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

Ladies and gentlemen, good day, and welcome to the I G Petrochemicals Limited Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantee of future performance and involve risks and uncertainties that are difficult to predict. I now hand the conference over to Mr. Pramod Bhandari, CFO, IGPL. Thank you, and over to you, sir.

Good afternoon, everyone, and a warm welcome to all the participants. On the behalf of I G Petrochemicals, we thank you for joining us today. We also have the SGA, our Investor Relations Advisors, with us. We trust that you have had an opportunity to review our financial results as well as the investor presentation, which has been uploaded on the stock exchange and also available on the company's website. During our discussion -- today's discussion, we will be giving you a brief overview of the industry, followed by the IGPL operating and financial performance for the quarter ended June 2026. In terms of the industry, the overall domestic demand across several downstream industries continues supported by the infrastructure spending manufacturing activities and healthy industrial demand. As a result, the Indian chemical industry demonstrated resilience and reflecting a gradual transition from cyclical weakness towards a more stable growth trajectory. While the global commodity chemical market remains competitive, however, the geopolitical uncertainties have improved the operating environment in the domestic market compared to the corresponding previous quarter for the last year. Although the near-term volatility may persist, however, the industry long-term outlook remains positive, supported by the rising domestic demand, global supply chain shift, infrastructure growth and favorable government policies. The chemical industry continues to operate in a dynamic environment. Ongoing geopolitical tension in the Middle East have also created a near-term uncertainty for Indian economy, particularly through their impact on the energy prices, supply chain and logistics. This has led to the volatility in the prices of key raw materials, including the ortho-xylene as well as several other chemical products across value chain. However, we expect the disruption to gradually ease over the short- to medium-term and supporting a more stable operating environment. Against this backdrop, IGPL has delivered a strong operating performance during the quarter. Our business continued to benefit from a strong domestic presence, a well-established customer network across key end-use industries, primarily within a range of 150 to 200 kilometer radius of our manufacturing facility. This localized customer base enhanced supply chain efficiency, foster a strong customer engagement and contributes to the stable demand. While certain downstream industries served by IGPL experienced temporary moderation in their demand over recent quarters, we are also now witnessing increasing signs of recovery in several end user segments. IGPL continued to maintain its leadership position in phthalic anhydride market. We are among the largest producer of phthalic anhydride in India and among the largest producers globally. Over several decades, the company has built a strong reputation of manufacturing excellence, operating efficiency, product quality and customer reliability. One of our key strengths is low-cost manufacturing through our continuous operational improvement, efficient plant management and disciplined cost control, we have maintained our position as one of the lowest cost producers in the industry. This enabled us to navigate the market cycle more effectively while continuing to deliver the value to our customers and the stakeholders. In terms of the business performance and operating performance, Q1 FY '27 was a strong quarter for the IGPL. We delivered a healthy revenue growth along with a significant improvement in the profitability supported by the improved realization across all product portfolio. Our performance benefited from our continued focus on the operational excellence. As a part of our ongoing focus on strengthening long-term competitiveness, we have continued to invest in the equipment upgrades and maintenance to enhance the operating efficiency and support the future growth. Now turning to the greenfield