Gujarat State Fertilizers & Chemicals Limited (500690) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Gujarat State Fertilizers & Chemicals Limited Q2 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. S.K. Bajpai and S.V. Varma. Thank you, and over to you, sir.

So good afternoon, sir. So we are pleased to welcome you all to the earnings conference call of GSFC. We appreciate your participation in the GSFC Quarter 2 Post-Result Conference Call. I trust that you must have reviewed our findings and the other presentations that have been posted on our website as well as the stock exchanges. We are happy to inform that your company has achieved a standalone, highest-ever quarter 2 PAT of INR 303 crores, also second highest-ever quarter 2 PBT of INR 391 crores and second highest-ever first half profit after tax of INR 395 crores. However, company turnover fell by 13% in quarter 2 and 6% in H1 on Y-o-Y basis. The main reason for reduction in turnover is reduced subsidy rates and lower DAP and urea trading volumes. However, operating margins rose from 7% to 11% in Q2 and 7% to 9% in H1. The company achieved this performance despite ongoing external challenges in Fertilizers as well as Industrial products segment. First of all, subsidy rates for P&K fertilizers fell significantly year-on-year in Q2 and H1, with ammonium sulfate falling by 38%, ammonium phosphate sulfate falling by 35%, and DAP falling by 24%, resulting in reduced P&K fertilizer sales realization. However, the government declared onetime special package of DAP of INR 3,500 per metric tonne on October 24, which provided much needed support to industry. The government is also prompt in releasing the subsidy, and we have received this subsidy that too in the second week of October. Contrary to this, cost of essential inputs, such as natural gas, ammonia and phosphoric acid are on increasing trend. Presently, phosphoric acid price has increased to $1,060 per metric tonne for Q3 current financial year versus $948 per metric tonne in the quarter 2 current financial year. International prices of DAP has now stabilized in the range of USD 620 per metric tonne, closing exchange rate of USD-INR is also of cause of concern for the industry. Geopolitical tension in Middle East and Red Sea crisis are causing delay in the arrival of vessels of DAP and other input materials. Considering the other factors, cost effectiveness of local phosphatic fertilizers, manufacture is likely to be jeopardized. The company responded by boosting capacity utilization, increasing sales of manufactured products and optimizing product mix in both segments. Fertilizer output went up by 16%, 1.21 lakh metric tonne during first half on Y-o-Y basis. Good rainfall during current monsoon and enhancement of minimum support prices by government of India for 6 major Rabi crops will enhance demand for agri inputs in the upcoming quarters. The government is also pushing the industry to supply more DAP, and the company has finalized the import contract of about 1.25 lakh metric tonne in the upcoming quarters. We are targeting sales in the range of 5 lakh metric tonnes in quarter 3 current financial year. In case of Industrial Products segment, capro-benzene spread reduced to $620 per metric tonne as against $673 per metric tonne on Y-o-Y basis. However, the demand for our major industrial products is likely to remain stable to firm during next quarter. The turnover of Industrial Products in quarter 3 '24-'25 is expected to be higher than quarter 2 '24-'25. Commercial production in HX Crystal plant has been commenced with capacity of 20 metric tonne per day on 11th October 2024. For melamine, domestic and export markets are expected to improve during quarter 3 current financial year, even though competitive imports of melamine are likely to pose a challenge. The organization is adhering to its strategic objectives with regard to capital expenditures. It is anticipated that Sulfuric Acid V Project and Urea-II Revamping projects will be operational at end of the current financial year. Further, we are trying for part availability of cheaper solar power from GIPCL after part commissioning of their 75-megawatt solar power facility at Vastan, Gujarat. These facilities are expected to be fully operational by May next year. I would like to express my gratitude for your patience, listening to my overview. We will now commence the question-and-answer session.

[Operator Instructions] The first question is from the line of Nirav from Anvil Wealth.

Sir, I have a few questions. Sir, when we discussed last quarter, you mentioned that since it was a start of the season for the fertilizer, we had to offer some sort of discount in AS and ASP. So just wanted to understand from you that were those discounts withdrawn by us? And because our sales volume for both the fertilizers also looks pretty good. So just wanted to understand from you that what was the situation on the discount part A and B? What was the average EBITDA what we have clocked for both the fertilizer grade? Because earlier we used to guide that for both the fertilizers on an average, it used to be around INR 2,500 to INR 3,000 a tonne. So if you can just share your views here.

