I G Petrochemicals Limited (500199) Q3 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to I G Petrochemicals Limited Q3 FY '26 Earnings Call. [Operator instructions] This conference call may contain forward-looking statements about this company, which are based on the beliefs, opinions and expectations of the company as on the 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. Thank you, and over to you, Mr. Pramod.

[ indiscernible ] today. On behalf of IG Petrochemical, I would like to extend a warm welcome to all the participants. We are also joined by SGA, our Investor Relations Adviser. We trust that everyone has had an opportunity to review our financial results and the investor presentation, which were uploaded on the stock exchange as well as the company's website. During today's discussion, we will briefly begin with a quick overview of the recent industry development, provide an update on the IGPL financial performance as well as the project progress, which will be followed by the financial highlights for the quarter. Coming to the industry. The Indian chemical industry continued to operate in a challenging environment shaped by the combination of factors, including ongoing geopolitical developments, volatility in crude prices, rising global trade and the logistic cost, subdued demand from the key Western markets. These headwinds have impacted the performance of the major chemical companies across domestic as well as international market. IGPL is also not entirely immune to these pressures. Companies with a higher dependence on the import of raw material, particularly those sourcing the raw materials, let's say, Europe, China have forced competitively faced greater challenges. As you see the player with a significant exposure to the U.S. market are impacted by the tariff-related uncertainties. However, following the announcement of the U.S.-India trade agreement, uncertainty surrounding the tariffs have been moderated. Further, the recent development around the EU free trade is also expected to open up the new opportunities for the industry over the medium to long-term. While certain downstream segment experienced temporarily softening in demand in earlier quarters, the current trend indicate a healthy demand revival from various end user industries. The impact on IGPL was relatively limited. This is primarily due to the localized customer base. Majority of our customers are located within radius of 200 to 300 kilometers from our facility, providing the logistic efficiencies as well as demand stability. Although IGPL doesn't directly export to U.S., however, some of our customers' downstream industries cater to the U.S. demand. About IGPL, IGPL continued to stay on a strong foundation, built our focus on the operating efficiency and cost leadership. We are one of the lowest cost producers of phthalic in India. We are the largest producer of phthalic in the domestic market and second largest producer of phthalic in the global markets. Over the decade of focused efforts and continuous improvement, IGPL has developed a strong manufacturing excellence, ensuring a consistent and reliable supply of high-quality products. In addition to phthalic anhydride, our diversified product portfolio includes maleic anhydride, benzoic acid and DEP, which cater to the broad range of industries. We expect these products to meaningfully increase their contribution to the company overall financial performance over the next 4 to 5 years. Particularly about the Q3, our performance for the quarter was impacted because of the compressed margin, lower realization of phthalic as well as soft pricing for the domestic products. These price pressure largely affected our revenue as well as margin during the period. In addition, the profitability was also impacted by the higher cost inventory buildup, which has been carried forward from the earlier period. From a balance sheet perspective, the past quarter, we had also converted most of our euro debt, euro-denominated debt into the rupee. So that has significantly saved us in terms of the currency fluctuation. And we also repaid a significant portion of our outstanding loan. So these initiatives have helped overall reduce the forex exposure and strengthen our overall financial position. As a part of forward-looking strategy, we are continuously focusing on upgrading our key equipments and improve plant reliability, ensuring we are well positioned to capitalize on the future growth opportunity. On CapEx front, our Advanced Plasticizer project is progressing well and expected to achieve the mechanical completion by the end of March 2026. The plant will have an initial capacity of around 75,000 tonne, which can be later on scaled up to 1 lakh tonne. The facility will be manufacturing a wide range of plasticizers, including DOP, DINP, DBP, and DIBP, which are captively -- which will captively consume approximately 30,000 to 35,000 tonne of phthalic anhydride when operated at optimum capacity, thereby improving the overall value chain and integration. In parallel, we are also doing the debottlenecking of our DEP plant, which will increase the capacity of DEP from roughly 8,000 tonne right now to 12,000 tonne by the end of March 2026. IGPL is also taking concrete step towards green chemistry and sustainable circular economy. As part of this, we have, we plan to set up a compressed biogas plant at Karnataka. The project is expected to generate the revenue from sustainable resources by reinforcing our long-term commitment to the environment. CBG project is under implementation and is on track to achieve the commercialization or mechanical completion by the end of the June or July 2026, while the plasticizer plant is expected to be on schedule. Along with these initiatives, we remain focused on enhancing operating efficiency, lowering our carbon footprint across our operations. We are steadily increasing the integration of solar power and other renewable energy sources at our facility, which will support sustainable and long-term cost optimization. In addition to this, we are also begun a phase transition from the conventional fuel, including LSFO/diesel to the natural gas. This shift is expected to save the cost over the period of time, but also improve the energy efficiency and reducing the emissions, thereby aligning our operational objectives with the broader sustainability commitments. We believe that the period of subdued demand for the phthalic anhydride is behind us. Price level across the key products appear to be bottomed out. Looking ahead, we expect to have a gradual improvement in the demand from end industries, supported by the normalization in the market condition. Additionally, the recent developments such as U.S. India trade agreement, EU-India trade agreement present meaningful opportunity for the chemical sector. These initiatives are expected to enhance the market access and improve competitiveness and support export-led growth. For IGPL, this evolving trade environment also opens up the opportunity for potential revenue stream, positioning the company to benefit from the global demand condition will improve. Overall, considering the favorable global environment and anticipated demand recovery, we remain optimistic about the outlook for the coming quarter with a strong operational capability and integrated product portfolio and disciplined capital allocation, IGPL is well positioned to capitalize on this opportunity and drive sustainable growth. For the quarter ended '26, total revenue was INR 471 crore, reflecting a 17% decline, primarily due to lower realization and impact of high-cost inventory. However, the overall sales volume has improved by more than 10% compared to the last quarter. Revenue contribution from the non-phthalic business was about INR 41 crore. Export contributed 15% to the overall revenue, which we -- expect a significant growth opportunity going forward. Gross profit was INR 86 crore. EBITDA was INR 16 crore, mainly impacted by the compressed margin, high-cost inventory and lower realization of the maleic anhydride. For the quarter, company has reported a loss of around INR 7 crore. Total revenue for the 9 months was INR 1,424 crore. The non-phthalic business for the 9 months was INR 114 crore. Gross profit was INR 303 crores and EBITDA stood at INR 56 crore. The total loss for the 9 months ended INR 14 crore because the first quarter was also having a loss, second quarter was profitable and third quarter against the INR 7 crore loss. Overall profitability was impacted because of multiple factors: inventory cost adjustments, M2M charges for the forex, as well as the compressed margin. With this, I conclude my presentation and open the floor for question and answers.

