Agarwal Industrial Corporation Limited (AGARIND.BO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Agarwal Industrial Corporation Limited Q2 and H1 FY '25 Earnings Conference Call hosted by HEM Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Astha Jain, Senior Research Analyst from Hem Securities Limited. Thank you, and over to you, ma'am.

Thank you, Neha. A very good evening, ladies and gentlemen. Thank you for joining the Agarwal Industrial Corporation Limited Q2 and H1 FY '25 Earnings Conference Call. Joining us on the call today from the management team is Mr. Vipin Agarwal, Chief Financial Officer. We will commence the call with the opening talks from the management, post which we will open the forum for Q&A session, where the management will be glad to respond to any queries that you may have. Before we go on to the call, I would like to read this standard disclaimer. There may be forward-looking statements about the company and the subsidiary, which are based on the beliefs, opinion and expectation of company's management as on the date of this call. The company do not assume any obligation to update this forward-looking statement if those beliefs, opinions, expectations or other circumstances should change. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Consequently, listeners should not place any undue reliance on such forward-looking statements. With this, I will hand over the call to Mr. Vipin Agarwal, Chief Financial Officer, to take it forward. Over to you, sir.

Good afternoon, everyone. It is my pleasure to welcome all of you to the Q2 and H1 FY '25 Earnings Conference Call of Agarwal Industrial Corporation Limited. I thank you for taking the time to join us today as we discuss our company's performance, key milestones and strategic directions, overview of the business. Agarwal Industrial Corporation Limited functions as an integral part of the Indian transport and logistics sector, primarily serving the infrastructure industry. Our core operations include manufacturing and trading bitumen and allied products, logistics, solutions for bulk bitumen and LPG and power generation through windmills. With over 650 specialized tankers and fleet of 10 large bitumen vessels, we are proud to be India's largest private sector player in bitumen logistics. Bitumen consumption in India is poised for exponential growth given the country's vast road network of approximately 64 lakh kilometers, the second largest in the world. With ambitious projects such as the Bharatmala Pariyojana and increased government focus on infrastructure development, the demand for bitumen and allied materials continue to surge. Financial performance of the highlights for the company. Let me now provide an overview of our financial performance for H1 FY '25 compared to H1 FY '24. Revenue reached at INR 1,033.38 crores, up by 20.07% from INR 860.67 crores. EBITDA amounting to INR 98.72 crores, reflecting a robust year-over-year growth of 39.43%. Net income stood at INR 57.45 crores, making a 31.79 percentage of increase. EPS recorded at 38.40 up by 31.78%. Cash flows from operations significantly improved by 321.86% reaching INR 67.54 crores. For Q2 FY '25, we delivered a strong performance. Revenue increased by 40.42% to INR 325.66 crores. EBITDA rose by 29.04% to INR 37.01 crores. Net income registered a growth of 15.18%, reaching to INR 18.44 crores. These numbers are a testament of our focused execution, operational efficiency and ability to meet growing market demands. Our operational milestones. In Q2 FY '25, we sold 65,338.77 metric tons of bitumen, a significant 47.27% increase over the same period last year. Additionally, our Ancillary Infra segment, which represents over 75% of our business demonstrated steady revenue growth of 15.23% in H1 FY '25. One of the highest -- highlights of this period is our strategic investment in a storage terminal at new Mangalore port trust with a capacity of 40,000 metric ton. This INR 40 crore project will significantly strengthen our supply chain and expand our presence in Southern India. This new terminal complements our existing network of Dighi, Vadodara, Mumbai enhancing our distribution backbone. Looking ahead the market opportunity for bitumen is immense. With increased infrastructure spending by the government of amounting to INR 2.78 lakh crores allocated in the FY '25 Union Budget and have projected 20% to 30% market share in the bulk bitumen private sector, we are well positioned for a sustainable growth. Our guidance for FY '25 includes revenue and volume growth target over 20% year-on-year, earning growth by a CAGR of 20% in EPS, ROCE and ROE, ROI, maintaining at a healthy 20% range. The Indian bitumen market is projected to reach USD 6.8 billion by 2032 supported by infrastructure initiative and increasing imports. Additionally, with a shift towards sustainable practices, our investment in modified bitumen projects position us for our future market needs. I would now like to take questions.

[Operator Instructions] The first question is from the line of from the line of Ankit Minocha from Adezi Ventures Family Office.

