Galaxy Surfactants Limited (GALAXYSURF) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to Galaxy Surfactants Limited Q2 and H1 FY '24 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 over the call to Mr. Unnathan Shekhar, promoter and Managing Director. Thank you. And over to you, sir.

A very good morning, all of you, ladies and gentlemen. Thank you all for joining this conference call on eve of Diwali. And it gives me immense pleasure to welcome you all once again for this Q2 and H1 conference call of the year '23-'24. And on this prosperous occasion of Diwali, I take this opportunity to wish you and your family a very bright, happy and prosperous Diwali. Ladies and gentlemen, it is said that we do not learn from experience. We learn from reflecting on experience. This simple yet powerful quote by American philosopher, John Dewey, shows us the value of reflecting and learning from our actions and words. Keeping the same in mind, today's call will be more about reflecting on what had been stated previously, how we have performed vis-à-vis that and where do we see ourselves in the quarters going ahead. In our Q1 FY 2024 con call, we had stated that volume growth remains the key prerogative. We are pleased to share with you that, for Q2, the volume growth clocked by your company stood at 9.8%. And for H1, the same stood at 8.6%, exceeding the upper range of 6% to 8% band guided at the start of the year. Going ahead, we remain confident of achieving the upper range of our guidance. Reflecting from that. The past 24 months for us has been a story of 2 worlds, one driven by India where growth, stability and momentum has only improved quarter-on-quarter; and the other driven by the world excluding India, where decline, volatility and macro, micro deterioration has been the norm. But today, after 10 quarters, this is the first quarter where we have seen across-the-board volume growth for all our segments and regions, not only year-on-year but also sequentially. This is a very positive sign. While India continues to remain a bright spot for us, registering double-digit volume growth in Q2 as well as for H1, the overall move from low single-digit volume growth seen last year to double digit for this quarter has been due to the improved performance seen in Africa, Middle East and Turkey and the rest of the world markets. Understanding the nuances of these geographies and reflecting on our performance will be critical to gauge the performance going ahead. Starting with India. We remain extremely confident on the India growth story. We are on the cusp of something special. While monsoons, crude, moderation in demand and inflation may act as temporary blips, over the longer term, we believe that double-digit growth story remains intact. Africa, Middle East and Turkey made a strong comeback in this quarter, clocking high single-digit growth in volumes. This was primarily due to the uptick seen in our Egypt market. While other markets, excluding Egypt, also grew in Q2, for H1, the same remained flat. With consumers adjusting to the new normal, volatility subsiding, barring any adverse effects of the war or macro headwinds, we do believe the second half will be better than the first. The rest of the world markets, which comprise of Americas, Europe and Asia Pacific, having a story of the developed versus the developing world. While the developed markets have been plagued by inflation, slowing growth and consumption, the developing markets of Asia Pacific and Latin America, with easing inflation and improving macros, have made a strong comeback in this quarter, thus enabling the rest of the world in clocking a low single-digit volume growth for this quarter. While sequentially, barring for Europe which remained flat, every region has grown, which is a strong positive for us. For H1, the overall rest of the world volumes remained flat. Going ahead, we believe, given the sequential improvement we are seeing, growth should make a strong comeback in 2024 in these markets. Moving on to the composition of growth, which has a significant bearing on the EBITDA per metric ton. The EBITDA per metric ton, despite clocking 8.6% worth of volume growth for H1, stood at INR 23,700 per metric ton. For the quarter, the same stood at INR 19,593 per metric ton. Compared to H1 FY '23, while it shows a decline which would even persist in H2, we believe the band of INR 19,500 to INR 20,500 per metric ton should hold for FY '24. What is important also for you to note is that, sequentially from quarter 1 to quarter 2, we have grown on volumes and as well as the EBITDA. Yes. While the significant uptick seen in performance affected volumes and masstige specialties has enabled us to exceed our volume guidance, uptick in premium specialties remains a critical requirement for improving our overall EBITDA per metric ton. We do see the situation improving in 2024, thus driving the EBITDA per metric ton going ahead. To conclude. Ladies and gentlemen, businesses need to be viewed with a long-term magnifying glass in hand. While it's [ humane ] to look at the short term with a microscope and a magnifier, it is equally important to keep a tab on the long-term story. The long-term story of your company remains as robust as ever. With all tools of experience, innovation, relationship and competencies, we remain on course structurally as well as directionally. Thank you once again, ladies and gentlemen. We open now the platform for your questions. Thank you.

