Alkyl Amines Chemicals Limited (506767) Earnings Call Transcript & Summary

Good evening all. On behalf of HDFC Securities, I welcome everyone to this Alkyl Amines conference call to discuss the results for the quarter and full year ended March 2020. We have the pleasure of having with us, top management team from Alkyl Amines, represented by Mr. Yogesh Kothari, Chairman and Managing Director; Mr. Kirat Patel, Executive Director; Mr. Chintamani Thatte, General Manager, Secretarial and Company Secretary; Mr. K.P. Rajagopalan, General Manager, Legal. And without further ado, I will now hand over the floor to the management for making the opening comments. Over to you, sir.

Yes. Thank you, Nilesh. Thank you, HDFC Securities. And thank you all the people listening. First of all, let me -- I mean, I hope that all of you are well and healthy after this COVID issue, and keep yourself healthy. This is going to -- may last for some -- few more weeks. Mr. Kirat Patel is with me, our Company Secretary. Company secretary is also there, and Mr. Rajagopalan is also there. And our Finance Chief is also there. So what I would like to do is I'll just mention that we had a good -- very good year this year. We have recorded a good profit. Our markets were also quite good. We had some issues in the last month in March because of our -- because of this COVID issues. But that did not last long, and we were able to manage to start production, even though in a smaller capacity. Since April, it's -- things are [ back ] in line, and we expect that we will be absolutely be normal by [Technical Difficulty]. I would suggest that we can start with question and answer and discuss if there are any particular issues you have in mind. We feel that many people would like to know how we have been able to do so well this -- let's say, even though our sales had not been that high. So in any case, I would prefer that maybe the questioner can start so everybody can have a turn in that thing. Thank you. So maybe the question and answer can start now.

[Operator Instructions] We have our first question from the line of Rahul Jain from Credence Wealth.

And sir, congratulations on a good set of numbers and more so fantastic cash flows. Sir, what kind of volume growth did we have for this half -- second half and for the full year FY '20? And what is the expected volume growth for the coming year?

I think -- you're talking about the last year or?

So the second half of FY '20 and the full year FY '20. And what could be the expected volume growth for the coming year FY '21?

Yes. In the last 6 months, the growth was [Technical Difficulty] not really -- didn't really grow except for a few percentage. So in this coming next few months, we expect a better growth and that, I think, will be known by end of this month how we have done in the first quarter. But because of this COVID issue, we are not able to make any clear forecast as of today.

Sir, in your opening remarks, you mentioned about -- because we missed the end part of it, you mentioned that we started in April, and the operations became normal by and then we lost the audio, sir. I'm so sorry about that.

Yes. No, our operations started in April. Hopefully, we geared it up. And now it is coming up to a level which is our normal level. But still, it is not up to our expectation.

Sure. Sir, you had mentioned about methylamines additional capacity debottlenecking about 15,000 tonnes to the -- comments in quarter 1 of the current year, you had mentioned this in your last con call...

Yes.

So is it on track? Or is it delayed? Or when do we expect this to start?

It is slightly delayed because of all these issues because we have manpower issues and logistics issues for the equipments and machineries and all. But more or less, it should be -- by the second quarter, we should be in line to start the expected capacity.

Sure. And sir, with regards to CapEx for the current year and next year, what kind of CapEx have we planned? And last time, you had mentioned that the CapEx which you've done in the last year -- sorry, CapEx, which you're planning for the current year will have some products on the derivative side and also some specialty chemical products. If you could share some details on that.

This methylamine expansion will be going through, and we are expanding. Of course, we are putting up a new plant for acetonitrile which will be coming up -- which is also slightly delayed now because of this COVID. But we expect that it should be ready by end of this financial year. So -- then there are some small, small projects, which are on line, but they will also -- they have been -- sorry, they have been delayed also slightly. But over the period of this year, some of them will come on line.

So do we expect about INR 100 crores of CapEx this year or it will be slightly less than that?

From that [Technical Difficulty]

Hello?

Yes.

Can I take that question, Yogesh?

Yes.

Yes, Rahul, last year, we spent about INR 80 crores in capital expenditure mostly on expanding our derivatives portfolio, debottlenecking and adding capacity. Next year, we expect to spend about INR 170 crores. Mostly -- I mean, the large portion of that is the acetonitrile plant coming up in Dahej. And as Mr. Kothari mentioned, the methylamine expansion has got delayed because the equipment has not arrived. The fabricating shops and all have got delays because the people are not there. So we expect -- they are promising now deliveries in September, but look, October [Foreign Language]. It's a question mark. Between September and October, I think we will be able to complete it.

