Ganesh Benzoplast Limited (500153) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Ganesh Benzoplast Limited Q2 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I will now hand the conference over to your host, Mr. Priyadarshi Srivastava from Capital Square Financial Services. Please go ahead.

Thank you, Ryan. Good evening, everyone. On behalf of Capital Square Financial Services, I welcome you all to Ganesh Benzoplast Q2 FY '25 Earnings Call. Representing Ganesh Benzoplast, we have today with us Mr. Rishi Pilani, Chairman and Managing Director; and Mr. Amar Kabra, General Manager, Finance and Taxation. Now, I pass on the call to the management for their opening remarks, which will be followed by the Q&A session. Over to you, sir.

Thank you, Priyadarshi and Ryan. Good evening, everybody. Thank you so much for joining us for the Q2 FY '25 conference call. We will initiate the call by taking you through the business highlights for the period under review, after which we will open the forum for the question and answer. Mr. Amar Kabra, our GM, Finance and Taxation, will now share the quarterly numbers with you, after which we'll take the question and answer.

Good evening, everybody. So for the quarter, Q2 of financial '25, on a consolidated basis, the company generated a revenue of INR 976 million as compared to INR 1,026 million of Q2 of financial year '24. Net profit after tax for the Q2 financial year '25 is INR 164 million as compared to INR 156 million of corresponding period of last year. On a stand-alone basis, the company generated a revenue of INR 543 million as compared to INR 562 million of Q2 of financial year '24 and net profit after tax for Q2 of financial year '25 is INR 147 million as compared to INR 148 million of the corresponding period of last year. So with that, I have given the highlights for the results. Now we would like to open the forum for question and answer, if any.

[Operator Instructions] The first question comes from the line of Gautam Rajesh from Leo Capital.

I have 2 questions. My first question was what's the approval status for the revised LPG projects are all approvals in the place are in place? And by when will it be received?

Okay.

And my second question was, when do you expect construction to start and by when would this project be completed?

So regarding the revised status of the approvals, like I've already said before, the main approval for PESO is already with us, which is basically the approval for -- required for starting our construction. Other approvals are in process, which are expected shortly. In the meanwhile, the construction to start like -- again, like I've said already, the firefighting construction has been already completed, along with the fire tanks and the fire pump houses and all. The test filing is expected to start from next week for the project. And thereon, it's approximately a 2-year time line from then.

Okay, sir. And like all the approvals would it be done by end of this financial year, calendar year? How would that be, sir?

So see, the approvals are from government agencies. So they keep coming in, but there is no hindrance for us to start the construction on the main tanks and other things. That -- so the comprehensive list of approvals is many, but then there are a few critical approvals that are required to start the project, which are in place.

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

Sir, I wanted to understand, sir, we have given -- you will be able to achieve INR 120 crore EBITDA for this year with improvement in margin on the chemical front, as well as some kind of revenue hike on the LST brand. But sir, when I look at the fourth quarter H1 results, sir, it doesn't seem that you can achieve this. So please help us understand this.

For quarter-on-quarter, yes, there may be some dips and some ups, but overall, our position is based on the maximum utilization of the storage tank and chemical plant also. And on a 6-month basis, the numbers are quite in line with our expectation. So yes, hopefully, next 2 quarters will be more better than the last 2 quarters.

So in H1, you have done an EBITDA of INR 50 crore on consolidated basis excluding other income. So can you achieve the INR 60 crores, INR 70 crores kind of EBITDA on the full year or like the H2 basis?

Yes, last year, we achieved some INR 100 crores of EBITDA. So yes, this year, we'll cross that benchmark, and we're going to cross INR 105 crores around it.

And sir, we have said that we would be able to achieve...

In the future, but yes, our line of expectation and the business, which we were doing, it is steady kind of business.

Sir, your voice was not really audible, sir if you could speak a little louder?

Sure. So as I said, our rental business is a steady business. Obviously, there cannot be any drop in the profitability of this business. And in Chemicals segment, yes, we are doing well, as you can see from the segment also. The chemical division has performed well as compared to the past -- last year. So our expectation from current year is obviously much -- quite higher than the last year. So yes, we're trying our level best to achieve the EBITDA of around INR 110 crores for this year.