expansion. As you are aware that we have concluded the mechanical completion of our plasticizer plant in March 2026. The facility will have an initial capacity of 75,000 tonnes and expected to start commercial production before September 2026. The plant will manufacture a broad portfolio of plasticizers including DOP, DINP, DBP and DIDP, catering to a wide range of downstream industries, several of these industries have a healthy domestic demand with limited import dependence. This development represents a significant step in expanding our value chain, strengthening product diversification and enhancing the profitability. We believe that the plasticizers business offer attractive long-term growth potential and will become a meaningful contributor to IGPL revenue going forward. To capitalize on the growing demand, we successfully completed the debottlenecking of our DEP plant during the last quarter, increasing its production capacity. We expect the diversified product line to contribute meaningfully to our overall business performance over the next 4 to 5 years and creating a more balanced and resilient revenue mix. In terms of the sustainability, we remain -- it remain integrated part of IGPL long-term strategy, guided by our commitment to the environment and circular economy principles, we continue to invest in the initiatives that support the sustainable and long-term value creation. Our CBG plant at Raichur is progressing well and the project will support renewable energy transition, while creating a sustainable and diversified revenue stream. The project not only diversifies our business opportunity, but also reinforce our commitment to sustainable industry practices. In addition to the growth, we remain focused on improved operating efficiency across our manufacturing network. We have continued integrating solar power and other renewable solutions into our facility to reduce overall carbon emissions intensity in our businesses and optimize energy costs. Furthermore, we have initiated the phased replacement of conventional fuels such as LSFO and diesel with the natural gas. This transition is expected to deliver multiple benefits, including improved energy efficiency, lower operating cost and reduced emission and sustainable performance. Looking ahead, we remain optimistic about the growth opportunity ahead. Demand across all key end users expected to improve, supported by the infrastructure development, manufacturing activity and increasing industrial demand. With our strong market position, expanding manufacturing capability and diversified product portfolio, we are well positioned to capitalize on the opportunity. On our ongoing investments, product diversification and operational excellence are expected to further strengthen the competitive position and support the sustainable profitable growth over long-term. We continue to execute our strategic initiatives with a disciplined capital allocation. We remain focused on creating long-term sustainable value for our stakeholders. With this, we thank our shareholders, investors, stakeholders for their continued trust and support. We remain committed to execute our growth strategies with the discipline and deliver sustainable long-term value for our stakeholders. Now coming to the financial performance for the quarter for Q1 FY '27. Company delivered a strong quarterly performance with revenue rising by 30% to INR 625 crores, driven by the improved realization across all product segments. Revenue contribution to the non-PAN was standing at INR 49 crores, led by a better realization of maleic anhydride and DEP. Gross profit and the margin was around INR 207 crores at 33%. EBITDA was INR 120 crores compared to INR 13 crores for Q1 FY '26. EBITDA margin was 19.2% compared to 2.7%, reflecting the strong improvement in the profitability. Profit after tax for the quarter stood at INR 71 crores, reflecting a significant improvement over the corresponding quarter for last few years. India has extended the antidumping duty. I think the notification has come as recent as last 2 days back on phthalic anhydride, which is $40 for China and around $140 for Korea. That is effective for 5 years effective from 1st August 2026. With this, I conclude my presentation and open the floor for question and answers. Thank you.

