DCM Shriram Limited (DCMSHRIRAM) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to DCM Shriram Limited Q2 FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Siddharth Rangnekar from CDR India. Thank you, and over to you, Mr. Rangnekar.

Thank you, Jacob. Good afternoon, and welcome to DCM Shriram Limited's Quarter 2 FY '24 Earnings Conference Call. Today, we have with us Mr. Ajay Shriram, Chairman and Senior Managing Director; Mr. Ajit Shriram, Joint Managing Director; Mr. Aditya Shriram, Managing Director; and Mr. Sanyog Jain, Deputy CF of the company. We shall commence with remarks from Mr. Ajay Shriram and Mr. Ajit Shriram. Members of the audience will get an opportunity to post their queries to the management following these comments during the interactive question-and-answer session. Before we begin, please note that some of the statements made on today's call could be forward looking in nature. And a note to that effect has been included in the conference call invitation that has been circulated earlier and is available on the stock exchange website. I would now like to invite Mr. Ajay Shriram to give us a brief overview. Over to you, sir.

Thank you, Siddharth. Good afternoon, ladies and gentlemen, and thank you for taking time to join us for our Q2 Financial Year '24 Earnings Conference Call. I wish to take this opportunity to convey our festive greetings to each one of you ahead of Diwali. I will commence with the strategic imperatives of our business, followed by Ajit giving a perspective on our business' performance. The first conflict in the Middle East set to roll back the already weak economic recovery in the weak developed economies. Inflation remains the primary disruptor, the normalization of growth as central bankers are already setting the tone for a tighter policy regime. The combined impact from geopolitics, higher interest rates and nonlinear risks from climate change will intensify problem formation with voted debt and weak economies. We are already seeing adverse impact in our total businesses from these sectors. The steps we are taking to diversify our product mix and bring in higher efficiencies shall mitigate these issues to makes sense. Sugar industry continues to operate in a stable political environment and is likely to remain insulated from the global dynamics given the fall in production estimate. Shriram Farm Solutions, our business vertical in rural agri input area has continued launching new products, including from our own research and has also started working towards creating a manufacturing footprint. Connector business continued its growth momentum, and we augmented our extrusion capacity to support growth in the UPVC segment and are also looking at expanding geographically and increasing our product offerings. Sustainability being central to our initiatives, one will see progress in water and energy conservation, green energy and circular economy. We have also raised a sustainability-linked loan to mark our unwavering dedication towards the ESG objectives. I would now like to walk you through our various business. First is Chemicals. The major economies are yet to see the path to sustain economic revival due to geopolitical factors. Caustic soda being a key product that gets consumed by several key segments of the economy. Its demand has remained subdued in the first half of the fiscal year, driving inventory levels higher. In India, new capacity addition has led to lower operating rates as the demand pickup is not commensurate to capacity additions. Also, during the first half of the year, the net export was lower at 1.16 lakh metric tons versus almost 1.4 lakh metric tons corresponding in last year. We continue to face price pressures due to international prices and continue to work on the cost side to improve margins. Our captive green energy plant was commissioned in the last quarter and the 120-megawatt more efficient power plant has started trial runs and will reap results from this month. Other projects are under advanced stages of execution and will be commissioned before the end of this financial year. Vinyl. South Asia continues to attract imports as demand from North America and China remained subdued. Demand across India was strong. However, China with its excess capacity and aggressive pricing continue to put pressure on prices in the country. The volumes have been higher this year. Also, the raw materials, mainly power and carbon costs have corrected and have kept