Sure. And sir, with regards to this acetonitrile expansion, I believe it is a 15,000 tonnes per annum expansion. And given the prices today because of supply constraints, what is the expectations in terms of -- when do we expect this global supply constraints to ease off? Or till what time do you feel it can continue?

Kirat -- yes. What -- let me -- Kirat, let me talk.

Yes, yes.

Sir, this acetonitrile is very volatile type of pricing. It goes on depending on the capacities which are available. We are very -- I mean, today -- as of today, we feel that there is some more time for any of these new capacities coming up. And I mean the plant that's shutdown abroad will start up because the automobile industry has not really taken now and requirements for [ ABS additionally ] have not gone up. It is possible that the swing at least will extend for the next 6 months to 9 months and maybe more also. Our capacity increases also to make our customers have 2 separate locations from where they can get material. Our products also go into the pharma industry. It's very important that they have an alternate supply from a reliable supplier but from different locations. That was the idea of putting up extra capacity. And our efforts in looking at the export market also is very -- it's been quite positive, and we expect that, that will increase.

Understand. Is it going to be…

[Operator Instructions] We have next question from the line of Bhargav Buddhadev from Kotak Mutual Fund.

Sir, you hear me?

Yes.

Yes. Very clear.

Sir, I wanted to know in terms of how much of our acetonitrile would be exported as of now or everything would be consumed in the domestic market?

This type of information, we don't part.

Okay. Secondly, sir, in terms of utilization with our pharma and agrochemical customers, would it be fair to say that their utilization levels have essentially not been impacted during this COVID situation?

They have been affected, but now I'm more concerned about the restrictions that may come up, where I found the pharma companies may have issues with their -- at the end of the day, products they'd coming into India.

Sorry, sir, your voice was not very clear, sir.

Yes. I'm -- [ was saying ] that because of this China issue, the pharma industry depends a lot on chemical intermediates from China. Now because of this, there could be some sort of a break in the supply chain, and that may affect us but not for every one. Some of the products, it may -- we get affected.

So broadly, sir, what could be the utilization at your customers? And is it possible to quantify or very difficult to say that?

Yes, it's difficult to say, and we may not want to also quantify.

We have next question from the line of [ Siddharth Mehta ], individual investor.

Yes, this is for Mr. Yogesh Kothari. First of all, congratulations. We are very happy to be with your company as an investor and a shareholder for the last, maybe, 6, 7 years. And we have watched this company grow and bloom, and I really credit you for having the integrity, the focus, the governance and the quality. This is very rare in today's world. So thank you for that, and congratulations for that. And would like to suggest that maybe you can have a meeting one day with the analysts and the investors, so that we can thank you in person and also get a chance to meet the management and the key people. My question relates to what you see in the demand because of the situation today with the virus? How do you see this demand folding out? Do you see adequate demand and sufficient demand? And also, what do you see in terms of pricing? If -- when the fluctuations happen, does the price also move rapidly up and down? Does that affect our sales and our margins?

See, there are pluses and minuses because even in this COVID issue, some of the products which are going to be used as treatment, like the one which some companies have already started manufacturing in India, there are some of our products going into that. So there is a positive sign from that angle. But overall, the pricing will again depend on demand and supply. So as long as imports are not coming, and there, we are sort of happy -- not happy, but at least because the rupee, to some extent, has remained low. So that is giving us some boost.

Okay. How -- so as far as you are foreseeing, it's a mixed picture, if I understand you correctly?

Correct. Correct.

All right. And what is your sense that if this mixed picture continues, at the end of the next FY, do you see a 20% or 30% increase for a company in sales and profits and so on?

It is difficult to say anything just now. Because a lot of uncertainties. I don't want to make any comments on that.

Okay. Okay. And please kindly consider my suggestion. We would like to meet you in person also.

Okay.

We have next question from the line of Amandeep Singh from AMBIT Capital.

Sir, firstly, can you help us with the utilization levels for FY '20?

Kirat?

You see, utilization levels are very difficult because we have about 12 plants, and they vary very widely. But I would say on the whole, about 80%, 85% utilization -- capacity utilization would be there, which is quite on the edge for some plants because 80%, 85% is fairly high. And so that is why we need to expand things like acetonitrile, methylamine and these kind of plants because our capacity utilizations have gone.

Sure, sir. And sir, on acetonitrile, can you help us with the current realization for the product? And with competition now commencing there acetonitrile production, has there been pressure on the realizations?

I think these are all depends on the demand supply. Again, the pricing today is not dictated by a competitor in India. It is what is coming from USA or from -- I mean, from Europe or from Japan or from Korea or China. Because in the end, customers have choices. So they would rather buy from people who are -- they are very confident of giving them the best quality material available and at a price which is competitive. So we have been quite -- very successful in that, and we have been able to capture the market which was being run by all the foreign companies earlier.

