Kiri Industries Limited (532967) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the Q4 and FY '22 Earnings Conference Call of Kiri Industries Limited. [Operator Instructions] Please note that this conference is being recorded. At this time, I would like to hand the conference over to Mr. Anuj Sonpal from Valorem Advisors. Thank you, and over to you, sir.

Thank you. Good afternoon everyone, and a very 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 fourth quarter and financial year ended 2022. Before we begin, I'd like to mention a short cautionary statement. Some of the statements made in today's 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 focus of today's earnings call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. Now let me introduce you to the management participating with us in today's 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 start with his opening remarks. Thank you, and over to you, sir.

Good afternoon everybody, and welcome to the earning earnings conference call for the fourth quarter and financial year ending 2022. I hope you are all keeping safe and well. Kiri Industries Limited has remained focused on its goal to achieve growth under tough business conditions and hence adopted and concentrated in penetrating global markets and retaining market share to beat economic contraction in this weakened global business environment. The company was able to attain revenue growth on sustained volumes and also improving profitability as compared to the previous financial year. On a consolidated basis, financial year ending 2022 operational revenue was INR 1,497 crores, which grew by 56% against the previous year and EBITDA was INR 121 crores, an increase of 47% year-on-year with EBITDA margin reported at 8.1%, while net profit was INR 53 crores, which grew by more than 100% year-on-year basis, with PAT margins standing at 3.53%. The margins were impacted due to increase in key raw material prices, power and fuel costs, freight and transportation costs during current financial year as compared to the previous year. The company has been striving to regain EBITDA margins, which is earned prior to pre-COVID times by optimization of product mix and gradually passing over the increase in raw material prices to its end customers. Since March 2022, the momentum of passing on the increase in prices has slowed down, since company experienced further increases in the raw materials prices in the backdrop of Russia-Ukraine war and lockdown in China after resurgence of COVID. As you may know, globally, prices of commodities have shot up and crude oil has remained volatile, while upward trend. The dyes industry has been impacted with average raw material prices having increased by 50% and cost of power and fuel have increased by 45% during FY '21/'22. For the fourth quarter of FY '22, the consolidated operational revenues were INR 417 crores, a growth of 15% year-on-year basis, EBITDA reported for the quarter was INR 25 crores, EBITDA margins stood at 5.97% and net profit was INR 9.2 crores, with PAT expect margin 2.21%. Again, the Ukraine-Russia war broke out in February '22, impacting revenue from operations in quarter 4 FY '22, which were 3% lower on quarter-on-quarter basis. Spiraling of raw material costs, power and fuel prices, freight and transportation costs impacted EBIDTA of quarter 4 FY '22 negatively for both year-on-year and quarter-on-quarter basis. On a standalone basis, the operational revenue for the financial year ending 2022 was INR 1,137 crores, representing 65% increase year-on-year. EBIDTA stood at INR 31 crores versus EBIDTA loss of INR 1 crore in previous years. Net loss for the financial year after depreciation was INR 9.3 crores, compared to the net loss of INR 37 crores in FY '21. Operational expenses have increased during FY '21/'22 on account of increase in raw material costs, power and fuel costs and especially legal expenses being incurred towards litigation of minority interest in DyStar at Singapore. In coming times, the legal expenses should reduce since the decision on the value at which the stake of the company has to be bought by Lonsen expected anytime from the Supreme Court of Singapore, which is the appeal judgment. Once the decision is out company would be paid by Lonsen Group, which means Senda and major litigation would come to an end. For the fourth quarter, on a standalone basis, revenues from operations were approximately INR 328 crores, which grew by 19% year-on-year; EBITDA was INR 6 crores, which there was a net loss of INR 34 crores for the quarter. The trend line below demonstrates the path of growth in revenue. EBITDA is sluggish in quarter 4 FY '22, mainly on account of sharp increase of 66% in raw material prices on year-on-year basis, increase of 59% in power and fuel cost, which were the result -- which were due to the result of Ukraine-Russia war, as I mentioned earlier, lockdown in China and the effects, which were out of control of the company. The situation today is that the manufacturing cost of raw materials for key reactive dyes intermediates such as H-acid and vinyl sulphone in India are higher as compared to the selling prices of such materials from China and the same are being imported in higher quantities in India, rather than being manufactured in India. Prices of Sulphur, caustic soda, soda ash, aniline, key raw materials for manufacturing of H-acid and vinyl sulphone, which are 2 key intermediates have increased by 22% to 27% in this quarter. Inclining manufacturing to reduce our curtail production temporarily and thereby to operate at lower capacity to absorb fixed cost. Secondly, cotton textiles are currently experiencing record high cotton prices, which has lowered the demand for reactive dyes impacting the volume growth of reactive dyes in short term. Amidst portrayal of gloomy business environment, the company is moving cautiously in short to medium term with key focus on sustaining volume growth and strengthening margins growth by optimization of product mix from its diversified product portfolio and by controlling operational cost. Company's core strength is its fully backward integrated manufacturing facilities. Secondly, the production of certain types of naphthalene and aniline based intermediates shall support the strengthening of margins. In addition, manufacturing of Disperse Dyes, which is already on stream now, shall support the company to expand its foothold and further penetrate the market in near future. Lastly, the decision of Supreme Court of Singapore on the value of DyStar buy-out order for the company stake by Longsheng Group is expected, which is [indiscernible] which is expected anytime, which will allow us to take a leap forward in enhancing intrinsic value of the company and focus on sustainable non-dilutive growth with strong focus on return on equity and free cash generation. With that, I would like to open the floor for any questions. Thank you.

