Camlin Fine Sciences Limited (532834) Earnings Call Transcript & Summary

Ladies and gentlemen, good day. And welcome to Camlin Fine Sciences Earnings Conference Call hosted by Prabhudas Lilladher Pvt Ltd. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Jinesh Joshi from Prabhudas Lilladher. Thank you, and over to you, sir.

Thank you. Good morning, everyone. On behalf of Prabhudas Lilladher, I welcome you all to the 4Q FY '20 Earnings Call of Camlin Fine Sciences. We have with us the management represented by Mr. Ashish Dandekar, MD; Mr. Nirmal Momaya, Director; and Mr. Santosh Parab, CFO. I would now like to hand over the call to management for opening remarks. And after that, we can open the floor for Q&A. Thank you, and over to you, sir.

Thank you. Thank you. I'm Ashish Dandekar. Good morning, and welcome, everyone, to the earnings conference call for the fourth quarter of FY 2020 under review. Firstly, under the circumstances, I hope everybody is keeping safe and healthy. And I wish you -- all of us a safe passage through this COVID pandemic. Before we move on to discussing the earnings, I would like to brief you on the fund-based plans approved in yesterday's Board meeting. We're in the midst of difficult times, especially with the COVID pandemic, and the world economy is being threatened with the likely impacts. The consequences of this pandemic are being debated, and the implications are still difficult to predict accurately. The post-COVID world that we're looking at is looking at global growth to suffer with the economic giants also facing negative growth. Surge in job losses with increase in layoffs resulting into unemployment rates skyrocketing will impact the economies. And with reduced economic activities around the world, this will definitely lead to a demand compression. Our management feels that this is an opportune time to strategize dynamically and be ready to face the post-COVID environment. It would clearly be ideal to be able to de-risk the business due to the uncertainties that are sure to come in the next few quarters, leverage opportunities in the market if we are in a strong position and invest in existing business segments to further growth prospects and also equip the business for changing consumer preferences, which probably will happen. Also, given the current unstable geopolitical dynamics with China as well as the general apathy for us Indians for Chinese products, which maybe will not last for long, but it is still very apt to address the business continuity risk in China for us. Adding additional capital in this time will also allow a much needed financial cushion. It will insulate the company to contain its debt levels and protect solvency. With all these goals in mind, the company has decided to raise the funds. So in the Board meeting held on the 25th June 2020, the Board has approved the raising of INR 180 crores from Infinity Holdings and [ Infinity Direct Holdings ], who are represented by Convergent Finance LLP, headed by Mr. Harsha Raghavan. The deal has been structured as a subscription to equity warrants priced based on the prevailing market price and in accordance with applicable SEBI regulations. The warrants will be paid in 3 tranches with 1/3 paid on subscription, another 1/3 in 9 months and the balance by end of 18 months. However, the company has the right to call for the warrants to be paid at any time with a 30-day notice. The investment will result in a 22.65% ownership stake for Convergent on a fully diluted basis. Additionally, as a critical step towards aligning the interest of all stakeholders and the growing complexities of the business and further in terms of this investment, the company is contemplating the institution of an ESOP for senior management and eligible employees. The company has always started to address this contribution of not only its employees but its directors, and the ESOP's team is directed to cover these stakeholders also. The company has decided to grant a maximum of 4.4 million stock options, each convertible into 1 equity share of INR 1. To shore up the holdings of the promoters, a call option has been granted by Convergent, whereby the promoters can acquire 61 lakhs, 50,000 equity shares at the option price of INR 72 per equity share after 3 years of the conversion of shares against the warrants to be issued by -- issued to Convergent. Customary closing conditions including all shareholder approvals will apply. Let me move on to the purpose of the funds to achieve the goals set as follows, the purpose of the funds that we are borrowing -- getting. Firstly, there's the urgent need to restructure the vanillin manufacturing business in China. We'll discuss this, maybe if you have questions about that or later. CFS own -- the CFS Group owns 51% stake in its China subsidiary of CFS Wanglong Flavors (Ningbo) Company Limited, with the balance of 49% stake owned by a local partner. In CFS Wanglong, CFS manufactures vanillin, which is a key raw material for flavors, fragrances, pharmaceuticals and other areas of application. With the growing global trade tensions in China, we would like to de-risk ourselves by having the ability and flexibility to bring the technology and machinery to manufacture the same products out of India, where the company also has plans to set up a facility to manufacture ethyl vanillin, which is similar but not the same as the vanillin. The second reason then is we want to strengthen our position in the blend market. As you know, we have been growing the blends business from scratch for the last 5 years. And we are at a position now where the more we invest, the more we can expand, the faster we can grow because we have already got a good grip on the market in most of the areas where we are. So we want to strengthen this position by acquiring the residual minority stake in our Mexican blends business. As you are aware, CFS owns 65% in the subsidiary Dresen Quimica Mexico, with the balance 35% stake owned by a local partner, who was one of the founders. Dresen Quimica has 11,000 square meters of our Kosher facility, that is a food approved facility for production of antioxidants, blends and other additives for human and feed sector. Company -- this Mexican subsidiary of our company along with its subsidiaries in Colombia, Guatemala, Peru and Dominican Republic has been one of the best-performing subsidiaries of the group. And with the growing business outlook, we see an opportunity to consolidate and strengthen our position in this subsidiary. We are delighted to have Convergent as our partner. Especially in such uncertain times, their confidence and investment in our company will not only strengthen our position in Mexico and China but also in our blend and our Health & Wellness segment. Today, more than ever, there is a heightened awareness for nutrition, food and feed ingredients. And at Camlin Fine Sciences, we see an enormous opportunity in providing more such solutions to the customer. As I told you before, Convergent is headed by Mr. Harsha Raghavan, who is also the ex-CEO of Fairfax India and a known name in the financial world. We will greatly benefit from Harsha and Convergent team's global network of relationships, strategic insights and operational expertise. Needless to say, both the investors are represented by the Convergent. Now I request Mr. Santosh Parab, our CFO, to take you through the financial and operational highlights. Thank you. Over to you, Santosh.

