I G Petrochemicals Limited (500199) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to I G Petrochemicals Limited Q2 and H1 FY '24 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Pramod Bhandari, CFO. Thank you, and over to you, Mr. Pramod Bhandari. Go ahead, sir.

Thank you very much. Good afternoon, everybody. On this call, we are joined by SGA, our Investor Relations Advisor. I hope that everyone was able to review our financial results and the investor presentation, which were uploaded on the -- to the stock exchange and our company website. After providing a quick overview of recent industry development and IGPL progress, we will proceed towards the operational and financial highlight. During the year between the 6 months ended September, prices of the petrochemical products are swept by the multiple factors, including the Central Bank policy for the tightening, weak demand in China, which led to the increased inventory across all the chemical sector companies. Q2 saw a slight increase in the price of Phthalic Anhydride, although the demand continued to remain fragile for certain end user markets. We are seeing a sign of demand revival. We expect price and demand to be stabilized in the next 1 or 2 quarters. IGPL being a market leader and one of the lowest cost supplier of Phthalic in India, our portfolio includes the Maleic Anhydride Benzoic Acid and DEP, which is the advanced plasticizer, which we have started around 1.5 years ago. Domestic demand of the PAN is expected to around 450 to 480K MTPA and is growing at a CAGR of around 5% to 6% every year. Further, the usage of the Phthalic Anhydride has grown significantly in the last few years due to the multipurpose usage of Phthalic as a raw material or as an intermediate by most of the downstream chemical companies. In terms of our expansion of 53,000 tonne at our existing location at Taloja is on track. We are expect it to complete it by March. We are planning to start the trial run probably in December and Jan. Following the implementation of PA-5, our total capacity of Phthalic Anhydride will increase 275,000 tonnes. This expansion will lead IGPL to be the next leg of the growth. We have successfully stabilized the DEP business, which is one of the key advance plasticizers. We are also assessing a couple of more downstream derivatives, few more plasticizers product to act our overall product portfolio. We will announce more details whenever it is finalized and approved by the Board. For the quarter ended Q2 FY '24, the total income stood at around INR 509 crores with a decline of around 11%. EBITDA was around INR 33 crores with a margin of around 6.5%. The margin has been subdued because of the lower spreads as well as the lower volume of our production due to the cut down of PA-4 for changing the catalyst for 27 days. And margin was around $100 to -- $80 to $100 compared to an average of $150 to $200 for the last couple of years. From the half year ended, the total revenue for the first half was INR 1,072 crores, which then decline of around 13% on year-to-year basis. That is mainly on account of the lower volume because of the shutdown, lower margin of Phthalic, no realization on the Maleic Anhydride and some extra charge, which has been provided during last quarter because of shutdown, which is INR 6 crores to INR 7 crores of the repair and maintenance as well as the energy, which is required when you shutdown the plant and again, restart the plant. EBITDA for the first half of '24 stood at INR 100 crores with an operating margin of around 9.3%. As of September, our company is net debt free with a strong balance sheet and cash flow. We expect cash flow to continue to remain strong post PA-5 expansion, which will further strengthen our company balance sheet. We believe we established a solid foundation for the future back focusing on long-term expansion plan. The company foundation is robust enough to resent any volatility despite a few quarters of sluggish demand, which we are witnessing in the last probably 3 to 6 months. With our increased capacity, we will be in a good position to capitalize our upcoming opportunities such as rising domestic demand and imports substitution. We continue to evaluate and add new product to our product portfolio, which we facilitated our expansion into new market and new end users. With this, I would like to conclude this presentation and open the floor for question and answers. Thank you.

[Operator Instructions] The first question is from the line of Kumar from TCS.

So I got a couple of questions. My first question is that I remember last year, you had mentioned in the con call that the company will be able to generate a minimum net profit of around INR 50 crores per quarter. But then the company is falling very short of that for the past 1 year or maybe 3 to 4 quarters. So I just wanted to know the reason behind that and what steps the company will be taking for that minimum target? And my second question is about the greenfield expansion project because in 2021, the company had announced that the project to the tune of INR 600 crores. So is that project still on or what's the update on that greenfield expansion project?

