Chemplast Sanmar Limited ($CHEMPLASTS)

Ladies and gentlemen, good day, and welcome to the Chemplast Sanmar Limited Q4 and FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference call is being recorded. Before we proceed, this conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. I now hand the conference over to Mr. S. Ganeshkumar, Managing Director, Chemplast Sanmar Limited. Thank you, and over to you, sir.

Thank you, Satmali, and good morning, everybody. On behalf of Chemplast Sanmar Limited, I extend a very warm welcome to everyone joining us on our call today. On this call, we are joined by our CFO, Mr. A.R. Balaji; Dr. Krishna Kumar Rangachari, who heads our Custom Manufactured Chemicals division; Mr. N. Muralidharan, Executive Director of Finance; and SGA, our Investor Relations Adviser. I hope everyone has had an opportunity to go through the financial results and investor presentation, which has been uploaded on the stock exchanges and on our company's website. financial year '25-'26 turned out to be a very challenging year. During the year, the company reported consolidated revenue of INR 4,224 crores and EBITDA of INR 198 crores. The year was marked by persistent price pressures, excess global capacities, geopolitical disruptions, volatile feedstock and energy costs and continued dumping of Suspension PVC and Paste PVC into India from China, Europe and Japan. Getting into the details, the Specialty segment recorded one of its strongest -- stronger quarterly sales at INR 475 crores, reflecting 13% year-on-year growth. Sales volumes also registered a healthy 17% year-on-year increase, mainly driven by PVC. Now getting into the details of specialty products within the segment. Starting with Paste PVC in quarter 4 FY '26, demand conditions remained relatively stable from the footwear segment, while the automotive and upholstery segments continue to see healthy traction. On the regulatory front, we have received the final findings from DJTR in the ongoing antidumping duty investigation against imports from the European Union and Japan. We await the notification by the Finance Minister. This has already resulted in relatively lower import bookings from Europe, while implementation of the ADD is now expected during first half of FY 2026-'27. The Kadaluaste PVC facility operated through the year at 100% of capacity, reflecting a very strong operational performance. The realizations and margins also saw a steady uptick in Q4. Overall, we remain positive on the Paste PVC business given the strong demand, relatively lower pressure on feedstock side and potential upsides via implementation of ADD on imports from the EU and Japan. The ongoing war in the Middle East has had both its positives and negatives. While prices and margins have improved, there has been some temporary concerns around demand due to the nonavailability of MP. Coming to the Custom Manufactured Chemicals business, Q4 saw healthy dispatches despite some sales getting deferred to the current financial year. Performance during the quarter continued to be impacted by the slowdown in global agrochemical market, led by pricing pressure from low-cost generic supply from China and slower ramp-up of new molecules by innovators. However, we believe the current weakness is temporary in nature, and we are encouraged by the early signs of recovery, supported by a strong order book for FY '27. On the expansion side, progress on MPB 3 Phase III continued as planned during the quarter. The pipeline continues to gain momentum with 45-plus molecules progressing across various stages of development. Our customer engagement and diversification efforts have started yielding results with ongoing discussions and progress in new product development. We are further accelerating our business development efforts in the markets where we participate. This includes recruiting senior resources in these geographies. On refrigerant gas project, we are happy to announce that the commercial production of R32 refrigerant gas at our 2 kt swing plant in Mettur has commenced recently. Further, the commissioning of the new plant is expected to be undertaken in phases over the course of the year. Moving to our value-added chemicals business. During the quarter, caustic soda and chloromethanes market remained under pressure in the first 2 months due to weak demand and continued pricing pressure. Caustic soda volumes improved sequentially, supported by better sales and inventory liquidation at the [indiscernible]. Volumes, however, remained lower year-on-year due to reduced production at the Mettur facility on account of the membrane change activity. There was a temporary spurt in caustic prices immediately after the war, which had started tempering down. Hydrogen peroxide and chloromethane volumes were impacted by lower hydrogen and chlorine availability linked to reduced caustic soda output. However, demand from key end user industries and pharma customers remained largely stable during the quarter. Moving on to the suspension PVC business. Quarter 4 FY '25-'26 began on a positive note, supported by dealers restocking ahead of the seasonal demand cycle and expectations of improving prices. The Chinese government's announcement to withdraw the export rebates on PVC also helped in pushing PVC prices further up. However, the commencement of the war in the Middle East led to a chaotic situation on the prices and availability of both PVC and feedstock. The Middle East war situation has had consequential impact on the availability of VM in Asia, given the acute shortage of naphtha and ethylene. This led to a sharp spurt in VCM prices. While this increase in VCM prices were matched initially by similar increase in the PVC prices, the latter did not last as carbide PVC from China, which was largely immune from the impact of the war in the Middle East, started flooding India at very low prices. This, therefore, led to a sharp disconnect between PVC and feedstock VCM prices. As a result, the broader industry outlook continues to remain very subdued. The industry had expected relief through antidumping duties, higher customs duty or other import control measures to counter persistent low-priced PVC imports, especially from China. However, none of these measures has come through. In fact, regulatory support has weakened, including the rescinding of PCOs and the recent reduction in customs duty, though only till June 2026. While the removal of export rebate in China acted as c in the first 2 months of Q4 FY '26, the same has been completely nullified with the volatility seen post the commencement of the Iran war. These developments together created a more structural reset in the earnings outlook, necessitating reassessment of the carrying value under Ind AS 36. The assessment has resulted in an impairment loss of INR 898 crores vis-a-vis the book value of the investment at INR 1,556 crores. This is a noncash adjustment that aligns the book value of the investment with the current economic realities. It does not affect liquidity or the company's ability to operate the business. Also, CCL recorded a charge of INR 150 crores as an exceptional item for the year ended March 31, 2023, towards provision for onerous contracts and write-down in the carrying value of raw materials in line with the applicable accounting standards. At this juncture, I would -- I wish to communicate that the Board has constituted a committee of 3 independent directors to examine the strategic priorities for the company with a view to enhance the long-term value creation for stakeholders. The company may evaluate potential reorganization and M&A opportunities and will table their findings to the Board for review and appropriate decision-making. The committee may engage advisers to support them in this engagement. As we move into FY 2026, '27, the commodity business, including CCVL is expected to face volatile near-term operating environment, driven by the ongoing geopolitical developments, fluctuations in global raw material and energy prices and continued uncertainty in international supply chains. However, we are positive in our specialty business, where we expect a stronger performance given the better fundamentals and prospects. Our focus will remain on operational efficiency, cost optimization and improving capacity utilization across our manufacturing facilities. We will also continue to strengthen customer relationships, ensure timely execution of the ongoing expansion projects and enhance our specialty portfolio to drive more stable and value-accretive growth going forward. Now I would like to invite our CFO, Mr. Balaji, to walk you through the financial performance of the company.