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

First, on the AMET side. On the -- closer to Egypt, there has been a geopolitical disturbance. I know Egypt is not directly impacted from it, but do you feel Egypt and Turkey, which is the larger geography, can have some sort of disruption or an inflation or anything? Any risk to the volume in our -- in that region do you fear there?

This is Vaijanath here. Frankly speaking, both the economies have absolutely seen the lowest of their country-wise economic inflationary effects already. And they have started to show the signs of recovery, right? From last quarter, we had mentioned this, but it has started to really manifest in numbers from, actually, this quarter. The situation which has been unfolding for last about a month or so now is something which we are very closely watching. We are in touch with our entire segment of customers T1, T2, T3 in the region. The demand pool is steady. They have not shown any concerns in terms of the current demand patterns, but as you know, there are definitely uncertainties that will need to be watched out. But they have not shown any signals of slowdown, including in the country of Israel. Everything is -- the dispatches, supply chain, everything is normal. So the coming 2 months will really tell us, so we are watching it very closely.

Even the transportation logistics, are they also impacted? Or they are intact with the Mediterranean region.

Yes. Entire Mediterranean region, including Suez Canal, which is connecting east to west, entire logistics, entire supply chain, is absolutely normal, no signs of any concern, red alerts by anybody. And -- but still, as we all know, we need to watch out very closely, but it's -- as of now, everything's going normal.

So only worry, only concern is in case it intensifies further and you have nearby countries getting pulled into the conflict, yes, then the outcomes can be very different, but we are not looking at it that negatively. But as of today, we don't see any challenges, the way things are today.

Fair enough, fair enough. Second, on the -- again continuing with the AMET region. Do we think the worst is behind? And can we again go back to the earlier volume paved by exit of this quarter? Or you think going back to the earlier volumes of 40,000-odd metric ton, will it take more time? Or we will be there?

Yes. So last time also, we mentioned this is the second time, in last 5 years, happening. And we have seen this pattern of recovery, which we had seen about -- we had estimated about 6 to 12 months in the period. And in last time also, it has happened in that period. Exactly now we have started to see the similar patterns. The new norms have come into existence. Luckily, all the commodity prices also have rightly reasonably normalized. All international logistic costs have normalized, so I think that is also complementing. And we see that now, from here on, there will be -- should be a steady recovery that we see.

I know China plays some role in that region. And China has become slightly more aggressive than what they have been in last 3, 4 years. Have you seen that kind of a scenario for us in the AMET geography or any other geography?

Frankly speaking, China factor has been on and off in last almost 7, 8 years. It knocked the door with a bang for some period and, again, there is a complete disappearance. So this, we are completely used to. To that extent, it is again visible, but this pattern is very well known to us. And our customers also know this, so we have a very good place and experience to navigate through.

Got it. Second, on the India side, have we seen our specialty ingredients now seeing a lot more traction with the premiumization trend which has really picked up well in India? So how are we seeing our specialty ingredients being adopted? And that way, should our specialty see much more traction with developed markets coming in and India picking up?

Yes, yes, you're right, Sanjesh. So in India also we are seeing -- with the positive momentum that is there in India, we are seeing specialty volumes also picking up. But we need to note that it is on a small base, okay? But what is critical for our specialty volumes overall to get the momentum back is what happens with developed markets. So in India, yes, it's picking up pretty well, and we do clearly see this continuing.

And will India be 10%? Or lower than that in the specialty?

In terms of volumes, yes, around that. It will be lower than -- yes.

Okay, lower than the double digit, got it. On the margin side, I think, last quarter, we spoke of INR 20 to INR 24, INR 23.75, to be precise. Now we have slightly readjusted it or narrowed down the band to INR 19.5 to INR 20.5. What makes you this confident? Is this AMET coming back is optically diluting the spread? Or slower picking up of North America is leading to this thing?

