Galaxy Surfactants Limited (GALAXYSURF) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and a very warm welcome to the Galaxy Surfactants Limited Q4 and FY '20 Earnings Conference Call. This conference call may contain certain forward-looking statements about the company which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Unnathan Shekhar, Promoter and Managing Director of Galaxy Surfactants Limited. Thank you, and over to you, sir.

Thank you. A very good morning to all of you, ladies and gentlemen. As we begin our con-call for the financial year 2019 and '20, I trust and pray that you and your families are safe, healthy and secure. Ladies and gentlemen, these are unprecedented times. It was only 4 months ago when we had our last con-call in the first week of February 2020. But as Vladimir Lenin had once said, "There are decades where nothing happens, and there are weeks where decades happen." Within 15 weeks, to be very precise, the whole world has undergone a 180-degree change; change that has not only impacted our today, but which shall live on and also impact our future; change that has not only brought the world economy to a grinding halt, but which has also disrupted lives across the globe. Within weeks, we have experienced what people had not experienced for decades. Unprecedented times call for unprecedented measures. The lockdown imposed by countries across the globe as well as by our government on March 23 to protect lives impacted business operations adversely, but it also gave rise to our new-age warriors, warriors on the ground who comprise our doctors, police staff, administration and other authorities who've selflessly been defending and fighting for our lives and our country. We thank these warriors. They are our real heroes. Daily lives though came to a standstill, essential products and services were still the need of the hour. It was time for our customers to stand up and deliver the essential products required for all our lives. To enable and equip our customers, Galaxy was ready. This was about our nation and our people. Our COVID yodhas, as we internally call our members from the plant, operations and logistics, not only fought through the various risks and lockdown restrictions, but also ensured we keep on delivering and fulfilling our customers' needs 24/7. This has not been easy, right from restrictions imported by local authorities on traveling to work, to restrictions of ports and unavailability of transportation mediums, operations were severely impacted. But as they say, there is always light at the end of the tunnel. Things have not only improved since lockdown 1.0, but we do see normalcy returning sooner than later. We acknowledge and thank our COVID yodhas for braving this storm valiantly. In these grim times, ladies and gentlemen, I would also like to share some positive news with you. We at Galaxy celebrated our 40th Annual Day on 22nd of June 2020, that is last week. The journey, which began in 1980, has now completed 4 decades; 4 decades of creating value and growing with our customers; 4 decades of growing with our country's growth, which has grown by over 200x and building Galaxy to a globally recognized, reputed and respected brand. The 4 decades has seen our profitability compound at a CAGR of 28.5% from INR 1 lakh in 1980 to INR 230 crores as of FY '19-'20, and our revenues have multiplied by more than 20,000x. But more than the financial numbers, these 4 decades have been about the sustainable partnerships and relationships, which we have built and nurtured with all our stakeholders; relationships which have not only stood the test of time, but also enabled our growth over the past 4 decades. We thank all our stakeholders for their continued support and contribution. Moving on from the last 4 decades, the last decade, the last decade has seen your company grow at CAGR of 10.9% in volume terms, 15.9% in EBITDA terms and 19% in PAT terms, maintaining, of course, our threshold ROCE of 22%. Both our segments, that is Performance Surfactants and Specialty Care Products, have seen volume growth in excess of 10% during this period. As we enter the next decade, the last year of this decade, FY '19-'20 [Audio Gap] relative mixed year for us. I say mixed, as while all our segments and regions registered growth, this growth was relatively subdued in the second half of the year. While our Performance Surfactants business grew at 6% in volumes, Specialty grew at 1.7%. Overall volumes grew at 4.4%. Egypt made a strong comeback registering 22.2% growth in volumes over the previous year, which primarily drove the Performance Surfactants volume growth. Specialty business though started off on a strong note registering 10% volume growth in H1. On account of seasonality in Q3 and the outbreak of COVID-19 in Q4, the Specialty business registered a decline of 6% in H2, that is in the half -- second half of the year. Lack of adequate credit for the distribution channels along with reduction in inventory days impacted business in India, which remained sluggish and flat for the year. The Rest of the World markets, which had outperformed last year, grew 2.8% in volumes in FY '19-'20. This was mainly on account of a decline of 11.7% we had experienced in the second half of '19-'20 due to lower offtake of Specialty Care Products, in Q3 on account of seasonality and on account of outbreak of COVID-19 in Q4, which severely impacted the developed nations initially. The Africa, Middle East, Turkey region made a strong comeback this year, registering 9.4% volumes growth, mainly driven by the robust performance registered by our local Egypt market. Now while business has been relatively mixed, business operations too have been adversely impacted by the following 2 incidents: lockdown imposed by the government on March 23, 2020, completely wiped out our last week's sales for the quarter. The major impact though will be seen in quarter 1 FY '20-'21, where due to supply chain disruptions, our ability to serve this underlying demand got severely constrained. The Tarapur incident, which though did not impact quarter 4 '19-'20, shall impact quarter 1 '20-'21. The blast which took place at our M3 unit resulted in 3 casualties. This has left an indelible blot on our illustrious 40 years journey, which still April 30, 2020, had not seen any serious incidents involving casualties. While as an organization, we have always given safety the topmost priority, this incident has taken us back to the drawing board, right from implementation of behavioral-based safety for all employees to refining and improving the safety SOPs, to framing new SOPs, to new -- all processes and studies for operating under the COVID-19 scenario, to conducting safety audits and evaluations by the safety teams, we are leaving no stone unturned to ensure such incidents do not happen in the future ever again. All necessary support, financial, emotional and social, has been extended to the families of the deceased. They will always remain part of our Galaxy family. Looking ahead, ladies and gentlemen, while the demand for Performance Surfactants remains fairly stable and visible, our Specialty portfolio can see slowdown for the next 6 to 9 months. Quarter 1 FY '20-'21 has seen headwinds and challenges on account of supply chain disruptions, which impacted people and operations, including production, material clearance supports and our service commitments to our customers. While demand for Performance Surfactants remains fairly stable, cut down on discretionary spending, along with hoarding of cash, will impact new launches and sales of existing premium products, adversely impacting our Specialty Care business. But we remain hopeful, and I say that as the situation month-on-month has been improving, for example, with April being the worst, May being better than April and June being better than May, we hope this continues. Though sales and utilization levels have not reached the pre-COVID levels, we remain confident that within the next 3 to 6 months, we should see [Audio Gap] provided consumption gets back to normalcy, and there are no further lockdowns. Region-specific outlook though at this moment will be tough to predict and clarity will only emerge post quarter 2 FY '20-'21. A positive, though, has been our Egypt plant, which faced no disruption shutdown on account of the pandemic. Therefore, momentum of Q4 should sustain going ahead for Egypt. The CapEx plan for our Specialty Products remains on track, though execution and operationalization will get delayed by 6 months. The 2019-'20 began with the operationalization of our Performance Surfactants plant at Jhagadia. While nobody could foresee the rise in demand for Performance Surfactants on account to the pandemic, it is our ahead of the curve CapEx planning and execution that has and is holding us today in good stead as the demand for Performance Surfactants rises. 2019-'20 also saw your company winning several reputed awards in the areas of: one, innovation, the Gold Award at Home & Personal Care India for our oil soluble surfactant TiLS (G); in terms of human resources, our certification as a Great Place to Work for the second time; on intellectual property, an excellent use of IP and innovation award at the IP summit; to finally, my own nomination as a finalist at the EY Entrepreneur Of The Year awards 2019. To conclude, ladies and gentlemen, with an operating cash flow in excess of INR 3,300 crores, ROCE of INR 23.5 crores and PAT growth of 20.6%, awards and recognitions for our performance in multiple areas and growth across segments and regions, this has been good end to the last decade. For your information, the CapEx spend for the entire year was INR 230 crores, made up of INR 150 crores of the CapEx that we had begun at the beginning and we also invested INR 80 crores in a new land acquisition at Jhagadia. At Galaxy, sustainable and consistent value creation for all our stakeholders remains our motto. We have consistently demonstrated it over the last 40 years, and the next decade and decades to come will be no different. We remain committed to growth. And despite the headwinds, the inherent robustness of our business model, sustainable relationships built over the years gives us the confidence to achieve lot more in the decades to come. On that optimistic note, ladies and gentlemen, thank you once again for joining us today. I would now open the platform for questions, ladies and gentlemen.

