NOCIL Limited (NOCIL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 and FY '20 Earnings Conference Call of NOCIL Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. S. R. Deo, Managing Director of NOCIL Limited. Thank you, and over to you, sir.

Thank you. Good evening, and very warm welcome to everyone present on the call. Along with me, I have Mr. P. Srinivasan, Chief Financial Officer; and SGA team, our Investor Relations advisers. I hope you and your families are safe and secure in current circumstances and taking necessary precautions. Hope you all have received our investor presentation by now. For those who have not, you can view them on the stock exchange and the company website. As we discussed in the last call, after we announced our Q3 results, because there's lots of uncertainty and prolonged slowdown in the auto industry, we decided that with the expansion of our capacities near completion, our strategy would be to focus on maintaining volumes, market share from customers and explore the option of seeking additional volume wherever possible. If you all may recall, we had indicated during our last call that the volume in Q4 was probably the highest in FY '20 and will end the year with marginal degrowth in volumes. I'm happy to announce due to the good efforts by our marketing team, we could touch the best quarterly volumes over the last 8 quarters. As a result, we could achieve 11% volume growth for Q4 compared to the quarter Q3 of FY '20. On the annual front, we could end the year with degrowth of 4% in volume. In fact, in Q4, on account of COVID lockdown, which started from 22 March, we possibly lost the sale of about 600 to 700 metric ton which could have been added to Q4. As all of you are aware, the Indian auto industry witnessed a prolonged recessionary trend or slowdown in sales. Sales in domestic markets have been on a decline on a regular basis since September 2018, and this prolonged till February 2020. It was expected that some recovery was in anvil, but unfortunately due to COVID lockdown, the recessionary trend has got extended for the reason which has been explained in the past con calls. The COVID-19 pandemic outbreak has hit almost all the countries and the industries across the world. There have been many disruptions in terms of labor issues, concerns on health, safety management on the shop floor and supply chain disruptions. To sum it up, both the supply and demand side have got impacted. It may be noted that month of April 2020 was the first time ever in automobile history that there have been 0 sales. We expect the near-term to be challenging for the auto sector due to lack of short-term demand in view of economic impact for COVID-19. The adverse impact on the same is expected to be witnessed, obviously, in our first quarter June '20 performance as well. However, there are lots and lots of positive developments, which I would like to share with you. Recently, some of the major domestic auto manufacturers has also indicated that the market has already bottomed out, and the demand is expected to increase from here on. June retail sales were better than May. And from July onwards, it is expected to improve further. Most of them have scaled up their utilization levels and continuing with their capital spending. Though it will be slow, but domestic market is beginning its uptime. Our customers have indicated to pick up more volumes in the coming months, both domestic as well as international front. The recent notification by DGFT, putting the -- all the tires under restricted imports, will enable the tire manufacturer to increase the operating risk and in turn will present an opportunity to NOCIL to supply additional volumes. Even during the difficult time, NOCIL could start dispatching its good to meet export commitment from mid-April 2020. Export segment continued to grow, and our efforts in this segment is to spread across different customers with global presence. In fact, during these times, some very reputed international customers have classified NOCIL in their scheme of things from a regional supplier to a global supplier across the country. Coming to NOCIL, with necessary approval from government authority, we started operations at our facilities, both in Navi Mumbai and Dahej, and we are currently operating in all 3 shifts. We have sufficient stock of raw materials to meet the production requirement. One point which I would like to touch is the HSV measures. NOCIL being a responsible care company, before we started our plant, we decided to create a COVID manual which included practically all the directions which were given by authorities, like curtailing the manpower, social distancing, focus on employee's health, revising shift schedule and also to look at the comorbid cases within the company. Production sites have started the operations, and company is strictly following all the guidelines issued by the local regulatory authority and comply with all the norms within the factory -- in all the factories and also including the head office, which we started recently from 10 of July. Every employee who comes in the company undergoes a thermal screening, sanitization, all the social distancing and compulsion for using the mask and hand sanitization for every 2 hours. Turning to anti-dumping front. As you all know that the anti-dumping duty ended from August 2019, and H2 FY '20 saw full impact of ADD which in turn, did impact our profitability margins to some extent. Recently, the company has filed application for anti-dumping investigation on imports of rubber chemicals -- rubber chemical, 1 single chemical, that is PX13, the main antioxidant. The DGTF have initiated the faircase, which essentially indicates that the authorities are prima facie convinced about the existence of dumping into India. The investigation process will be conducted as per the rules, and we hope that some favorable outcome be concluded in their findings. To summarize, we feel Indian manufacturing industry have got a golden opportunity to position itself, one of the reasons, cost-efficient manufacturing hub in the global supply chain. India is better positioned in auto and few other industries in terms of becoming manufacturing hub for the world. We see customers increasing their preference for locally produced product. And this preference is going to bring in a huge amount of advantage to NOCIL. Simultaneously, the international companies are very seriously looking at supply chains outside China. And NOCIL is one of the most reliable supplier of rubber chemicals out of China with additional volumes, which are practically commissioned. One more thing is the initiatives announced by the government under Aatma Nirbhar Bharat Abhiyaan will hopefully boost the Indian auto and auto ancillary manufacturers to resume business and fortify the supply chain. This will help companies to ramp up their businesses and reduce automakers reliance on other countries. Going ahead, we will continue our strategy of gaining market shares and optimally utilize our resources. Now I would like to hand over to Mr. P. Srinivasan to give you an update on the financial performance. Srini, over to you.

