GHCL Limited (GHCL) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Q4 FY '24 Results Conference Call of GHCL Limited, hosted by Emkay Global Financial Services. [Operator Instructions] Please note that this conference is being recorded. I would like to hand the conference over to Mr. Meet Vora from Emkay Global Financial Services. Thank you, and over to you, sir.

Thank you. Good evening, everyone. Thank you for joining us on GHCL Q4 and FY '24 Results Conference Call. I would like to welcome the management and thank them for giving us this opportunity to host them. We have with us today Mr. R. S. Jalan, Managing Director; and Mr. Raman Chopra, CFO and Executive Director of Finance. Before we begin this call, I would like to point out that some statements made in this call may be forward-looking, and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. I shall now hand over the call to the management for their opening remarks. Thank you, and over to you, sir.

Thank you, Meet. Thank you. Good evening, everyone, and welcome to GHCL's earnings conference call for the fourth quarter, 31 March, 2024. Kindly note that our results and investors presentation has been uploaded on the stock exchanges and the company's website. I'm joined by Raman Chopra, EV and CFO; and Manu Jain from our investors relations and finance. Our results for Q4 '24 were in line with our expectations and better on a sequential basis on back of higher volume and lower input costs. This resulted in higher sales and margins. In 2024, our revenue and EBITDA were lower than 2023, but higher than each of our previous 5 years. We grew by 9% CAGR and 6% CAGR over FY 2019 till 2024 for revenue and EBITDA, respectively. In India, demand is relatively stronger as compared to the Western world and grew by 2.7%. Demand in end user segments such as detergent and chemicals improved, though solar glass faced challenges from imports. Higher imports from Turkey, U.S. and Russia has resulted in oversupply situation and exercising the pressure on the pricing and margins. However, there is some disruption in the global supply chain due to geopolitical uncertainty and [indiscernible] some of the imports. Demand for India is likely to be better next year on account of healthy growth recovery. As a result of this improvement in market sentiment, we will benefit. We will continue to enhance our production, cost competitiveness through better efficiency and cost control measures. We are making good progress on our planned growth endeavors. In greenfield [ soda ash ] project, we are making progress and expect it to obtain final approval soon. While [indiscernible] project is progressing as per the plan, we are [indiscernible] new bromine project at our existing salt works. Our salt yield improvement project is underway. Sodium bicarbonate increased capacity has headroom for increasing sales and margin. Further in FY '24, we have successfully completed installation of 6.7 megawatts of renewable energy, which demonstrate our commitment to strengthen the sustainability of us. We believe these steps will enhance our growth trajectory and accelerate our profitability in the future. The global demand for sodas excluding China fell by 3.2% year-on-year in calendar year 2023. Demand in the U.S. and Europe fell due to high inflation and weak demand. China was an outlier, as demand grew strongly by around 10% on year-on-year in calendar year 2023, driven by solar glass and lithium carbonate segment despite continued weakness in the real estate sector. As a result, global demand, including China, grew by 2.7% year-on-year in calendar year 2023. Globally, there is a capacity addition of around 9 to 10 million metric tonnes in calendar year 2023 and still [indiscernible] 2024 combined, driven by $6.5 million via natural sodas and 2.5 million via synthetic process. As a result, the global soda market is oversupplied and sentiment remain weak, putting pressure on realization and margins. Calendar year 2024 is likely to be [ bumpier ], but I believe it should not be worse than calendar year 2023. And growth will be similar of calendar year 2023 at about 2.5%. In calendar year 2025 and 2026, there will be no major capacity addition across the globe. This, along with the global recovery, will rebalance the demand-supply situation. We believe that the Indian market may remain range bound with an option for upside as and when scenario improves. Now I will hand over to Raman, who will provide further detail on our current performance. Following that, I look forward to addressing your questions if you have any. Thank you.

Thank you, sir. Good evening, everyone, and a very warm welcome to our Q4 and the year ended 31st March 2024 earnings call. The performance for the current quarter came in at lower than Q4 of the last year, however, some recovery has been observed from Q3 of this year. Revenue for the quarter came in at INR 840 crores compared to INR 1,140 crores in the corresponding quarter of the last year, and INR 813 crores compared to Q3 of this year. The reason for this lower revenue is mainly due to increased imports from Turkey, USA, and Russia, thus putting a pressure on the realization. In Q4, volumes increased from Q3, which resulted in higher revenue. EBITDA for the quarter stood at INR 201 crores compared to INR 371 crores in Q4 of FY '23 and INR 165 crores in Q3 of the current year. For the quarter, EBITDA margin came at 23.9% compared to 32.5% in the corresponding quarter of last year, and 20.3% in Q3 of current year. Sequentially, improvement in margin is mainly on account of increased sales volume and reduction in input costs. [ Cash ] from continued operations stood at INR 124 crores compared to INR 251 crores in Q4 of FY '23 and INR 100 crores in Q3 of this year. For the year ended 31st March '24, we generated INR 662 crores in cash profit after tax, which was utilized towards payment of CapEx of INR 107 crores and loan repayment of INR 152 crores and dividend of INR 166 crores. Also, working capital got reduced by INR 157 crores, mainly due to reduction in input costs. This in overall basis resulted in an overall cash surplus of around INR 400 crores for the current year. We are a net debt-free company, and our gross debt stood at INR 197 crores with cash and cash equivalent of INR 898 crores, resulting in a net cash surplus of around INR 701 crores at the year-end. Board has recommended a dividend of INR 12 per equity share of INR 10 each, which is 120% of the paid-in capital and 20% of our net profit. With this, I conclude my comments, and would now request the moderator to open the forum for question and answer. Thank you.