Sanjeev Varma here. In case of discounts, yes, we have slowly reduced the discount over the period as the market started taking the fertilizers. As you know, the season was delayed. So real sales happened lately, but now it's been nearly zero for both the products.

Got it. Got it. So sir, what was the EBITDA per metric tonne for both these grades put together in Q2 of FY '25?

It is near about INR 2,500 per metric tonne.

Got it. And because now those discounts have been withdrawn, we can see further improvement in quarter 3 because you also guided 5 lakh tonnes of fertilizer production in Q3. So this would help the margins to improve in Q3?

No. We are not certain because the sulfuric acid prices and ammonia prices are going to increase in the next quarter. So it is very difficult to predict that the same margin will continue for the Q3 also.

And PA prices has also increased. You know that PA prices gone up by $110 per metric tonne that will impact the cost of production. Yes, the prices -- the market will start responding to this increase. And let's hope for the best.

Got it. So sir, just to continue here, like based on the production numbers, what we have reported, I think our quarterly requirement for sulfuric acid this quarter was close to 175,000 tonnes. And I think what we are having current capacity is close to around -- on an annual basis, close to around 7 lakh tonnes. So you rightly mentioned that there was an increase in the sulfuric acid prices globally and also domestically. So does this buildup in the prices for -- or increase in the prices of sulfuric acid doesn't help us to increase the prices of both these fertilizer grades? And how much we are currently buying from the outside market so far as sulfuric acid is concerned?

So as you know, the Sulfuric Acid IV Project, what we are under construction, that will be operational at the end of the financial year as per my opening remarks. So whatever the deficiency in the sulfuric acid for the period from October to March, we have made -- tied up with the other companies as a long-term solution. So we are receiving this sulfuric acid at a competitive price rather than going on the spot. And as you know, the spot market is very volatile and is very costly also. So we have made arrangement of sulfuric acid for the 6-month period until the time our Sulfuric Acid V Project becomes fully operational.

Got it. But the number of 175,000 tonnes of sulfuric acid requirement is pretty near to what we have actually consumed in Q2 or the figure is slightly different?

No. It depends upon the production of ammonium sulfate and ammonium phosphate sulfate at our this Fertilizer Nagar Complex and ammonium phosphate sulfate in -- at Sikka, Jamnagar. So depending upon the production over there and here in Fertilizer Nagar, we prefer the sulfuric acid.

Correct. But then government doesn't allow us to build up those cost increases in our MRPs or let's say, the subsidy doesn't go up. Because what we can understand from you that there are only 2 players who are producing this. And being a critical water-soluble fertilizer for the farmers, doesn't this allow us to pass on those cost increases to the customers or to the farmers?

See, we are in a competitive market. There are different grades of water solubles available in the market. Yes, we get a subsidy based on the NBS rate for NPKs and we have to move subsidies because it is only MRPs where we function based on competitors in the market. So that is going to remain for all the products, which are water-soluble mostly.

Got it. Sir, second question is on -- you mentioned that our contracted price for phos acid this -- for Q3 was close to $1,060 per metric tonne. And with the shortage of DAP currently in the market, does it provides a chance for us here to increase the MRP or there's a fair chance that government would increase the subsidy here so that our per tonne margins are not impacted? You mentioned last time that even DAP were making losses at the EBITDA level. So if you can help us understand what was the situation in Q2? And how do you see the things forward.

As I told that DAP in the last interview also, the DAP was not a very cost economical thing for us to produce here by purchasing of phosphoric acid. So we have shifted our production to ammonium phosphate sulfate and other NPK grades of fertilizer at Sikka unit. And as far as the requirement of DAP is concerned, we have tied up with foreign suppliers for importing the DAP of 125,000 metric tonnes, and we will be receiving in quarter 3. However, in Q2, if you have heard this -- my opening remarks, the lesser revenue -- one of the reasons of lesser revenue is that we did not incur any trading of DAP. So that was one of the reasons. So that's why our revenue turnover was 13% below in Y-o-Y basis.

Correct. And because INR 3,500 per metric ton increase in the subsidy was effective October, was Q2 being still at a loss at the EBITDA level for the DAP?

No, it is effective from 1st April, if I'm not mistaken. This INR 3,500 is effective from 1st April through 31st December '24. And this one more circular came from the DOF for the compensating the loss, if anything, due to the import of DAP, that is effective. I think that came from 1st of October. And if whatever import we are doing, and if there is any loss incurred by the company, then this will be compensated by the government.

