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

Ladies and gentlemen, good day, and welcome to I G Petrochemicals Limited Q1 FY '25 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.

Good afternoon, and thank you, everybody, for joining this call. We have joined by SGA, our IR adviser. I hope everybody had a chance to review our financial results and the investor presentation available at both the stock exchange and on our company website. We will provide you a brief summary of recent investor changes and how IGPL is progressing. And post that, we will talk through the operational and financial highlights. After the recent challenges in the chemical sector, the demand for end user industry have started showing the sign of revival. Despite the destocking of major chemicals in the past quarter, chemical prices have started seeing a modest recovery. We have witnessed a similar trend in our Phthalic Anhydride market, though the export and the import of the same has been slow due to the ongoing challenges in [ sourcing ] due to the freight container's heightened shipping charges. The company like us marginally impacted because most of our suppliers clients are within 200 to 250-kilometer radius in domestic market. So we have -- this gives us a better [ edge ]. IGPL is renowned for its proficiency in Phthalic Anhydride products in the market and hold the second largest position globally. The product saw diverse industries with significant application in paint, plasticizers, polymers, pigments, coatings. Post our recent addition of PA-5 unit, our capacity has announced 275,000 tonnes per annum. Currently, our facilities are operating at around 80% to 85% utilization with 2 plants underwent maintenance shutdown due to the statutory requirement. Demand for Phthalic Anhydride in India is expected to grow. Right now, it is in the range of 5 lakh to 550,000 tonne and expect it to grow between 5% to 6%. The utilization of Phthalic Anhydride has been firm and growing over the last few years driven by versatile application as a key intermediary. We foresee steady demand for PAN, especially for downstream derivatives. Our product processes also include Maleic Anhydride, Benzoic Acid and DEP. IGPL is the key manufacturing of Maleic Anhydride in India, using wash water from the PAN manufacturing facility. These products are utilized in the industry, including lubricant additive, agrochemical, perfume, plastics. It is primarily catered to non-food market in India and have a huge potential to serve the domestic demand and substitute imports to certain extent. On the other hand, the DEP has also been growing at a healthy rate with nearly [ 1,700 to 1,800 ] tonnes per quarter. Coming to the plasticizers, we are actually pursuing to add new range of downstream products. We are setting up plasticizer plant of around 75,000 tonnes, which includes the product like [ DOP ], DINP, DOP, [ DBP, DIDP ], DINP. Our project of the plasticizer is on track. We are expected to commercialize it in Q3 FY '26. Notably, this project will consume around 30,000 to 35,000 tonnes of Phthalic. This project will announce our non-phthalic revenue contribution and improve our product mix accordingly. Our company is proposed to set up a [ CBG ] plant of 5 tonne per day as a trial and test plant and the Board has decided to pursue the same project in IGPL, instead of IGPL Biofuels with an expected investment of between INR 30 crores to INR 32 crores. We'll share the more information about this in coming quarters. Coming to the financial performance. The total revenue, including the other income stood at around INR 595 crores, with the year-on-year growth basis, 5.7%. The margin between the PAN and OX from quarter-to-quarter has spread, is ranging between the $150 to $200, which is a good increase between -- compared to the previous quarter, and we're getting a price recovery. The price of Maleic Anhydride continue to remain moderate between $860 to $900. EBITDA for the quarter stand at INR 71 crores, a growth of 7.3%. EBITDA margin stood at 12% compared to 11.8%. Profit after tax for the quarter is at around INR 35 crores. We continue to enjoy the net debt zero -- benefit of the net debt zero company. We have expected to generate -- we're generating right now the healthy cash flow. We are not able to utilize our full capacity due to the shutdown, which has been undertaken for the 2 plants for the complaints with some statutory requirement. The production have remained at similar level what it was for the last quarter. However, the depreciation and interest for the entire -- all the 5 plants were considered in the [ P&L ], which is not reflecting the true picture for the obvious profitability because profitability is for 3 plants, while the interest depreciation is taken for the 5 plants. With our additional capacity, we will be well positioned to capitalize on the multiple prospects, like growing domestic demand [ import substitution ]. We'll continue to add new product to our product basket, which will further help us to reach out to the new clients in new industries. With this, I would like to conclude the presentation and open the floor for question and answer.

[Operator Instructions] First question is from the line of Nirav Jimudia from Anvil Research.

The first is on -- you mentioned that like now we have 5 plants running, out of which 2 were under the maintenance shutdown and in our prior...

Not mentioned as shutdown. It is strictly required shutdown for boiler inspection.

Got it. And what we have discussed earlier, you mentioned that this new [ trend ] could give us some operating cost benefit to an extent of, let's say, $25 to $30. So I just wanted to understand from you that with this new [ trend ], which has come up, one is the cost benefit, but is it also possible that the yield in terms of input, output ratios are also better than our previous trends, what we have already been running on? So how the situation looks like? And a related question to this is that, is it also possible that with some sort of modifications or further CapEx in our earlier prior 4 trends, there could be yield benefit coming to us also with respect to the newer and what we have commissioned.