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

First of all, congrats on completing the successful 40 years of journey. A couple of questions. On the gross profit margin, the margins have grown quite strongly at 36.4%, whereas our performance volume mix has reduced, but value mix has grown up. Is that we have sold more high profitable products in the Specialty? Are there any one-offs we should be aware about in the gross profit margin?

Yes. Natarajan will take this question.

Yes. So see, this essentially is in terms of the way we manage the sales pipeline and also the way we manage the risk in terms of a raw material -- maybe major raw materials. So essentially, it is a combination of the way we manage risk and also in terms of how we are able to generate some better value creation in terms of the way we're able to price our Performance Surfactants.

So it is fair to assume this entire margin expansion has come from the Performance products and not really from the high-value Speciality being sold?

No, it's not that. We also had -- although Specialty had a volume growth of only 2.8%, we also could have some better pricing possible in that as well. So it's a combination of both Specialty and Performance Surfactants.

And performance at these levels is not sustainable in a long run, right?

So it all depends. If the demand remains robust, and then we are able to continue this particular run rate, I think we would be able to retain some of them. But it all depends more on the demand side, okay, and how the whole scenario pans out. So I would want this particular rate to continue, but it all depends on how the external situation develops.

Got it, got it. My second is on the demand side, which you rightly said. On the Performance product, now that there is more awareness on cleanliness and hygiene, and we have seen SLES-based products like liquid hand wash and olefins have been taken up very well and the Jhagadia plant, as sir rightly said, has come in probably more opportunistic time, do you see this year Performance products growing at double-digit volumes and now that we also have a benefit of pent-up demand, refilling demand for the depleted inventory in the entire supply chain, do we see Performance outgrowing this year in FY '21?

Yes. So see, one is where what we see, Sanjesh, is that the habits now in terms of cleansing habits and cleaning habits, and the hygiene consciousness has now taken a change for better, okay, for the consumers and as well as for the industry in a very, very decisive way. So we -- on the demand side, we do expect that this particular -- this would continue, but the only thing is the rate at which this continues depends upon how it gets tempered down, okay? It will definitely be higher than the previous years but whether this sort of -- because there's a lot of stocking, people have really gone on to the other end of the spectrum in terms of hoarding. So now having said that, we do see this as a positive in terms of growth for Performance Surfactants. But the only caveat that I'd put here is in terms of the demand growth being there is in terms of disruption in operation that's now been caused, okay, by this COVID-19 still hanging it's head now and again because then that -- those sort of disruption certainly make it very tough in terms of operations to be able to service the demand. So we don't want -- the first quarter, what we saw in lockdown 1 and 2, if a similar situation comes, that can be a damper. Otherwise, we do see the demand growth going up pretty well. And it -- our preparation in terms of capacities being set up ahead of the curve, okay, certainly has been a good move.

