Fairchem Organics Limited (FAIRCHEMOR) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 and 9 Months FY '24 Conference Call of Fairchem Organics Limited. [Operator Instructions] I now hand the conference over to Ms. Purvangi Jain from Valorem Advisors. Thank you, and over to you, ma'am.

Good afternoon, everyone, and a warm welcome to you all. My name is Purvangi Jain from Valorem Advisors. We represent the Investor Relations of Fairchem Organics Limited. On behalf of the company, I would like to thank you all for participating in the company's earnings call for the third quarter and 9 months ended of the financial year 2024. Before we begin, a quick cautionary statement. Some of the statements made in today's con call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by and information currently available to the management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings conference call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. Now I would like to introduce you to the management participating with us in today's earnings call and hand it over to them for opening remarks. We have with us Mr. Nahoosh Jariwala, MD and Chairman; and Mr. Rajen Jhaveri, CFO. Without any delay, I request Mr. Rajen Jhaveri to start with his opening remarks on the financial highlights. Thank you.

Thank you, Ms. Purvangi, and good afternoon to everyone. Welcome to our earnings call for the third quarter and 9 months ended of the financial year 2024. Let me first start off by giving you some of the key financial highlights, after which our CMD, Shri Nahoosh Jariwala will give you some of the operational highlights. For the third quarter, the revenue from operations stood at INR 148 crores. EBITDA for the quarter was INR 20 crores with EBITDA margin at 13.37% and we reported net profit after tax of approximately INR 12 crores for the quarter. For the 9 months ended December 31, 2023, the revenue from operations stood at INR 461 crores. EBITDA was INR 48 crores with EBITDA margin at 10.46% and we reported a net profit after tax of approximately INR 29 crores. Now I would request Shri Nahoosh Jariwala to brief you on the operational highlights for the period under review.

Thank you, everyone, and good afternoon. On operational front, there was an increase of around 2.64% in volume on quarter-to-quarter basis across all products, while in value terms, the company witnessed a decrease of approximately 2.8%, which was due to decrease in vegetable oil prices, which is the basis of our finished product sales price. The rise in EBITDA from 11.04% to 13.37% was primarily attributed to a more efficient material consumption percentage in relation to sales. It is crucial to emphasize that we have maintained our customer base without losing any of our big or small customers. And we remain quite optimistic about our high value-added product Isostearic acid. Notably, the company achieved its inaugural export of shipment of Isostearic acid to one of the big customers in Europe during the last week of December. But due to the current Red Sea situation, the transit time of vessel has increased and maybe the material would be reaching the shores by end of this month. Taking proactive measures, the company has actively started taking approvals from new customers and consumers anticipating a positive response. The quantity processed during the third quarter of '24 amounted to around 15,277 metric tons and looking the way things are going on we expect this marginal increase in the quantity consumption for the quarter of January, March. With this, I open the floor for the question-and-answer session.

[Operator Instructions] The first question is from the line of Dhruv Mukesh Bajaj from Smart Sync Investment Advisory Services.

Congratulations on a strong recovery in the results. Sir, my first question was that how much percentage of our current business comes from exports? And are we seeing troubles on the Red Sea crisis going forward?

Our current export during this quarter was around 10% only of our total sales. And as far as Red Sea situation is concerned, we will be impacted in respect of our shipments to Europe. As far as our intermediate nutraceutical business is concerned, it is mainly to U.S.A., and we do not anticipate much problem as far as U.S. shipment is concerned. But as far as this Isostearic shipment is concerned, if the Red Sea situation doesn't improve, by the time we go full blast on Isostearic acid, yes, it may marginally impact in the sense that the transit time of the vessel would be increased. And freight would be somewhat higher than what we had anticipated.

Okay, sir. And sir, did Q3 revenues had a contribution from Isostearic acid because you mentioned that we actually shipped one shipment in December or that revenue will come in Q4 since...

That revenue as per the Ind AS standards that revenue will come in this January, March quarter because it was on CIF terms. So we'll be able to recognize the revenue only after the vessel reaches the European Seaport. Though the physical shipment was made in December, it is not accounted. And that was the first shipment of somewhat smaller quantity of about 10 tons only. So, its accounting would be in the quarter of January, March.

