DCM Shriram Limited (DCMSHRIRAM) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the DCM Shriram Limited Q3 FY '24 Earnings Conference Call. [Operator Instructions] Please note this conference is being recorded. I now hand the conference over to Mr. Siddharth Rangnekar from CDR India. Thank you, and over to you, sir.

Thank you, Dorwin. Good afternoon, and welcome to DCM Shriram Limited Quarter 3 FY '24 Earnings Conference Call. Today, we have with us Mr. Ajay Shriram, Chairman and Senior Managing Director; Mr. Vikram Shriram, Vice Chairman and Managing Director; Mr. Ajit Shriram, Joint Managing Director; Mr. Aditya Shriram, Deputy Managing Director; and Mr. Amit Agarwal, CFO of the company. We shall have remarks from Mr. Ajay Shriram and Mr. Vikram Shriram, today. 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 commence, 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 invite that has been circulated earlier and is also 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. Thank you for taking the time to join us for our Q3 financial year '24 earnings conference call. Here is wishing all of you a very healthy and happy 2024. I will share my thoughts on the business and industry dynamics, and then Vikram will share views on the financial and operating performance. The global context today is characterized by delayed economic recovery for major economies, rising geo... [Technical Difficulty]

Ladies and gentlemen, the line for the management seems to have disconnected. Please stay with us while we reconnect with the management. Ladies and gentlemen, we thank you for your patience. We have reconnected with the management. Over to you, sir.