So typically, our yield benefit range between 7% to 8%, and we are enjoying similar yield benefit for all the plants, including the new plant. So the new plant, when it reached to the optimal capacity, it'll give the similar yield. The yield, which we are talking about, is already optimized, and 7% to 8% is the peak. Sometimes it is 8.5% to 9%, but it's not correct to take for 1 or 2 quarter. And overall, it is between 7%, 8%. When it comes to the cost, since the PA-5 trend has been added at existing sites, so all the supporting infrastructure, the pipeline, the steams, the water, electricity is shared, including the manpower cost. So the overall cost for the conversion will be around $20 to $25 cheaper compared to the earlier plant. That advantage will be available once we operationalize the -- in terms of the production of the PA-5 plant into our system, which you will see probably next quarter onwards, the production is improving to what is the optimum level for all 5 plants.

So sir, the capital changes what we normally undertake every 3 years for, let's say, each of the trends. How does it help us whether it helps us in terms of maintaining the yield or maintaining the current -- how does those catalyst changes help us?

It helps us in terms of the maintenance of the yield. After 3 years, it is going to deplete. Once we'll see change the catalyst, the guarantee of the catalyst will come into the picture for maintenance of the yield, number one. Number second, the energy consumption will also be moderate compared to if it is delayed by 1 year, there will be higher energy consumption. So it is always advisable to maintain or change the catalyst every 3 years. So that the guarantee of the catalyst remain [ valid ].

Got it. Sir, and a related question to this is, how much was the utilization of the PA-5 plant in the first quarter?

It was around 50% to 60%.

Got it. And it is ramping up. And the 2 plants, which were under the inspection shutdown, when do you expect them again to be back into the production?

I think in August first week.

August first week. So then possibly put together all the plan should start ramping up, and I'm producing close to 80%, 85% utilization once those...

I think Ideally, we need to reach at 90%, but initially, it will be casual. Then you will see probably from this quarter onwards, the output is going up, and then it will be achieved at next quarter.

And both these [ trends ] would have a capacity of 50,000 tonnes each...

53,000 tonne each.

Got it. Sir, second question is on if you -- sir, you mentioned about the global margins and the realizations of [ MA ] in the international market. But if you can just help us in terms of what was the realization of PA and MA in Q1 FY '25 in the domestic market?

So I think it's not correct to give the pinpoint because it's always [ ranging ]. The margin for the Phthalic Anhydride in the industrial market was between $150 to $200, which is the difference between the OX price and the PA price, not IGPL because of the operational efficiency and the maleic, benzoic acid is making around $80 to $100, $120, the [ over and above ] sale.

Correct. Correct. Sir, last from my side is, if you can just share about the mix of OX, what we have sourced from the domestic as well as from the imports?

I think typically, it's between 80% to 85% from domestic market, 10% to 15% for [ import market ].

And when we will improve the production quarter-on-quarter and sequentially? Does that incremental OX will come from the imports? Or...

No, it is the same ratio, will be maintained.

Okay. It will be maintained at the same ratio.

Same ratio. Yes.

Got it, sir. Got it. Wish you all the best.

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

Sir, first question is on to the shutdown, which you have taken. Sir, you have said that volumes have remained flattish only, like, despite -- so taking the shutdown. So for how many days the shutdown was taken? And we are not witnessing any sort of increase in other expenses because of the shutdown.

So this shutdown -- there was some increase in the expenditure. That is for the purpose of the energy cost of when you need more [ LSF ] for the purpose of ramping up, which is INR 2 crores to INR 3 crores. That is very small. But the shutdown is generally during the regulation or inspection in the boiler, on that account, we have taken the shutdown, which is, I think, long over dues from our plant -- existing plant. So we have taken the shutdown in line with that. Shutdown generally lasts for 30 to 45 days because somebody needs to come down and check, and you need to shutdown the entire plant before they start checking, at least 10 to 15 days. So almost you can say the 70% to 80% of the quarter has gone from the shutdown and inspection.

This is in the month of July you are sitting right now.

No, no, no. I'm talking about last quarter, April, May, June.

Okay. But sir -- then sir, how come the volumes can be flattish? You had stated that.

No, no, it was flattish for the last quarter. Now you will see the gradual improvement. July August, September, will be better in terms of the overall production, maybe 10% to 15% better than the last quarter. In October, November, December will be further 10% better than the current quarter.

Okay. Okay. Sir, on, like when we look your numbers on a sequential basis, so is there any sort of reduction into iron prices, which we have -- or we have got some benefit of lower cost inventory because the spreads have gone up on quarter-on-quarter basis by roughly around $50 to $100 per tonne. But when we look at the spot figures there, so their numbers are not reflecting the sort of a jump. So have we got some benefits on the low-cost inventory of such?

No. There is no absolute inventory gain or loss. It is just because the margin has gone up because the inventory remains same, while the Phthalic prices has gone. So you can say, otherwise, the raw material is cheaper compared to the sell price, or sell price is higher compared to the raw material. Ultimately, the profitability is a reflection of difference between the final product price and the raw material price.

Okay. Got it. But sir, like on spot basis, when we were tracking the prices, the prices were also showing in line with the rise into the PAN prices. So that was -- I was trying to understand that -- so spreads have gone up materially, you have said that.