[Operator Instructions] The first question is from the line of Riya from Aequitas.

So I would want to ask since we have all the 5 plants running, what is the capacity utilization this quarter? And what would be the kind of volumes we have done?

So typically, we are operating right now 4 plants, not 5 plants. And also one of the plant was shut for 1.5 months. So for 4 plants, the capacity utilization was around 80% to 85%.

And why was the fifth plant working only for 1.5 months?

That was some technical snag that need to be changed. Otherwise, we intend to operate only 4 plants, but there was some technical issue because of that, it was shut for around 20, 25 days. But again, it has started in December. Overall sales volume compared to the last quarter has improved by more than 10% to 12%. It was more than 51,000 tonne.

I think last quarter also, we had some maintenance shutdown, right?

Last quarter was -- there was a change in the catalyst. We have 5 plants. And every year, we need to take 2 plants for the change in catalyst. Every 2 to 3 years, we need to change the catalyst.

Yes. But however, every quarter, there is 1 plant or so, which is so which is under maintenance or not operational.

Generally, we are operating 4 plants. And in that 4 plants, 1 or 2 plants need to shut down for changing catalyst. Fifth plant is expected to start in line with the plasticizer.

Okay. Fifth plant will only start on the line with the plasticizer, this March, April?

Which is March, April, yes. When plasticizer production will start because that plant will cater 70% of the requirement. 70% of that plant production will go to the plasticizers.

Right, right. Also in terms of spreads, what are the current spreads? Also I'm understanding this since last 2, 3 quarters on the call, we have been mentioning that it is going upwards of $100 to $150 range. However, it is not reflecting in the margin.

Yes, yes. It is -- last quarter was, I think you can say that for last 9 months, it was the worst quarter where the margin has compressed to around $50 to $100, which was the lowest. And that also the impact of the lower realization from the product, the higher cost of the Orthoxylene, which has compressed the margin. Second, the reason is the lower realization because $670 was around maleic anhydride, which has a revenue of around INR 11 crore to INR 12 crore, while we were expecting INR 15 crore to INR 18 crore every quarter. So that December quarter seemed to bottoming out all the margins. Since then, the prices has gone up from INR 82, INR 83 to INR 90 to INR 93. Now there is improvement in the margin.

This was maleic or phthalic?

Phthalic, phthalic.

So INR 80 to INR 90?

Yes. December quarter seems to be the bottoming out of most of the product prices as well as the margin. In Jan, Feb, we have seen very good improvement in overall margins.

Okay. Could you help me in terms of dollar terms, what are the current spreads right now?

When you are talking about the market margin, it's between $100 to $120. And I G margin is generally $40, $50 or $60 higher because the operating efficiency, maleic, benzoic acid all advantage if you consider, then you need to add around $70 to $80.

Yes. So earlier, I think this number was like I think last Q2 and Q1, you -- I think Q1, you had mentioned that the spreads were around $100 to $120 levels only.

$100 to $120 was right when the maleic prices are very good. Now that $100 to $120 moved to $60 to $80 because of the decline in the maleic prices because maleic realization in our case, is directly added to the EBITDA. The maleic prices have gone down significantly by, I think, last -- 20%, 25% in the last 6 months. Today the maleic expect around 600...