That is on the trading only. But on the manufacturing side, the subsidy increase of INR 3,500 will take care of our profits or still the profits are not at the reasonable level to adjust?

The profits are not that delaying. That's why I told that we have shifted already to the APS production in case of DAP. So that is as simple as this.

Got it. And sir, last question from my side is on the urea part, how much we are currently losing at the EBITDA per metric tonne level? And once that energy conservation measure is implemented, which would reduce our gcal per metric tonne, how much of this EBITDA per metric tonne could be recouped?

This is [indiscernible]. With regards to the urea, as everybody knows that the government has not implemented or revised the fixed cost, which -- and the fixed cost is based on company-wise for each industry. So that's the question because variable cost is being passed through. So that's the question which affects every company. So ours is also the case where we get hit about INR 1,000 to INR 1,200 per metric tonne on the EBITDA side.

Got it. And this energy conservation measures, what we have been implementing or is in the process of getting completed, would this INR 1,000 or INR 1,200 per metric tonne would help us to save some of the fixed cost? Because then our urea capacity is also going up. So is there any chance of us recouping some of this EBITDA per metric tonne loss?

That will also do some sort of help in respect to covering up this differential. Over and above, government is also in the process of revising that and they have asked for data of the fixed cost from all industries. So they are in the process. And once they get completed over with that process, they will come up -- they might come up with increase in the fixed cost per metric tonne part also. So that process is all and they have -- we have already submitted the data for the same. And let's see, once they come up with their calculation and finalization of the increase in fixed cost.

The next question is from the line of [ Shanmugham ], an Individual Investor.

My question is slightly on the cost. I see employee cost have sharp reduction, sir, approximately by INR 50 crores. Is it -- is there any onetime cost that has an impact? Or do you expect the same reduction in the coming month or so?

No, no. This is the onetime cost. Actually, what we have provided something because of the pay revision and bonus payment there were some certain adjustment, but it is not a regular feature, so it is a one type of -- onetime cost.

So there is an entry for INR 50 crores, am I right?

What?

There is an entry for INR 50 crores, entire is due to that onetime adjustment?

[indiscernible].

Let me put it this way. Can I expect the employee cost in line with the previous quarters?

Just a moment. Let me see. So this is INR 250 crores over in '23. And now September 30, '24, there is -- the personnel cost is only INR 185 crores. Is that right?

Yes.

INR 250 crores was earlier September 30, '23, when we have made the provision. So that's why the cost was higher in '23. And now it has been reduced to normal levels, and which is INR 185 crores.

Okay. Great. So it's going to be -- it is current norm, it's going to be the same in the coming months. Am I right?

Yes, yes, yes. That's correct.

Yes. That's fair, sir. And second, cost element, raw material costs. I see there is a drop by 1.5% on a sequential basis. So in the initial remarks that I understand that we may not sustain in the coming months here and there. If I look at in a different perspective, sir, can we at least stick to 63% of material costs in the coming months? Or it will be like last year, it will be 65%? Sorry, if I'm wrong in numbers.

No, no problem, but this raw material cost is an increasing trend, as I spoke in the opening remarks. Main raw materials are [indiscernible] P205, phosphoric acid and ammonia. So both the costs, if you see internationally, ammonia pricing and the phosphoric acid pricing is in rising trend. So anyway this raw material cost will go up. And as we are -- our production is higher in this quarter, so that is also the impact on the higher raw material cost.

Is there any value here that we can expect to see -- to sustain this, to offset the hike in raw material cost in the coming months?

It is very difficult to say because the hike in the fertilizers, the prices are determined by the government subsidy and the MRP both. So if there is any increase in the cost, we have to the adjust somewhere either to shift the production of other products or we have to absorb the cost. But we manage this through the product mix changes so that we are keeping it in control.

Yes, yes. That's what I understand from your opening remarks as well. Because of the product mix, we could offset the higher cost. So in that sense, can we maintain this 11% or at least 10% of EBITDA in the rest of the quarter?

Yes, we see, 7% to 8% will remain in the same line.

Sorry, sir?

You were talking about that EBITDA percentage, no?

No, what I was trying to say, we do expect the raw material cost increase in the coming months that we agree. And also I understand from you that there is product mix changes that given good improvement in EBITDA. So the hike in raw material cost can be offset by your product mix changes in the coming months. So ideally, so what you achieved 11% EBITDA can be expected in the coming months. Am I right, sir?

