Kiri Industries Limited (532967) Earnings Call Transcript & Summary

[Audio Gap] everybody, and a warm welcome to you all. My name is Anuj Sonpal from Valorem Advisors. We represent the Investor Relations of Kiri Industries Limited. On behalf of the company, I would like to thank you all for participating in the company's earnings conference call for the second quarter of financial year 2022. Before we begin, I'd like to mention a short cautionary statement. Some of the statements made in today's earnings con call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by and information currently available to management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings conference call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. Let me now introduce you to the management participating with us in today's earnings call. We have with us Mr. Manish Kiri, Managing Director; Mr. Jayesh Hirani, Senior Manager, Accounts and Finance; and Mr. Suresh Gondalia, Company Secretary. Without any further delay, I request Mr. Manish Kiri to give his opening remarks. Thank you, and over to you, sir.

Good afternoon, everybody. It is a pleasure to welcome you to the earnings conference call for the second quarter of financial year 2022. Kiri's standalone revenue during Q2 FY '22 were INR 263 crores, which was 137% higher on a year-on-year basis and 32% on a quarter-on-quarter basis. There has been a reduction in a loss for quarter 2 FY '22, which was reported at INR 7.4 crores against INR 9.61 crores in quarter 1 FY '22. On a half yearly basis, the standalone revenue were INR 463 crores, half 1 FY '22, which increased by 158% year-on-year. The EBITDA for half 1 FY '22 was negative INR 3.7 crores compared to negative INR 41.1 crores in half 1 FY '21 last year. Similarly, the net loss has reduced significantly. For the half year, net loss was INR 17 crores compared to INR 62 crores for the same period last year. The rise in crude oil prices during quarter 2 FY '22, resulted in an increasing raw material cost, which impacted the company's material margins as the cost increase could not be immediately passed on to the customers. The increase in coal and lignite prices have impacted power and fuel cost. Secondly, crude oil prices have increased freight for transportation of goods and overall international freights have increased significantly. Legal and professional fees for litigation against Senda and DyStar in Singapore courts, which are nonrecurring and exceptional in nature, are included in the operational expenses impacting the company's EBITDA. Working capital cycle has been gradually strengthening and is expected to further improve in the coming quarters. Inventory turnover has decreased from 84 days to 36 days on a year-on-year basis. Similarly, trade receivables have decreased from 248 days to 107 days, which is almost near normalized numbers. And receivables recovery has improved from 132 to 47 days on year-on-year basis. For quarter 2 FY '22, consolidated revenue has significantly turned around. The company achieved a consolidated turnover of INR 358 crores, which was 105% higher on a year-on-year basis and up by 22% on a quarter-on-quarter basis. The EBITDA reported for the quarter was INR 28 crores, which increased by 21% quarter-on-quarter basis. The EBITDA margin for the quarter was 7.8%, and the net profit was INR 12.4 crores, which is an increase of 82.4% quarter-on-quarter basis. On a half yearly basis, total consolidated revenues for half 1 FY '22 amounts to INR 651 crores, which is an increase of 129% year-on-year. The EBITDA stands at INR 48 crores compared to a loss of INR 56 crores for the same period last year. And the net profit was INR 19 crores compared to a loss of INR 38 crores for the same period last year. Quarter 2 FY '22 experienced volatility and increase in coal and crude oil prices, which led to a sharp increase in raw material costs, power, fuel and logistics expenses. During the quarter, there was a 4% increase in raw material consumption cost, 22% increase in power and fuel costs and 28% increase in logistics expenses for exports on a quarter-on-quarter basis. In the backdrop of uncertain periods of COVID-19 during FY '21, consolidated material margin got impacted during FY -- quarter 2 FY '22 because of volatility -- volatile markets, leading to a sharp increase in input costs, which could not be passed on to the customers impacting material margins. The uncertainties in business environment because of COVID-19 pandemic are now a matter of past. Secondly, the increase in input cost is now getting stabilized during quarter 3 FY '22, which shall be the enabling factor to attain momentum and growth in coming quarters for the current fiscal. Coming to Kiri's minority operations suit. As you may already know by now, the Singapore International and Commercial Court has awarded a final valuation of $481.6 million for Kiri's 37.57% stake in DyStar. Both Kiri and Senda have filed appeals against the SICC order dated 21 December 2020, 21 June 2021 with Court of Appeals and Supreme Court of Singapore. And Kiri has also filed appeal against SICC order dated 17 March, 2021, and the Supreme Court shall hear all appeals on any of the days between 24 to 28 January 2022. In another case against DyStar, SICC has delivered judgment on 24 September 2021 on Kiri's counterclaim against DyStar in SICC 7, 2020, and has dismissed Kiri's counterclaim and awarded all-in cost of U.S. -- of SGD 1.37 million to DyStar. The company has filed appeal with Court of Appeal against the same order and hearing dates are awaited. Lastly, coming to future outlook. As you may be already aware that the Indian chemical sector is on the cusp of very high growth trajectory in the coming years. Exports of dyes and dyes intermediates increased by 41% and 16%, respectively, in April -- September 2021 period, mainly because of low base of exports in the same period last year. The exports from India are said to strengthen in coming months because of ease of doing business, creation of plug-and-play investment manufacturing environment across various industrial corridors and launch of production-linked incentive schemes. Further reduction of custom duty will have stark effect on shipping costs, thereby giving much impetus to exports from India. Now I would like to open the floor for questions. Thank you.