Yes, in fact, we were very clear last time. We said we are not guiding on the EBITDA per metric ton because of the way things were fluid. And we said volume growth is going to be the priority, and we are pretty much delivering well on that. This -- we are giving well to be enough into H1. And we are able to have a good visibility on how we're going to end the year in terms of the momentum in volume growth and the mix that we are able to foresee. If you see, the mix is what is contributing to the EBITDA per metric ton not going up, okay, in line with the specialty is not being what it should be. We do see certain green [ shoots ] coming up in Europe with our specialties. Premium specialties need to really come back. North America, yes, it's probably we need to wait for 2 more quarters to come back. So we do see the specialty and the premium specialties portion coming back to a growth trajectory in the developed markets in probably early next year. And that should then get the EBITDA per metric ton back on track in the zone that you indicated.

Any more clarity on our Europe subsidiary? Are we going more aggressive? Are we paying for sort of -- or so the -- because we have been operating from AMET, now we are opening up an office in Europe. What is driving this?

You can say Europe is obviously the -- may have a lot of headwinds today and a lot of negative publicity in terms of what's happening, but Europe, as far as a [ specialty ] market, is a very significant market. And for us, in terms of our specialties, Europe is going to be a critical portion of our strategy. And the office is going to be only preparing and enabling us to be able to partake in the growth opportunities there in a very significantly better way. That's the way I'll put it.

But Europe is equally more fragmented, right? Unlike the world where surfactants is more a consolidated market, Europe is a completely fragmented market. Is the industry landscape changing in the euro?

So not exactly. Because it's fragmented, that's why you need to be more closer there and be constantly at it in terms of leveraging on what potential you have there. So that answer is to why we want to be there. And this particular Europe setup is going to help us in terms of working the market and consolidating the position there.

The next question is from the line of Aditya Khetan from SMIFS Institutional Equities.

Sir, when we were tracking some of the macroeconomic indicators we have, I mean, like the inflation in Turkey and the inflation in Egypt, sir, that data is still indicating like inflation is still at record-high levels. When we look at Turkey inflation, that is at 61%. Even Egypt inflation is at around 69%. Also the private consumption, in expenditure, so that has also came down on quarter-on-quarter basis. So sir, what is that optimism, like, when we look at the global markets? So what is that optimism which has led to this volume growth on quarter-on-quarter basis, when the indicators globally are negative [ only that ]?

Yes. So frankly speaking, you are rightly saying that the inflation is as high, and it has been there for quite some time now. The overall macroeconomic situation in the region is not going to change overnight. So these realities will be requiring a new norm in terms of the market is concerned. And as I rightly said, that exactly similar phenomenon happened 5 years back, and we knew how the new norm got established and consumption patterns got restored. Because, when it comes to our industry, home and personal care, we have seen that consumers have established a typical pattern of consuming these goods in their daily life and then it readjust. And we have seen this phenomenon happening very closely, and it reflects finally in terms of -- through our dialogue with our customers in terms of volume. So we are seeing that, though the inflationary pressures are not going to calm so easily, various reasons in Europe and Middle East, but we feel that now the consumers have reached a new norm enabled by current situation of ease of commodity prices, ease of supply chain and availability. So obviously we've been there with them. We definitely have an edge, and we believe that this should now, from here, lift up.

Okay. So sir -- so despite this peaking of inflation, so like -- so we can take a conclusion like -- so consumers will -- they can adapt to the new normal, although we might have to take a cut in realization to push volumes. But still, how the volume growth will remain, considering now inflation is at the peak and things are still going good for us?

Yes. So let me answer that, yes. The volumes are -- so one is in terms of whenever you have a scenario where things are pretty high in terms of inflation already because now we need to wait till the consumers start adjusting to that. That's what we have been saying, those consumers finally adjust, and that has happened. And with this sort of equity of relationships that we have with all our customers, we actually are in a very good position in terms of leveraging any growth opportunities that emerge. But to your point as to whether there is going to be any realization compromise or whatever in terms of bidding it, I would like to tell you that our pricing has to be fair and in line with what the markets are and then very competitive. And that's what we will do. It is not that we are chasing volumes by just taking some very irrational pricing, so that's -- I'd like to correct that understanding if that is what it's indicating.

Got it. Got it. Sir, second question, sir, when we look at the lauryl alcohol prices. Sir, on quarter-on-quarter basis, there is a 14% jump. Sir, what has led to this decline? And sir, consequently, our, like, gross prices have taken a hit, so because of this rise in lauryl alcohol prices. But generally, sir, we are following a path on mechanism, so we can think also coming in -- in the subsequent quarter, our gross spread should increase, considering lauryl alcohol prices have gone up and we might not have been able to pass on in this quarter. Is this understanding correct, sir?