See we're not getting clearly what you're asking. See what we have said that we are trying to change the product mix as to recover hike in the product cost for the mix thing and that was the best endeavor which we are doing. So we are assuming that we will be able to maintain our EBITDA margins in that case.

Okay. Can we -- so 10%, we can expect in the coming months as far as EBITDA is concerned? Currently, the 11.6% is achievement. So even if you look at hikes in coming headwinds or something, this product mix could help from that. And could be around 10%, I can expect, sir?

See, again, we are not able to clearly hear you what you are saying. The only thing which we want to say that we will -- our endeavor is to see that our EBITDA margin is protected with the change in the product mix in spite of increase in cost of the raw materials. And this will be on the best endeavor basis based on the market demand and supply, both. So yes, our full efforts we will see that we at least get some EBITDA which is [indiscernible] this Q2.

And I understand that power cost -- there is a reduction in power cost that would -- I do appreciate cost management [indiscernible] . But you said that still there is a room and there are some project which are coming. From next year onwards, there will be good impact, next year, maybe in May onwards, that's fine. With respect to other expenses, sir, I see it's very neutral. It's fixed in nature compared to last year and -- or sequential basis. Do you see any room for cost control on this area, other expenses? Or you can drill down a couple of elements that's contributing more than 50% of other expenses?

So what I see in the other expenses are more or less at the same level in the quarter and as well as in half yearly basis. The quarterly basis, it is around [ INR 274 crores ], and half yearly it is [ INR 443 crores ]. So there is no difference as such, and we are maintaining the same level of the other expenditure.

Sir, my last question on other income, how much portion that comes from your investments, sir? I see the balance sheet, you have a huge investment. If I ask you how much portion of that is related to your investment income out of the INR 150 crores, I believe, I remember...

It is INR 150 crores. And most of the things the other income contains is the dividend received from the other companies and the interest on our access fund, whatever we have parked in the fixed budget or with the banker.

So the entire income from that accrual -- sorry, that investment. Am I right?

I cannot say it is investment. It is a temporary parking of funds whatever we are having. Whenever we receive subsidy or something like that, so for temporary period we park the funds and we receive the interest on that.

Okay, sir. Sorry, one question last, I missed. Sorry for that. With regard to cash equivalents, I see a huge element in the balance sheet of about INR 2,000 crores, I believe, roughly I remember, INR 2,200 crores, I believe. So this cash company, you have any idea, sir, to diversify this to maybe to improve efficiency from strategic perspective? Do you have any idea to share?

We cannot get what you want. Will you please repeat?

In the balance sheet, I remember, there is a cash equivalent more than INR 2,000 crores in the balance sheet. Am I right, sir?

Yes, yes, maybe.

So we have huge cash that's idle. Do you have any plans to invest in to improve efficiency -- to improve verticals?

Whatever the cash we are having in the balance sheet, it will be used for our expansion project, which is lined up as per the investor presentation, 2 projects we are -- we will be commissioning in the year-end, so where INR 400 crores to INR 500 crores is required to be paid. And then after phosphoric acid or sulfuric acid plant, we are projecting at INR 600 crores, that cost INR 1,560 crores also. And over and above the Dahej project, we have already got land and that study is going on and we have immediately starting the finalization of which product and which project we will be going to install there. And so whatever the money we are having, it will be planned for the expansion of the project.

Great, sir. So what is capacity utilization as of now for the current year?

Capacity utilization is more than 100%.

More than 100%. Yes, I understand. I understand. So all these expenses that you are looking for CapEx will be effective from the next year onwards?

Whatever CapEx we are having [ INR 565 crores ] I told that it will be required to be paid at the year-end. And afterwards as per the progress in the project, we would be utilizing the fund.

I mean when it will be converted to numbers, the CapEx, could be next year onwards? Next year, January?

Yes, yes, because all these projects are for the captive consumption. So there will not be a direct one-to-one link [indiscernible]. So whatever sulfuric acid we will produce over there, it will be consumed internally. So it will be having impact on our bottom line rather than the top line.

Okay, sir. Sir, last and final, you said that annual guidance in the last con calls, I do remember that volume perspective, there will be growth of 20%. Hope that we stick to the same number. Am I right, sir?

You said the growth in turnover, right?

Volume base, yes.

Volume. See growth in the volume, if you see this quarter, there was some decrease in sales because of the market condition where -- next quarter will be improving the sales. Yes, we have projecting still the growth of 20% to 30%. Yes.

