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

Ladies and gentlemen, good day, and welcome to I G Petrochemicals Limited Q3 and 9M 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, Chief Financial Officer of I G Petrochemicals Limited. Thank you, and over to you, sir.

Thank you very much. Good afternoon, friends and everyone. On this call, we are accompanied by SGA, our IR Advisor. I hope that everyone was able to review our financial results and investor presentation, which were uploaded to stock exchange and our company website. After providing a quick overview of the recent industry developments, we'll proceed to the operational and financial highlights for the 9 months as well as the quarter ended December. During the past 3 quarters, we have seen the erratic demand of key chemicals. That was the focal point for across the board for all chemicals. Because of this, the growth momentum of many chemical producers have been hindered as the end user industry has been holding back their purchases to a certain level. The demand recovery in China is occurring at a modest pace. Overall, liquidation is still slow, especially in Europe. Destocking of the key commodities and essential chemicals have put some pressure on those chemicals and has spun out over the last few quarters. In contrast, the demand of the Phthalic Anhydride was less affected, especially in domestic market, although the spread of the PAN and the OX were affected as the price of the PAN has not increased in tandem with the Orthoxylene prices during that period. The Red Sea crisis has further prolonged the transit time for the goods and heightened the freight costs. The cumulative impact of these factors has impacted the performance during the Q2 as well as Q3 of FY '24, has replaced the overall realization of Phthalic and Maleic Anhydride. There are a few manufacturers in the world that supply the Phthalic Anhydride, and IGPL is one of the largest producers in India, second largest manufacturer in the world. We wanted to highlight that Phthalic Anhydride is an exclusively an imported chemical, which is consumed by wide spectrum of industries, where the demand is either stable or growing. Despite temporary holding back from a few selected end user customer, our company has reported a steady performance on year-to-year basis, especially in terms of the revenue front. In terms of the PA-5 unit, we are delighted to announce that we have commenced our long-awaited Phthalic Anhydride PA-5 plant at our existing facility at Taloja in line with our scheduled timeline. We were supposed to start before March '24, and we are happy to announce that we have declared the commercial production of the same on 12th of February in current week where we have expanded our overall capacity of Phthalic Anhydride to 275, Maleic Anhydride [indiscernible] and 1,000 for the Benzoic Acid. As of now, our 4 key product portfolio are Phthalic, Maleic, Benzoic Acid and DEP. Post PA-5 our overall capacity will reach a new effect and will add incremental revenue of roughly INR 500 crores for a full financial year FY '24, '25. We now have 5 units of manufacturing facility of Phthalic at Taloja. The plant is managed by a highly skilled workforce and adhered to all required protocols to meet high quality standards. Globally, the Phthalic Anhydride market is projected to be in -- domestic market is projected to be between 450,000 to 480,000 and annually growing between 5% to 6%. Moreover, the utilization of Phthalic Anhydride has witnessed a substantial growth in last year attributed to versatile applications, both as a raw material and intermediary across the majority of downstream chemical users. In terms of Plasticizers, we are actively pursuing the addition of new product -- downstream products in our Plasticizers category to our product portfolio. We will be investing nearly around INR 165 crores for the new CapEx which we have announced. It is expected to be completed post receipt of all the approvals between 15 to 18 months. It is important to note that the project will consume around 30,000 to 35,000 tonnes of the Phthalic, so it is basically 50% -- more than 50% of the Phthalic which is produced by the new plant will be used for the downstream plasticizer projects. As a part of company's derisking and diversification strategy, we wanted to expand our downstream derivative products and expect to enhance our footprint in Indian domestic market, which will further improve our operating leverage and boost our profitability. The expansion would increase the revenue pie of Non-Phthalic business. As on date, the company has a very strong balance sheet and best in class working capital facility with number of days are between 10 to 20 days. Post expansion, we are expecting a healthy cash flow from the business, which will further extend the company foundation. In terms of operational highlights, the company revenue stands at around INR 495 crore, Phthalic -- Non-Phthalic business sales were around INR 46 crores, which include the maleic, benzoic acid, and DEP and other income. Export contributed around 16% of the Phthalic business. EBITDA for the quarter was compressed mainly due to the nill or negative spread as well as the inventory losses during the quarter. The spread was recorded in the month of January. We have observed sharp decline in the prices of OX minus -- PA minus OX from October to November when the customer preferred to wait till the price of PA settle and destock their existing inventory, which on one side impact the overall demand in the market and other side exposed the company to the inventory losses on the high quantity of inventory. The spread between the OX and PAN in international market reduced to the link to negative due to the global slowdown, which has impacted the overall demand from our existing pigment, coating and the paint who supply their product to the Europe and Chinese market due to major slowdown in European and Chinese markets. IGPL has term loan in Euro and because of that, we have provided INR 5.5 crores on account of M2M provision because of the depreciation of rupee against the euro and dollar. That has also been accounted in our system. So basically, from INR 25 crores of inventory and INR 5 crore of M2M, INR 26 crores has been provided. Therefore, we have reported a net loss of INR 15.2 crores for Q3 FY '24. Slowdown in China resulted in export of PAN through the domestic market in addition to the historical players like Taiwan, Korea and Russia. Ongoing Red Sea crisis has also affected the ocean disruption has escalated the freights, which has halted the free movement of export, has also led to supply destruction. Freight rate has gone up from $60 to $250, generally for the export of cargo to UAE. For the 9 months, total revenue was INR 1,566 crores, Non-Phthalic income was around INR 129 crores, EBITDA was INR 100 crores and the margin of EBITDA for 9 months was 6.4%. And profit after tax was around 30% for 9 months. With this, I would like to conclude the presentation and open the floor for questions and answers.