No, no, no. See, the price, if you look at it, it has gone up by 14% in a quarter, but it is a point-to-point comparison. So we buy every month, so it is not that you buy only an -- so it's a question of what is the average of over the month. So this is a point-to-point comparison return on average, okay? That is one. Second is you're talking about it reflecting in our revenue growth, whether the revenue growth will be higher in the coming up, but 14% is too small lifting for it to be having a major implication in terms of revenue growth. There will be too many other combinations, like our specialty volumes getting better, like our realizations getting better, which can impact, okay, the revenue growth. Otherwise, this 14% increase that you're seeing is point to point.

Got it. Got it. Any specific reason, sir? So why these prices have gone up?

Yes. That's because there's a huge amount of speculative interest that is there. There's also the impact that people are seeing, well, we know, on the supply side in terms of the yields of the farm. So there will be multiple factors, but if you see here, it keeps going in the -- operating in this particular range. And with the way we have seen this market, 14% increase is too little volatility for us to be looking at, but we do expect things will be in a stable state within this range moving forward.

Got it. Sir, on to the specialty care volumes. So this quarter, there was a very good jump in volumes. So sir, if you can quantify that, particularly from which segment we have seen this growth, like, from the mild surfactants side or from the proteins side or betaines. Which segment has contributed to this phenomenal growth?

You see that it is the masstige specialties, as we call it. The premium specialties, they are to come back. As I said, that is made in the developed markets of Europe and North America, so we've been able to do well in specialties with the masstige specialties.

Sorry, sir. Sir, pardon. Sir, I missed all that part.

Yes.

Sir, which segment has shown that growth? I missed that part, sir. Sorry.

Specialties also, you have a certain segment. So you have masstige specialty, that is one between premium, okay, and your mass segment, okay? So there are also your specialties, but those are all what we call as masstige specialties. But the main growth in the -- but the main component in terms way that you are able to harbor ingredients in specialties is premium specialties. It essentially gets consumed, as you know, in the evolved markets of Europe, North America. So that needs to come back. So I was -- that's what I was indicating in terms of what has led to the growth of specialty in the last quarter.

Got it, sir. Sir, just one last question. Sir, on to the EBITDA spreads, I know that, sir, we are not guiding on to it. But considering now since we might have -- we are standing at almost a 7- to 8-quarter low in terms of EBITDA spreads and considering now we are witnessing a volume growth into specialty in all, so we can like, sir, make a case. So this could be the bottom and considering things in the global could revive, so we can again go back to that -- a level which we had taken over the last few quarters. That kind of idea, also, is good, sir?

Yes, yes, yes. We firmly believe that, that's quite possible. Our efforts in this direction are pretty much very intense, but yes, as we said, the actual situation should continue to cooperate and with our -- and the green shots we'll be seeing in terms of growth in North America and Europe has to continue. So there's no reason why -- if everything cooperates, with -- at the intensity with which we are approaching our business, why it's going to happen.

The next question is from the line of Arun Prasath from Avendus Spark.

First question is on the India volume growth. We have kind of delivered a double-digit volume growth in India, at least as I can see in the last 3, 4 quarters, consistently. And this is something which has not happened in the last 5 years, as far as I can see. This consistency is -- was missing, but now we can see that. The -- has something changed in the last 5 years which is structurally delivering this kind of double-digit volume growth in India consistently?

Well, one is in terms of the way the market now has more participants spread across all the tiers, Tier 1, Tier 2, Tier 3. So if you see, in the last 5 years, the share churn sort of happened between these particular segments. Now also in terms of how well we have prepared ourselves over the last about 3 years in terms of addressing the demand across India -- so that -- both these has contributed to you seeing the consistency in terms of volume growth that we have had.

Home care.

And also home care, where home care has seen -- been a significant growth contributor in the India market. And our home care product solution has also been one of the contributors to our participating in the growth in India.

Right. And within your customer base, with the way you categorize MNC and local and regional players, who is actually contributing to this kind of a growth?

So we say all the segments, but it's majorly tilted towards, skewed towards the Tier 2 and Tier 3 customers.