Thank you, Mr. Deo, and good evening, everyone. Just to run through the financials for Q4 and financial year '20. The net revenue from operations for Q4 '20 stood at INR 213 crores, which grew by 9.5% or [ 9.4% ] on a quarter-on-quarter basis as compared to Q3 of INR 194 crores. As Mr. Deo said, Q4 in volume terms has been the best performance in the last 2 years or last 8 quarters. Volume for Q4 grew by 11% as compared to the previous quarter. As already said by Mr. Deo, in the second half, we aggressively participated in the volume offtakes. We saw -- we sacrificed some price suppression. We don't -- we went in with a conscious effort of fighting the position effect but to gain the volume or market share. Net revenue for the year under review was INR 846 crore as against INR 1,043 crores for the previous year FY '19, down by 18.9%. Value-addition parameters. Value addition for the quarter 4 '20 is INR 106 crores as against INR 102 crores for quarter 3 '20, up by 4.7%. Prices of raw materials have been stable during the quarter. Even on the selling prices, too, we were some more managed to continue. Value addition for FY '20 is at INR 458 crores as against INR 576 crores, down by 20% on a year-to-year basis. On the operating EBITDA front, the EBITDA for quarter 4 is at INR 37 crores as against INR 36 crores in Q3 FY '20. One of the important factors, which we have been advocating is that the conversion cost as a percentage will change as we scale up the volumes. And this quarter reflected in the conversion cost percentage for the quarter. It came down to 33% from a high of 35% on the back of better volumes. Operating EBITDA for the year under review was INR 176 crores as against INR 290 crores for the previous year. Operating EBITDA was down by 39% on a year-over-year basis. However, the operating EBITDA margin stood at 20% for the year under review. And I guess this has been a fifth year continuously exceeding 20%. Lower margins on the back of operating leverage did play some impact on the margin fronts and also the ADD succession or withdrawal from August 19 did play its parts for the year. On the profit before tax front, for the quarter under review is at INR 31 crores as against INR 29 crores in the preceding quarter, grew by 6.8%. PBT for the year is at INR 152 crores as against INR 277 crores for FY '19, down by [ 45% ]. PBT margin was at 18% for the year. PBT margin also got impacted by due the additional depreciation of INR 10 crores for the year on account of capitalization done in January '19 and something in February '20. Our profit after tax level. The profit after tax from quarter 4 '20 is at INR 22 crores as against INR 21 crores in the preceding quarter, up by 8%. For the year under review, the profit after tax is INR 131 crores as against INR 184 crores in FY '19, down by 29%, with a margin of 15.5% of sales. On the liquidity position of the company, in these challenging times, the company as on date has sufficient liquidity. Company continues to be debt-free for quarter ended June '20 as well. And we are taking care of our working capital requirements through internal goals. We have so far managed it to sail through, and we don't see much of a challenge. Before opening up for the question-and-answer session, a quick update on the thing. In terms of the government directive of COVID-19 lockdown, the company -- just to reiterate, we have said in the semi-results, company closed its operation during the last week of March 20. As a result, loss of revenue, profits, realizable value of assets, et cetera, for the year under review on account of COVID-19 are not material in nature and the financial statements prepared have not considered any of these effects. The management is regularly reviewing the lockdown effect for the year 2021. And any material information required to be communicated to stakeholders, it will be done at an appropriate time. Secondly, on the recent amalgamation of the promoter companies, Suremi Trading Private Ltd Limited and Sushripada Investments Private Ltd, the Board has approved the proposed scheme and the respected shareholders under Section 230, 232 of the Applicable Provisions of the Company's Act 2013. In this connection, the company has received the NOC from the stock exchanges, and we have already filed our application -- petition before the NCLT. Pursuant with the scheme being -- becoming effective, the shareholders of Suremi and Sushripada will be allotted equal number of shares what they hold -- the promoter company hold in the NOCIL portfolio. There has been no change in the shareholding of promoter. In fact, just to add a bit, the promoters have purchased about 5 lakh shares somewhere in April, and that has been communicated to the exchange in April. With this, I would like to open the floor for question and answers.

[Operator Instructions] The first question is from the line of Dhaval Shah from Girik Capital.

A couple of questions from my side. Sir, firstly, how do you see this anti-China sentiment amongst your client in terms of procuring the product? And coupled with this, specification of our portfolio was getting disturbed because of Chinese dumping. And now we have an expanded capacity and [indiscernible] tires as well. So we're very really nicely placed to overcome whatever problems we saw in the last 1, 2 years after the ADD got over. So what is your thoughts on that?

