DCW Limited ($DCW)

Ladies and gentlemen, good day, and welcome to DCW Limited Q4 FY '26 Earnings Conference Call hosted by Arihant Capital Markets Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ayush Chaturvedi from Arihant Capital Markets Limited. Thank you, and over to you, sir.

Thank you, Youssef. Good afternoon, everyone, and thank you for joining us on DCW's Q4 FY '26 Earnings Call. I would like to thank the management for giving us the opportunity to host on this call. Representing DCW's management, we have Mr. Saatvik Jain, President; Mr. Amitabh Gupta, CEO; Mr. Sudarshan Ganapathy, COO; and Mr. Pradipto Mukherjee, CFO. I would like to invite Mr. Saatvik Jain now to give his opening remarks, post which we can open the forum for Q&A. Over to you, sir. Thanks.

Thank you. Good afternoon, everyone, and thank you for joining us for DCW's Q4 and full year FY '26 earnings call. As always, I appreciate your time and continued interest in our company. I will begin with a brief view of the broader industry environment and then move on to our full year performance, operational progress and way forward. FY '26 was another volatile year for the global chemical industry. The sector continued to deal with fluctuations in crude-linked feedstock and energy costs, geopolitical disruptions, changing trade flows and elevated logistics costs at different points during the year. While underlying demand across several end-use sectors broadly remained stable, pricing was under pressure across many chemical value chains due to excess global capacities and weak international realizations. For Indian chemical companies, the pressure was even more visible. Large volumes of competitively priced imports, especially from China, continued to impact domestic pricing and margin structures. This was particularly relevant for commodity chemicals where global oversupply and import competition kept net realizations under pressure for most part of the year. At the same time, India's medium- to long-term opportunity remains intact. Domestic consumption, infrastructure creation, housing, water management, agriculture, industrial growth, continue to provide a strong base for chemical demand. While near-term volatility in input costs, geopolitics, trade flows will continue, we remain constructive on the sector's long-term outlook. Against this challenging backdrop, we are happy to say that DCW delivered a steady and satisfying performance for FY '26. Our EBITDA grew by approximately 11% year-on-year, and our PAT grew by more than 60%. This performance is particularly encouraging because it was achieved in a year where net realizations declined across our entire product range with the exception of our pigments. PVC realizations alone corrected by more than 20% during the year. Therefore, the improvement in profitability was not driven by pricing tailwinds, but by higher volumes, better operating discipline, improved utilization and a stronger specialty contribution and leaner balance sheet. During the year, we recorded higher production and sales across almost all of our products compared to FY '25. The only exception was external PVC sales where incremental volumes were consciously diverted for captive consumption in our CPVC production. This is aligned with our strategy of moving further downstream, improving value realization and strengthening the specialty chemicals contribution within our portfolio. FY '26 was also a record year from a volume perspective. We achieved our highest ever sales volumes in CPVC, Synthetic Iron Oxide Pigments and Synthetic Rutile. This is an important milestone for us, especially given the difficult external environment. In CPVC, the year marked a significant step forward. We added 30,000 tonnes of capacity to our earlier 20,000 tonne base, taking our total annual capacity to 50,000 tonnes. The expansion was commissioned on time, within budget and commercialized at full capacity, all within 1 quarter. The final 10,000 tonnes was also completed on time towards the end of March, and we expect the benefits of this additional capacity to start accruing from Q1. Our Synthetic Rutile business also delivered a strong year with record sales volumes and a significant reduction in inventory pressure. This is a positive development considering the tough market conditions in this product over the last few years. The progress reflects better customer engagement, improved dispatch planning and sustained focus by our team on rebuilding market confidence. The Synthetic Iron Oxide Pigments business continued to perform well, supported by healthy demand and market penetration. As discussed earlier, we are also working on expanding our product range with newer grades, which should help improve our market reach over time. From a segmental perspective, Specialty Chemicals continue to support overall profitability, although margins moderated due to the correction in CPVC realizations and spread compression. On the other hand, the basic chemicals business showed improvement performance, supported by better utilization levels and benefits of our renewable energy project. Our renewable energy project was also commissioned during the year, and the benefits have already started reflecting in our power costs. This was an important initiative, both from a cost competitiveness and sustainability perspective. Equally important, FY '26 was not only about capacity additions and operational performance. We also repaid INR 145 crores of long-term debt during the year and ended FY '26 with a net debt-to-EBITDA at 0.3x. This gives us a much stronger financial platform as we prepare for the next phase of growth. As I had mentioned last quarter, we are not only preparing for a cyclical recovery, we are building the organization for scalable growth. During the year, we progressed on several foundational initiatives. The implementation of SAP S/4HANA is a key step forward to stronger governance, sharper financial controls, better data visibility and process standardization. We have also begun piloting AI-based process optimization at our soda ash plant in partnership with the Netherlands-based technology company, and the early results are encouraging in terms of operational efficiencies. Across functions, there is a clear focus on digitalization, technology adoption and building systems that can support larger, more agile and more accountable organization. As we enter FY '27, the global environment remains dynamic, particularly due to the situation in West Asia, which has created a near-term disruption in PVC supply chains and pricing. We will remain watchful on capital deployment in this uncertain environment. At the same time, our growth plans are in advanced stages and our intent remains clear. With the expanded CPVC capacity, improving specialty volumes, reduced synthetic rutile inventory, renewable energy benefits, stronger systems, significantly leaner balance sheet, DCW enters FY '27 with a more resilient and future-ready base. Our focus now is to convert this stronger platform into sustained growth while maintaining discipline in our capital allocation and execution. With that, I will hand it over to our CFO, Pradipto, to take you through our financial performance in detail. Thank you.

