Apcotex Industries Limited (523694) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '21 Earnings Conference Call of Apcotex Limited -- Industries Limited (sic) [ Apcotex Industries Limited ]. [Operator Instructions] Please note that this conference is being recorded. At this time, I would like to hand over the conference to Mr. Anuj Sonpal, CEO of Valorem Advisor. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone, and a warm welcome to you all. My name is Anuj Sonpal from Valorem Advisors. We represent the Investor Relations of Apcotex Industries Limited. On behalf of the company, I would like to thank you all for participating in the company's earnings conference call for Q1 FY '21. Before we begin, I would like to mention a short cautionary statement. Some of the statements made in today’s earnings call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by an information currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings conference call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. Now I would like to introduce you to the management participating with us in today's earnings call. We have with us Mr. Abhiraj Choksey, Managing Director; and Mr. Anand Kumashi, Company Secretary. Without much delay, I request Mr. Anand Kumashi for his opening remarks. Thank you, and over to you, sir.

Thank you, Anuj. Good evening, and welcome, everyone, to this earning conference call for Q1 FY '21 under review. Along with me in today's earning call, IR Managing Director, Mr. Abhiraj Choksey. I hope you had an opportunity to look at the company's performance for Q1 '21 as well as the earnings presentation, which has been circulated and uploaded on the website of the company as well as on the stock exchanges. To brief you on the financial performance for the first quarter of the financial year ended 2021, the total revenue stood at INR 60 crores with operating EBITDA loss of about INR 4 crores for the quarter and a net loss of about INR 7 crores. From the numbers, we can make that this quarter, we are the worst point of the COVID-19 pandemic. As you know, both plants are closed from the last week of March 2020 as per the lockdown orders, but we obtained the necessary permission from the concerned local authorities to start -- restart for production at the end of April. We did started ramping up slowly from the end of April. And in the month of June 2020, we were at 80%, 85% of the pre-COVID monthly volume sale -- volume levels. Our sales for the quarter were lower by about 59%, but our volume sales were lower by only 45%. However, lower volume sales, coupled with a high cost of inventory, which has resulted into loss of about INR 7 crores before tax. As demand for few industries was slow, we modified a few sites to manufacture more of NBR latex for gloves, where the demand is robust. The marginal investment we made these assets more flexible will be complete in Q2 FY 2021. On antidumping petition part to dumping of NBR into India continues since the last financial year. The sensitivity has been initiated by the designated authority in Q4 FY '20 against South Korea, which accounts for 50% of the NBR imports into India. Fresh antidumping petition has been filed in Q4 FY '20 against Russia, China, Japan and European Union. The case was initiated by the designated authorities in Q1 FY '21. Several cost-cutting measures and innovative ideas being implemented and considered in order to -- in order for the company to successfully withstand the impact of COVID-19. To update you on the CapEx projects, the last 3 years CapEx spend of around INR 100 crores, FY '18, '19 and '20. We completed as planned by June 30, 2020, albeit got delayed out of 3 months on account of the COVID. The capacity announcement Valia front and the reasonable savings expected in Q2. Our new project focused our effort on '21 XNBR Latex for Gloves to diversify product range, industries and geographies. Investment estimated around INR 100 crores. We're in the design phase now and hope to obtain environmental consent by October '20 to start the construction in Q3. Before opening the call for the question and answers, I would like to hand over the mic to Mr. Abhiraj Choksey, our Managing Director. Over to you. Thank you.

Thank you, Anand. Good afternoon, everyone. I just wanted to -- before we start with the question and answer, I just wanted to spend a couple of minutes discussing or recapping on the last couple of years for the company. If you'll recall, after we made the acquisition in 2016, we turned around the company, and we had pretty strong results for FY '18 and FY '19. We were upbeat about FY '20, but suddenly, towards the second quarter and onwards, quite a lot of dumping from a couple of countries for NBR especially started. And that resulted in FY '20 being more challenging than we had initially anticipated. However, we were coming out of that again in Q4 of FY '20, well of course, COVID the lockdown began towards the second half of March. And then, of course, the last quarter was really difficult for most companies, including ours. There were no exceptions. So we, as Anand mentioned, were shut for a month and then we slowly started ramping up. We are surprised with the pullback -- pleasantly surprised with the pullback, and we're seeing reasonably good demand across most industries that we are catering to. As again Anand -- so even in as early as June, we were back to 80%, 85% of pre-COVID levels, and the momentum continues and July is even better. We are quite confident that with all the work that we've put in over the last 2, 3 months and made a lot of changes, view this adversity into opportunities, and for example, creating the assets to become more flexible, making the assets more flexible, to make XNBR Latex for Globes, which is obviously in pretty good demand all across the world. So -- and several cost-cutting measures and innovative ideas. I am sure that by the end of Q2, early Q3, we should be back to pre-COVID levels, and as a company, we're quite confident, our team is quite confident in doing that. I just wanted to leave you that with these thoughts with you before we start the question-and-answer session. I'll be happy to answer any other questions you have.