Congratulations on a good set of numbers. So my first question was on with regard to the ongoing tensions in the Middle East and the wars that's kind of going on. So is that kind of having an impact on the shipping or the bitumen business for you? And do you kind of anticipate some sort of impact in Q3?

Yes. Thank you for your question. The tensions are not in the region that we are working as of now. We are bringing our products from UAE, Oman to India and going towards the east of India. So in our case, we are not dealing with these areas as of now wherein the war situations are there, which is not having any major effects on our business, apart from the normal, what do you say, psychology in the market.

Understood. And a lot of companies are reporting increased shipping and freight costs due to this. So are you also seeing some benefit or disadvantage of that in your business?

No, no. Freight cost has not increased in the bulk side that we do in India. Containers also -- the rates have remained the same in the last few months now. It is not increased, not at least towards the India side.

Right, right. My second question is with regard to the Y-o-Y outlook for bitumen price. So if I look at Q3 '24 and if I look at the prices that are prevailing right now in Q3, '25, could you give us an estimate of where the bitumen prices are and how does it compare to the same quarter last year for Q3?

If you compare the realization value of bitumen last year, the entire last year, these prices were around INR 35,000 per metric ton, which is poised to increase this year because of the tensions going on maybe. And since it is a commodity, last year, the average value was on the lower side compared to what we are getting -- we may finish it in this year. It will be higher. I expect the realization value to be on the higher side in the current financial year.

Currently, what is the number that is coming in right now, as you speak?

Realization value is the average of the last year itself, around INR 35,000 as of now.

The next question is from the line of Yash Dantewadia from Dante Capital.

Yes. Am I audible?

Yes, sir.

Yes. Sir, I just have one very important question that you need to give a lot of clarity, right? That is, if you look at your balance sheet, your ship vessels, right? You started buying ship vessels, I think, at around '19-'20, '19, '20. Is that right? Am I audible?

Yes.

Yes, yes. Yes. So when did your company start buying ship vessels?

2019.

Correct? So from 2019 and until today, you have close to from INR 53 crores, it's gone to INR 540 crores, your ship vessels, right. Is that right?

Yes.

Yes. So one thing I really, really have failed to understand with your company, how can you invest so much money in ship and vessels and your OPM is still the same. Your OPM pre-buying the ships, right, pre-2020 was at 7%, 8%. After buying INR 500 crores worth of ships, your OPM is still 8%, 9%. So what was the point of investing so much money into the ships when your OPM is not able to go higher?

Okay. See, if you see 5 years back in today's market, the markets have also significantly changed. At least we are not losing today. We are maintaining our margins. If you see, the market has become very competitive. The investment side that we have made on the vessels, it is only purely on the CapEx and to save our cost of freight that we used to pay. And today, if we have -- with the increase in volume, the discount volumes for supplying the product to end users have also increased. So it's a mix and match of all the setup that we have made, wherein the operational margins have not gone down, irrespective of the markets, margins have been eroded by so many companies. That is one difference where in the last...

When do we see the margin actually expanding? Like when do we see the benefit of spending INR 500 crores?

I think on the bottom line, we're already seeing.

No, no, no, I'm talking about, see your top line has grown quite significantly. Kudos to you. I think you're one of the only companies who've grown their bottom line with such structural integrity over the last 5, 10 years. I'm not denying that. I'm not challenging that. But what I'm asking you is on the OPM front, we've invested so much money into the shipping. Usually, generally, you look at any company, when they invest so much in their main cost, your main cost is transportation of bitumen, right, from overseas to India importing, right? So when your main cost, which is the shipping cost, pre-2020 and post 2020 of investing INR 500 crores, you're telling me there is no benefit in terms of OPM at all. I mean before 2019, 2020, also you were doing a similar OPM. So that INR 500 crores, you've done higher volumes, great. But I'm asking why haven't we seen the benefit of margins coming in over the last 6, 7 years? See if it is a 1-year case, it was some Red Sea crisis or anything that is a one-off issue, I am with you, I completely agree, right? But what I'm not able to understand is there's no change. Like I can see that you spend INR 500 crores in your balance sheet. But if I look at the pre-spending and post spending, there is no change. It's not like there were no shipping crisis before 2019. Before 2019, also, there were a lot of crisis in terms of shipping and shipping has generally been a volatile business. So one thing is great that you don't have to face that issue anymore. But when are we going to see the benefit of you spending INR 500 crores coming in, in terms of margins?