[Operator Instructions] Our first question is from the line of [ B Suresh ] from [ Buran Financials ].

Last quarter you told legal issue, can expected -- case expected March ending during that time the last conference call. What is the present status and further, this is the first question. Next question is, this amount actually case will declare after we're getting amount, how much time take and you will get the amount what is the next amount you can utilize the expansion or paying the dividend, sir? Hello?

Yes, thank you Suresh for these questions. Go ahead.

Please give sir, what is next -- what is the step?

So, let me answer your first question first. Regarding the final judgement from the Supreme Court of Singapore, we were expecting somewhere around March end as per the earlier call to get the judgment. Somehow it has delayed and now it is almost end of -- already May ended and beginning of June, we expect the judgment at any day, any time. If you -- just to give you some more information, we were trying to follow what are the -- what are the judgments coming in Singapore Supreme Court and last one week, there are several judgements, which have come for the cases, which ended in January 2022. So, sequentially also, it seems that the substantive cases are coming for judgment now. So we expect that any day or any time Supreme Court judgment should be out and we are eagerly waiting for that. We are following up on daily basis. As soon as we receive the judgment, it would be announced. So that is your first question. To answer your second question to, when the funds would come and where the funds would be utilized. So the -- the payment from Senda to execute this buyout order would be due the day they receive the judgment. So then -- then we will try to ensure that the funds come as early as possible and Senda honors the orders, the court order at the earliest possible. There would be a reasonable time we would give with the legal actions post -- post the judgment is out and then our attempt would be to have this buyout order executed at the earliest possible, but we cannot tell the definitive timeline, what kind of further legal actions that we would be taking to ensure that we -- we have the enforcement faster. Now regarding the utilization of funds, as I -- as I mentioned earlier, the utilization would be both for the future projects and for the future investments, which I have not decided yet, not crystallized yet and also some part to pay the dividend. So both -- both will be there and once the final amount is known, then at appropriate time, we will also disclose the breakup after the -- after the deliberations at the Board of the company.

One doubt, sir. Actually after the judgment, payment execution give the time Supreme Court or Senda can decide timeframe in payment received.

Sorry, I couldn't understand...

Actually, the judgment -- the Singapore Government is -- Supreme Court is giving the judgment, after the judgment payment time can decide the Supreme Court of Singapore and time decide to Senda.

No, no. See, there is -- the Supreme Court is not going to stipulate any time. Okay. That means that the time is due and the payment is due, the day Senda receives the judgment. So Senda has to pay immediately on receipt of the judgment. So no time has been given to Senda by International Court and no time would be given to Senda by Supreme Court. It has been -- it has been almost a year since the International Court judgment is out. It has been a year Senda knows the amount which is to be paid, the range of amount which is to be paid to be precise and there is no time given for that. It is due with immediate effect to execute the buyout order with immediate effect. That is what the interpretation of order would be.

Best wishes you can answer that as earlier as possible you're giving judgment, shortly will come, the best [ wishes ].

Our next question is from [ Srinivas Kashyap ] from -- an investor.

So Manish, given that the going concern is a concern because of huge losses, INR 4 lakh [Technical difficulty]. My second question is anymore FCCBs are pending or FCCBs are all converted into shares now?

All are converted. No more pending.

Okay. So FC -- and are you in -- last time you said we will communicate with them soon. So, are you able to communicate with them?

Communicate with whom?

[Technical difficulty]

Sorry, couldn't understand.

With all the quotas and all these people, private equity alone.

I mean, whoever the shareholders are the shareholders and they participate -- they also approach company sometimes like what you participate in the calls or like a common call like what have -- we have today or are also sometimes individual calls or individual meetings that are being arranged. But, yes, they do participate.

And my one more question is that the promoter holding is too low now after all the conversion and mostly shares have been sold by you people recently. So is the promote -- what is like the intention of like Pravin -- Mr. Pravin Kiri and yourself, like you are increasing the stake or...