[Operator Instructions] First question comes from the line of Farokh from Avestha Management.

Can you hear me?

Yes.

Just had a couple of questions. Firstly, in the introduction, you all mentioned that the new gloves capacity would be INR 100 crores to be spent over the next year. Is -- so keeping that in mind, could you just sort of, again, reiterate what is the sort of CapEx estimate for this year? And what would -- this fiscal year? And what would be the CapEx estimate for next fiscal year? And if I remember correct from previous calls, the money that was to be allocated to the gloves project involved, I think, a figure in excess of INR 200 crores. Is that my misunderstanding? Or where is the variance coming through? And secondly, you mentioned that there has been a repurposing towards gloves capacity from existing NBR facility. So is there any way in the current time that we could maybe accelerate this process of repurposing all of our capacity towards the glove, which is a more attractive -- which is a more obviously attractive market and certainly at this point in time?

Yes. Thank you for your question. I'll take your first question first. Yes, I think there some misunderstanding. So last previous con call, we were talking about 2 separate projects. One was XSB latex for glove and the second was for NBR -- expansion of the NBR capacity. Now the XSB latex for gloves, at that point, we had mentioned somewhere around INR 65 crores to INR 70 crores. And the NBR Line 2 was supposed to be about INR 180 crores to INR 200 crores. So I think you may have misunderstood the 2. So the extent the latex capacity that we had set, INR 65 crores to INR 70 crores, has -- that budget has gone up to INR 100 crores as we went more into the details. But we're also looking at adding more capacity as well as making provision for future additions in the future. So for example, our construction will be a little bigger than what is actually required for the first phase of about at least 45,000 tonnes that we're looking at. But we will be able to then, in the future, add more reactors and other assets without having to have any -- without any civil construction. As a result, the costs have gone up a little. In terms of technology also, we are looking at a little bit more automation so that we can scale in the future. So I hope that answers the first question, Farokh.

So that's INR 100 crores, which will mainly be spent in this fiscal year for the...

No. So it will be over the next 2 fiscal years, this and next one.

Okay. And what about the INR 180 crores to INR 200 crores CapEx. Is that going to be on a sort of -- we will see it as it comes kind of things?

Yes. As of now, we are -- given the dumping that started last year of NBR, we just want to make sure and we should know in the next 1 quarter on the final outcome of both those petitions. Based on that, we will take a call on that business or on that expansion. So hopefully, by -- if not the end of Q2, definitely, in Q3, we should have a decision on that project as well. Also, the other thing is with COVID hitting us and this uncertainty that has been created by COVID, we also just wanted to wait and watch for 3 to 4 months before we embark on that project. So while that's still on the horizon, as of now, we have gone slow on that project And as far as your question on how much of the INR 100 crores will be spent this year and next year, I -- specifically -- I don't have an exact number, but if I were to venture a guess, it would be close to 50-50, maybe 40-60, but more of it would perhaps come in the next year because a large chunk of the payments and the -- would come in the next year -- next fiscal year.

Okay. And on the repurposing?

Yes. We are already doing that. Just to give you an idea, our first intention was to only supply a few hundred tonnes. I still don't want to give an exact number because it's proprietary, but a certain quantity for the next 1 year from our Taloja plant, while we built this capacity in the Valia plant. But with COVID hitting and with the demand uncertainty for some of our other segments, we decided to repurpose some of our reactors in both locations. You mentioned only Valia for NBR, but in both locations, we have done it, in Taloja and in Valia. Today, the manufacturing NBR -- NB Latex for Gloves from both locations. And we are manufacturing almost more than twice of what we were manufacturing in March, for example, as said, in March, of this product. And by Q3, we would be manufacturing maybe 4x the amount that we were manufacturing pre-COVID. So to your point, we are accelerating it and trying to convert as much as possible. As you can imagine that the plant is not designed for XSB latex. So it's not the most ideal way to manufacture it. However, if demand in other segments is not strong over the next couple of quarters, then we are able to now make XSB latex for gloves. And we expect that at least for the next 1 year, the demand will be quite robust, and there's no problem with demand there.

[Operator Instructions] Next we have Mr. [ Adnan ] Shah. He's an individual investor.