Let me answer to your question. The value chain that we have created today to do the volumes that we are doing, that is the plus point that we have achieved with the whole having the CapEx of INR 500 crores-odd in the vessels. If you would not have the vessels, you would not have made this kind of a setup that we have today. And operationally, the margins would have been much, much lower, considering the changes in the market from last 6, 7 years, wherein if you say 6 years back, there were a few importers, there were a few storage facilities. Now everything is [ eminent ]. And there is a flood of even products growing in the market, storage, vessels moving into India. So there's a lot of quantities coming into India as of now. This setup that we have created, that means the value chain and the supply chain that we have created across the Indian ports in line with the road transport and the sea transport, that is helping us to maintain the levels that we were at even 6 years back. That is the difference that is being created with the addition of these vessels. And going forward, yes, we will get some more benefit because we have now created the entire value chain considering land, sea and the storage points wherein you can distribute your product in a more efficient way.

Right. So can you give some sort of guidance or understanding in where are we seeing the OPMC. Top line, no doubt you've done a great job in the last decade, you're going to do a great job in the coming decade because you set up the infrastructure like you said, you've backward integrated everything, now you're forward integrating it by putting storage units, that is also great. But the question comes, when are the margins going to go up -- if they are going to go up. That is my main question. That's what I'm trying to understand from you, sir.

Going forward, as the volumes will be increasing further, I think you will definitely see operational margin increase. And earlier on volume, that we will be increasing from, say, 5 lakh tonnes to the current financial year of 20% growth that we are expecting, you will definitely see some growth in that side as well.

But from what I understand, are you being conservative with 20%? Because I mean, quarter 2, you grew 47% volumes, right? So are you being conservative when you're saying 20% growth? Just trying to understand.

So we always give a number that we think we can easily achieve. Anything over and above what we say is an additional bonus that we can get in terms of volume that we do.

Right. And what is our capacity utilization with the shipping? Like we bought another ship, right, I think, 2, 3 quarters ago. So are our existing ships getting fully utilized, that's why we bought another ship? Or it was because of another route? Like I'm just trying to understand why did we buy another ship because I'm assuming the utilization of the current ship is running full. What is the reason?

All the vessels are optimally utilized. And since the requirement in a particular area when you are going, it does require a specific time line. You have to have more vessels in your hand to even do the volumes and what do you say, a turnaround of maybe west is lesser than the eastern side of India.

And last question, where are we sourcing most of our bitumen from? Which country are we sourcing it from? If you can give me the breakup?

The breakup is not handily available.

Can you give me the top 2, top 3 countries?

UAE and Oman is the 2 places where we get -- we source our products from mostly.

Okay. Okay. Sir, the Middle East crisis issue is not impacting.

Where is the Middle East crisis happening.

Basically, Israel side, right? Rright, sir?

We are not operating in that area. That is not -- that is not impacting our business in any case.

So shipping costs didn't go up, right? Or are you telling me shipping cost went up, like I'm trying to understand the shipping costs?

No, no. There was some fuel oil bunkering rate fluctuation, there is no additional cost of either on the higher side or on the lower side.

So with crude oil prices coming down, we should see some margin benefit, right?

Bitumen prices are not directly linked with crude at all. If you're aware by previous con call also, bitumen and crude is not directly linked in terms of prices.

The next question is from the line of Sandeep Dixit from Arjav Partners.

Sir, following up on the margins, and I want to try to understand the dynamics of the business. You have had strong Y-o-Y growth in both bitumen and shipping. But if I look at the margins, they have actually come -- they have actually shrunk. Shouldn't operational leverage kick in and improve the margins?

As I rightly said, to increase the volumes and to supply to PSUs as well wherein you're supplying through a particular tender and formula based. You don't have the margins that we can get when we are dealing with the private sector companies. When you're dealing with PSUs, though the volumes are there, the margins with the PSUs may not be the same on a fortnight basis or on a month-to-month basis because the formulas are fixed in any PSU tender. On an average basis, we can say that since the volumes are increasing, we have to pass on a little bit of more discounts to the various vendors to they increase the volumes.

Okay. The related question is that in 4Q FY '24 call, you had mentioned 2 points. One is that the EBITDA per tonne, you expected that it would rise from INR 3,625 [ to INR 829 ] per metric. Are we still on track for that?

The EBITDA, I will give you the number for EBITDA. The current EBITDA is -- last year, the EBITDA per tonne was INR 3,625 for the whole year. On a half yearly basis, it was INR 3,955, which this year on half yearly basis, it is INR 4,185.

So INR 3,955 has gone down to INR 4,155.

INR 4,186.

INR 4,186.