Let me just clarify a few things to you that our intention of promoter is to increase stake definitely. There is 100% interest to increase stake in the company and you will see in the next future months. But number 2, there has -- there was a dispute and certain disputed shares were there. Once the disputes were addressed, the disclosure were made, none of the promoters have sold any shares. Okay. No doubt the disclosures were delayed and the reasons were the earlier disputes on the shares, but -- so there is no share has been...

[Technical Difficulty] what are -- were in this dispute?

What?

The dispute was where, between you people on a phone call or like court like Ahmedabad High Court or...

No, no, it is a private dispute between the people.

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

Just one clarification. On the last con call, you had mentioned that Senda owes us $9 million and that has -- that payment has been delayed for quite some time. So, I did not understand what was the reason for that $9 million payment, is that some interest payment or if you can just make me understand that. That's question number one.

Okay. So Rajesh, that cost award, which Kiri had received, Senda filed -- Senda filed appeal against it. Okay and Supreme Court took little longer time to decide whether to admit or not, correct. And then Supreme Court admitted their appeal of against the cost order of $9 million and then the Supreme Court proceedings started after that and the hearing has been set up or hearing has been fixed on September 15 and 16, 2022. Another thing, which we have learned as -- and just to let you know that an assurance has been taken from Senda that as soon as the appeal judgment is out, within 21 days, Senda would need to make a payment to Kiri for the cost. So the delay is because of the appeal and now hearing of the appeal has been fixed as on September 15 and 16, 2022.

I see. And this 21-day window is only with respect to the $9 million dispute, not the [ $482 million ], correct, that's a separate case?

Yes, yes. So 21 days assurance and undertaking was given by Senda for this $9 million, correct. You're right.

Understood. Okay. And then I'm just curious, back in when we had the last call, the expectation that was that it will come out by March, and it has been obviously delayed much further. So what happened lawyers -- your lawyers told you why there is so much of delay because Singapore is known to be very efficient. So that's why they're curious, right.

You are totally right. I mean, and this has been delayed as per Singapore standard and there are 2 reasons explained to us by the lawyers. Okay. Number one is that overall -- sequentially the orders have been delayed in Singapore Supreme Court recently. So for example, the orders, which came in April, were pertaining to the cases, which got closed and judgments were reserved in November, December. And it is the substantive cases, I mean not the minor cases, but the substantive cases have overall delay in -- are having overall delays [indiscernible]. And the January cases, judgments have started coming in last 2 weeks, the cases, which got closed in January. So that is one reason. Second reason what lawyers explained to us that there might be -- we might expect changes in the judgment because it's a complex matter, there were number of issues involved on the valuations. Appeal was from both the sides, not only one side. And this may not be just a dismissal of appeal. If there is a dismissal of appeal, it would not have taken this much longer time. So we might expect some substantive changes or something which would come in this judgment would be different from the International Court order that is what they've taken -- which might have taken longer time among the judges to deliberate and decide. So, complexity plus delays in terms of having certain changes expectations that we have in this order, and those 2 are the reasons that we are experiencing this delay.

I see. But the most important point is what you said that with the systemic delay in the whole Singapore appeals court, right. That's really what I'm gathering [indiscernible]

Singapore judgements, if you look at and review for last 1 month, 2 months, they are running 2, 3 months delay.

Understood. Okay. Now on the business side. My question is that, how much revenue did we get from the specialty intermediate side this quarter?

In fact we got much lesser from specialty intermediate side. One second, I'll give you the number, which is around INR 35 crores.

Okay. So why it's so low and because, I think last time you mentioned that your capacity utilization was around 27%. So, has that gone up or down?

No, no, actually what happened is capacity utilization reduced to some extent because there is -- this quarter was a different quarter in which we have huge increase in the raw material cost, further increase in the raw material cost, for example caustic, which was INR 40 plus increased to almost INR 65, right. Similarly, soda ash, lot of other raw materials have increased and gone up substantially. So, that changed the overall complexity in the sense that the sales prices in fact for VS and H-acid reduced in this quarter, instead of increasing. So on one side, there is a reverse effect of raw materials going up and the sales price is going down. The specialty intermediates also suffered in the sense of due to increase -- sharp increase in the raw materials, demand has also shrunk. So certain product lines, which we expect to utilize in last quarter, we couldn't utilize because we wanted to ensure that we sell product with certain secure margins. Unfortunately, Chinese prices became somehow more attractive in this quarter due to their basic chemicals and intermediate prices being lower compared to India prices and that created kind of a tough and challenging situation in this quarter, Rajesh. So, we couldn't achieve what we expected to achieve in this quarter.

Understood. So would you say, Manish that the EBITDA margin has bottomed out in this quarter and from here on, we can only see up trend or do you think it will be subdued, let's say, in the current quarter and a few more quarters in this financial year?