I think, Dhaval, in the introductory speech of Mr. Deo, we did answer this question that so far as the inquiries from customers, both India as well as global, yes, there are been inquiries which has been in the anvil and that seems to have intensified, and there is a relook at their end to reconsider their supply chain distribution. In fact, we did -- Mr. Deo did speak about one of the reputed companies, classifying or categorizing NOCIL to invite NOCIL to be a global supplier instead of a regional supplier. And they have asked our intent to supply our capability of how much we can supply to their global plants. So we have responded appropriately.

Yes. Sir, I was asking, sir, mainly more from a domestic requirement and there is no notification or rule from the government or any sort of anti-dumping duty with regards to the imports which are happening in the country. The customer who'll always see a trade-off between selling price and the rate at which they are imported. So on that front, anything they are doing after, like, last 2, 3 months, as they've changed their strategy, asked for more volumes? Or any change in their procurement?

I would say there have been changes that we witnessed that some of those got reflected in the Q4 volumes as well. But I think the finer feature will come about as we go along in the next quarter. Because today, April-June has been an average since the economic activity coming to a standstill at most places. So that is not a reference point. But I think we should wait for July-September to get a clear idea of how the tire companies are strategizing themselves to position themselves on the supply chain front. So maybe we may have to give some time. But yes, the direction is to improve their market share or allocation to domestic manufacturers. That's no doubt. I mean that's a confirmed aspect we can give at this point of time.

Okay. Okay. And sir, on the gross margin front, we are at 50%, which is lowest over the past 3 quarters -- last 4 quarters. So what could you refer this to?

Gross margin, I think we have been -- Dhaval, I think we have been guiding the investors quite a long time, even when we were recording 55%, 57%, we were recording -- driving a guidance of 50% medium term. And -- see, basically, when I look at the last 5 years parameters, I think just for a moment, if we just go back to '15, '16 parameters, we were at an EBITDA level of 16% anti-dumping duty enforced in '15, '16. But today, at this time, we are -- we don't have anti-dumping duty and still we are going up 17.5%, 18%. So that gives us the confidence that we are -- our cost positions, our action plans, strategies, whatever we have planned or whatever we are executing are on the right direction.

Okay, okay. And provided, even if the ADD doesn't come back, but the newer portfolio, the export portfolio plus the value added in the expanded capacity should help us expand our GP from here? Is my understanding correct?

I think, yes, partly true because there are certain specialty chemicals, which are going to the health services, especially the latex rubber chemicals. So these are meant for surgical gloves and stuff like that. So obviously, that will go up over a period of time. I'm not saying it's immediate, but in the years to come, it will go up. So that is a good point. That's a positive thing. Just to -- this part is pretty clear where that we are in the right direction. That's what we want to give.

[Operator Instructions] The next question is from the line of from [ Hasmukh Gala ] from Finvest Advisors.

Hello, sir. Hello? Hello? Can you hear me?

Yes, yes. We are able to hear you.

Hello?

[ Mr. Gala ], we can hear you.

Yes. Can you hear me?

Yes. We can hear you.

We can hear you.

Yes. Okay. Fine. Yes. I just wanted to know, can you help us in the volume front, how much volume did we do in FY '20?

I -- we don't give the specific numbers. What we have -- Mr. Deo had given a guidance is minus 4% degrowth for the year.

Okay. Yes, because I was asking this question because the EBITDA margin has got a visual illusion in the time when your selling prices are falling and the raw material cost and other expenses are also solid, the numerator-denominator impact. So I just wanted to understand what is the EBITDA for funds which you could maintain in the different scenarios where the raw material cost is going up or going down or is remaining stable?

[ Mr. Gala ], I think that is getting into too much price or business sensitive information. We would now like to divulge of those points at this point of time, please. Thank you.

Okay. So you are not revealing EBITDA per tonne?

No, no. We don't wish to divulge those things.

Okay. And just can you tell us in FY '21, what kind of CapEx do you have now?

I think we have a CapEx capital of INR 150-odd crores in the [indiscernible]. That will be capitalized by October 20, that's the intent is. And I don't think so other than that, there are some -- maybe some routine CapEx may come here and there. I would like to just ask Mr. Deo in case he wish to add on CapEx something.

No. In fact, I think because of COVID some of the CapEx, which we could have completed in the month of March, April, we could not do it. And we will be completing that CapEx by October. If we really look at our capital investment, what we have done is we have built sufficient capacities practically in all the products. Now from here on, as I said that at the beginning of Q4, we said that our focus is going to be on volume growth, and that focus will continue. In fact, now, there is a huge opportunity for us in the domestic market. There is an opportunity in the international markets. And we are pretty optimistic that over a period of time, okay, we will start actually selling more volumes. Now this financial year, we are not planning any capital expenditure. As we go along, okay, then we will start looking at capital expenditure depending on the feasibility of the product. But right now, we have no plans.

Okay. Sir, in FY '20, what was our capacity utilization? We have 73,000 tonnes capacity, if I'm not mistaken.

Yes. It's about 65,000 to 70,000. 65,000 to 70,000.

65,000 to 70,000.