Got it, sir. And sir, I wanted to know that on volume terms, are we seeing good order flow from new paint players? And how much percentage of our total revenues actually comes from paint segment?

Paint segment historically only the paint segment used to contribute approximately 49%, 50% and this dimer acid used to contribute around 24%, 25%. So, till such time we go full blast on this Isostearic acid, this percentage is likely to hold up. Maybe on a quarter-to-quarter basis, there could be some plus or minus between this 75% share of these 2 main products.

And have we capitalized the new CapEx in our PP as Isostearic sales have started...

Yes, whatever Isostearic acid -- yes, that up to December, since we made first commercial shipment, we have capitalized whatever assets we used for Isostearic acid, yes.

Okay, sir. And sir, how do you see the -- Sorry?

In the quarter of October, December, we capitalized those assets.

Okay. Okay. So actually, we got H1 balance sheet that's why I just wanted to confirm. And sir, how do you see the potential of the new Isostearic product 2 to 3 years down the line?

We see very -- I mean, it's an excellent product. We are one of the only -- I mean, in fact, we are the only manufacturer in India and one of the few in the world. There are hardly 5 or 6 players. And the product what we have made meets the international specification. So, we are very optimistic about the product.

So, whatever we will produce at the full capacity, we hope to achieve that full capacity production and sale hopefully by December 2024 only. We hope to reach the full capacity utilization.

And the current realizations for the Isostearic acid, can you quantify the total capacity revenue potential, if possible?

That amounts to UPSI, so you will better understand that on a selective basis, and it is still in the transit stage because there are many customers and many applications for these Isostearic acid and the prices also differ. But it is a high-value product, that much we can assure you it is a high-value product.

It will help us in achieving good bottom lines.

Okay. So do we see that achieving at least 20% to 25% of the total revenue book 3 years down the line? I just wanted to understand that directionally?

No, no. As we said that up to the capacity for which we have created this facility, up to that only it can give the revenue.

The next question is from the line of Tejas Sonawane from Asian Market Securities.

Firstly, congratulations on a good set of numbers. I had a couple of questions. Firstly, on the new value-added products, which we are planning to launch. We have already launched Isostearic acid and one more product which we have in the pipeline is methyl esters. So just I wanted to understand how is the overall competitive landscape and the opportunity landscape for these 2 products in terms of the end user applications. And also, if you could throw some color on the margin profile of these 2 products, that would be very helpful?

Isostearic acid, as I said earlier, we are the only manufacturer in India and one of the few manufacturers in the world. In fact, there are 5 or 6 manufacturers only. So we are -- I mean, as I said, it's -- I mean, opportunity is very good, and we have created a capacity which is good enough to take care of whatever the production we'll be doing and the market what we have foreseen also, and we'll be able to fulfill all those things. And by end of this year, maximum by December, we expect to reach full capacity utilization. See, it's a forward integration project, product. So monomer fatty acid, which was our co-product of dimer fatty acid we have taken it forward to manufacture Isostearic acid.

In terms of margin profile if you could provide some color on that?

It will be -- I mean, it will add substantially to the bottom line. In rupee terms, it won't be possible for me to quantify, but it would really help us achieve good bottom lines.

Okay. Understood. Secondly, we are witnessing headwinds in terms of oversupply coming from China. And also, we continue to see prolonged restocking in key regions of the U.S. and Europe. So I just wanted to understand how has been the overall impact of China doing aggressive dumping into the Indian market on some of our products like dimer acid as well as some of the nutraceuticals which we cater to. So just wanted to understand in terms of the impact which we have had on volumes as well as prices for some of these products?

See, I've been in Q1 of this current year, we saw that dumping happening from China in that particular quarter. After that, we haven't seen any dumping happening.

And China is competing only for dimer acid with us. As far as our other product for paint industry and this Isostearic is concerned, China is not making Isostearic acid. And for the paint industry also, China cannot compete with us because of freight component, et cetera. So dimer acid is the only thing where this happened somewhere as Shri Nahoosh said in the Q1 quarter, and since last close to 4, 5, 6 months, it is a normal shipment only from China, and there is no dumping at a substantially reduced price. So we are not having. For other chemical items, whatever you said could be the case, but for our dimer acid since last few months, that is not the case.

[Operator Instructions] The next question is from the line of Prakash Kapadia from Anived Portfolio Managers Private Limited.

