Galaxy Surfactants Limited (GALAXYSURF) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Galaxy Surfactants Limited Q4 and FY '21 Results Earnings Conference Call. This conference call may contain 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 afternoon to all of you. And welcome to this conference call for the year 2021. Ladies and gentlemen, Oxford Dictionary defines resilience as the capacity to recover quickly from difficulties or the ability of a substance to spring back into shape, elasticity. While the world may define 2021 as a year of pandemic and disruptions, at Galaxy, we would like to define the year as a year of resilience. The year which tested every aspect of our business, be it our people, operations, supply chain or demand. But despite all the challenges that persisted throughout the year, the performance has been exceptional. Exceptional, as at the start of the financial year, we had 1.5 months of complete shutdown. Multiple supply chain disruptions that persisted all through the year. Demand variability challenges with excess demand for Performance Surfactants and cut down in consumption of Specialty Care Products at different points. And finally, a pandemic to deal with, with varying intensity levels throughout the year. Against that, your company has delivered a volume growth of 5.3% and an EBITDA growth of 22.6%, a PAT growth of 31.1% and with a ROCE of 25.2%, an improvement of 170 basis points and a net operating cash generation of INR 365 crore. Our Performance Surfactants have registered a healthy 8.8% volume growth. And despite the disruptions in H1, Specialty Care Products have ended the year with a 1% decline in volumes. In H2, the demand for Performance Surfactants remained the same in absolute terms vis-à-vis H1, implying the structural uptick in demand whereas Specialty Care Products registered a 15.7% volume growth in H2 over H1 fiscal year 2021, thus arresting the decline seen in the first half. Now despite the shutdown in quarter 1, volumes in India have grown 11.2% versus previous year. AMET margin, which got its mojo back in quarter 2 FY '20, has not only sustained but also registered a healthy 8.2% volume growth for the year. Finally, the Rest of the World markets, which primarily are driven by Specialty Care Products, which saw a major decline of 16% in H1 versus previous year, have made a strong comeback in H2, registering a growth of 4%, overall ending the year with a 6.8% decline. So to summarize, ladies and gentlemen, if 2021 were an alphabet, we would like to call 2021 as the year of P -- 5P's; that is, the Pandemic and Pressures countered by Persevering People and Persistent Partnerships, which ensured we deliver a near Perfect Performance. Having said that, let me take this opportunity to thank every Galaxite who has made this possible, starting with our frontline warriors; our operators on the floor; operations and supply chain team members; business members who held fort when everything around them appeared hazy and turbulent; our support staff who, within days, adopted a completely new lifestyle of working from home, balancing both the needs of their families as well as that of Galaxy; and finally, our administration and CSR teams, the teams that ensured we continue functioning as well as helping our society throughout the year. But ladies and gentlemen, as they say, every battle has a price, the price one pays. And while the battle against the pandemic continues, I want to take this opportunity to remember our 8 Galaxites who lost their lives battling it. Losing a family member is not easy. And while no amount of monetary compensation can make up for human lives, your company has taken steps to support their families. We've introduced the COVID family care policy for all GSL employees to provide economic stability and financial security to the families of the employees who succumbed to COVID, a small step to ensure their families do not face any further disruptions or challenges on account of loss of income and continue leading their lives honorably. In this, the family will receive a monthly committed payment till the notional date of retirement of the employee, medical facilities, along with education support for their children, apart from the emotional support your company shall be extending at all points of time. Throughout the pandemic, your company has ensured that not a single rupee was spent by our people or their families for any COVID-19 related treatment. The entire cost was borne by our company. Apart from tying up our badge, your company has also decided to reimburse as well as organize a vaccination drive for all its employees. While the battle rages on, this is a battle which we all need to win, and your company will leave no stone unturned to come out victorious. Ladies and gentlemen, at Galaxy, we believe the next decade will be the decade of innovation, sustainability and digitization. While sustainability and innovation have been part of our core strategy for more than a decade now, the year 2021 saw us making strides in the digital arena. Your company has not only successfully adapted to the work-from-home culture but also enhanced its digital marketing presence through various channels. Right from customer interactions to multiple product application promotion campaigns, to new product launches, we are slowly but surely stepping up in the digital arena. The coming year should see your company enhancing its digital presence and reach further. While adaptability to the digital age was all about equipping ourselves for the future, building on the sustainability and innovation journey, which began years ago, today, has become a precursor for survival. In relation to that, Galaxy launched EcoSafe, a especially designed fatty alcohol ether sulfate with ultra-low 1,4-Dioxane levels to comply with the new U.S regulations aimed at protecting the environment. Galaxy also commercialized Galaxy Galguard LipoG, nontoxic, biodegradable, naturally-derived and safe preservative for beauty and personal care segments. These products shall form part of our environmental-friendly new age products basket. The 2020/'21 also saw your company releasing its 10th sustainability report. To celebrate the same, we organized the Galaxy of Sustenance event which not only highlighted the significant work done by your company in the field of sustainability, but also saw us taking up new targets for 2030. So ladies and gentlemen, it is the efforts of the last 10 years that have started to yield fruits now, slowly but steadily. In the last years, our Taloja plant was conferred with the CII Green Company rating. We achieved consistent progress in carbon disclosure projects, CDP 2020, with a score of Management Level B in CDP Climate Change compared with global average of C. We achieved a Management Level B- in CDP Water compared with global average of B and Leadership Level (sic) [ Management Level ] A- in supplier engagement compared with global average of C. We won the EcoVadis 2020 Gold Medal. Our M3 Tarapur site has been awarded as a winner for the Kaizen in the category waste elimination. We received certificate of appreciation from IMC Chamber of Commerce and Industry for becoming the first IMC certificate of origin member to release the online digitally signed certificate of origin. Our Jhagadia manufacturing plant got accredited with EFfCI GMP certification. Recently, as you would have seen on our social media platforms, your company's watershed management efforts across draught locations in India was recognized by the CII as an excellent effort towards ecosystem restoration. So to conclude, ladies and gentlemen, while the underlying strength of your company's business model has ensured we come out stronger, the year 2021/'22 will be all about consolidating and building on from here. The CapEx is planned for our Specialty portfolio, which have got delayed by further 6 months, we are confident of operationalizing the same by quarter 4 FY 2022. While the demand remains structurally robust, supply chain disruptions, normalization of demand as against the pent-up demand we saw in quarter 2 and quarter 3 FY '21, wave 3 and below average monsoons are the potential headwinds we see going ahead. While the long-term growth story remains intact, in the immediate short term, we remain very, very cautious. Thank you, ladies and gentlemen.