One on the Specialty side. Now considering that our Tarapur plant was completely shutdown for the one full quarter, I don't know have we started the production there or not, but how do you see Specialty Care Products' performance for this year? Will it be a significant decline in terms of volume or do you think it will be a decline in the range of, say, 0% to 5%? How should we see Speciality Care Products?

See, first of all to clarify, Sanjesh, see, we made a good amount of Specialty Products in Jhagadia and Taloja as well. So Tarapur is -- because of the unfortunate accident -- Tarapur contributes about 8% to 10% of our volumes, okay? And most of what we do is specialty chemicals, okay? So now what we do see is that we have now come back to -- we have received all the regulatory approvals in terms of commencing production. We've also commenced production of all the products, okay, in a very phased manner after we complete our internal safety review, which we have put in place post the incident. So we've gone back to the drawing board, looked at every aspect and then only when it is certified by the internal team of experts, okay, we are starting. So we should be up and -- we are up and running on most of the products. I think some of the products where we are waiting for the review to be done, it should happen in the coming days. The only thing what we see in Specialty is if the consumers start down trading, okay, so there can be a situation where some of the high-end formulations, the launches, all the momentum that was there with the previous year, may get impacted. But we'll have to wait, okay? So probably, we can be able to make a clear comment on this, say, in the next con-call, when we meet for the results that we'll be declaring for the first quarter, okay? So -- but otherwise -- see, for example, what I can say is that in -- when people wash their hands more frequently, okay, it also ends up drying their hands, okay? So you need to have some moisturizers that need to be put into that, and that gives a good scope for some of our mild surfactants. So we only have to see as to how it pans out in the coming months, okay? But we remain optimistic that even Specialty should find some good usage into these hand cleansers and all that.

Got it, got it. One question on the tiering of the customer. Our Tier 3 customer who generally contribute higher margin, that proportion has come down to 34% in FY '20 versus around 39.7% in FY '17. Any reason why the Tier 3 customer contribution is falling because we understand that in India, it is more of Tier 3 who will guide the growth?

Yes. See, it's essentially some sort of basis that we had Tier 1 and Tier 2 also going up. So it is essentially, it's not that they didn't grow. It's only that as the -- in terms of the proportion, we had T2 growth happening better last year and T1 as compared to T3. Otherwise, our intensity in terms of growing our business with Tier 3 customers, okay, is extremely good. So it's probably only some sort of arithmetic that leads to that. But the focus, it is extremely high.

So from here on, should we see a proportion increase in the Tier 3 category as well?

Yes. We should see, we should see. So the only thing that I would like to say is Tier 3, in terms of the way this COVID situation has impacted people, we wouldn't be so clear as to which of the T3 customers would take some more time to get back to business.

We can make a general statement, Sanjesh, that the T3 segment has got more impacted because of this lockdown not only in India, but across the world. The T1 customers have been much more resourceful in terms of coming back in terms of their operations. So the T3 people are -- have certainly been impacted.

Got it, got it. Just last 2 bookkeeping questions. What is your expectation of CapEx for FY '21 and '22? And number two, in terms of Tarapur, what would be our loss and how much of it can we recovered from the insurance?

See, as far as the CapEx for 2021 was based on identified projects which are already under execution, INR 100 crores outlay is still to be done over there, okay?

Is it INR 100 crore per year or is it combined INR 100 crore over there, sir?

Yes, yes. It is INR 100 crore per year. I'm talking only of 2021 as of now.

Okay, okay, okay.

That is one. And as far as our insurance is concerned, Tarapur is fully covered by insurance. There's no issue. We cover total profit and loss insurance.

Oh, so everything is covered in that today?

Everything. Even loss of profit is also covered.

[Operator Instructions] The next question is from the line of Nitesh Jain from Birla Mutual Fund.

I mean, you provided a good summary of both the businesses, with the Performance Surfactants and the Specialty Products. So I want to ask you this so-called muted outlook on the Specialty portfolio. Is it a very short-term blip that you are witnessing? Because by a very long term, I mean, the trend line, the growth prospects for this portfolio is quite strong. So I mean, this is just a 3 month, 6 months you are looking at or your -- and then perhaps in this second half, it can come back to, say, 8%, 9% type of volume growth?

Let me say like this, see, Galaxy's mission always has been to improve the quality of life in terms of cleanliness, hygiene, beauty, care, comfort, wellness. And I have made a mention that the consumer trends, both in India and globally, has been and will continue be towards safety, sustainability. Now that particular trend, whether it is COVID or non-COVID, is going to be consistent and then continue. And that is where the Specialty Products will -- are being designed and innovated to address the requirements of sustainability and safety of consumers. Now whatever we are seeing now is that there is certainly an impact on discretionary spending by consumers across the world, one is -- fundamentally, one is because of, as we have seen, there has been loss of employment, one; and number two, people are more or less staying at home. Now we do believe that once the world comes back to normalcy, okay, the specialty should grow as they have in the previous period. So today, the entire consumption with respect to consumers has been allocated largely to cleaning and hygiene and sanitation rather than to personal beauty or -- personal beauty, I mean, that's where. So whatever we are going to see with respect to Specialty are going to be short term. And we believe that once we come to a semblance of normalcy, whatever we have seen in the previous years should continue.