Sure sir. So as a follow-up on that, sir, I mean, we have seen acetonitrile prices holding up to high levels for almost 1.5 years now. And the last time acetonitrile prices held up at such levels for as sustainable period was post the GST in 2008. So how much longer do you anticipate these prices to sustain at current level? And are you hearing of any capacity addition in acetonitrile globally?

I've not come across any capacity addition that we except -- most of it was coming as a byproduct of making of acrylonitrile, which has come down because of the ABS plastics issue because of automobile industry. So that way, there is a breather for us for the time being.

So we have next question from the line of [ Rajeev Rupani ], investor.

Yes. Congratulations to the management on good set of numbers. Sir, I had a question. We have seen a very good performance, improved results for the company. So would you attribute it mostly to the acetonitrile product?

Yes, if you -- to an extent, yes, but we have some other products also, which are also contributing more than what they were contributing earlier, and we have added some new products to change a lot of -- I mean, we have improved our processes which are [Technical Difficulty]. All this condition is really helping us.

Okay. And I would like to know what is our current capacity for acetonitrile? And how much are we adding?

See, we have already a part in [Technical Difficulty] where we have a capacity, 14,000 tonnes -- yes, 14 -- sorry, 40 tonnes per day. And we are putting up a new plant in Dahej, which is going to be almost 50% more than this. So we are going to be quite comfortable with the availability of the material. And since our process has been -- I mean we have been very confident with the quality of products which we get, we do not foresee any issues in marketing our products.

Also a follow-up question earlier investor asked. I think our competitor has -- is adding a lot of acetonitrile capacity. I think they have environmental clearance for about 18,000 tonnes, 19,000 tonnes. So will that affect the acetonitrile end prices? And they have started production.

Definitely. Any new capacity coming in the market definitely affects. So we don't know how it will effect. So -- but in the end, there is a growth taking place to some extent, plus there is an export market. In totality, we do not really fear this. So we are quite confident that we will be able to succeed in this.

We have next question from the line of [ Omkar Kulkarni ] from [ Sri Invest ].

Yes. In the new capacity, which is coming up at Dahej, what's the maximum revenue you can generate from that?

Kirat?

Yes. If you take about 15,000 tonnes -- yes, I presume you're talking about the acetonitrile plant, which will come up in '21, '22?

Yes.

Yes. Okay. So that's another 15,000 tonnes to 16,000 tonnes. And...

Kirat. Hello?

Hello? Can you hear me?

Yes.

K. P.?

Yes.

Just give him a round figure.

Okay. So that would be about INR 300 crores to INR 350 crores -- INR 300 crores and INR 350 crores on the top.

Okay. At the maximum capacity -- fully utilized capacity?

Fully utilized, at current prices.

Okay. At current prices. Okay. And what about the recent capacity which you will be doing?

I'm sorry, I didn't get that. What recent capacity?

This is about the capacity which is coming on stream in '21, right?

Correct. '21, '22.

Yes. And what about the recent one which you did?

No, no. We already have a plant in Kurkumbh, which is manufacturing, say, 40 tonnes to 50 tonnes per day, so which is anyway going on. This is only a flexibility on top of our existing plant, plus growth in the demand which will take place. So the pricing -- in the end, revenues will all depend on the final price. Today, the prices are very attractive, but maybe it may not remain that high.

Yes, correct. And in terms of, say -- I know you cannot give any guidance because of this corona issue. But structurally, how do you see the -- your industry shaping up? Or the company shaping? How it will be doing in terms of the favorable factors for the industry, say, next 2, 3 years?

Our products are -- fortunately, a large portion goes into pharma industry, agrochem industry also. And pharma industry is definitely doing quite well. As I said earlier, that only issue could come up is, if there is a restriction on the imports from China about the products which the pharma industry imports as their inputs, then we may have some issues. But today, we -- I mean, this is again a guesswork because these are important chemicals which they have to have.

Correct. Yes, but I'm asking more about from a 2-, 3-year point of view, how do you see the industry as well as your company doing in that?

It's quite -- it's going to go up only. Because whatever you say pharma industry with our population and the requirements which are there and the health care, which is needed, it is bound to go up.

We have next question from the line of [ Keval Ashar ] from [ Investment Options ].

Sir, I would like to congratulate on your results first. I had 2 questions. So the first is we had grew good margins this time. So are the margins sustainable? And can we grow the margins in times ahead?

Well, we hope to -- hope that they will be remain sustainable, but it is, again, a question mark. Again, lots of issues surrounding this COVID plus imports can also come. We have other producers in India also. So it's a combination of things. But -- we -- hopefully, this margins will remain in this level or improve.