[Operator Instructions] The first question is from the line of Gaurav from Capital Farming Consultants.

I have 2 questions to the management. The first question is regarding the expansion which has been announced.

Sorry, Gaurav, if you can speak a little louder because we are not been able to hear you properly.

Is it audible now, better?

Now better, now better.

Thanks a lot for confirmation. So my first question is, considering that the market is already struggling with oversupply and subdued realizations, right, so our proposed expansion of 5.5 lakh tonne per annum, which will cost us approximately INR 4,000 crores, how is it justified, considering the oversupply and subdued realizations? That is my first question.

So Gaurav, if you look at -- if you want me to answer this or you want to ask all the questions together?

Yes, yes. You can answer these first, please.

Yes. So basically, Gaurav, this [indiscernible] situation which you are seeing and oversupply situation is not likely to continue. Second, in India, if you look at today also, the approximately around 25% to 26% of the product which is coming from outside the world. Pricing could be a challenge, but every producer has been able to sell the product into the domestic market. And longer if you look at pricing, maybe 3 to 5 years from now, every year, you need another 200,000 tonnes of extra volume demand growth happening in India itself. If you take that into account, there is a kind of a -- the position what we have is the demand, which is around 4.3 million tonnes, which is likely to be around 7 million tonnes in the next 5 to 7 years of time. So there is a kind of a demand growth of around 3 million tonnes from here, right? And this 500,000 tonnes will get absorbed without any difficulty.

So related to this only, on the capital allocation, like you are saying that for 5.5 lakh tonnes it will cost us INR 4,000 crores, and if I'm not wrong, our current capacity stands...

May I request you to use the handset, please?

I'm using the handset only. Is it audible now? Is it better?

[indiscernible] we are not able to hear you Gaurav, if you can - yes, please go ahead.

Is it better? Is it better now?

Yes, better now.

Yes, yes. So what I was saying that, considering 5 lakh tonnes, we are going to spend almost INR 4,000 crores, and considering if I'm not wrong, our current capacity is 12 lakh tonnes per annum, right, so almost our replacement cost [indiscernible] turns out to be somewhere around INR 8,000 crores, whereas marketing -- market is valuing our company less than INR 5,000 crores. So from a capital allocation point of view, does it make sense that rather than going and spending money as of now, we should go and do the buyback so that the internal rate of return of the money -- because when you are taking up the project, I'm sure that you are evaluating the internal rate of return that -- how much that is going to give you as a company. So if you correlate that, even if the buyback, isn't it that at such cheap valuation, you can go for the buyback of shares and then the free flow, free cash flow is there, maybe in 1 year, 2 years down the line, then we can continue with the planned project? That is my second question and the last.

Yes, Gaurav, let me respond to this. You see basically the capital allocation, the way we look at the capital allocation is from a slightly longer-term perspective. Okay. In terms of the market capitalization which you are talking about, is a kind of a phenomena which depends on the meaning of the other things as well, current market situation and so on. So therefore, from keeping that into mind, the growth of the company is also very, very important, because ultimately the growth gets to that [indiscernible] valuation. So as in management, we always believe the right allocation of the resources in the growth and the reward to the shareholders has to be kind of looked at. And like you know that we are in this business for the last 35 years. It's still in this business, the return on capital employed is more than 25%, 26%. And even the projection which we are having for the greenfield project, our IFR is coming more than 16%. Okay, keeping everything into mind, we should not get our thoughts modified every now and then because of the market, which [indiscernible] just change every now and then. We have to always look at slightly from a longer-term perspective. So our belief is the combination of the reward to the shareholders, either in the form of dividends or the buybacks, or on the other side, the growth of the company. Like you know that in addition to the soda ash expansion of 0.5 million tonnes, we are also looking at the bicarb, the [ bromine ], vacuum salt, and so on. So those -- growth is also, as a management, we believe that the growth is also equally important. And you know that the last couple of years, we have grown from 7 lakh tonnes to now 12 lakh tonnes. And we'd like to continue with this journey of the growth of the volume. Ultimately, we have to become a kind of a relevant player into the soda ash business when the demand growth kicks in.

Sure. And just a follow-up on this, if you don't mind. How you are going to fund this? Is it going to be debt-to-equity ratio of 80-20, 50-50? What exactly is going to be ratio? For this expansion?

So very right. This thing you see, basically, as you know that today also we are on the balance sheet of around INR 900 crores. And by the time this project gets completed, another 3 years, is another almost the bottom line at this -- even in this market situation, we have something around INR 500 crores of net cash after paying the dividend and everything. So very comfortably, we will be having a very, very, what we call, balanced debt equity ratio. Right now, we are in a negative debt equity ratio. But I think our [ peak ] keeps coming even less than 1, it's coming [indiscernible]. It is not going to be more than 0.5, and funding, as you rightly said, will not be more than -- maximum to maximum is going to be something around INR 2,000 crores, maximum to maximum.

The next question is from the line of Jainam Ghelani from Svan Investments.