Thank you, Saatvik, and welcome, everyone, to Q4 FY '26 earnings call for DCW Limited. Quarter 4 revenues stood at INR 609 crores, which was higher by 13.2% Y-o-Y basis and 17% on sequential basis. The annual revenue stood at INR 2,144 crores, an increase of 7.2% on a Y-o-Y. The annual revenue numbers registered this growth despite the realization across all product segments have been impacted during the course of the financial year and further 25% to 30% incremental PVC volumes were diverted for captive consumption. It is important to mention here that at the annual level, the company recorded highest ever sales volume for CPVC, SIOP and Synthetic Rutile. While CPVC incremental volumes were produced due to capacity expansion, the commercialization of the same happened seamlessly, thereby nullifying any inventory increase. In case of SIOP and Synthetic Rutile, the company was able to sell more volumes than production, thereby reducing the inventory levels. The annual production across all product segments have also surpassed the previous year's production numbers with standout of CPVC's 60% increase in production volumes and Synthetic Rutile's 20%. The soda ash production for the quarter 4 also recorded the highest number in the past 11 quarters. The -- Now the EBITDA. Quarter 4 EBITDA, including other income, stood at INR 70 crores, up by 14% Y-o-Y and 40% on a sequential basis. The annual EBITDA stood at INR 240 crores as against INR 216 crores last year. That's an 11.2% increase. Q4 Basic Chemicals EBITDA stood at INR 30 crores, over INR 14 crores in Q4 last fiscal. That's an increase of 1.1 times and a breakeven number in the previous quarter. The annual EBITDA for Basic Chemicals stood at INR 54 crores, over INR 19 crores in the last fiscal, that is 1.8 times. The performance could be attributed to higher production across all product segments under Basic Chemicals, resulting in a better fixed cost absorption, coupled with benefits flowing from substitution of power supplies from Tamil Nadu electricity board to solar. Quarter 4 Specialty Chemicals EBITDA stood at INR 39 crores, over INR 46 crores in quarter 4 of last fiscal, it's a 16% reduction and INR 50 crores over the -- INR 50 crores in the previous quarter, which is 22% reduction. The annual EBITDA stood at INR 177 crores for the Specialty Chemicals as against INR 189 crores in last fiscal, a degrowth by 6.5%. Despite volume increase in both CPVC and SIOP, the significant reduction in NR by 22% in CPVC with no consumer rate reduction in PVC price, input prices resulted in PVC/CPVC spread contraction and consequently margins. Annual EBITDA margin for the company stood at 11.2% in the current year, an improvement from the last year -- last fiscal margin of 10.7%. While the Specialty margin clocked at 30%, a contraction by 6% over last fiscal, the Basic Chemical margins improved 3.5% -- improved to 3.5% over 1.3% last year. The PAT for quarter 4 stood at INR 18 crores, which is higher by 60% Y-o-Y and 2.7 times on sequential basis. The annual PAT stood at INR 48 crores as against INR 30 crores last fiscal, which is a significant increase of 60%. Such a growth could be achieved by an increase in EBITDA by 11%, coupled by reduction in finance costs by 7.5%. The finance cost for the quarter 4 stood at INR 15 crores, INR 15.4 crores, reduction by 2.3% Y-o-Y and 4.9% sequential basis. Annual finance cost stood at INR 62 crores, down from INR 67 crores in the last fiscal, showcasing a reduction of 7.5%. On the balance sheet front, it's important to discuss this -- these 2 numbers. The company's closing gross debt stood at INR 276 crores versus INR 426 crores in -- a year back. This is a reduction of INR 150 crores due to scheduled term loan repayment. The company had not borrowed any additional term facility during the current fiscal and with such closing borrowing -- and such closing borrowings are over -- are the lowest over many financial year ends of the company. The company continues to maintain a cash -- healthy cash position, including bank FDs at a level of INR 204 crores, thereby having a net debt of only INR 71 crores, demonstrating the effect of significant deleveraging program run over the last couple of years. With this, we open this forum for Q&A. Thank you.