Thank you. Sorry for the disruption, ladies and gentlemen. The central banks are grappling with the inflation, interest rates and growth paradox. There are also deepening trends around climate change, generative artificial intelligence that have led many countries to look at policies around these concerns more aggressively. 2024 will also be a year of elections. 30 democracies, including 3 of the largest, which are India, U.S. and Indonesia will go to the poll, accounting for about 46% of the global population and nearly 60% of the global GDP. This is likely to generate regulatory and policy uncertainty in the short and medium term. We, as an organization, are cognizant of these developments and keep preparing ourselves for possible eventualities. We have already taken conducive measures in terms of enlarging product portfolio as well as sustainability. This is a key focus area for all our businesses, and we will ensure that we keep growing along these lines. All our businesses continue to witness good growth, except Chloro-Vinyl, wherein we are witnessing price softening led by oversupply of caustic in India and import of the PVC into India. I would now discuss about the key industry dynamics across our various businesses. First is Chemicals. Demand trends in major economies for key end user industries that utilize Chlor-Alkali have been subdued, leading to a sharp decline in prices of caustic soda in Q4 of the last year, post which the prices have remained low and range bound. U.S. has witnessed some capacity shutdowns in last couple of years, and Europe is looking at reducing productions amid lower demand. Demand continues to be lower in China as well. However, they operated at a higher rate and exported surplus to contain falls in their domestic prices. The Indian scenario did not change much from last quarter and operated at lower capacities with sluggish demand growth and new capacity addition. We expect this scenario to continue for a couple of more quarters. We are cognizant of the imperative and a consistently matched capacity augmentation with efficiency initiative. Our energy costs have come down and our new 120-megawatt power plant will further support lowering energy costs from Q4 financial year '24. The sourcing of green energy that started in June '23 is helping us in costs as well as in the endeavor towards sustainability. However, given the industry scenario, we expect the businesses to be under pressure for a few quarters. The other initiatives, ECH and H2O2 projects are expected to come online in Q1 financial year '25 and expansion of caustic soda capacity is expected to be operational in the current quarter. These are aimed at making the overall business more resilient, more efficient and more diversified in terms of the product range. Vinyls. High interest rates have meant that housing sector continues to underperform in the major economies, including China, thereby impacting PVC demand and prices globally. The disruption of logistic lines in Panama Canal and the Red Sea may spurt the freight cost and increase prices in consuming countries. India is registering a healthy growth in demand but the prices continue to be subdued due to excessive imports from China. And therefore, the margins are negative for PVC in spite the cost savings in terms of lower energy prices. Carbide prices have also declined, but margins continue to be positive, and we are maximizing carbide sales. Sugar. Globally, sugar demand and supply is expected to remain balanced and this is supporting firm sugar prices. Domestic sugar production estimates have been revised to 31 million metric tons with impact of El Nino in Maharashtra and Karnataka. Sugarcane prices have been increased. The fair remunerated price by INR 10 per quintal, and the Uttar Pradesh State-Administrated Price by INR 20 per quintal. There is a significant gap in margins between Maharashtra and Uttar Pradesh mills. Policy intervention will be required in this regard. Ethanol industry received two setbacks this year. Firstly, with central government restricting sugar diversion for ethanol production to 1.7 million metric tons. And secondly, Uttar Pradesh government increasing the country liquor obligation on molasses. The positive side was that the central government has increased the ethanol price by INR 6.87 and INR 5.79 per liter for C-heavy molasses and damaged corn-based ethanol, respectively. In spite of this, we feel that feedstock availability with the distillery will be challenged this year and blending will see a decline from about 12% blending achieved this ethanol year. We feel that there is a need for consistency of direction from central government and state government. We started sugar operations in this quarter and have planned majority of our operations on C-heavy route. The crop is looking good so far. Our expansion initiatives at Loni and CBG projects are proceeding as per timelines. Our potash fertilizer project commissioned in January 2024. The CBG as well as potash fertilizer are part of our initiatives on sustainability through circular economy. Fenesta. Consistent measures to enhance the portfolio has translated into better performance metrics for this business. During the quarter, we have delivered healthy growth owing to increase in volumes and pricing. The trend remains positive and order bookings are also up at 9%. We have commissioned our fabrication units or facades at the Hyderabad facility recently. We have also increased the uPVC extrusion capacity at Kota to enable growth and better service. Strategy-wise, we are accelerating presence in new territories and product categories, and this is translating into better performance. For the last few years, Fenesta has become a significant contributor to our earnings. The agri business portfolio comprises of our Shriram Farm Solutions, Fertilizers and Bioseed business. Shriram Farm Solutions has seen good growth given better volumes in seeds, especially research wheat. The new varieties that we introduced for research wheat last year has received a positive response from the farmers as they are attuned for higher yields and enhanced heat tolerance. Our production facility for water-soluble fertilizers and biologicals under a subsidiary was commissioned during the quarter. Over the last few years, Shriram Farm Solutions has become a significant contributor to our earnings. Fertilizers. Lower gas prices that is a pass-through impacted both top line and profits. Also last year, we have received arrears on account of revision in energy norms. Subsidy outstanding as on December 31, 2023, stood at a negative INR 21 crores as compared to INR 461 crores in the same period last year and INR 310 crores as of March 31, 2023. Bioseed. The business saw improvement in volumes both in India and Philippines. This is on the back of the new high-performing hybrids that have been introduced by us in corn, cotton and vegetables. Our pipeline for the coming seasons remain attractive as our team is focused on developing newer and promising varieties. Frequency of economic volatility, vagaries of climate and their impact on business have increased in the recent past, and these have become a part of business. So India continues to show buoyancy in economic growth led by infrastructure development and investments across various industries. Some impact of these events cannot be ruled out in the coming year, and we feel our investments directly to enhance sustainability, business mix and efficiency in operations will help us sail through these challenging times. We continue to have a healthy balance sheet, and this will support further growth initiatives. I'd now like to invite Vikram to cover the financial -- over to you.