I just wanted to understand now as you indicated that the pricing in the domestic market is getting impacted by a higher input coming from Turkey. But can you throw some light in terms of the demand? Because as you indicated in the opening remarks that solar glass demand has been seeing a little bit of pressure. So for '24-'25, '25-'26 how someone looks at the overall demand in the domestic market.

See, as you rightly said a couple of things, let me first clarify before I answer your question directly. First and foremost, Turkey supply which you are getting into the Indian market is a temporary phenomena. For them, the natural market is the Europe market. The moment the Europe recovers, all the volume or a majority of the volume of Turkey will go to that market. Because ultimately, in this business, the most important thing, where do we supply because of the supply chain cost. So that's one. Second, now coming back what you rightly said about the solar glass investment. As you know, there are many large players in India has announced massive solar investment or the green hydrogen investment into India. And the solar investment becomes very, very important for green hydrogen. And these are getting now saved up. Yes, some imports are coming right now for the government since they are kind of mandate of growing the carbon footprint reduction, and therefore they are aligned with solar import -- solar glass import. But subsequently when the subsidy gets built into India of the solar glass, automatically that incentive for the import will get reduced. And therefore, the demand will get recovered onto the solar glass as well. So on one side, the huge amount of opportunity on the solar glass. Second, even the import of solar glass will also get tapered down once the capacity gets built into India. So we see a clearly kind of a path for a good growth into the solar glass.

Sir, appreciate, but this will be that from a medium- to longer-term perspective. But if you are looking on the near term, in last quarter, we did see a good volume growth for GHCL, but do we continue to see the same volume numbers for FY '25, or probably there could be some pressure on that as well?

As I mentioned in my opening remarks, the demand growth in 2023-'24 was 2.7%. The way we look at, and of course, you know that in this current geopolitical situation and the overall uncertainty in the -- across the globe, something with clarity speaking about is very, very difficult. We definitely see that next year, '24, '25, the demand growth will be better as compared to '23, '24. So therefore, we definitely see in detergent, in chemical and other consuming sectors, we see a kind of a slightly better demand growth in India in '24, '25.

And secondly, [indiscernible] since you indicated the global [ industry ] oversupply, and given the current prices separately, there won't be a majority of the company will be obtaining at a good level of profitability. So are we seeing any rationalization of the capacity in the industry?

Sorry, I have not understood. What you said...?

Sir, given the current pressure in the overall margins of the sodas business for the domestic as well as the global company, are we seeing any rationalization of the capacity in the industry?

I don't think at this point of time, even this margin -- see, we are comparing our performance as compared to '23, '22-'23. And like I said in my opening remarks also, if you look at our same performance after eliminating the '22, '23, that was an abnormal year, margins are still very healthy. So keeping that margin, that margin which we are talking about, even 23%, 24% at this point of time, is a very healthy margin on this. So therefore, I don't see any rationalization at this point of time in the business, either in domestic or in the global space.

So then the last question from my side is on the CapEx that we have -- the Board has approved -- and Board has also shown an interest in setting up a bromine project also. So if you look from a near-term 3- to 4-year perspective, what is the total CapEx that GHCL will be spending if you consider a greenfield project, your vacuum salt and the bromine one?

See if you look at the investment into the bromine project, it is a very hardly around INR 115 crores, INR 120 crores kind of a thing. I mean, [indiscernible] salt roughly around INR 160 crores to INR 170 crores, right? Put together both, we are talking about INR 300 crores. The major growth investment, which is coming into the greenfield project, which is around INR 4,000 crores. And that also will be happening in the next 3 years of time. Whether it will be -- the more major expenditure will happen in the rear end of the project completion. [indiscernible] this is like INR 4,300 crores of investment will be there, which will incur in the next 3 years of time. And for the greenfield, we have already acquired a land, right? Yes, we have got a major portion of the land has already been acquired. A lot of work has been done. Basically, engineering has been completed, retail engineering is working, environmental clearances on the last leg of that. So we are very close to kind of a situation where we have to just start kind of in next few months, so that the [indiscernible] activity should start.

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

Question is during FY '24, what is the volume growth throughout the year? And given that we had a couple of setbacks because of the operational challenges. And next year, beyond the soda ash volume growth, will there be any additional revenues coming from the new projects?

Yes, Rohit, as you rightly said, in terms of our overall volume production, because of the -- some of the technical issues which we had last year, our volume was slightly lower than the earlier period, okay? But that is now settled. And therefore, this year, the volume -- production volume will be better than last year. So that's sure. And then second I said if the demand projection which we are talking about, definitely, the sales numbers should also be slightly better as compared to the last year.

Sure. And any other revenue streams from the newer projects which will likely to contribute in FY '25, or those will predominantly come '25-'26?

One is the sodium bicarbonate as I've mentioned. [indiscernible] expansion has happened last year. Now we are seeing the kind of the demand growth in the sodium bicarbonate. So the volume growth in the sodium bicarbonate will also be good in this year, '24, '25, so that will also add to the revenue. And in addition to that, like I said, our efficiency, our cost control measures, we have many things which we are doing which will add to that, to the bottom line.

Sure. Sir, second question is in terms of Chinese demand, where the growth was almost 10%, as you mentioned, last year. So is it a total consumption-led growth, or probably there is some inventory of solar glass in the global system and that may have some repercussions during the course of 2024 in terms of the soda ash additional demand?