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

First of all, congratulations for the great effort on the green and sustainability. It's really nice to hear all those -- detail on them. Few question on the sustainability of the gross profit margin. This quarter, we did a gross profit margin of INR 45 per kg or INR 45,000 per tonne. And for the full year, it has been INR 42,600, whereas it was INR 39,000-something in last year. So how much of it is sustainable? And how much do you attribute -- are you benefited, say, from the inventory gain because of the sharp rise in the LA prices? And number two, how were the LA prices now? Have they started softening or they still remain high? That's my first question.

Yes. Sanjesh, so the gross margin essentially of last year, which you did talk about roughly around INR 40,000, INR 42,000 per tonne. You would -- essentially, you would also see in terms of there were -- I said now, there were some cost impact, they were much lower than which we explained even in the last quarter results. Okay. And then we also had certain onetime discount in terms of incentives that we received on the accrued basis -- on cash basis from -- in our Egypt unit. Okay. But with regard to the inventory gains that you spoke about, I think we have been able to manage the situation well. And moving forward, we only expect that things would stabilize. And we should see as to how we are able to maintain these contribution levels. And the mix also plays an important role. So it's a combination of a lot of factors. And given the current turbulent situation, we'd only wait -- we would like to wait for a few months to be able to make some clear comments on this. And with regard to the fatty alcohol prices, as against about $1,600 in the last quarter, they're at almost $2,200 to $2,300. And the international supply chain situation makes things a little bit more complex. But yes, we are managing the situation pretty well.

Great. Just 1 follow-up on the gross profit. But what should be a very sustainable basis? What do you think is a right number to look at? I'm not asking for 1 quarter or 2 quarter perspective, say, FY '22, '23, '24, what kind of gross profit...

To me, we have -- we always -- we last -- in the last call, we did guide for EBITDA this thing, we increased it to INR 16,000 to INR 18,000 per tonne. I think we would like to remain there. And the gross margins is the combination of various factors. So we'd like to stick to the INR 16,000 to INR 18,000 EBITDA per metric ton that we guided in the last call.

Got it. That's clear. Second question on the volume growth. It looks like India slowed down very sharply in this quarter. So we had a very great 2 quarters, double-digit growth. Now it's a mid-single digit. And RoW, again, we saw a recovery last quarter, but it looks like flattish, whereas I think Rest of the World is opening up. And I thought we will have a pent-up demand to benefit, should be that coming in the coming quarter? Have you seen any sign of the pent-up demand in the Rest of the World?

Yes. So I'll answer the first question in India volumes. So if you see overall India volumes, we have grown for the full year at about 11.2%, okay, which obviously is much ahead of what the -- our industry had a growth in the last full year. So this quarter-on-quarter variability typically happens because on -- the way the market responds in terms of stocking up. So I don't see that -- it's not indicative. The last quarter, India volume of about 5.8% that we grew is nothing indicative of the way the market is panning out. So overall, we have grown by 11%, which is pretty good. In fact, if you see quarter 3, we grew pretty significantly. So it's all a question of how the pipeline inventories get managed by customers. Now with regard to the Rest of the World numbers, last quarter, we did see the impact in terms of global supply chain. So you would see that the entire supply chain was impacted first in terms of the availability of space on shipping -- on ships, okay, given that the entire logistics industry is going from worse -- going from bad to worse month after month. And then what further complicated this situation was the lock jam in the Suez canal, which also delayed certain of our shipments, okay. So we do see things getting resolved and coming back. So although the international logistics situation remains still challenging, but I think it is much better than the situation we had when the Suez Canal situation of almost 15 days ended up messing up with the supply chain, international logistics. It still continues to give us some sleepless nights, okay, but we are managing it pretty well. So if no further headwinds coming in terms of logistics situation, I think we expect things to come back in the Rest of the World in terms of better movement of material.

Okay. So you're telling logistic was a reason why we did not see the revival, but from the next quarter onwards, that should be visible, right?