I think the situation is such that almost 80%, 90% of certain intermediates products in India has reduced. Everyone has slowed down. Okay. And this is not going to resolve soon. So we are expecting that couple of quarters of this financial year are going to remain subdued. Unfortunately, that is what it seems. And this is the situation in which we are. So it is not going to come back soon. It is going to remain flat in for a couple of quarters to be cautious, Rajesh.

Okay. And then in terms of the legal expenses this quarter related to the Senda litigation, what is that about?

Yes. Now major litigation and charges are over. So from this quarter, the first quarter of this financial year, there is a reduction and there would be continuing reduction also because major arguments and everything is over. There are few side cases like one related to this cost -- [ and 87 ], another small side case nothing to do with the buyout order. Those are going on, but would be less cost compared to the major cost is out now. So major cost is over.

Right. What was the number in Q4?

Q4 was...

Or for the last financial year, whichever is readily available with you.

Right. So Q4, when you add up the legal expenses as well as legal cost plus the value of cost, it is almost, I think INR 10 crore. But if you look at the entire financial year, we would be closing, we would be crossing or touching almost INR 35 crores.

Okay. So INR 10 crores in Q4 and for the year, it was INR 35 crores.

Correct. Yes.

Right. Okay. That's all I had. And just a small request since the last call, I've been trying to arrange a meeting with you to come and see you in Ahmedabad. So it has not been made possible somehow by [ the little folks ]. So, can I just request you to give me your number or email ID so that I can get in touch with you to arrange the meeting?

Sure, sure. You are most welcome. Visit us. Visit our facilities and you want to note down the ID or you want...

Yes, yes, yes. Whatever you can give it to me, so that I can be in touch with you directly.

Okay. So suresh.gondalia, who is our company Secretary, [email protected]. This is his and my email ID is [email protected].

Our next question is from the line of Harsh Gupta, an investor.

My question is, on the basis of are you saying you can expect it anytime. So, does that include, first question the summer break right now till 24th June or it will happen only after that. That's the first question.

Yes, it can come in this summer break also. As you know, it is from 30th May to 24th June and several judgments have come even our earlier times from Singapore courts during December and June. So, definitely it can come in June, no bar on the judgment, there won't be any hearings taking place, but the judgments can definitely come during the summer break.

Okay. And on the complexity of the valuations being slightly redid based on appeals from both you and Longsheng Group, the question is just to understand, I mean, of course, that only the judges can say, but are the arguments for a larger increase from your side or a larger decrease from their side, just to get a sense of the probability, what is at play here, if you could throw some color on it.

I think the entire, there was 2 days arguments and major -- I mean, from our side, the major push was to increase the valuation on certain sound points, for example DLOM, there were quite a long arguments on DLOM and there was a huge debate among the judges and the counsels on DLOM, then detailed debate and arguments also took place on interest factors, because it's again a very genuine argument because Kiri's economic interest has been suffering in DyStar from the valuation date and transaction date is too far away from the valuation date. So, genuinely Kiri has been suffering an out-of-pocket, not earning any return on its investment during 4 years period and there was no earlier precedence in Singapore where the valuation date and transaction data are so far away. So, again there was a detailed discussion on that. So, on increase part, I would say there were major discussions and the arguments took place rather than the quantum of arguments on the decrease side.

Okay, that makes sense. What is the DLOM Manish?

That is a discount for lack of marketability. See, because Kiri -- Kiri is not a willing seller for the DyStar stake, right. Kiri is a forceful seller and suffered by operations from Senda. So, the arguments are around how you can have a forceful seller, unwilling seller should be further punished by putting discount on a stake in the valuation. So, that was the major argument from us, plus the -- there is a known buyer. In this case, it is not a free market sell, the buyer is also defined by the court who is the majority shareholder. So -- and who is getting a control of the company. So, control premium and discount for lack of marketability usually cancels out with each other.

Makes sense. Make sense. So on the same increase point, have legal expenses to be reimbursed been discussed as part of the judgment or as part of this argument?

Yes, Supreme Court, whatever legal expenses, which have been awarded by the court are to the International Court legal proceedings. So the cost, which has been incurring from international court proceedings still the Supreme Court proceedings ended, that is -- that is to be still awarded by Supreme Court in the judgment, yes.

Yes. Okay, and my point is, like in Indian Supreme Court, there is something called a review petition. Is there any possibility of reviewing this judgment whenever it comes out by, let us say, a party it is unhappy, for example...

We have categorically asked and it is not possible. There is no such provision there.

There is no such provision and similarly to the question by the last gentleman, you said for smaller case of $9 million [ side ] pocket, there is a 21-day kind of lock-in. Is there a similar provision, I mean, what are the real kind of legal remedies plausibly available to you, if they kind of hold up on the payment of 450-plus whatever amount is million U.S. dollars.