If I look at our 9-month sales and PAT numbers, revenues are down 7% and PAT is also down approximately 7% for the 9-month period. You hinted at vegetable oil prices being lower, so that partly affects revenue. So, can you share some insights on end user demand, especially for paints and inks, what is happening? Is it lower than what we were anticipating? Because earlier, we seemed pretty confident of INR 700 crores plus turnover this year. But even if I take, say, a growth in Q4 of 15%, we'll still end the year with a negative revenue and PAT growth. So when does this change? And what's the outlook in terms of FY '25 things looking better? What are you sensing from your customers? How is movement of production happening? How is demand looking like? And would that translate to 15% EBITDA and higher sales growth in '25 or no?

Yes. I will take it one by one. First of all, as far as margin and absolute numbers are concerned for '23-'24 versus '22-'23. '22-'23, if you could recollect, was partly aided by a bumper kind of a profit during April, June 2022 quarter which witnessed a substantial profit, something like out of abnormal kind of a profit. So that influenced or that increased our profit for the financial year '22-'23. As far as...

INR 27 crores was the profit...

As far as '23-'24 is concerned, let me tell you one thing. On a 9-month basis, at least the quantity processed is higher by approximately 15 months. But as far as absolute number is concerned, time and again, we have told this in our earnings call previously also, I'm not sure whether you had participated in that call or not, that our sales price for prime products substantially depend on the refined soya oil price for paint industry market and for dimer acid, whatever is the China market or whatever is the international market for that. So we have a control or we can look for higher volume. But as far as absolute value is concerned, it is not 100% in our hand. But having said this now for '24-'25, we -- as earlier we said in response to answer for the previous 2 speakers, we are quite optimistic and confident about Isostearic acid. The only thing is that Isostearic acid, that commercial shipment was delayed by a quarter or so. Otherwise, if had that impact come in this January, March quarter, we would have reached or increased or surpassed the sales of financial year '22-'23 and nearly reached the bottom line, which we reached in '22-'23. But having said this, for '24-'25, we certainly hope to achieve top line growth and bottom line growth both.

Okay. So you're saying '25 directionally looks better because Isostearic acid will start contributing and we are working with customers and approvals are likely to come. And how is the demand scenario from paints, inks, what is happening?

There's normal. There's nothing -- I mean, normal demand. There is no drop in demand anywhere or neither there is any major surge in demand.

And no, we haven't lost any customer also. So I mean there's nothing like that.

Okay. From paints and as well as inks?

Yes.

Okay. So we remain confident of FY '25 definitely being better than...

Yes, yes, for sure.

The next question is from the line of Nirag Shah from Exemplar Investment.

Can I have the separate value and volume figure of linoleic soya fatty acid as well as dimer acid for Q3 '24 and 9 months '24?

Dimer acid Q3 quantity was nearly 2,000 tons. And linoleic acid, Q3 quantity was more than 7,000 tons.

And for 9 months?

For 9 months, dimer quantity is nearly 6,000 tons and linoleic acid is 22,000 tons.

And secondly, I wanted to know that once bulk supply starts for Isostearic acid post stability test and other approvals from customer side, what kind of yearly metric ton volume we can produce of Isostearic in first full year of operation?

At peak capacity, as we earlier said, we are quite hopeful of achieving by December 2024, our annual production of Isostearic acid is estimated at 2,000 metric tons.

Okay. And lastly, since we are now just less than 2 months away from closing fiscal '24, can we have at least a rough idea as to when we exactly plan to commission the new raw material processing plant that we were talking about at the beginning? And what kind of products you plan to manufacture out of it?

No, we are still working on that new product. It's taking a little bit longer time.

Because we are focused on Isostearic acid.

It focus more concentrate on Isostearic. But now again, we have started work on that new product on a fast-track basis. But then again, it's a very tricky product. So I mean, we were -- certain guesswork, yes, we feel that we'll be able to achieve something like this by this time, but it may not so happen. Again, that product no one is making in India, and we are going to make it for the first time. And we're going to be again one of the few manufacturers in the world. So I hope you understand that it's not going to be an easy product.

Okay. But in FY '25, we will see it commissioning?

Maybe last quarter of FY '25.

The next question is from the line of Prit Nagersheth from Wealth Finvisor.