[Operator Instructions] First question is from the line of Pujan Shah from Molecule Ventures.

Hello, am I audible?

Yes, please go ahead.

Sir, first of all, good set of numbers and we are starting with FY '27 with a very cleaner balance sheet. So congratulations on all the efforts you have made for that. Now coming to my first question, so it's pertaining to caustic soda. So we have seen the prices are forming right now. So what is the core reason for that? It is more of a cost push, or we are seeing some end user industry demand coming up, which is driving the prices?

So one of the primary reasons in our view is that there has been a lot of production interruptions in the entire Southeast Asia because of the geopolitical situation and the -- usually the caustic complex also has EDC VCM facility. Because there has been no supply of petrochemical feedstock, operating rate of caustic soda had come down. So there was a supply imbalance, which helped the prices to improve. So this situation is likely to continue for some more time till the situation normalizes.

Okay. Got it. And a similar question pertains to the soda ash. So do you feel -- so as the chlor-alkali always move in a same tandem, so do you feel that it also -- it will remain elevated for the similar time being?

We can't comment because the situation is changing on a daily basis. So we don't know. I just can't answer on that aspect as of now.

And are we expecting any government support on that part, on soda ash?

Soda ash...

I think the efforts are being on, right? Efforts are being on.

Soda ash we have moved for the antidumping duty. So let us hope things come out. But since there is not much of imports coming from Russia and Iran, the prices have gone upwards and the margins are pretty good at this stage. And the situation is likely to continue for some time, but nobody can predict forever.

Got it. Sir, and pertaining to the PVC, so I just want to understand 2 parts. One is we have seen a reduction in imports due to China removing the duty. And there is also implementation of duty by Indian government, which was removed due to all this geopolitical situation. Now considering all the scenarios, do you feel the PVC price should be -- remain range bound at INR 85, INR 90? Or do you feel we have some headroom still over from this price as well?

We don't know because as of now, yes, prices have started improving. But whether it will go to INR 85, INR 90, INR 95, I think that is anybody's guess. What has happened in the month of April, I think was that there was a lot of PVC coming from China, which was in the SEZ, which got to be exported before the [indiscernible] duty, which was withdrawn on the exports from China. So now that the VAT has been removed or what the -- VAT concession has been removed on exports of PVC from China, what will be the impact? We are waiting and watching. As of now, it is too early for us to give any, I would say, heads up or the forecast on how the prices will go.

Sir, why I'm coming to the question is because we have seen the real estate prices in China has been at a 20-year low. And versus -- there is a China anti-involution where they are taking some measurable steps by shutting down some inefficient plants of PVC. So I'm not able to gauge the incremental delta of how it will be converging into the scenario?

See, anti-involution, we have been hearing last 6 months. But how it is going to pan out, nobody can really forecast. And with regard to the real estate growth drivers which are not doing well in China, the same was the case even in the last couple of years. So I don't know how the Chinese economy operates or how they work. We just can't -- we can only watch and see how they are able to supply the product. And if they are -- if there is some real thought on anti-involution by which they will be forcing their products where they are not making any margin to shut, then it will help us. But it is too early for us to make any forecast or comment on that.

Got it, sir. And understanding the power cost savings, so we draw solar -- we invested in solar and we try to have a savings benefit of INR 40 crores to INR 50 crores. So this quarter, we have drawn around INR 12 crores, INR 15 crores of savings from power? Or we are still mature to get the understanding correct?

See, the number was never INR 50 crores. The number when we assessed and got into this substitution by -- and went into the decision was around reaching up to INR 40 crores. But that had a different dynamic so far as TNEB prices and coal prices are concerned, right? Now what we guided last time was around INR 25 crores to INR 30 crore number. I think if you see our numbers this year with the volumes which we have achieved, we have still our power cost in the face of the financials will be INR 7 crores, INR 8 crores less. There is an incremental volume effect. There is a coal price which has gone up from last year to this year. So negating the coal price increase effect, negating the volume effect which has an impact on power cost, our power cost in absolute terms are still lower on the year level by INR 7 crores. So according to our estimates, the savings would have been around INR 23 crores, INR 24 crores on...

And are we planning to invest in solar going forward for this year? Or we are still in a -- we are on likely mode that we do or not to do?

So far as the investment goes, we would come up with some investment proposition. But as and when we do, we'll let you know, will be the first thing to include all our shareholders given an information. But as been told, we're going a bit slow because we want to tight over the uncertainty so far as this Iran war is going on. And then we have our plans for the investments going forward for this year and maybe a couple of years to come.