Thank you. Good afternoon, everyone. I will now take you through the financial highlights of Q3 and 9 months financial year '24 results. Net revenues for Q3 financial year '24 were at INR 3,035 crores as compared to INR 3,236 crores in Q3 financial year '23, a decline of 6% year-on-year. Revenues were impacted by prices in the Chemicals, Vinyl and Fertilizer segments. Growth for the last quarter was driven by sugar, Shriram Farm Solutions and Fenesta. PBDIT for Q3 financial year '24 was at INR 480 crores as compared to INR 588 crores in Q3 financial year '23, a decline of 18% year-on-year. The revenues in Chloro-Vinyl segment declined 31% year-on-year to INR 663 crores and PBDIT was at INR 56 crores as against INR 237 crores in the last year. The Chemical segment reported revenues of INR 535 crores, a decline of 29% year-on-year. ECU prices were lower by 40% year-on-year, which were partially compensated by caustic volumes being higher by 6% year-on-year. PBDIT declined 71% to INR 63 crores. However, hydrogen sales along with lower energy costs have helped to mitigate this to some extent. The Vinyl business noted a decline in revenue of 37% year-on-year at INR 128 crores, mainly on account of the decline in prices and volumes of PVC by 12% and 29%, respectively, and lower carbide prices and volumes by 20% and 16%, respectively. Volumes declined on account of partial shutdown in Q3. PBDIT was at negative INR 7 crores as compared to INR 19 crores led by subdued prices of PVC and carbide as well as volumes. However, this was partially offset by lower energy and carbon costs. Sugar segment revenue, net of excise duty was at INR 891 crores and increased 22% year-on-year due to higher volumes and prices in both sugar and ethanol business. Domestic sugar volumes were up 24% year-on-year at 14.7 lakh quintal due to higher domestic releases. Although last year, there were exports of 2.3 lakh quintals in the same period. Volume of ethanol was at 349 lakh liters versus 231 lakh liters, supported by the commissioning of the 120 KLD multi-feed distillery. PBDIT came in higher at INR 188 crores as against INR 102 crores led by better prices and lower costs versus the same period last year. Cogen volumes from the expanded capacities at Ajbapur were also higher. Revenues of Fenesta Building Systems increased by 20% year-on-year to INR 214 crores and PBDIT grew by 8% to INR 43 crores largely on account of higher volumes and prices. The order book was up by 8% -- 9%. Shriram Farm Solutions revenues grew 17% year-on-year at INR 596 crores as compared to INR 512 crores last year. The segment saw higher volumes and prices in seeds, especially research wheat. PBDIT for the quarter came in at INR 180 crores as against INR 143 crores, a growth of 26% year-on-year due to higher volumes and margins in research wheat. Segment revenues of fertilizers declined by 36% year-on-year at INR 418 crores and PBDIT declined by 72% year-on-year at INR 26 crores, attributed to lower gas prices, which is a pass-through. This led to lower energy savings rate and hence, impacted the earnings. Also, in the previous year, Q3 saw a onetime positive impact of INR 49 crores due to revision of energy norms of the earlier period. The Bioseed segment saw a revenue increase of 29% year-on-year at INR 138 crores. This was primarily led by domestic revenue increased by 29% year-on-year at INR 95.5 crores due to higher volume. The international revenues increased by 30.8% year-on-year at INR 42.2 crores, owing to higher volume in the Philippines. The Bioseed business is improving and is expected to reach near breakeven in the current financial year. For the 9 months, December 31, 2023, revenues net of excise duty were at INR 8,523 crore, reporting a marginal decline of 3% year-on-year. This was mainly on account of lower prices in segments of Chemicals, Vinyl and Fertilizers, which saw lower ECU, PVC, carbide and gas prices. Our business segments of sugar, which was aided by the commissioning of the 120 KLD distillery, Fenesta, SFS and Fertilizers saw higher volume year-to-date. Accordingly, the PBDIT is at INR 800 crores, a decline of 41% as compared to INR 1,354 crores last year. The company's net debt is at INR 314 crores as on December 31, 2023, as against INR 681 crores as of March 31, 2023. Return on capital employed for December '23 came in lower at 16% as compared to 27% for the financial year 2023 due to the reasons mentioned above. In summary, our balanced performance is anchored on a diversified portfolio, commitment to smart investments and sustainability and a strong financial foundation as can be seen by our balance sheet and cash flows. As we embrace the future-ready mindset with a focused approach on growth, we are strategically positioning ourselves for long-term viability and growth in the evolving new business segments also. This brings me to the end of my 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 Parth Mehta from Vallum Capital.

I just have two questions. First is on caustic soda volumes, which in the presentation, it shows that there has been flattish growth for 9 months in caustic soda. Help me out for the reason why the volumes have remained flat?