Thank you, Ashish. I'm Santosh Parab, CFO of the Camlin Fine Sciences Group. I hope everyone had a chance to look at the company's financial statement, which has circulated and uploaded on the company's website and the stock exchange and also the [ erratum ] we filed on June 23, 2020. Let me first brief you on the key financial highlights for the quarter on a stand-alone basis. During quarter 4 FY 2020, our operational revenues have decreased by 18.7% on a year-on-year basis to INR 139.5 crores. The EBITDA margins, after adjusting foreign exchange gain/loss and other income, stood at 9.96% for quarter 4, which grew from 279 basis points from last year. The net profit as reported -- was reported at around INR 16.5 crores as against INR 2.7 crores in the corresponding period in the previous year. On the yearly basis, the stand-alone operational revenues stood at INR 579.8 crores, a growth of 5.8% versus FY '19. EBITDA was INR 59.7 crores, which signifies a growth of almost 99% on a year-on-year basis. The net profit was INR 30.7 crore, marking a growth of around 186% on a year-on-year basis. Now coming down to the consolidated performance for the fourth quarter of FY 2020. Operational revenues has increased by 9.3% year-on-year. And the EBITDA is INR 34.3 crores. The EBITDA margins are around 11.71% in quarter 4 FY '20 as against 7.99% in quarter 4 2019, which marks an expansion of around 372 basis points on year-on-year basis. The net profit for the quarter was reported at INR 3 crores (sic) [ INR 2.1 crores ] as against INR 6 crores in quarter 4 FY 2019. The consolidated performance in FY '20 has been quite remarkable. Operational revenues for the financial year was reported at INR 1,049.2 crores (sic) [ INR 1,049.1 crores ]. This is first the time in the history the group has clocked a turnover more than INR 1,000 crores. It represents a growth of INR 17.6 crores on a year-on-year basis. EBITDA was around INR 130.7 crores, which is near double that of last year. The net profit was INR 29.8 crores as against a mere INR 3 crores last year. As you're aware, rupee has depreciated significantly during the current quarter, which will impact our results for the year. On stand-alone, the net exchange gain, the relative profit and loss is somewhere around INR 13.36 crores. Our future lien of INR 18.25 crores was disclosed in the other income, while INR 3.9 crore was shown under finance cost, which is in line with the accounting convention. On a consolidated basis, there was a net loss of INR 9 crores, INR 9.23 crores, which was disclosed under financed of INR 9.6 crores and a gain of INR 0.37 crores under other interests. Overall on a consolidated basis, there is an improvement in the consolidated margin driven by -- generally by a better product mix and yield improvement and control over the expenditure. Now I'll give you a brief on our subsidiary performance for FY '20. And I'll start with Europe. Europe reported revenue of INR 309 crores as compared to INR 329 crores last financial year. CFS Mexico reported a revenue of INR 267 crores as compared to INR 217 crore last financial year, representing a growth of 18%. CFS Wanglong in China reported INR 176.5 crores against INR 134.5 crores last financial year, representing to growth of 31%. This was in spite of COVID impact, and they encountered the COVID impact later on. Our Brazilian subsidiary reported a revenue of 62 -- INR 61.8 crores as compared to INR 41.1 crores last financial year, representing a growth of 50%. Brazilian subsidiary now started settling down and would have even started reaping the benefits. CFS North America