margins positive. [ EV ] prices have further softened and we are maximizing carbide sales. Sugar. World sugar balance is expected to be balanced and hence, international prices remained firm presently at approximately $730 per tonne for white and $0.27 per pound for raw sugar. Domestic market being insulated from international market, sugar prices continue to be much lower at approximately between INR 3,800 to INR 4,000 levels. Indian sugar stocks as of September 30, 2023, at 4.5 million metric tons, along with sugar production for the sugar season '23-'24 estimated to be around 30 million metric tons should support domestic sugar prices in the coming months. The Uttar Pradesh government is yet to announce the State Administrative Price, SAP of sugarcane for the upcoming season. The industry will be expecting a parity with the central government FRP, the Fair Remuneration Price also factoring in the impact of the country liquor policy of Uttar Pradesh. We plan to commence sugarcane crushing in the first week of November and are expecting a good crop for the year. Our distillery operations were slightly impacted due to nonavailability of molasses for the few days in the coming season due to the irrational country liquor policy. However, this will be mitigated to a large extent in the upcoming season with change in the feedstock mix. The government has achieved ethanol bringing of 11.7% as of August 2023 and has also increased the prices of damaged grain ethanol to ensure higher blending in the balanced ethanol year. The prices of feedstock that with sugar and damaged grains continue to be high. And therefore, industry is expecting an increase in the ethanol prices for all categories of ethanol to ensure higher blending rates in the coming season. Moving on to our heavy duty businesses, which comprise of Shriram Farm Solutions, Bioseed and fertilizers. Shriram Farm Solutions first. We have seen healthy growth on the back of research wheat and hybrid seed volumes. In our drive to introduce more research-backed products, we introduced 3 new products, including a novel product in specialty plant nutrition. We're also working towards enhancing a brand-centric promotion. The winter rain is expected to be low, and thus, we are expecting Rabi to be weaker for crop care and specialty plant nutrition vertical. Our project to manufacture water soluble fertilizers and biologicals continues on track and will be commissioned in Q4 financial year '24. Bioseed witnessed higher revenues in vegetable seeds in India and corn seeds in Philippines. New and superior performing hybrids have been introduced and well received by farmers in corn and cotton in the target markets of India. More launches are lined up for wheat and vegetables in the upcoming Rabi season. Based on the strength of these products and strong pipeline, we are optimistic about significantly increasing our market share in the coming season. Fertilizers. The raw material prices have come down sharply, impacting both topline and bottom line of the business. Profit for the quarter were lower for the above reason. However, the profit for the half year were higher due to maintenance shutdown in the last year. Subsidy outstanding stood at a negative INR 267 crores as compared to INR 683 crores last year and between INR 310 crores as on 31st March 2023. Connected Building Systems. We have seen performance trends sustaining with both our project and retail segments, showing healthy improvement in volumes. We have commissioned 2 new extrusion lines at Kota, and this should help in sustaining this growth momentum. We have also formed a strategic partnership with a UAE-based firm for our facade business. We are looking to grow both by geographic and SKU expansion, backed by a strong brand and business process. We are once again at the crust of economic volatility on the global arena. The transmission of softer demand trends in India in tandem with firmness and energy cost is impacting key sectors of the economy. Our strategic investments in enhancing the business mix and efficiency in operations are expected to be fully achieved before the end of the financial year. As a strongly growing country, India remains the sweet spot for higher consumption and as a multi-business entity, we shall be prepared to grow smartly. Our healthy cash flow and healthy balance sheet will supplement our growth initiatives. I would now like to ask Ajit to cover the financial perspectives with you. Ajit, over to you.