I think maleic is reducing since last 1 year only, right?

Actually, historically, if you look at maleic was around 20% higher than phthalic. So suppose phthalic is $1,000, $1,050, maleic is $1,200. Ideally in last 20 years. But in the last 1, 1.5 or 2 years, the maleic is 20% or 30% lower than phthalic. When maleic is $150, maleic is $670. So that has impacted the overall edge of our $100, $150 has reduced to $60 to $60.

Right. So my question is that the maleic prices have remained subdued since the last 1, 1.5 years. However, we were doing much better margins than the current quarter. So what has changed given that the industry spreads have also remained the same, why is the margin impacted to this extent?

So there are 2 reasons. First reason which I have mentioned, there is a compressed margin for last quarter. Second, we were carrying some inventory...

Sorry, I couldn't get you.

So first reason is there is a compressed margin for the last quarter. Second, we were carrying some inventory, which is of higher cost. So that inventory we are carrying at higher cost that you need to sell as per the prevailing market price. So the result inbuilt the inventory losses in itself. The third point which I mentioned is about the lower realization of the maleic anhydride.

Right. Could you help me on the first point a little?

Typically, the margin across all segments were impacted because the downstream industries to whom we are supplying, some of them are supplying it to the U.S. market. They were not doing well. So that has impacted the overall demand and the margin. And margin -- when I'm saying margin is compressed, it's not just because of Indian market. In the global market, margin has gone down, which indirectly impacted the domestic player also. So 3 factors put together. One is the compressed margin. The second is lower realization of the maleic anhydrate. And third is the high-cost inventory, which we were carrying. Now that all are settled up to December.

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

Now sir, the remaining catalyst change for this fiscal year has been completed. When you see like the next catalyst change would start in second quarter or?

I think it is not there in -- next 6 months, it is not there. It is not planned in March or June. It may be after June, but I don't have exact date today.

Got it. And sir, now we had mentioned like because U.S. market was -- because of this tariff impact, volumes of end user industries have been impacted. So sir, now what is the negotiations going on, on the table? Are the customers witnessing an uptick the volume.

I think the volume has already improved because the U.S. matter more or less settled. And whatever the -- actually, if you look at last 9 months, so MTM inventory loss comprises around INR 40 crores to INR 50 crores in last 9 months in the results. So that all matter has settled. Now the prices has already bottomed out, expected to go up. And we are expected to have more than 50,000 tonne of the volume every quarter or more than that. And then there will be PA-5 along with the plasticizer, which will further improve the phthalic volume as well as the volume of plasticizer, which will add -- it's at optimum capacity of plasticizer and PA-5, it will add INR 1,000 crore to the revenue. But I expect 30%, 35% on an annualized basis starting off the plasticizer. Gradually, it will go up to optimum capacity.

Got it. Sir, on to the DEP in our existing plant of 8,000 tonnes, we are debottlenecking to 12,000 tonnes. Already, sir, we have a 7,000 tonnes plant in completion right now. This plant is [ indiscernible ]

No, there is a different...

Is there any [ indiscernible ] for expanding into this...

There are 2 plants. One plant, I'm talking about the DEP, which we started in '22, that is catering to the fragrance industry, mainly like all type of fragrance chemicals companies like Orient, JB and all that. So this plant, which has a capacity of around 8,000 tonne, that we are right now doing the debottlenecking, which will improve the capacity to 12,000 tonne. So that is already under progress, expected to complete by March 2026. And another plant of plasticizer, which is under construction, that is separate that doesn't have a DPE. That is actually DOP, DINP and other products.

Got it. Got it. So sir, like expanding into DEP, is there more rational like because more customers are phasing out from DEP and looking to other options because of toxins and other reasons...

If you ask me, first, there is a better margin. There is a stability in the pricing and there is a good growth demand. We are not only supplying DEP, which is the base for the fragrance for all type of perfumes and all to domestic market, but we also cater to the export market. So for us, I think DEP is something which provides greater stability in the overall margin. Right now, we are also at DEP 40% of market share with 12,000 tonne, we will have more than 50% market share in DEP. DEP is a good product. All the perfumes which you are using, like a lot of market perfumes are available, the fragrance, agarbatti and all that. The base is DEP.

Got it, sir. Sir, what would be the CapEx on to this debottlenecking?

It's INR 2 crore to INR 3 crore, very small. It is not the CapEx, it will be part of the operating cost -- operational cost, yes.

Got it. And sir, this new deal, new plant of plasticizers, volumes and revenue will flow from Q2?

Q1 will be there, but very small revenue, but yes, Q2, gradually, it will go up in Q2, Q3.

Got it. Sir, with this -- with the high tariff imposition on China, so it seems like more of material will not go into U.S. and flow into other markets. So maleic anhydride is there any sort of a concern like outside of U.S., the inventory would be very higher that would lead to further softening in prices or still like you say like this is the bottom in maleic?