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

Sir, could you just tell us more about the export performance? And how the market is looking, like, in the last 3 months, I mean, FY '20 performance? And how it is looking in the first quarter?

Export performance for Q4, I think for the year under review was about 6%, 6.5% volume growth. In Q4, I think it was 7% growth. That's what I can say. For June quarter, I think it's little premature in the sense that there was an impact of COVID and that will play a role on the volume front. So it's not advisable to talk about exact volumes today. Let's see the shipments which has taken place in the last few days, and we can conclude thereafter.

Yes. Sir, another question is on the strategic plan. So that we are generating the free cash flows, and this year's free cash flow will be predominantly used for the ongoing CapEx, which is under CWIP currently. But from next year onwards, again there will be free cash flow. So what would be our strategy to utilize those free cash flows in terms of any backward integration for power integration or any new products or new segments?

I think Mr. Deo answered just about a minute -- few minutes back. He did say that at -- in this year, there is not any CapEx plan for us. But next year, depending on how the business unfolds and how the business shapes up, we will be examining the feasibility studies of various other scheme of things and appropriate decision will be taken at that point of time and communicated. Sudhir, would you like to add anything on this?

That's correct because this year, I think what we are going to do is we are going to consolidate the business in terms of volume. We are going to aim at higher capacity utilization, and we see an opportunity and was asked because of anti-China sentiments. Now this is what we need to watch during the financial year. And based on the performance then we will look at in terms of maybe new product or new lines, but that is something which we cannot talk as of today. It depends on how do we proceed during this financial year.

Okay. And I think to squeeze in a last one. In terms of raw material, how much do you procure from the domestic and if we import anything? And how has been the situation in these days?

50% is import, 50% is domestic.

And we're able to procure that without any hindrance? As of now we are sufficiently having the inventories that had not been...

Yes. Mr. Deo did and said that we have sufficient inventory. And we don't see, at this stage, supply chain, any problems. As we go along, we'll see.

The next question is from the line of Sunil Kothari from Unique Asset Management.

Sir, as rightly, you mentioned in your speech that you were guiding always about reasonable, I think, 50% gross margin. And as you -- in your starting, you mentioned that you will be increasing higher capacity and want to capture market share and utilize more. But because of this slowdown in auto, we were not able to utilize or maybe increase our production, so 3%, 4% volume down. So ultimately, what I'm trying to understand is your medium-term target of gross profit -- GP and EBITDA margin, if you can guide anything on that? Because we are continuously talking about increasing production and increasing market share. And yet, we have so much capacity to fill. So what type of EBITDA margin will be comfortable where you won't be ready to increase our production and supply?

Kothari Ji, I would like to answer in a different way, in the sense that every manufacturer, every businessman would like to have a target of a nice margins or a dream come through wish list. But the issue is we are in the competitive world. Obviously, we have to face the competition and how to survive in this competition. Mind you, these numbers are after considering a competitor who has a 75% market share or a supply chain share in the global space and who is beneficiary of a huge element of government subsidies and other direct and indirect benefits. Now these numbers are quite substantial. It could be as high as 20%. In fact, I would request all of you to just go through China Sunsine's balance sheet to get an idea of how much is the export incentive which they are getting on -- record on their financial statements and other things at the operating level which they get. And despite that we are able to compete well, and we are able to survive well. It gives us the confidence that we are in the right scheme of things. Yes, there have been -- this slowdown has been prolonged one. But if you look at our overall performance in comparison with the auto sector, I think we have performed reasonably better than the auto degrowth. I'm not claiming credit for that. I mean basically, if you look at auto, degrowth has been 15% this year, and we are at maybe minus 8% or 9% degrowth. So I'm not saying that -- it's a degrowth, but still, as compared to the auto, we are slightly reasonably better. We have challenges, and we will try to overcome as we go along.

Sir, I'm not debating about your ability and what you are doing. What I'm asking is, looking at the current situation, which are the medium-term margin you are trying to -- or you will be able to comfortable or you are open to any margin?

We are -- see, as long as it's remunerative, we should be -- we open to any business ventures or any of the rubber chemicals. We intend to supply a portfolio of 22 rubber chemicals, and we would like to continue on the -- bring business on that.

Okay. So this second half margin is sustainable, here? Or that is also not sustainable?

I think, Kothari Ji, it's -- I would not like to speculate on margin straight away. Our desire is to -- our belief is we are on the -- maybe the bottom end, we should be doing better than this. That's fine.

Wish you good luck. But previously, if you check your every statement and call, you are ready to explain the margin. I understand these are a different situation. So that's why I'm asking.

The next question is from the line of Nav Bhardwaj from Anand Rathi.

Congratulations on being able to show growth, at least quarterly, even in such situation. And sir, the point was on the anti-dumping front, on the 12th of the month that's gone by, there was a dumping that was announced -- anti-dumping announced on aniline. So how will that affect us? And what quantum does it -- among the category that's given do we fall under?