So let me answer your first question first. Your question is regarding the margin. The company has made around INR 40 crores to INR 50 crores of PAT for the last consecutive 8 quarters, apart from the last 6 months. And nobody can certainly give the guarantee about the profits. It all depends on the margin. But in terms of the operation the company is consistently performing in terms of the capacity utilization and selling the product in the market. Having said that, the margin, if you ask me today in the market was around $100 -- of $80 to $100, which was negative. That was one of the key reasons that the profitability was impacted. The second reason is company is producing the Maleic Anhydride, which is roughly 7,100 today, post PA-5 which is around 9,000. Realization from Maleic is typically for last 10 years is 10% to 15% higher than Phthalic. But today, the Maleic price is around 10% to 15% lower than the Phthalic Anhydride rate. So that is one of the key reasons. So today, what we are talking about, we need to have around INR 100 crores to INR 120 crores of revenue from Maleic and post PA-5, INR 150 crores. But right now, the annualized revenue is around INR 60 crores to INR 70 crores because the price of the Maleic has gone down drastically in the last 6 to 9 months. So that was the key reason. The guarantees, I think, we will not be able to give a guarantee for the profitability, but we can assure you about the operational excellence and overall cost optimization. Your second question is in terms of the expansion. I think PA-5 is on track. We will start December and January the trial production. And probably before March, it will be a commercial production for PA-5.

Yes. Sorry, sorry, I was talking about the greenfield expansion, which you had announced in 2021.

2021, the expansion which we have announced is about PA-5 and plasticizer. So PA-5 is just completed in the next couple of months, say, in December to March, and another expansion of the downstream derivative where we are evaluating various plasticizers. I think we have applied to the Government of India for the environment clearance. Once we are able to get the clearance and subject of the Board approval, we'll be able announce the same. It will take around 15 to 18 months for implementation.

Okay. So that is to the tune of INR 600 crores, right?

No. This project, which is the Phthalic is around INR 350 crores. That project will be between INR 150 crores to INR 200 crores.

No. There are 2 expansions, right? One was the brownfield expansion, that is the PA-5 which is currently going on. And the first one which you had announced was about the greenfield expansion which was a totally new expansion to be setup in Gujarat...

Yes, that has split into 2 parts. One part is the PA-5, which is completed. Second part is the downstream plasticizers, so INR 350 crores plus INR 200 crores is INR 550 crores.

The next question is from the line of Aditya Khetan.

Yes. Sir, in your opening remarks, you had mentioned that the demand is muted. So which are the like -- hello?

Ye, yes, yes. Please continue.

So you have mentioned that demand is remaining muted. So which are the segments like the plasticizers, paints, pigments, which segments like hasn't shown that pickup?

So basically, the paint is doing well. Speciality UPR is doing well, but the biggest impact is coming on the CPC and pigment, There, the guys are operating around 50%, 60% of the capacity. That is because of the turmoil in the Europe, demand sluggishness in Europe, and impact from the China. So that is the one segment. And second, the plasticizer demand, I think, more or less stable, not going very well. Right now, the plasticizer and pigment are the 2 segments, which comprise around 20%, 30% of the overall sale. They are not in a good position right now in terms of overall demand and the growth. But we expect that after March, we will see the improvement in this. And that is not because of the domestic market. Domestic market demand remains the same. Whoever is dependent on export, like if the downstream industry is selling the product to Europe or China or other places, that has been impacted heavily.

Okay. Okay. But sir, our export, so that is very minimal. So like we are not materially impacted on the export side because the domestic pigment players are impacted, so we are taking that hit.

Yes. I'm not saying about our impact. We are selling 10% to 15% to generally Middle East. I'm saying the downstream sector. If they are impacted, of course, there will be a sluggishness in the demand side from their side.

And sir, on to the spreads part, as you have mentioned like we are at $80 to $100 per tonne. So like sir, this price, I believe, sir, like in '20 just so before COVID only, I believe, so we are at the same level of spreads, like $80 to $100 per tonne.

I think in 2020, the difference in terms of the margin was at the time the crude has touched to 0. The margin is collapsed because of the -- some geopolitical issues which have taken the crude to the negative. So this time the overall geopolitical issues, supply chain issues in the various part of the Europe as well as the issues, the GDP of China, which is a around 37% of the chemical production. Their GDP has gone down from 8% to 8.5% to now 4.5% to 5%. So overall, in the global market, apart from India, India is going extremely well, but the sectors which are dependent on the export of their chemicals, that have got impacted.

Got it. So sir, now since you are also expecting a pickup like probably by February or March. So we can expect margins also to remain at the same level for the next 2 quarters?