I have 2 questions. One, first, going through the annual reports, I've noticed, we have a very active equity market operations, like we've bought some 40 companies and sold some 40 companies, small equity investment rate business. Now looking at the size of our company and the volatile times that we are in, isn't it better to just place whatever treasury money we have in a fixed deposit or in a simple investment, so you can concentrate your time and energy more on strategic investments and growth of the core business?

Yes. Thanks, [ Adnan ]. So first of all, our time and energy, as far as the management team is concerned, is 100% of the core business. I completely agree with you. Until last year, we were managing this treasury through 2 or 3 different advisers. Now what we have done is brought the entire treasury under 1 adviser. And that's the reason why you saw a lot of churn in the last sort of few months is because of this move to 1 adviser. We've also considerably reduced our equity exposure. Our main intention is to maximize the returns for our shareholders for the treasury that we are holding. Of course, the treasury would be used for future projects and for future potential acquisitions. That's the intention. At the same time, we want to maximize the return so, of course, investing is actually is the easiest thing to do. However, in the past, and we've seen this in the last -- we've been investing through advisers for the last 14 years, and we have seen that on average, we have made much better returns in our portfolio have changed any portfolio over the last 14 years, and we've used this money for our acquisition as well. So we've seen quite strongly then, yes, we should not be managing this money because we lost all our expertise. And so we brought in some good advisers in the past and now the entire treasury is under 1 adviser.

Yes. But the times are volatile and maybe from our core operations, we are facing tough times, and we might get another jolt in the investment also, so just a word of caution.

So just like the equity investments on -- as a percentage of the whole portfolio currently are much lower than they used to be as a result. We also manage that risk in the sense that I think they would be under 35%, 40% currently of the total portfolio. So even if there is a little bit of a -- look, we are long-term investors. We are not looking to trade every day make short-term profits. So we believe in the long term. We should have an exposure to a couple of different aspects and equity being 1 of them.

Yes. And I have 1 more question. The INR 100 crore investment, which we are planning for the latex material for the gloves. Now let's assume as the demand for these materials for COVID comes down. Can you -- that capacity because INR 100 crore you are investing for some other materials?

Yes.

Can you -- for some other material also, the INR 100 crore investment for -- hello?

Yes. I can year you, yes.

And there are a couple of things. First of all, the capacity that we are putting up is not even -- is less than 3% of the total demand for these products as on today. This market is growing by -- in about 13% to 14% per year pre-COVID. After COVID, of course, now that COVID has picked up, at least for the next year or 2, we expect the growth to be much higher because people are not only using more gloves, but they're using more nitrile gloves. As a result of it, the nitrile latex demand is even higher than natural latex demand because these are the 2 different types of gloves: natural latex and nitrile latex.

So even though we're putting up INR 100 crores, it's 3% of the global consumption. And therefore, we -- unlike our other products where we already have already a very high market share in India, this product will be more for the export market. There's only a handful of companies that manufacture this product and we would expect that we would need to make any other product from these reactors. However, your point is very well taken, and that's definitely part of the reason the cost has also gone up from INR 65 crores to INR 100 crores was because we also want to make the plants more flexible or at least have the provision that in the future, if it does happen, then we'll make the plants more flexible to make other products. And that's something that we're going to make some decisions on in the next 2 to 3 months as we finalize the final design for these gloves. Point taken.

Next question comes from the line of Saurabh Shroff from QRC Investment.

Abhiraj, just a quick question on the quarter gone by. If you could maybe give us some sense on what the sales mix was between NBR and the other products. And secondly, you mentioned that you would quadruple your XNBR latex production by the end of December or in the third quarter. So again, there, if we could get some sense on volumes. And this INR 100 crores CapEx that you're putting up, how much is that in terms of tonnage? The 3% of global capacity that you mentioned.

Yes. So in terms of tonnage, this would be 45 -- it would be less than it, so it's about 45,000 tonnes that we're looking at, right now.

That INR 100 crores were new CapEx for XNBR latex?

Yes, which would be about INR 300 crores of -- INR 300 crores to INR 320 of revenue as per current price.

Okay. Even in this particular product, the economics, in terms of the pass through of raw material volatility, et cetera, with 15 days to 1 month lag, all of that still remains true even here? Or is this -- because it's a bit more of a consumable, do you get slightly better terms or worse terms or whatever?

No, it's quite similar. We can pass through with the lag.

Okay, pass through the lag.

And about your question on your -- on NBR, the first quarter, look, we -- obviously, when we started off, the essential products starting off first, which was paper and packaging for packaging because we supply to a lot of companies that, hello?