Firstly, to clarify, I don't know whether the custom's notification has come so far. At this stage, it's in the recommendation by the DGTR. That's what we saw the notification. This is a preliminary finding, it's not a final finding. There will be some investigation, I mean interested parties disclosures and stuff like that. And our final funding will come a little later. That's number one. Point number two, aniline is Euro III available product. It is available in India, it is available from China, it is available from Europe, it is available from other parts of the world as well. And we are in discussions with -- in fact, we have already procured a few parcels from other regions as well. So we will try to mitigate to best possible extent. Obviously, it will have some price escalations or cost escalations on our revenue account. But I don't think so that's a significant amount to talk about today.

Fair enough. So not a material impact.

Yes. At this point in way, it's not a significant amount. As we go up, we'll have to see the impact.

Sure, sir. Also, sir, about the product, the single product, which Deo also mentioned that we filed a petition for. What would be the contribution to our revenue from that product?

Maybe can I keep it separate? It's a sensitive issue, please.

No worries, no worries.

The investigation is going on. I don't wish to...

Sure about that. No worries. No worries. No worries. Last question, sir, if you could share that, we've been talking a lot about exports and orders and we being recognized. And so do we -- not in the immediate future, but in the foreseeable, do we see our export mix changing for better on the current levels or we wish to maintain another similar levels currently?

Sudhir, would you like to answer on this, if you can?

Basically, if you are -- we are looking at, yes, in future, the export growth, but we are also confident that the domestic will increase. So more or less, the ratios will remain same, but the overall volume sales will go up.

The next question is from the line of Anand Bhavnani from Unifi Capital.

Sudhir, I have 2 questions. Sir, first, on tire versus nontire, how was the split in this year, FY '20?

I didn't get you, Anand?

Sir, our proportion from tires versus nontires? Because rubber acquisition could be in nontire as well. So just wanted to understand if you have any...

It's a typical 65%, 35% ratio. 62%, 37% something like that.

Okay. And sir, with this new capacity, you were planning to also make certain newer products which are Import substitutes. Can you update us on whether we have started making them or when you would consider making them? Any color on that to be would be helpful.

Sudhir, I would like to leave it to you to answer this. Sudhir?

Okay. So basically, I think in our previous con call, we have said that we are going to make certain accelerators, which are not being made in this country. Now I'm very glad to inform you that we have already started manufacturing. The tire industries, they have already sampled the products, and the product is approved. And very soon, we expect that the commercial quantities will start flowing. It will also be an advantageous to tire industry because it's going to be an import substitution. So we see a pretty positive business in that segment.

That's very nice to hear, sir. Sir, broadly, what kind of import levels were earlier there for this particular product? Was it significantly large product or a medium-sized products? I mean if you can give a ballpark. Estimate of the market value of this products?

I would say it is a medium-sized product.

So maybe INR 50 crore, INR 75 crore kind of number, would that be...

No. Much, much more.

Much more?

Much more than that.

Okay. Okay. And sir, you said this is approved by certain vendors. So then maybe from this product, revenues can start flowing in FY '21 itself, except like you can...

It will start flowing in FY '21, yes.

And do you have more such products in the opt-in, import substitutes, whereby -- which can give you growth even in a weak economic environment because these are newer products and everybody would always want some supplies from a domestic manufacturer. So are there any more such products in the offering?

Basically, in our expansion plan, which we are going to complete by October, it's more of expansion of the existing capacity or existing products.

Okay. Okay. So we had this 1 single new product which we have launched. If I -- which is at the moment likely to commercial in FY '21. And you have no other products kind of in opt-in maybe next year or year after you might do. Currently, 1 product is what can give us steady growth in addition to the existing markets? Did I understand correct?

That's correct. Because even the existing products where we are expanding, they are also getting imported. So it becomes, again, an import substitution for domestic manufacturer.

Yes. And sir, in case of our other products, we are hearing that government might consider a broad import duty on Chinese products in addition to the anti-dumping duties. I mean do you have any updates or anything of that, that you have heard and you can share with us that kind of thing is likely, unlikely?

I think we have also held like you, but there are no updates on this.

[Operator Instructions] The next question is from the line of [ Praveen Kumar ] from Aequitas Capital Advisors.

I had a couple of questions. The first one was on this demand from latex gloves manufacturers. I just wanted to understand this. Have you seen any significant demand for that -- from these kind of operators? Or are those -- is such demand too small to mention separately in your comments?

It's a significant in the overall NOCIL scheme of things, but it's -- in its own class, it's a significant one.

Okay. That's good to know. My second question was on -- in the medium term, given your -- once you have finished your entire capacity expansion, next -- let's say, in the next 3 to 4 years, what kind of capacity utilization would you be comfortable with?

Frankly, we would like to utilize 100% capacity as early as possible. That would be our endeavor. But also there are challenges. And it remains to be seen how the economy unfolds or opens out and how the operating rates improves. But the opportunity is there, as Mr. Deo mentioned just a few minutes ago, that we are in the place where a non-Chinese competitor chemicals significant capacity additions and approvals in place, the market is there. So we need to encash the opportunity. And hopefully, we will be able to achieve much faster than what we expected.