See the international court awarded this amount and decided on the -- on the valuation of the company in June 2021, okay.

Yes.

Post that, Senda has not been able to get a stay on the enforcement and execution of that order. So, technically, as we speak now, Senda has already defaulted in honoring the order for 1 year without securing the stay, correct. Right, so they all -- by the time Supreme Court judgment is out, they have passed enough time and that is the reason that they are already at a stage where Kiri would perceive this as an intentional non-payment, if they do not pay within a few weeks from the -- from the judgment of the Supreme Court. They had enough time to collect money, they are sitting on enough cash in Longsheng books, there is -- there is too much cash on DyStar's books also. So, their financial strength of both the companies are good and Senda is only a vehicle. Senda is not an operational entity. It's only a vehicle, an SPV through which the investment has been made. So, both the operational companies are filthy cash rich, correct. So, there is no reason for them not to dishonor. So, in a short time, if it is -- if the judgment is not honored, then Kiri's option to go to the court and file for the alternate remedy and contempt of court is already there.

Okay, any alternate remedy, just to understand, is there any precedent in Singapore...

Yes, alternate...

[indiscernible] option.

Yes, alternate remedy is to sell the company as a running business and as a growing concern and that court take charge of it.

Okay. So on that note, how has DyStar's business been doing?

DyStar has been -- business has been doing very well. DyStar has December ended again on more than 115 million profit after tax, even after they are taking away some money as all kinds of fees and things like that, right. Still DyStar had booked quite a significant profits even in December 2021.

Okay. My final question, Manish, is the JV you have within India, Longsheng and Kiri, has there been any discussion [ appeal ] on how will that be resolved or that is only after this thing gets resolved?

Unfortunately, there is no discussion on that. There is no -- there is no debate on that. There is no -- there is no negotiations on that and I think both the sides are waiting for DyStar to get resolved.

Okay. Because you are controlling it effectively even though you are the minority shareholder in that JV.

Yes, yes, correct. Kiri has the management control of that company and that company is run, operated by Kiri very professionally, that company is also doing well and it -- and its value has also been built well all these years.

Our next question is from [ Amal Goel ], an investor.

My question is regarding the promoter stake. I know you did explain a little bit on that. But I just wanted to find out what is the dispute and who is that dispute between. And so what I've seen is, promoters has offloaded some shares, which is what has been on NSE and BSE as well. So was it just a revoking of the pledged shares or what they're [indiscernible] I think we just want some clarity on those?

Yes, yes. Sure, sure. The issue goes back almost 10 years, which is 2012-'13, okay. And during those times, Kiri went through financial distress. So this issue is not a recent issue, its 10 years old issue, number one. Number 2 at that time, certain lenders, one of them was right -- a few lenders who had given loan to the company actually even after that debt was paid off, right, they sold companies -- promoters shares, okay. And there was a dispute with them that they should was not have sold these shares and those shares, they have to give back to promoters, right. And we didn't accept that. So we have been demanding that this has to be come back to the promoters, and it was not a part of the agreement with the promoters that they would sell the shares. And they did invoke. At the time their intention was to put pressure on the promoters, when the company was in financial trouble, correct, and with that intention, they did certain sale, which they were not supposed to do, correct. So then we have been demanding and asking from them. They should put back the shares to promoters' account buying from the market, which they didn't do for all these years. So, and then we realize that there is a mismatch and then we have to resolve that, so that is why it was disclosed that's the reason.

So there is no actual share seen, involved or sold in the market?

No. There is no. This issue is a dispute issue, it's an old issue. There is no -- there are no shares even pledged of promoters in the market.

Okay. Are we forcing...

Promoters are unpledged.

Right. Are we forcing any more disputes like that, like that's completely a surprise to everyone, all of a sudden.

Yes, no, no issues. Not at all.

Right, okay. And the second question -- question I have is about the other expenses up INR 77 crores and that's a significant amount when you look at the amount of sales we did and the expenses we have. Would you provide some light on that, what those INR 77 crores are. I know you mentioned about the legal cost, which is about INR 10 crores out of that, but still there is about INR 67 crores in other expenses. So, is there any big numbers that you can just give some light on? [Technical difficulty]

Ladies and gentlemen, we have lost the line for the management. Please stay connected while we get them connected. Ladies and gentlemen, we have the line for the management connected. Mr. Goel, you can proceed with your question.

Yes, sure.

Did you hear what I said, I don't know when we got disconnected. So, I'm not sure...

I don't think you started, there's nothing big. We got disconnected just when you...