Thank you, Ganesh, and good morning to all the participants on the call. Coming to our performance in Q4 FY '23. On a consolidated basis, the company reported revenues of INR 1,256 crores, registering 9% year-on-year growth [indiscernible] last year. The [indiscernible] has recorded [indiscernible] being the [indiscernible] With this, [indiscernible] I open the floor for question. Thank you.

[Operator Instructions] The first question from the line of Sanjesh Jain from ICICI Securities.

First on the suspension PVC, how is the...

Sorry to interrupt Sanjesh [indiscernible]

I'm on the handset. Hopefully you can hear me properly. First on the suspension PVC, can you help us understand now that things are settling down, how is the trend for the spread as we speak in the Q1? Because I think last quarter or probably in the month of March, one can understand the volatility hasn't been in our favor considering that we signed certain onerous contract, which has taken away all the profitability in the suspension PVC. How is it looking now? The spreads are still weak considering that the carbide export continue to remain unabated. In that scenario, how should we expect the performance of CCL in FY '27?

Thank you, Sanjesh. You are right that there are still uncertainties looming around the market and with China bringing in the carbide PVC at lower prices. We are -- as we speak, we are looking at a spread which is at a neutral level on a replacement cost basis given the current VCM prices. But we are also seeing some softening on VCM prices. It may not be significant at this stage, too early to talk about it. But at the same time, we may get into a positive side. But having said that, while we have taken the broad impairment on the onerous contract, what you say, the INR 150 crores sit on the balance sheet on the P&L. We still may have some in between today's price and the onerous contract, there are still a couple of other contracts which will hit the production line between May and June. So there could be uncertainties as we go into this quarter. But we are hopeful that as the geopolitical situation stabilizes and the production comes back, we will be able to move to the spreads that we have been talking about.