also reported a revenue of INR 38.6 crores as compared to INR 23.6 crores, which is a growth of 63%. Our 2 other subsidiaries in Argentina and Chile, which has also been dealing basically with the antioxidants, which substantially started their operations in current year also in a total turnover of INR 8.64 crores. And we see that this will improve further in the coming years. Now I'll come to the COVID impact. Because COVID has been -- we are almost in all the hotspots of COVID all over the world, so I'd like to brief you on that. Currently, all our manufacturing plants are operational. Of course, there are constraint of labor and supply chain which are still persisting and are yet to come into the normalcy. Operations in the Chinese plant have closed for the holiday of China, Chinese New Year, which is a customary holiday every year. And we generally close the plant given all the labor goes out to the -- for holidays with their religion. So that's closed on January 24 to February 1. And due to the declaration of lockdown by local authorities in China on January 31, 2020, so plant has not restarted, and it remained in the shutdown. The shutdown was eventually lifted, and the plant restarted on 24th February 2020. In spite of secured supply chain in China, because of the global slowdown, the unit is still running at 60% capacity currently. Tarapur plant in India stand-alone was shut down on March 24 with the lockdown orders in India. Being part of essential production, we received the approval from the local authority to restart the plant on 27th March 2020. So after taking all the necessary precautions, we started the operations on 1st of April 2020. Our corporate office is working 50% attendance from March 17, 2020, as per the orders. Complete shutdown was announced by the government on March 20, 2020. And consequently, employees started and still are working from home. Our application lab at corporate office restarted on May 14, 2020, and it's working. Our diphenol plant in Italy -- Italy, they were -- they've been a hotspot in the month of March to May. Our Italy plant remained operational. And in fact, we're happy to tell you we had a record capacity utilization in March 2020 of almost 100%. Our blends manufacturing facilities in Brazil and Mexico remained operational. However, corporate offices are working from home. In U.S.A., the application lab as well as tool manufacturers were not affected by shutdown. Lastly, as an update on the Dahej plant, we are happy to report that the mechanical completion of plant was successfully completed in the last week of January 2020. The trial runs commenced thereafter, but we have to stop the trial run due to the declaration of continued lockdown on March 24, 2020. After the approval of the local authority, the plant restarted April 10, 2020. However, operations were impacted due to the labor ability, both on skilled and unskilled level. And it basically has impacted the completion of trial runs. Fortunately, as we had disclosed in our disclosures [indiscernible] on June 4, 2020, there was a blast in the adjoining plant of Yashashvi Rasayan Private Limited which caused to shut down our plant. Loss and damages due to this blast is estimated at INR 5 crores. The plant is adequately insured, and we will get this loss reimbursed. After reviewing safety precaution, we are happy to tell that we have restarted the trial run production we have stated, that is June 25, 2020. We expect the commercial production to commence sometime in the first part of Q2 FY '21. With this, I would like to open the call for question and answer. Thank you.

Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Our first question is from the line of Rohit Sinha from Emkay Global.

Congratulations for the deal. So as you mentioned in the filing that there would be wellness products also coming up. So could you elaborate a little more on what kind of wellness products we'll be looking at and preferably which kind of region it would be taken into?

Yes. So I'll answer that question. Rohit, this is Nirmal Momaya. The wellness products -- so the company launched health and wellness products in the last year, in FY '20. And we've done a small business in FY '20. These products basically are herbal extracts. And the main markets for these products are U.S., Europe and parts of Latin America. The product category we are working on is cumin, there's [indiscernible], and there is [indiscernible]. We are expanding the portfolio. Currently, we are using third-party manufacturers. So we buy the raw material, get it processed and then sell it in these markets. So the focus is going to be on extraction products as well as we are foraying into fermentation products. The fermentation products will be basically algae-based products. So we have technology for -- available for producing products which are algae-based. So this is where the focus of the company will be in the health and wellness sector.

And what kind of revenue potential you are looking into?

So in the next 3 years, we could be looking at, at least a turnover of -- in excess of INR 100 crores, INR 150 crores, yes.

Okay. Okay. And about this overall transaction you told in the opening remarks, but how this transaction will be, I mean, executed in due course and how we will be getting the money and will be using in our business? If you could just brief me about that.

How will it be executed? Sorry, there is a procedure which is -- which has to be followed, which takes about 45 days or so. 45 to 60 days is what we expect the procedures to take. And thereafter, we start -- we get the funds and we start utilizing it for the purposes that we've laid out there.

Okay. Okay. And just one last thing, what kind of valuation we would be looking at into this Mexico and China and how it would be an EPS-accretive business for us moving forward?

So for Mexico, 35% is minority interest. So it is already -- in the last financial year, we are at a healthy margin, EBITDA margin. And the acquisition price is a predetermined formula for buying the minority stake of 35%, which is a multiple of EBITDA. So it will be accretive on a net profit level. 35% of the profits that we were not getting will get credited to us. As far as China is concerned, it is not an EBITDA-based valuation. It is based on the cost investment. So that would be 49% of the values. We had paid -- for 51%, we had paid, whatever, $6.2 million. This would be for 49%, in equivalent amount with some depreciation reduced from that. So that's how it will be. The idea then ultimately is if we do move the facility to India, which is what is in with us. There are several cost savings and there is not only logistics but also several other costs including labor and utilities which are much cheaper in India. And with that and consolidating a facility along with the facility next to it for ethyl vanillin, we believe it will be highly EPS accretive.

[Operator Instructions] Our next question is from the line of Surya Patra from PhillipCapital.

Yes. Congratulations on the great deal, sir. A couple of questions. Starting with the purpose for which the fund is getting utilized, you have mentioned 3 things. One is that obviously the Mexico one. So just to have a more clarity about the incremental thing that we should be getting out of Mexico, can you share what was the kind of EBITDA number of Mexico for FY '20?

Yes. So FY '20, we did a top line of INR 257 crores, and EBITDA was around 17%. So -- and we're growing -- that subsidiary will grow at about 20% as we go along. And so we believe that the 35% that the minority shareholder has,, the value of that will keep increasing dramatically as time goes. And it is the right and opportune time to actually acquire that.

Yes. On that business, what is the -- you have been seeing kind of strong double-digit growth at the time of acquisition for this business. And since the focus is entirely on the kind of blends side, so sure, game plan would be like, say, you would be obviously targeting 20% kind of growth from here. But what would drive that? And what initiatives and whether with the exit of the partner, any challenge do you see for this business? That is about this particularly Mexico business. My second question would be on the China integrating and it means acquiring and bringing back the assets to India. So what are the real modalities of that bringing asset? And what cost that you would be incurring for that? And what time frame that will be required to execute all those, bringing the asset back to India and integrating activities here? So on this point, if you can elaborate a bit.

Sure, Surya. As far as Mexico goes, we have a huge pipeline of new products which we're bringing to market. And we actually bring several products every year into market for maintaining the growth in Mexico itself. In the other markets, we have a great opportunity, even grow from our existing portfolio where we have lower market shares to gain market share. So it's a combination of 2 things. One is new products and gaining market share. Since we now more or less supply to most of the large animal feed producers or daily producers in that region, adding products to the portfolio give that very quick sale -- it gives us a quick momentum in increasing of sale. So technically, we are well settled in that area. We have a good technical team and a good pipeline of new products which we'll bring to market, which will give us this 20%-plus growth. As far as China is concerned, the cost of shifting would be anything between INR 25 crores to INR 35 crores to bring the plant from there to here, plus the -- of course, the acquisition cost. So the total cost would be in the region of about INR 70 crores. The time frame would be about 6 to 9 months to finish it, the shift from China to India after we start the process.