I think compared to the $100 to $120 to $140 last quarter, this quarter was between $150 to $200.

Okay. Okay. Sir, on to the compressed biogas, sir, I believe, sir, like this is a very big market and big players are only investing today. So like we had initially sought given an investment of INR 32 crores. But like when we look at the bigger picture, so to set up a 1 CBG plant, it requires at least INR 100 crores to INR 120 crore. And so sir, like what is the bigger plan, like would we be investing a bigger amount into this business going ahead?

I think CBG, if you look at it always depends upon the availability of raw material. So even the big players are setting up the CBG of similar size. They may be setting up maybe 50, 100 or 200 plants. The CBG typically in India is set up at 5 tonne per day to 10 tonne per day. We are planning to do the 5 tonne per day. And it's basically the test and the trial. Once you are successful, then you can repeat a similar model across all other different, different locations based on the raw material availability. We are setting up this plant if flexible for entire raw material, but mainly it is predominantly based on the napier grass. It can be set up on the agro waste, rice straw waste, food waste. It's a combination of all you can use it. We have a full flexibility. But our focus is basically the agro and the napier grass. We are trying to set up the plant, which is 5 tonne per day. And generally, in these all the plants, which is the blending of the CNG, which is effective from next year, government has allowed to do the CNG blending up minimum 1%. It will go to 5% by '28, '29, which is the compulsory. And generally, it has a buyback by HP, BP, IOC and the [indiscernible]. So once we set up the 1 plant, we understand the economics profitability and everything, then we can replicate the similar model for all other places whenever we wanted to set up the plant.

Sir, any sort of CapEx figure we have outlined, so how much number can it be? Because I believe so this is a very big area like where we can invest. So somewhere INR 400 crores to INR 500 crores also would be less...

Right now, I think it is long for me because Board had approved the 1 plant and costing can go up to INR 30 crore. INR 30 crores to INR 32 crores is the gross amount. You will get the capital subsidy, you will get other subsidies, that will be lower. We have given what is exactly approved in the Board.

Got it. And sir, just one last question, sir, how sustainable your numbers of the current quarter can be like for the full fiscal? Can we expect some moderation in your numbers and all going ahead?

I think it's not correct for me to compare what is going to be for the next 6 months or 9 months, but I believe that this year is expected to be much more better than the last year.

The next question is from the line of Rahul Jain from Credence Wealth.

Sir, just to understand this shutdown in the utilization part. So typically, if you had not -- or what is the amount of production loss, volumes loss for the planned shutdown, which has been taken?

For 2 plants, which is typically 106,000 tonnes, we lost almost 80,000 to 85,000 tonnes annualized basis. So if you count it, it will be between 10,000 to 15,000 tonnes for the quarter compared to if you operate all at full capacity.

Okay. And we have an additional 53,000 tonnes plant, which has started operation in the month of April. Right?

I'm counting that also into net.

Okay. So typically, for this year, the way we look at it now, assuming that further shutdown, which is to be completed in this current quarter and also the increased utilization from the new expanded 50,000 tonnes capacity, for the full year, what kind of volumes do we expect?

I think anything between 205,000 to 215,000 or 220,000. I think it's better to take 210,000 to 215,000. It may be 5,000 here and there. But annualized basis, we should touch between 210,000 to 215,000.

Which last year was around 204,000 -- somewhere between 204,000 and 205,000.

Correct. Correct. Absolutely right.

Fair enough. And then going into the next year, all the plants will be operational or you have some planned shutdown for the next year based on the time lines and the regulatory requirement?

We have the shutdown for the change in the catalyst even for this year. After considering that, I'm counting this between 205,000 to 210,000. Next year also minimum 1 or maximum 2 shutdown for change in the catalyst, but I think it's too early for me to give the projections, but I believe, as per my understanding, if we take the 2 shutdowns from the change in catalyst, it has to be between 225,000 to 235,000.

Fair enough. And secondly, on the spread, you mentioned that the spreads in the previous quarter were around $120?

$120 to $140 for the previous quarter. And when I'm saying previous, it's Jan, Feb, March.

And that is for our company as such, right?

No. It is for the international market. Our company is making around $80 to $120 over and above because of operational efficiency and the byproduct of Maleic, Benzoic Acid and DEP.

Okay. Got it. So when you said currently, it is 150 to 180, again, that is for the industry as such?

Market, market. It's a pure difference between OX minus PA.

So we will be around 80 to 100 higher than that. Is that right?

Yes.

And those spreads continue to be present even today?

Yes.

Sue. And lastly, sir, as we go ahead with expansions coming from our competitor also and we also gradually picking up our utilization, do you see anywhere issue with regards to procurement of OX or maybe the prices of OX changing because of the increased demand from the manufacturers of Phthalic Anhydride?