We should see that getting better.

We should see that getting better. That's great. And the last question before -- I have a few more, but I will come back in the queue. The last question from my side is on the CapEx. What is the CapEx plan for FY '22? And what are the products we are looking to expand in the FY '22 or commercialize in FY'22?

So Sanjesh, I think our CapExes have certainly got impacted. We were almost done and the second wave hit. So in a way, it has set us back. So I think there is a further delay of something like 5 to 6 months because of this second wave. So hopefully, we would like to complete all the projects that we had begun about 2 years back in the next 6 months. And so I think our CapEx, if you see, has been -- we have always had a desire to incur something like INR 150 crores every year. And so this year also, I think, all goes well, we should be able to complete our CapExes and incur that CapEx of INR 150 crores.

Okay. So this year, INR 150 crores should be. Because last year, I think we did somewhere around INR 100 crore. FY '22, we...

We couldn't spend it so the expenditure was around whatever you said.

Other thing, Sanjesh, is although we are ready in terms of all our plans, but then the availability of the project manpower is becoming very critical. So that's something is what is slowing things down. Otherwise, we have a lot of plans in place.

But is our growth anyways hurt by this CapEx delay in any product you are...

Yes, yes, yes. Certainly, yes. I think if something gets delayed, it certainly impacts our introductions.

Okay. So that means our introductions and the volume should be better with this CapEx execution, say, from the second half, right?

Yes.

Yes.

Yes.

[Operator Instructions] The next question is from the line of Nishant Chaudhary (sic) [ Naushad Chaudhary ] from Systematix.

This is Naushad Chaudhary. Two clarifications, sir. First, on the raw material side, there is a sharp increase in the raw material prices and I think most of our clients are also suffering in terms of demand. So just wanted to understand what are the challenges are we facing in terms of passing on this because there's a sharp jump? And I believe we have month-on-month passing on prices, but looking at the kind of condition our clients are having, what kind of challenges are we facing in terms of passing on this to clients?

Yes. So obviously, there is a graded way in which prices are adjusted into the market. And we are doing that on the -- ensuring that we are able to get the price increases, which is -- but then the demand situation is what is critical. So the way I look at it is that if the demand situation continues to be robust, it -- combined with high commodity prices, it makes the job easier. If the -- we only hope that the demand situation doesn't get impacted because of the -- if that happens, and then the commodity price continues to remain high, that will be a different challenge that we need to face, but we are cautiously optimistic that the demand situation will continue to remain robust. And that would enable us to be in a better position to be able to pass on the price increases on the raw material front.

Does it impact in terms of volume offtake as well if it continues the similar kind of raw material prices for next 1, 2 quarters?

It all -- see, finally, it all depends on how the consumer demand pans out in the market. So if the consumer demand doesn't get impacted because of the amount of money that they're able to have in their hands to spend on these items, we don't see an issue. So the -- our demand is of the derivative, how the consumer demand pans out. So as of now, we're not able to see any clear direction. We only see things are into a steady state. We only -- we need to wait for next 2 or 3 months to understand post this COVID wave that has happened, how the demand has come back. Like the same situation was last year as well. Like same time last year, we were also pretty uncertain about how the demand is going to pan out, and it panned out well. So we do hope that the same situation repeats, and then we'll be in a better position to manage the raw material volatility.

Understood. One more clarification. If I see the working capital cycle, sir, despite sharp jump in the raw material prices, we have been able to manage our working capital quite well, in terms of inventory days as well. So just wanted to check, are we carrying our inventory lesser than what we used to carry, let's say, 2, 3 quarters back?

Yes. In fact, if you see one of the -- we would -- if you ask us, the way the uncertainty in the international logistics situation is, we would like to actually keep our inventory levels up. One of the reasons why it was lower was because our ability to stock up was impacted because of the international logistics situation that was there. So ideally, yes, we would need to be better prepared because that would give us a good opportunity to partake in the sort of growth that we expect moving forward, okay. Our ability to cater to pent-up demand is directly proportional to our ability to build up inventories. So ideally, we would like to build up inventories to be able to cater to the sort of growth that we expect moving forward.

Actually, I was asking, are we having a lesser inventory compared to previous ones because that doesn't see -- reflect in the working capital cycle? So technically, if we are having higher inventories compared to previous...

No, no, we would like to build. We didn't -- we couldn't build inventory as well as we wanted to. That's what I was saying. So we would like to, moving forward, build that. So what you see as a lower inventory level is not something that is ideal for us. So we would now focus in terms of how are we able to build up the inventory to the most optimum level so that we don't miss out on partaking in the demand growth that we foresee.

The next question is from the line of Rohan Gupta from Edelweiss.

Congratulations on such an improvement -- improved performance in a tough year, sir. Sir, 3 to 4 questions from my side, sir. Sir, first is on our EBITDA per tonne improvement or more specifically the gross margin per tonne, which has improved significantly and probably in the current quarter, as per our numbers, sitting at almost INR 45,000 per tonne. So there has been a significant improvement there. And, sir, this time, we have seen this improvement has happened without much change in the product mix because the Specialty Products still remain on a lower side only. So in the last 3 years, we have seen that -- or probably the last time when the sharp improvement in margin has happened, it was mainly driven by the product mix change. But this time, I think it has mainly improved from the surfactants business itself. So just wanted to understand that has there been any significant changes in surfactants business has happened? Or it is just only because of the higher price increase and raw material price-driven rally which has benefited to you and maybe going forward, margin per tonne, they will -- may come down slowly?