Yes. So we have gone up by almost INR 230 per metric ton.

Okay. So that actually confuses me a little more, sir. If EBITDA per tonne has gone up from INR 3,955 to INR 4,185, why is it not reflecting in the EBITDA margin as a percentage of sales?

See, because sales -- as I've already said, our sales -- our PAT is not -- our EBITDA or PAT is not to be considered with the volumes with the top line that we do because it's a commodity product wherein the price of commodities are changing, wherein we try to keep our margins on a fixed per tonne basis, and we are not selling our product on a margin of percentage basis. Suppose the rates are at INR 30,000 per metric ton and at or at INR 40,000 metric ton, our per tonne margins are remaining the same, irrespective of the pricing being at INR 30,000 or at INR 40,000. So I've said in all my con calls, our industry is not such wherein we can compare our top line and EBITDA in the percentage terms because we always sell our products on a per metric ton basis margins. So we have to compare my numbers with the per tonne margin that we have been getting on a year-on-year basis.

So I think that explains it. We should be looking at margins on a per tonne basis rather than a percentage of sales basis. Fair enough. Sir, last question on that is that last year, you had mentioned that 60% of volume was through own vessels in FY '24. And it will rise to 65% to 70% this year. Are we on track on that?

Yes, yes, definitely.

So 65% to 70% through own vessels?

We will be performing through own vessels.

So can we expect that EBITDA per tonne for the full year will be even higher than this INR 4,186 that we got for the first half?

No, on a year-on-basis, suppose it was at INR 3,625 last year. We expect it to be somewhere around INR 3,900 to INR 4,000 per metric ton.

The next question is from the line of Tejas Khandelwal from Prudent Equity.

Am I audible?

Yes, sir.

So my first question is like why are the margins declining in both the Bitumen and Chartering segments. So specifically, when we look at PBT, so PBT margin in the Chartering segment has dropped from 31% in last quarter to 23% this quarter. So is this due to the cooling freight rates or is that another reason? I would like to know.

Can you just repeat your question because I think the voice was not very clear.

Okay. So my question was, why are the margins declining in both the Bitumen and Chartering segments, because PBT margin in Chartering segment dropped from 31% in last quarter to 23% this quarter. So is this due to cooling freight rates? Or is there any other reason?

See, there are some vessels, which are in drydock in a particular time. So basically, when you're considering the shipping side margins, I think it has always been above 20%, 21%, which we have maintained. We have never said that it will be 30% or 35%, but we have always maintained that our shipping margin will be always -- always at a level of 20% or 20%...

No, but my question was -- in last quarter, the shipping margin was 31%. And in this quarter, it is around 23%. So this is a huge drop, right?

No, no, no. I don't think so there is a drop in the quarter-on-quarter as well because our sector is not to be compared with the quarter-on-quarter basis. Because first, these vessels are on during the monsoon, that is a flat period wherein we have to do our cargoes for maybe a spot TC or on a [ voice ] basis. So now the fourth quarter is the peak season wherein we get the highest revenues. Fourth, third quarter is the second. First quarter is third and fourth quarter -- the third -- second quarter is the fourth quarter, which is the flat season because of the monsoon across the entire Asian region.

Okay, sir, understood. And then my second question was regarding the volume. So you had guided for a 6 lakh tonnes of volume for this year, right? But in the first half, like 40% of the target has achieved. So are you confident about achieving the remaining 60% in the second half?

We are very much confident.

Okay. And sir, my -- another question was regarding the resolution of split. So the resolution wasn't approved. So can we expect the share split in the near future?

I would not be able to comment on that. But as of the resolution that you're taking about, yes, the Board and the -- through voting, it has been decided that the resolution was not passed by the Board. So effectively, that has been put off for now.

Okay. Okay. Sir, my last and final question would be regarding the volume only. So I could not understand that with the new vessel almost doubling your own capacity. So why you are giving the guidance of 20% growth? So don't you think this is a conservative guidance?

No, no. As I have mentioned earlier also, the -- all the vessels are not carrying the same capacity and at the same time because if you are going to the Eastern side or, say, to Malaysia, Indonesia or any other side, it requires 45, 50 days for going to Singapore, Malaysia or Indonesia, that is during the monsoon. And if we're going to eastern side that is Haldia, it would take around 40 days to complete the voyage. If you require a vessel during that time, product, we have to have a vessel from outside because the quantity -- if the vessel comes back, we're not able to load the same quantity on your vessels and take back to that port. We require a number of increased vessels to do that volume. And not that necessarily if you have 1 lakh tonnes storage, you'll be able to do, say, 1 million in 6 months or 7 months because it is a -- it is a process wherein the vessel comes, it discharges, goes back, again loads and again come back. So it's a process of -- it's the timing and it takes for going from -- after discharging and after loading coming to India. It's a process. It will take time.