Okay. And the second question.

And second one is on epichlorohydrin, the new capacity that is coming up. So one of our competitors is also adding new capacity. So wanted to know what is the demand-supply scenario and would that lead to any oversupply in the industry?

Okay. Yes. Just answering your first question on caustic soda volumes. So actually, our new capacity is yet to be commissioned. So these volumes are with the same capacity as was there in the previous year. So we have marginally moved up on the sales from the existing capacity. And this quarter, we will be commissioning the new capacity. And after that, the volumes, would see an increase. With regards to your second question on epichlorohydrin. You're right. There is one other player who has commissioned capacity, and we would be the second one to commission capacity in this space. But there is -- I think with all products and chemicals, we are seeing growth in demand in parallel, so we do expect that in the coming quarters as we ramp up our capacity gradually, the material would be absorbed in the market, and we'll be exploring markets all over, whether it's domestic or international as well. So we do expect that in the coming quarters, this capacity would get absorbed.

Okay. Just one more on ECH. What would be the payback period for our CapEx? And how much CapEx would we done in ECH?

So the payback should be in the range of around 4 to 5 years, 5 years ballpark. And the CapEx will be in the range of around INR 500 crores to INR 600 crores. I don't have the exact numbers right now, but that should be the range.

Okay. And the CapEx in caustic soda new capacity that we are coming up with, and what will be the capacity since?

Yes. So the capacity there is about 850 tons per day. And they also flaker plant of about 600 tons per day. Put together, the CapEx is again in the range of around INR 800 crores to INR 900 crores.

Sir, missed out the numbers, you said 50 tons per day?

850 tons per day.

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

Congratulations on good set of numbers, especially in your sugar, agri and Fenesta. And I think even your chemical has sequentially done better. So just firstly, on chemicals on your -- so what was the ECU realization for the month of January -- I mean, average price during January?

Average price.

For January, Pratik, the average prices are around INR 25,500.

Okay. And sir, this is ECU level. So chlorine is still negative?

Chlorine is still negative.

And that would be how much?

Around INR 4,000 -- INR 3,000 to INR 4,000.

Okay, sure. And what is the slightly medium- to longer-term view on the caustic demand front because of the overcapacity that you are seeing. So how do you -- when you expect the entire capacities to get fully absorbed, and then we can expect the prices to go up?

Yes, you're right that in the short term, we are seeing an increase in supply. And demand, as we've already shared earlier in the call has been subdued. But we put up capacities with a long-term horizon. And we do expect that in the coming quarters, with the robust demand for a country like India across sectors that this capacity will get absorbed. So it's hard to put an exact timeline or a price in the future, and we normally don't give forward-looking statements. But we expect that with our chlorine integration as well that we are focusing on that this capacity will get absorbed and running fully in the next financial year, that is FY '26, it will be full.

I'll just add that, as mentioned by Amit earlier, we are also installing a 600 tons per day flaker plant. So that gives us the flexibility for exports. That puts opens up another value avenue of selling our products if the pricing is suitable.

Sure. Sure, sir. And then secondly, could you just share some details on your agri business because I see your agri has done exceptionally well in kind of a challenging quarter because most of the other companies that are reporting numbers, especially in the agri and seeds front are putting a top line degrowth while margins for most of them have been better, but you reported agri top line growth as well. So if you could just share something on the product details or even on...

Yes. I think in our Farm Solutions vertical, we have -- Farm Solutions segment, we have 3 verticals, the crop care, plant nutrition and seeds. Now crop care and plant nutrition have been flat in terms of top line, and bottom line also is largely flat. And for these reasons that we just mentioned that the industry is going through a rough patch. But our seeds vertical has done exceptionally well. And December quarter, Q3 is also rabi seasons where the wheat seed, the research wheat seed, where we are market leaders that is sold and that has done exceptionally well. So that is the key reason for the growth that you've seeing for this segment in this quarter.

Sure, sir. And then what can we expect going forward the trajectory in terms of for the upcoming kharif season?