Thank you. Good afternoon, everyone. I will now take you through the financial highlights of the Q2 and H1 FY '24 results. Net revenues for Q2 FY '24 were at INR 2,708 crores versus INR 2,740 crores in Q2 FY '23, a decline of 1% year-on-year, adversely impacting -- impacted by lower volumes and prices of Chloro-Vinyl segment. Sugar at Shriram Farm Solutions led the growth for the quarter. PBDIT for Q2 FY '24 was at INR 136 crores versus INR 302 crores in Q2 FY '23, a decline of 55% year-on-year. Chloro-Vinyl segment revenues declined 30% year-on-year to INR 656 crores, and PBDIT was down 81% at INR 47 crores. The Chemicals segment reported revenues of INR 509 crores, a decline of 35% year-on-year. ECU prices were lower by 40% year-on-year and volumes of caustic soda sales were down by 2% year-on-year. Therefore, PBDIT was down 85% at INR 38 crores. However, the segment continues to see good demand and prices for hydrogen. Margins are currently positive, led by a reduction in energy costs. Vinyl saw a decline in revenues by 5% year-on-year at INR 147 crores, largely on account of a decline in prices of PVC and carbides by 13% and 47%, respectively. However, volumes of PVC and carbide increased by 15% and 7%, respectively, as there was a power plant breakdown last year. However, PBDIT saw an improvement of over last year at INR 9 crores versus negative INR 10 crores, led by lower power and carbon costs. Sugar business revenue, net of excise duty was at INR 970 crores, an increase of INR 57 crores year-on-year due to higher prices and volumes in both sugar and ethanol businesses. Sugar volumes were up 30% year-on-year due to higher domestic releases. Volumes of ethanol were at 541 lakh liters versus 256 lakh liters owing to the commissioning of the 120 kld multi-feed distillery. Sugar and ethanol prices were also higher. PBDIT came in higher at INR 15 crores as against negative INR 15 crores for the above reason despite taking a charge of INR 45 crores in the current year on account of the irrational country liquor policy by the state government. Fenesta Building Systems revenues increased 18% year-on-year to INR 209 crores at PBDIT by 23% to INR 45 crores, largely on account of higher volumes. Order book was up 48%, driven by project segment. Shriram Farm Solutions revenues increased by 18% year-on-year at INR 280 crores, supported by volumes of research, wheat and hybrid seeds. Prices of hybrid seeds were also higher. PBDIT for the quarter came in at INR 44 crores as against INR 36 crores last year on account of better margins in research wheat. Fertilizer revenue was lower by 37% year-on-year at INR 368 crores. PBDIT was down by 48% year-on-year at INR 28 crores on account of lower volumes by 7%. Also, prices were lower 33% year-on-year on account of lower energy prices, which is a pass-through. The Bioseed segment saw a revenue increase of 46% year-on-year at INR 128 crores. This was primarily led by domestic revenue increased by 53% year-on-year at INR 91 crores due to higher volumes in vegetable seeds, whereas international revenues increased by 31% year-on-year at INR 37 crores due to higher volumes in corn seeds. For the half year ended September 30, 2023, revenues net of excise duty was at INR 5,488 crores, reporting a marginal decline of 2% year-on-year. This was mainly on account of lower prices and segments of chemicals, vinyls and fertilizers. Volumes were higher in vinyl and fertilizer due to breakdown and shutdown in last year, which were higher in sugar, led by higher sugar releases and commissioning of the 120 kld multi-feed distillery. Fenesta and SFS continued its growth journey. Accordingly, PBDIT is at INR 320 crores, a decline of 58% year-on-year. The company's net debt at negative INR 203 crores as on September 2023 as against INR 681 crores as of March 31, 2023, largely on account of sugar off season. Return on capital employed for September 2023 came in lower at 18.5% as compared to 36% for September '22. In conclusion, our overall performance reflects our commitment to sound investment strategies and with a strong balance sheet and cash flows, we are well positioned for the future. Our focus on healthy, sustainable growth has paved the way for continued success and prosperity. This brings me to the end of my opening remarks, and I would like to request the moderator to please open the forum for the Q&A session. Thank you.

[Operator Instructions] The first question is from the line of Ahmed Madha from Unifi Capital.

My question was first on the caustic business. So can you give us some comments on how do you see the current global prices? And how is the demand supply behaving in the global market as well as the domestic market? And also, we are witnessing that there is some uptick in the prices in the last couple of months. So is it fair to expect that from quarter 2 to quarter 3, there will be some improvement in our realizations?

Yes, sure. So in terms of the global demand supply situation, we do see that there was a slight increase in prices, as you suggested as well. This was largely due to China not being in the market aggressively in the past few weeks. But post the Asian games, we have seen that the supply from China has increased again. So that was a slight uptick in the market and that has corrected. So we do expect that in the coming short-term period, next quarter or so, the prices are likely to be ranged down.