Okay. So during that time, during that phase, whether -- what will happen to our vanilla business? And can we still maintain our markets globally? Or we will lose that business during this time? Or you have some alternate way of maintaining your market share for the vanilla business? I think even having now the entire integrated operations starting from intermediate or input material of cathecol to intermediate of guaiacol and vanilla in one integrated site of Dahej, will it give significant value over a period or over a time period. But -- yes. So during the period of transition, what will really happen to our global market share where we claim that we are, thus so, largest?

Yes. So there would be some impact, for sure, because if we discontinue production for a period of 5 -- 4 to 5 to 6 months, between 4 to 6 months, there would be some disruption to our market that we have globally in this business. But we have some strategies to supplement part of that capacity in Dahej with our ethyl vanillin facility, which is interchangeable. So we'll try and time it in a way where we get some -- at least 2, 3 months of production with the ethyl vanillin coming in. I mean the ethyl vanillin plant is being commissioned so that we can make it -- use it for making vanillin. But yes, sure, there will be some impact. There would be a few months of impact once we start. But in the meantime, what we are doing is we are ramping up the production in China, and we will carry some stocks for that period so that we don't get thrown out of the market completely, get out of the market completely.

Okay. But in terms of earning efficiencies at vanilla currently since we are operating this vanilla business from 3 sites, like Italy, India and China, and so many added -- means unrequired kind of expenses are involved, also paid and all that. So having the integrated business here in one site, what earning margin benefit that one should expect for this particular business? Or are there -- what would be your current margin that you would be capturing for your vanilla business in different places currently? And with the integration, what you can achieve here and whether you will have any incremental advantage for your India operation because, generally, China is considered to be not safe so far as the edible products are concerned like vanilla.

So as far as the market is concerned, there is a bit of a challenge for China apart from not considered safe, that is one. But also the trade barriers and after -- especially after the virus, the Western world is wanting and trying to move away as much as they can from the supply chain perspective from China and looking for alternatives. So in fact, countries like U.S., U.S. is -- and an additional duty for products out of China, so on vanillin, it is 10%; and on ethyl vanillin, it is 25%. So there is a significant difference between 10% and 25%, there's vast differences in duties between China and India. And U.S. is one of the largest consuming markets. We believe that even Europe will, at some point -- and European companies have started looking for alternatives that we see in the market. They are most excited if we move and if we start producing in India as versus what we are doing in China. So they're encouraging us to -- all the customers are encouraging us to do that. So from a market perspective, surely, there's a big advantage. As far as the cost structure goes, I would say that in the entire chain of the vanillin, today, vanillin is a $10, $11 product, you will improve the margin by at least $1 or so if it is integrated at one location and one site.

Okay. And my last question, I think I don't know how do you address that. But there are so many things that cash inflow and outflows are planned for near term, like this INR 180 crores that is likely to come in. If you can share some idea that, okay, in what tranches and how that will be flowing in. And also, there is a kind of -- second tranche for IFC's fundraising, means IFC's money of INR 100 crores, that is also there. When would that be drawn? So that way, it will be giving us a kind of a cash inflow of around INR 280-odd crores. And we have now payment plans like Mexico, something like INR 90-odd crores; or China, some INR 75-odd crores, at INR 70 crores or what you've mentioned. And you have CapEx plan as well for ethyl vanillin.

Ethyl vanillin, MEHQ.

Yes, MEHQ, Dahej. So all that -- how would that really happen? And during this period of 2 years, you would obviously be generating much stronger EBITDA for your consolidated operations. So something on that cash flow upfront, if you can just...

Yes. So the total inflow is INR 180 crores, you're right, plus INR 100 crores, INR 280 crores. The total outflow of this INR 280 crores, INR 100 crores for Mexico, INR 70 crores for China, INR 20 crores as liquidity for working capital or anything. We're just saying that time is, as such, uncertain that you keep some cushion. And the balance INR 80 crores is for CapEx on -- for ethyl vanillin, MEHQ and some of the extraction business and the downstream of hydroquinone products. It's combination of all that.