Okay. Got it. And the second question is, are we planning any CapEx this year? Any major CapEx?

Sorry, repeat the question.

Are we planning any major CapEx this year?

Well, it is ongoing CapEx now. One is this methylamine expansion, plus is acetonitrile new plant in Dahej, plus, we are putting up some small, small projects, which [Technical Difficulty] in some of the specialties, which we are in. Then we have also in one of the places we are making the plant more useful by producing more chemicals. So it is a continuous process, and CapEx is going to be needed there.

So we have next question from the line of Viraj Mehta from Equirus PMS.

Congratulations for a good set of numbers. Sir, just had 2 questions. One, with the amount of CapEx that we are seeing the pharmaceutical companies are doing in the recent last 6 months and our announcement over next 2 years, this CapEx is higher than what they've done cumulatively over the last 3 years. Are we getting any indication? Or do we have any sense from our buyers that the growth that they have provided us in last 1, 2 years is going to be significantly higher across products going forward? Because what I understand last 1 year or 2 years has been good for us because of agrochemicals and not really pharmaceutical products. But going forward, that segment is also…

But that is not correct. That's not correct. More pharma and less agro.

Okay.

It is not only agro, it is more pharma and less agro.

Sure. Sure. So sir, again, have you got any front-ended indications from our clients -- end clients?

See, they are always -- see, we are also finding new customers. At the same time, the existing customers are also wanting more materials. So that itself is an indication that the requirements are going up.

Sure. And sir, second question. Last year, we had talked in the AGM that over 3, 4 -- or 4, 5 years, we should be able to do INR 2,000 crore revenue. How much total CapEx do you think we will require over this 3 years to reach that target?

I think minimum INR 300 crores or so over a period of -- after finishing these projects what we already have in pipeline. Others will be at least INR 200 crores to INR 300 crores -- INR 300 crores or so, which also we have some ideas in mind. So once these projects are done, we will take them up immediately.

We have next question from the line of Umang Shah from AMSEC.

I had 2 questions. Sir, the first question is that considering there are only 2 players in India who have such large capacity of aliphatic amine. What are the entry barriers which stop other players from getting into the industry, considering the high margins?

Well, there are no entry barriers except -- of course, the capital costs are now higher. Plus, this is a chemical -- I mean it's a process where -- it's a continuous type of processes. So mentality should be there to get into something which is of continuous nature. I'm sure other people might be planning projects looking at this type. But then they have to also see the newcomer is always going to have issue in entering this type of a market, which is a well-established market by 2 players. And internationally, also, if you see, there are only 4, 5 -- about 3, 4 big players in the range of products which we and our friends in India make. So it's not so simple. Not so simple or rather it's not easy. I mean, nobody would take up an investment because something is doing well because it took us so many years to come up to this level.

Right, sir. And also I think your initial technical collaboration with U.S. company has also helped.

Yes, of course. We had a -- our first 2 projects that is for ethyl amines and methyl amines were with American technology. Subsequently, then, we developed it, more improved on the processes, and we also then set up our R&D center, and we developed many new other products, okay, based on amination with ammonia and with alcohols. And we have been successful. The acetonitrile project, it took us 3 years to develop from pilot front to the end level and it has helped us a lot.

Right, sir. That's very helpful, sir. And the second question, sir, is, sir, if I look at the long-term financials of 18 -- 17, 18 years, I think what has significantly improved our margins is the decline in power costs, which has been structural and which has been -- the company has done really well in managing the power costs, which is significant. So going forward, next 5 years or so, are there any other measures that you're looking at, which will help in increasing your margins? It could be better product mix? Or it could be more of speciality chemicals? Or it could be at the cost structure level also? If you could comment something about it.

See, it's going to be mainly -- of course, going on improving the process so that you improve your yields, consumption of your raw materials and utilities, the energy and other things. So that is a continuous process. At the same time, we are always looking out for new products, specialty products, which will add value to our existing set of products and give overall improvement in our top line as well as bottom line.

So we have next question from the line of Siddarth Mohta from Principal Asset Management.

Sir, 2 questions. Sir, you have mentioned that our methylamine capacity -- additional capacity will come by September 2020. Sir, so is there enough demand for this?

We hope so. Beg your pardon, we hope so. That is because still, there are issues because of this COVID.

Yes, sir, might be 1, 2 months here and there. Sir so, is there any enough demand for this additional capacity either in our existing or the new product application as a stand-alone methylamine product or in some of our derivative or downstream products?

See, some of the methylamines we use internally for making some of these derivatives. And some we are going for some new products, which will be also using a methylamine. So -- plus the existing consumers are also increasing their requirements. So -- and methylamine is one product which is not easy to transport. So that is definitely going to be -- definitely a plus point for us.