Okay. So this question is regarding the new ship. So how many towns this new ship can do in 1 year?

She can do around 8 voyages on the eastern side.

This new ship, right, the big one?

Yes.

Okay. And will this do these all the trips at the full capacity?

Yes, yes, always the full capacity only.

[Operator Instructions] The next question is from the line of Yash Kukreja from Equity Capital.

Congratulations on good set of numbers. Sir, my first question is on the realization front only. So for H1, it was around INR 34,000, INR 35,000 and for the new orders that you have posted, it is around 42,000. I just wanted to understand what is -- how we are seeing it for H2 and FY '26?

Can you please repeat the question again?

Yes, sir. So my question is on the realization front only. So for H1 FY '25, it was around INR 35,000 and for the new orders that we have got, it is around INR 42,000. So how are we seeing it for H2 and FY '26?

The average realization -- the realization value that we have given is on a full 6 months as on date, and last year, it was a full year. It may not be necessarily because some, in a particular fortnight, rates are higher, and in a particular fortnight, rates are low. So realization value can only be derived at the end of the year. We cannot give any numbers. But yes, given the fact that last year's commodity prices had gone down, we assume that this year, the realization value should be higher than last year on a full year basis.

Okay. Got it. And sir, my second question is, do we have any plans to add vessels?

Sorry, sir?

Do we have any plans to add vessels in H2 FY '25 or next year?

Yes. As informed earlier also, we are looking at good opportunities. And if there is good opportunity coming along, we may definitely end up buying more vessels, yes.

The next question is from the line of Vipin Abraham from Integritechnologies Private Limited.

Sir, congrats on a very good revenue numbers. My question is that the revenue has grown by 40 percentage and the cost of the direct consumables, for examples, the main raw materials have grown only 35 percentage. Still the profit is significantly lower, right, because from INR 18 crore profit before tax, it has grown only to INR 20 crores. Now if you look at the real numbers, your other expenses have grown significantly from INR 45 crores to almost INR 73 crores compared to year-on-year quarter-by-quarter basis comparison. So what is the cost of the other expenses, which has gone up so high?

These are all the fixed expenses that the company is -- maybe we have been -- there is additional storage that we have this year. That is related to more expenses on the expense side. And I understand what -- the point of margins lowering and it was basically because of the fluctuation in prices of the commodity.

So the prices of the commodity is -- when I look at that, that is not really impacted, right? It's mainly the other expenses. And other expenses, you're saying that storage costs. So is it like we are at a storage space where we have not yet fully utilized? Is that the reason why the cost has gone up that much higher?

Storage is for a month or 2 months, which has increased on the expense side. It is very temporary phase wherein maybe bigger vessels when they are arriving and we don't have an [ collage ] or a storage due to whatever reason, we have taken a spot facility from the terminal to store the product.

The next question is from the line of Agastya Dave from CAO Capital.

Am I audible?

Yes, sir.

I will not ask you about the margins because I have been tracking the EBITDA per tonne number and it has been consistently rising since you have started adding ships and the ROE numbers have also improved. So clearly, those are helping. Sir, I have a question on -- there is a line item that you report in your annual report, which is the direct expenses, which comes under the other expenses line item. Sir, would you have the number for that for H1?

Unfortunately, it is not available readily in my hand. If you can mail me, I will definitely I will send some details as per the query that you have.

No problem, sir. Sir, next question is on your CapEx. So my assumption is for the next 2, 3 years, you will continue to have around INR 150 crores of annual capital expenditure. Is that the right assumption, sir?

Given the fact that we get the opportunity to add the vessels because basically these CapEx are driven mainly for addition of the vessels. And as informed, we have also started the storage terminal in Mangalore. So another INR 40 crores CapEx will be going towards that terminal.

Is there a possibility that you may exceed the INR 150 crore number for any particular year over the next 2 or 3 years?

We add, say, 2 -- more than 2 vessels in a year.

Okay. Okay. Sir, based on the visibility that you have today on your capital expenditure, what would be the maximum potential volumes that you can move based on your asset block today? And what capital expenditure you're doing today? I mean, which is definitely firmed up and on the ground?