Okay. And one more question on the caustic side. We see that the cost has come down from the last quarter. So can you quantify how much of the savings from the renewable power and how much of the savings from the decline in coal prices?

So as far as the renewal power is concerned, because of that, there is going to be a saving of around -- on the variable cost of around 10%. And we will not be able to quantify in terms of how much is from the renewable and how much is from these other sources, but that is the ballpark number.

And on the sugar business, are there any one-offs in the sugar business this quarter? I'm trying to understand. I know that this is the weakest quarter seasonally, but we have very significant growth in volumes, both for sugar and ethanol. So is it just related to the inventory cost, which we were carrying from last quarter? Or are there any one-offs?

Our inventory is valued at around INR 3,200 per quintile. So we are carrying an inventory of INR 12.9 lakh quintiles as of now. I hope I have answered your question.

I just wanted to understand, I mean, there was loss in this quarter, and the volumes were really good. So is it just a factor of the inventory cost? Or is there any other reason why there was loss?

No. As mentioned in the opening remarks, we have taken a hit of INR 45 crores. We've taken a hit of INR 45 crores because of the change in the country liquor policy. So that has been a massive raise in the bottom line in this -- in the current quarter, which we've taken on our P&L and balance sheet. That's the revaluation of molasses from -- because we manufacture through the BAV routes and these government equated B-Heavy and C-Heavy at the same level, which is not rational, really.

Okay. So was this like a one-off or is it recurring?

So it's because of the policy. It's because the policy where the alcohol output from B-Heavy is double that of C-Heavy, but when they equated it at the same level. So it's a one-off. The new policy has come out yesterday, and we are evaluating our strategy of what we'll do in the current year going forward.

Okay. Got it. Got it. And just last question on the CapEx. How are the -- how is the update on the CapEx? So what will be the timeline? Should we expect that it should be commercialized by Q4, all the CapEx which we have for the caustic loading business?

Yes. So I think I have mentioned earlier on the call as well. We are making good progress with the CapEx. And most of the mechanical completion is almost done. The pre-trials and pre-commissioning will begin. So we expect that by Q4, we would be commissioning and completing the CapEx.

And how much balance CapEx will do for the second half?

So we'll be doing close to around INR 500 crores in the second half.

[Operator Instructions] The next question is from the line of Parth Vasani, an Individual Investor.

In the Chemical segment, the CapEx that we would have done, like for the epichlorohydrin for the hydroperoxide and for the caustic soda. So what would be the total amount, if you can guide in terms of the CapEx that we have spent or we are supposed to spend?

So total spend would be around INR 2,500 crores in the Chemical segment. And out of that, another INR 500 crores will be spending in the next H2.

So INR 2,500 crores will be spent in the next coming years, that's what we are saying?

No, no, INR 500 crores only.

I think you have to clarify what you're asking, Parth, INR 2,500 crores has already been spent on the 120-megawatt power plant, on aluminum chloride expansion, on the ongoing caustic soda expansion, [ Grade 2 ] expansion. And we will be spending approximately INR 500 crores more in the second half of this financial year.

Okay. Okay. And in terms of the epichlorohydrin, when do we expect to get it commissioned?

Yes. We expect it to be commissioned by Q4 this financial year.

Okay. Okay. Second question, we are also expanding the caustic soda capacity. And what I understand is chlorine is something which is a bottleneck in terms of -- because it's sold at a lesser price. So just wanted to understand, I mean, once we expand the caustic soda, how we will be managing this, considering the negative price generally presumed in the market?