So sir, I mean, on the same line, if we just ignore the short-term and, say, FY '21 performance, say, 3 year down the line, how do you see the Galaxy as a company's portfolio between the Surfactant and the Specialty. I guess the Specialty is around 1/3 today, right, or some 30% types? So what could be the ratio, say, 3 years down the line?

Yes. See, as we have -- Natarajan here, Ritesh. So as we have said earlier, see, our clear focus is to grow both the legs of our business that is both Performance and Specialty. So typically, today, we're at about 1/3. So as we had said, as you continue to grow both the legs, okay, what we would see is that the Specialty can be from, say, 30% to 40%, 1/3 to 40%, 42%, okay? But then it can't grow us because essentially, Specialty goes into certain -- a specific formulation in lower dosages, okay? So in volume terms, okay, you can always see 40-60, but what will be of relevance is in the way the portfolio changes within Speciality because there'll be a lot of high-end innovative molecules that you'll see coming out of our pipeline, and that's what's going to -- that will make a difference in the coming years.

Sure. And lastly, can you elaborate something on the R&D initiative which the company took for the full of the financial FY '20, some of the successes or what are the hits or misses, I mean, for the full year as a whole?

See, for R&D, so the various new products that we launched last year, like one of the awards that we received for an oil soluble surfactant, okay? So these are all which are receiving -- similarly, GLI 21, which is a very, very mild cleanser, okay? So these are all receiving very good this thing from the market. And that is why we are preparing our setup at Jhagadia to be able to service this sort of a demand. So that is going pretty well. Our investment in R&D infrastructure enhancement, okay, that we have planned, that also has got slightly impacted because of this COVID-19 situation. We should be up and running, say, by the end of this year. And also our multipurpose plant at Tarapur also would be ready by end the year. So we are set ourselves well, okay, in terms of encashing on the consumer trends that we see giving a fillip, okay, to the Specialty Care portfolio.

Sure. And lastly, if I'm allowed to ask, the current setup which you have for both the Performance Surfactants as well as the Specialty, I mean, the current capacity is good enough for how long? Is it 1 year, 2 years? Without getting any new project, you can meet the demand up till what?

See our capacity utilization will be in the region of about -- how much? 61%, 61%. So we have enough amount of headroom. As we have mentioned many times, as soon as it reaches so-called tending towards full capacity, we immediately start thinking about increasing our capacities. We never like to operate at our full capacity, and we have always been so, build capacity in anticipation and make ourselves ready in terms of the market.

The next question is from the line of Saravanan from Unifi Capital.

Sir, this INR 80 crores that we have used for land acquisition, this is for the new CapEx that we are planning to undertake in the future year?

Yes, this is for taking care of the future CapEx requirements of Galaxy because, as you know, our Taloja we have mentioned is more or less full. We do have -- Tarapur also we are executing a particular CapEx in one of our premises. Jhagadia, we do have some amount of space, but this is in terms of preparing for the future.

Okay. So the related CapEx, would it start next year or the following year, FY '22 or FY '23?

No, no, no. Saravanan, you should -- see, what we're doing is that this is to be future-ready. So you need to obviously buy the land and get your environmental clearance everything done, which takes 18 months, 24 months. So this is more in terms of future, which I'll say, is medium term. The CapEx that'll come, say, beyond the current 3 years that we have, which will come up in Jhagadia only in the existing plant.

Yes. And this entire COVID crisis, is it a blessing in disguise for organized players like us? So unorganized players will find it -- would they find it tough to compete with us?

I wouldn't say that. I mean I would look at it that it is an opportunity for almost everybody because the end market, it behaves in a very strange way in a short span of period. There is no predictability or certainty about everything, at least during this short term. So for everything to come to a return, it is going to take time.

And in any case, we don't want to call it a blessing, whether in disguise or not in disguise because I think people who are suffering and then it has really scared people, there's a fear psychosis. So for -- we'd want things to return to normal quickly, okay? And we need -- we are very particular in terms of ensuring safety and health of our employees. That's very critical, okay? So operations essentially need to be done with this in mind.

Understood. Sir, last question. So R&D initiatives would now be focused on, I mean, Performance? Or we will still focus on Specialty Chemicals? Because now there are a lot of opportunities in Performance itself, right, because of the hygiene and COVID-19...

Sure. So our R&D -- to put it very clearly, Saravanan, our R&D innovation focus is majorly derived out of the consumer trends, emerging consumer trends, okay? So as we see the consumer trends emerging which needs us to be focusing on something different, we'll do that, okay? So it's too early to comment on that, but we already have good amount of things in our pipeline. So our focus would continue to remain in terms of being relevant in terms of product offerings, to -- and well-calibrated to the consumer trends that are emerging. So that's what I would like to put it across as.

The next question is from the line of Sneha Talreja from Edelweiss Securities.

It was more pertaining to your Egypt operation. So just wanted to understand, so the market share loss that we had done, are we back to similar levels? And what are the current operating rates in Egypt?