[Operator Instructions] The first question is from the line of [ Ashit Koti ], an individual investor.

Now sir, 2 things we said just wanted to understand. One was we have a share of profit of associates, which we are showing in quarter 2 as 888 million. And on a half yearly basis, we are showing is 1,725 million, that means INR 172 crores, if I understood it, rightly. And whereas we are saying profit after tax of 192 million, that means INR 19.2 crores. Have I understood it rightly sir? Or is there a mistake from my side?

Just to clarify your understanding -- hold on, we'll just open up. You're talking about the consolidated statements, right?

Yes.

Consolidated statements, earnings of...

Share of profit of associates.

Right. Which is INR 88.77 crores. So your earning per tax would be INR 101.16 crores.

Right. So my -- what I wanted to understand was this INR 80....

88 plus 9...

INR 88 crores from profit of associates, which includes -- which all company or which all associates?

That's only DyStar.

That's only DyStar. So INR 124 crores is only ours. Is it a standalone part? How do you take profit after tax, INR 124 crores. Does that include anything of DyStar, no?

So profit after tax is INR 101.16 crores to be precise, right? At 102.16 out of that, INR 88.77 crores is from DyStar and INR 19 crores is the -- sorry, sorry, INR 12.35 crores -- so 12.38 crores plus INR 88.77 crores. That amounts to a total, INR 101.16 million.

So INR 12.38 crores is only Kiri's profit, right?

Yes, INR 12.38 crores is Kiri consolidated profit. Kiri, Longsheng Kiri and other subsidiaries all put together.

So this INR 88 crores is basically DyStar, Singapore?

Yes. correct.

Okay. Sir, when are we moving away from commoditized product portfolio to real value added? Because it's been quite a long journey. I mean, you say after 2019, if I'm not wrong, we are -- how long.

Yes, we are quite also keen to have the product mix of change of portfolio to be kicked in. Hopefully, we should start seeing the numbers change due to the new products added in from this quarter. So we hope that you will have a better change in this quarter, and that is where we are moving in this quarter. So now on, as market improves, you will see the changes in our product mix improvements.

Can you throw some light on those products -- on your product mix?

Mainly coming from the specialty intermediates. So there are a host of products which we started in Phase I, and those have started also moving to the market. So that is where we will see the numbers coming.

But the specialty intermediates would continue means what -- again, would be towards which industries specifically.

There are 3 industries. If you remember the earlier discussion. So one is definitely dyes intermediates, so as a dye industry; second is Performance Chemicals for performance industry; and some parties also used in agrochemicals. So it's 3 industries in which it would be serving.

Percentage-wise, can you -- would you be in a position to...

Yes, around 50% would remain -- 50% to 60% would remain for dyes industry. And I would say 40% would be other products on dyes industry.

[Operator Instructions] The next question is from the line of Vishal [indiscernible] Jajoo from Tycoon Mindset.

Sir, I just want to know like how are our export market is performing? Because I guess most of the textile businesses, are you now seeing reverse back in the -- are actually at least more than the pre-COVID levels in their export market for textile. And as an art chemicals part, we are not like still back to pre-COVID levels and even margins are impacted. So just want to get to know like how is the industry level going on in the export market for the dyes intermediates? And also for the domestic market, if you can just give a small idea on that.

I see the export markets for dyes are coming back to almost pre-COVID level. There has been quite volatility on the price front. So there were quite a lot of fluctuations, which we have seen on a price front, and that would be -- that is one of the factors could be affecting or postponing some of the demands, which we couldn't see last quarter, which will come in this quarter. But we see that the exports on a monthly basis is now starting to get regularized at the same level as pre-COVID level.