Yes, I'm here.

So it started off with packaging, I don't have the -- I should have the exact numbers, but if you just give me a second. So I would say that largest chunk would be the latex manufacturing and less would be NBR, because the NBR sales really didn't start till the end of May, whereas latex started from the end of April. I don't have an exact percentage breakup, but I would venture a guess and say about 65% to 70%. 70% was latex and 30% NBR in terms of value.

Okay. And June, you said, was 80%, 85% utilization. July is even better. So is that demand essentially coming from across all of your industry verticals, be it autos, packaging, paper, et cetera? Is it across the board? Or is it sort of concentrated a bit more here or a bit less there?

No. Look, every -- this is on average cost. There are a few that have come back to almost 100%. So for example, the packaging that we're do, paperboard has almost come back to pre-COVID level. As far as, for example, construction, because there was 1 or 2 months -- we supply to the waterproofing industry in construction. So because there was a couple of months where everything was shut, there was a lot of pent-up demand from waterproofing during this monsoon season. So that's done very well. Only export-related products have done reasonably well. Certainly, there are some products that have not done as well. So -- and within NBR also, we supply to the auto industry and the non-auto industry. The non-auto industry like rice roll manufacturing and some other industrial applications has done quite well. And obviously, the auto has not. So I would say, on average, besides auto and maybe one other in this -- 1 or 2 other -- most of the other that just bounce back, we will do well also.

Okay. And I guess we had some exports to Pakistan as well in the past. Is there any change there? Or is that sort of business...

Yes. That was the case as I mentioned in my previous call, last year, in August, because of political reason that we're not able to export to Pakistan anymore. But we have made up that business through other -- by developing other markets. And our exports will be similar to last year in terms of volumes even though we lost quite a lot.

Understood. But this is -- but the time being gone -- I mean, that's not coming back and it doesn't matter. You've replaced it with something else.

That's right.

Okay. Fair enough. And finally, with the power plant and the restructuring debottlenecking you've done at Valia, would you try to have some sort of a margin number for us just so that we can understand, even if it is on a per tonne basis or whatever, just so we can understand the trajectory of how the rest of the year is going to look?

Look, obviously, we expect an improvement in the margin. But however, I don't want to give any number right now because there is -- this uncertainty around COVID is there. But given the projects that we've undertaken, and most of them have been now -- all of them have been implemented, the big one being the power plant. We do expect a couple of percentage points higher than what it would have been without those projects.

Okay. So if we take the current quarter, 6.8% or 7% of FY '20 as base and not even talk about the 11% or 12% that we've done in the past, at least -- we could be close to a double-digit margin, at least. There's no reason to think that the 7% number should be anywhere in the vicinity of reality. But you mean things normalized. I mean barring COVID impact, which is in no one's control. I'm saying just from...

Exactly.

There are a lot of uncertainties around COVID, as you saw in Q1. But I think -- first, I don't want to mention a number, but obviously, it will be a couple of percentage better than what it was before.

Okay. Fair. And sir, just 1 final question from my side. I think it was 2 quarters ago, this whole, I guess, the inversion of one of the raw materials where we are, of course, starting to dump towards that -- the whole reverse chain, has that sort of normalized?

Yes, that absolutely normalized from February, Jan, Feb onwards. But I think you're talking about butadiene being much cheaper in Europe. Yes, because that being much cheaper in Europe than in Asia, that -- currently, butadiene in Asia and Europe is pretty much the same.

Yes. So that sort of shock was a one-off, which you had mentioned, and that's not happened again for whatever reason?

That's right. That's right.

Next question comes from the line of Dhavan Shah from ICICI Securities.

Sir, you mentioned something about the high cost inventory, which resulted into some the operational losses for this quarter. But if I remember correctly, from the beginning of this calendar year, the prices of all our key raw materials were coming down. So I mean I'm just missing on that part. And our inventory days are also between 30 to 40 days. So how have we lost because of high-cost inventory?

So what happened was in -- towards the -- the mass production is going quite strong, and our production was also very strong in both factory in the month of March. When the lockdown was announced, we had -- obviously, we're, like many other companies, we were stuck with inventories in our factories that was going to be shut down until the end of March or early April. What shipped us is that all our raw materials are linked to oil. And as you know, oil, between March and June, fell quite drastically. As a result of which, petrochemical prices fell drastically. As a result of which, our finished goods prices fell drastically. So what the -- the finished goods that we have -- for example, finished goods that we had in stock which were supposed to be sold at the March price, we were forced to sell it in May and June at a much lower price because our customers would not accept the prices that were there in March any longer. And if we wanted to move volume, we have cut our losses and reduce prices by as much as 30% to 35% in some of our products. A large chunk, again, of that loss was in NBR and related products, but it was across the board. Similarly, we've also stuck with high cost raw materials. So obviously, at 30% to 35% reduction in cost or reduction in pricing when you are stuck with high cost raw material affected the company in Q1 fairly significantly.