[Operator Instructions] We have our first question from the line of Nirav Jimudia from Anvil Research.

I have few questions to ask. Sir, first is on the sales volume for this quarter. I think last quarter, we were at 47,000, 48,000 tonnes. So how are the volumes this quarter?

It is similar to the last quarter.

Okay. And you also mentioned in your opening remarks that there were some inventory losses during the quarter. So if you can just quantify that number?

So the inventory losses was generally when there is a sharp decline into the raw material as well final product, so you need to account for the inventory loss. Generally, it is adjusted inside the cost of raw material as well as change in inventory. For the quarter ended December, the inventory loss was around INR 21 crores, which we have booked separately in our presentation as well as the INR 4 crores to INR 5 crores on account of M2M, which is a non-cash item we need to provide it.

Got it, sir. And sir, if you can just break it down the revenues from maleic, benzoic acid and plasticizers in Q3 as well as for 9 months FY '24? I think you mentioned some INR 49 crores of revenue from non-plasticizer business in Q3 and INR 129 crores for 9 months. So if you can just break it down?

50-50 is the split between the DEP and the Maleic Anhydride and Benzoic Acid and the balance is the Phthalic Anhydride.

Got it. Got it. Sir, regarding the pricing of PA. So how was the realization for PA and MA during this quarter? And how they are currently looking on?

So the realization was actually on the very lower side compared to, you can say, the phthalic in international market, the margin was around negative to around $5 to $10. During the current quarter, it has improved to around $100 to $150. But the last quarter was very difficult one because one side, the prices have gone down, there are some challenges in terms of the downstream segment as well as the prices of maleic was also historically, which is 20% higher than phthalic. For the last 6 to 9 months, it's 10% to 15% lower than phthalic. Along with that, it has added to the inventory loss. So basically, you can say on overall market basis, the margin was less. But I G because of the operational efficiency and the maleic and other byproducts, we are able to just break it even. If you remove the inventory losses and M2M charges, we will have around INR 5 crores to INR 10 crores of PAT.

Got it. So suffice to assume that like last quarter, the margins were negative on the phthalic side, which is currently trending at around $100, $150, right?

Correct. Not negative -- negative, you cannot say negative. It was nil in the international market. So you are making some extras which is covering your operating costs.

Got it. And have Maleic Anhydride prices also improved along with the improvement in the spreads of PA or they are at the similar level?

It is more or less stable. Compared to the last quarter, it is up by 5% to 7%.