Are the margins coming back to the same level, like what we have like on a stand-alone basis also. Pre-COVID times, I guess, including those legal and all the costs, we were still about like around 10% at OPM margin. And currently, our OPM margins on a stand-alone basis is still going negative. So I just want to get to know whether the margins are still coming back through the pre-COVID levels or still there is some lag.

No, margins -- the sales would come back, but because of the increase in the raw material cost and -- cost and all other costs, which I just mentioned, all of those cost increases couldn't pass on, couldn't -- we couldn't pass on to the customers. And that was the reason that our margin still continue to remain on a lower side or neutral EBITDA side last quarter. So this quarter, we expect that the prices are increasing to a level that raw material increases are passed on and the profits are also maintained. So hopefully, from this quarter onwards, we are expecting that the margins on the price increases would also be sufficient enough to maintain the profits. Because there has been price increases, and those price increases have been absorbed by the cost increases. Again, legal expenses are ongoing. And legal expenses would continue to go -- to continue at the same speed till January end because the final hearings are January end. So we expect that the legal expenses would continue to incur.

Okay. Okay. So sir, we don't have a hedging policy for the raw materials, right?

There is -- the practically hedging is not possible in the raw material side because when the raw material prices increase, most of the raw materials are supplied by 1 or 2 companies in India or from outside also. So where you have no choice but to pay the price increases the day it happens. So whether you buy from Reliance, you buy from GNFC, you buy from other companies. The moment the prices are increased, even products like caustic soda ash, you have to pay instantly the increase in raw material prices, that long-term orders or even existing orders have to be amended. That is how the raw material markets operate and the basic chemicals market operate. So you can only use your low-cost raw material to the extent you have stock. But otherwise, you will have to pay the increase instantly the day it is implemented. That is how it operates practically.

Okay. So I guess it would take more 2 to 3 quarters for us to be back at least at the pre-COVID at OPM levels, like our margins level. Sales might be there, but that must be because of, I guess, the inflated prices which are going on, but margins will be back to pre-COVID level after 2 to 3 quarters or we are expecting some more delays?

It will start coming to pre-COVID level from this quarter because last quarter is the one in which all pass-on of the cost has already happened, right? We could not make profit, let me put it this way, but we could pass on whatever increases that have occurred, right, in the last quarter. But this quarter, because of the prices further increasing, we would have profitability in addition to passing on the price increases, which have already taken place.

Okay, okay. And sir, just last one question. Sir, actually, we have our borrowings like at almost -- we are almost at no borrowing levels. And we have some other plans to divest in some other areas as well. So apart from non-dyes segment, which you said like you want to plan to invest in those segments in the previous calls. So are we planning to take up the debt level because currently, the interest rates are, I guess, also at the lower end. So are we planning to take up the debt levels and start off with the new sectors, new geographies as well and in the newer product team as well so that we can have at least test business then after 1 to 2 years in other areas as well?

Not in this financial year. We would not borrow in this financial year. We would first make business stabilized. And we would first ensure that our working capital, the market margins all are on track. So our efforts would be on business rather than incurring new investment and new CapEx. As we mentioned earlier, we will complete the second phase of specialty intermediates plant towards end of the financial year, which is just a pending implementation compared to a fresh investments, which we are not going to do in this financial year.

Okay. The expansion would be only basis of the DyStar funds, right?

That would happen in the year 2022/'23. But we -- it's not like we would never borrow in life, okay? When opportunity arises when we see good projects, to ensure that we have adequate return on equity, 2022, '23. We will see what is the best mix of equity and debt, and we will borrow in years to come.

So sir, do inorganic expansion or acquisition makes sense in this industry because I guess I don't know much about the industry on the intermediate side. So I just want to know does the inorganic acquisitions make sense?

It would make sense if valuations are right and if proper sized companies are available. So there would be some opportunities, which may grow up in global market, if not in India, right? And -- but there is nothing -- there is no target currently in [ radar ]. There are no decisions on that front. And we haven't been approached by any companies offering their companies to us. So nothing like that has on -- put on the table.

[Operator Instructions] The next question is from the line of V.P. Rajesh from Banyan Capital.

Just first question, how much would we spend on the legal expenses in the current quarter and for the 6 months, which is regarding the DyStar litigation?

How much is the number? So we have -- see our run rate per quarter ranges from INR 6 crores -- INR 5 crores to INR 6 crores to INR 9 crores, right? Now the last quarter, one is the legal expenses and second, the legal fees and second is legal expenses because both incurred. So when you put together in last quarter, it was a little bit more than INR 7 crores.