Okay, sir. Sir, in case of acetonitrile, our additional capacity is going to account next year. So is there any new application that we have developed? Because, again, what I understand that the purity label, it plays a important role in this particular segment. So are you able to crack the high pure -- high purity label application in this segment, sir, so which will help us to develop the new market or the new product?

Yes. We have always attempted to -- or rather we have been producing the best -- very good quality product -- best. So we are exporting also our product as well as, [ exporting ] to people over here who are exporting their products. So it is something which we have achieved, but we are going on improving the purity levels.

Okay. Okay. And sir, final question from my side. Sir, would it be possible for you to give some direction on new products or derivatives, which is there in our R&D pipeline which is going to be launched in the coming 12 to 15 months? Or any new chemistry where we are -- where we have seen some initial success at the lab scale, sir, that would be really helpful.

I'm sorry, I will not be able to give you that information. But when we are out with the product, we will inform.

Okay. But in the sense, are you satisfied what is happening within your R&D pipeline, whatever you have expected a couple of years back and whether you are near to that target?

We are, but this last 3 months have gone waste because it's all closed just now because the laboratory is closed. But we are restarting immediately now.

Okay. Okay. Great. And sir, something on this raw material front. Most of your raw material within ammonia, acetic acid, methanol or ethanol, whether you have seen any spike in the prices or it continues to remain at a subdued level?

Yes, it's remaining at a subdued level. So that has helped us.

Okay. And as of now, they continue to remain at a lower level whatever visibility we have?

Correct.

We have next question from the line of [ Siddharth Rajpal ] from Reliance PMS.

I'm actually -- I just wanted to ask regarding the gross margins of the company. On a sequential basis, we have seen an improvement in the gross margins. So I just wanted to ask -- I mean, is the raw material prices become more favorable and especially since we use ammonia and ethyl alcohol for making a product. So have you seen some reduction in ammonia prices? And do you think that this is going to continue further as well and we will reach probably 50% in terms of gross margin levels in the future?

Yes. So the ammonia prices and methanol prices and acetic acid prices have definitely -- currently, they are on the downward side, but they've held, but you never know how long this will last.

Okay. And sir, additionally, on the margins -- I mean, in the last few quarters, we have -- on this quarter, we have got the highest margins that -- we have about 28.8% kind of margin levels that we have seen in this quarter. So are these -- have these margins been because of good product mix? Or is it because of a reduction in raw material prices? And going forward, are these kind of margins sustainable? Or what will be the normal case margin, if at all, this margin is not sustainable?

This definitely is a combination of both raw materials giving us support as well as a very good product mix. Both have helped in this.

Okay. So are these margins sustainable going forward or?

It will all depend on the [Technical Difficulty] end markets as well as pricing -- raw material prices. Because of various reasons just now, prices are quite attractive.

So we have the next question from the line of Nirav Jimudia from Anvil Research.

Congratulations on a good set of numbers. I have 2 questions. Sir, if you can just share us the broad breakup in terms of our sales to various sectors like pharma, agro, rubber chemicals, foundries, personal care products, that would be helpful, sir.

Yes. Often, I would say pharma would be about 50%, agro would be about -- I mean, this is often, I'm…

Broad breakup, yes, sir.

Agro would be about 50% to 80%, rubber chemicals would be about 5% to 10%. And various other applications are there, [Technical Difficulty] industry, [Technical Difficulty] are intact.

Sir, your voice was slightly unaudible, sir. Could you just please repeat, if you don't mind, sir?

Well, I would say pharma would be around 50%, agrochem would be around 15% to 20%, rubber chemicals would be 5% to 10%, and the rest would be quite like [Technical Difficulty] chemicals plus [Technical Difficulty] industry, many applications.

Okay, okay. And sir, second question is on, sir, like, earlier participant mentioned about the power costs, like, how we have reduced our power cost from 15% to 10% in last almost 16 years. So this being a consolidation here, and with coal costs also coming down, have we initiated some cost optimization measures internally in order to probably -- since probably some of the sales might get impacted, as you mentioned. So any cost optimization measures which we have initiated this year?

Yogesh, can I take this?

Yes, okay.

Yes. So Nirav, you're right. Over the period of maybe 10 years or so, we have reduced our power, fuel, water costs by almost 4 percentage points when you look at the -- as respect -- with respect to the sales. Now most of this has come from the benefits of volume because power and fuel do not go linear with volume. They are a little semi-fixed kind of nature. So a lot of that is because of that. The second is as more volume is given, then many, many projects, small, small projects of energy savings add on value. For example, about 3 years ago, we added a solar site. We have a turbine, which has expanded by almost 50% the electricity which we generate in Kurkumbh. Looking at wind and solar energy sources for electricity in Patalganga, Kurkumbh, Dahej, so we are always constantly -- in fact, Dahej also we are looking at seeing turbines generate our own electricity. So we're constantly looking at energy as a field, not just to save money, but it's environmentally thing to do. As a responsible care company, we need to focus on conserving energy rather than spending it freely. So it's not just the cost, it's also a matter of environmental touch.