So my question is on the solar project that was going to be put up. Can you please share what the progress is? And also, what would be the impact on margins?

I mean, based on the government of Gujarat's new policy, we are looking for the solar project, which can take care of our 100% of our requirement. And obviously, it will have an excellent eBay concept. We are looking for the land, suitable land at a reasonable price. Nothing else. Otherwise, we are -- everything else is set.

As soon as the government of Gujarat's new policy came out where we can -- we could go for 100% of our power requirement. Earlier, it was 50%, Mr. Nagersheth you would be knowing. And government of Gujarat has now come up with a policy that we can go up to 100% for solar power. And immediately thereafter, we have already started searching for this thing, land, et cetera.

Okay. So it's a little bit early there. We'll wait for it to materialize.

The next question is from the line of Narendra from RoboCapital.

So my first question is that when we expanded our capacity to 120,000 tons, we had a target to fully utilize it and, say, 2 years, but then all the disruption in the paint industry happened and the raw material cost -- raw material volatility was there. So now I believe that things have stabilized. So what would be your target as to when you achieve that full utilization of the expanded capacity?

Yes. So in the expanded capacity of 120,000 tons, what we have now planned is that 80,000 tons, we have earmarked for the present activities which we are doing that is this paint industry product, dimer acid, Isostearic acid and even the stearic acid also, which is meant for local market. And the balance 40,000 tons, these equipment which we have earmarked, et cetera, and some of the balancing equipment which we may take, that is earmarked for this new project, about which I think the previous speaker talked about this new project. And that 40,000 would be, as Nahoosh said, hopefully, in the last quarter of the next financial year, that would be in operation. So presently, we are concentrating on the 80,000 tons of utilization of capacity, which is available with us. And our current utilization is nearly 75% -- more than 75%, something like that...

So we should be reaching around full utilization to 90% in the next year for this 80,000 tons, right?

Yes, certainly. We are quite optimistic about that.

Okay. Okay. So -- and regarding the realization and the oil price ratio have they stabilized? And should we see normalized growth and margins going ahead? I know in percentage terms, it's not possible for you to say, but say absolute terms, is it fair to say that it would be growing going ahead?

No -- since last few months, this refined soya oil price is moving in a narrow range compared to the volatility, which was prevalent after this Russia-Ukraine war, et cetera. But since last few months, it is moving in a narrow range. But before that, let us take this opportunity to place on record that before this COVID, before this war and even before the COVID, these oil prices had all this right from '96 when we started this business till 2020, oil prices hardly moved beyond the range of, say, 2% to 3% either side. But after COVID and more particularly after this war, a lot of volatility is seen. But of late, it is showing the signs of stability. But then again, government may tinker its import policy, custom duty levy, et cetera, on different kinds of oils, et cetera. And that again could have -- that could result in the volatility. But that is -- you can understand that is not in our hands.

It looks like that volatility would be to the extent what it was in the year '21-'22.

So it should be -- the absolute EBITDA number should be growing going ahead. So that was my basic question, and the indications are towards that, right, unless something untoward happens?

Yes.

Okay. Okay. And one last question. So for example, if we make INR 100 on the Isostearic acid, so what would be the ballpark percentage that could reflect in our EBITDA margins, if you could shed some light on that?

Pardon?

He is saying what would be the increase in EBITDA?

No, no that -- It is still premature and it depends on UPSI also we won't be able to share it.

The next question is from the line of Dhruv Mukesh Bajaj from Smart Sync Services.

Sir, I've been attending your call since last 2, 3 quarters, but I just want to understand one thing more intently that is the raw material prices of oil directly proportional to our raw materials since we are using vegetable waste oil. So, like I'm trying to understand the impact of palm oil or refined oil prices in the supply on the company.?

See, I can say one thing for sure, exactly not in percentage terms, it is there, but if the vegetable oil prices go up, our raw material prices also go up and finished product prices also go up. If vegetable oil prices come down, our raw material prices also would come down and our sales prices also would come down.

Got it. So we are not affected by the absolute increase we are just affected by the volatility in that, right?

Yes, exactly. Exactly, exactly. And volatility is not good for any business.

Right, sir. And sir, I have been tracking the fatty acid prices. So is my understanding correct that our dimer prices and linoleic acid are directly related to the fatty acid WPI index. So is that the right benchmark to track our realizations or?