I would say that as far as local Egypt is concerned, certainly, compared to 2016 or 2017 times, the market has come back to its original level. But -- and we have seen growth as far as the local Egypt market is concerned. And -- but the only thing that we need to -- yes, the growth rate of home care in Egypt, including inflation, of course, has been at about 13.3%, but only 2.8% on constant value terms because -- and the T1 players were [Audio Gap] players who still major players at about 62% market share. And the local players have a low share. So we have seen, for example, we have mentioned that the local consumers were downgraded in the initial years, but today, we do believe that the T1 customers have been able to come back to their original level. So -- but though we have had no impact in the first quarter, Egypt as a country has again been seeing a surge in COVID cases in the last about 1 month. So we do hope and pray that it doesn't significantly impact the supply capabilities of us. We would like to remain optimistic that we are able to continue because in the first quarter, we were not impacted at all. I think we should be able to see the same -- like we saw the same level of momentum that we saw in the last quarter of last year and the first quarter of this year. So the only risk as far as Egypt is concerned is in terms of the COVID situation. So let us wait and watch and then -- for the next maybe, let's say, 3 or 4 months or so. Yes. However, I should say that the other countries in the Africa Middle East region had an impact of this COVID in the last about 3 months or so. So I mean, we would like to keep waiting and watching before we come to some definite picture with respect to what we think can happen.

Sir, that's really helpful. Sir, secondly on your operations, if -- you, of course, said that May was better than April, and June is much better than even May. Could you quantify in terms of what was the utilization when we started? And I think you just said that currently, we are at about 61%, so in case we can give some month-on-month progress of how it has been for us in terms of utilization rates?

When I mentioned about 61%, that was for last year, last year capacity utilization overall, okay? Now I should say that April, we were very severely impacted. I mean, as far as April month is concerned, we would have hardly worked on a number of days because the lockdown was so sudden that we had to close initially and then seek permissions and only when we got all the permissions, could we restart. So April was severely impacted. And May was much better than June. Natarajan, you want to say something?

Yes. So what I'd say, it all -- it's essentially April was severely -- so it will go, say, lockdown 1 and 2, which happened in April and the first half of May was the severe impact. Then once lockdown 3 came, there was a good amount of relaxation, which enabled us to get our operations to a particular level of -- at a particularly higher level. And June, once the lockdown was -- we have a lockdown -- unlockdown 1 or whatever we call it, okay, things are much better. So it is directly proposal to the way we are able to operate given the lockdown conditions. So that's why we say June was better in terms of operations. The freedom we had to operate was much, much better in June. That essentially means our ability to serve the demand, okay, was much significantly better than what it was in May.

Sure, sir. Just one last question from my end would be, are you seeing any structural changes as far as COVID? Of course, your portfolio is expected to see a major change because given the demand for hygiene products is increasing a lot. Any structural change that you see this particular product or a portfolio can do very well or you're seeing higher amount of demand in terms of that? And secondly, what is the customer feedback as of now that is coming to you? Because I'm sure that you get a much early view from the customers' end with respect to demand. So what are you getting in terms -- from the likes of a HUL or a P&G or even the smaller amount of players that you are working with?

And one interesting thing is we keep hearing that consumers are washing their hands multiple times, washing their bathrooms and wash basins and floors multiple times. So the consciousness with respect to personal cleanliness and hygiene is very, very high. So we need to see whether this is a major structural change, whether this will sustain. Because the order of magnitude in terms of increase of what we call hand hygiene and cleanliness is multiple times. So we need to see whether this is going to be a structural change for the industry. And this is what our customers were saying. Yes, Natarajan?

Yes. So I think what I'd say is that, having said what Shekhar said, I think it will be too early to comment whether there's any structural change happening in this except that the hygiene conscious levels have gone up significantly. Now what sort of this thing it'll lead in terms of product offerings or whatever is to be seen. Like today, we are seeing veggie wash, meat wash offerings being done. Now how the customers will lap it or how will they get used to it or how they'll continue to keep having this sort of thing will be seen. Now other structural change, it's too early to comment in terms of people stop going out that frequently, okay? If they don't want to travel that frequently, they don't go to the beaches that frequently. Now what will the impact on certain formulations? We may probably only know, say, by end of this calendar year for us to make some statement. Now it's too early. We're not hearing anything on these lines even from our customers on a structural change, except that they're saying that hygiene consciousness has gone up significantly.

The next question is from the line of [ Lakshminarayan ] from ICICI Mutual Fund.

Couple of questions from my side. First is that because of this change in the Ind AS in terms of how do you classify your depreciation because of the right-of-use assets, what would be the like-for-like EBITDA? Because we always say that we need to actually look at EBITDA and not at the revenue level, right?

Around INR 4 crores depreciation is higher on account of Ind AS account.

So INR 4 crores. So -- okay, okay. And the other thing is that if you look at your EBITDA contribution across various regions, if I split that EBITDA or like you split the revenues in terms of 3 different regions, what would be the EBITDA in terms of the same pie chart, India, AMET and RoW?

So that is not something that, [ Laxman ], we essentially want to talk about because it is -- it is all -- the portfolio that would be there, Specialty and in terms of Performance, then the Tier 1, Tier 2, Tier 3 customers, so it's a bit complex, and we would not like to mention anything on that front.

Got it. The reason I'm asking this question is that you had mentioned several times in your earlier calls, don't look at the revenues because what is more important is your EBITDA and EBITDA per tonne, right? So that's the reason...

Yes, yes. We've always said that in terms of how well we are growing ahead of the market in terms of volume, and we always say that our EBITDA growth will be higher than the volume growth and PAT growth will be higher than the EBITDA growth.