So how are the prices now?

Well now, the pricing is low, obviously. But luckily now, we are out of -- we have finished all the -- almost all our high cost inventory. So now we're buying raw material at a lower price also, right, so June onwards. The one thing I wanted to mention is that, which is kind of a related point is that even though our sales are lower by 69%, a value that you're seeing to INR 60 crores, but our volume is down only by about 14%, Q1 of this year compared to Q1 of last year.

Right. And our R&D expense somewhat around 2%, something of sales. But we are not seeing any new product development from the company side. I mean these XNBR Latex, these talks are going on since last 2 years. But from that point of time, I mean, we haven't seen any development in terms of the product -- new product development.

So let me clarify something. Sure. So to clarify, there are 2 types of new product development. One is new product development areas. We are going into a completely new industries like this, can be latex for gloves that we -- that we've embarked on. But within the current grades that we do have, currently in this case also that we cater with paper or construction or carpet or textile. There are called, still, developments and new grades for new customers. For example, export markets, what we supply to Southeast Asia for construction, maybe there is difference from what we supply to the Middle East or what we supply to Europe. So that kind of development work, which is incremental product grade -- we call internal grade, new grades for a specific application. That's constantly happening. The other thing that's been happening in R&D is -- the third type of thing that happens in R&D is -- for example, NBR. Our NBR is 1 product, but again there are 4 or 5 different grades. A lot of things that happened is we -- since we took over that business 4 years ago, there are still some customers that we need to ensure that our grade is up in those customers. There's a lot of application development along with the customer which is also part of [indiscernible]. I hope that answered your question. And therefore, the SB R&D team that we have in laying all the types of...

But the chemistry in which you are present. So I mean what kind of new product development can be there it will take 3 years horizon? I mean is there any new product going to come in -- I mean, maybe this is fiscal or the next fiscal, are you developing something on that? Or the -- right now, the base business is also -- is only in the focus, the XSB R&D in India?

XSB latex, NBR, SB Latex and styrene acrylics latex. For these four, as I said, we will keep having new grades that will come out over the next 1 or 2 years. There are, obviously, other things in the works as well but it's too early to talk about them. As and when we are ready to commercialize them, we will announce them.

Right. And the Capex, what you spent this INR 100-odd crores. So can you please share the breakup once again? I mean the power plant is there, then the debottlenecking is also there. So I think debottlenecking cost was somewhere around INR 30-odd crores. The power plant and other cost was also around INR 30-odd crores. But can you please share breakup again out of this INR 100-odd crores?

Look, we don't give project-by-project breakup, but the broad breakup is correct. We spent about INR 40-odd crores in the power plant. We spent about INR 30 crores, INR 35 crores on a lot of -- not only debottlenecking projects, but there were also projects that I don't -- obviously, we can't reveal. So that added up to INR 75 crores. Other than that, look, there are regular CapEx costs that do come about like adding new storage vessels and so on. So those are sort of what I would call maintenance CapEx of about INR 25 crores, that would have happened over the 2 years.

Okay. And the new CapEx, what you are initialing this INR 100-odd crores, so what kind of growth are you looking at?

What kind of what?

ROCE are you looking at...

Oh, ROCE. Well obviously, it's a fairly attractive ROCE. We have not sort of -- we don't want to get into those numbers right now, but I can assure you, it's in the high double digits.

Okay. Okay. And we earlier mentioned some -- I mean, the NBR demand itself is not there. So we were earlier planning to convert that NBR into the NBR latex. So when can we see into numbers? I mean, can we see those 4,000, 5,000 tonnes into the actual numbers post this H1 during this fiscal or not?

It's already started in Q2 -- yes, in Q2, but I think it will improve further in Q3.

But as I said, it depends, then we have no choice to make XNB latex or NBR, depending on productivity margin, look at the...

So right now out of the 20,000-odd tonne capability, how much NBR latex can we make?

I don't want to give -- I don't give -- we don't give numbers like that. I'm sorry, for proprietary reasons.

Next, we have Mr. Karan from Asian Market Securities.

In Q4, you mentioned that because of the supply side disruption, of INR 15 crores to INR 17 crores of sales. So is it fair to assume that, that is reflected in the Q1 numbers or yet it is to be achieved?