Yes. So you're right, chlorine is a key factor in expansion of caustic soda as well. I think we have a couple of factors. One is that we have captive consumption that is also increasing from the past. We are putting up an epichlorohydrin plant, as you know, that will consume chlorine. We have already commissioned an aluminum chloride plant that is already consuming some of our chlorine that will be captive support for the expansion as well. And additionally, we have very strong partners in our customers as pipeline customers. So they have been on the growth journey along with us, and we truly value that partnership. So as they also continue to expand, we are confident that a large percentage of our chlorine will be consumed through the pipeline and captively.

So currently, what percentage would you be consuming like in current capacity? And what will be post-expansion. Any numbers?

So currently, it is close to 40% as a combination of captive and pipeline, as we mentioned earlier. And after the commissioning, we expect this to go up to 50%, close to 50%.

Okay. This includes both internal consumption and the pipeline customers?

Captive consumption and pipeline customers, yes.

We expanded capacity to expand it to...

[Operator Instructions] The next question is from the line of Riya from Aequitas Investment.

I have 2, 3 questions. First is in terms of what are the current caustic realization as of -- as China has started and we're seeing internal utilization also improving. So on that?

Caustic realization.

It is approximately around 26,000.

26,000. So is it fair to assume that 25,000 in July was kind of a bottom out?

So as we said, that it will be in the range of around 25,000 to 27,000. And so right now, it is at 26,000 ECU, I'm talking about.

And my second question is in terms of sugar. So what would be cost of production for last season?

As we said it is already been reached, it is at 3,200.

That's inventory, right?

Inventory valuation.

Cost of production?

That's the direct cost of production.

Okay. That's the direct cost of production. Okay. Got it. And in terms of timeline for the current CapEx for the distillery?

No. We've already commissioned it under our distillery during 120 kl multiple distillery. It's already commissioned.

Right. And in terms of the new 2,100 TCD, which we have just announced?

That is expansion of one of our sugar plants, and that will be commissioned by the sugar season '24-'25. It will be ready by October '24.

October '24, it will be ready. And what kind of -- sir, recently in UP, your other peers just said that the FTI for the grain based not getting rains and they've shifted maize and like so what is our strategy there?

So our strategy keeps revolving, depending on the price of the raw materials available. So as mentioned earlier, this is a multi-feed distillery we can process rice, wheat or maize. So depending on the prevalent spot prices, we'll take a call.

Okay. And what are the yield and -- yield expectation and the cane crushing expectations for the next year for us?

That is a little difficult to say. But yes, this year, we will be utilizing the fully expanded capacity in Ajbapur which was commissioned by -- after the season started last year. So we'll be utilizing our entire 41,000 PCB.

41,000 PCB entirely, right? Actually, I was talking in terms of the area and crushing, do we expect it higher than last year, the crushing? Apart from the new incremental capacity addition?

Yes. The crop looks good. So we do expect a higher crush compared to last year.

All right. Great. And in terms of Fenesta, what are the details of the strategic partnership, if you could give in the new announcement of the facade, which we have given today, if you could elaborate more on that? What is the kind of revenue potential out of the CapEx?

We feel that Fenesta, we've been making windows and doors for many years now, and we are a leader in that. But we are getting into facade, which is the fixed windows like you have in airports and other multi-story office buildings, et cetera. So for that, we have tied up with a party in Dubai to get their input and their technology to start put up a manufacturing plant in India. So that is what we are working on.

Right. And what would be the kind of revenue potential or the CapEx involved in this?

I think it's a little early because we are still discussing with our potential partners of what is the scale -- size, scale, scope of this plant, and we will be growing it starting with a size which is more practical and we keep growing it. So we've not yet worked out the details about the CapEx.

Got it. And in terms of power cost savings, what is -- could you give your outlook there going forward in the coming quarters by how would the power cost saving because we have commissioned the new plant as well and the power prices have also gone down. So what would be the savings in that aspect?

So what we expect is that there will be a steady -- in the variable cost approximately of around 10%. Because of -- once this power plant comes in and becomes critical.

Okay. For 10% improvement vacancy in terms of...

Approximately, INR 1 per unit that is what we expect.

[Operator Instructions] The next question is from the line of Saket Kapoor from Kapoor & Company.