Correct. And sir, normally, from January to March, we generally get our required quantities of ethyl alcohol. So have been successful this year also to get the required quantities at best of the prices that we normally procure? Because we generally find that this ethyl alcohol is also getting applications for that IP, which goes for sanitizers. So has there been any availability issues in terms of ethanol as well as the pricing threat -- pricing escalations?

Yes, actually it has happened. Kirat? What has happened is now our usage of the alcohol made in India has become less, and we are mostly importing it. So this has not now become seasonal. It's all -- because there it is made from corn. I think -- earlier, we used to buy it locally. That's why that seasonality was there. We need to buy large quantity and stock it up, which is not necessary now.

Okay. Okay. Okay. Got your point. Sir, last question, if I may. Sir, if you can just help us in terms of the broad sales breakup in terms of amines, derivatives, and specialty, that would be helpful, sir.

It's again very difficult because our -- some of the products are such that they again fall in amines also as they may fall in derivatives also. Kirat, it would be what about 50% amines?

Yes, about 50% amines, about 25% derivatives and maybe 25% specialty. I would -- it's in that region. Maybe a few percentage points here and there.

We have next question from the line of Rohit Sinha from Emkay Global Financial Services.

Sorry, actually, my line was dropped somewhere between. If my question is being -- getting repeated. So in line with the last participant's question, just about the mix between the amines there that you gave us specifically. So would it be possible to just give a volume rough figure about what kind of volume growth was there in these 3 segments?

I think we would not like to give details.

Okay. And sir, so broadly, if you talk about the ethyl amine and methyl amines industry as a whole, which meets the segment we see higher growth in methyl amines processing space or ethyl amine space?

See, we are also making other amines. We are making also isopropylamine. We make 2-ethylhexylamine also. So ours is a larger range of products. And to some extent, yes, it is -- like some of them go more into agro, some go more into pharma, like that. But overall, pharma is a larger user.

And there is -- large are ethyl amine, right?

Yes, ethyl is larger. Even methyl also larger because if you see DMAHCL is made from methyl amines and it goes in your glyphosate -- not glyphosate. It is going for…

Glycomet.

Glycomet. So…

Metformin.

Metformin, metformin, yes.

Okay. Okay. And sir, would it be possible to share overall export and domestic mix inside a whole of your revenue?

Approximately, I would say, this is again a round figure. These exports vary from anyway from 15% to 20%, and the rest is domestic.

Sir, we have next question from the line of [ Ayush Jalan ], investor.

It's a follow-up question on something that a participant asked earlier. You had given a guidance that you would be planning mostly around INR 300 crores CapEx to achieve a revenue target that you had given in the earlier con calls or AGMs. I just wanted to know how much of this would be debt and how much of it would be in internal accruals?

I think it is a little bit early to sort of give this because we hope that a large amount of our internals will take care of it. But still, we will go for debt, especially if we are importing anything for that.

Okay. Okay. Understood. And one more question I had on ranitidine for the DMAHCL. In the last con call, you had said that there was some issue with certain clients, but it seemed to be below the FDA level. So do you have any closure on that issue? Or is it still being investigated? Could you help us on that, please?

To the best of our knowledge, there is no issue remaining now. Because most of the customers are buying from us. So we do not feel there any issue remains. But I need to check it up again.

No, as far as metformin is concerned, I think the issue seems to be closed with U.S. FDA. Sorry, as far as ranitidine is concerned. And the metformin thing is being resolved.

[Operator Instructions] We have next question from the line of Kunal Mehta from Vallum Capital.

Sir just one clarification question first. Sir, just you mentioned that your capacity for ethylene alcohol was 40 tonnes to 50 tonnes per day. So this is operational throughout the year, sir? Or we gradually ramp with your capacity from around 10 tonnes, 30 tonnes, 35 tonnes per day?

Sorry. Just come back slowly.

Yes. Sir, you mentioned that our capacity of acetonitrile was around 40 tonnes to 50 tonnes per day for the entire year. So this was operational throughout the day -- your operating -- throughout the year, we are operating at this level itself?

Yes. We operate throughout the year at an average of around 40 tonnes per day. But I would say that this again needs -- this client needs a lot of cleaning and repair work and all. So that's why it is 40 tonnes production.