Apart from this, we are waiting for a clarity on the regulatory related matters because there were some regulatory changes announced by the TANGEDCO in Tamil Nadu wherein the banking rules got changed. So we are waiting for a clarification on that because entire dynamics will depend on extent to which we are able to offset the renewable over the TNEB rates.

Got it, sir. And sir, in our initial remarks, we have said that there was a narrower of spread on -- in PVC and CPVC. Sir, in the current situation, are we able to get the pre-war type of spread or we are still in the early -- we are getting a narrower spread than the previous -- than the last month?

The spreads have improved. It has gone back to the pre-war. What has happened is that there was a spike in the PVC prices in the month of March. So that was -- our crossover was not happening in the CPVC. That's why we have seen a contraction in our profit numbers on CPVC, which we feel that in the coming quarters will regularize, normalize.

Got it. And my last question is, are we still facing dumping issues from Malaysia for PVC or we are seeing easing out there from that region?

Dumping issues are there from everywhere. For all the products, we have dumping issues. So that's a separate -- I think we can have a separate debate on that. Dumping issues are there from Malaysia.

Next question is from the line of Keshav Garg from Counter Cyclical PMS.

Sir, I wanted to get clarity on a couple of things. Firstly, our net debt seems to be around INR 80 crores, but the annual interest cost is in the vicinity of around INR 60 crores. Sir so going forward for FY '27, what is the finance cost number that you have in mind?

See, the finance cost, which is INR 62 crores this year, has an effect not only on the net debt which you see, it has also -- the net debts are distributed into 2 parts. One is the long-term term debt, which interest is gradually coming down as we are repaying. And as we have been maintaining our INR 200 crores of cash in the balance sheet, there is -- and the working capital challenges have come up over the couple of quarters. We have a separate line of credit which we have taken without infringing our internal strategy of keeping around 5% of the top line in cash. There is a negative carry. So if you have to see my interest cost, you please also reduce my interest income to find what is my debt overall. You may not see the benefit of the interest cost reduction, but over the period of last 2, 3 years to the extent of the debt reduction, but you have to also take into cognizance what is the other income or the interest income which has increased over the 2, 3 years. So we're deliberately keeping a negative spread because as a internal financial policies, we're keeping around INR 200 crores kind of FD for which we are earning interest. And next year also -- for next year also, we are keeping the philosophy of INR 200 crores odd as FDs. And basis that the -- and the repayments which are planned out, the interest cost should go down by around INR 12 crores, INR 13 crores. Now having said that, we also have to see how the pressure on our short-term working capital comes in if the war continues. That will have an effect of interest cost increase because we'll borrow some credit. We utilize some credit lines to support the working capital function. So roughly, it should go down to INR 50 crores if we are not having very much challenged by the working capital borrowing lines, we have to keep it open for longer. If that is not the case, it should be INR 50 crores or sub INR 50 crores.

Understood, sir. Sir, and we had estimation for FY '27 for roughly INR 2,500 crores top line and INR 400 crores EBITDA and net debt free by the end of FY '27. So are we on track to achieve all these parameters?

See, scheduled debt repayment for next year is again INR 130 crores. So obviously, we will be debt free because we have a INR 71 crores of net debt. So net debt obviously will be debt free. The only challenge what we find is the INR 400 crore number which we have planned for -- which we had communicated as a part of the -- I mean, a couple of years plan. That actually gets bit derailed because of the pricing pressures which we are seeing both in the Commodity segment and more importantly on the Specialty segment. We have tried to maintain the absolute value of Specialty profit by increasing volumes from -- of CPVC from 10 to 20, 20 to 40 now. We have also announced a 10 kt commissioning of the last phase, which we had communicated to all our stakeholders. That also will be in place. So the only thing is that we are definitely not seeing the benefits of the increased CPVC volumes, commercialization volumes because a large part of it is eaten up by the price erosions, which we did not anticipate when we gave you a INR 400 crores of guidance. But debt number, as we discussed, if it's INR 71 crores and INR 131 crores, INR 130-odd crores of scheduled payment, we will be net cash positive company.

Sir, so does INR 300 crores EBITDA for FY'27 looks reasonable?

We would not be able to give you a guidance on that because the prices movement has an impact. You have to please understand that we are a upstream B2B business. Our downstream prices does not reflect in line or tandem with the upstream -- the sale prices. So if the sale prices of commodity chemicals remains elevated and goes up, we will have profits which we cannot anticipate at the moment. So we are trying to -- whatever we are trying to do is we are trying to exhaust our capacity, to produce to the fullest and sell to the fullest and see how the prices shape up, right? That will be -- because fixed costs are in control. We're trying to do all efficiency improvement drives, which reduces our fixed cost or keeps it in control. That's what we can do as an organization. But today, it's very volatile in terms of pricing of both our raw materials and finished goods which we sell. So giving a number would be difficult. But I mean -- but we are well placed to tide over this storm, if this war continues for long. That much I can say.