Just dwelling to the last point, sir, what would be the annual savings in the absolute number, if you can share for the power cost?

I think it's -- it could be close to around what we expect is INR 100 crores of savings. Then it is operational at full capacity.

And sir, there are 2 components to it. First is the new power plant and then is the renewal one also. So for the renewable segment, 43 megawatt, what is the plant load factor and average we are taking into account the -- when we are arriving at...

Renewal power is 43 megawatts, actual note would be around 22 megawatts that we will receive. And what we price at what we receive is around INR 4.20 per unit. So that is the expectations on the renewal power.

Okay. But this INR 100 crore number is only from the thermal power plant?

That's right. Yes.

Okay. And the CapEx we have done for this thermal and what is the payback for this plant?

It's around 20%.

20%?

Yes.

Sir, as you were mentioning that the ECU currently is in the vicinity of -- in the band of INR 26,000 to INR 27,000. So earlier also the way I've seen historically that PVC and the caustic prices have inversed correlation because of the reasons I explained by you earlier also as -- but what currently is the outlook in terms of -- especially for the caustic prices, the capacity buildup has been in our country domestically, the prior -- there has been 1 million ton additional capacity that has come up. But globally, what is the -- how are things shaping up? If you could give some more color on the same?

Sure. So fundamentally, we are seeing that at a global level, the demand is not very, very robust. Of course, Europe, there are challenges in terms of demand. The war also has created an uncertain outlook. The other factor, which is -- can have implications in, of course, China. And China has been pushing material into the global market aggressively as well. So we do expect that in the coming quarter or couple of quarters, the prices are likely to be range bound. And in India, yes, as you indicated, there is an increase in supply. So unfortunately, there is a demand factor and a supply factor, which is why the short term we see prices to be railed down. Medium to long term, we expect a positive outlook.

Sir, when we look at your capital work in progress it has moved up to now closer to -- it is INR [ 23.57 ]. So for the coming -- for H2, what percentage network amount would get capitalized? And if you could just dwell which projects are going to get commercialized within this financial year?

So we are seeing that ECH and H202 and P120, all these projects will -- and -- all these projects will get capitalized in H2.

Okay. So we have spent the entire amount or...

No. So we still have to spend around INR 500 crores on these projects.

Okay. But we were about to commission something for the third quarter. I think the December quarter, we will be commissioned, yes.

P120, we will be commissioning sometime in November.

Come again, sir? I missed your point.

P120 plant, they have already started. We're already running. We are gradually taking it up. So by the end of November, we expect it to run to a reasonable capacity, which will contribute to the power requirement for the plant.

So P120, can you elaborate? I am not aware what are you...

We are putting up a new power plant of 120 megawatts.

Yes. Okay. P120, power plant, okay, fine sir.

Now we have started, and we will then keep increasing capacity gradually in a structured way based on the rules and regulation for reaching full capacity of our power plant.

Correct. Sir, when we look at your net debt number, it was -- when we were cash positive. So how did we achieve this for the first half?

So it is largely because of the liquidation of the sugar stocks and also -- and receipt of the FICC dues.

The subsidy part?

Yes, yes. Subsidy -- fertilizer.

And that is the reason why you have mentioned in the subsidiary segment also that, that is also carrying a negative balance. I was coming to that.

Yes, carries a negative balance, which will get adjusted as in the future billings.

Okay. So for FY '24, what should be the debt number -- closing debt number we should look forward?

Too early to give that number because it depends on government policy also regarding the FICC dues.

Correct, sir. Now sir, coming to this -- our farm, the Bioseed part and the Farm's edition business, particularly for the Bioseed segment, if we -- if I correctly remember 2 quarters back, you did mention about some policy changes and things to be put into space so that this segment will start contributing. So where are we in midst of the Bioseed part of the story, the restructuring part?