Sir, assuming if crude remains elevated and gas prices remain elevated for a while, Chinese will keep having that advantage of having a much lower cost and it doesn't look like they want to make profit out of that situation. This means that even FY '27 can remain a stressful for CCL.

On a very -- what you say, pessimistic end of the assumptions, yes, it is possible. But however, from what we also hear is the Chinese producers are also going through the stress. Second is end of June, we hope that the 7.5% duty comes back into the system. So that would add another what you, $60, $70 to the pricing and the realization. And Chinese also, we feel that from what we are hearing is not all of them, but some of them are going through tremendous cost pressures at this price.

Got it. Got it. Now coming back to Paste PVC, how different the behavior in Paste PVC versus suspension PVC?

See Paste PVC, the size itself is very small compared to what we are talking about in suspension. From a 4.3 million suspension, we are talking of a 200,000 tonne -- roughly 200,000 tonne market. Second, the paste has always traditionally been at a higher price. Further, there is already antidumping on 5 countries, which is levied, which also puts brings in some pressure on how the product is entering the market. Fourth point is given that the ADD investigations are finalized and the file is with the Ministry of Finance, import, we have seen a slowing down of imports from Europe, especially which is the other alternative. So overall, we expect that at least this time around, we are hopeful that the government will take a fair approach, and we should be able to manage the paste business effectively.

Got it. One last question on the gas and the specialty. has been the specialty this year, the growth versus the previous year? And we were expecting INR 1,100 crores kind of a revenue in '27, '28 now considering agrochemical supply chain being a little stressed. How should we think growth in next 2 years? And what does this 45 product mean? What is an opportunity size? What is the probability? If you can give some color on that? And number two, on the R32, there's a lot of debate on it, but we have started 2,000 metric ton now. By end of this year, where do we see ourselves in the R32 capacity?

So I will first take the R2 and then give it to Dr. Krishna to respond to the specialty chemicals. We have -- as in earlier calls, the quantities have been specified. So we are now on the verge of getting into the expansion. We are already progressing very well. And by the end of the year, as committed earlier, 14 kt capacity, but we are also providing design opportunities to debottleneck it further as required as the opportunity may arise.

So by this calendar year, we should be having the 14,000 metric ton?

Yes.

Responding to your question, our projections on the custom manufacturing continues to be strong. The 4 molecules that we talk about includes 17 that are commercial, the balance what we call which are at the various stages of development. And for us, we keep monitoring that particular number, the overall basket, which continues to grow quarter-on-quarter and the reason for that is the engagement with our customers is quite strong. And all of them continue to indicate and intend to diversify their supplier base in India. And when they look [indiscernible] temporary issue in the near term, primarily driven by the slowdown in the space. And because of which many of the molecules that our customers are launching are not ramping up as quickly as originally anticipated in the near term. But the medium to long term continues to be [indiscernible]

The next question from the line of Ankur Periwal from Axis Capital.

Continuing with Krishna, sir there on the CDMO side, you -- we have been highlighting on the pricing pressure in the global markets, which have led to some deferment in terms of the innovative demand here. Any updates there in terms of given the current macro, is there any revival given that pricing pressure would have eased a bit? And how is the product pipeline sort of looking like both in the agchem as well as in the other segments across lines?

No. So our model is innovators, right? And we have not been impacted by what's been going on in the generic space many of our products do not fall in that category. Most of the products that we supply now as well as the projects that we're working on, many of them are linked to new molecules, new pipeline molecules that the customers have been working on. So we have not seen any significant issues related to demand on those. It's just a delay in terms of how those launches have been going on from a customer standpoint, which is why what we're going through is a near-term issue. So again, long term, medium to long term, we continue to be optimistic because the engagement and the pipeline continues to grow. In addition, we have also started working on putting in additional resources both in the markets that we participate in as well as to look into new markets beyond Agchem. Again, that's medium- to long-term initiative to diversify our exposure to diversify beyond Agchem. So towards that, we have recruited some very resource in Europe as well as we are ramping up our engagement in Japan where there are significant opportunities and we have identified resources there to drive some of these initiatives.

