain beyond 24 months, which I said right now, our clarity is only for 18 months, and we don't want to sort of look beyond that.
So our view is the prices and the costs will settle down lower, but they will not settle down to old levels. So if you want to ask me, have you done the return profile, we will do that in the due course, a good question. But clearly, there is a reset in price. But current elevated levels, probably the input costs will come down in my view. Our energy costs can't remain this high, but they will not go back to the old levels of $40 a barrel or what, $30, but they're not going to remain at $100.
So same way, I think the soda ash prices will not be at $600, $640 we are seeing in spot market, but they will tend to move down in tandem with energy cost, but they will not go down to the old level. So I think that should broadly tell you what the trend is. But in terms of whether greenfield is more attractive, yes, it is, but if it would -- more capacities come on stream.
I think in terms of synthetic, I really think they have to -- somebody needs to think deep about opening up a new site. New site is not just about capital cost and return, new site also in synthetic soda ash is about getting environment clearances and approval, which is a fairly tough road, which is why most places are doing only green -- brownfield, not greenfield. Opening up a greenfield site really requires lot of other clearances, which take longer time than what we do and which are just 3 years. In fact, greenfield sites take at least 24 months more than that just to get environment clearance. A long answer to your short question, but I just think it is not just returns, it is beyond returns.
The next question is from the line of Saket Kapoor from Kapoor Company.
Sir, if you could articulate what are the demand signals from the fuel gas requirements? Are we seeing that, that aspect also opening up?
Zarir, do you want to address it?
Yes. I think -- and this is especially for sodium bicarbonate more than soda ash. I think it's a mature market in Europe and the U.K., where in the U.K., certainly, we supply into that sector. We started seeing signs of that in India as well about 18 months ago with the NTPC beginning to pilot it in one of -- in some of their plants. And now it's -- they've extended it to more of their plants. So we are seeing certainly strong demand for bicarb coming from that segment. And in India, especially, which is a less mature market, but the potential to grow here is much higher, and something that we are supplying into even currently.
Currently it is a nascent market, this is what you are trying to...
In India, it's been a nascent market, but it's a market that has now in the last 18 months, certainly from one of the largest players that's pan-India in terms of operations, they are looking at it very seriously, and I believe that we will see that grow.
Sir, as mentioned that there is a lot of buoyancy in the pricing of soda ash. So any price hike that we have taken post the exit of the last quarter? Or if you could give some color on what are the prices as for to Jan to March quarter?
In India, post exit in the month of April, there has been a further price increase. In our other markets, as we've mentioned earlier, quarter-to-quarter, wherever possible, especially in the export markets, price increases are being taken.
What is the quantified -- just quantify the hike for the April month, sir, if feasible?
I think in the month of April, if I recall correctly, in India, we've taken a price hike of about INR 2,000 a tonne on soda ash.
[Operator Instructions] Due to time constraints, this was the last question. I now hand the conference over to management for closing comments.
Thank you, and thank you, everyone, for the participation. And I just wanted to reiterate our strategy remains the same that is we are focused on ensuring in the short-term, our customers are well-supplied, our deliveries are serviced well, and we respond to market changes with agility. At the same time, we are focused on the long-term in terms of building the core in our chemical business with about additional INR 2,000 crores being committed to expanding capacities further in India.
At the same time, our international businesses will use the cash flows to pay down debt so that they also become debt-free in the next -- at least, operational debt is taken out in the next 3 years' time. The Singapore debt is something which we'll think through how to sort of take beyond that. But that's our broad plan, reduce debt using cash flows, use India cash flows for growth, and in the short-term service our customers well. We are well-positioned to do this, and we look forward to engaging with you next quarter. Thank you.
Thank you. On behalf of Tata Chemicals Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.