[Operator Instructions] The next question is from the line of Nirav from Anvil Wealth.

Sir, in earlier discussions, you mentioned that put together everything like HX Plant and renewables as well as the sulfuric acid and phosphoric acid plant, our CapEx was close to INR 2,200 crores to INR 2,300 crores put together. And I guess we have spent close to around INR 250 crores till March of '24. So if you just walk us through how much we have spent until first half? And what could be the numbers we should look for FY '25?

First half, we have spent I think INR 100 crores to INR 150 crores. And up to 31st March, second half, we will be spending around INR 400 crores to INR 500 crores because SA-V and Urea-II Revamping, both the plants are slated to be commissioned in March or up to the end of this financial year. So mostly all the payments or final payment will be released up to the current financial year. And as far as this phosphoric acid an sulfuric acid project is concerned, it is at initial stage. So there will not be any direct impact on the expenditure. But slowly, slowly after the detailed engineering and the orders are placed to the detailed engineering workers, then after the current payment will start because the time period is also mentioned that up to March '27, I think.

Correct. And sir, currently, I think based on the production volumes, I think our phos acid requirement, depending upon the grades we produce, is close to around 200,000 to 250,000 tonnes in between that. So how are we currently placed? Because one, that capacity would be commissioned, so before that, currently, how much we are producing phos acid? And how much we are currently buying from the market?

See phos acid is produced only at Fertilizer Nagar complex. There is no phosphoric acid plant at Sikka. What we are having the capital expansion project, the phosphoric acid or sulfuric acid plant is to be put up at Sikka for meeting the requirement for DAP and other NPK grades of fertilizers. So presently, there is no phosphoric acid plant at Sikka in it. All the material is purchased from the foreign suppliers. As far as the Fertilizer Nagar Complex is concerned, we are getting some rock phosphate from this RSMML. And we are also procuring rock phosphate from the foreign suppliers [indiscernible].

So how much is our current PA production, sir, if you can share?

In Baroda, it is around 60,000 metric tonne per annum.

Okay. Okay. And for that rock phosphate, what you mentioned, we either import or source something from the domestic market, correct?

Yes, yes.

And sir, last question is on -- you mentioned last time that Baroda complex consumes close to around 75 to 80 megawatts of power. And like 40% is from renewables. Rest, we are currently buying it from the grid. So has there any reduction in the grid cost? Or are we increasing our renewables? Because I think you mentioned that GIPCL is get -- going to commission in June 2025, something close to around 75 megawatts of solar power plant. So how the power mix would look like once that supplies from GIPCL commences? And any cost reduction in per unit basis, what we have seen from our power buying from the grid?

So there are 2 plants we are proposing. One is it Charanka solar power plant of 15 megawatts. That plant is proposed -- commissioned by -- and I think by the end of this year, financial year. So that the whole 15 megawatts, we will be receiving for our own consumption.. However GIPCL of 75 megawatts plant, 50% of the electricity will come to us and 50% will go to the GACL, the other partner. So in the GIPCL, our share is 37.5 megawatts. So there must be some power saving because after this -- we start receiving the power, then we will come to know what is the rate and what is the sort of charges they are offering. But certainly, it is cheaper than the current purchase -- power purchase from the grid.

Correct. And the grid cost is what, close to INR 10 a unit or it is lesser than that?

It is, I think, INR 8 to INR 9 per unit.

Got it. Sir, similarly, if you can also help the power consumption in megawatts for our Sikka plant and how we are placed there?

Sikka consumption is around -- is quite less compared to Baroda unit. And presently, we are buying part from windmill and certain from the grid because Sikka operation depends on the availability of phosphoric acid and ammonia. So there it is very important to how to do this thing. And total project power cost you get is a weighted average from Sikka and Baroda, both in the balance sheet.

Got it. Got it. But any idea on the total power consumption at the Sikka...

[indiscernible] megawatts, if it run for 100% capacity. So based on change in capacity consumption reduces.

The next question is from the line of Saket Kapoor from Kapoor & Co.

Sir, for our Industrial Chemicals segment, if you could give us some more color what's the market scenario currently? And I think -- so we were looking to move more downstream products for caprolactam. So where are we in terms of penetrating or improving our product basket?