Sure. Sir, now coming to our investor presentation, Page #13, 14, which shows the capacity utilization product-wise, it seems that in almost all the products, we are at or near full utilization.

Yes.

So I understand the CPVC volumes, we have increased capacity. So in FY '27, we can see some volume growth, so but in the rest of all the products, are we at, by and large, the -- I mean, how much incremental volume growth can happen from FY '26 levels?

So as you rightly pointed out, this year we are more or less at capacity for the SIOP. The 2 products where we were chasing capacity was CPVC where we were doing CapEx and increasing volumes; SIOP where we did the debottleneck from 18,000 to 28,000 and we have moved on to 24,000 last year, now almost -- I mean, almost capacity sales this time. So there is no much scope of capacity expansion in any products and thereby giving revenues or EBITDA, except for CPVC. And hence, we are in a place where we have to announce our CapEx, which is in line, which has been sorted, but we're just waiting out for the couple of months for the geopolitics to play out to its fullest. At the same time, we have done certain investments in SIOP, wherein we are moving for not growth in volumes, but moving to value-added products wherein we think that there will be some amount of incremental margin which would be expected to flow.

Sir, and directionally, going forward, will we do CapEx only in the specialty side, which is CPVC, SIOP or in the commodity side as well we are open?

So in the commodity side, it will be more CapExs for efficiencies, not for volume. The CapExs which will come for growth predominantly as of now, our thought process is to make it in the Specialty segment or in the niche segment with related chemistries. So that -- as and when we are just a bit comfortable with this geopolitics, we will announce and inform all our stakeholders. You have to only understand that as we are closing this year, we are in the most deleveraged balance sheet over many years or many decades maybe. So we have -- and our legacy loan gets over by this year-end, which eventually gives us a lot of headroom to take a good CapEx size and take the company forward. But we're just holding back because we just want to see the geopolitics how it shapes up and accordingly take an informed decision so far as CapEx is concerned.

Sir, now coming to the CPVC division where we have incurred CapEx, but so have all the other industry players. I understand Epigral has done a significant CapEx, Lubrizol, Reliance, Grasim. Sir so now all that capacity is coming at the same time. And please let me know if I missed any other player, which is also bringing some capacity. Sir so what is the total capacity in the pipeline of CPVC, which is expected to get commissioned? And even globally, if you could shed some light that is there any significant capacity in the pipeline globally also? Sir so -- and basically, what will be the demand supply? I mean, is there a chance of a glut in CPVC specifically?

On the companies which you have named present is -- even if Epigral has come in, Epigral and our volumes put together still leaves a lot of headroom for import of CPVC into the country for the domestic requirement itself. So with the capacity which has been informed by Lubrizol which comes in, we don't see -- by the time it comes in, there will be any mismatch in domestic production versus domestic demand. So that's where we are comfortable as of now with the fact that if and when Epigral comes with the full capacity and Lubrizol comes with the full capacity, we would not be challenged in [ placing ] our volumes.

Sir, lastly, our power cost is INR 307 crores. So out of which power and fuel, so out of which how much is power cost?

I mean that breakup we generally do not give, but we'll take your question and come back if required.

Sir, what -- where I'm coming from is that since we have 2,500 acre land, so what is stopping us from just putting solar capacity and basically captively generating this -- I mean -- and stop taking this power from the state electricity board?

So state electricity board and fossil fuel is a stable source of power. Solar gives power only in the morning. So we have to -- so there is a very unique balancing which goes in. Most of the time when you -- when we take alternate power, there's a lot of effort which goes into either side to understand what is the power, timing of supply, whether we blend it with solar and wind or not, then also what is the flow of supply because we cannot keep our plant operating based on power supply fluctuations. So it is not that easy. We have substituted 25% of our power. There is future CapExs which comes in -- and steam which is required at the plant is not given from solar power. It's not generated. So eventually -- and you have your captive boilers in place, you have your TNEB. So it's not a very simple math to do that we substitute all the power from TNEB to electricity board to us, because in because in any case you have to do the wheeling. So it's a lot of complex calculation. It's not as easy we think. Secondly is we are trying this with -- for 20 long years, right? So today, it may look lucrative. We have to do a balanced approach in terms of how much substitution of TNEB we do from solar and what is your power requirement -- power capacity from your own power plant. So that math goes in, yes.

Sir, and lastly, if you could just tell us that for each of our products, what is the starting raw material that we are buying from outside?