Sure, sir. And from a ramp-up perspective, any time line for that INR 1,000-odd crores revenue that we were looking at? Or we still sort of keep that number intact?

We still keep that intact. I mean last quarter, we indicated hopefully next year, we will be at that number based on what I have in the pipeline and the products that are commercial, we stand a good chance of getting there.

Okay. Secondly, on the SPVC side, you did allude towards Chinese import being sort of picking up, which is where the prices or the spreads overall are under pressure. The 7.5% duty that you are talking of, right? So the comeback of that duty, is there any talks with the government on that? Or how are we looking at that?

We have been representing to the government under the [indiscernible], recent announcements by the Honorable Prime Minister, where he said that we have to manage ForEx outdoors, we have to add value back in India. So we have been representing as industry bodies with the government, different sectors in the government about the 7.5% to be bought back, which while there is no response to indications to any extension, but which means we are assuming that it should come back at the end of June. There are other measures, both what you say, trade measures like minimum import price et cetera, which we are still talking with the government. But ultimately, to provide an level playing field and not being used to be dumped, the antidumping duty is the only long-term solution, which is compliant with the WTO.

Sure, sir. But where I'm coming from is earlier also, there have been multiple times hits and misses there on the antidumping duty on SPVC, especially. We are hopeful of that getting implemented on PVC. But will that be the only payout for the business economics to be stabilized? And till then, we will have to be sort of -- the profitability will have to be slightly under pressure. Will that be a fair way to look at it?

As of today, under the given circumstances, yes, -- but then there are other measures, non-trade measures like QCOs, which was presented, which is now we are representing back again saying that this is a different -- you can't paint all products with the same dash. This is another effort which is being taken with the government. So thereby idea is to bring in a fair level playing field to the domestic manufacturers. And that should be the approach, which will help us in the short to medium term. Today, as we look at it, it's all there. Tomorrow, if, for example, the supply chain stabilize, the war situation goes away, the VCM PC and PVC spread is back to normal, then things would be different. But as of today, as we see, this is where we are.

Just to add to what Ganesh said in the suspension PVC business, as you know, last 2 years have been a struggle primarily because of the excessive dumping from China. And regulatory support there is very critical, it could be AD, it could be PCO in some form, regulatory support on the suspension PVC side is very critical from the medium to long-term point of view. Of course, the short term is more driven currently by the war situation that is happening. But if you look at the medium to long term, it's important that the regulatory support some form or shape comes.

Sure, sir. That's helpful. Just one last question, if I may. On R32, what is the thought process here, whether we are looking to sell this in the domestic market itself? Or is there some tie-up or maybe some global sort of tie-up there? Is where this ultimate capacity will go into?

So regarding the go-to-market strategy for R32, domestic, of course, is one of the destinations for the product. But apart from that, we are also looking at serving the global market. And we are exploring with a few partners on how to bring this to the market in the international space.

We take the next question from the line of Nikhil Gandhi from Bajaj Life Insurance.

[indiscernible]

[indiscernible] It's almost a breakeven kind of thing. So hopefully [indiscernible]

[indiscernible] estimated for the segment, we expect meaningful [indiscernible] '27 and '28 [indiscernible]

Airways is view point around the uncertainty around regulatory support, the best estimate has been used and has been used for the valuation purposes. And as it stands today, the margins currently, if you look at the Chinese PVC is coming at [indiscernible], variable cost. That is where we are today. So that is the outlook that we can see as of now given where we are today. And if things improve over a period of time, obviously, impairment review on a period this day.

We will take the next question from the line of Rohit Nagraj from 360 ONE Capital.

First question, again, unfortunately [indiscernible] has been the domestic demand in the wake of the current volatility in prices? And second, in terms of the sustainability of our operations, given that there has been challenges even from the raw material sourcing and we are dependent on imported raw material. And third aspect from the perspective, have we filed for an application because I think after filing the application, there will be a process of 1 year, 3 months before any decision comes in.