So the maleic anhydride prices, I think I believe in next 1 or 2 years is tight because China has extra capacity, which they are supplying to catering to the global market. However, with the India and Europe deal, trade -- free trade is signed, there will be a lot of opportunity for Indian phthalic, maleic guys even to sell into the European market. U.S. market has a certain type of deal, but they are providing certain concession to the Chinese market. The Chinese continue to sell their maleic to the U.S. market and Europe market. So whoever is selling in China and Europe, they need to compete with the Chinese. But I believe that next 6 months to 1 year, there will be a compressed margin. But logically, because today, the margin of maleic is below the cost of production through the butane route. If you get the butane today in India, it will cost INR 500 to INR 550, INR 300 is conversion. So INR 850 to INR 900 is your break-even. Prices are INR 670. I G case is different. We are using the -- we are getting maleic from the wash water. So cost is practically nil. Otherwise, if you use the butane route, maleic is not viable today.

Got it. Sir, just one last question. So we maintain that our top line of INR 2,000 crore would be visible, so INR 1,000 crore of incremental addition on top line and subsequent like 14%, 15% margin...

Right now, we have revenue between INR 2,000 crore to INR 2,200 crore, which is roughly INR 2 lakh crore -- of 2 lakh tonne of the phthalic which we are selling with maleic and benzoic acid with optimum utilization of say, 90% utilization of PA-5 and the plasticizer, we expect to add INR 1,000 crore revenue. If we do utilization of 40%, 50%, accordingly, revenue will change.

[Operator Instructions] The next question is from the line of Chirag from Keynote Capital.

Pramod, sir, my first question is related to the time of frame you are talking about. So just on a comparative basis on Q1, Q2, were you also specifying Q1, Q2 spread with maleic acid or maleic anhydride into picture because in our understanding, it was like the spread that you always talk about is span of spread. So this $60 to $80 spread that you are speaking about is something new that you have incorporated while specifying maleic anhydride into it. So could you give a comparative directional for the spreads for Q3?

Can you just repeat your question? Because I've not got -- you wanted to ask a question why the additional margin over and above the market margin is coming from? That is your question?

No, no. No, sir. I'm just saying that since in last 2 quarters, Q1 and Q2, when you were specifying about the spread, it used to be $100, $120 in last quarter, $120, $150.

Correct.

You were talking just about time of spread, right?

So I will repeat again. Whatever is the market margin, I G used to have $80 to $100 to $120 extra because of operating efficiency, yield by product like maleic anhydride and benzoic acid. When the market is compressed, when I'm talking about is the margin plus the addition. If there is some inventory inbuild loss and all that loss, that will be reflected in the financial results.

Okay. So it was just the extra that we were earning was because of the maleic anhydride and benzoic acid specifically.

Maleic anhydride and benzoic acid and the operating efficiency of the yield advantage all 3 together.

Okay. And that spread has come down to $60 to $80 for the quarter.

Yes. But $60 to $80, it was for the last quarter, now it has again improved it. And in our case, it has also got impacted apart from market margin because of the high-cost inventory, which is now nil because that has been adjusted or sold and now the prices have gone up.

Got it. Sir, my second question is related to the 4 plant that you are specifying about to run every time in the year around the year. So based on my understanding, once the plasticizer plant will come up, so we will be using 3 plants for phthalic and 1 plant for plasticizer and 1 plant will always be shut down roughly on an average?

No. We will be operating 5 plants. One plant, 70% will be utilized for the purpose of plasticizer. And out of 4 plants, 1 plant will be taken the shutdown for change in catalyst every year.

Probably we would be having 2 shutdowns every year as you specified earlier in the call.

I think I will repeat it again. Every 3 years, we need to take shutdown. So if we have a 6 plant, we need to take shutdown -- 2 shutdown in every year. Now we have 5 plant. So every year, there will be 2 shutdowns, 1 year, there will be 1 shutdown.

Got it. And sir, this technical problem that we faced during the quarter led to 1 month shutdown for the plant.

Yes, yes. That has been sorted out and started again back in December. But that has not impacted the sale. That has not impacted the...

What kind of volumes we did in this quarter compared to last quarter?

Last quarter was around 47,000 and this quarter it was more than 51,000.

This quarter was 51,000. Roughly last quarter was 46,000 if I'm not wrong.

So basically, I don't want to comment directly on volume, but we improved around 10% compared to last quarter. Sales has improved although there was a good inventory line.

Fair enough. And maleic prices currently 35% is down compared to PAN prices.

Maleic prices are today is less than $700 in international market. Less than $700, $670 to $680.

And this is because of the excess supply from China?

I think there are multiple factors. It has actually been going down for last 1, 1.5 years from $1,000 to $850, $900, $800, now $750 then now again below $700.

Got it. Just 2 questions from my side. So first is when you're saying that we are expected to get mechanical completion for the plant of plasticizer in Q4, when can we expect the plant to commission completely after the dry runs?

I think generally, 1 month. So that's why I mentioned it. There may be some quantity of production of plasticizers, but that will not be high in April, May, June. But you will see the gradual improvement from July, August, September in production of plasticizer.