No, no.

It is more based for palm.

You are saying Is more based for palm and we are into soft oil byproducts. And palm is a hard oil one.

And sir, like in this quarter, we saw volume growth, but on the value terms, we saw a slight degrowth. So is it because of the poor demand scenario or again, the high supply side pressure that you're talking about in the dimer assets?

What just now Nahoosh said that is the refined soya oil prices. So a declining trend, our finished goods price also would show a declining trend. That is what we said that in spite of a higher volume of 2.5%, there is a degrowth in value terms of 2.5%, around 3%. That is because of that.

The next question is from the line of Rajesh Jain from Neuberger Berman.

I have 2, 3 questions. The first one is regarding your project of handling a new different raw material. So my question is, is this something similar to waste vegetable oil that we are handling now?

Yes, it's basically we have been. We are not deviating from our core competency area of vegetable oil-based products, byproducts and fatty acids. It is a fatty acid. The equipments are going to be near about the same. And market is going to be -- I mean, it's more going to be an export-oriented product.

So will the products will be different than what we are currently markets are selling?

These are different type of fatty acid, end use these would be different. A different type of fatty acid having a different end-use application.

Okay. Needless to say, the margin should be better than the current ones?

Yes, yes.

Sir, just now our CFO said that you have earmarked around 40,000 metric tons for that project. So that means currently, in case if next year, if the demand [ outstrates ] and can't we use that 40,000 for the existing products?

I mean, see, if demand in the current set of products like we have earmarked 80,000 tons. And if demand goes up substantially, by say, and we are able to sell equivalent to 100,000 tons, then we can increase from 80,000 to 1 lakh. I mean that capacity is there. The equipment will earmark it for this set of equipment, this set of products. But what we felt is it makes more sense for us to go for a new product, higher value addition products rather than the same set of products. So that's the reason we have earmarked 40,000 tons for new products. We can reduce that to 20,000 tons, and we can add 20,000 tons to current set of products.

Over a period of last 27 years that we are in this business, what we have understood is rather than putting so much of pressure on the availability of raw material and selling finished goods by trying to attempt more and more quantity, it is always better to diversify and take this new set of products, which no one in India makes. So that is what consciously, Nahoosh bhai had decided that is what we have to do. But if you -- as you said, if the market scenario so requires, we can go for more than 80,000 tons also.

No, sir, the point is understood. What I wanted to know is now in case if -- as you mentioned, by Q3 or Q4 of next financial year, if this project becomes successful and if you start utilizing, let us say, 20,000 metric tons of the capacity in FY '26 and for the regular products also, if the utilization increases, then there may be a requirement for you to add more capacity. Is that understanding is correct?

Yes. Yes. Correct.

Okay. Sir, my second question was regarding the sterols, like the nutraceuticals segment, there was some project where you wanted to increase the concentration of these products and also deliberating to enter into some more products in that segment. Is that project is on hold or anything is there still in the...

That project is on hold only for one reason that -- I mean, it's not that viable lucrative proposal.

Okay. Sir, in that scenario, we had bought almost 4, 5 years back some land parcel. So is there -- in case if you want to...

See, we have already utilized that land parcel for increasing the capacity to 120,000 tons for Isostearic acid and for the new product what we are working on. So now there is no excess land...

The next question is from the line of Ritesh Poladia from Girik Capital.

What is the market size, global size of Isostearic acid?

Yes. I mean, see, typically, no one -- none of the manufacturers would share their production capacity or anything. So whatever data would be available would be just a guesswork. But I can say our capacity would be equivalent to hardly 5% or 6% of world's demand.

The response which we have got from the overseas users of the Isostearic acid, that itself give us this kind of confidence that we will be reaching the full capacity utilization by December '24 only, the response which we have got over a period of last 3 to 4 months.

And sir, what's the ongoing realization of this product?

It is a high-value product...

Yes, that is a high-value product. That is what Nahoosh bhai repeatedly says that it will help us in increasing our bottom line. Of course, top line, it is a value-added product.

It goes in making of cosmetics and biodegradable lubricants. So you can understand both are high-value applications.

Sir, somewhere in the range of $5,000 a ton?

It is a high-value product.