Okay. Okay. Sir, second question is on the operating cost of our new phthalic plant. So I think if we see the current 4 plants, our blended level of operating cost, fixed plus variable close -- comes close to around $150, $160. So do we see any improvement in...

Yes, there will be improvement, around $10, $15 because all the fixed infrastructure like power, steel, the manpower, everything will remain more or less same. So that will be divided between the 5 plants compared to the 4 plants, we will see a saving of around $10 to $15 per tonne in terms of conversion costs.

Got it. And sir, last question before I join back. If you can just share your views on the demand for Phthalic going to the Paint and Plasticizer segment, like how much of this -- both these segments currently consume how much of Phthalic Anhydride because you mentioned that the Indian market is close to 450,000 tonnes?

Typically, if you look at the Plasticizer and the Paint, it comprises around 35% to 40%, both put together of total phthalic market.

Okay. Of 450,000 tonnes, 35% to 40% goes to paints and plasticizers?

Correct.

And sir, have we seen any recovery in terms of the offtake of phthalic from the specialty chemical players because that is also one of the segments?

Speciality chemical is growing well. In fact, paint is also steadily growing. But the challenge we are facing sometimes in plasticizer and sometimes in CPC and the coating side. Otherwise, Specialty Chemical and UPR is growing continuously.

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

Sir, my first question was on to the inventory losses. Sir, you mentioned that figure as INR 21 crores?

Yes. Yes, you heard it right, and it's there in the presentation also.

And sir, how does the spread -- like you have said that the spread has improved to $100 currently. So like this spread impact is largely because of the decline in OX prices?

Sorry, can you repeat your question?

Sir, this improvement in spread. So this is largely because of the decline in OX prices?

I think I will put it in that way that earlier when the PA prices have gone down, the OX prices has remained more or less the same. So there is a compress in the overall margin. Now the OX prices have remained the same because of the ongoing demand, which we have seen the recovery, the PA prices has improved. So the margin has improved. Earlier, it has depressed because the OX prices remain the same, PA prices was depressed. Now OX prices have improved slightly, but PA prices compared to the OX prices have gone up sharply because of the continuous demand from the downstream segment. It's about the size.

Okay. So PA prices have actually gone up. Okay. So sir, with the recent rise in the crude prices, again now, we have started to see crude prices rising. So these OX prices might not remain at that levels, like so they will also start to go up. Is it in the demand from the PA...

I understand that. But generally, what happened is when the crude price is going up, there are late lag impact on the OX and then it is on PA. So it's generally 15 to 30 days lag effect, which will be there. Then generally, directionally, when the crude price go up, OX prices go up and accordingly PA prices also go up. So when the crude prices go up, it doesn't go immediately, probably by 1, 1.5 months, you can see the impact on both OX and PA.

And sir, one more thing I wanted you to clarify -- would be largely used for this advanced plasticizer or we would be selling to all the like PA end user itself?

I think advanced plasticizer includes a lot of plasticizers and it goes into various industries, cables, marble and different industries. The plasticizer is a variety of plasticizers, which will be used in various industries.

Okay. Sir, the CapEx is now complete for this PA-5 unit, so now the new CapEx would be into the plasticizers side only?

This new CapEx is going to be for plasticizer, which is not exactly -- adjoining to the existing area, not in the same compound, but just outside the compound.

Okay. And sir, what would be the CapEx and the capacity like we are planning for this.

Capacity, we are planning up to 1 lakh tonne. Initially, it will be X, then it is going -- raising up to the 1 lakh tonne. And CapEx, we are planning without taxation and IDC Is around INR 165 crores.

INR 165 crores, okay.

Approximate. When we get that final report then it may come to, but approximately INR 165 crores.

Okay. And sir, the prices that you mentioned that are still -- maleic anhydride prices are lower as compared to . So like are we still witnessing higher imports of China because there was a flooding of inventory. So now they're dumping into Korea, that is slowing down or you see like...

We have seen the import typically, which was around 100,000 tonnes to 120,000 tonnes around 1 year back. It has gone down to now around 40,000 tonnes to 50,000 tonnes because we have seen that other players have started. So overall import has gone down. And China is not as such because right now the other guys from the Taiwan, Korea and not specifically China, everybody -- when we are talking about 50,000 tonnes, I think China is number 3 or 4 in terms of overall import.