Got it. And just last, any update on the CBG plant? It is expected to be completed in Q2 as per schedule?

I think construction is going on. We expect mechanical completion to happen in June 2026. Construction is right now on.

And what are the -- what is the raw material that you would be using in CBG?

We will be using the Napier grass and the agro waste as a raw material for CBC production. Yes.

And the raw material would be available in the nearby area as well as we have...

Yes, yes, it is abundantly available. It is -- actually, the plant is in between the sugar belt and all other belts. It's Raichur is the center place surrounded by a lot of sugar factories and other factories. Agro waste is available and Napier grass is being grown to supply.

And what would be the size of the plant?

The size of the plant is 5 tonne per day, the production of CBC, 5.2 tonnes or 5.3 tonnes. It's a pilot plant for CBG.

Yes. Got it. And expected to run 300 days in a year?

350 because there is no other problems in that plant. 330 to 350 is the production period. So 1,500 tonne in a year. 1,500 to 1,600 tonnes in a year, yes.

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

Sir, 2 questions. So first is on the user industry side, like UPR and pigments were indirectly affected due to the U.S. tariffs because we were doing a lot of exports from India in terms of both these products put together. So if you can just help us understand in terms of the volumes, which we were catering to these segments before the tariff and after the tariff, how much of the volumes would have impacted?

So I think, at this point I can't give you because after the tariff volume is yet to improve, which we will see gradually. Typically, paint, plasticizer and pigment put together is 50% to 55% for us. Paint, pigment and plasticizer between 50% to 55% put together. Balance is the specialty chemical, DEP and other plasticizer.

No sir, what I was trying to ask is that, let's say, when the tariffs were in place and when the tariffs were not in place, I'm not talking about the existing situation.

So basically, 2 segments which were impacted. One is UPR and some portion is the resin and the CPC. So overall difference will be 5% to 10% of the sales. We expect that in this segment, sales will improve by 5% to 10%.

Got it. So let's say, if you are doing a volume of 50,000 tonnes, 2,500 tonnes were impacted, which should come to us on a steady-state basis as the tariffs go?

Correct. Correct. Absolutely right.

Got it. And sir, with reference to the paint, which you just touched upon, like a new player Grasim has been consistently increasing its market share. So are we currently supplying to them? And if yes, what sort of monthly volumes we are catering to?

So typically, we have supplied to all paint companies in India. And the typical volume for the paint company is around 15% to 20% of our production which we...

So close to around 10,000?

15% to 20% because it's a seasonal. Sometimes it's 15%, sometimes 17% because in gaining season, the paint demand will low, plasticizers will improve. So it's changed quarter-to-quarter.

Got it. The second question is on the imports of OX. So with this EU FTA going -- so like EU FTA in place, so from next year onwards, we will start getting the benefits of trade deal. So are we importing anything from Europe in terms of OX so that the duties which currently are there...

No. We don't import anything from Europe, but there may be opportunity to sell the product in Europe where the prices are good. However, we need to check the logistic point of view. And second is 60%, or 65% of product which is being sold for Phthalic in Europe is molten. And around 30%, 35% is on flakes. So we are generally domestic market, we produce flakes because molten is not easy to transport. So there is a limited opportunity for the Indian player in European market. However, we need to check the commercially based on the logistics. Duty has been made to nil.

Yes, correct. And sir, last question from my side. You mentioned about 9-month inventory loss figure of close to around INR 45 crores, if I heard you correctly. If you can just quantify...

No. I will tell you. I will just mention that the M2M charges and inventory impact is INR 40 crore, INR 45 crore, both put together. So M2M was around INR 25 crores to INR 28 crores and INR 10 crores to INR 15 was inventory. Both put together was INR 40 crore to INR 45 crore in the financial results for 9 months.

Correct. Sir, is it possible to share the inventory loss figure for Q3?

So we don't have a direct number calculated for that. It is cumulatively and it is not reflected in the results. That is how we internally calculate because the high-cost inventory remain in your books and then you are selling it, then the loss which is being calculated. So it is -- there is no separate calculation done by us for inventory. However, for M2M, we have already provided in the 9 months' results.

Correct. And sir, with the plasticizer plant getting commissioned, currently, we are around, let's say, give or take, 2 lakh, 25,000 tonnes of volume.

Correct.

How our volume should optically look like in terms of production for FY '27? Any guidance that you can share?

'26, '27, ideally, it should be between 230 tonnes to 235 tonnes. Out of that 5,000 to 10,000 tonnes will be for plasticizer and DEP and around 220 tonnes to 250 tonnes would be for phthalic.

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

So Mr. Bhandari, disappointment seems to have become the destiny of I G Petrol shareholders every quarter, either there is a planned shutdown or unplanned shutdown or some technical breakdown. So -- but the bottom line is that the numbers are really disappointing. And it is reflected in our stock price. The net worth is over INR 1,300 crores and market cap is around INR 1,000 crores. So basically, market doesn't believe our net worth that -- so I mean, that's what the -- means when the market cap is below net worth. So any plans to do share buyback? And why are we wasting money on CBG plant, pyrolysis oil and other exploring downstream chemistries when our core business is trading below book value. So why not just do a share buyback?