Sure, sir. And sir, just one follow-up question on this. We are announcing the CapEx of 15,000 tonnes in acetonitrile as it would start from FY '22. So I wanted to understand that once we are off this peak in prices and the prices normalize after 12 months, assuming. So are you confident that this additional 15,000 tonnes, which we have built -- which we are setting up, at least we'll be able to use that capacity over a period of, I would say, 3, 3.5, 4 years? Is that a fair estimate?

Yes. We are very confident. And we are in a situation so that -- we are doing also for several of our customers who are insisting that we must have 2 locations so that any time they don't have a problem of getting the material. So the idea is to give our customers a comfort level as well as increase our capacities because the growth is also there.

Okay, sir. And we see this basically beside -- when we adjust production, business -- when the auto cycle recovers, I would say, maybe 24 months down the line and we have huge amounts of acetonitrile coming from normally the acetonitrile group. Despite that acetonitrile coming into the market after 18 months, you would still be able to maintain our [ range ]? Do you think you could do justice with the plant which we are setting a bulk capacity?

See, one thing you remember that what acetonitrile we produce is from acetic acid and ammonia. And it gets classified as a green product. Because there are no real byproducts in this. While the acetonitrile, which comes as a byproduct of acrylonitrile, does have impurities which may not be suitable for some industries. So it is for -- after a lot of thoughts and people are really sort of very happy that we are able to produce this inside large capacity on a continuous basis.

[Operator Instructions] We have next question from the line of Vaibhav Badjatya from HNI Investments.

So as far as the replacement cost is concerned, you have also earlier in the call indicated that capital cost has gone up. And your competitors also indicate that capital costs have gone up substantially in the last couple of years, maybe 5 years or so. So what is unique to our industry that is leading to this higher replacement cost? Is it something to do with pollution control norms? Or what is the reason behind it?

I have not understood your question properly, but when you say capital cost of the plant and equipment or of the whole project?

Yes. Of the -- on the whole project basically. That created entry barrier for any new player in terms of making the products in the same price. If the capital cost is high as compared to us, then definitely, they are at a disadvantaged position. So I just wanted to understand that why this cost has gone up so much?

Let me tell you -- see, our size is such that it is too small for very large people, and it is big for very small people. So we are in between. So we are able to manage in this. Now why the cost has gone up, I don't know what you mean by that.

Okay. Probably, I will take this offline. And sir, lastly, earlier in the call, you alluded that earlier you used to kind of procure ethanol from -- within India, then you shifted to outside India, which is made out of corn. So why this is not happening in India? Why the corn is not being used to make ethanol in India? I mean, any reason for this shift? Is it price competitive or why the trend is not in India?

See, in India it's made from sugarcane because there's ample sugarcane and the whole UP as well as Maharashtra, the sugar industry is based on this. Now government is helping the sugar industry by allowing them to sell ethyl alcohol as a plan to the petrol. And they are fixing up a price which is quite high. So that's why all the sugar mills are producing ethyl alcohol from their own molasses, which comes out from the sugar mills. So that's what is helping them produce the ethanol and selling into all these refineries.

Sir, we have next question from the line of Nav Bhardwaj from Anand Rathi.

Sir, short question on the availability of land. Is there enough land available for expansion in Pune as well or all new capacities are going to come in Dahej?

No. In Pune, we have some space. We've got our EC clearance for some of the projects. And Dahej, we have also enough space for the time being but we will look for some more space in the long -- in the short term, maybe after these projects are over.

Great. Also sir, a quick question on -- could you shed some light on the quantum of capital usage for methyl and ethyl amines? And how much do we sell it outside?

Often, I'm not able to tell you this, but we use methyl amines for 2, 3 products, like DMAHCL, which goes for ranitidine and metformin. We use -- we also make DMAPA which goes for manufacturing of betaines, which goes in shampoos. Then we make huge ethyl amine for manufacturer of DEHA, which is diethylhydroxylamine, which goes for water treatment and some other polymer applications also. We also have some other specialty products based on ethyl amine.

Great, sir. And lastly, sir, on our export mix, do we see this changing in the near future -- foreseeable future? Do we see that 15%, 20% turning into more of a 30% to 50% kind of range based on the visibility, 1 or 2 years?

No. I'm often not able to look at. But I think that if the Indian market growth as a consumer -- I mean, as a customer base increases, our products will be needed in India itself. I would rather make them sell the products in India rather than export them.

[Operator Instructions] We have next question from the line of Ronil Dalal from AMBIT Asset Management.

Congratulations on good set of numbers. Sir, my question was that -- so given that even your competitor is adding a lot of ethyl amines capacity, are we still going to go ahead with the switching over of methylamine to ethyl amine at Patalganga?

That is already there. We're already manufacturing.

It is done. It is done.