Okay. Sir, so earlier, like previous quarter, only, we were telling that INR 120 crores would be achievable. So why is this downward pressure? Are we not able to do a price hike in the terminal or LST business or any other thing with -- so -- because of that -- because sir, for the next 2, 3 years, sir, this was the only source of growth that we were going to have. So that's what I'm trying to understand.

So every time we are saying that our growth rate for the upcoming years is 5% to 6%. Obviously, our last year's EBITDA was INR 102 crores or INR 103 crores, then obviously, it will be in that range only 5% to 7% of jump. The major jump you will see from the LPG and increasing the chemical capacity of plant. So then you're going to see the major jump. But otherwise, it will remain steady for at least the next 2 quarters.

And sir, are we going to increase our chemical division capacity?

Not right now because ultimately, we are working at 75% of capacity right now, 70%, 75%. And our target to achieve 85%, 90% within a short span of, say, 6 to 8 months, and if required, then we can see for the -- we can plan for the CapEx -- further CapEx. But right now, we don't see any requirement to increase the CapEx in the chemical division.

So to answer your question, Madhur, right now, we are not adding CapEx capacity to the Chemical division, but our target is to increase the capacity utilization of the installed capacity.

Okay. Got it. Sir, I have a next question. Sir. We did in -- so we did acquisition of the Rail Logistic business in 2020 for 65% to 85% share. So since then, sir, I don't think that we have been able to create value for ourselves in this segment, sir. So what kind of IRR or the payback was expected on this? In investment, I'm sure, it hasn't happened yet. So I'm trying to understand that this capital allocation went wrong.

So see, the Rail business, if you have to understand, it's a very long gestation business. And ours is not a typical model where we go out and develop Rail business without having a back-to-back visibility on the business, okay? So like -- so currently, the division is doing well in the segment that it is operating right now. The company has zero debt on it and is generating significant EBITDA and a PAT for us.

So with a single customer, we are managing right now and some -- you can say single plus 1 more customer is there. So with that, we are achieving a revenue of around INR 28 crores to INR 30 crores per annum. We are making a EBITDA of around INR 8 crores to INR 9 crores in that company and profit of around INR 5 crores. So I think with the single customer, it's just a number. But yes, with the increasing number of customers, this will going to be double.

Sir, so like if I look at the investor presentation, we have given highlights for this for the last 5 years since the acquisition. So we've made a INR 18 crore PAT and a INR 41 crores, INR 42 crores EBITDA over the past 5 years. And we have paid INR 65 crores for this acquisition for not even INR 100 crores of the business. So, sir, I'm trying to understand, sir, why are we not adding a new customer or why are we not being aggressive with this? Because sir, we have the asset, we need to utilize it. And so even on the EBITDA ratio, the payback has not happened yet. So, sir, if you could just help us explain when can we see additional customers or additional growth in the segment?

So, Madhur, we don't look at it that way. We look at it as a combined process. So I'll explain to you, let's say, for the single customer, if today, we are handling approximately 20,000 to 25,000 tonnes -- sorry, 15,000 to 20,000 tonnes a month, but actually, the way we look at it is that the tankage allotted to that customer is only 10,000. So we are also getting a double throughput in GBL through this business for that tank for which we are building to this business, the full tank rental, which generally, you're in the liquid space, you build only 20% to 25% of the throughput. So if we build only 20% to 25% of the throughput to the Rail business, the Rail business EBITDA would shoot up sharply. But what we are doing is we are building 100% charges of the throughput to the Rail business. So that's why that effect doesn't show up fully, but on a combined basis on how we are getting a throughput through the tanks for this business and what ILSL itself on a stand-alone basis is generating, we would probably have the EBITDA margins jump up by twice if we passed on that effect to ILSL.

I'm sorry Madhur, if you could please join back the queue. The next question comes from the line of Sudhir Padiyar from Consultant Capital Advisor.

Am I audible?

Yes, yes.

So, sir, as mentioned in our earlier call, okay, the entire CapEx for the LPG segment was slated anywhere between INR 700 crores to INR 750 crores. So we actually secured the entire CapEx? And if so, what is the breakup between internal accruals and the external debt that will assume?