Thanks, Rohit. Regarding the domestic demand side, I think if I look at the full year that has passed by, the demand has been muted rather probably about 1 percentage point below last year, which was at 4.3 million tonnes for SVC. So we can say that demand is more or less the same as over the last 2 years. We see that as of today, there is no indication of it growing significantly. But we are optimistic that it should catch up maybe after the first quarter once the global geopolitical situation settles down will take 1 or 2 quarters for the demand to bounce back. So that is our estimate given today's environment that we are looking at. Regarding sustainability of operations, you are right. You're right. We are -- to that extent, VCM is critical for us to run the SPVC business. And we are constantly looking at different ways and means of mitigating this risk. And I think you may appreciate that to the credit of the team, one of the suppliers declared that they are going to -- will not be able to supply post the contract period, the team managed to secure the same supply without any disruption before the contract period expires. So to that extent, the ability of to be able to understand the market, get the supply is very high. Is that a long-term solution? No, it is a short-term solution. For long term, we are exploring various avenues to see how to secure feedstock on a more sustainable manner. When I say sustainable, both from a qualitative and from a commercial point of view. So we are working on that exercise.

Yes. And just a clarification on...

The third point on ADD, we are working on the data to be -- for the ADD to be filed. Have we filed as of now? No. But we will be filing in the near future for the ADD to be relooked at for imports from China.

Right. And again, sorry to again on R32. So we initially plan to have focus on the domestic market. But given that there will be multiple players who will be also tapping and the demand will be limited at least in the near term. What is the strategy that we are looking at from tapping the exports market? Have we already started seeding it? And how are we planning to do over the next 1.5, 2 years I mean the window is open until December '26?

So Rohit, from an R32 perspective, the go-to-market strategy always considered a combination of domestic and export because we were looking at the multiple capacities that would be coming up in the country and it was always on the radar. We are working with a few partners. We are working with a few of them trying to see in what way can we collaborate in the export market, which is we are pretty sure that we should be able to crack this part of the puzzle.

Just one clarification on the numbers part. Was there any inventory gains and ForEx gains during Q4?

Inventory gain because we have made for the inventory. For all our imports we have covered. So on the mark-to-market,[indiscernible]

We will take the next question from the line of Madhur Rathi from Counter Cyclical Investments.

Sir, I wanted to understand regarding the spreads that it seems that currently around $100 for the variable, the gross spreads. So sir, how do we see the spreads improving with first, the [indiscernible]? And second, with the energy cost, the renewable energy JV that we have done with JSW. So how should we see the spreads for suspension PVC maybe over the next 1 year if things normalizes? And second was with antidumping duty, how should we look at the spreads on paste PVC moving versus what it was? And sir, what were they in FY '26?

[indiscernible] contract and its impact on the [indiscernible] is not power intensive. It's more caustic soda that is power intensive. So that contract will more benefit the VAC business, not the suspension PVC business. It will not have any significant impact on the spreads of suspension PVC. And how we see going forward, actually, the current situation is reasonably sort of volatile. Like I said, currently, the prices are more or less at variable cost level, we are breaking even. That is where we are. And the future outlook would depend on how the Iran situation sort of pans out and how soon the feedstock availability becomes much more easier. So it's slightly difficult to predict at this point in time.

I'm not asking you to predict, but we see the 13% whatever delta from anti China and the 7.5% import duty that is expected in India should have some impact like 10%, 12% impact. Can we expect that is a reasonable expectation from this spread improvement or that is still uncertain right now?

13% actually benefit that came through actually improved the profitability in January and February. Post that post the war, that's been completely subsumed in the overall market scenario that currently, we are not seeing the impact of that spread at all in our [indiscernible]

And sir, one question on the CMC, we used to LOI of the products that were in commercial stages. So what would be the revenue potential from the LOI of the 17 LOIs that we have currently? So if you could help us understand on that, like where has the business moved maybe from I think earlier you used to give like it was INR 1,300 crores, INR 1,400 crores in -- closer to FY '24 and FY '25. So where it is right now?

So just to clarify, the LOI is not on the 17 molecules that are commercial. We announced LOIs on 6th of '17, if I recall. So it doesn't cover the 17. And as I indicated earlier, we are behind by probably 12 months or so in terms INR 1,000 we are still comfortable with what I stated earlier that we anticipate getting to that level next financial year.