Right. So basically we have -- is it like -- more like a penetration increasing and large MNCs losing, but that is being captured by the Tier 2, Tier 3 that is…

No, no, no. Our expectation is not -- I would say, exactly losing, okay? You had the new entrants coming in. And then they're creating own brands; and that's giving an opportunity to be able to participate, okay, in that growth. So enabling them to be able to launch new products and they are able to have a share. So if you see all of them -- I've been talking about all the -- I mean I've been talking about a flattish or a low single-digit volume growth, okay, whereas some of them, with a low base, have been able to even look at a high double-digit volume growth. And we, participating along with them, is enabling us to partake in the growth that they are having.

And for these Tier 2, Tier 3 customers, our wallet share among within them, that means we can sell more products to the same customer, or more formulations we can do, as compared to the, say, similar relationship with the large MNCs. Is this the right understanding?

With large MNCs also we have a good basket of ingredients. So what happens with the smaller customers is that they start small, but then their ability to keep expanding their portfolio will determine as to how we are able to expand our product portfolio with them. With the large MNCs, you have a bigger pie to participate in, whereas the smaller customers like Tier 2 and Tier 3, you have a smaller pie, but you need to do, clad, go through their journey with them in terms of their launching new products and their product basket of ingredients expanding in terms of what they can source with us.

And recently, a similar company got listed. And do you see many such companies are also evolving in their growth trajectory and this will -- this can potentially benefit us?

Yes, certainly. Certainly. Because India is going to be -- is going to see a significant growth in terms of the per capita consumption of home and personal care products. So the home and personal care products consumption per capita is driven by the greater GDP -- in line with the GDP growth, in fact, higher than the GDP growth. So obviously India is going to be a very -- a good story, as far as HPC per capita consumption is concerned.

What is very gratifying for all of us to know is the emergence of a whole lot of small players across the various states and geographic ranges. This is a very interesting phenomenon and we're all -- should be encouraged by this.

Right, understood. My second question is on the sequential reduction in the EBITDA per kg, per ton. Is it because -- is it usually you'll see then volume growth suddenly accelerates? You -- the low-spread products gets first recovery? And is it -- does it explain the sequential reduction in the EBITDA per ton? Or is it more like a inventory management or a mismatch in the pricing?

So your -- I'd say, the first statement that you made, that is what is the right conclusion that you should go. It is nothing in terms of any inventory, higher-priced inventory or mismanaged -- trying to manage the higher priced. That is not the case. It's only that the mix has changed because, as we've said, the bulk of the growth has been driven in terms of volume by performance products and matching specialties. Once -- if the premium specialties also have kept pace in terms of growth, which obviously is --the major contributor is North America and Europe, then yes, we could have even seen the EBITDA per metric ton sustaining at those high levels as last -- corresponding for the last year.

Right. And then how we are placed in terms of -- at least in the top 5, 6 products in terms of utilization? Do we have enough room to keep up with the pace at which the volume is growing or...

We are well prepared on the supply side, okay? And we are geared up, okay, in terms of our capabilities and capacities to be able to leverage on the growth opportunities that'll emerge.

All right. And then -- and can you just give a little bit granular details on CapEx that we have done in the first half? It seems to be a little bit high as compared to the earlier trajectory.

So ,yes. It's -- we -- as we said, we typically do about INR 150 crores of CapEx every year. And there are some projects that we're commissioning. And that's why it has seemed there's -- would have been some incremental, certainly in terms of the way the timing happens based on the project schedule that we have. There's nothing else. We will also have, this year, about 150 crores of CapEx.

Right. And this is in mild surfactants? Any category of products that you are...

This will be -- no, this will be across. So it will be on certain CapEx related to certain improvement plans, certain -- relating to performance products as well as specialty.

The next question is from the line of Rohan from Nuvama.

Also, Mr. Natarajan, sir, all the best for your new role, sir. Sir, first question is on our India market. You mentioned that definitely the volume growth remains very solid. I just wanted to understand, sir, though your market is more towards performance and there's strong growth in India market, do we see that the contribution in specialty segment as well, can we expect, over next 2 years, can change significantly? I mean, India itself can drive a significant growth in specialty. Do you see that transition happening in the Indian market?

Yes, actually, we do. As I said, with per capita consumption going up, we'll also hear opportunity for the growth happening across the verticals in mass, masstige and prestige. And the way we are seeing the development of the growth of specialty happening in India over the last 2 to 3 years, I think it gives us good confidence that it'll get better and better as we move forward.