I did not understand the question. We lost the sales because of the lockdown. And in Q1, the lockdown continued, so we lost sales there as well. So did I understand your -- can you repeat your question?

In Q4, you had mentioned that because of the supply side issues, we had the order on hand, but we could not supply to our customers' orders.

Because of the lockdown.

Yes, because of the lockdown. Is this now reflected in the Q1 numbers? Or still we have something pending to be supplied to in Q2?

No, those orders, some of them are canceled, frankly. Because, for example, we were supposed to supply some floor export customer. Because we could not supply, obviously they bought the materials from other countries. In cases of India, a lot of our customers were shut for 2 months. So those orders, some of the orders are canceled and some of them got postponed and they were supplied to in the month of May and June. So we don't have any pending orders from Q4, if that's your question.

1 Yes. Okay. Got it. But -- and on the exports, we've seen strict lockdowns in domestic markets. But the exports were not that strict enough. So is it right to understand that exports do wait for us in their current quarter?

Exports, as a percentage, was higher in the current quarter because the opportunities were there. India, as you know, we shut a lot of our customers opened even as late as June or end of May. So as a percentage, last year, we did about 13%, 14%. And in Q1, our export numbers were close to 18%, 19% as a percentage.

Correct. And 18%, 19% compared to what percentage on a similar quarter last year? If...

All of last year, average was about 14%, I think, 13% to 14%.

Okay. And sir, on the CapEx front, apart from the XNBR latex, CapEx of INR 40 crores odd in this current year, what are the CapEx? Because I remember earlier, we were also going to increase capacity of latex by 20% at the existing location? Plan is still on?

That plan is still on. And we will take a final call in the next 2 to 3 months.

Again, there also, we reduced our environmental concern, but that project will be much smaller. It will be...

INR 12 crores to INR 15 crores, kind of...

INR 110 crores. Yes. Currently, it looks like it will be INR 110 crores. So that's a decision we'll take in the next one.

So, also, do we have enough visibility for our user industry that we are going for a key of 20% kind of capacity expansion in the current year?

You're right. There is uncertainty. There is uncertainty, but we are looking at it more for the long-term rather than the current year. So it's not a question of if. It's a question of when. So we may postpone that by 3 months, 6 months. But right now we have enough capacity from -- for Taloja latex plant, but the question is when.

And don't forget, as of right now we are also making XNB latex from our Taloja plant. But when the big project comes up in Valia, being the INR 45,500 crores project comes up in Valia sometime next year -- next fiscal year, at that time, there will be some capacity that will be freed up for other segments as well. So we're looking at all items, and we will take an appropriate action. Of course COVID has, about 6 months ago, if you're asking, there was no question. We are going to go at it because we were running at almost full capacity. But given the current situation, we'd like to wait for 2 to 3 months more and just see the uncertainty around COVID. That's how that's freed up. But we are planning for everything. We have already applied for the consent from all environmental clearances that we need. And we have also started the design phase for that quarter.

[Operator Instructions] Next, we have Mr. BJ Shah. He's an individual investor.

First of all, I wanted to know why the debt-to-equity ratio has increased. That means you are borrowing short-term and putting additional capacity from the short-term fund?

Debt equity ratio has increased. I think increased drastically. It may be because we may have borrowed a little bit at the end of March.

Your finance cost has also increased, sir.

Finance cost has increased, yes, because we had borrowed INR 30 crores last year for this coal power plant project -- sorry, co-gen power plant project. And our working capital last month has gone up because of this COVID issue. So working capital utilization as well.

So that is what the concern is. Anyway...

No, but there is no concern at all. There's little surprise because we're net debt free company. Today, we have more cash in the books than the debt we hold. And this includes the working capital utilization. So as far as we are concerned, and we believe that in terms of...

Your asset turnover ratio has also come down. Your debt equity ratio has gone up. That means...

Gone up compared to when?

FY '19 to FY '20.

Yes. Because as I said, we borrowed some money last year. In FY '19, we had no long-term borrowings. In FY '20, we took a small loan of INR 30 crores for the co-gen power plant project, which has just been commissioned. We expect that we will be paying that back once this -- from September onwards. And you will see that debt equity ratio again coming down. But we may take a loan again for our new projects. So as far as debt equity ratio is concerned, that will be up and down, but we still feel it's a very healthy ratio, and we are completely net debt free. So we have enough cash in the mix. So that is not a concern at all as far as we are concerned. You can't just look at debt equity ratio as a stand-alone ratio. So an asset turnover has decreased because, yes, FY '19, we had very strong numbers, but please remember that in our kind of business, the finished goods prices vary dramatically with the price of oil. So FY '19, the price of oil was on average $80, $85, obviously our per kg cost of our products were higher. Now in FY '20, while the volumes were not very different, the core per kg cost of our product sell. So therefore, the turnover is full, but the assets have remained the same. So that's also -- just as a single number is not fair to look at it that way. You have to understand the context of the business.