So overall, if you look at the market, we continue to expect to get 80% to 85% of our total requirement. 10% to 15% in any case we are reporting. Similar way, everybody whatever is available in the domestic market will take and balance need to be imported. When it comes to the pricing, I think the market is big enough not to impact because of the small demand from the domestic market. It's ultimately the OX and the PA margin, which is the determine based on the global demand and supply. I don't think any challenge. The second question is the new plant coming up. I know that the new plant is expected to come up in the next 2 to 3 months. Our plant will also be ramping up. So right now, we are not exporting, a minimum export 5% to 7%, which may go to 10% to 15%, which is our average. And secondly, once we start our plasticizer project, around 30,000 to 35,000 tonnes of the Phthalic will go into the plasticizer project. So I think it's a matter of, say, 9 to 12 months where everything will get [ adjust or set ].

Sure. And one last question, sir, with regards to the supply -- sorry, with regards to the demand for Phthalic Anhydride, the various segments, which we are catering to, how do you see the demand changing in the last 2, 3 months and how do you see the demand going ahead? Specifically, if you can also share some details about which are the segments or which are the sectors where the demand is picking up or you expect it to pick up much better than the other segments?

So I think the demand for overall Phthalic Anhydride is growing at around 5% to 6%. I think out of that paint, plasticizer and [ CPC ] account around 50%, 55% Indian market and for us. Similarly, the area which is doing very well is the specialty chemical and [ UPRs ]. If you could talk about that 2 years back, UPR in specialty was around 2% to 3%. Today, they are between 13% to 15%. So that segment is doing well. We expect paint and infrastructure segment to further do well because it pays a lot of new capacity being added by existing players and the new players is also entering to the same. So it is expected to do well. Similarly, the plasticizer and the CPC segment is also growing at their own pace. But the actual demand, or you can say the exceptional demand is coming up in specialty and the UPR segment.

Sure. That's helpful, sir. And all the best.

The next question is from the line of Chirag from Keynote Capital.

Pramod sir, my question is related to the catalyst that you change on a 3-year basis. So in FY '25, are we expecting any catalyst to change? And what is the rough time frame for the...

Yes, it will be, it will be for this year. And it is expected generally catalysts take around 30 days, 25 to 30 days. But if you are planning the catalyst change along with some other changes inside the repair and maintenance because we wanted to do both the things together, it will be around 45 to 55 days for 1 plant. So when I was mentioning that overall capacity of the production, it counts for the 1 plant.

Right. Right. Sir, second question is related to the prices per tonne for Maleic Anhydride. Could you just give me a directional pathway for how it has been in the last 6 months? So currently, if it is $860 to $900 per tonne, what was it 3 months back? And what was it that 6 months back?

I think 3 or 6 months back, it was between -- typically it is between $900 -- $850 to $900, $950. Today, it has gone up to around $1,000 to $1,200. So it has sequentially, if you're talking about last 2 quarters, it is improved by around 15% to 20%.

And what is the decadal average for this?

Decadal average is for the Phthalic -- compared to Phthalic, it is always 20% higher than the Phthalic. Today, Phthalic is $1,200. I'm just giving you an example. Suppose Phthalic is $1,250, so Maleic was always $1,500-plus, 20% higher than Phthalic. Today, it is 10% to 15% lower than Phthalic.

Correct. Correct. It is currently also at 10 to 15 percentage lower than Phthalic.

It was 20%. Now it's 10% to 12%.

Perfect. Perfect. So the third question is related to the capacity expansion plan that we have related to the plasticizers. Aren't we expecting that the plant was expected to commence in FY '25 as per your recent commentary or the presentation that you have occluded, we are expecting it to start by Q3 FY '25. So could you just let me know what is the reason for this 9 to 12 months delay?

No, it's not delay. We were planning to do it in September to December. Earlier, the communication was, we will do the trial and run started somewhere in September, October. Higher, we are again maintaining that commercial production starting December. So it was always between September to December. But for the purpose of the statutory requirement and other requirements, we always maintain and that it will be start in FY '26 because there are certain regulatory requirements, which you need to follow. If it's delayed beyond that, then there is implications at banking side, there is implication at [ construction ] side and everything you need to manage. So we always give 2 to 3 months higher side so that we are comfortably to compete within that time.

And sir, just wanted to understand what amount of time frame will it require for the testing or the trial production period, and we can expect that we have started giving clients within plasticizers. So what is generally the...

So 2 to 3 months is the extended time frame.

Okay. And have you already started having conversation with the clients for plasticizers?

Sorry. Can you repeat again?

Just wanted to know, have you already started having a conversation with the clients that we are -- for the plasticizer plant? Or it will start after the commencement of the plant only?

You're talking about the customers? Or you are talking about the equipment supplier?

Customer, sir?

Customers. So we are already producing one of the processes called DEP. And I think most of the customers of the Phthalic and the plasticizers are common. So we are already selling the Phthalic to both of the customers. So it's 70%, 80% customers are similar.

Okay. Okay. And sir, last question from my side is related to the CBG plant expansion that is taking place. Sir, the INR 32 crores of the CapEx that you are doing, does it include the land acquisition or it is just the plant cost?

So the land is taken on lease, which is the -- land is taken on the lease, 15 acres from the group company, they have the land available, which is in the Mysore Petrochemical. That has been taken on lease. So the land cost is the lease rental included, not the land cost.

[Operator Instructions] The next question is from the line of Jainam Ghelani from Svan Investments.