See, the last year, the demand growth in China was primarily because of the very high growth into the solar -- solar and the lithium carbonate. And they were the net importer, as I mentioned in the opening, there were the net importer last year. Probably, at this point of a time, projecting what will happen because it's a global situation is very difficult at this point, but I've just given you an update of last year. And second, the real estate, which was lagging in the last year, how does that shape up next year, that is also to be seen. So let's hope on the journey of China continuing the way they have done in the last year.

The next question is from the line of Riya Mehta from Aequitas Investments.

In the [ overall ] volume for Q4, you mentioned that it is higher than Q3, but in terms of realization per tonne and EBITDA per tonne, was that also higher than Q3, or are you seeing some flat?

See, in terms of the volume, it was marginally up as compared to the last quarter. Almost I would say that -- I would say in the same range bound, not much significant volume growth was something around 5%. The volume growth was around 5%. And in terms of the realization -- in terms of the realization, yes, the realization was lower as compared to the last quarter of -- last quarter -- Q3 of '24, it was lower. And EBITDA was slightly better because of the better cost of [ fuel ].

Okay. Also in terms of demand/supply scenario, so globally you said that we have seen a global demand decline of 2.3%. That would be majorly coming from Europe?

Overall, as I said, if you look at -- excluding China, the demand has been -- growth was around 3.2%. And that is primarily the demand degrowth into the Europe as well as in the U.S.

Okay. And we have seen a natural soda ash capacity in U.S. also in [indiscernible] last year. So how is the ramping up happening there?

That has already come in line. And currently, those expansion is fully under utilization. So like I said in my opening remarks, that in the last 18 months, I think around 9 million to 10 million tonnes of to the new capacity has been built. And let me also tell you one thing that every year, even if we go with the 3% of demand growth globally, you require almost around 2 million tonnes of extra demand every year. So this -- like I said, in '25-'26 and '26-'27, we don't see any global new capacity coming in. This will get absorbed with the supply chain -- the demand/supply rebalance will happen in the -- after one year. This is what the way we look at.

Got it. In terms of [indiscernible] plant, the Phase 2 has also commissioned?

Yes. The phase 2, no. Phase 2 will come. Phase 1, fully completed. And Phase 2, most likely it will come after 2 years of time.

Okay. Phase 1 was 2,50,000 tonnes, right?

Sorry?

Phase 1 was 2,50,000 tonnes, right?

No, no, no. Inner Mongolia was more than 5 million tonnes.

More than 5 million tonnes. And over there, how are you seeing net imports? Are there a lot of shutdowns of plants that is happening?

You are talking about in China?

Yes.

Yes, China, some of the plants was at shut down because of some of the operating issue or the current environmental issue. Yes, there is some shutdowns over there.

Are you also seeing some shutdowns in Europe and U.S.?

Very difficult at this point of the time, Riya, to project on those things. So let's let the thing to be a little bit clearer, then probably we will be able to tell you better.

Also Tata chemical just commissioned its capacity, and going forward, they have mentioned about the brownfield expansion. So that will come prior to our expansion. So will we see some kind of volume impact?

No. Like I said, overall demand in the India really grow as per our projections by around 5%, and that itself will require another 200,000 tonnes of extra volume. And because of the demand/supply, the supply disruptions because of the [indiscernible], but we don't see that kind of a challenge in the coming quarters.

Okay. And in terms of ARPU capacity utilization, how much more can you do as compared to the volumes are in Q4?

No, I think we are on the full capacity utilization at this point of time.

Okay. So Q4 would be the highest possible volume we can go, correct?

Yes.

Okay. And then on the raw materials, how are we seeing the power cost -- over a period of time [ we are seeing ] power cost being reduced. So how is it for us?

See, ultimately, we will also be led by the overall globally, the prices pattern. Currently, I think prices are no longer stable into the energy prices. So I think at least at this point of the time, of course, you know that with regard to the global uncertainty is very difficult to predict what will happen. But currently, we are seeing a stability in the energy prices.

Okay. So there is no decrease in prices as such?

Yes.

Also, our capacity, greenfield capacity, where are we in the approval stage? Like where is it trending?

I think I've already said, Riya, in my earlier [indiscernible], that we are in the very last leg of our approvals.

Okay. How much time, if you could help us estimate?

Very difficult, Riya, we cannot predict the time line.

Okay. It is at the MOEF level?

Sorry to interrupt you, miss. I request you to join -- come back for the follow-up questions. [Operator Instructions] The next question is from the line of S. Ramesh from Nirmal Bang Equities.

Sir, if you look at the current global supply situation, if you are saying that the new capacities are operating at full capacity, there is still, I think, the bulk of the industry capacity is mostly operating only at 80%. So the question is, do you see material reduction in capacity or reduction in capacity utilization, particularly in Europe, where they are facing a lot of pain? And when do you see that happen? And what is the current -- what is your sense of the current cash cost for the new [indiscernible] natural soda ash and the new capacity based on synthetic Solvay route? Any sense you can give on these two?