Yes. The CapEx that we are doing is on 2 fronts now, vessel capacity that we have already added in the last few years, along with the -- what you say, given the view of adding few more vessels in the coming 2, 3 years and the storage facility, that terminal work that we have started, we expect the volumes to increase to almost double than what we are doing in the next maybe 3 years. That would be the guidance.

What's the base for that, sir? Should I take 2024 volumes as the base on which you will double over the next 3 years?

We can take FY '24 as the base because going forward with the growth target that we assume, we can -- we will easily reach 8 lakh tonnes in the next 3 years. And adding 2 lakh tonnes should not be a problem for us, given the fact that we are adding more storage tankages to our existing storage that we have.

Last year, you did 4.9. So you're saying in 3 years you can more than double sir. Is that, again, FY '27, by then you will double? Is that the right assumption?

Yes, we can double the volume that we did in FY '24.

And you already have the assets in place using which you can double? Or would you require any further CapEx?

More or less, we have all the assets in place. A few more storages may be required to boost up the sales in terms of top line, to add more volume than what we are discussing.

Perfect, sir. Sir, one last question. So we know that second quarter is always the lowest point for the year, seasonally weak quarter. And then there is a spurt in demand in Q3. But this time around, on the infrastructure side, there are like murmurings that the government CapEx has not picked up. So what are you seeing in terms of demand for bitumen? Is there the usual pickup that you see after monsoons and after Diwali, is that happening? Or are the things slower? So what kind of expectations should we have in Q3?

No, practically, it's not slower. The demand of bitumen is still there, and it is going to go there. That is the reason all the PSUs -- all the PSUs have started taking product from private players. We are now supplying to all the 3 PSUs, IOCL, HPCL, BPCL. Yesterday only we have intimated on the exchanges, giving information that we have got spot tenders from BPCL and IOCL, which is actually supplied in the next 1.5 months. These are spot requirements that even the PSUs are having, which we are trying to fulfill in a very short time. And going forward, with these kind of additions of spot tenders by called by all the 3 major PSUs will help us in boosting our volumes from the current level. So that is why the guidance that we are giving is inclusive of all these 3 PSUs put together as their demands from the private sector players have also been increasing. And whatever capacities are to go reduce on a year-on-year basis.

Sir, whatever you're thinking about for the year at the start of the financial year, you are still seeing that level of growth?

Definitely. As on date, we are in line with the projections that we have targeted for our own self.

For your own self. Okay. Because the guidance that you have given, you are far ahead of those numbers.

As of now, but yes, we want to complete the 20% guidance growth that we have given on a year-on-year basis, which we have always maintained more or less.

Understood, sir. And sir, these spot tenders which have come out, these would have better margins because these are spot in nature?

It is adding good margin. And moreover, the payment cycle from the PSUs is very strong. So with the addition of top line, the payment cycle is also very good.

Great, sir. Congratulations, sir. The margin expansion at least at the gross and EBITDA level was very good to see even in a seasonally slow quarter. So congratulations for that, sir. All the best for the rest of the year, sir.

Thank you.

The next question is from the line of Mohit Madiwala from Envision Capital.

Congratulations on a good set of numbers. So my first question is on the bitumen part of the Ancillary and Infra business. So we have done 47% volume growth in typically a seasonally weak quarter. So I just like to understand where exactly this has come from? Is it that the imported share of bitumen in India has increased and we are benefiting from that tailwind? Or is it that we have tied up with more road contractors? I just wanted to understand where this has come from and where it can go from here?

Yes. See, if you say in the last few years, earlier times, during the monsoon, the work for the road construction used to not happen at all. There were very few road works that used to happen during the monsoon. But with the new technologies and on a year-on-year growth, if you see every year in the monsoons, we have done better volumes compared to previous quarter in the same year because even in the monsoons, roadworks are not totally closed. They have -- there are so many works that are happening across Indian states. That is one of the reasons and the volumes are increasing even in the off season. And on top that, we have supplied to all the 3 PSUs even in this monsoon period.

Okay, sir. Understood. So I just wanted to understand what percent of our revenues will come from these top 3 PSUs that you're speaking of?

I would have to check, but we would be supplying nearly 20% -- around 20% to all the 3 PSUs in the current financials.

Okay. So basically, in your total revenue pie, 20% of your revenues come from these 3 PSUs. Is that understanding correct?

Yes. The guidance for this year, it should be around 20% or maybe a little bit more higher than 20%.