Okay. Sir, you -- again you also mentioned that overall EBITDA growth with that 6% to 8% guidance in volume and more towards EBITDA and, furthermore, higher than at PAT level. The first half has been -- we understand, because of the multiple growth challenges globally, have seen degrowth on a Y-on-Y. That leads to slightly higher asking rate in second half, so with the current environment, it still will be volatile. You also mentioned that India, because of the monsoon and -- right, and inflation or rising crude prices, may see some near-term volatility. However, medium term looks promising, so with that, we still are confident about, sir, second half performance is strong enough to take care of volume growth of more than 6% to 8% and bottom line and EBITDA more than that?

Yes. So one is, as you said, in the way the market is today, I think I -- we'll be very happy if we are able to chase everything and deliver on that contribution per metric ton and volume, but we said, given -- the context with the global macroeconomic situation is, we need to prioritize volume growth in a very meaningful and a profitable manner. And that's what we have done well and we are extremely happy about what we have done. Moving forward, we do see that, except for any new macroeconomic challenge or geopolitical tensions emerging or intensifying, we don't see a challenge on delivering on this volume growth. With regard to EBITDA per metric ton, we've said the composition has to change in terms of more volumes of premium specialties. And that essentially requires that Europe and America continue to build on the green shots that we saw last quarter, okay? So that will be critical for us to be delivering on the EBITDA per metric ton increase as well.

Okay. Sir, just last weeks, you mentioned that definitely in U.S. and EU, you have started seeing recovery in masstige segment. However, specialty probably has yet remained lackluster. So recovery in masstige, does it have indicators that going forward or sequentially we will see the recovery in specialty as well? I mean how the market reacts. Have we started seeing recovery coming in, in specialty as well? Because what we understand, that U.S. and Europe both are still struggling with the high inflation. And demand probably has yet not picked up, so how do you see the trading increasing or improvement in masstige will play out?

So this is -- obviously, we are able to derive these -- the way the market is going to grow only from the way on the discussions with the customers, so what we can say is that, over the last quarters, the customers seem to be more optimistic. The negative tone has reduced. And that gives us confidence because they see it more closely. And that tells us that, yes, okay, there is a good room for things improving. And that is what we will derive from our conversations with customers. So we're able to see directionally and how the sentiments are. And that gives us the -- that gives us an indication that, yes, okay, things should start looking better, say, from early next year.

Okay. And sir, just the slight recovery which we have seen in lauryl alcohol prices on Q-on-Q, is it gradual? And do you see that trend sustaining? Or it was just only short-term blip and the prices may further come around. I'm just asking that are the prices on an upward trajectory gradually which we may see for maybe 2 to 3 quarters? Or would remain volatile?

So it will remain volatile but in a smaller band, okay? So that's the way I see it because there are global demand challenges, say, as far as your palm oil and everything is concerned. We also see that the production levels have been not as bad as what it was expected. So inventory levels have -- recently reports in, have gone up in Malaysia by about 5% to 6%. So all of this points towards the fact that you can have -- it will be volatile but in a very small range. That's the way we would put it.

The next question is from the line of Rohit Nagraj from Centrum Broking.

Sir, first question is again on specialty. So we have seen that there has been an increase in terms of volumes both Q-o-Q as well as Y-o-Y, so is there any element of restocking which have started? Or the other way looking at it is probably the per-unit realization has also come down, so have we gained any market share in this particular category?

First of all, it's a composition. So one good thing is that the specialty volumes have grown. This tells us that the restocking is happening in the masstige segment. So where is there a masstige, specialties go. But yes, destocking is still not over, as far as the premium specialties are concerned. And that's why we have said we expect that to start showing a restocking pattern early next year.

Right. And this strong volume growth, again, does it indicate that there have been some fallback from the competition? Or any other geographies, some of the players going out of the system? Or is it purely again based on the characteristics of both the individual segments?

So it's not -- I think we do see that the restocking has happened, so it's nothing in terms of some special situation that happened in the quarter that led to some opportunities. So it is, like, we are seeing that it's a secular trend in terms of volumes picking up, okay, in terms of restocking on the masstige specialties side.