As you know, the IT segment or chemical market is very -- it's still not out of woods. And there is no [indiscernible] material is available from the China or other foreign countries. So we have to compete the cheaper material and cheaper pricing of the caprolactam as well as melamine in the Indian market. However, we are doing some efforts -- we are taking. For the caprolactam, we have commissioned this HX Sulfate Crystal plant. So HX is one of the intermediates for producing the caprolactam or it will go to the -- for the production of HX sulfate, HX Crystal plant And that is 20 metric tonne per day capacity. And that has been commenced from 12th October. The per annum capacity of both the plants, 1 and 2, comes to around 10,000 metrics tonne per annum. So near about -- top line will increase by INR 125 crores. And being a good margin product, we expect around 30% to 40% margin in this HX sulfate. So that will reduce the caprolactam availability in the market. So we will get benefited by this and the new product, HX Sulphate crystal which is 100% imported presently in India. Nobody else is manufacturing. So GSFC is only the manufacturer of this new product. So being a put forward for the Atmanirbhar Bharat. So that is a good step for the company.

Sir, can you come again for the number. What will be our annual savings with this commercial production of HX Crystal plant?

Sir I told that top line will be INR 125 crores on full capacity per annum basis. And 40% means INR 30 crores -- INR 25 crores to INR 30 crores bottom line will be improved.

When can we see the plant...

But whatever we are having the breakeven of some few crores loss, that will [indiscernible] back out.

Okay. And when we be will achieving the optimum utilization levels? [Foreign Language].

First of all, we are operating at more than 100% capacity already. The second one is commissioned on 11th October, and it is near towards 90% or 95% capacity utilization. And I'm sure in the next month or so, we will be achieving more than 100% capacity in that plant also.

Sir, secondly, for the fertilizer segment, I think so with Rabi season buying, I think, so in the annual -- what kind of volume growth are we anticipating going ahead for Q3 and Q4? And what is the -- what should be the trend going ahead? For fertilizer, we have more visibility than the industrial products.

In case of fertilizer for next Rabi in Q3. Mr. Bajpai has said in his opening remarks that we'll be selling around 5 lakh tonnes of fertilizers. Yes, we'll be meeting that and may be surpassing that because Rabi is in full swing now. But from January to March, the fourth quarter is always a main season for this thing and mostly goes to the stocking levels in field. So it will depend on the prices of PA and ammonia at that time how much we produce and how much we put in the stocking at the field level.

But overall, sir...

Growth, what we have indicated growth in the volume should be there.

Okay. And our INR 1,500 per tonne EBITDA number is also -- we should hold on to that?

Yes.

Correct. Sir, we have seen our raw material price trends, employee cost, these things remaining stable. And also your presentation also speaks for the same. So going ahead, do you think that these line items -- the vagaries of raw materials are now behind us, and we can look at these price trends to remain in a similar way?

No international prices of all the raw material is very volatile. As you might have seen, that current crisis, international prices [indiscernible] parked between the countries and Red Sea crisis. So this may impact the future scenario of the raw material availability in India and also the pricing. So it is very difficult to say what way it will go.

But sir, when we look at the key input cost movements, even year-on-year or even barring the June quarter, vagaries most of the imported phosphorus, ammonia, natural gas, benzene, prices have remained in a band only, sir. Correct me there, sir, when we look at the key input cost movements, Slide #5. So Slide #5, it does speak in that manner. That was the reason why I came to that conclusion.

This is a slide only depicting the caprolactam and benzene spread. So [indiscernible] light of the presentation only capro-benzene is spread. And I have thought that it has been reduced to $620 from $673 year back on September '23. So capro-benzene spread is reduced, and let us hope for the best that some improvement will be there in the next quarter or so. But we are not very much hopeful. That's why we are taking this step to divert this caprolactam or reduce caprolactam production and divert the material for the new project called HX Crystal. And we are also importing some direct alone. So that can be directly fitted into our caprolactam plant. So the benzene consumption will be lesser because if you see the benzene pricing, it has been increased 23% on year-to-year basis for the quarter. So benzene price is very volatile. In comparison to caprolactam, benzene price is much higher. That's why the spreads get squeezed.

[Operator Instructions] As there are no further questions, I would now like to hand the conference over to the management for the closing comments.

Yes. Thank you for patience, listening, and I hope that we have given the satisfactory reply to all the investors who have posed the question on the working of the company. And we will meet again after 3 months at the -- after the result of third quarter in January next year. Thank you very much.

On behalf of Anurag Service LLP, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.