Okay. Okay. And sir I just wanted to get a clarification on the H1 numbers. So what kind of volumes will we do in H1 FY '25? I know the Q2 number, I just wanted to get the H1 number as well.

240,000 tonnes.

240,000 tonnes.

And I would also like to highlight here in the last entire -- on the EBITDA levels, we had done 8.2%. That was the EBITDA level in the last financial year of '23-'24. Whereas this year, in the EBITDA levels, we had 9.52%. And on the PAT level, last year, first half, we were at 5.05%, which this year, we are 5.54%.

Right, sir. Correct. So just a couple of questions on the chartering business as well. So just trying to understand, again, where the realization growth has come from. So we have basically done in this quarter, INR 83 crores of revenue on a base of 10 vessels. Now in Q2 last year, we did INR 47 crores on a base of 9 vessels. So just looking at this, the per vessel kind of revenue that we are getting is significantly higher. So could you please explain how this has happened? And what has kind of led to this realization growth?

It's not necessarily because in a particular quarter, maybe a few vessels are out of service because of the drydock for the maintenance. So it's not that last year when you saying it was not that 9 vessels -- full 9 vessels were operating because few of the vessels last year, it was on the dry dock. And this year, when we are comparing with the current quarter, all the vessels were in use, and there may not be any vessels which were undergoing maintenance. That is one of the reasons for a difference in revenue in the 2 quarters that we are comparing.

Okay. So it is purely a function of utilization on the vessels that.

Utilization in terms of maintenance of the vessels in 2.5, 3 years.

Okay. Okay. Got it. And just one last clarification, sir. What is the tax rate that we pay in the UAE entity?

As of now, there are some taxation policies that have come up. But as on date, it is zero for UAE operations.

Okay. So still 0%?

But they have come up with new taxation policies, which is not very clear in terms of where -- what percentage we will be taxed. But going forward, we may pay some taxes in UAE, which is not significantly at the levels that we pay in India.

The next question is from the line of Bhaumik Shah, an individual investor.

So my question is the last ship which we have inducted, which is of 47,000 metric ton capacity. Has that been fully been operationalized now? We are using it fully now?

Yes, we are using it fully, yes.

That we are using fully, right? Okay. And 6 lakh tonne this year, whatever the goal we have, that is, I think, reachable, right?

Yes, very much reachable.

[Operator Instructions] The next question is from the line of Anshal Jain, an individual investor.

Congrats on a good set of numbers and fantastic execution. Just want to understand the outlook for your business for the next 3 to 4 years, if you can help with that.

Earlier, the guidance for the next few years is looking very good because of the infrastructure development and the spend that government is basically focused on for getting all the Indian state connected through seamless road network. So that will help us in creating more roads, which ultimately will lead into requirement of bitumen.

The next question is from the line of Vivek Joshi, an individual investor.

Congratulations on a good set of number and your robust guidance. I have a couple of questions. One is that can you help me what percentage of the domestic consumption of bitumen are we handling? Like I could not get the numbers like.

So in the private sector, we have done almost 20% of the total bulk that is happening.

What are our volumes of bitumen handled? I could not find that number, like?

240,000 tonnes in the first half of this year.

480,000.

240,000.

If I double it, it is like 480,000.

240,000 in the first half of this year.

Yes. Okay. So another question is at what percentage of revenue comes from PSUs and not from the private?

As I said in the last 5 minutes back, this year, we're expecting around 20% of revenue from all the 3 PSUs put together.

Okay. And have you found any trends because like there was a data that the government infrastructure spend has dropped by 15% in the first half of this year. So have you found it in?

Not trend, but maybe because of elections and other government, what do you say, political issues that may be going on. But as on date, I don't think so there is any issues with this government spend on the infrastructure side. It is in line with what the governments have allocated.

In your segment, you're not facing any shortfall -- any shortfall. That's what I was asking, like so.

No, no, no. See, government is already focused on building roads. So this sector, I don't think so there will be any issues going forward even in the next 10, 15 years.

Do you think the move to concrete tops and all will make a big difference in the bitumen demand or you're confident of the demand?

We have answered multiple times, there is absolutely no question of major highways building through concrete because government is not keen on making highways with concrete itself.

The next question is from the line of Ankit Minocha from Adezi Ventures Family Office.

So my question is to understand your 20% growth guidance more clearly. So is this 20% revenue volume growth? Or is it revenue value growth that we're talking about?

Volume growth is what we target always.