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

I have a few questions to ask. So sir, in our earlier conference call, like we used to say that the Indian demand for phthalic anhydride is close to around 4.50 lakh to 5 lakh tonnes. So on a run rate basis for Q1, how has been the industry demand? Because you mentioned that there were some user industries where the demand was slightly subdued, which have now recovered. So if you can just say -- if you just indicate in terms of how was the demand in Q1 and how from there onwards, it has recovered too?

So basically, there was an impact when there is a sudden jump in the prices of various petrochemical feedstocks, including phthalic because most of the industries which we cater like plasticizer, pigment, CPC, UPR, alkyd resin, they are not only using phthalic as a raw material, but also multiple other petrochemical feedstocks are used. So because of that, there was some moderation in the demand we have witnessed because the pricing has gone up by 50% to 60%. While we have seen there is a moderation in demand in April and May. By June, we have seen again the good recovery of the demand. So the segment which has gone very well is the alkyd resin in the paint segment, while the segment which has impacted was the specialty chemical and plasticizer. UPR remained more or less same. CPC remains same. So some of the product line has improved. Some of the product line remain moderated for first 2 months, April and May. But in June, we have seen the similar demand which was prevalent before the Feb 2026, like the demand has come to the normalization.

And sir, in terms of our production and sales this quarter, how was the situation in terms of when we compared to Q4 of FY '26? So if we see this quarter, if you can throw some understanding in terms of the production and sales part?

So actually, in terms of the production, we are operating around 3 to 3.5 plants. So we were between 40 to 45. For the overall sales compared to the last quarter, the sales was 10% to 15% lower compared to the last quarter. However, the overall price realization was very high because the prices have jumped by 30% to 40% for feedstock as well as final product. That's why if you look at the revenues, the reflection of the revenue is basically indication of the higher price realization rather than the higher quantity.

Correct. And safe to assume that this run rate of 40,000, 45,000 tonnes, which we have seen in Q1 and the demand improvement what we have been just discussed, there would be an uptick in the numbers in the quarters coming by?

Yes. We will see that there will be uptick in improvement in overall quantity of the production and the sales as well as there will be the sales from the plasticizer, which we are planning to start by the end of this month or probably early next month. So that volume will also be added. So we will see a good overall revenue, increment revenue as well as the overall quantum of phthalic and plasticizer to improve. We have also improved our DEP because we have done the debottlenecking last quarter. So now we are running at a run rate of around 10,000 per annum basis compared to 6,000-7,000 earlier.

Correct. So sir, like between INR 49 crores of revenue from non-non-phthalic business, how much was the DEP sales this quarter?

So this time, we have crossed highest ever in the quarterly basis. It was INR 28 crores to INR 29 crores for the DEP and around INR 17 crores to INR 18 crores of maleic.

Correct. Sir, last question from my side. What was the gross margins this quarter? And if you can share for Q4 of FY '26, that would be helpful.

But typically, the gross margin for this quarter was around 32% compared to the Q4 FY '26, 23%. So typically, right now, the margin is between $250 to $300, I G is making around $100, $150 -- $120 extra because of the operating efficiency and the byproduct. And since the prices were very high and operating efficiency give us some extra yield, that has translated into the higher margin.

Correct. What was this for Q4, sir, if you can just clarify?

32% gross margin.

No, sir, in terms of dollars per tonne, like you mentioned this quarter was $250 to $300.

Typically, for gross margin, industry was around $250 to $300, we were $100 or over above that.

The next question is from the line of Mohit from Subh Labh Research.

Sir, my first question is, since we have got the ADD approval once again from Minister of Finance. If you could please tell us what the landing price of China and Korea would be after the ADD, a ballpark number?

Can you repeat your question? I'm not getting your voice clearly.

First, what would be the landing price of PAN from China and Korea after the ADD addition?

So basically, whatever is the price today, $40 will be added to the China and around $140 to the Korea. So basically, whatever is the price in China and Korea, it added 4 things: First, freight transportation cost, the insurance cost, then the port cost, then local logistic cost, then the ForEx hedging cost plus the duty, which is import duty already there in some cases, then the antidumping duty of $40 and $140. So typically, if you ask me today, today, if the price is, say, let's say, assume today price is $1,000, so it will be around $1,100 to $1,150, depend upon country price. Around 10% to 15% higher. For particularly, the Korea and China will be because, there is already a duty, import duty in some of the cases. So apart from these 4 costs, it will be applicable of import duty, it will applicable and over and above antidumping duty will be applicable.

Very clear. Also, sir, can you tell us what percentage of our PAN revenue comes from paints and specialty chemicals. I am asking this because we are seeing good growth in both industries. Also the growth in these industries, if you can provide some guidance also going forward, what would be the volume coming?

Typically, we were selling around 20% to 25% for the paint industry in terms of the quantity of phthalic goes to, and it maintained during even Q1 FY '27. So for specialty, we were selling between 4% to 5% and remain 4% to 5%.

Okay, sir. And are you expecting some volume increase from paint industries?

Yes, yes because there are a lot of new players entering into the paint and the segment is using not only for the 2-wheelers, 4-wheelers, but there are alkyd resins demand growing across all the paint segment. And since infrastructure is being developed in India, we expect that demand to grow between 8% to 10%.