I think we need to disengage with two. First, the demand is the one part, which will improve once there is an improvement in the downstream segment. When we are talking about the margin, margin is the global phenomena. By increasing the demand in India, margin is not going to change. In global markets, the overall sentiment of the entire chemical sector has to improve to margin to improve. So once it starts, it will be reflected for all. If you look at all chemical players, the margin has swept in last 2 quarters. So if global demand improves, then you see the improvement in the margins. Right now, we are at the bottom of our margin. There, I G is making minimal profit, a lot of guys will be making cash losses.

Okay. So suppose sir -- for this quarter, suppose, sir, if we exclude the Phthalic Anhydride EBITDA. So like how much EBITDA would be contributed by the Maleic Anhydride?

Maleic was around INR 14 crores to INR 15 crores -- sorry, INR 12 crores to INR 13 crores. DEP was INR 24 crores, I'm saying the revenue, I'm talking about the revenue. And other income was INR 8 crores. So you can say that we have marginally or make nil to marginal EBITDA in Phthalic. Balance is all other products and operating efficiency.

So sir, at least at the bottom line, Phthalic Anhydride is negative.

Yes. Not negative. No profit, no loss. And we have spent around INR 7 crores to INR 8 crores for change in catalyst. The catalyst is being taken in 3 years, but the energy cost, if you see the -- compared to the last quarter, we have spent INR 6 crores to INR 7 crores extra in the energy cost and around INR 1 to INR 2 crores on the repair and maintenance. So INR 8 crores to INR 9 crores has been put specifically as a onetime charges in the P&L.

That could reverse next quarter, okay. Along with the ramp-up in running.

I think let's understand it because I G will have 5 plants at the end of next 3 months or 4 months. So every 3 years, you need to take a shutdown. So every year, there will be a 2 shutdowns. Probably in the third year, it will be one shutdown. So every year, there has to be 1 or 2 shutdowns for IGPL.

Got it. Got it. And sir, just a clarification on to your this INR 200 crores expansion of plasticizer. So sir, do we have some plans like current...

That part is under evaluation. Request has been put for the environmental approval. Post that, it is approved by the Board. And then it will be implemented. It's subject to the final approval from the Board.

Also having in place that 8,500 tonne capacity, we can take that to around 14,000.

We can. But that is what we have realized that while the margin of the Phthalic keep on changing based on the demand supply, the DEP margin more or less stable because of the DEP we are selling it to the aromatics and the fragrance industry, which more or less remain stable.

So we would be first, sir, from 8,500 to 14,000 and going that 200.

That is the secondary phase. We are right now focusing on completion of PA-5. And then along with the plasticizer, which is at a different site, we can plan for the same.

Okay. And sir, just a last update on to the Maleic Anhydride realization. So that continue to remain sluggish or like there is some improvement for the current month?

Compared to the last quarter, there is an improvement. It was around INR 70 to INR 72, right now between INR 80 to INR 85. But compared to the Phthalic Anhydride, which is around INR 98 to INR 102, it is still 15% down.

Okay. But why, sir, like since Maleic Anhydride is a chemistry, which is not that fragmented, it is only consolidated by a few players globally. So how come these value-added product prices are down as compared to a base commodity?

So the Maleic is very typical case. Maleic is a starting point of lot of new chemistry. So in India, there is a demand of 80,000 tonne, we are producing 7,000 tonne. So demand is not a challenge, but prices are determined by the global factor. If you look at the last 2 years, China has built up around 2 million tonne of capacity keeping in view the single-use plastics, which is built in 2022 earlier. They built 2 million tonne capacity, and now they have postponed that date keeping in view the Maleic implementation to Jan 2025. All the excess Maleic, which eventually they will be using it for their downstream of PBAT, PBT. They are flushing it in the market. So I G is very marginal player. The bigger players who are producing in the U.S. and Europe, they are taking the challenges. Because right now, maleic if you ask me, if you are using the n-butane route, you are not making any money.

Correct. Correct. Sir, what was that capacity figure in China you said? How much capacity has been built up?

They added 2 million tonnes.

On the base capacity, sir, what would be the base?

I don't have any idea, but I think they already had above 1, 1.5 million tonnes. But they built 2 million tonne brand new. You can go in Google and check, they will give you the list of plants which is built in last 2 years.

So 2x as the new capacity has been built sir, you mean to say?

Yes. That capacity was supposed to cater to the BO2, PBAT and PBT for their dissolvable plastics, which was earlier dated Jan '22 single-use plastic ban. Now they defer it to Jan 2025. So that has created a flush in the market of the excess Maleic is coming dumping into the global markets.

Okay, okay. So sir, we can expect like the prices might not substantially go up till like they are inventory or since they would not be using it downstream. They would be continue to...