Okay. And for the 6 months?

For the 6 months must be -- more than INR 15 crores.

Okay. Okay. And my second question is that you talked about your EBITDA margins improving from the current quarter. So what should be the expectations? Are we thinking about back to low teens kind of multiple? Or will be a gradual move up in this quarter and the next to 12%, 13% kind of percent EBITDA margin?

I think this quarter based on the half -- 1.5 months, which has already passed and looking at our order book, we should be somewhere in the range of 7% to 10%. This is our prediction. This is the forecast. And then next quarter, it can go up. But again, all these numbers after legal expenses.

The next question is from the line of [ Bhavesh Khandelwal from RII ].

My question is, I think if I remember correctly last time you said that we will be doing something -- I mean doing -- we will be revamping the organization and hiring has been done and we have been hiring a lot of other -- I mean, senior management in doing something else. So can you put some light on it? And how are we on it because we haven't heard any official communication on that part?

Right, right. See, we have been hiring several more people also in the current quarter and improving just our management bandwidth for future projects. So there are no announcements done because -- which were not required at this point. And some of the people who have been taken on board will take some time to be permanent with us. So we will see how things move. But yes, the hiring is ongoing and team building is also ongoing. And we are improving our management bandwidth, especially for future projects, not for current business.

Yes, yes. Okay. And second thing, sir, on the -- I mean, like the future outlook, I wanted to basically know like if, for example, like Bangladesh favorable export destination has been I think expiring maybe in 1 or 2 years, I'm not sure of the timeline. So do you think that it will benefit Kiri as a company? Or what -- or is it China policy, if you just put a highlight on it?

I think it would definitely benefit us as Kiri because Bangladesh is an important market. Bangladesh has been one of the top 2 exporters for us as well as for industry as a whole. So that would benefit us for sure. And that would help us to increase our exports to Bangladesh in the next few years. There are also further logistics improvements with Bangladesh because now trains have started even from Ahmedabad. I see there are specific trains recently started for direct exports to Bangladesh. So not being dependent on only containers, which have now become kind of a very high freight and high-cost affairs. So this train movements between India and Bangladesh would also benefit from logistics point of view from speed point of view because it's improving from both the sides from infrastructure point of view. So Bangladesh is going to be an important market for textile as well as for dyes that would benefit Kiri. Number two, if you have -- if you have seen recent announcements by the government, several textile parks are going to be set up in India, all across right? And those incentives to textiles, boost of textiles, the targets for more than 100 billion textile exports, which government is trying to set up to support textile industry that all will benefit and that all will provide growth opportunities for dyes to sell within India also.

And sir, last question is if I can ask. So basically, like there's a lot of supply chain disruption and because of which the raw material prices are too high. I mean, especially like we talk about -- so do you think is it going to be -- it's normal going forward in coming 1 or 2 months or it will take more time?

I -- based on our current assessment, we don't see prices coming down significantly before December. We don't see much hope that the raw material prices would reduce. If January to March quarter, when we see that the basic chemicals start going down in China as well as globally, we may expect some reduction, but not until December. We don't see any possibility of reduction in any major raw material prices before the end of this calendar year.

The next question is from the line of Namit Mehta from KC Capital.

Just a couple of questions from my side. So one is -- I know from, over the last couple of years, you plan to move the stand-alone business from, let's say, INR 1,000 crores to roughly INR 1,800 crores to INR 2,000 crores in a couple of years. How do you see that target as of now? Do you still want to keep that guidance? Or are we seeing it evolving based on where you will allocate capital over the next year?

I think that target still remains. Unfortunately, last 1.5, 2 years, we got all tied up with this COVID effects. But now having that behind us, I hope that we can have that target now restarted from this financial year. So hopefully, in a year or 2, we should be able to ramp up because we have capacities. We have already put capital in earlier plants, which we already established. And now it is only a matter of ramping up production, improving sales, increasing export and utilizing our already invested assets. So that would be our #1 and the first attempt to ramp up the stand-alone numbers, sales as well as margins growth. That will remain priority. Regarding your second point for the new expansions or investing into new projects, that we will see in 2022, '23 but not currently.

Understood. And just to confirm, so once we go ahead with the Phase 2 capacity expansion, that's basically all that's required for the revenue expansion to go to INR 800 crores to INR 2,000 crores, right?

Right, right, and not the additional CapEx.