See, PVC, we have been very vocal about in VCM. Soda ash, we have limestone. It's very openly available in the market. So CPVC becomes PVC, caustic becomes salt and water, and what else? I think...

Iron oxide.

Iron oxide is iron.

Sir, and Synthetic Rutile?

Ilmenite ore is the starting material. So that is also procured locally only. And we use HCL along with that.

Sir, so out of all of these that you just named, sir, we are -- like we have our own minds of which all products are we sourcing captively?

No, no. Salt is captive. Coal we are sourcing from Indonesia. Synthetic Rutile, ilmenite ore, we are sourcing from Indian Rare Earths. So for PVC, we are importing VCM. And for CPVC, we are using the PVC produced by us.

[Operator Instructions] Next question is from the line of Abhinav from Aequitas Investments.

So the first question was regarding caustic soda. Can you tell me what were the realizations in Q4 and what are the current realizations?

Realization in Q4.

Q4 I think it was around $350. And as we talk in Q1, the realization is in the north of $400.

Yes.

$400.

Okay. And have we seen any capacities globally shut down because chlorine production has been reduced because of PVC?

Again, I'm not able to hear you. Can you please repeat your question, please?

Have you seen any capacity closures or reduced capacity utilization in caustic globally because of the -- because chlorine is not getting diverted to PVC? And what would be the current chlorine realization?

No, no. There have been some capacity closures in the Europe of PVC, which will ultimately result in a corresponding capacity closure of caustic soda. But we have not seen any significant closure of capacity of caustic soda as yet.

Okay. And what would be the chlorine realization currently?

Chlorine realization, we don't sell any chlorine.

So it's not relevant for us because that's one transition which we have done as an organization over the years, we have now been a chlorine neutral facility down south.

But that would be around INR 8,000 negative?

Maybe, maybe. Market prices, yes, maybe INR 7,000, INR 8,000 negative. [indiscernible]

And -- for caustic, it is 100% domestic or do we export because we are a -- in terms of caustic, the entire supply is higher than the demand in the current...

We're also exporting caustic soda.

Caustic soda we also export because we are also port-based. So always we have an option of selling to a domestic user in the East Coast of India or export the product to Southeast Asia. So we have been doing both on and off whenever there is a demand from any of the customers in the East Coast, mainly the alumina companies or we export to some of our customers in Southeast Asia.

And why has our capacity utilization in Q4 reduced from 96% to 90% for caustic?

That is because of the maintenance outage...

No problem in the demand, right? Because I have heard that in paper and textile, people have curtailed capacities in those 2 segments being the highest user for caustic. Are we seeing any demand issues there?

See caustic -- as you may be knowing, caustic soda is 50% water. So the ability of any producer to sell their product will be within the 300 kilometers radius. The remaining of this product is only sold as a bulk shipment to either a bulk consumer like NALCO or Vedanta or to any of the customer in the Southeast Asia or Europe or some other market. So yes, there has been a demand dip because of the lower offtake from the sectors that you have mentioned. But there has been no production curtailment because of the demand dip that we have seen.

And all said and done, these sectors are not very big consumers of caustic soda. The main consumption comes from the alumina industry, which is doing very, very good.

Okay. Got it. And in terms of the soda ash with China coming up with the newer capacity in Inner Mongolia, having the newer natural bases, have we heard of any material capacities going on in China? And are they still exporting to us?

No. Frankly, there's not -- Main imports in India used to be from Iran and Russia, as I mentioned earlier, which is not happening now. And China has never -- is not a very big exporter of soda ash. So there is not much of issues from China. And all said and done, because of the increases in the freight rates and everything, the prices are pretty healthy today.

What would be the current soda ash prices?

Sorry?

What would be the current soda ash prices?

See, today the import price is in the vicinity of about $250.

Next question is from the line of from Maneesh Bhadane from 360 ONE Capital.

Sir, if I look at the Slide #20, so our ROCE is around 8.56%. So it is even below the cost of debt, like 9% to 10% is the cost of debt that prevails in India. So like what are the steps we are taken -- taking to improve the ROCE going forward?

So we have to only go into products which are high margin and lower CapEx. That's the only way to increase your ROCE. We are into business of caustic PVC soda ash for many years now. The investments -- there is no much investments. The ROCE is a function of profit wherein if the business conditions or the prices go up, we'll see the profit going up and automatically ROCE getting -- moving upwards. Now so far as what we can do as an organization is only ensure that we do investments which are of high margin or high ROCE. That means, I mean, higher capital turnover ratio and also higher margin business, which gives you a higher ROCE. So that's what has triggered our investments into SIOP and investment into CPVC, which obviously is much lower than investment payback period roughly for the incremental capacities what we did were around 2 years or 2.5 years, even at current prices. So that would have already been baked in. But what you need to understand is that the ROCE for us as an organization despite our proportion of the specialty chemicals going up is low because the commodity chemicals are at its bottom cycle. If you place this ROCE with the prices of which we got for commodities in 2023, '24, then the ROCE will be north of 14%, 15%.