Sir, all my questions have been answered.

The next question is from the line of Niharika from Aequitas Investments.

So my first question is on this new facility PA-5. So how much volumes did we did from that facility? And are we on the run rate of INR 500 crores for the full year, like you guided in the last con call?

So I think, we, in terms of the overall volume was almost similar to what it was last year, in fact, 3% to 4% lower than that. And you will be able to see the gradual improvement in terms of the overall from August onwards. So you see the improvement by 10% to 15% in overall volume in the current quarter and then 10% to 15% of overall volume from the next quarter.

So will we be on the run rate of INR 500 crores? Or it will be slightly lower than that?

No, no. We are already at INR 600 crores, INR 550 crores to INR 590 crores. And I think next quarter, it should be between INR 600 crores to INR 650 crores. When I'm saying INR 600 crores to INR 650 crore, I'm assuming prices remain same. Ultimately, it is a matter of volume as the price. If price remains same, it will be between around INR 650 crores next quarter.

Okay. Understood. And on last con call, you said that a lot of capacities were -- like a lot of plants were getting closed. So are any of those plants restarting or any update on the same?

Not exactly. The plant, which we're closing, was generally in China and some portion of Taiwan and Korea, but Chinese are some opportunistic plant, which were producing the Phthalic from the naphthalene basis, they were getting close because the naphthalene prices and the downstream of the naphthalene price has gone up. Because of that, the non-Phthalic based, non-OX based Phthalic plant, which is like a naphthalene-based plants are getting closed in the China because these are the opportunistic plant. Otherwise, I think more or less, the scenario will remain the same for the OX-based plant. One or two, which was already closed, is closed. No other new closure has been announced. And generally, the closure is announced when the margin is below $100, then it is unviable for them to operate the plant. Right now, this is not the scenario.

Right. And what is the percentage of current exports? And on the freight hike, like because of the Red Sea crisis, are we also facing any freight rate hikes?

So right now, for the Red Sea crisis, there is a -- I think there are 2 ways to look at that. It's not only Red Sea crisis. I think if you look at the overall global scenarios, the U.S. government has imposed duty on a lot of products in China, which is effective from, I think, September -- or August or September. Because of that, China has [ cornered ] around 80% to 90% of the containers or basically the vehicles, which is required for the purpose of supplying the goods because of that overall pricing for that container has gone up by 10%, 15% to 20%. That has created an environment where the freight for the import and export is up by more than 10% to 20% compared to the last quarter. So in a certain way, it is beneficial because if you need to import, you need to incur 10% to 15% or 20% extra in terms of freight, since we are selling 80% to 85% in domestic markets, not that much impact. When we are selling into the export market, which was, I think, export was around 5% to 7% of the overall sales this quarter, I will just confirm it to you what was the export sale overall, but export sales was generally lower in this quarter compared to the other quarters. This quarter, I think the sale was around 7%, 8% for the quarter. So when the export is higher, then you need to incur the higher freight cost. But generally, in our case, provide delivered supply, but whenever we provide deliver supply, we consider the existing freight available, and there is always a provision in which if freight goes up by a certain percentage, then agreements provide for flexibility in the freight rate, which you can charge from the customer.

Okay. And if we see that the freight situation will, say, normalize in quarter 3, how do we feel that -- like then the import would start coming up, how do you feel the demand -- domestic demand sustaining up then?

I think domestic demand if you look at overall typically 2 years -- 1 year back, India was importing around 120,000 to 130,000 tonnes. Today when the new capacity has started by the downstream customer, the import is around, say, 10, 12 to 15 -- around 50,000 to 60,000 tonnes. So it's already half the import. It is already half because existing customers, who are [ using ], they will not do the import. So import has already been reduced, plus the domestic demand [indiscernible] when 2 or 3 capacity additions are coming. At the same time, it will take for the market around 6 to 12 months to absorb that. And we are also starting our plasticizer project, which will take around 30,000 to 35,000 tonnes in our downstream production of plasticizer. So overall, it take around, say, 5 to 15 months to absorb the -- or create the [ equilibrium ] in demand/supply. Till that time, all the player has to do 10% to 15% export, which we are doing it historically. Last quarter, domestic demand was good. Not -- but so we are selling 92% to 95% in domestic market and 4% to 5%. Now again, export will come back to 10% to 15%.

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

Most of my questions are already answered. Just a couple from my side. One is from the UPR side, although it's a small revenue contribution as of now, but it's increasing quite significantly. And I believe that margins are also much better in UPR segment. So how is the overall outlook we are seeing? How is the market acceptance for this product as of now? And what sort of bigger picture we can expect in this segment?