Yes. See, margins per tonne will start tempering because we have started moving into a higher upcycle in terms commodity prices, okay. And then the margin per kilo also gets -- within Performance products in terms of what sort of the mix also makes a difference within the Performance Surfactants, okay. So that's also a very contributing factor. And the expenses also, okay. There is inflationary pressure. And then we do see that expense also would start going up. So we do see that to some extent, reasonable extent, the margins can get tempered moving forward. And I think that...

Also, I think an important factor last year was this one-off export realizations in Egypt, okay? So we had those cash payouts on export benefits last year, which belong to the previous years.

Right. So that you said that have benefited last year, but will not happen going forward?

Yes. Rohan, as we had said in the last call, we increased our guidance on our EBITDA per metric ton to INR 16,000 to INR 18,000 per tonnes. And then we would like to stick to that, and we see that, that's something that should be realistically possible. The gross margin variability, notwithstanding, okay, this is the range in which our EBITDA per metric ton would be, INR 16,000 to INR 18,000 per metric ton.

Right, sir. Exactly. So that's the question I was coming, that INR 16,000 to INR 18,000 range, which we have shared, and we are already doing almost more than INR 19,000 per tonne -- have done last year -- more than in the last year. So I think that there may be -- sir, as you also rightly mentioned, there may be some tampering off may happen in per tonne margin in coming years. And we must...

Yes. So as Shekhar said, we are cautiously optimistic. That's the way I'd like to put it.

Got it, sir. Sir, do you see that there is any structural change in the surfactant business has happened with the -- this rising prices or raw material prices rally with the fatty alcohol prices have almost doubled in the last year? Do you see that maybe some change may happen from -- towards the LABSA and/or the lower end of the product category can see some growth and that may affect our margin profile?

See, now everything is going up. If you see there's no commodity, there's not going much. Even LABSA prices have gone up significantly, okay. And alcohol also has gone up. So only when they start decoupling, that's when the issue would emerge, okay? But I don't see that happening at least in the next 9 to 12 months, okay? Because even LABSA is at a very high price today, okay, and fatty alcohol. So we do expect that this particular trend would continue, and we don't see that as a headwind. But obviously, you never know as to how these markets behave. So with the way things are today, we don't see an issue on that front.

But one important...

Sir, the LABSA is still achieved?

One important structural change which has happened is the increase in washing habits and cleaning habits of people across the world, okay? So which has -- which is an important structural change.

Which augurs well for us.

Yes.

Right, sir. Right, right. No, sir, that crude still has gone to the previous level and maybe slightly higher than the earlier level of $50 to $60, now it's roughly $70 range. But definitely, fatty alcohol, which used to be almost $1,000 to $1,200 is now $2,000 to $2,200 range. We don't know how long it will remain there. So that's what I was just trying to understand that -- definitely that all the commodities have gone up. But maybe in the fatty alcohol and in this kind of scenario, the prices there have gone up more. So can there be some short-term shift may happen towards the crude-based derivative and crude-based products?

No, no. But our products also get used because they also deliver superior performance into the formulation. So that need not exactly be the only reason. So only if there's a significant deviation between the prices, that can happen. Otherwise, we don't see that as an issue.

Right. Sir, our Specialty Product has been hit because of the restrictions in global travel and in the pandemic year. Do you see that with the opening up of the global economies over next 6 months to 1 year that we may add significantly or our Specialty Product market can give us significant volume growth over the next 2 years -- 2, 3 years once the -- when the global markets open up?

Yes, we are very, very optimistic about it. And that's why we have built the various CapExes in our various factories.

Right. Even sir, I understand that roughly INR 50 crores which we keep on -- we are talking about almost annual CapEx, a large part of that because in surfactants, we already have, I mean, significant capacity. So a large part of this CapEx is going on Specialty Products only, right?

Yes, I think as of now, yes.

Okay. And sir, what will be the utilization level of our surfactants right now? And when you see that with the current growth profile, we need to go for the additional CapEx for surfactants?

So we are currently at about 65% to 68%, okay? And typically, we keep reviewing on product-wise basis what sort of CapEx we need to be ready with and we are planning to -- for the future. So that will keep happening. We already have some discussions in the drawing board, but that will keep happening, depending on how we see the demand panning out and how we need to prepare.

The next question is from the line of Bhargav Buddhadev from Kotak Securities (sic) [ Kotak Mutual Fund ].

This is Bhargav from Kotak Mutual Fund. Sir, is it possible to share the mix of Specialty business in the India piece of revenue and the overseas piece of revenue?

Yes. So, essentially, your Specialty is a big portion of Rest of the World market, okay? And within India, probably it can be about -- of our India business, it will be about at 15%.

15%, okay. And essentially, the growth would be coming primarily from the Rest of the World piece, right, as far as the Specialty business is concerned?