And sir, any specific reason why global inventory surged due to Maleic Anhydride only?

Sorry, can you repeat your question?

Any specific reason why -- so there is global inventory picked up into the Maleic Anhydride business and not into the Phthalic Anhydride business?

I think China, because they have the ban on the single-use plastics, so they have put up a lot of capacity between 1.5 million to 2 million tonnes for maleic, which they are going to use it for probably into Maleic to [indiscernible] effective from Jan 2025. Till that I think maleic is expected to be basically margin under the control because there will be a supply in the market.

[Operator Instructions] The next question is from the line of Hardik Gori from Alpha Plus Capital Associates.

Could you provide the volume number for each segment over the past 9 months, along with the corresponding volume.

We generally don't provide the number. Generally, we operate -- it's very clear we generally don't keep the exact quantity. We operate around 90% to 91% of our capacity. And we have a similar volume for 9 months to 9 months as well as the last quarter to corresponding previous quarter, it's the same, almost same.

Understood. Understood. Understood. And when will the production of Phthalic Anhydride at Taloja stabilize? And how soon can we maximize the utilization of the enhanced capacity?

I think it has already started producing. From April onwards, you can assume that it will be operating at between 80% to 90%. For full year production, you can take 80% to 90% of the capacity.

[Operator Instructions] The next question is from the line of Madhur Rathi from Counter Cyclical Investments.

Sir, I wanted to know what kind of IRR do we expect on this plasticizer plant?

Let me tell you the brief how it will happen. For plasticizer, we are expecting the revenue between INR 900 crores to INR 1,000 crores and expected profit is expected to be between 5% to 7%. Suppose if it is INR 1,000 crores revenue and say 7% or 6% is profit, so on investment of INR 165 crores or INR 170 crores, it is -- you are making around INR 60 crores to INR 70 crores or INR 50 crores to INR 60 crores of PAT. So the IRR is expected more than 20%.

Okay. And sir, this will be based on the current price because the PVC prices are down and the plasticizer prices are down, so...

I think plasticizer, typically, average profit is 5% to 6%. On a higher side, it is 10% to 12%, and we will have an advantage because of phthalic is in-house. So the cost of phthalic transportation, the packaging, conversion into flex will be saved. So that will be translated to slightly higher margins for the plasticizers.

Sir, so this will be on the conservative side 5% to 7%, and it could go higher based on realization as well as our in-house efficiency by...

Correct. It can go higher. And there are inherent advantage of using our own raw material. Around 30% to 40% of raw material will be used like phthalic will be used, 30,000 tonnes to 35,000 tonnes post operational commencement of production in plasticizer.

Okay. Sir, can you just provide me a guidance where you see the PAN as well as the maleic as well as phthalic market going forward because -- so I justed to get your understanding where you are seeing and how the margins move forward for FY 2024?

So generally, we don't comment on the future, but in terms of the growth, we believe that now phthalic is used in the various industries like paint, plasticizers and the PVC was historical, now it is used in the UPR, Speciality Chemical, Agrochemicals and a lot of new segments has opened up. As India grow their business and economy and getting into new areas of the Specialty Chemicals, most of the chemical and chemistry require phthalic. So we are sure about the momentum and the growth in the phthalic business. For the maleic business, we are around 8% to 10% of production. Indian demand is -- 80% to 90% in India is imported. So it continue to grow because maleic is the start of the entire chemistry, it goes to [PBATT, PBT] India has -- nobody has even come up with that. So once there is a sufficient availability of maleic, then you will be able to asses the actual demand. Right now, everybody is buying the downstream product directly from the market. But still it is growing at a healthy rate. And once there is a supply of maleic, then you will know the actual potential demand of the maleic.

Okay. And sir, would you say that the margins are around $100 to $150 for...

So I think it's not correct to talk about the margin for a particular quarter. It's better to look at average because the margin move between $100 to -- $300 to $400. And in extreme cases, it goes to $0 to $50 and in extreme cases and at that time it goes to $350 to $400. It's better to take for yearly next 5 year average, take between $150 to $200.