Yes, Mr. Ramesh, I think very pertinent questions, but at this point of time, our understanding is, like I said, very difficult to predict that any change [ of utilization ] into the European capacity will happen and when it will happen. On a logical basis, what you are saying is right. But when it will happen, we don't know right now. In terms of China, I would say where the major expansion has happened there, I think they are balancing themselves into their supply/demand situation. And we are not seeing, at least at this point of time, a major disruption happening from China to the other part of the world. But that's the way we look at the China at this point of time. So far as your question on the cash cost, as you know that the metal soda ash is much cheaper in terms of the cash cost. However, because of the supply chain cost from a location of a production to the [indiscernible] and some [ food ] to the consumption center, I think a significant amount of the benefit gets away from there. And so therefore, in terms of the cost competitiveness, the people who are closer to the location where they're consumption is, definitely, they are competitive -- in the last competitive landscape. Therefore, I don't see any major worry on those accounts for the new capacity to kind of justify for expansion or coming into the field. In India, particularly, as I said, India is in a sweet spot. Because you know that the globally, India is one of a few countries where the growth of the overall GDP growth or overall consumption growth are likely to be good. And therefore, we clearly see that the opportunity of investment into Indian space in soda ash.

Sir, if you see the outlook for, say, over the next 4 to 8 quarters, so when do you see the industry getting back its pricing power and some improvement in per cent margins given the balance between the cost structure and the demand and supply and the pressure from Turkish import, you take everything into consideration, when do you expect some kind of recovery in the outlook for the industry, pricing, for a margin, on a sustainable basis?

See, Mr. Ramesh, two things I just want to highlight here. You see at this point of the time, I would -- I think you will agree with me, such an uncertain environment that probably we have not seen this kind of uncertain environment anytime in the near future, okay? So much of uncertainty, [ Red Sea ], your geopolitical tension in the various countries and the energy moving up and down, so predicting any kind of a situation at this point of time is very difficult at this time, but we are focusing more on slightly longer-term situation, number one. And number two, we are seeing that sweet spot that we have. So like one of the things which we are doing in GHCL Limited, how do you become more competitive? How do you focus on our costs so that we become more competitive than what we were yesterday. Secondly, what are the [indiscernible] [ costs ] into the small smart investment, like I just said, bromine. Now the existing [indiscernible] we are going with the technology where we will be able to kind of create a kind of project out of the our existing [indiscernible]. Similarly, the vacuum salt, generating from the base energy producing the vacuum salt. So these kind of the initiatives, how to improve our productivity on production of soda ash, or including the cost as I mentioned to our captive salt production enhancement on that or even the opportunity of a sodium bicarbonate. So these are [ initiatives ] which we are doing, Mr. Ramesh, to kind of remain ahead of its curve into the business. What will happen in the next few quarters, very difficult at this point of a time. I can tell you what has happened. Based on that, probably I think we have to leave it at that time.

Understood. Just one last thought, if I can get your perspective. Last quarter. Very important. Just on the lithium carbonate and solar panels, there is a view that there's some amount of front ending of the capacities, and that is also squeezing demand for soda ash. So what is your reading in terms of the incremental mapping of consumption in these 2 segments? Are you really seeing on the ground consumption growth in lithium carbonate and the solar glass panels and the excess capacity build up there is not an issue right now?

It is as you rightly said, so far as the lithium carbonate is concerned, in lithium carbonate definitely, the front end has happened, and therefore the lithium carbonate prices are softened. But again, like I said, if you look at -- you have to look at everything on a slightly longer-term perspective. So we definitely see that the future of the lithium carbonate will continue to be robust. And maybe the demand/supply is misbalance will happen for short period of time, but we see we are positive on that segment [indiscernible]. So while the solar is concerned, we are very positive on the solar side because -- in India as well as globally. Because as you know that the carbon footprint and the kind of focus of the globe is there. we clearly see this is a sunrise industry. And definitely, that will lead a significant amount of growth into the soda ash consumption in this segment, which is a kind of a very small at this point of time.

The next question is from the line of Rohit Sinha from Sunidhi Securities.

Some of my questions are already answered. So few from my side is, as we have commissioned our sodium bicarb capacity last 2 years, so how is -- there and where we can expect having the kind of full peak utilization in that. And secondly, since we have announced this bromine investment, so what sort of revenue we would be expecting, what kind of margins we're expecting and when we should expect the final commissioning of this project.

First question what you said about the sodium bicarb. So the good news is that there is a kind of a -- the usage of the sodium bicarbonate to the flue gas treatment has been started. I think many of the projects had started [ using ] the sodium bicarbonate. And therefore, the good news is that you will see in '24/'25, the demand expansion happening into the sodium bicarbonate. And probably '24/'25, we will have a significant amount of growth into our utilization of '24/'25. And hopefully, the full utilization and probably maybe we will be looking at a few more expansion into the sodium bicarbonate in next year's production. So that's sodium bicarbonate situation. Now let's come to the, you said about the bromine project. We have just in last few months, we have kind of a [indiscernible]. Of course, the preparation was got going on in this -- and just to kind of [indiscernible], I said approximately the investment is around INR 120 crores. And we will be producing something around 2,800 tonnes and our IRR will be around roughly around in the around 18% to 20% kind of IRR will be there. And probably, this will be -- because India's bromine growth is something around 6% to 8%. And we hope that -- and even China has a large importer of bromine, so there's a good growth globally also, if you look at it globally, you will find that globally in the demand of bromine something around USD 3.5 billion demand is there and the growth is something around 6% globally, led by China. And so therefore, in a way, I would say that 2,800 tonnes, approximately the price [indiscernible] be kind of a top line will be there on this.