No, no, no,. I think as a matter of fact these -- all these specialty products are in line with the progressive trends which are happening, okay? so -- and that's how the various specialty products are growing in importance, both in our portfolio as well as in the consumption portfolio of customers. So the time difference, of course, will be there. I think the growth will be led by the western countries, U.S., America and Japan, and it will be followed by the various other economies like China, India and so on.

And as far as the quality of growth is concerned in India and China given the underpenetration, how different would be the realizations in India compared to overseas in your Specialty portfolio? Would it be a very big number? Or would it be a small number?

See, as we said, when we talk about Performance Surfactants, our sales are always in the nearby geographies of the country where we have our manufacturing situated. Whereas Specialities, whatever we produce here goes to all the parts of the word. So if you look at our Performance Surfactants, the manufacturing facilities are in India as well as in Egypt, and the majority of Performance Surfactants sales happens in the geographies or the countries which are around India as well as Egypt, whereas Specialties goes whatever is -- whatever gets produced, whether it is in India or Egypt, goes across the world to various parts of the world, various countries.

Sure. So is that the reason why the margins in the stand-alone business are higher as compared to your subsidiaries because the manufacturing margins are captured in the stand-alone business?

No, no. It also depends upon the product mix. See the product mixes will be different in India versus the product mix in Egypt versus the product mix in U.S., okay? The product mixes will be different in different countries.

Sure. And lastly, I mean, you mentioned that there was a lower exports incentive booked in the current quarter as compared to the same quarter last year. So is it that it got accrued and you did not capture it? Or how should we look into it?

No, that is to do with India export incentives. I think if you see the Indian government has held back.

See, the MEIS scheme, they capped it at INR 2 crores at December and subsequently, nothing was available. So in India, we used to have the incentives done on accrual basis, which we stopped accruing based on what the government announced.

So that is a cut back on incentives announced by the Indian government.

Okay. So as and when it gets again reinstated and we receive the cash, we might start booking it?

We'll get started.

Yes.

So that will be under the new scheme called RoDTEP. So they have to announce the rates.

Next question is from the line of Kapil Agrawal from Itus Capital.

This is Kapil from Itus Capital. I have 2 questions. The first one is...

Can you talk louder, please? It will be nice.

So could you give us a rough volume split between the synthetic versus the biodegradable surfactants? And could you give us the margins you make on both? And if they are any different? Also, where do you see the potential of the oleo-based surfactants growing?

See, the oleo-based surfactants, we make only oleo-based surfactants, okay? The -- if you look at globally, the oleo-based surfactants are exclusively and fully used in all personal care and a large part of hand wash products. However, the fabric wash uses both petro as well as oleo. And in terms of, particularly, premium products, premium fabric washers, I think there is an increasing trend in terms of using oleo-based surfactants in line with the desires and goals of sustainability by all the manufacturers across the world. So this is an important trend which is happening, but it will be progressive and gradual and evolutional.

Yes. Is it fair to assume that if the oleo is growing, it will eat out the synthetic surfactants in terms of volume?

Can you repeat? It will eat out what?

Synthetic.

Is it fair to assume that if the oleo portion of the surfactants is growing at a larger pace, will it eat out the share of the synthetic surfactants that you provide?

But that will be very, very gradual. See, as you say -- I mean it will possibly replace the synthetic surfactants in developed economies, but not so in developing markets.

Okay. I have one last question. Regarding the Rest of the World, the -- your volumes degrew by 6.8% in FY '21. Where do you see the bottlenecks coming from in terms of regions for growth?

I think this has been primarily because of the COVID situation, okay? See, as you know, the securer growth rate of the personal home care industry at a global level has been about 2% to 3%, okay? And this will be the growth level over the next even 5 to 10 years or so. But because of COVID, the growth rate has been severely impacted. So we would expect that this growth rate will come back once the world is fully vaccinated, which could happen possibly -- which could take maybe another about 10 to 12 months or so. So we would see certainly an impact because of COVID in terms of consumption of all these products, maybe for the next 12 months, but we believe that it will come back with a vengeance once this period is over.

[Operator Instructions] The next question is from the line of [ Parthiv Jhonsa ] from NVS Brokerage Private Limited.

Yes. I just wanted to check, with one of the previous participants, you rightly pointed out that your volume would be, say, 2x or 3x in the next couple of years, right?

2x, 3x of what?

Your volume growth?

No, 2x -- we didn't say that. We never said that.

Okay. So it might be my misunderstanding. Okay. I just wanted to check over, say, next 2 to 3 years, sir, what kind of volume growth and the top line growth which your company can expect?

We have already said that we would aspire to grow at the higher end of 6% to 8% volume growth that we have been talking of, okay? So this year, for example, we grew by 5.2%. [indiscernible] we grew by about 7% or so, okay? So we would aspire to grow at the higher end of 6% to 8%.

Okay. And what kind of margins would you expect in say over the next 2 to 3 years? It will be the same range?

We have said [indiscernible] EBITDA, then you could -- you should look at EBITDA of INR 16,000 to INR 18,000 per metric ton.

Per metric ton.

Yes. Yes.

[Operator Instructions] The next question is from the line of [ Bhuvan ] from HDFC Fund.

If I look at the full year numbers, and if I deduct the stand-alone from the consol numbers and look at the EBITDA margins in the ex stand-alone business, they have improved significantly, even if I adjust for the onetime benefit that you might have got in Egypt, I believe, in Q3 that you got. So they have improved significantly. And this is a consistent trend that we see for the last few quarters. So sir, anything that you can highlight what's helping -- what's happening there structurally? And what's changing in the business profile there for us to better understand how things are moving?