Sure. And sir, just last point. How much India would be importing? I think that data would be recorded?

India may not be importing Isostearic acid.

India may not be importing Isostearic acid itself. India might be importing Isostearic based derivatives.

The next question is from the line of Nitin Gandhi from Inoquest Advisors Private Limited.

Sir, when you say the capacity is 5% of world, so are we seeing the top player that Croda or Arizona will be at least 4, 5x of us or Nissan...

Yes, yes, yes. This should be 4 to 5x.

More than 90% is for the remaining 5 or 6. So any one of them could be much higher, yes. All of them may not be equal.

But in Arizona and Croda might be higher.

Yes. So it will be close to Zarchem or Emery, that's looks like, right?

Zarchem is more of a distributor.

Okay. It's more of a distributor and Emery?

Emery, I have not heard about them.

We haven't heard about that company...

There are quite a few if you really -- traders, they show themselves as manufacturers and they always like manufactures and distributors. So we always get confused about it.

No issues. Sir, I couldn't get the CapEx done for iso because presentation shows only date of September?

No. There is no separate CapEx.

So, there is no separate CapEx. Actually, some of our assets, which we are presently using for our this fatty acid business, they are also used in making the Isostearic acid because it is again a fatty acid only. And some of the assets which we have created for our new project, some of those assets which we have used for Isostearic acid and the balance assets we are going to use for the new products about which we earlier talked.

So this 2,000 will be forming part of the 40,000 of new products, right?

No 2,000 is part of this 80,000 only. It is a value-added product...

Forward integration of one of our product stream.

Okay. And this -- the best year of ours '22, what was our average utilization during '22-'23?

'22-'23 will be around 60%.

So '21-'22, because that's where we had the highest of the revenue, INR 650-odd crores.

Capacity addition might have been -- might have taken place during in between the year, et cetera, and all those things. And it was in phases. Capacity addition was also in phases. These were COVID years also. So actually, it might have been impacted because of that also. Actually, COVID we started in March '20, it lasted till the -- I think September '21 for 18 months, it lasted.

Okay. So now with this ISO and other products, is it possible that we reach the best margin, which we enjoyed during COVID of 15% plus?

Yes, we hope so.

And can you share some price trend behavior of 10 years of ISO? How volatile? I'm not saying exact number, but plus/minus of whatever base price?

Price trend of what?

Price trend of what?

Isostearic acid which you have 2,000 capacity?

Always it has been on the higher side. Always it's been on the higher side because it's a very tough product to make.

No, sir, I'm seeking volatility, whether it goes up by 25%, goes down by 25%, 30%?

See, I'll tell you one thing. Once you enter a specialty product segment, the volatility typically goes away. It would be more on a stable basis. Yes, marginal increase decrease can happen, but no major increase decrease like a commodity product. I mean, vegetable oils, no that type of volatility won't be there.

The next question is from the line of Nirag Shah from Exemplar Investment.

Yes. In response on previous participant question, you said we are almost at 75% utilization on 80,000 metric ton capacity that you have dedicated for old product and forward integration out of that?

Currently, yes.

Yes. So which is around, I think, 85% to 90% in FY '25. So historically, we have planned every capacity production which is around 85%. So my question was, are we going to go for any expansion in FY '25 end for the old product? Or we are seeing some kind of situation appears in said products. So we will be focusing on new products only?

No, no, no. It's not like that. I mean when we can go for expansion, there's no big deal. We have substantial cash flow. We don't have any debt. So I mean, that's not an issue at all.

We don't have any long-term debt since last almost 21 months.

I mean, going for expansion is no big deal...

So our existing land has brownfield...

As we have always been proactive with regards to expansion. We always prefer keeping latent capacity. So I mean, once we see that we'll go for expansion.

So our existing land has brownfield scope?

Adjoining piece of land is available. So I mean, if we really wish we can.

The next question is from the line of Manan Wandur who's an individual investor.

Congratulations for the good numbers. I just wanted to understand the Red Sea crisis. So as you said that your shipment is going to be delayed. So let's say, for example, let's say, the Red Sea crisis was not there. So typically, how much time it takes for the shipment to arrive? And because the Red Sea crisis is now going on, so how much is like kind of a delay? Like does it take 1 month on a normal basis? And because of the crisis, it is taking 2, 3 months, can you explain that?