I think in the opening remarks, I mean we made good progress in our vegetable seed. And we're doing trials on -- based upon the R&D and the government provisions, we bring extensive trials on a couple of other crops, which -- excessive trials in a couple of other crops and more launches are lined up for the vegetables in the upcoming Rabi season.

So what should be the outlook for this sector 2, 3 years down the line, what kind of business profile case will this segment shape up going ahead?

We see a positive outlook. We see a positive outlook because our pipeline is strong. And I mean, it's very difficult to say, depending on dramatic factors and very strong -- for next year, but we do see a strong outlook.

Sir, coming to the sugar distillery part. My second point was, I think, so the sale of grain by FCI was a big list of -- what is the status on the spin and our dependence on FCI sales?

No. So we're buying from the open market. And as I mentioned earlier, ours is a multi-feed distillery. So depending on the spot prices of grain, rice or maize, we take a call depending on a spot basis and purchase, I mean, whichever -- more advantages at that point of time.

And how has the prices being, sir, the raw material price bucket? But since now it is all market -- for market sources you are obtained...

Compared to FCI, it is higher. And we are now waiting for -- I mean, we're waiting for the revised ethanol prices, both on the sugarcane juice, B-Heavy, C-Heavy and the different grains going forward from the central government.

The prices were revised higher, sir, I think so last quarter itself, the September month only?

Yes.

I didn't get you, sir. Is it on the grain part only that have been...

For grain, yes, yes. They were revised for the grains. Now again, the new iteration is due, which would come within the next 3 to 2 weeks.

Right, sir. Sir, also in the ethanol part, I think with the liquor -- country liquor part we mentioned in your presentation that there was a INR 45 crore some loss we need to -- we had booked because of some government policies. Can you dwell more of what was this all about? And this INR 45 crores is for the first half?

As I mentioned earlier in answering a question, the state government has equated the -- of country liquor supply or alcohol supply for B-Heavy and C-Heavy. However, the output from B-Heavy is double that of C-Heavy. So if you make an ex reservation for C-Heavy, based on C-Heavy, you're supposed to make a 50% reservation based on B-Heavy. So equating both B-Heavy and C-Heavy is not [ same ] .

So we have made our presentation that this will be revised or if it is done and dusted?

As I mentioned earlier, the new policy for reservation has come out only yesterday. We are studying it. And depending on what is most desirable for our company, we will take that forward in the Rabi season, which will start next week.

Okay. Can you come again, which policy, sir? I missed your point.

Reservation policy of molasses for country liquor.

Okay. For this sugar season, for the current sugar season?

For sugar season, for '23-'24.

Correct. I think so the only growth part in our total segment is correctly for the Fenesta. And as you were earlier mentioning also, sir, to taking into account the pillars that you are getting and also now we are also improving our product profile. 3 years down the line, what kind of business are we looking up to set up from the financial vertical itself, if you could throw some more light on the same sir, and the key competitors in the segment?

The growth part is happening in all our businesses except fertilizer manufacturing business. We're growing in all our businesses and Saket we'll appreciate -- we could not out freer picture, when we're still moving on a growth path. I can't give any figures like this.

[Operator Instructions] The next question is from the line of Narendra from RoboCapital.

Sorry, if the question is repeated, but I wanted to know your outlook on the sugar prices given there are reports of lower...

I'm sorry, we can't hear. Could you kindly say that again, please?

I said, I'm sorry, if the question is being repeated, but I wanted to know domestic sugar prices given there are reports of lower harvest in the season.

Sugar prices?

Yes, yes. Domestic sugar prices, yes.

So domestic sugar prices, as was mentioned in the opening remarks is between INR 38 and INR 40. And sugar being a controlled commodity, the government leases on a monthly basis. So I don't see the sugar prices going up any further going forward.

Okay. Okay. Got it. And could you please mention your ethanol capacity once?

Ethanol capacity is roughly INR 18 crore liter per year.

Okay. INR 18 crores. And in the klpd terms?

That depends upon actually your -- I mean, the raw material mix being used, we're C-Heavy or B-Heavy. So it will depend upon the mix of your raw material.