Next question is from the line of Madhur Rathi from Counter Cyclical Investments.

Sir, I wanted to understand you mentioned that there has been some spread improvement and realization improvement in SIOP and Synthetic Rutile. So what led to this improvement? And what are the current realization for these products?

SIOP, I don't think there is a spread improvement. We told on PVC, CPVC spread. On SIOP, what we told is that we are making -- we are moving to higher value-add products, in which case we can command a better margin in those products. So the volume may not increase. Coming to your other product which you asked was on Synthetic Rutile, the prices depends on the mix to which we export it. It's a 100% export business. When we are exporting into China, we don't get those prices. When we export into our existing customers who have been -- who have been taking ex of China, their prices are better off. So if we can have our share of sales more into ex of China, the mix gives us a better realization and hence a better margin. We believe that we've got certain of ex-China customers long-term contracts which we are building up. And hence, the margins should stay elevated just because of a better weighted average price, which we will achieve from sale of Synthetic Rutile.

Got it. And sir, what was the realization and spread for both of these products in Q4? And what are they currently?

See these -- for Synthetic Rutile, you cannot see a quarter because it depends on how is the skewing of the sales across the full year. Now for SR as a product, we have never been giving it because it's a part subsumed in the caustic business and now caustic is a part of the basic chemicals. The whole idea is basically, what we can tell you is that the spread should stay elevated for Synthetic Rutile for this year compared to last year, which will give us some incremental profits compared to what we have closed in this financial year. SIOP, we had already communicated when we were showing that as a separate segment earlier, our margins were around 35% to 40%. We still continue to get those margins.

Sir, on the major improvement in EBITDA...

Sorry to interrupt Mr. Rathi, may we please request you to rejoin the queue sir for the follow-up question. Next question is from the line of Praneet [indiscernible], an individual investor.

The management has previously alluded to the fact that we have been facing a lot of pressures in terms of dumping. Could you explain what kind of pressures? How is it different between the specialty versus commodity dumping? And which countries is it split between? And what kind of margin compression is -- the company has been able to take -- has been needed to take because of this dumping force?

We had filed couple of petitions for dumping support from the government on PVC and on soda ash. And on both the products, despite there was a positive finding, those duties never got implemented. We had a case in CPVC of dump imports coming from China and Korea for which we had got a favorable dumping duty levied a couple of years back. So this is a phenomenon which keeps on and off based on the demand-supply imbalances from those respective exporting countries. So there cannot be any standard guidelines...

But what about the specialty?

Specialty, there are no dumpings now. Only in CPVC, we had a dumping duty case. Iron oxide, there is no dumping. In fact, we are exporting the product. So...

Understood. And one last question regarding the cap table, like what is the exact association? Is there an association with Times Group versus our promoters? Could you explain the relationship? Is there any more further relationship with Times...?

I think all these things better you write to our PR firm...

Company Secretary.

Company Secretary, he will explain to you. I think it is nothing to do with the business.

Understood. And last question in terms of operational margin efficiencies, are we at our peak because I think most of our utilization is the highest it can be. So going forward, without the price increase, our margins are going to stay in the same range, right? Is that the right understanding?

Yes, it would because, as we told that there is a 10 kt of additional volumes to CPVC which kicks in, which takes care of the increased growth for next year growth, growth per se. There are certain factors which we think would help us in terms of margin improvement, like as we told and discussed that we are working into long-term contracts with ex-China SR sales, which eventually increases our weighted average net realization for the product and thereby the margins or the profitability. We see certain price increases which are -- which we expect to be here for a couple of quarters so far as caustic and soda ash is concerned. But at the same time, we see that there is a bit of a challenge so far as VCM-PVC spread is concerned and also PVC-CPVC spread is concerned. We are trying to see how the pricing is played out and accordingly take decisions on the procurement as well as the sales side. But I think there are chances and there are more opportunities for us to increase the operating profit for next year than what we have achieved.

But -- so can you list out those -- I understand the long-term contracts you'll get a weighted average. Apart from that operationally, what can we do? Because you told...

There are 10 kt of additional volumes for CPVC which comes in, which we hope to place the volumes, and we will derive an annual benefit out of it because why, though we commissioned the plant in March end, we think that we will scale up pretty quickly with our experience of 20 to 40 kt. So more or less an annualized benefit of additional volumes and margin, absolute profit should go up there. There is some effect, as I told on the weighted average contract prices for SR, while in caustic and soda ash, we expect the prices to stay elevated. There will be some amount of dip so far as VCM-PVC is concerned, and that is predominantly with the -- with this war, we've to see how things shape up. So I think apart from that, we don't have a lever of capacity because we are doing almost the capacity utilization, whatever -- whenever we are doing a CapEx, seamlessly commercializing them. You have to wait for the next round of CapEx which we have to announce, and that also has to do with the fact that how the geopolitics shapes up in Middle East.