Normally, shipment from western part of India, that is Nhava Sheva to European Seaport normally should take within 3 weeks, that is less than 21 days if it goes through Red Sea. But now that it is not going through Red Sea and it is going through these other route. And this was the initial thing and shipping line decided to reroute after the vessel sailed from Nhava Sheva Port, it took a little longer, and it is now scheduled to reach tomorrow as per the date given to us 9 February. But ultimately, whether on 9th February it reaches or not, it is yet to be seen. So typically, instead of 21 days, it may now take more time than it otherwise would take for U.S.A. U.S. shipment reaches within 28 days, but this shipment would take even longer than that because from Nhava Sheva it will go to African side and from African side, it will again go back to European side. But that is okay. It may take some maybe 15 to 20 days otherwise our business is not going to be impacted because of that. Only thing is that it is delayed by 15 days. That's all. And somewhat shipping costs would be higher. But it is already a high-value product.

Okay. Understood. So in terms of that, like how will it affect the freight component? Like how much...

I think that is what I said, it is a high-value product.

High value product therefore percentage to I mean sales would be miniscule. I mean not something not even we will look at.

So we are not worried on that account.

Okay. Understood. And for this year's guidance, like we had guided around INR 700 crores and by the conversation that we had, I understood that we might not be able to achieve it. So I just wanted to understand on that aspect like we might not be able to achieve it, right?

We will be able to achieve the volume growth. Only thing is that the value part is because it is not entirely in our hands, as we said, it is partly dependent on the movement of refined soya oil price during 365 days of the year. So that is how. But otherwise, on a 9-month basis, there is already a volume growth of 15% in quantity processed. And year-end also, we might be having the same kind of 12% to 15% volume growth. But maybe value, we may not be having value growth, but it depends how this February, March goes. But that is -- as we said, that is not entirely in our hand.

Okay. And I just wanted to understand like every quarter, once we fully ramp up the Isostearic every quarter how much tons we will be supplying to our...

We said that at peak capacity, we can make up to 2,000 tons of Isostearic acid. So when we reach peak capacity, every quarter, we can supply 500 tons.

Okay. Okay. And the incremental revenue is around INR 25 crores, if I'm not wrong?

No, no, that's we haven't said yet what is the revenue increase. How have you arrived at INR 25 crores, we do not know.

In the quarter second, it was said. That's why I'm just asking?

No, no. I do remember someone asking me that what will be the increase in revenue? It would be INR 100 crores, I said maybe it will be something like that. it's -- I mean, we haven't said any perfect figure because it's not -- I mean, it's not possible for us to share. Nothing like -- I mean, nothing beyond that. It's a high-value product time and we are saying.

The next question is from the line of Sanjeev Damani from SKD Consultants Private Limited.

Sir, before I begin with my question, I really want to appreciate you all for the transparency and patience with which you reply all the questions and make us understand the business clearly. So thank you for that. So sir, now I only want to know, sir, one thing that the total capacity that you have mentioned is 120,000 tons is for all products together or it is for a particular product?

For all products together, it is always measured in terms of input of raw material.

Okay. Okay. Always in terms of -- so this much raw material we can put in and the same raw material make all the derivatives that we make out of this raw material. So they are all derivatives or...

We are something like similar to Reliance's crude oil refinery. It is always measured in terms of input of crude oil and not in terms of how much quantity of petrol you make or diesel you make.

Right. Sir, one more finding. Last time also in the last con call, I had inquired there is no major competitor to us of this kind in India or there are certain other manufacturers who process the...

Product wise you have to see.

Product-wise, you have to see, but for dimer, there is no competition. From Isostearic, no competition from India. For linoleic, no competition, a poor product -- I mean, inferior product to linoleic yes, there are manufacturers. There are manufacturers for nutraceutical, there are 1 or 2 small players. All these products, there are players in China and Europe and U.S...

Okay. Can you give us the percentage-wise volumes that we produce of each product? I mean, this is not something secret to share?

Already one participant earlier asked this question for a 3-month and a 9-month basis. I already replied to...

For 9 months, we have done 6,000 tons of dimer. Last quarter, we did 2,000 tons of dimer. Last quarter, we did 7,000 tons of linoleic. And in 3 quarters, we did 22,000 tons of linoleic. That is what we replied earlier.