So would you say that, let's say -- I mean, not to belabor that point, but would you say that in the next 4 years, maybe at least 50% to 60% might be manageable, if not more than that? Or you like to reserve your comments as such?

I just said just a few minutes back, that we would like to finish off the entire -- achieve the entire 100% utilization in the next 3, 4 years. Let's see how the market unfolds. That's where the whole thing is.

The next question is from the line of from Bharat Sheth from Quest Investment Advisors.

Sir, first question is how much of our dependency is on the China for import more?

China for?

Our raw materials?

Not significant.

Okay. Great, sir. Sir, now...

Couple of products we are depending on them. So to that extent, there will be -- the availability is only from China. So we'll see that how it moves along.

Sir, is there any alternate supply available or we have identified?

No. We have -- we have -- maybe we are working on it. Let's see. It's still premature at this stage to give us right now a concrete, but we are working on that. But not significant to the business perspective overall. That's what I'd say.

Okay. So now even if anti-dumping duty comes, but as a strategy to grow our volume, so what will be our strategy, I mean, increase the price or just to go for additional market share and grow the volume? So what will be...

Let the duty get notified, then we'll talk about it. Now why are we jumping the gun before.

Okay. But I mean -- and what is current, I mean, domestic and export mix is?

Domestic and export?

Yes, mix -- revenue?

65%, 35%. 65% is domestic, 35% is exports.

The next question is from the line of Dhavan Shah from ICICI Securities.

So I have 2 questions. Firstly, about -- you mentioned that Q4 was very good in terms of the volume growth, if we compare it for the last 7 to 8 quarters. So just wanted to understand the plant utilization in the Q4 versus Q3? And what is the plant utilization right now?

I think the plant utilization, Q3 versus Q4, I think there is a growth of about maybe 15% extra growth as compared to Q3.

And what is the plant utilization right now?

Right now -- which -- as of today or as of which period you are talking about?

I mean as of first quarter or maybe today.

I think that's too early for us to comment on it. I would not like to comment at this stage, please.

So Q4 utilization was around 70%, 80% of our 60,000-odd tonne capacity?

I think we answered to someone in the -- some question in the -- just about a few minutes back. We said for the utilization for the year is about 65% to 70%.

Okay. Okay. And secondly, about the PX13, so we filed antidumping on that. So how much does that constitute in our revenue, that particular product?

I think I answered just about 10 minutes back that it is little sensitive. We will not talk about it.

And the export -- I mean, we were earlier highlighting that the -- there is a good demand from the U.S. market. So how is that shaping up? And how much U.S. market is currently constitutes in our export business?

I think in export business, overall, U.S. will be maybe around 10%.

And any outlook on that? I mean how is the export demand from U.S. region?

I think it's more to do with how the relationship blossoms out. In the sense, there are certain tire companies, international tire companies asking or requesting also to supply pan-global rather than region. So once those schedules or those understanding comes to sort of a contract or something, then we'll be in a better position to give you what is the result. But obviously, we would like to grow our U.S. market over there, definitely.

[Operator Instructions] The next question is from the line of [ Rohith Potti ] from [ Marshmallow Capital ].

Sir, from my understanding, NOCIL has more than INR 200 crore in cash on the balance sheet right now. And average, we can comfortably generate more than INR 100 crore, INR 150 crore cash on a yearly basis. Given we have a lot of capacity, which is coming on stream just now and there is no CapEx spend at least for the next couple of years -- 2, 3 years, what will be the usage of this? How will the -- how is the management planning to deploy this cash? Is there a plan of buyback or something?

Gentleman, I think you're mistaken. The balance sheet cash as of March 31 is talking about something of INR 30-odd crores, INR 30 crores, INR 35 crores. It's not INR 200 crores what you have read or you just stated. So it's not that thing. And we have -- to be fair, I think today, in this recovery stage of the economy recovering, you may need it for working capital. So at this stage, we are conservative for working capital portal is. As we go along, as and when new -- the market conditions improve and the new evaluation of our feasibility project gets finalized, we will consider deploying that in future business expansions. As Mr. Deo pointed out some time back that not this year, maybe sometime during next year.

I apologize for my error. My next question is...

Not a problem, not a problem, not a problem. Absolutely, no problem.

Yes. So my next question, I mean, you have mentioned very clearly that we are seeing increased impact from our customers on our current products. But I mean, historically, you have worked with customers on creating new products is what I understand. So is this interest or collaboration with the customers to -- any new products that you don't have in the basket right now that is happening?

Mr. Deo, would you like to answer this? Okay. There have been discussions with companies, tire customers and other customers on development of new molecules or new products. Discussions are going on. Preliminary studies are going on. As and when a suitable opportunity does come in or when we come to a concrete plan, we will announce it.

Understood, sir. And this capital work in progress that we have on our balance sheet right now, this is in relation to the last phase of our expansion, I believe, right?

Yes, yes. It's part of the INR 450 crores expansion plan. And this should be, as Mr. Deo said, it should be commissioned by October '20.