So as I mentioned, so -- in kharif also there should be growth is what we are expecting across the verticals. We are seeing this...

I mean to say in terms of any product launches that we are anticipating for the kharif, which can add to further growth?

Yes. There are launches which are lined up. But these launches take time to mature. So it would not happen that we launch in this financial year and immediately we see -- they take time to mature. And in the past, whatever launches we have made, they are contributing about 10% to 20% of the top line are coming from the launches we have done in last 2 years. So it takes time to pick up. So this business will overall, as we mentioned in the past, will grow at about 15% CAGR. So we do expect that in manufacturing. And also, as a pivot for this business is the manufacturing, where in plant nutrition, we have started manufacturing, which will mature overbuild of maybe about 1 to 2 years. And also in crop care, where last year, we started our own manufacturing. So I think these are all steps to help the business grow.

[Operator Instructions] The next question is from the line of Riya Mehta from Aequitas Investment. Sorry to interrupt, ma'am, but the line for you is not very clear.

Am I audible?

This is better. Please go ahead, yes.

Yes. My first question is in terms of cost take. So we're seeing increase in expense and so basically [indiscernible].

I'm sorry, we can't understand what you are saying, ma'am.

Hello?

Now it's better. Now please carry on.

Sorry to interrupt, Riya, once again, the line for you is bad. I request you to please move to an area with better network.

Sure. Is it better?

But the line again for you is going bad. May I request you to please get to a better network area and return to the queue? Ladies and gentlemen, we will proceed with the next question, which is from the line of Subhankar Ojha from SKS Capital.

A couple of them I have. So with respect to this new power plant that you said 120-megawatt that is likely to get commissioned in quarter 4. So how much of cost saving will come from this? That's one. Secondly, this caustic soda plant, which is going to get commissioned in quarter 4. What are the other CapEx basically, which will probably come in quarter 4 or H1 '25? That second, and third, what will be our CapEx for '25?

So to answer your first question in terms of savings from the 120, that should be in the range of around INR 10 crores to INR 12 crores a month. That's the kind of -- once it gets commissioned and is fully operational. So that's point number one. Second in terms of CapEx, as we mentioned, that our the 120 and the 850 TPD that will get commissioned in this quarter. And ECH, H2O2 will be commissioned in the next quarter.

Okay. Okay. And the CapEx that is announced for '25?

That we haven't announced any new CapEx as of now. Whatever already announced is what we are completing. And then let's see if there is anything new that comes up in the Board meeting next.

How much of this is pending out of the announced CapEx?

The majority of it is spent Subhankar, because we are nearing completion. About 70%, 80% is already being spent in terms of cash outflow for these CapEx.

So this net debt figure of 314 December end not likely to go up much from here?

300 and?

I think the December end net debt figure is 314, 3-1-4.

See net debt will go up. So by March, I'm expecting the net debt to be around INR 1,900 crores to INR 2,000 crores. And the reason for that -- there are 3 key reasons. One this is the sugar season, therefore, debt goes up as the inventory for sugar builds up. Point number 2 is the urea subsidy, which is very abnormal right now, which is negative 20, which means we have to pay. So if there are certain modifications which are pending there. If they come, then probably there will be outflow of about INR 350 crores there. So that will add up. And obviously, there will be some outflow on CapEx as well.

Okay. Okay. Okay. And with respect to your business outlook for Fenesta -- can you share some outlook? I mean I can understand that the order book has gone up this quarter by some 9%. Can you throw some more color on the same business with respect to the other prospect of this?

Broadly speaking, the Fenesta business was established and has a long history and is a market leader in uPVC windows and doors. The aluminum windows and doors were established or launched about 18 months ago and have gained good traction and are moving at a fast speed. And I think the order book has exceeded over INR 100 crores in a pretty quick period. As far as the third new business, which is the facade business, that has just been launched. So in fact, now it is the first launch pre -- sort of post-launch trial facades that are being put up for builders or on their buildings. We've got orders for those trial facades. So the process is in the facade business, you put trials first and then you get the approvals of the technical specs and then you get the commercials and then you get the orders. It's a bit of a longer gestation, but that's the nature of the business cycle of facades. So the facade business will really take off maybe in terms of some meaningful volumes, maybe 9 to 12 months from now because till then it will be market feeding and development. You first put up the factory, then you put up the trials, then you put the -- get the approvals of the product at the customer end and then you get the orders.