Okay. Let me explain you about the industry first. Your comment is very blunt, but let's understand the industry how it works. So phthalic IGPL is the largest player phthalic. It is a cyclical industry. Please understand that the margins move in line with the international market price. We have expanded our capacity. However, the plasticizer got delayed by some 3 to 6 months. When we start the plasticizer, then we will get the advantage of complete integration of PA-5 and the plasticizer. Coming to your point, the market, the book value and all that, I think that is the one way of looking at the investments, but we are focusing on improving our efficiency. When the market is bad, you can look at how you can optimize our cost, how you can improve our overall margin. When market turned up, like in Jan, Feb, you see that there is a good revival in the market, the margin has improved. So I don't think the investors should look at 1 or 2 quarter results. And if not for I G, you look at the entire industry of the phthalic anhydride market. So company is -- when the company is doing or company is not making money, it's nothing to do with the company. It's the performance of the market and the margin. Company is not different from the market. If market is having x margin, company can have an improvement of $50, $60, $70 over and above.

So Mr. Bhandari, I understand the point you are making. In fact, you are proving my point that we are in a cyclical down cycle. We have a great future ahead of us. We have expanded capacity. And this is a temporary down cycle, then that is exactly the time when share buyback should be done so that all the future growth can get divided on a smaller base.

My dear friend share buyback decision is taken by the management and the Board. You and me discussing can't decide that. That is one. But the other opportunity, you always look at the equity market point of view. I understand your point of view. Another thing which I need to highlight for last 9 months -- while we are operating 4 plants, the interest and depreciation is being charged for the 5 plants. So what happened in the last 9 months doesn't necessarily mean that the future will not be changed. You need to wait for 1 or 2 quarters, you will see a drastic improvement in the performance of the company.

Right. Sir, so why is our interest cost high for the past 2 quarters, if you could just help us bifurcate, is it because of the euro loan that we -- sir, if you could just help us bifurcate, why is the interest level was high...

I will do it. The interest cost is not high. We have already projected for INR 36 crore. In the interest 2024 March, when we completed PA-5, the debt of the PA-5 is also reflected in the P&L. In depreciation and the interest of PA-5, which is yet to start the operation in terms of the production. So what you are seeing is INR 30 crore, INR 36 crore, INR 36 crore to INR 38 crore was the financial interest and finance cost. However, there is a minor impact of change in the interest rate from converting into euro to rupee. However, we have prepaid a loan of INR 45 crore. So that is somehow balance sheet route. So if you look at the overall interest cost because we have a treasury income of INR 20 crore to INR 24 crore, effective interest cost in our balance sheet is INR 15 crore. For a company which is revenue between INR 2,000 crore to INR 3,000 crore, I think this is a fair -- one of the best in the industry.

Right. Sir, if I were to bifurcate the INR 10.4 crores of finance cost that we did in this quarter. So if you could just help us understand how much was towards interest and how much was towards other charges related to all these factoring and euro loan conversion?

INR 3 crore to INR 4 crore was on account of term loan interest. Balance is the working capital charges, LC charges, bill discounting charges and other bank charges and around INR 1 crore, INR 1.5 crore was the M2M for balance EUR 5 million loan, which is lying in the balance sheet because we have converted INR 100 crore loan from euro to rupee, but one loan, which is 1.1% interest is still in euro. For that, we need to charge M2M, which is reflected in M2M as well as part of interest cost.

Right. Sir, just a final question from my end, sir, at what multiple do DEP and plasticizer realization can we expect versus phthalic realization? And sir, is it fair to assume that closer to 3,000 metric tons of phthalic will be used for the expanded DEP capacity?

Correct. So basically, when a DEP is -- as I'm assuming DEP is operating at 75,000 tonnes, then 30,000 tonnes to 35,000 tonnes phthalic will be used in that, which is roughly 40% of the DEP. Now coming to your second question, what is the margin? I'm assuming we are transferring the phthalic at a marginal cost or the lowest cost to the DEP plant at which we are selling our phthalic in the market. If you consider that, then the phthalic -- the plasticizer margin is around 10% to 12% over and above the phthalic margin today.

And sir, on the realization front?

Basically, realization front, you can assume that right now at 75,000 tonne, sales is coming around INR 950 crore to INR 1,000 crore. So typically, when you are considering phthalic, say, 90, 91, the weighted average because there are 6, 7 type of plasticizer is coming between 100 -- 105 to 110 depending upon which type of plasticizer because plasticizer raw material is not only phthalic, but also the different, different type of alcohol and some catalysts. So all put together, you can say if plasticizer is 110, then 100 is the cost of raw material for the -- all plasticizers. Including conversion cost, yes.

And sir, for DEP, what would that number be?

DEP -- again, DEP, we are actually more than 12%, we are making the margin on DEP.