Understood, sir. One last question regarding our potential expansion to other chemicals and specialty. Is there any near term the company has in terms of intention to expand into new chemicals? Or would it be expanding the specialty chemicals you already have in the next 3 to 5 years?

The specialty chemical growth which will come would -- has to be in related chemistry. The synergy comes either by utilizing the -- your marketing leverage or your chemical understanding of the product. That's the second one. And thirdly, very importantly, where thematically we want to see this organization 5 years or 7 years hence. Putting all these into factors, we have relatively had drawing board discussions on certain products which we can venture into. Please wait for us to come and communicate to you officially.

[Operator Instructions] Next follow-up question is from the line of Madhur Rathi from Counter Cyclical Investments.

Sir, so if I look at our Y-o-Y EBITDA from the Specialty Chemicals segment, so is it fair to assume that whatever decline that we saw in the spread composition for CPVC-PVC was mitigated or offset by SR spread improvement? Is that a fair understanding?

SR is not a part of our specialty. What happened is that the spread contraction of -- see the Specialty business is 2 products, which is SIOP and CPVC. These were separate segments, but we have clubbed into one. What has happened is the spread contraction of PVC to CPVC has been mitigated by the volume increase of CPVC, which is basically which we did around about 22,000 tonnes. This year we are doing around 37,000-38,000 tonnes. So the volumes more or less has doubled so far as CPVC is concerned. That helped us almost meet the numbers even despite the PVC-CPVC spread contraction. Anything you want to add, sir?

No. What he says is this is -- you are asking about the quarter 4 in specific?

Yes, quarter 4.

No, sir, I was asking about Y-o-Y there has been a flattish EBITDA closer to INR 180 crores. So I was trying to understand what has been the spread compression in CPVC and what has been improvement in SIOP? So I thought the Synthetic Rutile and SIOP...

SIOP...

Only SIOP?

So see, SIOP we have increased the volumes by 30% and CPVC we have increased the volumes almost double, 60%, 70%, okay? So that has been mitigated by the price correction only in CPVC, which did not have a consumer input CPVC price correction, which basically means the PVC-CPVC spread came under contraction. That contraction was mitigated by the additional volumes which we produced and sold. So that's the way it has panned out.

Got it. And sir, on CPVC segment, sir, how -- what is the extent of capacity closure that you mentioned that has happened in Europe? And sir, how is our feedstock availably currently that we import?

CPVC we don't import any feedstock.

No, sir. I'm talking about PVC?

Yes, PVC, there is...

We don't import PVC also, we import VCM. We produce PVC and we use those PVC in making our CPVC.

Sir, so I was asking about how much...

Sorry to interrupt Mr. Rathi, may we please request you to rejoin the queue.

Sir, this is a clarification, this is a just a clarification. I think there was some -- sir so I'm just trying to understand what has been the capacity closure in PVC that you mentioned that has happened in Europe? And what is the feedstock availability of VCM for our PVC segment? Is it available? Or are we facing shortages for this VCM -- for our PVC segment?

No, see, one is that we used to source our feedstock majorly from Middle East. Because of the Gulf war, that supply which has been the closest logistically, is not coming. So our contracts were all put on pause. So to tide over the situation, we are procuring the feedstock. There has been no issue in the production, but it is coming at a high cost, which we are finding it difficult to pass on in our finished product, which is PVC. This is a temporary effect. So there has been -- and even if there has been a plant closure in the Europe, technically, the product -- VCM cannot come to India because of the logistics cost, because it's a pretty long distance and VCM comes in a -- not comes in a container. It comes in a ship. So logistics is a very big cost.

No, sir, I was asking how much capacity in metric tonnes has closed in Europe?

Europe capacity, I think 2 plants got closed. I think Vynova is one capacity. I think that is some 2 lakh tonnes, which got closed, and one more plant which I don't recall, it got closed. But these closures happened much before the start of the West Asian conflict. It has got nothing to do with the current geopolitical conflict. These capacities got closed in the course of last year.

Ladies and gentlemen, we will take this as the last question for the day. I now hand the conference over to the management for the closing comments.

Yes. Thank you, everyone, for joining our call today, and hope we've been able to answer your questions. If any further clarifications needed, I request you to reach out to our Investor Relations advisers at Valorem. Thank you once again, and we'll talk to you next quarter. Thanks.

Thank you very much, sir. On behalf of Arihant Capital Markets Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.