Okay. Got it. Got it. And then one -- just one other question in the vein of one another participant asked about management building. If you can just talk a little bit about your organizational building efforts as you go to become future ready. If you could talk a little bit more about what you've done outside of even just team building either in terms of business plan development, environmental clearances and so on.

Right. So see, there are several objectives for which we have strengthened the management and we are strengthening. One is, as you rightly said, we have one area of people who have been applying various environmental clearances on various lands that the company has, right? Number two, also in specialty chemicals, there are various different products. And we have tried to hire people specialized on -- in those product ranges or in those product sectors. So we have, for example, there is benzene, nitrobenzene derivatives area efforts. So we are studying those. We have got people on that. There are some areas which are related to fertilizers and other byproducts. So we have got people for that. And we have also got several technical people added in our lab, which are now studying, reviewing, checking products such as APIs and pharma sectors. So we have selected people from different sectors to both technical side, environmental compliance side and also project and commercial business preparation side. So our in-house team has been preparing various techno-economic feasibility studies. We have hired 3 to 4 outside agencies also to work with this team. And that is how we have collected people who have experience in various fields. So that's where we are trying to build ourselves.

The next question is from the line of [ B Suresh ], an individual investor. [Technical Difficulty]

Hello? Hello? Hello?

Yes, sir, this is better. If you can be a little loud, sir.

I'm sorry. One second. And my voice, is it clear? Hello? Sir, my voice is clear?

Yes, this is better, sir.

The gross debt in [ January ] in 2022 is a final judgment, sir or will take more time, sir?

Yes, January 24 to 28. These are the days in which there will be one day. Based on our latest information, it could be January 24 itself, but it could be any one day between January 24 and 28.

Is it the final judgment, sir or any postponement?

This is the final one. This is the final hearing and the judgment will come after that. But this is the final hearing of the appeal of -- in Supreme Court. And good thing is that whatever appeals that both the sides have filed on various points and all the orders related to valuation, all those appeals are consolidated. And when the hearing takes place, it will cover all the appeals which relates to valuations, which are filed from both the sides.

Sir, one more question, sir. This is amount [indiscernible] dividend, are there any CapEx in further investments in the [indiscernible].

Sorry, I couldn't understand your question because of a lot of echo coming.

Mr. Suresh, your voice is breaking, you are inaudible.

Actually, you can [ coast is clear ], we can receive the amount. Can that amount be used in this investment and can be used dividend, sir?

Yes, yes, it's both. The breakup -- precise number has not been decided yet because we are still waiting the final number from the Supreme Court. Hopefully, it would continue. It could have the same number what International Court decided or it -- so that's the hope. But let us see if it is changed. Then looking at that, the broad usage is what you rightly say. It would be used for the further future investments and some part would also go back to shareholders, yes.

The next question is from the line of [ Hemant Kanungo ], an individual investor.

Sir, I just want to ask, sir, as we know that Senda, I mean the DyStar has been consistently making profit post the 2000 itself, after the verdict, 2018 verdict. So is there not a way when we can ask Supreme Court to at least release our share of earnings that is 37.57% of earnings, so that it [ won't -- like it would lead ] to further operation of Kiri Industries.

See the -- it's -- from the legal point of view, from July 3, 2018, right, the date on which the valuation for Kiri is decided, technically, that is what the number that we are entitled to receive, right? But as you very rightly said, since that date till now, even though Kiri continue to hold shares and transaction has not been completed. So there is a big difference between the valuation date of July 3 and the transaction date when actually Kiri shares are bought and amount is paid. And it's not a few months, but you are looking at almost 3 years time gap between these 2, right? So we must be entitled to get something, either profit or interest or there has to be some upside that Kiri has to get for this particular period. And that is -- and that point is also in appeal. So when Kiri has demanded the interest or the enhancement of its value between July 2018...

Yes, I want to add one thing. I want to at least -- we can ask that whatever the amount of our share of earnings we can always get it adjusted from the final valuation figures because that won't even soften our stand because you're not asking a particular amount. We are just asking our share of earnings. And you know that we can get it adjusted from the final valuation figure, what will be decided by the Supreme Court board like by INR 3,500 crores. So if DyStar is getting INR 100 crores, so we can ask our INR 37 crores to the released and get it adjusted from the INR 3,500 crores whenever. Because of that way DyStar can delay the judgment and we will be considering -- we are further facing operation from DyStar.

See, the judgment, the hearing of the Supreme Court and the judgment of Supreme Court will follow the court time lines, which have been fixed now, number one; number two, DyStar doesn't owe any money to Kiri. It is Senda, which owes to Kiri. Correct, right?