And sir, what was the revenue...

When I'm saying 12%, I assume whatever phthalic we are transferring to DEP, that margin considered in phthalic. Over and above, we are making 10% to 12% in DEP.

Got it. And sir, what is the revenue from DEP in 9 months? And what was the volume in 9 months that we did for this product?

So DEP right now, we are selling around 1,500 to 2,000 tonne in a quarter. So typically, right now, annualized volume is around 6,000 tonne for the DEP.

Got it. And revenue?

Revenue at 6,000, 6,500 tonne is around INR 100 crore. But today, the last quarter, the phthalic prices and the DEP prices was low. So the revenue in the last quarter was INR 15 crore, INR 15.5 crore.

So Mr. Bhandari, sir, next financial year, what is the expected volume in -- of phthalic?

Which I mentioned, I think you were there on the call. We expect the volume of pure phthalic 2,25,000. The production is expected between 2,30,000 to 2,35,000, 7,000 to 8,000 tonne will go to the DEP and the plasticizers and balance 2,20,000 to 2,25,000 will be in the -- available in the market for sale.

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

Sir, I believe the Chinese government had removed the export rebate on phthalic anhydride. So have we seen a similar -- have they done similarly for maleic anhydride as well?

Sorry, can you repeat your question? What they removed?

The Chinese government had removed the export rebate, which we are providing to the producers who are manufacturing phthalic anhydride. So has that similar thing happened in case for maleic anhydride as well?

No, not yet. I have not seen any publication on notification for maleic.

Understood. And sir, I believe that China had expanded this maleic anhydride capacities because we are going to implement single-use plastics. So maleic anhydride was going to be used in bio -- for manufacturing bioplastics. So has that got delayed?

Actually, not delayed. They were planning to implement in '22 compulsory implementation, then they decided to do '25, they further extended the date. So right now, biodegradable is not compulsory by law. It's optional. So because of that, not everybody is intending to convert the maleic into BDO and BDO to PBAT and PBT, which is the biodegradable plastics. So to that extent, the maleic is not being used for biodegradable, they will continue to sell maleic into the international markets.

Understood, sir. And now sir, you mentioned that currently, maleic anhydride producers are selling below cost, especially those who are manufacturing through butane route. So how are the Chinese able to do it? Because I don't believe they have their own butane capacities. So just wanted to get a better flavor, how are they able to manufacture at such a price?

The maleic in Chinese are being produced through butane and which is an integrated part of refinery petrochemical complex. So butane is basically the part of C1, C2, C3 and whatever butane is mixed butane, then they convert it into n-butane and again, balance butane because in the maleic process, you take 100 kg of gas, use 60, 40 unit to again give back to the refinery to pool it with the LPG pool. So around 60% gas is used and 40% go back to the source. So they are manufacturing the maleic, which is a fully integrated refined and petrochemical complexes.

Understood. Understood, sir. Got it. And lastly, sir, for phthalic anhydride, just wanted to get a sense, are the current lower prices, is it because of lower demand or there is excess supply? Just some kind of outlook flavor you could provide on phthalic anhydride.

You are talking about phthalic or maleic?

Phthalic sir.

I think phthalic overall, there was a geopolitical uncertainty and everybody was under negotiation. So there was an issue because a lot of downstream of the phthalic players like UPR, they are selling 70%, 80% of their product like artificial marble into U.S. Because of geopolitical issues, the downstream industry got impacted. That has changed the balance of demand and supply. That's why the margin got impacted. Since now the Europe, Australia, the U.S. deal is concluded, we have seen an uptick in the demand as well as overall margin.

[Operator Instructions] The next question is from the line of Prasad from KamayaKya Wealth Management.

So you mentioned that our CBG plant will go right from June 2026, right?

Yes.

And when does the pyrolysis oil plant go live?

That, I think, I will not be able to tell you right now, but we are trying to get it before September because pyrolysis CBG, I think work is more than 50% over. CBG is under construction is given to Pratt, everything is settled. Pyrolysis, I think plant construction is yet to start, Basic and detailed engineering is just completed. Probably next quarter, I will give you the exact time line.

Okay. And can you just repeat -- I guess, I misheard. Can you repeat the spreads that we earned in Q3 on PAN-OX spreads? What are they at currently for us?

In the result, the spread which is reported is around $90 per tonne, which includes the basically lower realization of maleic compressed margin, inventory -- excess high-cost inventory, everything is inbuilt. Market margin is around $60 to $80 or $100. Generally, IGPL earned around $50 -- around $60, $80 to sometimes $100 to $120 because of operating efficiency as well as the byproduct. But this time, all put together, there is a pressure of the downstream industry. There is a compressed margin, the lower realization of the maleic anhydride and overall operating performance, there was M2M in high-cost inventory, all put together is impacted. For last 9 months, if you look at the financial performance, it's M2M charges, inventory loss, everything build together and there was some unplanned shutdown also, which has also caused in all has been inbuilt in the results. We expect that Q4 will be better, much better than last 9 months. And going forward, you'll see the improvement when we start the PA-5 as well as the plant effects.