Right, got it. And one last clarification. So you also mentioned in terms of specialty, the masstige segment has picked up. And that is probably the reason why there is not EBITDA per metric ton increase on a Q-o-Q basis despite volumes going up. And as the premium segment picks up, probably there is a possibility of further increasing the EBITDA per ton. Is that understanding right?

Yes. Perfect.

The next question is from the line of Omkar Kamtekar from Bonanza Portfolio Limited.

Sir, the first question is with respect to market share. So if you could give some color on -- with respect to the market share that we have in the AMET, Egypt premium specifically; or U.S.; and Indian markets. The reason why I am asking this is so that I can understand whether we have pricing power. So because the prices may remain volatile, can you pass on? And do we have that pricing power competitive advantage as such?

So we don't -- this is confidential. We don't reveal market shares, okay, although we are aware, but it is suffice to say that, yes, with these sort of relationships and the positions we have, competitive positions that we have, okay, we would not say that -- pricing power is a wrong word to use, okay? I think we have the ability to ensure that we're able to get our high returns in all the products that we sell in the markets.

Okay, so we can insulate ourselves from any volatility of -- with respect to the prices and will -- so that margins remain -- could become volatile. So -- and that would be a good understanding here?

That's right. So we will not be able to be -- insulate, again, is not the right word. We'll be able to properly navigate any sort of volatility that enable us to get high returns on the products that we sell.

Okay. And just a clarification on the EBITDA per ton that you had mentioned at -- in your or in the opening remark: So it was INR 20,000 -- what -- I did not get that properly. It was INR 20,000-something...

So we have said INR 19,500 to INR 20,500 per metric ton.

Okay. So that was -- there's a band for the -- okay. Okay.

For the full year.

Okay, okay, okay. And with respect to the -- so in the presentation, I see that we have also applied for one more patent. And we have been continuously spending and making sure that we innovate our product. So the new products that we are innovating or we are going for, are these more tilted towards the specialty chemical? Or do -- or it's as and where you see opportunities?

It's all towards specialty chemicals only. It will be more on the premium specialty side.

Okay, premium specialty side. And the overall product portfolio pipeline, how many more products are we looking to launch maybe, say, over the next 1 or 2 years? And can we have some guidelines or some ballpark number?

Yes, we do have the pipeline, but I think we will not be able to say right now because it has to pass through certain stages of maturity, as far as our product development actions are concerned. So I think we will probably say that in every call. Once we are clear in terms of any friction, we'll able to give, at least, a statement. Right now we don't want to be giving you any directional stuff because that will not be right.

Okay, okay, no issues. And sir, with respect to gaining wallet share, how are we going about that? Because we have MNC clients and other also local clients. So how are we -- so what is the strategy with respect to gaining more wallet share with -- from them?

Certainly make sure that you continue delivering value to them, continue delivering superior service and be close to them. That's the only way, and that's the way we have been doing for last 43 years. We need to do it more often and more intensive.

Okay, okay. And sir, lastly, just a small suggestion. If you could just add one dedicated slide with respect to the volumes of the specific segments. So like, for example, it'd be on -- I think most of us on the call also, we've been sort of targeting the specialty chem volumes and the EBITDA per ton. So if you could just add one dedicated slide with respect to the segments and the volumes and the EBITDA on that, it would be just -- take out those -- most of those questions and it will also help us understand much better, the flow and the trajectory of the...

Yes, so we will be transparent to the extent that we don't compromise on certain company information.

No, no, yes, yes.

So yes. We've got your message, okay?

Okay.

The next question is from the line of Krishan Parwani from JM Financial.

I missed the commentary on EBITDA per ton for this quarter and the last quarter. Can you please highlight again?

See, what we have said is that, the EBITDA per metric ton, despite clocking 8.6% volume growth for H1, it stood at INR 23,700 per metric ton. For the quarter, the same was INR 19,593 per metric ton, so compared to H1 FY '23, while it shows a decline, which will even persist in H2, we believe the band of it is INR 19,500 to INR 20,500 per metric ton should hold for the entire financial year '24.

Understood, sir, understood. And the second question I have is I know that we have stopped giving absolute volume numbers. And I think we have guided some ranges in our presentation, but I mean, if possible, it would be helpful if you could give just the specialty volumes in this quarter and the last quarter.