[Operator Instructions] We have the next question from the line of Riya Mehta from Aequitas Investments.

Thank you for the opportunity. I hope my line is clear now. My first question is in terms of the caustic demand, so a big part of the user industry 20%, 25% is at textiles and we've seeing a revival in the textile industry, so what's your outlook on the demand for the caustic front?

So yes, the textile industry is one of the drivers for caustic demand. I think it will be slightly lower than the range that you had mentioned, but yes, it is one of the important drivers for demand. So the advantage with caustic actually is that there's multiple industries which lead to the demand. Even if one of the industries is slightly down, the other industry, consuming industry can support. So we do expect that in the medium term, the demand will grow and will be robust. And in the long term, it is likely to come back fully. So we expect the next 1 or 2 quarters to be tight, but we are optimistic that going forward after that, then there will be a good demand.

All right. And in terms of the overcapacity situation, which we are looking at, what kind of growth in supply are we looking at?

What sort of oversupply?

Yes. So I think a lot of the competitors have also come up with capacity with Gujarat Alkali also having spare capacity. There is a lot of supply in the market.

So that's right. The supply -- there has been a significant increase in supply, and it will be going from 5.6 million tons per annum to approximately 6.7 million tons per annum. So we are seeing a significant increase in supply in the short term. One of the key factors with caustic is usually chlorine. So evacuation of chlorine is often a constraint as well. So we are working actively on plans to integrate there and mitigate the impact of that. So we do expect that it will take some time for our capacity utilization, therefore, to ramp up. So FY '25, it will ramp up gradually. But FY '26 onwards, we expect it to be robust.

So our incremental [ 350 ] TPD plant which will come up in maybe, say, the quarter end. By when do we expect to have a capacity utilization as compared to 80% -- 75%, 80% like the current company utilization level?

I think -- see the project which comes up in this quarter, in FY '25, the utilization should be around 50%. And FY '26 is when it should reach the levels of 75%, 80%. And by end of that year, we should be around 90%.

So it will take 3 years to fully ramp up -- ramp it up.

Yes.

Also in the fourth quarter 600 TPD caustic lye project that would also have similar ramping up frequency?

That's the 600 TPD flaker plant. So that's like a subset. So you will have 850 TPD coming up, 600 TPD doesn't add to the capacity. It's only subset, it drives the liquid lye. So that gives us flexibility, as Chairman mentioned, it gives flexibility to export and it becomes an SKU.

Got it. Also, you're seeing a lot of Chinese players dumping PVC into our market. So currently, what is the situation in January? And do we see any improvement? Also, exports from India for PVC has reduced because of the Red Sea crisis. So is there a kind of a glut and what is the scenario there?

Yes. So in PVC, see the issue is the imports coming from China, where also the antidumping duty was removed about 1, 1.5 years back. So although the demand is very robust in the country, there is oversupply because of imports. And unless we have the demand getting improvement -- seeing improvements in China as well as in the Western world, the prices are expected to remain in that range where they are right now.

Do we export PVC and caustic, and how has that been for us?

So PVC from India is generally not exported because Indian manufacturers only meet about 45% of the demand and 55% is imported. As far as caustic is concerned, we do try our very best although the quantities are lower, the information is mentioned in our investor presentation that there are exports happening from country -- from the country for caustic soda.

But have they reduced, considering if we were exporting to European regions and there is issues in the logistics sector to reach?

They have marginally come off in the 9 months period.

So what would that number be, if I want to see Y-o-Y?

If you look at yes -- so in terms of 9 months, our exports as a country or as an industry were about 2.98 lakh metric tons versus 3.08 lakh metric tons.

Got it. And my second question is in terms of sugar. So within new -- sorry I missed the question, I think earlier participant had asked, what would be the capacity with the 120 KLD coming in incremental?