Got it, sir. So just one clarification. So the spreads that we mentioned at 100, 120 are what we are earning currently, right, in Jan, Feb?

I would not like to comment it. It's a market margin and what I G will earn in the quarter that will be reflected in the results.

Okay, sir. So the market spreads right now are $100, $120?

Correct.

The next question is from the line of Kunal from Alpha Alternatives.

Sir, to understand the size, we are at $110 to $130 spread now, and we do a volume of typically between 45,000 tonnes to 50,000 tonns a quarter. And given...

We typically 50,000 -- 50,000 plus minus 5%, yes. 50,000 tonne.

Assuming there are no inventory losses now and M2M is largely gone. M2M is largely gone, we should expect an EBITDA run rate of INR 50 crores to INR 60 crores every quarter, right?

Yes.

Sir, also, when we say that depreciation and interest is being charged for 5 plants and that is being absorbed by sales of 4 plants. But as I correctly hear you, always 1 plant will be on shutdown. So does this reason...

No, I will repeat it again. PA-5 will be starting along with the plasticizer. 4 plants will be operating at 90% capacity, 1 plant out of 4 will be shut for 1 month for changing catalyst.

That is only for 1 month. Secondly, downstream capacities for PAN, they were -- downstream industries were operating at 30%, 40%. Has there any upward trend there?

No, no. Downstream industry is paint, plasticizer, pigment, CPC, we are supplying to most of the chemical companies. Then we starting -- plasticizer we are planning to start in March mechanical completion and April, May when we start plasticizer, the volume will not go up in 1 day. Gradually, it will start and gradually it will go up. We expect 30%, 35% of the volume in the first year for the plasticizer.

Sir, not about plasticizers, our UPR and pigments, which are our downstream industries, which we supply to...

They are -- UPR -- paint, plasticizer pigment and CPC is around 50% to 55%. UPR and the DEP put together is around 20%. Balance is the other industries.

Sir, and what would be the reason that PAN prices have risen up 10%, 15% in last 1 month? Is there any pinpoint reason? And secondly, to understand, are there any triggers in Indian market, which will drive the realization more than global markets in the next 2 years?

So first question, your question is what are the reasons. So basically, because of the geopolitical uncertainty, there was an imbalance in demand supply, and there were a lot of free trade agreement is being executed between various countries. So that clarity has come. I think most of the free trade for India and other European market has already been concluded. Now U.S. free trade is also in place. So overall demand in the downstream, a lot of downstream industry, which were selling it to U.S. and Europe, they were not able to operate because there was a restriction in terms of the duty, like 50% duty, you can't sell it to Europe, whatever product you are producing. Now with that clarity, the overall production of the downstream industry has improved, which in turn -- I'm not saying improvement in demand, but returning of the demand, which was subdued because of these reasons. So that has improved. And the second is it has gone to the level where the -- it is very difficult for the company to recover the operating cost. No product can be sold for a longer period of time below the operating cost or basically the -- your cost of production. So the prices and the margin has already bottomed out. And since there is an improvement in the sentiment, we have seen the good price appreciation between INR 80 to INR 83 to INR 93 in a period of 15 days.

Sir, lastly on -- if you can tell us for next 2 years, what will be the CapEx? Any clarity on subsidy of your old plant? And as your competitor has filed ADD measure to be considered by government, what could be the time lines we could expect for this?

I think it's not the competitor, all players put together has filed for ADD, which is -- review is expected to come up in August, September. So it's from industry. It's no one person is filing, it's from industry. We expect overall margin to improve in next 1 or 2 quarters. And we have already seen in Jan and Feb, March is also expected to be good. What was your second question?

Sir, CapEx for next 2 years and subsidy clarity?

CapEx. I think we have a CapEx of plasticizer, which will be over by March, which is -- I think we have already done INR 30 crore -- around INR 30 crore, INR 40 crore is spending for plasticizer. CBG CapEx is around INR 30 crore, INR 35 crore. We are already doing it. So put together, right now, for the CapEx plan, you can say, around INR 40 crore to INR 50 crore for next year.

Sir, subsidy clarity, if any?

We have got in principle approval from the government from subsidy -- capital subsidy from the government, and we have applied to get the money from government in -- for '24, '25.

Ladies and gentlemen, due to time constraints, we take that as the last question of the day. And now I would like to hand over the conference to Mr. Bhandari for closing comments.

Friends, I think we have discussed the results in detail. Only point I need to highlight is all chemical companies, I'm not talking about I G is facing some challenges because of geopolitical issues, compression in the margin. But I believe there is a better time going ahead. I have witnessed in all chemical companies because we are supplying to most of chemical companies, which is 70% to 80%. So we see there is a clear cut improvement in the margin going forward. And we expect that not only there will be improvement in margin for I G, but also improvement in the volume in terms of the phthalic anhydride and plasticizers. So we expect '26, '27 will be much better than last year. Thank you very much for the call.

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