Sir, what would be the revenue potential of the 17 LOIs altogether over the life or the peak revenue potential we can expect I don't want the time line, but this is the intent that the innovator has given us that should be INR 2,000 crores, INR 2,300 crores. Any number would be helpful.

We wouldn't sort of refrain from giving a guidance on what would come out of LOI. Like Krishna said, we have signed LOIs for 6 products of them are sort of commercial products, but not every has an agreement or I would sort of refrain from giving guidance on the total value of business that is possible. trajectory is positive. Krishna said, the trajectory is positive. Of course, the business has gone through some pain because of the agrochemical slowdown, but the trajectory is quite positive.

We will take the next question from the line of Pujan Shah from Molecule Ventures.

[indiscernible]

It will come back for all the products. That's what we are looking at [indiscernible]

[indiscernible]

We are seeing the price stabilizing from the short, which was a blip during the Jan-March period. We expect it to achieve the normal level, which has been continuing over the last couple of years.

Last question [indiscernible]

China situation is always my -- whatever we can discuss, but at the end of the day, we will never be able to know the real situation [indiscernible] Rather, we should focus on -- our approach is to focus on our government, our regulatory system and make sure that we get the adequate protection or rather protection is not the right word, the adequate support to bring us on a level playing field.

We will take the next question from the line of [indiscernible]

I want to ask, do we have any quota allotment from the government for, let's say, Vietnam?

The government is still working on it. I think the entire country is operating on belief that we will be getting the quota. The government is still not because the period for the quota calculation is not over. It will be the end of 2026 for the baseline.

But it will be getting clear that we have the quota last month?

We hope we strongly believe that we should be getting the quota. We have a right to some volumes that we will be able to play in the market.

[indiscernible] risk strategy to go after that size of a plant without the quota allotment?

We are reasonably confident that we are reasonably confident of the allocation. Like we said earlier, I think the overall formula is we believe is for the country. And we believe the recent circular also sort of not that. And I think with the capacities in place, we are reasonably confident of the availability of quota.

Okay. Any time line by when it will be getting clear to us?

By next year by 2027 to [indiscernible]

We will take the next question from the line of [indiscernible]

[indiscernible] so how are we looking at [indiscernible]

So you're right. This is a good question because [indiscernible] to meet our short-term demand. And as the business progresses and as the business generates profitable contribution, we can even look at setting up our own [indiscernible]

[indiscernible]

Yes, we still -- 14,000 tonnes to be completely up and running, it is going to be. By that time, we already have -- we have our existing product, we have logistics in place. The rest of it, we are already in the discussion to keep [indiscernible]

We will have enough capacity for the R32 capacity?

Pardon?

We will have enough capacity for consumption for [indiscernible]

Yes.

We will take the next question from the line of [indiscernible] from Investment Private Limited.

Sir, just a question on the committee that has been formed. Is there any particular mandate that is in mind, which is being provided to the committee to look into from a more longer-term perspective?

Currently has 3 distinct portfolios. One is a specialty portfolio and the others are primarily commodity, which is the [indiscernible] outlook is also not that great. Given that we thought it is important that we look at the business as a whole and see how best we can reorganize the business going forward and create value, unlock value for all the [indiscernible] objective. And that's the mandate. Beyond that, we have not given any mandate to the it's will look at the business and how they can reorganize the businesses to create value for all stakeholders. And we also mandate would also include looking at possible M&A opportunities. All of that has been sort of considered as part of this exercise. We thought it's important that at this stage, we evaluate the business portfolio has and see how best they can be reorganized to create value. That's the object.

Understood. Sir, because the question was coming from the fact that even pre-IPO, we had essentially that we had invested in Egypt, and it was a similar situation where it was a commodity business and the reorganization happened post there was deleveraging of the balance sheet once we got listed. And it appears we are again in the same situation looking forward right now as we see it. So hence, just wanted to understand, is there a structural rethought from the management to say that what kind of future businesses or CapEx we would do so that this does not repeat because commodity cycles can keep repeating that is the underlying objective of the question.

No, just one point correct. Egypt was never part of Chemplast Sanmar. The investment was never part of Chemplast Sanmar always Chemplast Sanmar and the [indiscernible] PVC business in India together. So it was never part of it. It was never taken away from Chemplast also through a restructuring. That was not the case. So that's just to highlight that. And what was your second question?