As Mr. Madhur's line has got disconnected. I would like to take the next question.

Yes.

[Operator Instructions] The next question is from the line of Rajesh Jain from [NB] Investments.

Congratulation on advanced commissioning of the PA plant. Sir, with this commissioning and with now 220,000 is the capacity of Phthalic Anhydride, where do we stand? Are we the largest producer at the global level?

So we are the second largest producer in the world....

Ever after this PA-5, sir?

No, no. I'm just -- let me complete. We are the second largest producer in the world. If you are talking about the largest producer on single location, we are #1 because other companies have 6, 7 plants in different, different locations, which is #1. But even after commissioning of that, we continue to remain #2.

Even after completing. Okay, fair enough. Sir, now, the second question is, you have already given -- with this additional PA-5 plant will generate around INR 550 crores based on the current price of PAN?

Around INR 500 crores. When I'm saying PA, it includes PA, Maleic Anhydride and Benzoic Acid, all put together.

All put together. Okay, okay. Sir, to the previous questioner, you said that you are expected to ramp up this -- total capacity to 80% to 90%, you are saying. So this PA plant is also expected to ramp up to, let's say, 60% to 70% in FY '25?

Yes.

Okay. Sir, next question is you had mentioned in the earlier calls, it is no more works economically to put up a greenfield plant for phthalic.

Yes.

Okay. So in the existing plants that we have around 5 numbers, is there any possibility to do the debottlenecking and increase the capacity.

I think we already have that 5 plants in place. And there are chances to go -- better into the downstream rather than debottlenecking because the cost and expenses of the debottlenecking is very high. It's better to set up the new plant. Actually, for the brownfield it is cheaper. For greenfield, it costs you around INR 700 crores for the similar capacity, INR 600 crores to INR 700 crores.

Okay. Since it is very costly affair, so you may not looking for this debottlenecking as of now?

Right now, I think all the plants at current locations are optimally utilized if you are operating at around 90% to 91% capacity, which is the case for the last 10 years average.

Sir, you're already optimally using. That is no doubt, but what I'm asking is, is there any possibility to increase the capacity by changing the...

No, even if it is a costly affair, that is what I'm saying, the chances to debottleneck into the other -- like DEP and other plasticizers are better than looking at the phthalic for debottlenecking.

Fair enough. Sir, with the commissioning, is it possible to some figures for the interest and depreciation cost for '24 and FY '25 also?

I think the depreciation right now, which is being charged in the P&L is around -- expected to be increased by 25% to 30% for the year. Right now, we are between 45% to 50%. So it will be increased by INR 12 crores to INR 15 crores for the depreciation. Interest right now is coming around INR 6 crores to INR 7 crores per quarter. And it may go up to INR 9 crores or INR 9.5 crores to INR 10 crores. But since we have the liquid investment, which is generating around INR 6 crores to INR 7 crores, so net-net interest income will be hardly anything because today, we are having a INR 7 crores of interest and INR 7 crores of other income. So it is -- right now, it is nil. Probably post PA-5, we'll see INR 2 crores to INR 3 crores in addition to the other income.

Okay. Fair enough. Sir, my next question is regarding the plasticizer. You have already mentioned it is expected to generate around INR 900 crores to INR 1,000 crores...

Let me correct it, because standalone plasticizer has generated INR 900 crores, INR 1,000 crores, but since the raw material is used as a phthalic, so that will be net of in consolidation. So net income generated will be INR 500 crores to INR 600 crores, depends upon. If I'm saying INR 900 crores to INR 1,000 crores, which I consolidate because everything is part of I G. In raw material, suppose INR 300 crores or INR 400 crore of I G, so consolidated level it will be addition of INR 500 crores. Today, the revenue is INR 2,200 crores to INR 2,300 crores with PA-5 it is INR 2,700 crores to INR 2,800 crores, this plasticizer, it will be around INR 3,200 crores to INR 3,300 crores because of the phthalic will net of.

Correct. You're right, sir. Sir, my question is, have we got the approval for this adjoining plot already?

Approval, there are multiple approvals required. Most of the approvals are in place.