Yes, right.

So legally speaking, we do not have right to collect money from DyStar, but we do have right to collect money from Senda, right? So DyStar's profit is not Senda's profit from legal standpoint. So the guilty party is Senda and not DyStar. So court would not order anything against DyStar to pay to Kiri, right? That is number one. Number two, so that is where the 2 entities are different. Number two, we already proposed to Senda and to the lawyers and the corresponds are also with courts that whatever their side of an amount of $323 million, at least put that amount in the escrow. And Kiri has already proposed which is under discussion to open an escrow account and put this money there because irrespective of what is the outcome of Supreme Court, right, the amount which is there from their side, must be paid anyway, correct?

Right.

Put that in escrow, even if not given to Kiri, but at least that shows commitment to pay, correct?

Yes, correct, correct.

So that aspect and that proposal is still under discussion between both the parties. And also corresponds are ongoing with the court.

Okay. Okay, sir. And my second question is, we are also owning a coal company with the Longsheng in India. So are we facing some similarity of operation from Longsheng like in terms of involving us in the management practice and also sharing the dividends with the company? Are we getting the regular dividends from Kiri Longsheng or we are facing similar operations.

We are facing similar operation at that too. And we are with 2 months not paying dividend at Longsheng Kiri also. So there are certain -- there are no legal battles started between both the parties. But yes, they have behaved the same way at Longsheng Kiri, too. And operation at Longsheng Kiri still exists.

The next question is from the line of [ Nandan Kambadi ], an Individual Investor.

I have 2 questions. Firstly related to DyStar thing. Once the Supreme Court judgment comes in, in January last week, is there any way that Longsheng or either Kiri can appeal to another forum?

No, no.

International Court of Law, et cetera.

No, there is no further appeal. Let me just rectify. As I mentioned earlier, January 24 to 28 is a hearing date, not the judgment, right? So judgment come afterwards after hearing. But there is no further court. There is not any upper court or there is no other place to go to appeal for anyone.

Okay. So January last week is the final hearing?

Yes, correct.

Okay. And sir, what is the appeal made by Senda in this case. So are we sticking to $323 million or the figure which you just mentioned or what is the appeal that they're filing against the order, SICC order.

See, appeal is only now dealing with the valuation, with the number, right? Whether to pay Kiri or not, whether Kiri suffered minority operation or not, whether the buyout order is the right order or not. All these matters have already been heard, decided, upheld by Supreme Court already. So this hearing of Supreme Court and Senda's appeal is to only lower the valuation number, correct? Because valuer, if you go through the judgment, it -- the earlier judgment, it says that the Senda side presented $323 million as Kiri's stake, for the Kiri stake, correct? So there is attempt to reduce the number from $481.6 million towards $323 million. And Kiri has also appealed. Kiri's attempt would be to increase the number from $481.6 to $700 million, $750 million. Because Kiri also has several points, which are strongly in favor of Kiri that can be argued at the appeal. So both the parties will only fight for a number. That is the only matter in Supreme Court to give what number.

Okay. So in this case, only going for dual players, that is if court accepts $700 million or $750 million, the appeal which Kiri is making...

Yes.

That is fine, but if they reject and just stick to $482 million. Are we also -- have we also prayed for interest on that? And have we made a dual payer in practice.

Sorry -- but what is your question?

No. By filing an appeal have we made a dual prayer citing our claim Kiri's claim let's say, INR 700 crores to INR 750 what the actual number may be. And the court does not accept that and stick with the $482 million valuation, are we also praying for the interest portion? So are we praying 2 things?

Yes, yes, we are also appealing one of the main points in appeal is the interest portion, correct?

What is the interest rate, sir, in practice which we have claimed?

It's a fixed interest rate in Singapore, 5.33% per year.

Okay. Okay. Okay. And last question...

[ Mr. Kambadi ], sir, sorry to interrupt, but for any follow-up, maybe request you to rejoin the queue, please. The next question is from the line of [ Prashant Hazariwala ], an individual investor.

So if I will take out the legal costs, what will be the EBITDA margin for stand-alone entities?

If you see annually, the legal cost, if I give you the number now, has ranged somewhere between INR 35 crores to INR 40 crores per year, right? So if you take half yearly INR 15 crores, INR 17 crores, INR 20 crores, something like that, that is how -- so if you take it out, then your EBITDA would be at least on quarterly basis or half yearly. It would be around 6% to 7%.

6% to 7% for last quarter?

For half year, this financial year.

Half year. What about the last quarter?