So as you are aware that we have now revised the capacities by almost 1.5x. You might be aware that the original project that was envisaged was for 2 tanks of 24,000 each. And now the project has become 2 tanks of almost 32,000 tonnes each with and initially, it was steel now for added safety and for going to higher standards, we made concrete steel tanks. So the CapEx right now, along with all the IDC and everything is a little bit higher from 750 more towards 850, 900 range. But...

850 to 900, you said, right?

Yes. Yes. But the whole thing is secured through equity, part equity and the debt structure. We already have term sheets from quite a few banks. We are finalizing those. So probably the exact breakup of the equity and debt structure we'll know in probably a month's time.

Okay. But is there an external number on the debt that you would be willing to assume on the book?

So we are not going to assume any debt on GBL books. It will be in the subsidiary of GBL.

Yes.

Which will then participate in the JV. So the J -- which is between us, BW and CPIL. So the debt will be taken by the JV company, neither by GBL subsidiary nor by GBL.

No, I understand that base, but is there a number that you all have thought internally that beyond this number will not take a debt and we want so much to be coming only from equity? I mean anything like that broadly?

See, broadly, we are looking at the numbers that are ranging between INR 550 crores to INR 600 crores, but again, all this -- sorry, INR 550 crores to INR 650 crores, but all this depends on how we structure the time line. So the tenure of the debt, the interest rate and other factors. So that's why the mix of debt and equity will be finalized within a month, but whatever equity is required for the project to proceed as it is proceeding right now has already been infused by both the parties. And the balance equity will also be infused shortly.

Okay. Okay. Okay. Got it. I've got one more question, sir. In the LST segment, in this quarter, there was -- I mean, a 5% degrowth Y-o-Y. Any particular reason for that, sir in the LST?

See, we don't see, we have taken up quite a few tanks for our post-monsoon repairs. And plus, as you may be aware, I've already mentioned before, Cochin terminal has been -- most of the tanks have been taken over by IOC for a 4-year contract period. So those tanks are for ATF and ethanol, so those modifications were going on. Now, in November 1st week, IOC has already charged ATF, and as soon as the crushing season starts for the sugar mills, which is expected any rate now then they are -- from next week, they are going to move ethanol also. So those revenues will start flowing in from this month onwards.

The next question comes from the line of Shubhangi Agarwal, an investor.

I just had a follow-up question to the previous person who asked. So the CapEx that you mentioned, but the time lines remain the same. So you had expected this to come by October '26 as per your last call. The time -- that remains the same, right? There's no change on that front.

Yes. As of now, there is no change in the time lines.

I see. And sir, I mean, is there any further progress like in terms of adding new terminals, any update on that front?

So we have got approval to add some few more tanks in JNPT, which we are in the process of doing. I can give the exact details and everything in my next call whenever that happens. Or if you can, after about 15 or 20 days, if you can email me, I can share that with you. And apart -- yes, we are looking at other geographies also within India. So we are hopeful that we should be able to get some good location with good opportunities. We are exploring them, but I can disclose about them only once we have the definitive agreement signed.

Sure. I understand. Also, sir, lastly, the other income in this quarter was fairly high at about like INR 47 million versus, I think, INR 17 million last year. So could you just highlight what was that regarding? Sorry, if I missed that answer.

Other income mainly includes your interest income. So that may vary from quarter-to-quarter. Some idle funds we are giving in the form of loan, which is high single-digit.

The next question comes from the line of Yash Dedhia from Maximal Capital.

The first question I wanted to ask is about the chemical business.

Yash, your voice is not clear.

Is it now better?

Yes. Now it's better.

Yes. So the first question I wanted to ask you about the chemical division. The margin for the chemical division has improved this quarter. So if I see half 1 of FY '24 on, say, FY '24, it was about 3.5% to 4% and the half 1 of FY '25, we are already at 8.5%. So is this some kind of trend which is going on and we should expect it to be sustainable?