Okay. So, let me -- let me then tell you from the beginning. So, the other expenses actually include the 4 major -- 4 major breakup points, okay, each. One is the power and fuel, and you know, power has increased substantially. So that is #1 and fuel has also increased and fuel has increased almost 3x because the coal prices went up substantially. So, power and fuel is one of them. Then it also includes the labor charges, the charges for the workers, that also included in that. It has legal expenses, I just mentioned earlier, which is close to INR 10 crores and it also has all freight and transportation charges, okay. So, that is also included in that. So, these are the 4 major hits. It also has maintenance expenses. It also includes CSR and social welfare. It also includes the traveling expenses, all marketing expenses, all are part of other expenses.

Okay, that's great. Are we going to see any reduction in those costs, because I think that the proportion of expenses to the sales we did is quite high and is it sustainable or do we have any plans in place because we are living in an uncertain world, so if not Ukraine war, there might be something else in the next quarter. So we can't just piggy bank on those, right. So, did you have any plans for that, that we don't have an excuse for that.

Right. So, see -- we are trying to reduce our fixed cost currently, which means that we would be reducing some of our employees cost. Some of the contracts cost. So that is where we are taking steps. Legal expenses will go down anyway because major legal cases are now over, correct. So, legal expenses are expected to go down. Now freight and transportation cost, again, basically relates to the sales. So, if we have continued sales at a level we have freight and transportation looking at the current petrol [Technical Difficulty] prices, plus the export freights, sea freights are still continuing to be higher, there are chances to reduce those, but whatever we can do at our site level, at our manufacturing level like maintenance, we have put a huge cut on the maintenance currently. So that is also -- we are trying to fix only, which are essential and urgent. So which are -- so we are trying our best to reduce those costs, which are in our control. Legal cost will go down anyway. I'm just repeating as a summary and freight and transportation cost again would be directly linked with the sales. The major problem with us is the sales price have not increased to the extent that the cost of increase of fuel, power, energy along with the raw materials can be passed on, so that is where the real challenge is, how to increase sales price on those products and meanwhile, whatever we can cut, we are cutting already at the moment.

Sure. Just one quick question on that. Are we the competitor to DyStar anymore? Are we...

We do not compete to DyStar because we serve and cater to different markets currently.

Yes. Okay.

They are at a very high-end market while Kiri serving at a medium or a lower end market. So there is a market segmentation that defines the market for DyStar and market for Kiri and other producers like Kiri from India and China.

Sure. One last question on that. Are we going to see any promoters increasing their stake because right now what we have heard so far is, it's all looking rosy pictures and that just might come anytime. So that gives a good indication to across the shareholders spokes that things are going rough.

Absolutely. Promoters are right now already working on and promoters are trying to arrange whatever best way they can and doing their best and will definitely increase their shares. Yes.

Our next question is from the line of Anurag Patil with Roha Asset Managers.

Sir, laser and paper industry, how is the demand scenario currently?

Anurag, laser and paper industry is currently -- paper industry has been on a downfall over the last few years from demand side as far as dyes is concerned because less and less publications and papers have been printed, right. So if you look at the paper dyes [Technical Difficulty] which has been quite stagnant or not growing, I would say, correct. On the other hand, leather is also facing lot of challenges. So leather dyes business and leather market is also -- are all stagnant, not growing while if you look at the textile in general, globally, is having the growth of at least 5% to 6% CAGR, which you don't see in leather and paper dyes. They are almost at the same level, but again we don't know how the future would change, but this is what has been there since few years.

Okay. And can you share the H-acid and vinyl sulphone prices currently versus the last quarter average difference?

For example, last quarter average realization of vinyl sulphone it was INR 274, while H-acid was INR 465, that is the last quarter's realization. If I give you the number of earlier quarter realization, right, vinyl sulphone earlier quarter realization was INR 312, while the H-acid realization was INR 502. So, it has gone down the average realization. On the other hand, the cost has gone up. As we speak now, VS price -- vinyl sulphone price is continuing to be around INR 270 and H-acid price has, in fact, reduced from INR 465 to INR 450 as we speak as on today.

Our next question is from the line of Srinivas Kashyap, an investor.

Yes, I wanted to ask about [Technical Difficulty] Dubai subsidiary, right. It's saying the -- CA is saying like there is a 4 lakh loss on the going concern is a problem, right. So what is the loss and how is it going to go forward?

So, that comes on a historical earlier losses, which has been accumulated and carried forward, okay. If you look at the operations for last at least 5 to 7 years, there is no loss on that. So what auditor has mentioned is coming out from the earlier times and if you look at the Chemhub as a trading company, it is not booking profit. Profit is 100% subsidiary of Kiri and the transfer pricing have been arranged and have been in a way that the profits are being booked in a parent company in Kiri, right. So when you look at our consolidated numbers, all the profits, which has been made by Chemhub, it all comes to Kiri, but again the operational profit has not been kept there, so standalone profit would represent the profit of that trading company also.