So probably for next 1 or 2 years, we will not see the exceptionally high prices in the Maleic. Maleic is typically -- when Phthalic was INR 100, Maleic was INR 120 to INR 130. When the demand was very high, it reached up to INR 300 at some point of time for 1 or 2 months and again come back to INR 150. So typically, it remains 20% higher than Phthalic historically. But right now, it is 15% lower than Phthalic indicates that there is an oversupply in the market.

The next question is from the line of Nirav Jimudia from Anvil Research.

So sir, you mentioned about the demand part. But if you can walk us through in terms of the domestic capacity increases which we would witness over next 6 to 12 months. So we are expanding. Even our competitor is also expanding. And one of our customers has already put up a plant. So in terms of capacity now from the industry point of view, where we stand? How much are the imports coming to India? And what I could understand from your remarks is that whenever we would put up our own plasticizer plant, most of our new PA would be consumed over there. So if you can just walk us through in terms of the capacity part and where each of the player would be placed over the next 1 or 2 years, that would be very helpful.

So typically, I G has 222,000, which will ended by the end of, say, March '24, 275,000. Thirumalai is having 120,000, 130,000, and I think KLJ has started between 90,000 to 100,000. So all put together, if you say 222,000, for IGP, India will have by the end of March, a capacity equivalent to 450,000 to 500,000 tonnes, and that is what the demand is. Typically, the input which is happening around 30,000 to 35,000 tonnes per quarter or say, 100,000, 120,000 tonnes per year, that has gone down. For the last quarter, the import was 9,000 tonnes, but keeping in view the demand and supply, still import is happening between 5,000 to 6,000 tonnes because all the existing players which are producing in India, they are not only selling in India, they are selling in export market also. So whatever there is an equilibrium balance, that has to be imported, so that is one part. So demand of supply without ex-import is more or less matching today. If somebody is adding the new capacity, if the growth remains 5% to 6%, it will take 1, 1.5 years to absorb or clear -- to create equilibrium in the market. So till that, you can see slightly excess in Indian market. Provided if there is no imports, it will more or less match with the domestic demand. But that is not impacting the margin. Margin has to improve in the global market. Even if you have excess supply for say 6 months, 9 months or 1 year down the line. And if the global margin is good, most of the players are equipped to export their product outside India. So I think 1 or 2 years, you will see equilibrium in the Indian market before the margin further improve because of the local sector. Otherwise, international market margin will be driven by the international demand and supply.

Got it, sir. So here, just one thing. One of our customers, which has put up a plant last year of close to 100,000 tonne. Has he ramped up fully in terms of his volumes because probably he was earlier buying from us, importing also some of the volumes.

They have already ramped up to their, I think, optimal capacity. And they are right now contributing 80% to 90% of what they produce as in their captive consumption and 5% to 10% available in the market.

Got it, sir. That's very helpful. And sir, this compression in the spreads which we have seen this quarter and probably from last 2, 3 quarters, we have seen some compression in the margins coming on. It's more because with Orthoxylene prices not coming down. So it's more of the raw material trouble, which is actually putting the pressure on the margins or it's because the demand for Phthalic globally would have some issues? That's why the margins have fallen.

So it's a 2-way around. Phthalic, I think, move generally directionally in line with the crude prices. So the demand of the Phthalic as well as the end consumer, who are able to sell into the European market, Chinese market and American market, their demand has been seriously impacted in the last 6 months because of the geopolitical issues, the war between Russia and now the Israel and all that. The entire supply chain has also got distorted and the demand. Suppose there is an industry which is doing very well, growing very well. Suddenly there is a fight, fire. There is geopolitical issue, there's a war between 2 countries. Overall demand got affected. Similarly, China which is growing at 8%, 8.5% started growing at 4%, 4.5%. So overall, global demand needs to improve. There has to be peace in the global market for the demand to improve and then there is a growth. So both sides are got impacted. Because of that, the margins are sluggish.

Got it. Sir, just a clarification on, one on the capacity utilization side. So I think normally, we used to sell close to -- or produce and sell close to 16,000, 17,000 tonnes per month. So on a quarterly basis, it used to be around 45,000 to 48,000 tonnes. So because of the shutdowns, which we have taken in this quarter for a catalyst change...

It's a 10% impacted, yes.

Okay. So Q-on-Q basis, there was a volume down by 10%, correct?

Correct. 9% to 10%, yes.