Well, yes. I think specialty, as we said, was a high single-digit growth that we had with masstige segments doing a comeback, okay? And between -- and we also saw that there was a good volume growth and a double-digit volume growth in Q2 FY '24. So yes, we would like to keep it there because it's important that we also are able to have some sort of protection on the confidentiality of what we share. So yes, we are hearing all that you said. We'll see as to how we can do something without compromising on our confidentiality.

The next question is from the line of Aditya Khetan from SMIFS Institutional Equities.

Sir, my question was on to the ethylene oxide prices. Sir, last -- from the last quarter, we have seen a sharp uptick into the ethylene oxide prices despite, like, the specialty volumes or the demand globally, so not picking up much. So suppose, sir, in the coming quarters, it's that specialty -- if, the specialty demand in the U.S. and Europe, that makes a comeback, so -- further, we could see the rise into the ethylene oxide prices. Because, sir -- and I believe, sir, one of the global plants of Dow's, that has closed down, so that might have created some sort of a supply pressure globally which is leading to rising prices. So with specialty demand coming back also and increasing ethylene oxide prices, we could not see that benefit into our EBITDA per metric ton?

You are wrong there. I think that is not the reason. I think you -- Dow closing on as well has not led to any great increase in ethylene oxide prices even in U.S. and globally. And essentially I think ethylene oxide prices get determined by certain closures that happen due to turnarounds in, say, Northeast Asia and Southeast Asia, Europe and U.S. so that is more situational. And also in terms of rupee has been depreciating, so there are 2, 3 factors to this. It has nothing to do with what we're seeing in terms of the specialty growth happening and then ethylene oxide prices getting impacted. So there are many, multiple factors. And I think one attribute, only one of it to the way I think ethylene oxide prices are behaving.

But how much would this -- if ethylene oxide contribute as a raw material on a base of 100%?

No, no, no. So that is -- you can be -- ethylene oxide prices, we can be specific. It goes into various purposes and various products.

In terms of overall portfolio.

Overall portfolio. And it can be about, say -- and there's also a report, 8% to 10%.

The next question is from the line of Omkar Kamtekar from Bonanza Portfolio Limited.

Sir, with respect to the MNCs' contribution. So it has been steady around the 50% mark for quite a while. I wanted to understand. How much -- of the customers that we have, how much will be the top 3, top 5 or top 10 contributing as a percentage of total revenue? And are they more tilted towards the spec chem or specialty products, or the performance products?

No, no, no. I think that's something that is too detailed information, so I don't think we'd share that in terms of what it is, but it's suffice to say that we have growth across all of the segments. And we are getting a good wallet share across all customer categories.

Okay, okay. And sir, with respect to expanding into new geographies, so we have now set -- as per the expense line, we have set up a new office in Europe. So we'll be able to understand the market more and expand into this geography and go deeper, although it's been a fragmented market and the demand might be very different, but how do you see the initial phase of growth there? Will it be low single digits? Or we can see instant impact of say, of high single digits?

No, no. So it's not that we have not been selling into Europe. Europe, we are currently also selling. The objective is to then get there and be able to leverage more of those opportunity that is there, so it is not going to be something instant, okay? So it's something that we need to happen over a period of time and sustain the growth that we do, so nothing will be instant.

Okay. So my understanding was -- I thought we were not extensively present in Europe. And even so, maybe because more like...

No, no, no...

We've been in Europe for the last 20 years.

Yes, yes, yes.

Okay, okay. And sir, with respect to -- just a question on the spending on the R&D. So as a percentage of sales, what will be the -- do you have a target as such? How much are we spending? Or how much will we be spending for R&D...

We don't have a target on spending. So typically we do about 1% to 1.5%, but then we certainly have a very clear vision of the how do we ensure that we get the best value for whatever money we spend, so we...

And we invest significantly in innovation. And that has been the way Galaxy has grown, particularly over the last 12 to 14 years.

Yes.

Okay. So 1% to 1.5% is generally your ballpark figure that we can expect at almost average?

Correct.

Thank you. As there are no further questions from the participants, I now hand the conference over to the management for the closing comments. Go ahead.

Thank you all, ladies and gentlemen, for participating in this conference call. We close this meeting wishing you great celebrations for tomorrow and the next 2, 3 days. Have a great time. Thank you.

Thank you. And happy Diwali...

Enjoy. Happy Diwali. Thank you.

Bye-bye.

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