The second question was just to understand the future CapEx, hence the committee will be looking at capital employment from that perspective as well to ensure that we go ahead and invest in businesses which create more long-term value and get a bit away from the cyclical commodity underlying nature of the business. Anything to do with the mandate?

Actually, if you had our earnings call earlier guidance, our focus has been capital allocation for specialty is priority is what we've been community last year and we have invested in the manufacturing business. We are investing in which broadly consists of our portfolio of specialty businesses. That's been our capital allocation priority. I think that will continue to be our capital allocation priority. And as far as the committee is concerned, it's more to holistically look at our business portfolio and to see whether is there a need for reorganization. I don't think we can prejudge today that whether this will be done, will be done. I think it's too premature to prejudge. Basically, the idea is to see whether -- what are the existing businesses, how are they doing either a way that we can reorganize so that we can create value for all stakeholders. That's the mandate.

We will take the next question from the line of Darshita Shah from DSP Asset Managers.

I have a question on the PVC market. If you could just touch upon how the PVC demand has been -- I mean, how was it last year in CY '25? How are we expecting it to be for CY '26? And secondly, if you could touch upon how the demand -- I know you briefly mentioned about the demand, but if you could just give more details as to how do you see the demand for PVC as we move forward, especially in the light of higher diesel cost, which could result in higher transportation? Are we seeing any postponement of demand from the end user side?

Okay. So as we said in '25, the market size was around 4.3 million tonnes and about percentage drop in this FY '26. As we go ahead, we are assuming that the demand should be either stable or marginally move up. The diesel price hike, these are transportation typically as a percentage of the overall cost, whether it is construction, et cetera, will not be significantly impacting it. And construction once started, nobody will put it back. Second is also the consumption of where does the PVC go. The majority of it goes into the pipes, which is different applications, whether it is electrical pipes, whether it is different types of applications. But there is -- we don't see a construction of demand as of now. Indication is not there because if the GDP is supposed to continue to grow at even at a low 3.5%, 4%, 4.5% at a very, very pessimistic level. The PVC consumption follows because infrastructure follows GDP growth.

Okay. And the increase in PVC...

Plus coming back to pace, sorry, just to complete it, pace we have seen a sustained growth. There's still a long way to go because as long as the sectors of automobiles, footwear, et cetera, continues to have a robust demand, PVC will be a PVC will have a role to play. And that's somewhere we see this to continue the long-term average of [indiscernible]

And from a near-term perspective, because of prices going up from historical levels last year was somewhere close to INR 360, now trading at about INR 80, INR 85-odd. Are we seeing any demand destruction coming in from the agri side, irrigation side specifically, especially when we have concerns around El Nino around rainfall. Any demand destruction happening on the agri front?

See, in fact, the demand gets augmented by the agri side because most of the irrigation project in the agri is actually refinanced under the scheme. okay? This goes under priority sector lending and whereby most of the subsidy that is offered is based on the landed cost. So there, I don't think the demand destruction will happen. Second is logically with depleting water levels and challenges in agriculture, everyone is moving towards either sprinkler. So the demand for pipe will continue to be robust there. If you look at India's data, we have about 36% irrigated land, out of which 80% of 36% is irrigated through rainfall. So there is still a lot of scope for people to approach the irrigation side in agriculture.

Got it. And just lastly, are we seeing -- I mean, we've heard about some capacities coming in from Adani and Reliance starting with the PVC, but then moving on to PVC as well. Any update on that? Anything that you would have heard on when these capacities are expected to come through?

We are hearing what we are hearing from the market. So it's better that Reliance and Adani to respond to this question.

Ladies and gentlemen, we will take that as the last question. And that concludes the question-and-answer session. I now hand the conference back to the management for the closing comments. Thank you, and over to you, sir.

Thank you. Thank you, everyone, for joining us today on this earnings call, and thank you so much for the questions that you have asked. We really appreciate your interest in Chemplast Sanmar Limited. If you have any further queries, please do contact SGA, our Investor Relations adviser. Have a good day.

Thank you, members of the management. On behalf of Chemplast Sanmar Limited, we conclude this conference. Thank you all for joining us today, and you may now disconnect your lines. Thank you.