And IRR [indiscernible]. And once even so all these plant submission, sodium bicarb and now bromine [indiscernible] how diversified our revenue which should be looking at. I mean currently, I think more than 90% is still our soda ash. So anything there we can see a more contribution from other segments with the better margins?

See, first and foremost, Rohit, I think the soda ash itself is a good margin, and we have a kind of an expertise on that business, as you know, that in terms of cost competitiveness, in terms of our efficiency, the way we do the business of soda ash, I think we are in a much better position on that business. And we'll continue to our focus on that, yes. But as you rightly said, projects [ market ] expansion is required. And you have seen that journey in the last few years. We are gradually expanding our product base. So at this point of time, we have added to the sodium bicarbonate. We have doubled the capacity. We have a plan to kind of go beyond in that double capacity. We have added the vacuum salt. Now we are adding the bromine also. And we are also looking at some more product into that basket. So we will keep on growing our basket of the products. Even our focus on the expanding on the bromine side also -- we are exploring that possibility also. We'll keep on doing that growth, but it will take some time to kind of a -- create a kind of a fair amount of product market expansion, where [Technical Difficulty]

Okay. So, is this bromine largely for domestic or export?

No, we have both the opportunities Rohit. On one side, we have an opportunity on the domestic market. As I said, domestic margins are quite large, and the demand growth is happening, something around 6% to 8% in the domestic market. And on the other side, even the China is the largest importer of bromine, so we have that opportunity also.

[Operator Instructions] Next question is from the line of Saket Kapoor from Kapoor & Company.

Firstly, sir, when we are emphasizing better utilization and contribution from sodium bicarbonate, it is directly proportional to the realization for soda ash moving up. That is higher -- our margins for sodas on a combined basis will improve since greater usage of sodium bicarbonate. That is what the understanding was the raw material for sodium bicarbonate is soda ash itself.

Definitely, the volume growth into the sodium bicarbonate will definitely improve the overall margin up for that. Yes, you're right.

And sir, one more clarification on the bromine part. You mentioned the peak turnover will be INR 60 crores to INR 63 crores on a 2800 tonnes capacity. Okay. And in that realm of things that that is a very small project. That is we are trying something on it, and this is only a baby step in that direction.

Saketji, you said ultimately what we have to do is kind of build up this over a period of time, the new -- and we are getting out of the -- in a way you can say we've created value out of the -- nowhere. Because we are already positioning this salt for from the [ ocean ], and just by putting a small amount of money, we are creating almost around a business of something around INR 60 crores to INR 70 crores revenue for that. I think these kind of initiatives where the return on capital is very, very good. So our focus is to look at these kind of opportunities, like vacuum salt I just [indiscernible] in the earlier calls also, that we are doing this model where the entire energy is a [indiscernible] energy. Keeping that into mind, I think this is the way we are going.

Right. And one small point on the salt yield program, the benefits of salt yield programs will be accrued for the financial year '24/'25?

No. It has started happening. Like last year also, we got some improvement. This year, we will get another improvement on that. And this will be a journey, like I said in the past also, 3 to 4 years of time gradually things are happening, and this benefit will accrue over a period of time.

I have one question for Ramanji. Sir, we have seen the other expenses for Q-on-Q moving up significantly, from INR 128 crores to INR 145 crores. So is there any one-off item in it? Or if you could explain? And then sir, you did mention that dividend payout has been 20% of net profit. So earlier, we have sticked to the band of 15% on a consistent basis. So can we [indiscernible] now penciling in a 20% payout or due to the lower profit for this year, the management has kept to rewarding its investors and it is only one off 20% payout?

So first of all, I'll give you another brief on other expenses. Yes, the other expenses are higher because of the higher freight cost during the higher freight expenses because the volumes have gone up. So around INR 12 crores on account of that, and the rest is on account of the CSR expenses. So this is a broad breakup of increasing the cost. And there has been some increase in the donation also during the quarter. So these are the 3 things are there.

Okay. So what should be the number, sir, that we'll be penciling in for on a quarter basis? If you remove the one-off.

So it's largely because of the operational freight is higher by almost INR 13 crores as compared to the previous quarter.

What Raman is trying to say that the volume as well as the material moving closer to the customer, this cost has been there. It probably will not be -- get kind of repeated every year. Of course, if the volume goes up, then definitely, this cost will go up. Otherwise, no.

Right. And on the dividend part.

See the dividend part is a part of -- depending upon how the Board takes a view of the growth opportunities or the way your overall profitability happens. But as you know that over a period of time we have demonstrated our reward to the shareholders by buybacks, 2 buybacks we have already done in the past. And we'll continue to have that kind of allocation for the shareholders, depending upon how the situation pans out at that period of time.

Right sir. And to conclude, sir, on the EBITDA percent part, the EBITDA margin of 25%, closer to 25%, is a sustainable number for this year taking into account the improved numbers from sodium bicarbonate, the advantage of the salt yield program, the lower input cost. All these factors will cumulatively add to the margin. I'm just making my concluding remarks here. No questions, just a conclusion so that I can just revert.

Saket, it is very difficult at this point of a time to give a guidance on maybe percentage and things like that. I have given you kind of an overall how do we see the business, and as I said, these are the -- so I will not -- these are the assessment at this point of a time, how the scenarios taper in the next few quarters, probably because there's really a lot of uncertainty thing with the market. It will be very difficult to kind of speak about any numbers.