See, if you see, this year, the subsidiaries have done pretty well, okay, both Egypt and...

U.S.

Tri-K U.S. have done pretty well this year, and we are certainly optimistic going forward. Other important thing, which is structurally happening in the business, is a progressive increase of the specialty portfolio in the overall context, okay? So -- which is, of course, driven by our innovations, whether it is on nontoxic preservation or on mild surfactants or vegetable proteins. So these are the various platforms which reflect the consumer trends as the world evolves and progresses. And this has got a -- certainly a significant amount of flip in this COVID year, where people have realized that the attention to personal as well as social hygiene is extremely critical and important. So we see that these trends driving the consumption and growth for the personal home care industry as we go forward.

Sure, sir. Sir, just one thing on this, if I understand it correctly. Large part of the specialty portfolio that you sell is produced in India. Egypt, if I'm not wrong, is LABSA? And I believe the U.S. has some speciality business?

Egypt also will have -- has started producing specialties, and we will continue to grow on producing specialties, even Egypt also will do that. But yes, til date, it has been predominantly the Performance Surfactants, yes.

Got it. So sir, that is what I was aiming to understand, the ex subsidiaries have done well. So I believe this is not large, I mean primarily to do due to the specialty because that gets reflected in the stand-alone business. So the ex stand-alone is doing -- is also doing very well. I mean stand-alone anyways is doing well.

So Tri-K is entirely specialty and our U.S. operations, okay -- very largely specialty, okay? No, it's not entirely. And Egypt, the percentage of the specialty portfolio has been increasing year-on-year. Last year...

And fortunately, both Egypt and U.S. didn't have any lockdowns. So their operations fortunately were not significantly impacted at all unlike India. See, we can say our Indian operations, you can take it as a 10-month operation. I mean we could -- we didn't run 12 months at all. So we ran, in a way, only for 9.5 or 10 months as far as the last year is concerned.

Sure. Because in that context, so if -- despite the Indian operations running at only, say, for the 10 months, your EBITDA per tonne or gross margin per tonne or the overall performance has been significantly better.

Yes, that is because of the product mix, as we said. If you strictly compare between the various subsidiaries, then India's product basket has a wider variety.

And other thing we had said earlier also in Egypt, there was this accrued incentives, which we got on cash basis last year.

That I have adjusted in my numbers, even existing. So the point is that...

So India, your gross margin or EBITDA would be a reflection of the product mix that it has.

So sir the point is, if I add back, say, for example, for the 2 months impact in India and for the INR 15 crores impact, which you had one-off in this quarter, if I add back, the numbers would have been -- for the full year would have been much better. In that context, probably the EBITDA per kg would -- had been somewhere around INR 20 or odd. In that context, your guidance of INR 16,000 to INR 18,000 looks conservative. So that is what I was trying to get to.

[Foreign Language] All of us would wish that it goes up, and we would also wish that it goes up.

Yes. So we -- so last year, there was a significant jump. So we would want to. But then, yes, the external scenario needs to be cooperative. And then yes, our aim is to better it, but then we would like to guide at INR 16,000 to INR 18,000 per tonne as we did in the last call.

Okay. So the risk to this number, I mean your reason for lower guidance is primarily because of the RM situation and how that pans out will ultimately drive the overall thing. I mean that is what I understand correctly? I mean if the RM continues to be very high and demand does not pan out, in that sense, there could be some impact on margins. And that is why on a conservative basis, you're guiding for a relatively lower number?

It is also because -- see, as we have said, we will grow on both the categories, both Performance Surfactants and Specialty. And we have always reiterated that the gross margins or the EBITDA per tonne on specialties are higher. But we would not like to lose on the volume growth of Performance Surfactants in the various geographies that we operate.

Sure, sir. I'm anyways not -- I mean building in any change in mix, assuming the mix remains same as it was in, say, in FY '21. So even if that -- even in that context, your guidance of INR 16,000 to INR 18,000 looks low, that's the overall...

Yes, we would also like it to go up. And our -- always our striving is to ensure that we raise it.

The next question is from the line of [ Saket Kapur ] from [ Kapur and Company ].

Sir, of late, correct me, sir. Clariant Chemical has also entered into a JV with an Indian listed company for taking over their ethylene oxide derivative unit. So are they in line being a competitor to us? And what is their target market where we also operate, if you could throw some light on that?

I think you're referring to India Glycols?

Yes, sir. Yes, right.

India Glycols has largely been only in glycols and certain nonionics. I don't think they have been in other categories of surfactants. So we haven't come across India Glycols as a competitor til date over the last, say, 20, 25 years or so.

Okay, sir. So they are in no direct competition with us as of now.

We haven't come across them, yes, in the last 20, 25 years.

The next question is from the line of Sanjesh Jain then ICICI Securities.

Just 1 follow-up from my side. On the blast which happened in the Tarapur, you were supposed to receive certain insurance amount. I just wanted to check where are we? And what is the expected amount from that?

We have received the amount of the claims, about INR 70 lakhs.