Got it. And sir, one more thing which I would like to ask you is that in one of the calls, you mentioned that some of the specialty chemical companies have also started purchasing Phthalic for various chemistries and applications, which would have developed over a period of time. So there, have we seen any improvement in the volumes coming?

Yes. So basically, because the downstream plasticizer started their own plant. So that 10% to 12% capacity which we have at the time, we are selling it to UPR, specialty chemical, agrochemical. That has been taken over by them.

Correct. Correct. So there, have you seen any green shoots coming on in terms of some of your pigment volumes are being replaced over?

I think not pigment. UPR is one which is doing very well, and the overall demand in UPR is growing very well. Specialty chemicals is doing very well. The agrochemical is doing very well. So I think specialty and UPR is one which we have seen the green shoot in terms of the overall demand growth.

Got it. And sir, you mentioned 9,000 tonnes of imports have come to India in Q2, if I heard it correctly?

Yes, yes, yes, right. Compared to 31,000, 33,000 for Q1.

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

So you have guided that for the next 1 to 2 year with capacity coming up in India as well as crude prices rising, do we see our margin pressure to sustain or do we see some kind of improvement there, as Maleic Anhydride prices have increased a bit?

Sorry, I'm not getting the question. Can you be clear because I think I'm finding some echo voice.

Okay, okay. Sir, is my voice better now?

Yes.

Sir, I just wanted to understand regarding the margin pressure that we have right now and the capacity is coming in India. You have guided that there could be some kind of pressure for next 1 to 1.5 years. So how do we look from that perspective? So what will be the growth driver we are seeing there?

Capacity is coming up in India is fine because that Indian demand is also growing between 5% to 6%. Apart from that, India typically used to import around 100,000 to 120,000 tonne. That has moderated to around 50,000 because that existing player who was doing the maximum import, they have started their own Phthalic plant. So to that extent, we see the decline, a drastic decline in the overall import. While India is continuing to grow at 5% to 6% in terms of Phthalic, you will see the equilibrium because new capacities are adding. You will see the equilibrium, plus there is always an opportunity for the existing players to sell into the export market. There is a good market available in the Middle East and other places like Egypt, South Africa. But the question is, and we are also planning to get into the downstream derivatives. So once the plant will start, most of the production, which we are doing in PA-5 will be utilized for purpose of the downstream derivative products.

Okay. And sir, the -- we had - so the government had given a quality control order on these products. So have you seen any impact of that on our revenues and all? Yes. So I wanted to understand there is a quality control order that the Government of India released a few quarters back. So how has that impacting on the industry?

As such, there was no direct impact, because the government wanted all the guys who are importing or who are selling to the India need to have that certain parameter. So all the companies need to register. They see that slowly, steadily most of the companies got registered, and they are complying with the government notification.

And so we are not seeing a significant decline in imports due to that?

Import is declined because the players who were importing, now they set up their own plant. So definitely, import has gone down, but you can't say that it is because of that order. The order requires a lot of companies who are selling it to Indian market to register with the government and comply with the quality standard. So most of the companies are already in the process of doing that and most have already done that. So that was the compliance in terms of maintaining the quality of Phthalic coming into India.

Okay. And, sir, what would be a steady-state margin for Maleic acid as well as DEP going forward in a steady-state environment?

So I will not be able to comment about Maleic acid because we don't produce Maleic. We produce Maleic Anhydride. The Maleic Anhydride right now is moving between INR 80 to INR 85. Steady-state margin for Maleic has to be the price 15% to 20% higher than Phthalic. Phthalic is hovering around INR 98 to INR 100. So Maleic has to be INR 120. Today, if you ask me, it is 30%, 40% lower than its original price.

Okay. Sir, so we guided $150 to $200 per tonne would be a steady-state margin for Phthalic. So for Maleic, it would be around 20% higher on a steady-state basis?

Correct. 20% higher than Phthalic.

Okay. Understood. Sir, are we seeing some kind of -- so we have seen an improvement in Maleic prices right now. So in quarter 3, are you seeing further improvement in both Phthalic as well as Maleic prices?

Maleic prices compared to the Q1 has improved 15% to 20%. It was around INR 70 to INR 75. Right now, between INR 80 to INR 85. We have seen the improvement, but the visible improvement will be there once it crosses the Phthalic prices. Right now for last 6 to 9 months it is below the Phthalic prices. While the Phthalic has moved from INR 85 to INR 100, INR 105, in between and again come back to INR 95 to INR 100, but still so long as the Maleic prices remain below 10% to 15% of Phthalic prices, improvement is gradual. But ultimately, it needs to go past the Phthalic prices to see a real impact on the overall market.