[Operator Instructions] The next question is from the line of Harsh Beria, who is an individual investor.

My question is again about Isostearic acid. So as I understand currently that our Isostearic acid is a byproduct when we make dimer acid. And so far, we have seen sometimes that China dumps dimer acid to India. So sir, going forward, as we scale up our Isostearic acid, is it possible for us to reduce our dimer acid prices and gain further market share?

Yes, perfect. Perfect. Exactly, it will insulate us against Chinese dumping, so you have got it right.

You have got it, you are bang on.

Okay. And in my understanding our realizations, I know you are not very comfortable speaking about realizations of Isostearic, but I think it's -- the price is getable and it's about 4x maybe higher than dimer prices. So sir, in terms of value addition, like what else do we need to spend while making Isostearic acid after we have made dimer acid. So my question is largely on...

Yes, it's confidential. But if you -- I mean, we need to use certain types of specialty catalysts and certain types of other things, plus the utility cost and other. So I mean, yes, let me tell you one thing. It is -- the product was manufactured after more than 5 or 6 years of hard work because no technology is available for this. You need to develop it in-house and run it successfully on the plant.

First, we did it in laboratory, then on pilot plant, then at plant scale and that is how -- if something is made in the world by 5 or 6 companies only and that too in the developed countries of Europe and U.S.A., you can understand that, that product is not bound to be that easy to make.

Got it, sir. And sir, my final question is about linoleic acid demand. So in the recent times, we have seen that the volume growth in decorative paints has gone down quite a lot for a lot of peers. And are we seeing a recovery in volume growth coming back for decorative paint manufacturers? So basically, are we seeing our linoleic acid volumes growing at 15% or something, which we were doing in the past?

No, no, the volume growth will happen in linoleic acid. It's not that decorative paint segment is seeing any degrowth. So with so much of housing support given by government of India, I mean the continuous growth is happening. And in fact, new entrants are also coming in. And like with all the new entrants also, we are working closely with them as regards the product development.

Got it, sir. And sir, Grasim's plant is coming, I think, on stream in the next quarter. So are we already supplying to them?

Already our is approved. Already, our product is approved.

Laboratory has already approved our product.

The next question is from the line of Narendra from RoboCapital.

So this question is regarding the raw material that you are using in the product. So is it also a value-added product and the ballpark realizations should be more...

No, it's a different raw material we are going to use than the current set of raw material. But basically, it's -- we are not deviating from our core competency of vegetable oils and its fatty acids.

But the product would be a value-added one or the -- basically, I wanted to understand the realization. So would it be more towards our current product or leaning more towards a higher end product?

Higher end, higher end...

And any ballpark difference you could mention, say, 10% more 20% more anything?

Yes, it would be much higher. It could be higher. That's much I can say. Average sales value would be much higher.

The next question is from the line of Nitin Gandhi from Inoquest Advisors Private Limited.

Sir, can you just share out of 80,000, how -- what is the percentage which is sold as a monopoly product?

These are all -- we already talked about the dimer acid, we are selling this much quantity...

No, you shared and individually how much is sales, but I just wanted to know in a totality in a macro view, okay, out of 80,000, maybe 40%, 50%, 60%?

Other than linoleic acid and dimer acid, there are 4 products or byproducts. So there cannot be -- other than prime products, there cannot be a situation like monopoly or no monopoly. Monopoly or no monopoly would be there for prime products and linoleic acid and dimer acid are the present prime products. Intermediate nutraceutical is a prime product. Now Isostearic acid is also a prime product. So anybody want to talk about competition or no competition, we have to talk about these products. And for dimer acid, there is a competition from China only. There is no one in India makes dimer acid. As far as linoleic acid is concerned, we are the only company in India to make such kind of linoleic acid, there are 2, 3 other companies which are making an inferior kind of a product, not linoleic acid as such. Isostearic acid, we are the first company in India and perhaps in Asia to make these Isostearic acid. So there is no competition from within India or even from China.

Ladies and gentlemen, we would take that as the last question for today. I now hand the conference over to the management from Fairchem Organics Limited for closing comments.

Yes, we thank you -- we thank all the participants for participating in this call.

Thank you, everyone.

Thank you. On behalf of Fairchem Organics Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.