And Dahej's working capital need will be met from this only? Or that will be a separate money that will be required?

No, I think we can meet it out of this. This is a cushion. So we'll see how it goes with Dahej, what kind of requirements come up and how it progresses because there is a shrinkage of working capital cycle, which we are doing everything in one site. You can really squeeze the time that today, our working capital is tied up for much longer. So something will free up from there as well. So we'll see. I mean but this is -- we're keeping this as a cushion, yes.

Okay. Okay. So if you just allow me, last one question on the overall thing that I can ask. One is that, sir, you see, now there are so many things. So is it fair to believe that this FY '21 is a year of integration and segregation of all these projects? And the true benefit of all the integration for vanilla or to integrate -- or the benefit of the Dahej commissioning, all that will be seen practically in FY '22 numbers? And also on the earning efficiency front, having consolidated your position in all of your businesses currently, so what time frame that you see during which you can again go back to your previous margin profile of 19%, 20%, what you used to own before that Camlin issue happened?

So I would say the hedge benefit or the hedge will come into play in this year. So the earnings will start showing in FY '21 itself. It's not that it will all come in FY '22. So it's kind of the hedge will come this year. Ethyl vanillin, China consolidation will come next year. Mexico consolidation will come within this year. So it's a mix of all of this. So I think, yes, FY '21 and '22 will be the 2 years where the margin expansions and the advantages and benefits of all the investments that we are making will start showing, yes. As far as increasing the margins to high teens, we are at about 12%. And the high teens that we are looking at should be achievable in the next couple of years, yes.

Sure. Okay, sir. Wish you all the best. Congratulations for the great deal.

Thank you, sir.

Our next question is from the line of [ Agastya Dave ] from CAO Capital.

Most of my questions were asked by the previous participant. Again, just the last point that I just wanted to -- just to confirm. So the revenue profile, you said that China will be shut down and then will be moved to India. And you also said that you're building up inventories. So it will be completely smooth transition especially with respect to revenue? Or can we expect a couple of bad quarters -- optically bad quarters and then smoothening out of revenue trajectory? That's my only...

Yes, there will be some impact. Difficult to say how much of that impact will be. But yes, surely, there will be some impact for at least 5 -- 4 to 5 months, yes. So you may probably end up -- even if we had stocks, we are not going to have stocks enough for maintaining 100% of what we were doing. We'll probably be at 50% or so, yes, for those 4, 5 months.

And this transition out of Mexico is very smooth, right? There is no disruption.

Yes. No, no, no, there's no disruption.

Right. And the Chinese, if I may call it disruption, the Chinese disruption, do you plan to start that immediately? Or will that be like 2 months down the line when the corona impact goes away probably, hopefully, and then you start that transition? Or is it already in the processes of...

We have to tie up the financing first. First, the deal has to be completed. And thereafter, we start the process. So starting the process in itself is -- it takes 3 to 4 months for starting to dismantle a plant because you have to -- there's a lot of planning that is required. So that's the way we look at, yes.

Right. And sir, the acquisitions that you're going to make, right, the minority stake, so can we assume that it's a done deal or you need to negotiate? Are there things already in place?

Yes. There are agreements in place, yes, yes.

Agreement in place.

Yes.

So that process, the financial transaction will be very smooth.

Yes.

Our next question is from the line of Pritesh Chheda from Lucky Investment.

Sir, a couple of questions. One, this equity transaction that we've raised, which is going to happen, the promoter holding will come down to what number after this?

So it's 2 phase. One, it comes down to roughly 18.5%. And then there's a call option, which takes it back to almost 22%.

Okay. So your holding remains the same. There's about 1% here and there after the whole transaction.

Yes, after the call option is exercised, yes.

Okay. And at what price has this been done?

At INR 72. Ashish mentioned that. The call option is at INR 72.

Okay. And my second question is on the India operations, the Tarapur facility, where we have all the original facility, and the stand-alone EBITDA that we report. So that facility is largely fully utilized, right? And the EBITDA that we report reflects the full utilization or there is any scope there?

There is scope. We are doing some debottlenecking to increase capacities in Tarapur. So there is scope of about 30% or so for the debottlenecking.

Okay. And lastly, if you could tell me what will be the residual capital expenditure remaining now to be incurred in FY '21.