See, Yash, the thing is that you have to understand that the chemical business consists of 2 things that affect its profitability. One is how, obviously, how efficiently we run the plants. So we are bringing in new efficiencies. We are trying to increase the capacity utilizations. We are trying to push up our selling prices so that we can get better margins and which is shown in the better profitability. And the second also is -- which is something which is out of our hands largely is the raw material costs. So in the last quarter, the raw material pricing towards the end of the quarter was in our favor a bit. So that also helped us to push up the margins. How long this trend continues, we don't know. But definitely, with the combination of both these things of increasing our own efficiencies of operations and trying to get in as much price advantage in getting our raw materials, I think we should be seeing the trend that goes upwards. How much it goes upwards, I'm not able to really quantify because there are, like I said, raw material pricing is totally dependent on crude oil and other factors, which are not in my control.

And secondly, Yash, yes, as you said, sometimes there is seasonal thing also like in winter. You can see that sodium benzoate, which is refrigerative. So these soft drink companies, ice cream companies and all these things, they are using less because there is -- sale is less in this winter season. So yes, some part of the cyclical seasonal, so you can see that may vary from quarter-to-quarter.

Understood, sir. Is that this quarter, the margins are more than INR 10 crores. So I think the raw material price's fluctuation would have lessened.

Yes.

Am I audible?

Yes. Yes.

Yes. Sir, my second question was on the construction cost. Sir, as far as I remember, in the Q1 call, we reaffirmed our CapEx guidance of INR 700 crores to INR 750 crore for 60,000 MT tank. And with the same capacity now we are revising our CapEx guidance to INR 800 crores.

We achieve that concrete cost that is lost.

No, no. So basically, see, there are 2 things. One is the revised capacity -- and also what we have done is we've now revised the design also to make it out of concrete wall, which is much more safer. And operationally, it is much more better than having an outside steel wall. So the concrete -- the time consists of 2 walls, one is -- so generally, all LPG tanks in India are steel, steel, outer and inner. But with BW's inputs coming in and they are being the largest LPG logistics company in the world, the new facilities that are coming up all over the world are having outer concrete and inner steel. So all those we have now refactored into our costing.

Okay. And sir, this would cost about INR 150 crores more than the steel walls?

Yes. So there are -- so that's not the only design change that we have done. We have modified some other things also inside, so which may have a higher CapEx cost today, but they help us in operationally getting -- operating the terminal at a much lower cost in the long run.

Understood, sir.

Yes.

And sir, can you give some more color on the constructions that have started? So where are we in constructing the terminal as of now?

I answered this already in the first question from Gautam Rajesh. So basically, like I said, the fire tanks, the fire pump house, all those constructions are done. The test piling is going to start within the next 7 days to 10 days. And then we want to -- and then the construction will go on then full-fledged.

Our next question from Madhur Rathi from Counter Cyclical Investments.

I wanted to ask sir, in Q3 FY '25, there was a jump in our capacity at JNPT. But sir, that hasn't reflected in our revenues from the LST division. So why is that?

Which Q?

Q3 of FY '24.

Yes. So that's what Madhu I explained right now. So even though literally 60% to 70% of the Cochin terminals right now up until this first week of November, it was under modification. And we had almost 10% to -- almost 10% capacity of JNPT on the post-monsoon maintenance. In spite of that, we've managed to almost hold our numbers is because of the effect of the new tanks.

Okay. Okay. But sir, if I look at our September '23 quarter versus the December '23 as well as the Q4. Sir, the revenue has been in the INR 45 crores to INR 48 crores kind of range in the LST division on a stand-alone basis. So regarding this year, sir, even in the previous year, there wasn't any jump from this segment tank that we have done.

See, when you look at the LST division numbers, it consists of 2 parts. One is the main rental business that we have. And second is that we are offering a service of 2 additional jetties at JNPT, for which we collect the wharfage which is like the berth charges from our customers, and we pass it on to the operators with hardly any margin. Hardly like it will have like a 1%, 1.5% margin. So when you see these numbers, you have to -- and probably what we can do better for next reporting is we can also split these numbers out that what is coming from rental and what is coming from the service portion within LST so that you'll understand that what has happened is in the last quarter, the shallow jetty was under repair. So that revenue part was not being seen but the margins were maintained because that revenue doesn't have margin built into it.

And in a parent company also on stand-alone also, there is some EPC contract going on. So quarter-on-quarter, there is a difference in the revenue on account of their revenue also. EPC generates lesser margin of profit and EBITDA. So it's not in the line of the rental business. So that variation you are seeing in the top line is on account of the EPC as well as for the wharfage collection charges. But yes, ultimately, what is important that is always increasing.