So UPR is basically unsaturated polymer resin, where the phthalic, maleic and a lot of other chemicals are used. So today, if you look at around 90% to 95% of our Indian market are filled with PVC, CPVC, VPVC, which has a life of typically 10, 15 to 20 years. Generally, in all the households, these type of pipes are used. But if you look at the interest rate or a big infrastructure project, like agriculture or water pipeline, then they don't use PVC, CPVC this pipe because their life is 10 to 15 years. The UPR-based pipe has a shelf-life of 80 to 100 years, plus they have a lot of flexibility, not impacted because of the -- and there is no corrosion, not affected because of the water pressure and all that. So all the governments in Europe, America when they are building big infrastructure projects, they prefer UPR. In India, the concept of UPR has started off late by last 3 to 4 years, it's growing around 15% to 20%. And you can see that in company as big as Tata Steel, which is INR 2 lakh crore of revenue from steel and steel-based pipes and other equipment, they have started manufacturing UPR-based pipes. And recently, they crossed INR 100 crore revenue from that. So future is, of course, UPR, but it will take time for India to go because right now, the volume is very small. That's why you can see 20% growth. But we believe the UPR is the next segment. Globally, UPR consumed 25% of phthalic. In India, it is still less than 5%. So the opportunity to grow into the UPR segment is enormous. But it will take time because generally, it is costly, but it's provided the enduring benefits for large infrastructure product. So we believe -- I think the time has come it is growing at a healthy pace. And in some time, it will take some leap in terms of the overall growth when some big infrastructure projects will be undertaken by either power sector or the public sector. So UPR is the segment apart from the paint, which is expected to grow very well and specialty chemicals for Phthalic purpose.

And I believe margins are also slightly higher compared to other products, right?

I think this is not correct to say that UPR because ultimately, it's the margin of phthalic, it will decide. You can't say that you are getting extra margin in paint, plasticizer or UPR. It is not that case. Generally, everybody's smart in the market. They know what price the phthalic is available. And generally, the pricing for all the segments are we hear about is similar, maybe INR 1 or INR 2 here and there, otherwise it's the same. So you can't say that UPR are making extra margin, it is not the case.

And what would be the CapEx for FY '25? And considering the CapEx, what sort of debt level we should be expecting for FY '25?

So to clarify that, there is no debt taken or planning to again in the CBG. So there is no debt for the plasticizer, which is around INR 160 crores to INR 180 crores project, we have tied up for INR 100 crores, INR 110 crores but that is the tie-up we have done based on actual requirement and the interim cash flow, we may decide to take the debt lower than that.

So overall, for FY '25, what would be the CapEx?

For FY '25 and '26, I will put together both because the projects are coming online in '26. So for these 2 years, the CapEx will be around INR 150 crore to INR 160 crore for this and INR 40 crore for this. INR 200 crores is the CapEx for 2 years. This will be funded INR 100 and INR 100, debt equity.

The next question is from the line of Mahima Rathod from Tiger Assets.

Sir, could you specify what is the global demand for plasticizers and paint industry?

So the plasticizer, I think it's a very big market. It's around $18 billion market. We do expect it to grow by 6% to $24 billion by 2028. In India, demand is between 5 lakh to 550,000 tonnes, which is expected to grow at same 5% to 6%. So global plasticizer is not one. There are more than 20 type of plasticizer, even it goes into the not only the UPR, DOP, DIP, DIDP, there are multiple types, they are especially the plasticizer, there are engineered plasticizer, which are used in the jet -- building the jet body and all that. So when I'm talking about plasticizer, it's a whole range of plasticizers manufactured in the world.

And the paint industry [indiscernible]

Sorry, can you repeat again?

And the paint industry demand?

So paint industry has a very smaller demand for the plasticizer. It is not plasticizer. It is generally the resin. All the iron-based or other pipes, the other things which is manufactured by the steel industry, that resin is supplied by the paint industry. Resin requires phthalic. From phthalic, they produce the different, different resin, which is used by the steel manufacturer and other PVC and CPVC pipe manufacturers for the purpose of painting on their surface. And paint industry for the purpose of phthalic is growing very well. And because the existing guys are expanding their capacity, I mentioned that the new player has entered in a big way, so it is expected to grow between 8% to 10%.

Okay, sir. Sir, and for this plasticizer...

So sorry to interrupt you, Ms. Mahima, may we request you to return to the question queue for follow-up questions as there are several participants waiting for their turn. The next question is from the line of Deep Chitalia from 9 Rays EquiResearch.

Sir, can you provide product-wise volumes and realizations for Q1 FY '25 versus FY '24 as a whole?

So as a company, we have decided we are not sharing the volume for individual products and realization. On an overall basis, our quantity of the production of the phthalic is similar what was in the last quarter, typically 16,000 to 17,000 tonnes per month. Based on that, you can calculate what is the overall realization.

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

You mentioned that the spreads were around $150 to $200 per tonne last quarter. So have you seen the spreads come off in this quarter or seen an improvement in July?

I think it is. However, the [ spread ] are something seen every week, or in fact, sometimes twice in a week. So not correct to pinpoint for the particular week or two week. Generally, we take the average for the quarter.

So [indiscernible] is there?

So it is same. In July, it was same, what was in the last quarter.

Understood, sir. And sir now If I have to understand, you've seen an improvement in the time of spreads. So if I have to understand...

Sorry, I lost you. Hello? Hello?

To operate at such lower spreads.

So can you repeat it? I just lost in between?

So the improvement in spreads, which we see for in the last 1 to 2 quarters. So the reason for it?