[Operator Instructions] The next question is from the line of Chirag Vekaria from Budhrani Group.

Just wanted to know, sir, what are the spreads in Phthalic currently doing, sir?

It's around 100 to 120.

100, 120.

yes. Around 100. Moving around plus minus $10 to $15.

This PA-5, will it start contributing from Q4 of '24 or Q1 of '25?

It will be Q4, but it will be very marginal because suppose you are starting the trial product. And all the trial production profit and losses is generally capitalized along with that. So in terms of the profitability impact, it is expected in Q1 FY '25.

Okay. Okay. So in your outlook, sir, how do you see this thing panning out, sir? As far as the Phthalic Anhydride goes on. Globally, the situation...

I think first we need to wait for the geopolitical issues to settle and then there is an expectation of revival in Chinese demand. If these 2 factors corrected, we can see the good amount of recovery in the overall market.

The next question is from the line of [ Munzal Shah ] from Antique Stock Broking.

Sir, I have a couple of questions. So one is, suppose the Grasim has announced a decent expansion for their paint venture, and they are very close to maybe, in a few quarters, they will be commissioning. So have they started seeking for the procurement? And how does it work actually? Like they will procure from a couple of guys or they will procure from 1 guy? How does it work actually from a new player perspective?

I think they are looking at the market. They started discussion with all the players, and they will have a fairly big requirement. And they are gradually increasing their production over the period of next 1.5 to 2 years. Right now, they may be started 15%, 20% and then gradually, they're going up. So they have already started the discussion with the marketing team. I think we need to wait till their plants are operational. But the discussion they have already started. And I think they are doing the Phthalic base as well as water base. So we need to see how much is their total requirement once they start their, commission their plant.

But at full capacity, how much will they require approximately, like any idea?

Capacity is they are planning to take that capacity equivalent to Asian Paints, which will take time. So right now, whatever they are doing, I believe this will be a requirement of around 2,000 to 2.500 tonnes.

2,000 to 2,500 tonnes per month?

Per month, per month requirement, yes.

And sir, secondly, any update on this import from China this naphthalene-based Phthalic?

So overall, there is a decline in the import from 32,000 to 35,000 tonnes to 9,000 tonnes. But as such, we have not find anything stopping for naphthalene base because the BIS strictly don't provide the naphthalene base or the Orthoxylene base. They provide certain parameters. If you fulfill that parameters, irrespective of the source of the raw material, you can import this.

Okay. And sir, just last update. Beyond China, what is the capacity addition in Phthalic?

I think mostly all capacities are coming up in India only. Otherwise, 1 or 2, probably 1 plant in China. Otherwise, we have not seen any new capacity coming up.

The next question is from the line of [ Marsal ], who is an individual investor.

Yes. Can you please advise that during the Q1 and Q2, how much of Phthalic in terms of quantity we sold and what was the price, average price? And currently, how is the prevailing price, for example, what are the average price in the month of October? And how is the offtake now?

So general we don't provide the quantity because every company have a different, different yield proposition. So typically in Q1 and Q2, we sell between 45,000 to 46,000 tonnes, same because Q1 was also a shutdown of 1 plant and Q2 was also shutdown of the 1 plant. And the pricing remains in the range of -- for both the quarter because at the time crude price was high, so it was between INR 100 to INR 110, and this time when we are talking about, it is between INR 90 to INR 100, which is per Kg.

So you are saying this, now the price has reduced by about $10 something.

Yes, because Ox has also gone down.

Sorry?

Because Orthoxylene has also gone down up to certain extent. If you look at the price at the moment of crude, Orthoxylene. If Orthoxylene goes up by $50, then Phthalic will also go down. If the Ox is going down, then Phthalic will also go down. There is no meaning to look at specific only final product price. The raw material prices are also equally important.

Yes. We need to see raw material also. So like -- so if you talk about EBITDA margin, for example. So how is the margin in the October month? And how was the margins in the previous quarter, like September quarter, for example, after rate exchange?

October month, I think it is not right for me to comment about the October margins, but September margin, I think it's already visible that EBITDA margin is around 6% and the gross margin was 17%. It was a decline compared to the Q1. Q1 was 22% gross margin, which has -- last quarter was 18%, and the EBITDA margin was 12% in Q1, which is now 6.6%. So for the margin -- reason for the decline in the margin for the Q2, there are 3 reasons. First, the overall quantity was less. The second reason was the Maleic Anhydride rate, which you are producing almost similar to what you have been producing. The realization on Maleic continuously down by 15% or 20% of Phthalic prices for last 3 quarters. And third reason is we have provided INR 7 crores to INR 8 crores extra on account of change in catalyst in Q2.