Sir, including the environmental approval, which takes normally very long time?

We are saying that it will be operational before September '25.

September '25. Okay. Sir, any inkling you can give us how much time it would take to ramp up to the full capacity?

In 2 to 3 months post commissioning.

Plasticizer, sir?

Plasticizer will take 3 to 6 months. In phthalic, we used to do that, but plasticizer takes 2 to 3 months, you can say. In '26, '27, we will be able to see the full capacity utilization up to optimum level.

Nice to know that. Sir, my last question is, sir, in the previous quarter, that is Q3, you said the xylene prices -- Orthoxylene prices went up, whereas the phthalic prices did not go. Is it...

In Q2, the PA prices gone down, phthalic prices remained same. In Q3, phthalic prices have gone up slightly, but because of already done destocking as well as the continuous buying, so the phthalic prices in December, it remained same. But January we have seen a slight improvement in the phthalic prices. So overall margin has improved to around $100 to $150.

Okay. But other than using it for manufacturing phthalic, is there any way this Orthoxylene is used?

I think globally, 95% to 96% Orthoxylene is used for the phthalic, 4% to 5% it goes into different, different chemistries in very small quantity.

The next question is from the line of [Prolin] Nandu, an individual Investor.

Few questions from my side. Let's say, at around $100, $150 and $200 of spread, what are the different ranges of margins that we earn? Is it fair to assume 10%, 15% and 20%, everything else being equal?

I think it's not right for me to directly comment on the margin, but I will give you the broad picture. Typically, whatever is the market margin, I G will have around $100 to $120 higher than that. And based on that, if you calculate it, so -- at EBITDA level, you should have around 15% average. When the margin is around $150 to $200, you will have EBITDA level around 15%.

Okay. So when the margins -- when the spreads are $150 to $200, EBITDA level, 15%, 16%, right, sir?

Correct. Okay. Right. Right.

And can you also explain that what you were saying was that historically maleic acid have traded at a premium to phthalic acid, but now it is trading at a discount. And you expect this to continue for entire FY '25 as well?

So I will not like to comment because it will all depend upon if there is an oversupply in the market, which has happened because of China, up to what extent it remains. But for us, maleic anhydride is the -- which we are recovering from the wash water is directly translated -- income translated to EBITDA.

Income translated to EBITDA. I understand, sir.

So right now, it has improved, but still it is 10% to 15% lower than phthalic. We expect in the long run, it has to be 10% to 15% higher than phthalic.

Okay. And that will depend on how long -- how soon that long run comes will depend on how much excess capacity...

I think we need to wait probably for next 3 to 6 months to see how the market behaves.

All right. And now what are the spreads on plasticizer, sir? Like say, $150 to $200 is an average spread on phthalic, what are the spreads on plasticizer?

Plasticizer spread -- because plasticizer is not one or two, it is combination of various plasticizers. Every plasticizer has different economies. Somewhere they phthalic, somewhere they use alcohol, somewhere they use terephthalic acid. So different, different raw material is required. So on a gross basis, on all plasticizers put together, your EBITDA is between 10% to 12% or 15% depends upon what your phthalic prices are in terms of transfer and net profit margin is between 5% to 10%.

Right, right. But the spreads would be higher than what we make in phthalic, right? I mean, on a dollar per tonne basis?

I think you need to think -- look at from point of view, whatever you are making on phthalic, on Plasticizer, you are making over and above that.

Understood. No, sir, why I was telling you -- why I was asking you this question is that because we are going to use phthalic which is already in-house production, right?

Yes.

So the other way to put this is like this, let's say, if we are using $165 to expand either in some brownfield capacity of phthalic acid. What are the kind of IRRs that we would be making, right? I mean, I understand that you know...

I think -- I understand your question. I think you need to understand that in plasticizer, the asset turnaround ratio is 5x to 6x. If you are investing INR 150 crores to INR 160 crores, your revenue is around INR 900 crores to INR 1,000 crores. On INR 900 crores to INR 1000 crores, you are making suppose 5%, so you are making 50%. Your payback period is less than 4 years. So it is not absolute margin. It is -- the actual payback is different because it is on the revenue you are making your money. And that also depends upon the price at which you are transferring the phthalic. If you are transferring the phthalic at export price, domestic price at cost, that will also affect your plasticizer margin.