The next question is from the line of Sangeeta Purushottam from Cogito.

Sir, my question related to the global supply/demand situation that you have put on one of your -- on your slide which is Page #13. Now there basically, we're seeing the global capacity of 80 million tonnes -- million metric tonnes, and production at 66 million tonnes, which means there's still a fairly large gap, right, about operating at globally 80% capacity. Now even if the global demand grows by, say, 2 million to 3 million tonnes, would that capacity not be enough to just take care of the demand for the next, say, 4 years at least? And therefore, is it likely that the prices may remain under pressure for longer than we think or may not rise very much?

See, as you have seen that the major demand -- major expansion of the capacity which is happening in China. What our understanding is in a slightly longer-term [ frame ], this rebalancing of the capacity in China will happen, because there are many plants in China, which are likely to be kind of a having a headwind on because of the location, because of the cost competitiveness and things like that. Like I said at the beginning of my comments, that we see '25/'26 and '26/'27, this rebalance will happen. And second, in terms of the capacity, probably, like you said, at this point of time is 80%; probably that can go to around 90% and -- but things will not be very significantly different than what it was in '23/'24 or likely to be in '24/'25.

Right. So sir, would it be fair to say that prices may have bottomed out now because the impact of the new capacity has been [ filled ], but it is difficult to predict when they will start rising. It could be 12 months from now, it could be 18 or 24 also?

Again, predicting what will happen in the future will be very difficult to kind of predict. But I can only tell you that based on the current assessment that we have, I think prices are on the [indiscernible] territory of that bottom out. This would be in the range-bound kind of a situation on this pricing. [indiscernible] at this point of time, how it will happen after 2 months, we don't know right now.

Right, right. Okay. Sir, [ Andre ] has one more question.

[indiscernible] Just a follow-up question to what Sangeeta was saying, we've been talking to a lot of companies about what the demand situation across the whole category of [indiscernible] Europe. And no one seems to be seeing a [ trend ] for some higher demand. If Europe is going to remain slow, will this phenomenon of Turkish companies dumping soda ash in the market affect our -- continue to affect our realization, so it's possible that there will be some demand growth in India, but the realization of soda ash would remain poor because of the weak demand in Europe linked to Turkey and all dumping?

See, I just said in my earlier answer also, that predicting how the shape-up of Europe will happen, how the domestic industry of the Europe will shape up, they will be sustainable on the current demand-supply situation, will they be cost competitive on those costs, and if the demand of the Europe does not recover, these are the questions which needs to be answered, and we don't know right now at this point of the time. But one thing we reasonably kind of believe that kind of a realization of the demand supply situation definitely will happen. Like China, in spite of such a huge demand growth of the supply, they balance themselves into their demand/supply situation. Same way, the same thing should happen in the Europe also. So at this point of time, I can only say that we see that, yes, 2024-'25, probably have willing the similar range-bound situation. How that will step up in '25, '26, we don't know right now.

Okay. My only comment was [Foreign Language].

[Foreign Language] At this point of time to predict all those uncertainty will be very difficult. But like I said, I'm repeating it, that if you look at slightly longer-term situation, we are very confident in this business that the base -- the demand of the solar or the lithium and other [indiscernible], probably, demand/supply balance will happen, and it's nothing to worry on that side.

The next question is from the line of [indiscernible] Shah from RatnaTraya Capital.

I have broadly 3 questions, we can go one by one. So first is on the greenfield capacity. Roughly, is there time from that we can think that the volumes from this capacity will start coming in, maybe 2 years, 5 years, anything like that?

No, I think the projection at this point of a time, we think is likely to take around 3 years of time from now onwards to complete this kind of a massive project. So that's the time line we have in our mind. [indiscernible] As you know, we have announced 0.5 million tonnes of the [indiscernible].

Sir, given 3 years for just to kick in, and we are already at high utilization, usually around 90%, do you think we might lose some market share?

As you rightly said, at this point of a time, we have the highest capacity utilization, probably some volume growth will happen in '24/'25 because last year we have lost some volume because of our technical issues, which we will gain this year. And on the other side, we are expanding on the other products. But yes, in terms of the soda ash, probably we may not have kind of a new volume coming in the next 2 years of time for '24/'25, which will be, but '25/'26, '26/'27 probably we may not have this volume.

Understood, sir. And next question is what would be our split in terms of dense and light soda ash? And the reason I ask this is solar glass would be mostly dense soda ash. So how do we think about that?

No. We are definitely very clear about this -- the demand growth, which is likely to happen into the dense more than the light soda ash. Of course, in the light soda ash also in the Indian typical situation, the detergent demand will grow. But as you rightly said, dense production will be higher. We have currently full capacity, almost around 60% of the volume can be generated for the dense. And in the new location also, we are going on the same ratio. And probably, we will not have any difficulty because of light and dense combination.

Alright, sir. And my last question is on if you have any outlook on realizations going forward for the next 6 months or couple of years.

Very difficult at this point of a time to talk about any prediction about the realization. But I just said, range bound, the bottom out of the prices at this point of time, and should be in the -- at least near term, this year [indiscernible] range bound realization at this point of time. But yes, if any opportunity comes, then definitely there is a possibility of upside into the margin.