FY '21, the capital expenditure in India?

Yes, total, if you give India and outside India total.

So there's an acquisition cost from Mexico, that is INR 100 crores. then China is INR 70 crores, INR 170 crores. And in India is about -- by FY '21, March, it will be about another INR 60 crores or so.

This is for the Dahej facility, right?

Yes. In Dahej, it's for MEHQ and ethyl vanillin.

INR 65 crore in India. And anything else?

No. This is the main one for FY '21.

Okay. Okay. And your debt or, let's say, any target on debt, EBITDA or absolute debt plan over the next 1 year or 2 years, whichever way you may have planned?

So right now, I mean, we have INR 100 crores of ECB which we'll draw down during this year. And that should more or less take care of all that we are doing along with the equity raise there.

Our next question is from the line of Tarang Agrawal from Old Bridge Capital.

I have a couple of questions. The first one is, sir, each of your subsidiary, maybe except Europe, have done reasonably well in FY '20 amidst all the disruptions that one or the other geographies has seen. So how are each of them going on a profitability basis?

So Mexico is...

17%.

Brazil also has turned now EBITDA positive in FY '20. U.S. is just below breakeven. But this year, we are expecting it to touch breakeven by the end of the year. And Brazil will grow and should get to at least -- it's between 7% to 12% EBITDA margin.

In FY '21 this is?

Yes, yes.

Okay. And on the China front, so my sense is we are completely exiting China, right, once the transaction goes through?

Yes.

So the entire market that we've seeded for ethyl vanillin in China will...

Not ethyl vanillin, methyl vanillin. It's methyl vanillin. And we'll move the plant here. We're not exiting. We're moving the facility. That's what we have discussed earlier.

And -- but the revenues will start -- will continue coming in from China, is it?

I answered that question earlier, yes. I mean 3 times I've answered the same question.

Okay. Any update on [indiscernible]?

On [indiscernible]...

[indiscernible] is moving well.

From 22 August, we have to start supplying them 1,500 metric tons. So one pilot facility will have to be set up in the next year in Dahej. So the work is going on, on the basic engineering and also on the final negotiations with our customer to finalize this build of 1,500 metric tons. And 22 August, we will be delivering material to them. That's going on target, yes.

And so what was the net debt around 31 March '20?

Santosh, can you answer that?

It's around INR 480 crores debt. And we had a cash of around INR 50 crores.

Okay. And this is basically now in terms of incremental, we are just looking at INR 100 crores drawn down from the IFC, correct?

Yes.

We'll take our next question from the line of Pallavi Deshpande from Sameeksha Capital.

Just wanted to know on the Mexico side how much is -- any exports over there? And has there been a decline in EBITDA margins? I believe it was around 20%.

No, there has not been any decline. It is in the range of 17%, 18% normally. So it's in that range. And there is some export from Mexico we do to Latin America and Central American countries.

Right, sir. And sir, I'm not too aware of [indiscernible], sir, so if you could just update me on that?

No, I just updated on [indiscernible].

No, I mean what exactly is this?

No, it's -- you can look it up in our website, yes. It's an old habit.

[Operator Instructions] Our next question is from the line of [ Pratik ], an individual investor.

Yes. Sir, in one of the [ reports ] you mentioned that INR 180 crores is raised from Convergent.

Sorry to interrupt. [ Pratik ], [Operator Instructions]

No. So is clear now?

Yes. Thank you.

Hello? Yes. Is it better?

It is.

Yes. Sir, in one of the [ report ] you mentioned that from Convergent, you raised INR 180 crores here. And there is also additional INR 100 crores of inflow expected. So what was that, please? I just missed on that part.

IFC. It's an ECB from IFC.

IFC. [indiscernible] could be more warrants, nothing that -- not as...

Yes, it's ECB. It's ECB. It's a borrowing.

Oh, it's a borrowing. Okay. Okay. Got it.

Yes.

Our next question is from the line of Manish Bohra from Param Capital.

So basically, my question is on the promoter holding. Like you said that our promoter holding will be targeted to around 18.5%. So like basically what I have calculated, it comes to around 17.59% on a full dilution basis. And also you said that like after the call option, we will be able to have that -- or we're rolling back to 22%. So I just wanted to understand like how we shall convert it back to 22% because we are having the call option of 61 lakh, 50,000 shares.