This financial year, I mean, starting from April until September.

Right. But what about the last quarter, in September quarter?

September quarter legal cost was even higher. So last quarter and this quarter, together, we just reworked the number, it was more than INR 15 crore close to INR 17 crores.

If I'm taking out this last quarter on legal costs, what will be the EBITDA margin, for the last quarter only.

Last quarter, 250, 63 -- around 3% -- 4%. Around 4% would be last quarter's EBITDA margin.

All right. So when I'm comparing ourselves with EBITDA of peers like Borderline and Rchem something like that. They have done much better than what we have done on the EBITDA margin. And they even given a good profit compared to the last quarter -- last year same quarter. Where will be -- where we have -- lose our competitiveness or EBITDA kind of thing?

Yes. For that, you -- let me explain you in 2 parts, okay? One part is that maybe they have been able to -- because they are more of intermediate players, and we are dyes and intermediate players 50-50. AksharChem, [ Bagaria ], they are just pure intermediate players, okay? And for intermediates, the passing on price increases or cost increases to customer is much earlier. While for dyes to pass on to customers take longer time, right? So that is one factor where they have -- they might be able to pass on price increases to their customers earlier than what we could, number one, correct? Number two, there are certain intermediates that Kiri produces for Longsheng Kiri, which goes for Longsheng Kiri and then Longsheng Kiri sells dyes. So there is a different structure here. So when you look at the consolidated numbers of Kiri, it gives you a better picture or a clear picture compared to a stand-alone number. Because consolidated number without DyStar would give you the intermediate capturing of the margin as well as dyes capturing of the margin at Longsheng Kiri level. Because in Kiri, dyes are produced in 2 companies, one Kiri stand-alone; and second is Longsheng Kiri. While if you compare, for example, Bodal, their dyes are produced only at one level, while our dyes produce at 2 levels. So for that, when you look at the consolidated margin, that gives you a true picture, in fact, of what we have actually earned. By selling dyes directly from Kiri and also by selling dyes through Longsheng Kiri for Kiri's portion of 40%. So let us say, if you look at the consolidated EBITDA number, which is close to 4% -- which is close to 8%. And if you add around another 5%, let us say, for half year, you will come to around 12%, 13%, which would be in line with what they have done.

All right. And the other question is like before 6 months con call like the end of the year 2021, FY '21, you said there is no problem in Longsheng and Kiri joint venture. Now you are saying that we are facing the same kind of problem, right? So like how these kind of things will be because we have not yet settled down this DyStar problem. And we are going into another problem. And DyStar problem has taken almost 4, 5 years after we claim, right?

Let me just clarify. Let me clarify, there is a clarity before you. If you understand question properly, okay, and my answer properly, there are operational problems or there are management problems or company problems, there are no such problems, number one, companies operating directly managed operators run by actually Kiri. That's one.

With Longsheng Kiri?

Which is Longsheng Kiri, yes, right? The second question, what was asked to me by the gentlemen, are we facing minority operations in Longsheng Kiri, that's a different question, correct? For that, my answer is yes because since 2009 until now, Longsheng Kiri has also not paid a single rupee of dividend to Kiri, even though being debt free, correct? So it may be operating, it is generating profits. It's a normal business operations. But does it -- do we also face minority operation in Longsheng Kiri? That's why my answer is yes. I hope I have been able to explain to you.

But this company is run by Kiri only, right?

Correct. But the management dividend is the majority directors, isn't it?

Are they taking dividend or they are also not taking any dividend?

They are also not taking dividend.

Nobody has taken dividend, right?

Nobody has taken dividend since 2009.

So all the accrual is happening into the Longsheng Kiri, right?

Yes, yes. Correct.

So we are a good part of this management or we are having some -- how this management board is...

The management -- the Board is structured with 3 directors from Longsheng and 2 directors from Kiri, right? But the management, managing directors and operations are all belong to Kiri. The Board matters have majority with Longsheng.

The next question is from the line of [ Rohit Ashwa ], an individual investor.

I have 2 questions regarding the January hearing. The first is, does the hearing have to get completed in one day? Or can it further get extended and we get one more day later on? And second is, based on our experience with Singapore now for years, when do we expect the judgment to be delivered after the hearing is completed?

The first answer, as per the current indication from the court, the hearing would be just one day. So only one day would be given for arguments. Number two, based on our prior experience with the Supreme Court and in general, the judgments, the way Supreme Court gives post hearings, our only assessment has come in 22 days from the hearing date. And it has taken a maximum about 2 months' time also. So we can expect that within a couple of months, the judgment can come.