Okay. So, sir, we have given INR 39 crores, INR 40 crores of loans on our books to different entity-related parties. I will ask some other corporate bodies. So, sir, what is this regarding? And sir, I wanted to ask, sir, what is the business of Bluebrahma Energy, Vishal Infra and Sagar Distilleries, whom we have given the loans? And sir, this is the first part of question. And sir, similarly, you've given loans of around INR 21 crores on a stand-alone books to GBL Clean Energy, which is in turn invested into Bluebrahma. So, sir, I'm trying to understand, and GBL Clean Energy is our investment entities for our group. So, sir, I'm trying to understand, we have given INR 21 crores to that, but Bluebrahma is only around INR 6 crores, INR 7 crores of loans. So one, there is discrepancy, and why have we given INR 40 crores loans to these entities?

So first of all, all these loans are for the net purpose of the associates and entities and all carries the rate of interest is not at a rate of interest or it's not free of cost. As Rishi will explain the synergy between this business.

So basically, Bluebrahma and Sagar are the ethanol group that we had invested. So this was our equity and loan contribution into that group when we had taken over those entities from the erstwhile promoters as a group of investors. So this is what that number you see. And like Amar explained, all these are bearing interest and they are interest-bearing loans, and we look at it like what do we earn in an FD against these investments, and then we take that call.

Okay. And sir, have the subsidiary started operations? Or are there still construction phase of the ethanol?

No, no. They've all started operations.

Okay. And they would be profitable?

Yes. So they have all started operations from this -- like Sagar has started its operations from January of this year only. So you know the sugar year is from October to November. So we'll come to know all the profitabilities and all as it goes along.

Okay. And for Bluebrahma?

So Bluebrahma is just a holding company for Sagar. So Bluebrahma holds the shares.

Okay. Got it. Got it. Sir, just a final question, sir. Sir, we have capabilities in the EPC pipeline, constructing EPC pipeline as well as tank construction, sir one of our company listed on the stock exchanges Likhitha Infrastructure, sir, they do 20%, 21% kind of margins on the EPC business. Sir, so any thoughts on going into those kind of business because we already have a capability, why not just utilize them for external proposes?

See, we -- see, we are not a EPC company per se. We are basically tank farm operators and chemical manufacturers. But yes, we do use our EPC capabilities to support ourselves and to use it strategically to support our customers and to look at the long-term growth. So we don't want to do EPC for a general thing because that's not our core business.

Okay. Got it. Sir, there is a line item in our annual report, rental expenses worth around INR 14 crores and legal and professional fees of around INR 18 crores. Sir, so what is this regarding? Because rental expenses, I'm not trying to understand. We receive rental income, why are you paying this INR 14 crore rental to?

So these would be the lease charges and all that you pay to the port -- some office rentals. So these would be your office rental expenses.

Okay. And sir, the INR 18 crore...

I'm sorry to interrupt you again. If you could please join back the queue.

It was the final question, just I was asking regarding the legal and professional fees of INR 18 crores, sir?

Yes. So these are all about the -- we have -- as you explained, there are various court cases that are going on regarding the old issues that the company was facing, especially Morgan and all these guys, so there are a lot of -- there's a big legal team deployed along with senior councils in Bombay High Court, Delhi High Court, Supreme Court in all these areas, this is a mix of professional fees as well as legal fees. Yes. So professional and technical fees as this year rental business and all these technical things. So obviously, some fees are included in that.

Okay. Got it, sir.

Which is -- in future, yes, it is going to reduce because now we are -- aim to that margin thing.

The next question comes from the line of Udit Gupta, an Investor.

My question is regarding these NBFCs who have -- the disclosure that you filed, sir, the cases against us. Any other progress on that matter, so like anyone else with whom you've settled or something about that?