The next question is from the line of Manan Patel from Equirus PMS.

Sir, from what I understand, you had sent sample batches to your export customers from the new capacity. So just wanted to hear some updates on that, if any?

We have been receiving approvals from every customers to whom we have sent samples. And obviously, this being an -- see, basically, what happens in a typical manufacturing setup, you take the material. In case there is a product recall, you will send it back to the vendor. But in case of rubber chemicals, the situation is slightly different because as a constituent, rubber chemicals is less than maybe 5% of the overall tire weight or tire component -- composition. Obviously, the product recall is not regular features here. So that being the case, the pre-commercial approvals or studies are taking a long time. And even though approvals -- there are sometimes in 1 customer, only 1 approval is there, some customer 2 approvals are there or 3 approvals are there. See actually, each customer has its own set of parameters. So we have started getting approvals, and we have started supplying the initial commercial lots or something like that. I think the business should stabilize from this year or from the quarter July to September onwards or slightly later for additional volumes.

Understood, sir. And sir, my next question is on the international customers that you have mentioned that have approved you from -- upgraded you from rather regional than to global. So what kind of, like, scalability we can see from that part of business?

I think again it's little premature to comment on the scalability of the volume or impact. Let's see how it unfolds. And as we go along, we will start communicating as and when some significant development comes out.

Okay, sir. And my last question is...

Intent is there. Intent is very important. That means they are looking at you as a non-Chinese dependable global player. That's very important. That's a huge sequence they are giving you.

Right. And on similar lines, the intent you mentioned, has there been a, like, much stronger intent after especially what has happened in terms of COVID and all? Like, do you see the share from China from 75% to going down to 68% or whatever, in much faster way than what you expect...

I think this is not the right time to talk about it because what happens is before the COVID slowdown, people were operating at a much higher operating rate. And suddenly, the lockdown came and everything came to a standstill. So I think any data, which you are referring for the period April to June or for that matter April to September is not a represented data because it includes some element of old coverage which will be negated out. So I personally feel let's wait for some time. As we get more clarity, we will communicate to you.

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

Sir, I have 2 set of questions. Sir, one is, if I look at our P&L for last 2 years, apart from the gross margins, the fixed and variable cost combined together for last 2 years has been in the region of INR 280 crores to INR 285 crores. So probably FY '19 was to INR 285 crores and FY '20 is INR 282 crores, precisely. And sir, if we see, I think we have done a volume growth of 4%, as you mentioned in your opening remarks. So some portion of the margin compromise would have been because of this reason as some part of our -- this INR 285 crore would be fixed cost, which continues to be incurred by our -- irrespective of the volumes being done by us. So could you just share with us in terms of the broad breakup in terms of INR 285 crores, like how much is fixed and how much is variable? That would be helpful, sir.

I think the broad parameters, I can say is about -- just a second.

And in the absolute rupees crore, that would be very helpful, sir.

I'll give the broad split up. Maybe I would say about 50-50, we can take it for the variable nature and the fixed nature. Though some part of, I would say, utilities also has a fixed component in that. But a broad amount -- broad basis, it is 50-50.

Okay. Sir, a related question to this. Let's say, if we hypothetically assume this to be INR 140 crores for this financial year. With capacity utilization gradually getting improved, let's say, whenever we will reach those 70,000 tonnes of volumes or probably utilizing 100%, how much this fixed cost can go up from here? Like right now, it is INR 140 crores, but what is your...

It's not -- it will not be proportionally going up. It will be tapering out, tapering down. I don't want to quantify the numbers at this point of time. But I think it will not go in this same proportion of what we are talking about.

Okay, okay, okay. And sir, second question is like if we see before 2, 3 years when there was a strict environmental regulations being imposed in China and because of which some of the capacities got closed, we got an opportunity in terms of increasing the realizations and which probably helped us also in terms of getting the extra margin. So sir, if you can just shed some light in terms of how is the situation currently? Because I think some of those capacities, which got closed down, probably have been coming back. And some of them have also expanded the capacity. So if you can just tell us what has been the utilization at the global level in terms of production and sales, that would be helpful, sir?

I think China Sunsine, if I'm not mistaken, they're still going at 100% capacity utilization. That's what we know from their financial statements, which is getting uploaded in the Singapore Stock Exchange. But I'm not sure about Yanggu Huatai or for this matter other Chinese companies. Kumho is not operating at 100%, definitely is operating at maybe around 50%, if I'm not mistaken. And what's happening is in view of the auto slowdown, suddenly, we -- it appears that there is a surplus in availability of capacities of supply. Now as the auto market or the consumption market -- demand market stabilizes or improves post the economic recovery, I think the small players in China will have difficulty. I don't think so they are going to be in business on a long term -- longer term or a medium term. They may -- some of them may have wound up, some of them may be find it difficult to survive because government in -- as we understand, we don't know what is China can change every now on that. But as we understand, they don't seem to be keen to be lenient on pollution parameters henceforth or any more. In fact, chemical plants are not encouraged totally in certain provinces that we understood.

Okay, okay, okay. And sir...