We're already manufacturing at Patalganga. We've already spent money on the whatever necessary things are there. And that is a continuous process. We go on adding new equipments to improve the process.

Okay. So that is…

Capacity is much more than what is at Kurkumbh.

Right, right. You were going to add 6,000 to 7,000 tonnes?

Unfortunately, would not be able to tell you.

Okay. Okay. Sure. And sir, the proposed ban on chemicals. So there were some government notification was there propose ban on some chemical products. So are any of your businesses affected by that? Or any of your revenue mix affected by that?

No. Which ban you're talking about?

You're talking about the agrochemicals?

Yes.

Yes, yes, yes. No, there is still a draft.

Yes, yes, draft, proposal, proposal -- proposed ban.

And the government has already indicated that exports will still be allowed.

Exports is fine. Yes. I mean, given the direction in a year or maybe more than a year, I mean, maybe some of those could get banned, but would you be impacted in any way if that happens?

Yes, to some extent, yes, but not very significantly.

So would it be a single-digit revenue impact, something like that or no impact like that?

See, none of our products goes, I mean, very heavily into any one similar products. But some products we used to manufacture for a long time, and they have sort of been over a period of time phased out in any case. But this is -- personally, I don't think is going to affect us much. Yes, it will be in single-digit type of percentage.

We have next question from the line of Alisha Mahawla from Avendus Wealth.

Earlier in the call, I don't think you gave this details out. For FY '20, can you split your growth into volume growth and value growth?

I can do one thing. Kirat, can you just…

Yes, I'll just take that. The…

One liner.

Yes. Value growth is about 17%, as you can see from the numbers, and volume growth is plus or minus 1% of that. So it's almost the same. Though within that volume, there may be some major ups and downs. It's about the same, 17%, 18%.

Okay. And just for my understanding, so I believe it was mentioned that in H2 of FY '20, the volume growth was almost flat with very little volume growth. So is this because of limited capacity being available?

No.

Was it a capacity constraint issue?

No, no.

It wasn't a capacity issue. And it was not significantly lower, but just -- overall, if you say that first half, we grew at 20%, second half, we grew at 16%, 17%, then the average came to 18%. That kind of number.

Okay, okay. Yes. Okay.

You must -- the last week of March, we lost sales because of the shutdown.

Understood. Understood. And just my last question is, yes…

About 1 week we lost.

Yes. And one last question, sir, this methylamine capacity that is expected, all of it is going to be used to produce derivatives, right. Any indication of what is the kind of revenue that we can look for from this capacity? Because I was…

Not all of it is going to be used for derivatives. It's both merchant and internal use. And a 50 -- increase of about 15,000 tonnes would -- at peak, when all of the 15,000 tonnes increase, is used up at the price of about INR 80 or so, I think it is, would be about another, what, 150 -- 100 tonnes, 150 tonnes -- INR 100 crores and INR 150 crores.

Okay, sir. And any indication how long will it take to reach the peak capacity?

Well, I hope quickly.

I don't think [indiscernible]

It won't take any longer.

We have the last question from the line of Amandeep Singh from AMBIT Capital.

Sir, can you help us with margin guidance for the next 2 years, assuming that acetonitrile prices start reverting to FY '19 levels in FY '22?

Difficult to answer your question. Because at this stage, we would not like to think of future in a negative way. So let us keep it the way it is today.

Sure, sir. And sir, are you witnessing any pickup in demand from the international markets in the recent past? And if yes, can you highlight the products? And how competitive are Indian players in the export markets?

See, our products are made internationally in Europe, U.S.A., China, and Japan, and Korea, and all. So there is competition everywhere. So we have to be in a situation that we are able to compete as well as the customers over there, they will want your product just in time. So all that logistics and all has to be worked out very well. But we have been successful over a period of time, which has helped us a lot.

Sure, sir. And lastly, one bookkeeping question, sir. So sir, the tax rate during the year was around 18%. So can you help us with normalized tax rate going ahead?

The normalized tax rate will be about 22%. 22% -- the regular one. This is because of the deferred tax assets which we have had to use up.

The tax rate change from 39%, down to 25% and the deferred tax had to be recalculated.

Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments. Sir, over to you.

Thank you very much HDFC Securities and all the participants. I'm very thankful for you giving us an opportunity to explain to you what we are doing and how we are doing it. Hopefully, we will continue to do well and maybe better. And I just want to thank our people who are in this call Mr. Rajagopalan, Mr. Rahul Mehta, Mr. Kirat Patel; and Mr. Chintamani Thatte, whose name I had forgotten earlier. So please -- thank you very much everyone. Be safe and be healthy. Bye-bye.

Thank you very much, sir. Ladies and gentlemen, on behalf of HDFC…