Okay. Okay. Got it. And the second question regarding caustic demand and pricing situation. So do we see it improving in near or medium term next year or so?

I'm sorry, we can't understand what you're saying. Could you kindly speak a little -- we can't understand what you're asking.

So I was talking about the caustic environment, caustic soda environment, the demand and price point. So do we see it improving in the near term, say, next couple of quarters?

So as we shared earlier also on the call, the near-term outlook, we expect the pricing to be ranged down. But in the medium to long term, we do see positive upside.

Could you repeat that? I missed it. Sorry, please.

So as we said earlier, in the near term, given the demand-supply scenario, we expect the prices to be at the current levels. But going forward in the medium and long term, we are bullish on where the prices will go.

[Operator Instructions] The next question is from the line of Pratik Tholiya from Systematix.

So what is the chlorine prices currently?

So it is around INR 26,000. Chlorine is a negative INR 5,000.

Chlorine is negative INR 5,000. And this is the same number for Q2?

Pardon?

Second quarter is -- this is INR 5,000. This is currently in the month of October?

Between INR 3,000, INR 3,500.

Okay. And so the INR 36,000 that is -- sorry, INR 26,000 that you said was ECU and not caustic, correct? Just wanted a clarification on that.

Yes.

Okay. Okay. And then secondly, in the sugar business, is there any [ red rock ] sort of incidents happening in our chain area also because some of the companies in the call have been mentioning about [ red rock ] in some parts of UP, especially in the low line region. So are we also seeing anything on that front?

Yes, there has been [ red rock ] in our area as well. However, our cane team is taking very proactive steps and mitigating the [ red rock ] and also, I mean, progressively changing the variety of to create to other varieties, which are less red rock...

So what is the mix right now then with respect to our cane variety? How much of our cane variety has now shifted outside of 238?

It will be difficult to give that estimate as of now.

Okay. Okay. Sure. And so, we are also hearing about chain SAP going up. Has there been any formal announcement on that trend? And what sort of number are we expecting?

No, there's been no announcement so far.

The FRP by the central government was repriced at INR 10 a quintile, 3 months ago.

Right, right. So is it going to be in line with that or higher than that, what is your say?

It is now in [indiscernible] so far.

Okay. And lastly, I think Fenesta has really done well. We are now clocking almost INR 200 crores of quarterly topline with 18% EBIT margin. So I'm guessing our EBITDA margin will be 20% plus. So what is the roadmap over here? Is this sort of a revenue run rate, quarterly revenue run rate now sustainable? And also on the margin front, you think this 18%, 20% sort of margin is now sustainable. So what has really changed in this business? And how does -- how do you look at this going forward over the next 2, 3 years?

I think I would say that as we discussed, we expect growth of 15% to 20% in the Fenesta business going forward by moving into newer geographies, introducing new products. As I mentioned earlier, we're looking at facade, that's the new business we're getting into. This is an ongoing business. We put up 2 more extrusion plants at our Kota factory, which gives us a larger number of profiles available. And we are seeing that the real estate market in India is growing and the aspirations of people is growing. They want a better product, better quality, which gives better insulation, less dust, less noise, less heat, and this is a product like ours have a positive impact. So we are positive on this business.

[Operator Instructions] As there are no further questions, I now hand the conference over to the management for closing comments.

Thank you. Thank you, ladies and gentlemen, for your participation in today's call. Our strategic investments in diversifying our product mix and enhancing operational efficiencies are on track to yield results by the end of this financial year. With India continuing to grow, we are well prepared to grow diligently across our diverse business portfolio. Thanks to our healthy balance sheet, we are well equipped to fuel our growth initiatives and drive positive change in the markets we serve. And thank you all for being a part of our journey. We thank you for taking our time during the onset of the festive season, and we take this opportunity to wish you along with your families, a very safe and happy Diwali and a healthy and prosperous year ahead. Thank you very much.

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