Fair point. I understood sir. So basically, ROCE for plasticizer would be much, much higher than for our core phthalic business?

It's because of asset turnover ratio.

Because of asset turn, exactly because of our asset turn ratio.

The next question is from the line of Chirag Vekaria from Budhrani Group.

I just wanted to understand in terms of -- first is, sir, the turnover that you have done. Sir, can you give the breakup of phthalic, MA and BA in the turnover for quarter?

So I told you that already that the overall -- the non-phthalic, we have already given in the presentation, non-phthalic revenue which is splitted between DEP, plasticizer and MA equally. And for phthalic, I think generally, we are making 90% of -- 92% revenue -- 90% revenue on account of phthalic.

Okay. Sir, in Q3, you said there were negative spread, how do you see...

When I'm saying negative spread it is the -- in the market. The spread was between, you can say, it's minus $10 to plus $10.

What is attributed to this spread -- negative spread? Any reason attributed...

There are multiple reasons. There are challenges in the downstream segment, which is the CPC coating. They are supplying their product to the European market. There was a challenge in the Chinese side because some of the guys in downstream are selling it to China because there was a slowdown in China. Second, lot of guys who are doing the exports, there have a challenge in terms of the Red Sea issue where the freight cost has gone up from $50, $60 to around $200 to $250. And overall demand when it will goes down, you try to export, but on export side, you have another challenge of the freight cost. So that all put together and that is the domestic change. Then international is changing. When you see the overall margin in the international market because of the demand supply has gone down, so it also impact the domestic. Domestic, you are not insulated from international market. You are making what is the available in the international market over and above that because of your operational efficiency and the other products. So all 3 factors put together has compressed that margin. And lastly, the most -- I think margin in the one part, still you can manage. But what happened is there was so sharp correction in the OX and the phthalic prices that everybody who maintained the inventory has to face the inventory loses. So we -- actually, if you look at the total profitability, we lost INR 21 crores on the inventory loss and INR 4 crores or INR 5 crores M2M ForEx. So INR 26 crores has lost, which has nothing to do with the market.

Okay. So 2 things, sir, what are the current spread and sir, how is the inventory placed now?

Inventory -- I think inventory, we always keep between 10 to 15 days. So inventory is not something which is abnormally high or abnormally low. We always keep 10 to 15 days of inventory. The challenge is when the correction is so sharp, within a month if it goes down by 10%, 15%, 20%, then the end user customer is in a wait-and-watch mode. They are saying, let the price settle, then we will buy. And when it started to going up, then suddenly, you will get the 2x of the order. So it is the phenomenon, which is happening every 3, 4 years. In the last 20 years, we have seen 5, 6 incidents which have happened.

Okay. Sir, in Q4, what are the spreads moving right now? So right now, what is the spread levels internationally?

Spread has improved. And right now, it is between, say, 70, 80 to 100, 120, 130 because it moved different, different periods. Then first 15 days, last 15 days and Feb, it moved to a range around $10 -- $100 plus/minus 20%.

Sir. And sir, on the plasticizer unit, is there a cost plus markup or there also you have spread? I mean, how do you calculate the margins?

So margins, we are calculating that, like whatever is the phthalic average selling price that we take as a cost -- that we will take as a cost. And then we calculate the spread for the plasticizer.

So you would mark up and then sell plasticizer?

100%, because phthalic margins would not be translated to the plasticizer margin.

Okay. Okay. So here, sir, in case of the way it happens in Phthalic business, similar would not be the case in plasticizer, right? Irrespective, you'll make money in the plasticizer plant?

Plasticizer is a separate demand/supply equation and Capex margin. There are various types of plasticizers. And apart from phthalic, there are 60% other raw material being used. So all that raw material and the selling price will determine the margin. You will only get the advantage because phthalic is in-house. There is no transportation, packing or flexing is involved because you will be directly supplying phthalic liquid portion to the plasticizer plant. To that extent, we'll get that.