Okay, sir. Very clear. And sir, my next question is on plasticizer plant. Since we have done the mechanical completion and we are just getting ready to start from September sometime. Can you give some idea on how customers visit plants totally and approvals are going on?

So I think all approvals are fairly in place. We are planning to start probably either in August or early September. And we expect that we will start with around 1,500 to 2,000, and we expect around 2,000 to 3,000 tonnes per month, we will be able to sell for the balance period of 6 months. That is what our target is. So it will generate roughly a revenue of INR 250 crores to INR 300 crores. Gradually over the probably next 6 to 9 months, it will reach to a capacity of 50,000 to 75,000 tonnes.

Okay, sir. And sir, if also, can you please share the end user industry, which we will be focusing on more, so for the plasticizer plant?

I think all the plastics users, which is some of them are phthalic and maleic customers, particularly it will be leather industry, it will be the cable industry, it will be the other plasticizer industry. It's -- I think wherever you see the plastic is all result of the plasticizers. So we will be focusing mainly on the cable industry, which is DINP and the DOP, which goes for the various plastic modules. These are the key focus area. And since it is a batch processing, we will be producing based on whatever is the requirement in the market or demand in the market. So our production is fungible. We will be able to produce based on the requirement of the market.

The next question is from the line of Riya Mehta from Aequitas Investment.

Congratulations on the good set of numbers. Just wanted your input on -- in the current quarter [indiscernible] what would be the amount coming from inventory gain. There is a lot of disturbance.

Inventory gain as such, we have not concluded. But of course, there are inventory available because at that time when we were in April, there was a lot of inventory was pending at our end in March. And then that inventory of 5,000 to 10,000 tonnes is available at a lower cost has been sold at a higher price. So typically, whatever is the inventory loss which we have taken in the 9 months has been able to -- we are able to cover it up in the current quarter.

Right. And what will the amount, if you could help me on the volume?

I have not calculated specifically, but you can say it range between INR 10 crores to INR 15 crores.

INR 10 crores to INR 15 crores. Okay. And in terms of volume, we were always guiding for 50,000 tonnes kind of volume to be done. However, this quarter, we've done 40,000 to 45,000. So are we -- is this because of demand impact?

I think it is not only the demand because you are aware that there are certain exports we are not able to do because there is a logistic congestion in the market. The containers are not available. There are a lot of other geopolitical issues. Typically, we sell around 15% to 30% to export. The export volume was around 7% to 8% or 10%. So that is one of the reasons. Some of the industries we are able to sell, but it has been not taken into -- like it has been at the end of, say, it has been sold at the end of June when our order is actually on delivered basis. So if we are selling in last 5 days, it delivered in the first week of July, then it is considered in the next quarter.

So overall for the year, we are still there at a 5 lakh tonnes, right?

2 lakh tonnes. But we have a capacity of 275. We are guiding again for the 2 lakh tonne of plus/minus 2% to 3% on either side. The 2 lakh tonne is intact.

Yes, because I think that is a flat number since last 2 years. So I think...

Yes, yes. I know it. It is expected to improve once we start the plasticizer project. And if the plasticizer project is expected to grow in terms of the quantity and the sales, then automatically phthalic will also grow in overall.

And for the full year for plasticizer, we would be able to do around INR 500-odd crores of revenue, right, at full capacity utilization?

At full capacity utilization of 75,000 tonnes, it will a generate a revenue -- gross revenue of around INR 1,000 crores, but that will be the gross revenue and net revenue will be around INR 600 crores because INR 350 crores to INR 400 crores will be phthalic, which will be...

Sorry, that would be how much? You're not audible.

Net revenue -- just a minute. Net revenue will be between INR 500 crores to INR 600 crores because there is a higher prices for plasticizers right now.