Sorry, I just missed the point on the CapEx front. Out of the INR 4,000 crores, how much have you spent?

No, we have very meager amount we have only spent, which is only on, what you call, on the land acquisitions and things like that. Slightly expenditures will start once we start the physical activity of this project, so maybe some amount will be spent during '24 and '25. And the major portion will be happening after that.

[Operator Instructions] The next question is from the line of Rohit Nagraj from Centrum Broking Limited.

Just two quick follow-ups. One is the CapEx for FY '25 and '26, excluding the greenfield CapEx. And second, given that the market is oversupplied, in your assessment, is there any inventory situation across the globe, which is on a higher side?

So Rohit, last question, the inventory buildup at this point of time, not a very significant inventory build up into the system. Because of the China is on the low inventory situation. And the first question, frankly speaking, I've not understood what your question is about.

So barring the greenfield CapEx, what will be the CapEx for our expansion, I mean, the regular expansion plans during FY '25 and '26, the maintenance plus smaller expansion plans.

As I said, overall is about [indiscernible] basically 2 projects, which is the vacuum salt and bromine, and some very small amount [indiscernible] side. Next year also [indiscernible] other than the greenfield project, completion of vacuum salt and bromine [indiscernible]. This will be in the range of around INR 250 crores kind of a situation, every year kind of a situation.

The next follow-up question is from the line of Gaurav from Capital Farming Consultants.

Thanks for this follow-up question. The follow-up question is that like we have announced the capacity expansion. So any other player in Indian geography specifically who has announced capacity expansion in next 2, 3 years or 4 years down the line?

Gaurav, sorry, again, I've not been able to understand your questions clearly. So if you can slightly louder.

Sorry, my colleague has told me. Any person announced the capacity, yes, like you know that some of our competition has announced those capacity. And I've given you kind of a scenario of the way we look at the growth into the India. So definitely, there is a room for all of us to kind of grow our [indiscernible].

My last follow-up question is on the capacity utilization. Sorry I missed out if you have already clarified.

The next question is from the line of S. Ramesh from Nirmal Bang Equities. Due to no response, we are disconnecting their line. The next question is from the line of Saket Kapoor from Kapoor and Company.

A follow-up question from my side is on the utilization levels of the company for the year and the import number for the country for the whole year, if you could give these 2 data points.

This year, in '23-'24, the total import was around [indiscernible] million tonnes. And utilization was I think almost at peak level, slightly in the first 2 quarters, slightly quite low. But overall, it was in the peak level in the last [indiscernible].

Sir, average utilization number you can give, sir, for the year. You are contemplating 5% volume growth. So is it okay that 95% will be the number and we will be a aiming for a 100% utilization level for the next year, that translates into 5% volume growth?

Saketji, I think I've given you to an indication of that [indiscernible] utilization at this point of time. In the first 2 quarters, we had some setbacks because of the technical issues. And next year, probably, we will have that number, which will be better than this year's number will be there. I think you can always calculate this number. You have all the data.

The next follow-up question is from the line of Riya Mehta from Aequitas Investments.

In the balance sheet, your intangible asset has gone up by INR 20 crores. So what would that be?

There is a -- during the year, we acquired Ajmera Cement. There is a lease that is up, lease mine reserves are there [indiscernible] there. So that is classified as intangible [indiscernible] limestone.

We have acquired a business for the captive limestone and that is that [indiscernible] that account.

And what was the total payment done to them?

I think the total payment was around INR 27 crores.

The next follow-up question is from the line of S. Ramesh from Nirmal Bang Equities.

So if you look at this captive limestone for the expansion, what is your target in terms of the internal production of limestone and in-house production of salt, what would that percentage be?

So at this point of time, we are looking at a policy that we have. We are taking some [indiscernible] there. We are definitely trying to enhance our capacity there. In addition to that, we are also looking at the possibility -- we're trying to get some more captive salt acquisition or some government lease on the salt field. And hopefully, the way we are planning, probably we will be able to take care of the requirement of the new grid as well as the current requirements of our soda ash plant. Probably we will be in a much better position as compared to what we are today in terms of overall soda ash salt requirement [indiscernible] which we are doing. And in terms of the limestone, that limestone, as you know, that the major portion of the limestone in India by all across the industry, that's being imported. And there, we are kind of distributing that limestone supply from a different geographical location. And largely, we will be more dependent on the import of limestone even in the greenfield project, yet some percentage will come from the domestic as well.

When you say domestic, I'm asking about the company, will the company be able to increase the production or share of captive production of limestone and salt? So when you say imports, you're talking about import from outside India, right?

Yes. So like I said, captive production, we will not be able to increase in a very significant manner in the limestone. But yes, in the salt, as I mentioned to you, we are looking -- we are doing some initiative on that area. And probably there, we will be able to increase that salt production, captive.

Thank you. Ladies and gentlemen, due to time constraints, that was the last question, and I'll hand the conference over to management for closing comments.

Yes. Thank you, everyone, for your all support which you have been given to us. And as I always mentioned that we will always do best of our ability to kind of grow the business, remain competitive in the business and do everything possible to kind of create value for our shareholders. And we will also be very vigilant on our capital allocation to ensure that the capitals are being properly utilized for the value creation of our shareholders. So thank you for all your support.

On behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Thank you.