The reason is very simple. Typically, when the spread was around $100 to $120, most of the companies which are producing the phthalic, they are not able to cover the conversion cost because in Europe and other places, the conversion cost is $150 to $160. So it binds to happen because a lot of guys decided to shutdown their capacity. Now the spread has come up because otherwise, it is not sustainable, they were making the cash losses. So it is not possible for a longer period to remain below a setting, say, $150 to $200. If it remains, then a lot of guys who are -- cash losses, it's not viable for them, they need to shut down the plants.

And sir, the spreads, which we witnessed last year, so were they one of the lowest, which you witnessed in the last 15 to 20 years?

I think it is second time. It again happened in '19, '20 or '18, '19, I don't remember exactly, when the crude went to 0. When crude was $0 dollar, then again the spread was below $100. It happened in my view in last 10 year twice.

Okay. Understood. And sir, now this is a difficult question to answer, but just to understand the future PAN-OX spreads. Now if the freight costs are to reduce, the imports should increase and with our competitor also increasing capacity, the overall capacity for PAN would increase. So would it be correct to say that the PAN of spreads you are discussing right now would be capped and there shouldn't be any material improvement from these spreads going forward?

Two things. First, the spreads in the phthalic minus OX does not depend on domestic demand and supply. It's a global number. Number second, the existing players in domestic market, who are producing that, they are competitive enough to take care of any import happening. And generally, it's always easier to sell in domestic market when some domestic producer is producing and selling into the domestic industry because in import, apart from the product, it takes 30 to 45 days to import. We need to get freight, transportation cost, handling cost, local transportation, foreign exchange plus the duty. So it is not viable if you are buying a very small quantity, say, 5,000 -- sorry, 100,000 tonnes or 200,000 tonnes. If you are buying 10,000 tonnes, it makes sense. Otherwise, it doesn't make sense for the player to import because the vessel cost will be very high if we are importing in the smaller quantity. So I think the domestic industry is very competitive. In fact, they are able to easily compete with the import. So that is not a [indiscernible]. And when the production is available in the domestic market, I think more or less, imports will remain as it is where it is today. In fact, there will be opportunity for the domestic player to export some of their product in the international market at a competitive price compared to the other player in the market, in the international market.

Fantastic sir. And sir, last year, there was slowdown in the pigment industry. So how -- and which is one of the bigger consumers of PAN, so how is that industry now behaving? Are we seeing a pickup in demand from that industry?

Yes, yes, they have come back very well. Now the pigments and all are doing very well. In fact, they are around 20% of overall phthalic market, and they are growing very much.

The next question is from the line of Pinkesh Thakrani from Profitgate Capital Services LLP.

I just wanted to know about the margins, the EBITDA margins. The company had in the past a good EBITDA margins of over 20%. But now from last couple of quarters, and I would say, financial year also, the margin has come down. So what the management expects when this is going up and we see the days we had left in the past?

So typically, margin move between, say, 10% to 20% for the EBITDA. And sometimes it is more than 20%, sometimes -- very few times, it is less than 10%. So the margin keep on changing, depend upon the demand supply and the overall margin between OX and phthalic. So for a long-term basis, it is prudent to assume around 15% margin because market is good. You are making 20%. When market is not so good, you are making 10% to 12%. If you look at the last 10-year average, you will be able to get around 15% for the margin.

The next question is from the line of Pradeep Rawat from Yogya Capital.

So my first question is regarding the naphthalene [ route ] supply of PAN. So what is the current spread between Phthalic Anhydride prices derived from Orthoxylene route and PAN prices derived from naphthalene route? So what would be the spread between those prices?

So as mentioned, the Phthalic is between $150 to $200 in international market. Naphthalene-base will be slightly higher. But it is not apple-to-apple comparison because the operating efficiency or yield benefit is not much available in naphthalene. Naphthalene is made in certain segments to be used. The phthalic of naphthalene base is not used in certain segments like CPC. Number third, in naphthalene, the operating cost will be much higher than the OX base. So even if on the pace, it looks it's $50 to $100 better, but when you count the overall yield, the byproduct and operating cost, it's more or less [ acquiescent ].

Sir, I was asking more about the price differential between both the prices of PAN produced from both the routes. So if...

Same, same, same. There is no difference there. PAN price is same in the both route, but I was telling you the difference between the naphthalene price and the OX price differential, which resulted into the overall differential in these margins. But the yield and the operating cost cover it up to make it equal.

So earlier, naphthalene route was like oversupplying our markets also. So is it right to assume? And right now, it's like one...

Earlier, the gap was $200 plus. Now it is $100, and $100 is exactly the extra cost we need to bear. When it was $200, then it was lucrative to supply the naphthalene base to the phthalic to the other markets, including India. Now the naphthalene, the other products generated, manufactured from naphthalene, prices has gone up. So it doesn't seem to be more attractive to produce phthalic from naphthalene.

Yes. So current spread is around $100 and earlier it used to be at $200. So what is the historical spread like 4, 5 years earlier than today?