Understood. So then in that case, if I look at your PAT growth in H1 versus the PAT growth in H1 of last year, then I believe you still done a 20% of volume growth, but the PAT growth has been 30% for you. So does that imply that the PAT growth will be close to 30% as well for the year?

Not. It may not apply on a year-on-year basis. But as explained, we always try to increase the per tonne basis -- of per tonne basis revenue of PAT that we want to increase is on a per tonne basis, which is increasing on a year-on-year and a quarter-to-quarter basis. Definitely it will be on a higher side. But exact percentage, it would not be right for me to give any numbers.

Understood. And to a previous participant, you mentioned that the tax in the UAE entity might be going up. So I believe your effective tax rate for last quarter was 9%, and it's been significantly lower for the last year as well. What do you think -- what should we assume as roughly a safe tax rate to assume as related to your PAT?

At date, there's no taxes paid in UAE. But going forward, if there is any taxes that would be paid in UAE, it would be maximum up to 9%.

Sir, if I look at the full year for you last year, the PAT was -- sorry, last year, the tax rate was 14% for you for the full year, what could be the tax rate assumption for the following years?

Blended percentage on a consol basis, wherein UAE taxes remained zero.

Sorry, could you repeat that number?

That 14% taxation that you are mentioning is a blended taxation rate that has arrived on a consol basis, wherein the taxation on the UAE operations are zero.

Right. So what could this number be if the taxation in the UAE is 9%?

It should be around maybe -- maybe around 14%, 15%.

Understood. Right. And just to get a top view of the business, just to understand certain other things. So one, if we assume that crude oil prices are -- continue to be significantly lower versus the past. So does that incentivize or deincentivize the refineries to produce more bitumen or does that affect the price of bitumen? That is the first question with regard to crude oil prices. And secondly, with the shipping rates being higher over the last 1 or 2 years, if, say, shipping rates were to come down, would that affect your profitability and margins?

To answer your first question, the crude that is procured by the refineries, that has a limit -- that has a fixed percentage of in terms of bitumen that can be produced. It is not that bitumen prices are high. So they bring in crude and produce more bitumen because every crude that is being brought in by refineries, it has multiple destination points wherein they produce different products out of their crude. And bitumen is one part wherein it is a fixed percentage or maybe few percentage here and there, they can tweak to produce more bitumen, but they cannot produce 100% bitumen or 100% other products from the crude that they bring. To answer your first question. And second question, in terms of pricing of freight, it has remained the same in -- from Gulf to Indian region.

Okay. Okay. And on your first clarification on the pricing of crude. So if pricing of crudes here remains around the $60 to $65 mark, then in that case, bitumen prices are supposed to -- would be around this level only, the current prices?

No, bitumen prices are not directly linked with crude. It is always linked to international pricing, wherein demand and supply is -- are the factors, which plays the prices, which indicates or is the basis of any price formula -- price that is derived for bitumen.

The next follow-up question is from the line of Sandeep Dixit from Arjav Partners.

This 20% earnings growth guidance that you had given earlier. Doesn't it look too low considering that you have grown 31% in the first half itself?

Thank you. See, we always have a conservative target of volume growth wherein we can assume whatever we believe that we can achieve is put on paper, whatever additional if we achieve that is any ways a bonus for us to celebrate.

I understand that. But at the same time to be a little bit more realistic, you are saying EBITDA per tonne will go up to INR 3,500 or so for the full year versus INR 3,600, and you have got a 47%, 40% plus volume growth in the first half itself. So if I just put these 2 together, it just doesn't add up, the mathematics doesn't add up. So would we be looking at giving a slightly more realistic guidance? I understand that you need to be conservative, but this seems to be a little...

As mentioned, there maybe -- we have to keep in mind that we have to source the product from various international Gulf regions where we consider the waiting time for loading as well sometimes wherein the product is not available for us to sell in the market -- for maybe a 2-, 3-day gaps will be there from the vessel that is already coming into various locations. So that all gearing -- keeping all those factors in mind, we derive at a particular volume that, yes, this volume is achievable because we know that this much of product we'll be able to bring in from various countries. That is one reason we are giving a guidance of 20% because there is also a waiting time lead period for us to bring the product.

Ladies and gentlemen, we'll take this as the last question. I now hand the conference over to Ms. Astha Jain for closing comments.

Thank you. On behalf of Hem Securities Limited, I thank Agarwal Industrial Corporation Limited team for giving the time we spent on this call and responding all the queries in a detailed way. I would also like to thank all the participants for joining this call. Now I would like to hand over the call to moderator for the closing remarks.

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