Yes. Okay. So like as we have discussed...

Mr. [ Marsal ], I'm so sorry to interrupt you. May we request that you return to the question queue for follow-up questions...

I didn't ask for 2 questions. Two questions, you're to allow...

Yes, yes, please.

So sir, what I was saying, that is like -- is this like -- as we discussed during this call that already our competitor -- already our customer has set up the plant, new plants are coming up. So how do you see the prospect of this industry Phthalic in the next 1 year, 2 year for example?

So Phthalic prospects in Indian context has been very good because Phthalic typically, around 5-year ago used to be -- used in the 4 to 5 industries. Now it is more than 20 to 25 industries are using. Not only the plain plasticizer, PVC, pigment are the key user earlier, now you see the UPR, specialty chemical, agrochemical, photo films, all type of new specialty chemicals, which are coming up in India and are expanding. They somewhere need Phthalic for all their chemistries. So Indian demand continue to grow. Of course, you will a slightly, for 6 to 9 months, there is excess supply in terms of the new production coming up at the same time, but if you take the Indian growth momentum in the next 1, 1.5 years, it will be plateaued. And there is an opportunity to go into the downstream because that is also growing very well. And then there is opportunity to do the export in the Middle East. We are at the right location. We can do the domestic as well export. We continue to maintain 15% to 20% export.

So sir, like have we taken a target to make certain like percentage in export or like -- is it like normal way or are we going some aggressively for the markets?

No, no, there's no force majeure, please understand that. The force majeure is when we need to shutdown the plant. When you are selling in the domestic market, export market, everybody is getting a different, different margin and different, different segments. So there is no force majeure. There is an opportunity in domestic market as well as export. If you see the Middle East, force demand is...

Again because sir, I think that are we going full blast on the...

In the Middle East market, the demand is 50,000 to 60,000 tonnes, and there is no player who is producing in Middle East.

Very good sir. We need to explore it now. We need to just like explore it...

We are doing it 15% to 20% for last 10 years.

Now they're going to increase it, right?

It may be increased for some period because then we have our downstream derivatives plasticizer is coming up, then we will not have that much product available.

The next question is from the line of [ Aditya ] from Securities Investment Management.

So you mentioned that currently you are making a spread up around $100 in Phthalic Anhydride, and we are at a breakeven level. So the other players would be making losses at current levels? Should that be a correct understanding?

Not exactly losses. There'll be hardly anything in terms of the EBITDA. We are making slight addition to the EBITDA on account of Phthalic.

Got it, sir. And do you...

Sorry, I'm not clear about your voice.

Sir, do you pose a situation where the prices can -- the spreads can fall down further?

I don't think so because right now, if you're talking about $100, it is -- I think 80% of producer have a conversion costs of around $150 to $160. So most of the guys are making cash losses. So it is not possible. If it goes down, you will see a lot of plants getting shutdown in the Chinese, Taiwan, Korea. You will see a lot of shutdown if it goes below that.

Yes. That was my next question. So are we seeing any shutdowns of capacity in the...

There are 6 to 7 plants which were temporarily shut, and they extended the shutdown by 1 or 2 months in Korea, Japan and Taiwan.

Got it. Got it. And sir, what is currently the import duty or the anti-dumping duty on Phthalic Anhydride?

It remained between 3.5% to 4.5%. It depends on different, different countries and the players who are exporting to India.

And when is it getting over, this import duty?

The import duty for some of the countries are forever because import duty is there. Anti-dumping, I think the 4 countries which they have applied will be expired on 2026.

Okay. And sir, since India is the only growing market globally. Do you see a situation where these other players will start dumping more and more into India because the overall global demand is pretty weak. So do you think that these complete can increase their imports, which will lead to pressure in the end prices for us?

So I don't think so because at couple of times and places, our sale price is below the import prices. So it is not possible to compete because the cost of production of Indian players and the ability for them to supply at the right time, it's much, much higher. So at times, if you need to compete with the import, I think the domestic player will be more beneficiary.

Got it. Got it. And sir, now we are getting into plasticizers segment. So would did this product be competing with our customers? And is there any pushback from our customers which...

I think we are evaluating that. It is subject to the environment clearance and Board approval. I think let's wait for that, and the product is something which is growing at 10% to 15% and more or less the customers are similar.