Sir, in terms of the volume, can you give that, that mix, India, AMET and RoW? Or it would be same?

Overall, as we said, we grew last year by 4.4% on overall volume growth. And India was more or less flat and Africa was more almost at a level of maybe about 9% or so. And I think...

Rest of the World was 3%.

Rest of the World was some 3% or so.

So now, there is made in India, sold in India. And then there is made in India, sold outside India, right? So -- and then what is that mix?

See we've -- the international business constitute almost 65% of Galaxy's portfolio. So when I say international business, it is products made and sold outside India. So international business also, obviously, includes exports from India. The Egypt sales as well as the U.S.A company sales. So our international business constitute about 65% of the total turnover.

Yes. So that -- I mean, my question is essentially whether the exports from India has actually gone up or you think that would -- I mean what is that percentage? And is there a increased export from India given various dislocations we see across the world in terms of supplies?

Yes. So India, I think you can say exports out of India, say, will be about, say, 50% to 55%.

Of the turnover of India.

Of the turnover of India.

Okay. And is it -- has it trended up? And do you think that is going to trend up because of various supply dislocations you see?

So it has been trending up, that much I can comment now. Moving forward, whether it will continue to move at a much brisker pace, is a combination of what happens in terms of supply disruptions elsewhere, which we are not able to comment today. But our focus is to see how we are able to build more and more business, okay, with all our customers across geographies. So many of the specialties that we offer from India, many of the performance that we offer from India, okay, the objective is to see how we are able to grow that business out of India.

Got it. And in terms of your AMET revenues, right, so what's the broad mix of Egypt and non-Egypt there? And how is -- how that mixture has changed?

I think local Egypt will be approximately 40%, and balance will be outside Egypt.

60%.

Got it. And 1 last question is that with respect to your cliental, right, I mean a lot of our clients are very, very sticky in nature. And what's the mix if you look at it in terms of business coming from existing clients? And what is the business you got from completely new clients?

See, as we always say, our strategy is built on growing both the Performance as well as the Specialty Products together, that is very important for us. Secondly, grow across all the segments of customers, that is T1, T2, T3 and T4 and increase the wallet share with customers. So we'd like to work with customers across our entire portfolio of products. So in terms of the split, like we would have, say, with customers anywhere from across various customer segments and various individual customers, we would operate anywhere from, let us say, 3 or 4 products per customers to even maybe, let us say, 15 or 20 or 25 products per customers. So this is a very important element of our growth. So as far as new products is concerned, last year, I think approximately it would have been what? About maybe 5% to 7% or so, 5% to 7% or so.

Okay, okay. So essentially, you're saying that there is an existing customer's existing business and existing customer's new business.

Yes, yes, yes.

And that composition would be above 95%, if you look at the entire existing customer. I'm talking about the repeat customer business, which could be either an existing business or new business?

Our revenue share from new products for '19-'20 was about 6% to 6.5%, okay? And this new products could go to existing customers, it could go to new customers also. Okay?

No. That's what -- the new customer wise, how much was it completely new customers, like first-time customers? First-time customers would be how much?

It would be less than 5%.

Less than 5%.

[Operator Instructions] The next question is from the line of Pavan Kumar from Ratna Traya Capital Partners.

Sir, can you just give us an idea of how much of the revenue proportion might come from hand sanitizers and this liquid hand detergent? And also, I wanted to check on when we are -- how much pickup can we expect on the Performance Surfactants side of the business this year? Is it going to be pretty meaningful as of now from whatever trends you have seen?

As we've said, we would not like to make any prediction or comment as of now because we are still in an uncertain zone, okay? The major parameter that we see in terms of our not taking a call on trying to predict is the supply side uncertainty which is possible because of this COVID situation. So whether it is to do with, let us say, availability of drivers or transports or even our people being able to come regularly to our factory because you do see some areas being quarantined, suddenly your building could be quarantined, even though you may be pretty safe. So these are the sort of uncertainties. And so we would like to be patient for the next maybe 3 or 4 months or something. Our job is to, what is called, ensure that we are able to operate our plant very properly at all points of time and do our best. And our people have been doing tremendously in the last 3 months or so. They have overcome a lot of challenges. And they are all awake 24/7.

And hand sanitizers and hand liquid detergent wash, how much of that would be a proportion of our revenue, sir?

So see, that will be difficult to comment, but then it is suffice to say that we supply to most of them who manufacture hand wash lotion. So I -- we wouldn't be able to comment on how much of our revenues comes from the hand sanitizer and hand wash segments, but we supply it to almost all the people who make hand wash.

Yes. Will we have a good proportion of market share with them, maybe 20%, 30% or even higher?

No. As we said, we supply to almost all the people who make hand wash. See, hand sanitizer, as you know, which employs alcohol, we don't supply any significant raw material to this hand -- what is called hand sanitizer. Hand sanitizers uses alcohol, almost 70% of it is alcohol, okay? Hand wash, where you're able to wash your hands with hand wash and then with water, you require water, there Galaxy supplies to almost every single manufacturer in this country.

The next question is from the line of Bharat Sheth from Quest Investment Advisors.

Congratulation on good set of number on these difficult times.

Thank you.

And sir, just -- I missed your opening remarks. So one thing, how this input costs are behaving now, which was, say, last year first half, was going up? So -- and how do we see input cost scenario? That is one.