So now USD 4 lakh, is it -- that Kiri has to pay Chemhub or how -- what is the USD 4 lakh he has highlighted?

See USD 4 lakh he has highlighted was the losses incurred in the earlier transactions with the company.

It has to be paid right from Kiri to Chemhub.

Not need to be paid, no. So when Chemhub over a period of time gradually generates profit, right, would balance out that $400,000. There is nothing to be paid from Kiri.

Okay. And how -- what is your outlook like for this whole year March to March? Next year, will it be like profitable like from 33 till 9. So next year same time how much will be the profit or will it be a loss?

See, to be honest with you, it would be a speculation if I give you the 1-year figure.

Can you are sure at least green like it won't be minus?

Yes. That is what our attempt is. So over the, if I can, if I tell you the next 6 months. So for the next 6 months, we want to ensure that we remain profitable and that is what the target is. At whatever level we operate at whatever cost we operate, we remain profitable for the first half of this year That is what our target is. And that is what we will achieve.

And there's legal expenses you said it will reduce. So if it was INR 10 crores this quarter, how much it will be, and this year, how much it will reduce INR 7 crores, INR 5 crores?

So I think it would be less than half than the yearly spending that we have been having.

So every quarter, it will be just half right now.

Yes. The current quarter, it is already less than half. It would be...

And if all the cases are resolved, but it is there further appeals and appeals will it grow further on, or you are expecting this year will be the last for all legal expenses?

See, all the -- there are no further appeals for the -- for the buyout and for the major case, which we had. For other 2 side cases, appeals were already -- appeals were already admitted and appeal hearing dates are already all fixed. All are getting completed by September 2022. So by September '22 onwards, there would be nothing, zero.

No, no. How is this, the legal expenses done like every time they go and argue, you need to pay or when you want some appeal to be done, they tell that this is the charge or how is it or for the whole case, they take amount that for this case you need to give us this amount.

No, no. See the way the legal cost functions is that, you see Kiri has appointed one of the best lawyers of Singapore, [indiscernible] #1 law firm of Singapore, okay. And that law firm's lawyers, number of lawyers are involved. There is a team of at least -- at least 8 lawyers are there on board and each lawyer's fees are charged based on the hours and timing that is spent on the cases, okay. So, that ranges maybe starting from SGD200 per hour to as high as SGD3,000 per hour, right. So, it depends on how much work has been put up, how much legal work is involved and how much time all these different levels of lawyers are spending on all cases that are being fought there. So, those are the legal expenses for the Singapore lawyers. In addition, there are Indian lawyers involved who work along with the Singapore lawyers and Indian lawyers are based in Mumbai, named DSK Legal. So DSK Legal works hand-in-hand in Singapore. Again DSK Legal work is also involved based on hourly basis starting from a junior lawyer to their managing partners.

Why are you paying like for Indian lawyers in Mumbai, can't you pay directly to the Singapore people?

No, because they are 2 different law firms, right. They work together, Indian legal law firms as well work along with the Singapore law firms, they both work together on preparing drafts, preparing [ readings ] right and Singapore lawyers -- Indian lawyers also work with us to explain us better to coordinate with Singapore lawyers better. They would present Kiri's interest to Singapore lawyers also, right. So that's why the 2 law firms are involved from day 1 since 2015.

Our next question is from the line of B Suresh from Buran Financials.

This is a last question. Sir actually some other cases can expected in September. This case, actually Singapore Court is holidays -- holidays is going on, present going on holidays or future you can holidays, when it come holidays, Singapore court?

You are talking about the holidays in Singapore Court, correct, if I understand correctly.

Yes, yes, yes.

So, Singapore Court vacation already started from Monday, which is from May 30th and it is still June 24th. These are the exact dates for Court vacation. Why -- but during court vacation judgments come, judgments are announced and judgments are disclosed, so court -- during this vacation time, court hearings do not take place, but the judgments continue keep coming.

Okay. But holidays is not affected judgment -- Kiri judgment.

So holidays affect the hearing dates because they don't give the hearings in holidays, but it doesn't affect the judgments.

Okay. But can expect June ending -- of the month of June can colors in happy in Kiri?

Highly expecting, Suresh. Highly expecting.

Our next question is from the line of Manoj Bhura with Adinath Financial Services Private Limited.

Yes. Manish, my question is how much legal cost we have incurred till now on the case? And how -- what amount is expected to be recovered from Singapore, from Senda in total over the period of the case?

Sorry.

In totality, how much expenses we have incurred towards legal expenses in Singapore? And how much is that expected realization reimbursement order from the foot?

Right. If you -- if you count from 2000 till now every year, we have incurred cost of around INR 30 crores to INR 40 crores, okay.

Right.

So in this 7 years, we have incurred around you can say, more than INR 200 crores on the legal cost.