Okay. Great. I had one more question regarding FCCB conversions as well. I understand we have about INR 1.2 crores FCCB conversion spending by January '17. What is the status on that?

Until now, we have not received the conversion notices. But hopefully, before January, they might come. The moment we do receive, we'll announce.

Okay. And if they don't come, sir, then what other options we have?

If it doesn't come, then the company will return FCCB money. And that would not be converted then, finished.

The next question is from the line of [ Ashit Koti ], an individual investor.

Sir, with regards to Longsheng Kiri. I mean, say, when we have faced this problem of 5 years at Singapore Court and suppose if you are to again fight it out in Indian courts, the amount of time, efforts, money, which would go in fighting it out would be huge.

Yes, fighting out for what?

Either to get paid for whatever time, efforts invested by Kiri in Longsheng Kiri, right, or if they are not, then you are fighting it out to acquire the control.

Yes. So you mean to say -- management control Kiri already has. You mean to say for fighting out for separation, correct?.

Yes. Yes.

Right, to get separated. So fight for separation that is what you are indicating, right?

Yes. Yes. Yes.

So we will have a discussion because now till now, what I understand, both the parties have been dealing with the DyStar dispute and the legal DyStar at DyStar level, correct? There is no legal battle in this entity, in Longsheng Kiri, but we would always endeavor to settle and to discuss mutually to figure out if we can separate mutually. If not, yes, then again, it would be spinning into the courts for the separation purpose. But let us see what happens. It would be speculative for me to say that. Once DyStar is separated, I think both the parties will have the senses to prevail. And then and try to figure out to separate amicably, I hope so. And there could be a legal battle, yes.

And where does DyStar stand today? I mean, say, if they have to make the payment to you at one shot, are their balance sheet that much strong enough to pay you in one shot?

Yes. Balance sheet is very strong. Balance sheet of Longsheng is also extremely strong. And DyStar is also 0 debt and DyStar has a very high typical cash sitting with them.

Okay. So in a way, we are -- we are going to miss out on the huge potential which DyStar was offering when 2009 we acquired. We lost a decade and more. And yet, we also lost some market share, indirectly.

I didn't understand what you are saying.

We lost one -- more than a decade in DyStar, management, memories and otherwise. And we also lost some market share indirectly because now DyStar is no more going to be with us.

No, no, DyStar, let me -- Kiri has not supplied a single kilo of material to DyStar since 2014. Just to clarify, Kiri -- DyStar is no longer a customer of Kiri since 2014. So Kiri hasn't lost earlier, anything. Kiri has not lost -- Kiri has its own set of customers, distributors. Kiri has its own products. So Kiri has not lost anything in terms of its sales or market share with DyStar, number one, okay? Number two, Kiri invested 10 years ago, INR 95 crores or close to INR 100 crores. And with -- after this court battle after 10 years, that INR 100 crores of Kiri's investment right has grown into $481.6 million, which is close to INR 3,600, INR 3,700 crores. So for 10 years, it's not a bad investment, isn't it?

Yes, that's one way of looking at it. No doubt about it.

Correct. There is no loss of market share just to correct you.

Yes. Since we did not supply, no loss of market share. But the purpose of acquiring DyStar was to get into the lucrative European market, which we are not right now.

European market for dyes industry is no longer lucrative because there is no textile left in Europe.

Okay. So it's only China and forward countries?

It's only Asia, Turkey, Honduras, Central America, Brazil, these are the places who do textile processing. So DyStar, sales of dyes in Europe itself is much lesser and the largest is in Asia.

Capital work in progress 5 78...

Sir, sorry to interrupt, may we request you to rejoin the queue, please? The next question is from the line of V.P. Rajesh from Banyan Capital.

Just a quick question, what was the capacity utilization in the September quarter?

Yes. Yes, I will give you just now, hold on. For dyes, at a quantum level -- what is our capacity utilization in the quarter. Dyes capacity utilization is 36%. 37% to be precise is the dyes capacity utilization. Intermediate capacity utilization is 88%.

Okay. And what do you expect it to be in this quarter, given things are getting better?

Yes. This quarter, the prices -- the margin-wise prices would be better compared to last quarter. And dyes capacity utilization, we should be able to touch close to 50%. And we will -- our end of year is intermediate capacity utilization also increases to 95%.

Thank you. As there are no further questions, I now hand the conference over to the management for their closing comments. Over to you, members of the management.

Thanks to everyone for joining today and we'll see you next quarter. Thank you.