It comes about 21-point-some percent, 21-point-some-9 percent.

So basically, currently, like we are holding -- like we're what we're holding is around 2 crores, 75 lakhs shares, right? So basically, even if we acquired 61 lakh, 50,000 shares, what we're holding won't be to that level. Basically, I just wanted to...

Santosh, can you answer that?

[indiscernible]

Santosh?

[indiscernible] after the 61 lakh, 50,000 share is taken, and the fully diluted to promoter holding will come from 22.74% at current will move up to 20.25% in the -- after the options are converted and taken by the share -- the owners.

20.25%, 21%.

There will be any change on the Board like the Infinity Holding will be around [ 21% ]?

Yes. We have rights for holding, which will come on board.

[Operator Instructions] We have a question from the line of [ Agastya Dave ] from CAO Capital.

Sir, I lack a little bit of basic understanding about your business especially from the raw material side, so please correct me if I'm wrong. You do buy phenol, right? That's your key raw material.

Yes.

So the price fluctuations and the contracts that you have with your supplier, can you elaborate a bit on that? So we have seen huge fluctuations in all the crude-related petchems, right? So in such scenarios, what exactly materializes with respect to your supplies?

So they are generally based on -- phenol price is based on benzene price. It's always a factor of benzene. So if the benzene price comes down, it comes down. If it goes up, it goes up. So it's always at a formula based on benzene. That's how it is generally.

And the tenure of the pass-through, sir, so if the price is...

It's monthly. It's monthly.

It's monthly. And you do not have a lot of inventory risk, I guess.

No, no, no. It's all [ good ].

Our next question is from the line of Rohit Sinha from Emkay Global.

Yes. Sir, just wanted to know what's the current debt position in Mexico and China.

Santosh?

The debt position, we have an acquisition finance for Mexico which is stationed in Mexico. That's around INR 40 crores. And China, we don't have a date in China. I'll say the acquisition finance is in Italy, which is around INR 52 crores, INR 53 crores.

[Operator Instructions] The next question is from the line of Pallavi Deshpande from Sameeksha Capital.

Yes. On the raw material side, I understand the spreads in India different from the international spreads so -- for phenol. So I just wanted to understand how they move domestically and how -- you're manufacturing in Italy also, so how much is -- is the phenol bought on the international spread basis or domestic spread?

No, no, it's only international spread because as India -- similarly, it's for Dahej. So it's all in international spread.

So right now, it's still in Italy right, the manufacturing? Like if it's in Dahej...

Yes. So that's what -- so for Italy, it is international spread. And in Dahej, also it is international spread.

Dahej is also international.

Yes. Yes.

So you won't be buying from the domestic players of phenol?

No, no, no.

Is that due to some grade problem? Because I believe the supply has ramped up of phenol considerably in India.

No, it's not because of grade problem, it's because of their price formulas are more expensive than what we get in the international market. Commercially, it's not viable to buy it from them.

Okay. Yes. So internationally, spreads over the last 2 years have been down. That would have also helped our EBITDA margins. Is that right?

No, they've not been down.

I mean, I believe, from $900 2 years back to $500 now.

No, no, that's not the spread. That is the price of phenol has come down to $500, which was only for 1 month. I mean that is -- there's normally factors in that, yes. It was just when oil went into that state.

Yes, back in 2015, is that right?

Yes.

And you said it's a monthly contract. Is that right?

Yes.

As there are no further questions from the participants, I now hand the floor back to the management for closing comments.

Before, Ashish, you close, there is one clarification that I want to give, Manish Bohra asked a question of promoter holding. As you rightly pointed out, we have a holding of 22.74% now, which will get diluted after this equity participation by the new investor. But once Ashish takes 61 lakh, 50,000 option, this promoter holding on the current investment after the investor invest will be at 21.51%. Ashish, you can now close.

Okay. Ladies and gentlemen, thank you very much for attending the investor call. I consider it now closed because there are no more questions. Thank you very much. Have a good day.

Thank you, members of the management. Ladies and gentlemen, on behalf of Prabhudas Lilladher Pvt Ltd., that concludes this conference. Thank you for joining us. And you may now disconnect your lines.