So Natarajan here. So input costs essentially have softened. As you know, both petrochemical feedstocks and the oleochemical feedstocks. So -- and what we expect this to continue at a flat level, at least for the coming 3 months. We don't know as to how things turnout but we would expect it to be in this particular zone for the coming months.

Okay. Sir, now taking a little longer-term scenario, see, after several years of no much CapEx, now in last 3 years, '18-'19, '19-'20 and '20-'21, roughly, we'll be spending around INR 600 crore, including land purchase of INR 80 crore. So how do we see our asset turn as you said that once we reach, I mean, what kind of capacity then we, again, look for the next CapEx? So overall, if you can give some of your thought process with the kind of CapEx we are doing is to -- what exactly is the management philosophy whether to -- for new, more product or within our core business. So if you can share, sir, your thought process from 3 years' perspective?

See, all our investments are into our core areas, which is in the Home & Personal Care segment. And as we said, we invest in both the Performance Surfactants and the Specialty Care Ingredients line. So there are 3 legs we'll invest. One is in terms of enhancing our R&D capabilities, okay; enhancing our Performance Surfactants capacities; and enhancing and investing in new capacities of our Specialty Care Ingredients in terms of what comes from our innovation funnel. So there's a combination. Whatever we're spending in the last 3 to 4 years is a combination of all these 3 fronts. And it is only in the core area, that is Home & Personal Care segment, there's nothing beyond that.

Fair. Within that also, new, I mean, chemicals or anything that, if you can? And how do we see asset turns if you really -- out of the INR 600 crore CapEx you remove INR 80 crore for the land purchase, around INR 500 crore is on the CapEx...

Out of the INR 500 crore also, see, about INR 60 crore to INR 70 crore is for our multipurpose product plant in terms of enhancement and innovation capability at Tarapur. So typically, we look at INR 400 crores to INR 450 crores of CapEx, okay, which is both in the Performance Surfactants and Specialty Care Ingredients. Our typically asset turns is about 2.5. So you're talking about something like INR 1,000 crores of revenue from that based on the asset turns that we have historically had.

And your broader time frame, sir, whether this will take around 3 or 4 years or maybe less than that? I mean...

See Performance Surfactants, we typically always invest with a 3- to 5-year horizon in mind -- demand horizon, whereas Specialty we do -- the horizon of about 7 to 10 years. So that is based on, again, based on the past history that we have. Now, for example, if you have the hygiene consciousness enhancing significantly and people wanting to use more and more of cleansing products, okay, we probably will have to look at the CapEx very soon. So we're only wanting to wait and watch till end up this year to make a clear statement on that. But what is it -- we are well positioned, okay, to be able to participate in the demand growth that we -- if it turns out. So that's what we would like to comment.

Okay. And within Specialty Care, are we adding any more new product with the innovation what we are talking? So the product portfolio within the Specialty Care is increasing. And second thing, on U.S., we had acquired one facility for protein based, so any color on that?

Yes, yes. See, innovation is a continuous process in response to our -- the consumer trends and the market trends. Okay. So the innovation pipeline we'll have many products at various stages of development, okay? So -- and innovation happens both in India as well as the U.S. So the U.S. innovation is more specifically oriented towards the protein. There is the cosmetic proteins. Yes, yes, yes.

Correct. So are we seeing that -- I mean, that to ramp up, I mean, in...

Yes, yes, yes. There also continuous innovation happens. Continuous innovation happens. We have -- last year, for example, we put about 2 products -- 2 new products into the market, yes.

Okay. And how do we see this acceptability within because of -- from the U.S. customers?

Yes, yes, they have accepted well. But everything is what is called a horizon. Any product -- see, fortunately, for example, the Performance Surfactants -- if you look at our Performance Surfactants, these have had a horizon now 70 years continuing, okay? Whereas certain Specialty Products will have a horizon of 30 years, 40 years, 50 years. So the horizon -- we have long horizons as far as our industry is concerned, yes.

[Operator Instructions] The next question is from the line of Rohit Sinha from Emkay Global.

Just on in terms of would it be possible to share what kind of a market share we have in the domestic and globally during FY '20? And probably, in the last 3 months, how it has been moved?

Yes. So I think we obviously are -- we hold a significant share in terms of the India market. And globally, in certain -- we would not be able to say the same amount or global market of certain products. In some product categories, we hold a very major share. So -- and it has not changed in last quarter or what we see. Our objective is to keep growing our significant share that we already have in India and also enhance our share in the global market. That's...

Okay. For your information, we have -- we became market leaders in 1986. And since then, we have maintained, sustained and enhanced our market share in this country, in line with the growth of this country.

Okay, okay. And let's say, which are the new potential segments for our future growth looking at both our Performance segment and Speciality segment?