Right, right.

And we have been awarded $8.11 million plus close to $9 million till now and we will have another Supreme Court order will have another amount in it. Correct?

Right, right.

So let us -- I'm just giving you a number without any basis. If Singapore Court had another $2 million, $3 million, $4 million, right, maximum you would be able to get back, would be around close to $13 million, $14 million.

I think for the year, is it Singapore dollar or U.S. dollar?

Singapore dollar. So which would be -- which would be less than half, less than half of what we spend.

Okay. Okay. [ At 15 million ] it is -- it is roughly around INR 65 crore.

INR 65 crore, INR 70 crore cash, correct.

This we are expecting to realize this financial year?

That would come as the undertaken has been taken from Senda that within 21 days from the judgment date of the cost judgment. So your judgment hearing date, let us say is already fixed, which is 15th, 16th of September. And after that, if the judgment comes by December, January then it is highly possible it will be in financial for this financial year before March 23.

That means in March '23, we will be having this windfall.

Correct, right.

In our financial, and which [indiscernible] to around INR 12, INR 15 EPS per year with this year.

Yes. Correct.

Our next question is from the line of V.P. Rajesh from Banyan Capital.

So Manish, you mentioned earlier that all the FCCBs have been converted, so can you tell us the number of shares outstanding now after the dye conversion?

So total number of shares of the company is INR 5.18 crores.

INR 5.18 crores. Okay. And the second thing is I noticed that you paid more than INR 50 crores of debt. So what is the plan for this year?

Right, right. See if you look at our financials last 2 quarters, we paid in the quarter ending December and quarter ending March, we paid INR 60 crores, which was pre-settled debt, right. And another INR 68 crore would be paid in the next 2 quarters, which means the current quarter and the quarter after. So by September, the company's debt would be not there, it would be gone.

You still have INR 100 crores of debt, right. So if you pay INR 68 crores, then there will be still some INR 30 crores left.

Yes, I mean, odd INR 30 crores. Yes, very small amount.

Understood. Correct. Okay. Okay. Okay. But that's very good, that's very comforting that you're incrementally moving towards becoming the debt...

Yes, yes, yes. And we already have made plans to ensure that we fulfill our commitments before September.

Okay. And then just on the new project as and when we get the money on DyStar -- from DyStar -- you had talked about the big expansion. So that will include taking us some term loan et cetera, right? Is that a reasonable assumption?

Yes. Absolutely. It would be an appropriate debt equity. Yes. Absolutely.

Okay. All right. And I look forward to meeting you.

Otherwise, I would not be able to provide you the desired return on equity, so it has to be both.

Sure. Right. I hope the results from Singapore Court comes sooner than later and all the best.

Our next question is from the line of Manoj Bhura from Adinath Financial Services Private Limited.

Manish, can you throw some light on the competition of this FCCB persons? Who these persons are? Are they related to you in anyway?

There are no FCCBs anymore and they are not related to, they are all...

No the person -- the shareholders are there around 2 crore shares had been converted last year.

Yes. No related, not at all.

Who are the underlying beneficiaries of the share?

They are all there in the public domain, who are the shareholders.

No. Some name is there, but who the ultimate beneficiary is?

That I would not be aware of.

You are not now aware of.

No.

Okay. Okay. They are not related to you in anyway?

No, no, not at all, zero.

And can you throw some light on the specific projects, which you want to undertake once this money comes in?

Well, those projects, see, there are all several projects that we have been studying, evaluating. There are a number of feasibility studies have taken place. Okay.

Right, right.

Across the spectrum, there is a special Kiri's team, which has been working for now almost 3 years, certain people have been on board. And once we know the final amount, once we -- the Kiri's Board will debate, there is a special team has been arranged, right. And there is a special committee has been formed to review the investments and whatever Kiri's Board would choose out of 10 maybe 1, 2 or 3, we will definitely inform and announce at appropriate time, but nothing crystallized yet.

You did some MoU with the Government of Gujarat last year.

Correct. So those are also part of the aspirational projects.

Nothing has been crystallized -- nothing has been analyzed, it will be analyzed, you must have just selected some items or some particular specific projects.

Correct. Correct. Correct. So those are the intentions, those are expression of intent, but not crystallized yet. Correct.

Do you have any proposal to buyback of shares?

We will see that is -- that's also quite active on discussion because as I mentioned earlier, promoter will increase their stake. We will have to increase our stake and we are working on it. So if buyback takes place, we will not -- we will not give our shares, correct.

As there are no further questions from the participants, I now hand the conference over to Manish Kiri for closing comments.

Thanks to all for attending today's conference call and we'll see you next time. All the best to you. Thank you.

Thank you. On behalf of Asian Market Securities Limited, that concludes this conference. Thank you for joining us. And you may now disconnect your lines.