I understand. I understood. What happened that last 3 years, somehow or other, our results are not as before.

Sorry, I'm reacting because I think there is an understanding issue. If you see FY '19, we finished FY '19 with the strongest results we've had in the history of the company. In fact -- so when you say last 3 years, that's not...

Sorry, last 3 quarters, last 3 quarters, last 3 quarters, the results are not in line with what it was previously.

And we have explained the reasons why because the main reason being that there was a lot of dumping of NBR that happened and it's continuing to happen. As a result of which, that has been a challenge for the business. And the business has taken certain actions, so that we can use the NBR assets to manufacture other products we see if we need to for example, XNB latex. But you're absolutely right. Last 3 quarters have been more difficult and not -- COVID. COVID is...

COVID is another situation and therefore the things are there that previously, we have no volume of the sales, then you have corrected split, bonus split. And now the volume are there, but the rate has grown dramatically because of the results are bad. That means investor interest has come down.

Well look, every business goes through cycles. I can't deny that the last 3 quarters have been difficult cycles. I've explained the reasons why. We feel quite optimistic that we have understood the reasons and we have taken appropriate actions. The action we have taken is as follows: first, to repeat, we have signed an antidumping petition; we have invested, in the last few -- I refer when the savings from those investments, we will see in the following quarters; we have made our assets more flexible; we have introduced new products; we've taken several cost cutting measures. As a result of all this, I think we'll have the company back on track fairly shortly. The uncertainty around COVID, we know, for at least -- for the next couple of quarters, but other than that, we're optimistic about the business.

Another 3 to 4 quarters from now, we will be back -- another 3 to 4 quarters from now, probably, we will be back to '19?

I hope so, but we don't -- given the current uncertainty, difficult to predict. But we don't give sort of any detailed numbers for future.

[Operator Instructions] Next, we have Ankit Kanodia from Smart Sync Services.

My first question was, again, related to the ApcoBuild product, which you have discussed over the last 2 con calls. You mentioned that you'll share more details in the annual before. But I couldn't find any mention of the ApcoBuild products. So maybe in the next quarter brief presentation, if you can share more details, that would be great. That is when?

Sorry, I think we have this part in the annual report. Anand, if you can add something more about the ApcoBuild.

No. In the next quarter presentation, we'll cover this.

Yes. And next, regarding this antidumping -- regarding dumping issue of India. So this trade issue will always be there. So are we thinking of anything else or how to combat that? So -- I mean, what is our...

Look, obviously, we want to be competitive on our own, but there are -- I mean, we have seen that we have been competitive. We took over the NBR business in 2016. We turned it around in the year '16, '17 and -- or year '17, '18 and '18, '19, we did pretty well, I would say. However, last year, dumping started and we were forced to take certain actions. We believe that as we grow and as we build, we will be in a position to fight this. And I feel, as a company, even today, even with this issue, we still finished FY '19 -- FY '20 at a reasonable profit. Not as much as we wanted and what we had achieved in FY '19, but it does not tell the company ventured to a loss or anything like that. There were 1 quarter that we -- 1 or 2 -- 1 quarter that we had was bad. But other than that, as a company, we are looking at our overall strategy of introducing new products, diversifying product range as well as geographies. And from time to time, this may happen in any of our products, right? Today, it's NBR, tomorrow it could happen in another product. NBR, unfortunately, is a global commodity. And that's something we are to find. And the company -- we're working on an overall comprehensive strategy to fight this, but this will happen from time to time.

Yes. And last question. That helps. And last question is as our revenues and our lot of cost, it includes a lot of raw material commodity cost in play. And as you had just mentioned earlier that because food prices variation, there has been a lot of losses which are occurring now. I just wanted to have an understanding. In terms of EBITDA per tonne, are we on a similar range what it was in FY '19? Or are we a little down?

So obviously, in Q1, the stock losses that we had was in Q1, we don't expect that to continue into Q2. As far as EBITDA per tonne is concerned, I think going forward from Q2, you would -- we expect it to be as good as FY '19, if not better.

Next, we have Nikhil Porwal from Perpetual Wealth Management.