Right. Once you get the environmental clearance, but would there be any pushback from a customer because we would be competing with them?

Not exactly because there are only 2 players of plasticizes in India, one has already set up the plant.

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

In first half, sir, we have made -- from the non-Phthalic business, the topical contribution is around INR 83 crores. So sir, if you can quantify like how much was from Maleic Anhydride and from plasticizers?

So you're talking about Q2 or H1?

H1, H1.

So Maleic Anhydride was around INR 32 crores, INR 33 crores. And the plasticizer was around INR 37 crores.

Okay. And sir, in terms of the non-Phthalic business, so suppose if we annualize this number, INR 83 crores, somewhere around like INR 165 crores we can make for full fiscal. So this is similar to like FY '23 levels.

Let me explain it, if you are producing the 6,500 to 7,000 tonnes of the Maleic. Post PA-5 say 9,000 tonnes, you will be ended up providing the price of Maleic is coming to near to the Phthalic or higher than Phthalic, you will be -- on Maleic, you will be generating revenue between INR 120 crores to INR 150 crores. For plasticizer, we are running a run rate of around INR 20 crores to INR 25 crores per quarter. So it will be INR 80 crores to INR 100 crores. So if you take the full potential of Maleic, it is INR 150 crores. Full potential of plasticizer, it's INR 100 crores. So it will be INR 250 crores. And the other income, which is around INR 25 crores to INR 30 crores. So you will have around INR 250 crores to INR 300 crores of other revenue post PA-5.

Sir, that you're talking when the Maleic Anhydride realizations were at the normalized level.

Correct.

Now sir, for the next 1 to 2 years, we would not witness that scenario. So that INR 140 crores you are taking, that would INR 70 crores, INR 80 crores net-net.

No, no, no. I think that is the assumption. And I'm saying is equivalent to Phthalic, I'm not saying higher than Phthalic. Maleic has gone to INR 350, I'm not talking about it. I'm saying when it is between INR 100 to INR 110, which is 10% higher than Phthalic.

Okay. And for the non-Phthalic business, like currently, it is contributing only 7%, 8%. So like even if you annualize, the figure would remain the same. But sir, like we were earlier guiding by at least 25% of our total top line would be from the non-Phthalic business. So this is like constituting the new plasticizer expansion INR 200 crores that comes and so that can like materially shift to the non-Phthalic portion.

If it added, It will add INR 800 crores to INR 900 crores of revenue.

Sir, the INR 200 crores can add INR 800 crores to INR 900 crores, 4x assets turnover?

Correct 4 to 4.5x.

And the last question is from Madhur Rathi from Counter Cyclical Investments.

Sir, you guided last quarter that from the new...

Mr. Madhur Rathi, sorry to interrupt you, sir, your voice is not audible. Could you speak a little louder?

Is it better right now?

Management, can you hear him clearly?

Not exactly.

Mr. Madhur, I would request you if you are speaking from a speakerphone, just kindly use a headset.

Sir, I just wanted to understand that you have guided last quarter that from the new Phthalic plant, our fixed conversion cost would go down. So do you see these kind of improvement to help our margin in the FY' 25?

Yes, yes. Surely, the conversion cost will go down because it is being set up at the same location and the land, infrastructure, the power, water, everything will be used by same. And the fixed costs which is right now incurred by the company will be allocated to fixed point also. The overall cost of conversion will go down.

Sir, just I am trying to understand, you're selling Phthalic at INR 100 and our conversion cost is INR 150. So are we...

Conversion cost is between $80 to $85. When you are talking about the depreciation, interest cost, then it will come to around INR 130 or INR 140. Conversion cost is $80 to $85.

And that will come down to$73.

Depreciation and all are not part of conversion cost, correct.

And sir, the conversion cost will come down to $73 to $75?

It is right now $80 to $85. It will reduce overall by INR 10 to INR 15.

From once the new plant commercializes.

Yes.

Ladies and gentlemen, due to time constraint, that was the last question. I now hand over the conference over to Mr. Pramod Bhandari for the closing comments. Please go ahead, sir.

Thank you, [ Arnav ]. Thank you very much, everyone, for joining us on the earnings call. We appreciate your time and showing a deep interest in our company. On behalf of IGPL team, we wish you very happy Diwali in advance. In case you have further queries, please get in touch with SGA, our Investor Relation Advisor, or you can send the mail to us. Thank you very much, and happy Diwali again.

Thank you very much. On behalf of I G Petrochemicals Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.