90% of the plant in the world is based on OX. It is better technology, better deal, better operating efficiency, lower CapEx and lower OpEx. Naphthalene is basically the waste from the steel plant. It is an opportunistic plant. Whenever the difference between the OX and naphthalene goes about $250 to $300, then some of the unit try to use naphthalene to produce phthalic. Otherwise, in last 20 years, no new plant has been set up based on naphthalene. It is [ obsolete ] technology.

Yes, yes. Understood. And how have been the import...

Mr. Pradeep, may I request you to return to the queue for follow-up questions as there are several participants waiting for their turn. The next question is from the line of Darshil Jhaveri from Crown Capital.

Yes. So a lot of my questions have already been answered. So I just wanted to maybe get a feeling of how our revenue trajectory would maybe be in this financial year. As you're saying in Q1, we'll have more 10% of volume. And in Q3, we'll have around, again, more 10% than what Q2 was. So what kind of range of revenue could we maybe assume for FY '25?

So right now, our revenue is between INR 550 crores to INR 600 crores. So if you do the multiplication, we have to be between INR 2,300 crores to INR 2,500 crores for FY '25. For '26, there will be improvement for 1 quarter when we are starting our plasticizer project. But actual improvement or quantum improvement we will see in 2027 when the overall revenue will improve by INR 500 crores net. Overall, it is INR 900 crores, INR 400 crores phthalic will go into the system, so net revenue will be increased by INR 500 crores.

Okay. Okay. Fair enough, sir. That helps a lot sir. And sir, with regards to margin, as you were saying, in good years, you can maybe even do 20%. So right now, as we're seeing that we're getting great spreads than what we were getting last year. So what kind of EBITDA could we maybe think for FY '25? Not FY '26, but at least FY '25...

'25 between 12% to 15% is ideal because the $150 to $200 is the last 10-year average. And you are saying it's great. I don't think it is great. Great is when it is $250 to $400.

The next question is from the line of Akshay Kothari from JHP.

Sir, just wanted to know one thing. If I'm not wrong, [ ADD ] is going again FY '26 August. So how sure are we that ADD will get renewed?

That I can't give you a comment right now because it's up to government to decide. But there are some countries where import duty, there are some who has the ADD. I think 3 or 4 has ADD and government takes their own cost review and based on that recommend. So it is not right for me to comment today what is going to happen in '26, '27.

But even if ADD does not get renewed, what impact could it have on our margins?

So I think with or without ADD, the domestic market all producers are competitive enough because apart from ADD, there is an import duty, there is freight, transportation, ForEx, local transportation, everything. So after that, you need to make the pricing in line with that. I think if everybody sells at typically what is the international market price, they can't compete with the domestic players.

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

Sir, just a clarification out of your INR 40 crores of non-phthalic sales in this quarter, how much was a MAN sales?

Around INR 15 crores to INR 16 crores.

Correct. And sir, you mentioned about the various grades of plasticizers. We are into DEP, and we are going to put up a DOTP plant, DBP plant in the newer complex. So if you can just help us, what's the market of DEP in India right now? And have the margins improved this quarter that is in Q1 vis-a-vis that of last quarter?

I think DEP market in India around 20 -- 18,000 to 20,000 tonnes, we are producing roughly a 14% to 15% of DEP required. And overall demand for the plasticizers in India is between 5 lakh to 550,000 tonnes, which include DOP, DBP, DIDP, [ DIFP ] everything together...

Sir, what will be our addressable market because we are coming up with a few selected products out of that...

25,000 tonnes, which is -- 75,000 tonnes, which is predominantly will be DOP, DIDP, [ DIFP and DBP ]. These are the 4 products, which will be around 90% to 95% of our product.

Correct. That I understand, sir. But what is the total market of these 4 products in India? Out of...

Between 3 lakh -- around 3 lakh to 350,000 tonnes.

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

Sir, I was looking at the time PAN imports in India for this quarter. Sir, there's a significant drop of almost 70% to 75%. And I think the monthly run rate of PAN import in India is somewhere around 3,000 to 4,000 tonnes. And sir, this sort of a number was not even in COVID times also, sir.

When you are saying significant decline, you are comparing with whom?

I'm comparing with the Q1 of last year.

Okay. So, yes, compared to Q1, it is -- Q1 was 33,000, Q2 was 10,000, Q3 was 15,000, Q4 was 12,000 and current April to June, about 13,000. For the last 4 quarters, it is between 10,000 to 12,000 tonnes. And April to June when it was 33,000 tonnes, at that time, some new plant, additional 80,000 tonnes has started. After that, it is already reduced by 50% to 60%.

Okay. So sir, this figure of 13,000 tonnes per quarter, so like structurally anything has changed into this business, like so we understand that the freight cost has gone up. So that is why the Chinese...

No, no, new players who have started the production of phthalic, they were importing more than 50% of phthalic in India. So once they started the production, it doesn't pick for them to import. That is the reason it has gone down.

So to which countries now China would be supplying the PAN apart from India?

I think that you need to check with China. But generally, the countries to whom the China, Taiwan and the Korea supplying was India, Southeast Asia, Middle East and APAC countries.

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

Thank you very much, everyone, for joining this call. We appreciate your interest in the company. If you have any query, feel free to contact SGA, our investor relation adviser, or you can send the mail to us. Thank you very much. Have a nice day.

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