So our total sugar capacity is now about close to 550, 570 KLD -- ethanol capacity, sorry.

And that would be -- and how much of that would be grain based?

120 -- 250 now. 250 is grain-based now.

250 is grain based. Are we looking at feedstock like -- for that?

Pardon me.

Maize, maize. Our competitors are looking -- taking grain maize from grain, et cetera. So are we also kind of looking at alternative feedstock?

Yes.

But they are lesser in profitability. So what would be a major [indiscernible] in grain based?

So we are looking at -- as I said, we're looking at both rice and maize. And the margins are more or less the same in both the products. Sorry, please go ahead.

No, I was just talking in terms of Bioseed, what's the overall outlook?

So for Bioseed, as we mentioned in the Vice Chairman speech that we are expecting it to breakeven or near breakeven in this financial year. Over last 2 years, if you see the business is seeing improvement based on the new products introduced in the market and better marketing activities as well, so we do expect the trend to continue. And we are working actively on certain research things as well. So we do expect it to improve, but that improvement will be gradual.

And with the decrease in fertilizers prices, do we expect losses anytime soon?

No, there would not be any losses in our fertilizer business. The reduction in revenue, as we mentioned, is because the gas prices came down significantly from about $24 last year for MMBtu to about $15, $16 per MMBtu in the current quarter, which gets reflected in the revenue and has some impact on profitability as well, but we don't see any losses in this business in the near future.

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

Sir, firstly, if you could give the import number for caustic soda for the quarter, and also for the 9 months, also net of export if that number you can give?

So Saket, those numbers are mentioned on the investor presentation that is there on our website as well as on the stock exchange.

Okay. The import number, I'll go through them. And sir, how are the user industry faring currently? How are the consumption rates from the user industry for this quarter? And what's the trend going ahead?

So the user industry is diverse for caustic. It includes textiles, paper and pulp, alumina, other chemicals, et cetera. So the growth rates of each of these industries varies. In the short term, like what we've seen for many chemicals, not just caustic, there has been a reduction -- or not a reduction, a slowdown in the growth in demand. But we expect that in the coming quarters, the demand is going to pick up and therefore, the demand overall for caustic will be robust.

So if you take the current realization, the ECU realization, sir, how profitable are the global companies also and our company -- and domestic companies also, so where is the breakeven point from where which the things start turning -- while going ahead, where -- if you could throw some light on the same?

So Saket see breakeven point is itself a very volatile number because it depends on what the costs are, and energy costs being the biggest contributor, it all depends where the coal costs are moving, right? So I don't think it's feasible to give a number on breakeven price. And therefore, how others globally, whether they are profitable or not, it's very difficult. And our business has been profitable, as you can see from the numbers. And -- but yes, the profitability has been low. It has come off significantly from last year. So let's see how it pans out. It will be a function of cost and prices. Although we have worked on costs, so our variable costs have come off, but prices have declined more.

Right. And sir, on the utilization level, sir, I think, what have been the utilization levels for us for this quarter, and Q-on-Q, how are the utilization levels fare?

Around 80%, Saket.

Okay. 80% is for Q3. What was the number for Q2 and 9 months?

It will be around the level 80% to 90% range what we have been operating.

Okay. And we will be expecting to exit the next quarter also in the same vicinity?

Yes. I think there is -- we should be at this level in Q4 as well.

And for the Vinyl segment, sir, how are the utilization levels currently?

So currently, they are close to about 90% to 100%.

Right, sir. And for the last point is on the capacity that we are going to augment in this quarter. When -- you have explained, I think, so how the ramp-up will happen. So what should be the ramp-up for the next year and also for this quarter, what kind of capitalization will happen for Q4?

Saket, I mean that is what Mr. Ajay Shriram had explained that the utilization levels will be peaking by end of FY '26.

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

Just to follow up, what would be our current cost of power for us, considering we have so much built the captive power in for many years?

Riya, we generally don't share our cost of power. And -- but as I mentioned, it's been coming down, the lower coal prices as well as with the green power that we started sourcing in Q2. And with the 120 megawatts coming up, it should further decline.