So we have not settled with anybody. First, I'd like to correct that some of the NBFCs on their own accord realizing that they don't have any legal claim against the company have agreed to withdraw the -- withdraw their claims because we had filed counterclaims against them, they're both criminally and civilly that they have executed documents without doing proper background checks without doing the proper KYC norms and all. So they have voluntarily withdrawn those cases against us. So they have voluntarily withdrawn their claims against us. So we have not paid anybody or settled with anybody for any kind of claim adjustment, number one. Number two, there are no new entities that have come forward after that. And number three, in the matter, which is also disclosed in the matter related to the original fraud account, the police has concluded their investigation and they filed a charge sheet against the accused in the court, stating that the account was opened without following the deal procedure, and it was done as a fraud against the company.

So what was the total amount of claim against us? And how much is still standing against us after the withdrawal of some complaints?

So the original claim was between 40 to 45. I think approximately, I don't know the exact numbers off the top of my head, but I would say about NBFCs close to amount INR 5 crores to INR 10 crores have withdrawn their claims against us. But again, the important point is that the account in which these transactions happened, the police has concluded their investigation and have come to a conclusion that it was open fraudulently. So the company, in the legal sense has more responsibility or liability to pay against these amounts that were transferred through these accounts.

Right. And sir, you had a disclosure that's filed by the company on the exchange. And I think some of these have applied to NCLT as well.

Yes, yes, yes.

So how is the legal recourse in that case?

No, it's -- NCLT, they are just trying to use the pressure tactics, and we expect that very soon all these -- so none of the cases are admitted by the way. They are just applied. And they don't -- we don't expect them to be even admitted, there'll be this -- we expect them to be dismissed because there is already a pending dispute against this liability.

In the form of charge sheet as well.

So NCLT rule is very clear that if there is already a pending dispute, you can't approach NCLT for it.

And sir, when is our expected planned new tank completion date, sir as per the new schedule?

So it's same October, November 2026. That's what we are at right now.

Right. And it should take us about 1.5 years for the construction.

No. So with the construction period, I'm seeing October, November 2026.

Right, right. And so, we expect to begin by January.

Yes, yes.

[Operator Instructions] The next question comes from the line of Aaliya Shaikh from CapitalSquare Financial Services.

Most of my questions are already answered. So I have one question. So firstly, the EBIT margin of LST segment on this quarter, we have reported 36.1% as compared to last year, 37.3% and last quarter, 43.7%. So what was the reason? And what should be the sustainable margins?

See, that percentage you are saying, it's quite negligible actually, very, very -- and our margins in the rental business have remained steady around 48% to 50% is our rental margin, EBITDA margin. EPC margin is around 5% to 6%, and chemical, we are making margin of around 5% -- 4% to 5% chemical around 10%, 20%.

So to answer your question, again, like what I had explained earlier that -- we have started this new thing of providing because there are 2 more jetties available at JNPT for berthing. So we are providing our customers with the service of collecting the wharfage from them and passing it on to the operator of the jetty. So while you see that reflected in the revenue of the LST division, but it's not -- it's like having only a 1% or 1.5% margin in that. So that's why the overall -- while it appears that the overall EBITDA is looking down, if you look at only at the rental segment, we are maintaining a steady state of about 48% to 50% EBITDA margin. So we can do better in our reporting, and we'll see how we can do that so that this confusion doesn't happen in the future.

We have a follow-up question from Madhur Rathi from Counter Cyclical Investments.

How much capacity can be added to our existing tanks by increasing their heights? I think this was mentioned in our annual report. So other than the new tanks that we have -- we will get approvals for, sir, how much capacity can be added just by increasing heights of these tanks?

See, it's very difficult to comment right now because the problem is that we need to empty the tank before we can add capacities and tanks then need to be down for almost 4 to 5 months because the entire foundation needs to be changed to handle the capacity loads, increased capacity loads. So while this is something we do, we look at doing, but how much we can control it is very tough because the pressure on the business is very high, like I said in JNPT, we are already running at more than 100% capacity utilization, so to take tanks down for 4 or 5 months, we don't get those opportunities.

Okay. Got it. And sir, this new tanks approval that we'll get. Sir, do we have lined -- sir, this will be constructed on our existing land parcel that we have.

Yes, existing land, yes, yes.

As there are no further questions, I would now hand the conference over to the management for his closing comments.

Yes. So again, we would like to thank everybody for joining in and for their valuable inputs and questions. We remain available for any further queries or clarifications that you want and have a good evening. Thank you, everybody.

Thank you. Thank you, everyone.

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

Thank you.