Right. Also going from this, how much time will we take to ramp up the capacity? When we will be able to complete full there a process where it goes into testing phase with companies, et cetera? And what would be the typical time frame?

For this year particularly, for the remaining 6 months, we are targeting around 2,000 to 2,500 tonnes per month. So for 6 months, it will be between 15,000 to 20,000 tonnes for balance period of FY '26, '27. Then it will grow up to 50,000 to 60,000 to 65,000 tonnes in next year. That is our target. We are planning to achieve it.

Okay. Got it. Now in terms of realization, you mentioned that it was up 30% to 40%. This is for phthalic, right?

As well as phthalic.

And so now.

And so I think realization remain at an elevated level because the overall demand in the market is good since everybody is using 60%, 65% of their capacity. So overall supply is also limited in domestic market. So an import is hardly happening, it is happening at a very, very little quantity. So right now, whatever is the demand is feeded by the domestic players. And the margin remain between 250 to 300 level right now, which is on a higher side because there is a lot of geopolitical tension. And because of that, all the feedstocks of the petrochemicals are at higher price. When the prices of the raw material is high, we ended up higher realization for the final product. And second point, we have some operating efficiency because of that, we are getting some extra yield that is also being sold at a higher price. So there is a double benefit happening on that account.

Got it. So even after war situation easing out, we have not seen spreads reducing is my takeaway, right?

So I think we should not take any extraordinary higher or lower spread. I expect between $200 to $250 would be the average spread, which is the last 10 year average.

It is around $150 to $200, sir.

Right now, market spread is between $250 to $300 and I G makes $100 over and above because of operating efficiency and the byproduct.

This is the EBITDA per tonne you are mentioning?

No, I'm talking about the gross margin dollar.

I agree with the EBITDA per tonne, which you used to mention that last year, around it was around $150 to $200, $100 to $150 for the last Q4 and then we did on this quarter extra, sir.

Typically, if you remove the advantage of the yield as well as the byproduct, which generally cover around 80% to 90% of the operating cost. So whatever is the margin remain EBITDA margin. So if you take only the phthalic margin, you will be able to get the EBITDA margin.

Actually not audible with some disturbance coming from there.

You're not able to listen to me.

Some disturbance, sir.

But there is no more...

Sir, I'm able to hear your voice properly.

Okay. There may be disturbance and your end. I'm saying if you take our gross margin and reduce the operating cost, conversion cost and other cost, conversion cost is around $150 to $160 will be at EBITDA level. And then there is the other cost, which is interest and other. So total cost for us is around $150 to $200. So typically, when you are making $400 margin, including the byproduct yield and remove $200 to $250, you will end up at $200 for the EBITDA margin in the current model. Go ahead.

And this is sustaining...

Sorry to interrupt ma'am. May we request you to join the question queue again. The next question is from the line of Chirag from Keynote Capital.

Yes, so just a couple of clarifications. You said that on a Q-o-Q basis, our volumes are down about 10% to 15%, right?

Yes.

That means our volume for the quarter around 46,000 to 48,000, not 40,000 to 45,000, right?

I would not like to comment specifically, it is between 40,000 to 45,000.

40,000 to 45,000. Secondly, our spreads currently you said is about INR 250 to INR 300, right, normalized decadal run rate is about INR 150 to INR 200.

200 average. 200 to 250 is average for 10 years.

Yes, so currently even in the month of July, we are seeing the spread to be around 250.

Yes.

Got it. Sir, similarly, last year or in last 6 to 12 months time frame, where maleic anhydride prices were around $600 to $700 per tonne. If I'm not wrong, it is around about $1,100 and sustaining at that level. Correct.

You're right. All feedstock prices have gone up. So apart from phthalic, maleic prices have also gone up.

Got it. And so earlier the reason for the decrease in maleic anhydride prices was there was significant capacity built up in China. Are we seeing any kind of constraints taking place due to which there is a supply-demand mismatch and we are now back to a normalized level of...