Okay, INR 70 lakhs. And this -- the write-down of INR 7.2 crore, which we did, can you explain the rationale and what led to that write down?

Yes. See, this is a very old plant. It was set up in 1984 in Tarapur, and it's almost 35 years old. The civil structures, everything was reviewed. And our evaluation said that this needs to be completely -- you can't even refurbish. You need to actually take it down and build a new one. So that's why we said we should take the impairment and provide for it. That's what we did.

The next question is from the line of Rohan Gupta from Edelweiss.

Sir, can you give a breakup of -- for the full year in '21 of T1, T2, T3 customers, sir?

Yes, it is about 53% T1, about -- tier 2 was about 13%, tier 3 was about 34%.

Tier 3 was 34%, sir?

Yes.

Okay. Sir, with the changing customer habit and probably the MNCs probably have seen a higher market share gain in a pandemic year and some locals probably would have lost some market share. So do you see that there's any change in mix over next 1 to 2 years once this market is stabilized -- or we see that the market opens again or the things normalizes?

So we would see the disruption during this period, wherever -- whenever this COVID impact is there. So -- but everything will come back to normalcy once every -- the situation or COVID is totally vanishes from the world. And that could happen in the next, let us say, 15 months or so. Then we would see, I think, every single parameter or metrics coming back to as before.

Okay. Sir, on the Specialty Products portfolio, sir, I think that is roughly now 35% kind of volumes coming from there. How do you see that this specialty volumes, though you guided for total volume growth of close to 6% to 8%, and we like to remain in a higher range of that? I'm sir -- we want to -- specifically on the Specialty Products volume growth, how do you see that over the next 2 to 3 years?

I think they will fall within this particular range -- overall range, okay? Overall range, certainly, I think the absorption of Specialty Products is progressively increasing across -- particularly in developed markets, and even in India. So we would -- overall, the volume growth, as we said, will be in the 6% to 8% range.

Because the -- some of the Specialty Products are all low volume, high-end products. So you -- it will be very difficult for us to put a number because it's a combination of various Specialty Products, okay? So overall, 6% to 8% will be the right number to be looking at.

Okay. Because, sir, in last 3 years, if you look at the CAGR, then definitely, the volume growth would have been in lower range of this, but we have seen a significant improvement in EBITDA and EBITDA growth has been much higher than the volume growth because of continuous improvement in margins. So if we are looking at that margins may either taper off or may remain at best at current level over the next 2 years to 3 years, then probably the growth only will be chasing -- we'll be only chasing the volume-led growth. And if that remains the only 6% to 8%, then probably we may see a lower bottom line growth for next 2 to 3 years. That's what my concern was.

Yes. So first of all, we also need to be looking actually the good amount of new-age Specialty Products that we have launched. So last 1 year, we have some customers cutting back in terms of the, what you say, development activities. So -- and we are also -- even our project has got pushed. So we do have huge optimism in terms of our new Specialty Products that we have introduced. And we need to wait for some time for us to make some clear statements on this front. But yes, we are ensuring that we are growing on both legs of our business, that is both Performance and Specialty, and our innovation efforts are well-structured and well in place to be able to partake in the opportunity that we see in the market.

With a sharp rise in raw material prices and -- which are continuously rising, have we been able to take all the price increases to the end product or there has been some hit on the -- and we have not been able to completely take on all the price increase?

No, no, we've been -- we -- obviously, we have been -- it's been a significant increase. So yes, on a continuous basis, the prices are being adjusted to reflect the higher raw material price. So even if the prices go down, you do it in a calibrated manner, okay? Same way when the prices start going up, you keep doing it in a calibrated manner, and things are getting adjusted. But as I said, if you see, the challenge can only get much more difficult, okay, if you have the demand getting impacted and the commodity prices continue to remain high. Then yes, obviously, it's a very clear listing that absorption of the increased prices will be problematic stuff. But we don't foresee that happening at least as of now.

And you see, sir, that Unilever and Colgate and all our customers have reflected this price increase, raw material prices, which we are taking price increase, as they have reflected that in their end products. I mean all the detergents and soaps and toothpastes, all the prices have gone up in the same rate to -- for them to pass on the cost increase or they have been hitting hard on the margins?

Not that I have -- I know anything about what they do. But then based on whatever I have heard in their press statements, what it tells me is that they also realize there is an issue, but they have said like Hindustan Unilever, Sanjiv Mehta has very clearly said that we will take up the prices in a cautious manner. But what is important for us is to ensure that we have the volume growth happening. So I think it's not an easy question to answer, but yes, as he said -- what he said was he will take a judicious price increase. So that's what they're doing.

The next question is from the line of [ Ritesh Sharma ] from [ White Spike ].

I just want to understand like capital work in progress. As compared to last year, this year has gone almost double. When this project is likely to be complete and what will be the benefits to the top line and bottom line?

We are optimistic that we should be able to complete 2 projects in Tarapur and Jhagadia, which we started about 2 years back in another 4 to 5 months or so. And we are optimistic and hopeful that we should be able to have the benefit of this from -- in the quarter 4 of this coming year '21/'22. So they have -- they are projects which we are eagerly waiting for it and our customers are eagerly waiting for it. And they would be a very important contributor in terms of Galaxy's growth over the next few years or so.

I just would like to understand like what sort of turnover it will add to top line on bottom lines?