The next question is from the line of [Lohit Reddy], an individual investor.

So my question is with respect to the domestic PAN supply. So we see that the major domestic players are increasing and doing CapEx at the same time. So do we -- is there a chance to invest for an excess supply situation? And can there be a pricing war?

I think there are 2 ways to look at that. so I G has added while the market continue to grow between 6% to 7%. But if all players capacity coming at the same time, which I believe still there is a gap of 1, 1.5 years, it will take around 9 months to 15 months for the market to absorb. And then accordingly it will be decided. Till that time, I think all the players need to export certain extent. But right now, also I G is exporting around 15% to 20% and we continue to export. And I have a different take because in next 15 to 18 months when we start our plasticizers, then I think more than 50% of the phthalic of the new unit will go into the plasticizer. So hardly anything is available in the market. So you will see the equilibrium in the market in the next probably 12 to 15 months.

Okay. My next question is on like how are domestic PAN suppliers plays with respect to the Chinese players in terms of pricing? Like I believe antidumping duty must be helping to curb imports to a certain extent. But when we are exporting our Indian players, like if you want to gain market share, how are the players compared to Chinese players?

No, no, I've not understood. What is your question?

Like with respect to the domestic PAN suppliers, how are we placed in terms of pricing with respect to the Chinese competitors?

So in terms of pricing, I think we are the most competitive in terms of the pricing. I think we can compete anywhere -- anybody, because we are one of the lowest cost producers. The question comes is, do we want to compete, because if they need to export, they need to incur the freight, transportation, ForEx, insurance and duty. So domestic players while supplying to domestic market will always be in advantageous position. When we export, then you need to be very, very competitive because they are also exporting from their countries to Middle East and Europe and you are also exporting. And we can sense that we are very competitive. Very competitive even when we are selling it to the Middle East, and we need to compete with these guys. In domestic, there is no as such because their costing is very high compared to us. But even in International market, we are very competitive.

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

Sir, I wanted to know you were going to start bioethanol, compressed biogas, we have invested a few quarters back. So I just wanted to know what is the status of that?

So that is still under the evaluation stage where we are evaluating project report and all that. We are evaluating not actually ethanol, ethanol is not part of that, but biogas and CPG, which is under exploratory where we have mentioned that we are looking at various opportunities in terms of the green side of the business. So that is under exploratory stage. As and when it is cleared by the Board, we'll come up with the plan, we always come up. Like last quarter, we have come up with the plan about plasticizers, we have already declared that.

Okay. And sir, my next question, just we have guided at 30% of our revenue to come from non-PAN by FY '26. So this plasticizer plant, would it be included in that or it will be included...

Yes, Yes, because plasticizer will include around INR 1,000 crore revenue, INR 200 crores will be Maleic, Benzoic Acid and other. So on your INR 3,300 crores, INR 1,200 crores will be the revenue from other SKUs.

Okay. But sir, you're saying that the full impact for the plasticizer will come in FY '27. So...

No, plasticizer -- '26, '27. Because it will be planning to be started somewhere in September 2025.

Okay. So that will go -- the 30% diversification will go to FY '27, right?

Actually, effectively, when you start the plant, diversification is done by the end of March 2026. But the effect of the same in the revenue will be visible once you look at the full year.

Okay. And sir, just one final question. Sir, with these Chinese single-use ban plastic coming in FY '25. So do we see like by maybe fourth or second quarter of FY '25, these Chinese imports will go down drastically?

I think Chinese are not the biggest exporter to Indian market. If you look at the last 2 quarters, also, Chinese is not even top 3. And India is importing because still there are deficits because we do export and other players do export, you'll find there is a deficit in the Indian market. To that extent imports will remain, because import typically which was 10,000 to 12,000; 120,000 to 150,000, now it has gone down to around 40,000 to 50,000 per year. So it's already half.

Due to time constraints that was the last question for today. I now hand the conference over to Mr. Pramod Bhandari for closing comments. Thank you, and over to you, sir.

Yes. So thank you very much for joining this call in earnings today. If you have any questions, please contact SGA, our investor advisor or you can send us a mail. Thank you very much. Bye.

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