What would be the quantum of decline if you could just quantify with the new capacity coming of 120 megawatts?

Yes, for INR 10 crores, INR 12 crores will be the savings on account of 120-megawatt coming on power.

INR 10 crores to INR 12 crores of savings?

Per month.

Per month, right? Okay. And in terms of coal prices, how much are we importing and how much do we have with the Coal India?

So for Bharuch plant, we largely import, but again, it's very dynamic. We actually try to follow whatever the pollution control guidelines are. So in Bharuch, there's a mix of code and there are certain other substitute that we try and seek to reduce costs. We also use biomass. Similarly, at our Kota factory also, where the coal is primarily domestic, but there also a large component is biomass.

Large component has become biomass.

About 14%, 15% at Kota is biomass in terms of energy.

Are we seeing a decrease in coal prices in the imported coal?

Yes, we are seeing a declining trend.

The next question is from the line of [ Navneet ], an individual investor.

Sir, I have three questions. First your new caustic plant of 300 TPD in terms of annual capacity, it'll be about 100,000 tons, right? Just I wanted to reconfirm my math.

This is which plant?

The new caustic capacity which is coming up this quarter?

So the capacity of the new plant is 850 tons per day, which is approximately 300,000 tons per annum.

Okay. And you mentioned the overall industry is increasing from 5.6 million to 6.7 million tons in India, the supply. So beyond that, what are the new capacities that have been announced over the next 2, 3 years?

These are the capacities that we are aware of at this point in time. Beyond this, we don't have any clear announcement. And as they come in the public domain, we'll be aware of them.

And it will take approximately 2, 2.5 years to set up a new capacity like it for you?

Yes. It depends on case to case, but it can take up to 3 years also depending on land acquisition, environment clearance and then execution.

Okay. Got that. My second question is on your capital allocation. In your presentation, you mentioned that you're looking for more opportunities, especially in the chemical segment for fresh projects. So what type of chemicals are you looking at? Would it be commodity chemicals or similar stuff that you're already in or less cyclical commodities? What's your thought process over there?

So as you would be aware, we are expanding our core, which is caustic soda, chlorine. We are also expanding a couple of adjacencies, which is epichlorohydrin and hydrogen peroxide. Both those plants are expected to be commissioned in Q1 FY '25. And over time we're always exploring opportunities across the spectrum, whether it is in a commodity chemical or intermediate chemicals or even specialty chemicals. So we are continuously evaluating opportunities. And as the Board approves, we will approve them. And specifically also exploring opportunities into future sunrise sectors, including green chemicals, et cetera. So we're exploring all these opportunities.

Okay. So bulk of your fresh projects are expected in the Chemical division only, right, in terms of capital allocation and the bulk of capital deployed, that's what was mentioned in the presentation as well rather than the other divisions?

For us, the capital-intensive businesses are 2, chemicals and sugar. And the other 2 growth businesses, which is Farm Solutions and Fenesta are not so capital-intensive. And therefore, majority of the capital allocation will happen in chemicals followed by sugar.

The next question is from the line of [ Sandeep Behl ], an individual investor.

Just want to check whether you have any plans of demerging and listing separately the Fenesta and the Shriram Farm Solutions business, given that both the businesses have become sizable and significant, as you mentioned in the presentation as well?

So the Board will take a view at appropriate time. As of now, we have not had any discussions with the Board on that.

Ladies and gentlemen, we have no further questions. I would now like to hand the conference over to the management for closing comments. Over to you, sir.

Thank you. Thank you, ladies and gentlemen, for your participation in today's call. Navigating a challenging global business environment, our domestic landscape remains the beacon of positivity. Despite the business challenges, we are diligently implementing efficiency enhancement and sustainability initiatives within our operational framework. Acknowledging the pivotal role of driving efficiencies across diverse business segments, we are confident in our ability to deliver a robust overall performance over the medium term. Through strategic resilience and our commitment to adaptability, we are well positioned not only to navigate prevailing challenges but also to capitalize on emerging opportunities in the dynamic business landscape. Thank you very much once again. Goodbye.

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