So as we've said, we, as a company, are -- have been driven by a mission with respect to improving the quality of life, on cleanliness, hygiene, wellness, beauty care, comfort. So the consumers are driven by the needs and trends with respect to safety and sustainability. So we have already talked about with respect to Specialty Care Products, our focus on mildness and mile surfactants and nontoxic preservatives, this will continue, okay, though there is a short term blip. On the Performance Surfactants, mostly they are oriented towards cleaning, hygiene, sanitation, washing, and they have taken a significant amount of uptick because of the situation that the world is going through. We see more and more consumers or consumers rightly focusing their attention on hygiene. I think the way the consumers have been bothered about not only their personal hygiene, but also hand hygiene because the hand hygiene was not a very important category or a significant category as it should be in India, okay? Now this has seen hand hygiene -- the emergence of hand hygiene started only about, let us say, 15 years back, in a significant way. And we have seen a really, really strong surge in this last 1 year, okay? And we hope this continues. And the same is the case with home hygiene. I think India, as a country, saw consciousness about home hygiene in a significant way. And when I say home hygiene, it could be toilet hygiene, it could be bathroom hygiene, it could be floor hygiene, it could be dish washing. These have seen a conscious emergence only in the last 15 years. And in the last 3 years, I would say, these categories, their base is small, have seen significant amount of growth. They have seen double-digit growth, high double-digit growth, high-teen growth what I would call.

Okay. So basically, we will remain in this home hygiene and personal care segment continuously. It's added new products or maybe some segments, you can say, which would be driving growth.

Yes, yes. Our focus always has been the home and personal care industry. And possibly, we are possibly the only company in our industry, both India and globally, who are totally focused on the HPC segment.

The next question is from the line of Nav Bhardwaj from Anand Rathi.

Congratulations on completing 4 decades, sir. Sir, just a short question on the gross margin part, at the cost of repetition, could you please explain us how much of it has been from the raw material part where you said that prices are supposed to remain soft for the next quarter or so, increase in prices due to product mix change or any new products that we put in? And how much of this would you say that it's artificially induced due to the current situation?

No, no. I don't think we'll be able to give you that breakup. But what is that there is a combination in terms of the way that we -- our portfolio change with regard to our Tier 1, Tier 2, Tier 3, the way it change between Specialty -- within Specialty and within Performance, okay, and the way we manage the raw material risk. So it's a combination. So what I would like to say is that it is -- that if the -- if there is no -- if you'll have this momentum continuing, things would be the same moving forward. But then yes, okay, there is nothing that we could say was something one-time that came in the last quarter. That I explained earlier when Sanjesh asked it.

Right. So we do feel that this is pretty much sustainable for the foreseeable future, at least?

Yes. So what happens is that in the -- so the degree may vary, but in terms of the composition, okay, we don't see that being significantly different, but the degree may vary. So if you see that there are -- it all depends on what sort of demand profile emerges for some of the Performance Surfactants, some of the Specialty Care Ingredients, how the portfolio churn happens, okay? That all depends on how the demand is going to emerge from the customer side, okay? So it'll be too premature for us to comment on that.

The next question is from the line of Abhijit Sinha from Pi Square Investments.

I just wanted to understand, sir, what is your view on the fatty acid prices going forward now?

Which prices?

Fatty acid prices now. Because obviously...

Fatty acid price would be -- these are all agri commodities linked, so as of now, they seem to be in a steady state, okay? But it all depends on how the supply side is going to be in terms of the yields, okay, of the palm and palm derivatives, okay? So the high-season months will start from now. How the production is going to be keeping up with the consumption is what is important. But our this thing is that it would continue to remain flat at these levels with sideways movement. That's the way we are seeing it.

Okay. And because in your presentation, sir, you've shown that the fatty acid prices have actually gone up since Q2 FY '20, over the last 2 quarters?

That is fatty alcohol, fatty alcohol.

Okay, okay. And sir, I just wanted to understand that the home care segment and the hand hygiene segment is a part of your Performance Surfactants segment, right?

Not everything. I think...

Some of it...

As far as hand hygiene is concerned, hand hygiene can have both Performance as well as Specialty.

Okay. So one is the anionic surfactants and the other would be, what else would be used, sir?

Some of the specialties could be some fatty acids, some betaines...

Preservatives.

Preservatives and so on.

Okay. So sir, how much would we say of the revenues will actually be coming in FY '20 that come from the home care segment or the hand hygiene segment?

No. That is something that we would not be able to comment now. Yes. We would not like to comment also.

Due to time constraints, we will take the last question from the line of Dhavan Shah from ICICI Securities.

So I have just 2 bookkeeping questions. So can you share the volume breakup for India business between Performance and Specialty for the quarterly and yearly numbers?

No. We wouldn't be able to do that. We wouldn't like to do that also, okay? Yes. On an overall basis, as we said, the volumes constituted by Performance is about 65% around, and Specialty is about 35%. And this will go -- this will keep going up and down year after year because we continue to invest. For us both of these legs are very, very critical and important because this is in terms of responding to the consumers and the market needs and the customer needs.

Okay. But can you share the revenue percentage number? I mean how much revenue came from the India business last quarter and the yearly numbers?

I think, again, as far as revenue is concerned, India is 35% of our overall revenues, India business.

Pure India, pure India.

Okay. And fatty alcohol prices, you mentioned in the Q3 FY '20 release that it was around $1,188 per tonne. So what was in the Q4?

See in Q4, again, what...

Q4 was, I think, $1,300 or what? Because it kept going up and down last year. So I think my guess was it was about $1,300 -- it was about, say, $1,150 to $1,250 sort of a range.

I now hand the conference over to Mr. Unnathan Shekhar for closing comments.

Thank you. Thank you, gentlemen. I think it has been a pleasure talking to you and answering your questions. Look forward to see you again, maybe 3 or 4 months hence. Yes. Thank you once again. Have a great day.

Thank you. Ladies and gentlemen, on behalf of Galaxy Surfactants Limited, that concludes this conference call for today. Thank you for joining us, and you may now disconnect your lines.