I hope you are doing well. So I had a couple of questions. So can you tell me whether how do these manufacturers in developed nations are able to compete with the manufacturers in developing economies. Do they have some kind of a superior technological capability or some advantage in raw materials?

Are you talking about something specific or...

No, it's just a general opinion. I mean I've been tracking this space globally. And the margins for most of them are sort of the same. So despite us operating in a developing economy, I expect our fixed cost to be lower than them. So I guess that they kind of have some advantage in some technology or maybe some raw material advantage.

I think it's not technology. I think in some cases, it is raw material. Sometimes the raw materials are -- that's been one of the base problems in India is that most of the raw materials that we have today are imported into the country. So if you see 3 out of 4 major raw materials, styrene, acrylonitrile, there is no manufacturer in India, butyl acrylate. And therefore, not only the cost of logistics, but also the risk that someone takes, like today, what happened for us in the month of March, we are forced to hold more inventory. And when cost prices crashed, we are left with higher inventory costs. So certainly, that is 1 advantage that some companies and some countries have where the entire petrochemical chain has been well thought through by the country. And they have all the building blocks. For example, China has -- I don't know, 30 or 40 styrene plants and 15 or 20 butadiene plants. Today, we have 0 styrene plants and, I think, 4 butadiene plants. So we're in a much smaller scale. And in some cases, we don't have the building blocks. That's certainly an advantage they have. The second advantage, I think, they probably have, in some cases, is scale. It's not always an advantage, but in some cases, it could be that even though their fixed cost are high, because they manufacture larger quantity, fixed cost per ton are as competitive as our country. But I think that's something India is improving on and quickly, including our company, is achieving that scale. And I think in the next 4, 5 years, you will see a lot of Indian companies, especially with what's happening with China. A lot of Indian companies are working on scale. I'm talking about small and mid-sized Indian companies like ours and getting to competitive sale. Now just as we can have a government that can -- and in this key environment where petrochemicals are also thought through strategically.

Okay, I would just want to mention the kind of investments being announced in petrochemicals, may take maybe 4 to 5 years. We get someone who manufactures styrene or acrylonitrile and the likes on a larger scale so that the company doesn't have to mention -- maintain materials. So I think this problem of having inventory at a higher cost won't be there going forward.

I think it's absolutely required. I agree with you, in India.

Yes, sir. And I have more questions. Can I get your sense on whether the plan for the company 'over the next 3 to 5 years is going for downstream to reduce the volatility in terms of pricing of products?

As I said, there are obviously many ideas and many things that we've got. But we don't announce that and there is some solid plans that we have in place. So as of now, we -- as I mentioned, we are focusing on this XNB Latex for Gloves project and focusing on NBR expansion because we only have a small percentage of the Indian market and we are the only manufacturer in India for NBR. And we are looking at expansion on our XSB Latex products as well because we feel that over the next 4, 5 years, there'll be good growth in industries like packaging, construction, and there is a good export potential for some of these products as well. So we're focusing on these 3 growth trends as of now that we have announced. Other than that, there are always other opportunities that are there, both downstream as well as inorganic, which we evaluate from time to time. And if something comes to fruition, we'll announce.

Okay. And just about this, last question about the NBR CapEx. So it will go live, I'm assuming in Q2 FY '22. And if you can guide about how do you see the evolution of the capacity utilization of the plant post commencement.

So yes, we are looking at somewhere around Q2, Q3. I think COVID -- this issue with COVID has really thrown it off because a lot of our suppliers and our -- for engineering items, for our project items are facing manpower issues. So while Q2 is definitely doable, it may be October, early Q3 that we are looking, October-November, sorry, of '21, What was the second question?

I think, look, it will take a few months to ramp up. As I said, we have a -- it's a growing market. It's growing in double digits. We think -- and we already will have -- we have approvals in place with a lot of our large customers. So I think we'll hit the ground running, and we could see -- I mean, our target would be to go at up to full capacity utilization within 6 months.

Okay. I was expecting you to answer that. So you kind of gave me a confirmation. And I hope that the company doesn't give any more shorts going forward and you will be consistently happy. I wish you all the best going forward.

Thank you.

Thank you very much.

Due to time constraint, that was our last question. I now hand the conference over to management for closing comments. Over to you, sir.

Thank you all very much for joining us in our Q1 FY '21 conference call. Just to reiterate, it will -- a tough quarter. It's been an unprecedented quarter even though that word has been overused, it really has been unprecedented. And we thank you all for your support and your time. And we remain cautiously optimistic. And while the uncertainty around COVID may affect short-term performance and results, we feel very optimistic about long-term prospects. So thank you, once again, for joining.

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