See, I mean, as we said, our capital turnover ratio is in the region of, let us say 3 to 3.5, okay? And that happens over a period of, let us say, 4 to 6 years or so. So we would see a progressive growth and increase as far as the turnover is concerned coming from these particular CapExes over the next few years.

The next question is from the line of [ Ritesh Seth ] from Crystal Investment Advisors.

I've tuned in a little late to the call, and I don't know if I've missed out some of the initial strategic comments that you might have made. What I want to understand is in terms of our relative, what should I say, wallet share with some of our key customers and for the space or for the segments that we are suppliers to them, how much of the opportunity is penetrated and how much more remains? Do we have a 5, 10-year growth runway to keep expanding? And are we moving in that direction? What is the evidence over the experience of your last year? If you were to look at, say, 5 or 10 of your top customers, how much more of wallet share is available to us to capture? What's the opportunity penetration like?

See, if you look at -- one of the key things about Galaxy is that we have had very, very nonabiding and sustainable relationship with our customers. Our relationship with customers is anywhere from 10 to 40 years in line with when we started our relationship with them. And we have continuously grown with each of our customers. We have grown across various categories. We have grown across various product baskets. So we have continuously increased our wallet share with each of our customers in their various geographies and in their various categories. So -- and when we talk about the increase in the wallet share, the trigger for this is not only the customers' growth, but also the consumer trends which determines the emergence of new age requirements which drive our innovations. So the change in consumer trends brings an opportunity to us in terms of innovating new products, which also enables us to increase the wallet share with our customers. So this is a continuing phenomenon. And as we see, there is -- in terms of overall global growth rate -- global growth rate has been about 2% to 3% of an industry, which is collectively at about $600 billion. There is a huge headroom available for growth, particularly in emerging markets like India and Africa and the Middle East and which Galaxy is very well positioned to be able to leverage and capitalize.

Yes. So as an analyst of your business, the thing that is most important for me, if I want to be a 5-year or a 10-year shareholder, is not just whether you grow in line with the trends that your customers are encountering in the market, whether volume growth or whether even new product rollouts, but whether you are capturing a bigger and bigger part of their addressable opportunity that they open up to you. And so definitely, is it fair to assume that there are some people like you who are losing out because of your faster growth?

So we have always said that, how you -- how we evaluate ourselves is how well we grow ahead of the market, okay? So we have always grown ahead of the market in the various geographies that we operate on. And this has been a question which has come up and which we have answered and replied in every single conference call, where way we have grown ahead of the market in the various geographies that we operate in.

So that's what is attractive, sir. I don't want to labor the point, but you've done it so long. Is there still a runway for doing this for another decade? That's the thing. And if there is, that's very heartening.

Yes, yes. We do see that happening, okay? And then we -- the way we increase wallet share is in terms of -- one is the organic growth that happens, second is in terms of getting into more countries and regions where we are not present and other is expanding the product -- the basket itself with the customer. Because customer doesn't offer every product that he buys, okay? So it is a constant progression that happens. And we need to keep proving ourselves in our ability to be able to service them well across location. So it is a product bucket expansion that will happen in terms of penetration, it will be geographical expansion that will happen. And also in terms of new products that we'll offer, plus the changing trends in terms of reformulations, all that also will present their own set of opportunities for us. So that's why it's important that -- when Shekhar said the relationship, only relation we ensure that we are always on top of their mind, in -- whenever the -- any requirements, anything they want to be doing across certain geographies or enhance the products basket with us, okay, we are the top of the mind supplier and that is very important, and that's what we are good at doing. And we'll continue doing that.

Sir, shall we take one last question?

Yes.

Okay. The last question is from the line of [ Deepak Thakkar ].

First of all, really, I appreciate and congratulate you, sir, and the entire team of our company to give such a wonderful result. And you also said nicely that about 5P's how is resilience in even pandemic. Sir, my 1 -- first question is about -- in pandemic, the government has given this PLI schemes. So how much benefit we are able to take it of this scheme? And now the world economies are looking at the country other than next to China, so how much we are able to take advantage of this situation, sir?

Yes. So the first is with regard to our industry, the government has not yet announced any PLI scheme. So the government is looking at various sectors. Our sector has not been -- there's no framework that has been set under the PLI scheme. That's the first. As the government announces, okay, we'll let you all the eligibility comes in and what we would need to do. With your second question, on the China plus 1 factor, we -- right now, in our segment, it's more in terms of -- we actually export into China even today, okay? So the question of sudden demand that is currently carried to by China and now we can push in ourselves against that, okay? We are seeing as to what opportunities can emerge. We are evaluating it. But as of now, there are no clear statements that we are able to make.

I see. And one, maybe you can call it as suggestion or your plans, I would like to know. We are already completing 35 years. We are in the almost fourth year going to the public and we shareholders would request you to come out with the split or the bonus shares. Dividend you are already increasing.

Thank you.

Thank you. Noted.

We appreciate your -- and appreciate and note your suggestion.

That was the last question. I would now like to hand the conference over to Mr. Unnathan Shekhar for closing commons.

Yes. So ladies and gentlemen, thank you for attending this conference call. And I wish you all the best. Please stay safe. And til we meet again, take care.

Thank you. Thank you all.

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