In that case, if you are following the norms as per the thing and if you are able to manage your operations well within the norm opportunity, our technical team has an excellent fantastic networks and event team. So therefore, I see a great opportunity for NOCIL to encash this. And as we go along China, percentage gradually reduce, be it because of the sentiments, be it because of their own internal restrictions now. It remains to be seen how government is serious about, how long they can increment site or sustain this tight policy.

Okay. So just added question to that first point, what you mentioned, like in terms of the fixed amount breakup. So if we see like, would there be any cost rationalization being implemented this financial year because probably this is a year of consolidation in which we probably...

Region you're talking about...

Yes. No, no. What I'm trying to say is sir, let's say, we have a fixed cost of INR 140 crores in terms of broad breakup.

Yes.

So would there be any more cost rationalization measures which we initiated by the management in this financial year, given this year is a year of consolidation in terms of volumes and everything? So...

I think we are adopting a policy of need-based fixed cost in currency rather than standard cost-plus inflation factor. I don't think so we ever in NOCIL ever allow that. This is seen pretty well across the thing. We are very conscious of the cost, which is being incurred for the business. And we take a very, what we call a zero-based budgeting or the need to incur. Only if it is justified, we incur it. Otherwise, we don't incur it.

The next question is from the line of Avishek Datta from Prabhudas Lilladher.

Very good set of numbers in this tough environment, sir. Sir, just wanted to understand now that your capacity is fully commissioned, in this 11% volume growth, has there been a change in the domestic market share post the commissioning? If you can quantify before and after the capacity commissioning.

I think I can give a very specific guidance on the volume parameters for the quarter under review, I think more domestic and exports. In fact, domestic was more than double-digit growth. So that's the point we can share. Export was almost near double-digit growth, though it was not fully than double-digit growth. So that probably helps you this part that increased our domestic capabilities. And we hope that now the normalcy is more or less resumed in the operation front, we believe this trend, hopefully, as we go on, we will try to encash this or consolidate on this strength. Remains to be on how tire companies respond and stuff like that, but let's see.

So FY '20 end, what was our market share in the domestic market?

Maybe -- in the domestic market, I think we may be around 38% or thereabout. 40% is what we normally target, but maybe 38% because of the additional imports came in, that's it.

Okay. And sir, secondly, if I see your H2 numbers, your margins have averaged around 18%. And the pre-ADD -- during ADD, it averaged around 24% or 25% odd. And you used to mention that 3% to 4% is because of ADD. So have we seen like pricing pressure? Or have we deliberately...

No. I think Mr. Deo, at the start of the meeting, he did mention that we have gone in for an aggressive retention of volume share, market share, capture additional volumes wherever possible at the cost of some price thing. The important thing is the price aggression, which came -- again, I just explained a few minutes back to the earlier question. If supply is temporarily surplus in the market situation, then the price pressures come in. And you can also witness the same thing from the analysis of a competitor like China Sunsine. So given that factor when the price pressure is there in a competitive market, you have to respond aggressively to capture -- retain market share or capture volume share. So maybe we were forced to do it, we did it. As we go along, maybe, hopefully, we will -- things should change as the economy picks up.

Okay. And sir, secondly, I know it's a very tough question, like April was a complete washout. So we were already down around 8% for this financial year. So if I have to just ask you, like, for FY '21, what will be your -- like in this tough environment, what kind of volumes you are envisaging this year?

Avishek, it's too premature to talk about it on this front because there are so many contingent events, which is likely to happen. So we are only seeing the positive news coming out slow and steadily one by one. I think let it settle down, let there be a consistency, and then we can talk about numbers much more confidently. Today, I think it's too premature to jump the number and say that this is what we may end of the year or something like that. I think -- and this COVID pandemic was an unprecedented one. So therefore, how each one of the business units aligns itself to the new challenging environment, that's the question. And if we are able to fortunately align itself we will do well definitely as compared to others. So I think let's not jump the gun. The good news is, I can share one other piece of information, I think, to the rest of the people on the call. Then the [ IREC ], there is a recent report from a consultant or [ IREC ] expert, who often says that in a situation like what happened in 2008 of the Lehman Brother crisis and even today, when the economy is degrowing, post the impact of it, the next year is where it -- rebouncing will be much significant. And they have shown some similarities. Maybe some of you who have access to [ IREC ] report, please go through that.

[Operator Instructions] The next question is from the line of Krunal Shah from ENAM Holdings.

Sir, my question is regarding the volume growth of double-digit that you mentioned. For what period did -- is that double-digit domestic volume growth?

This is January to March vis-à-vis October-December.

Okay. So Q-o-Q. And can you share the Y-o-Y number for the same?

Y-o-y number, we just said. It is minus 4% for the year. Mr. Deo said at the start of conference, minus 4% as compared to...

No but domestic and export, y-o-Y.

Domestic minus 3.5% and exports plus 6.5%.

Perfect, sir. Okay. And how has been the raw material price environment during Q4 versus Q3?

Raw material has been steady for Q4 vis-à-vis Q3.

Okay. Got it. And so -- we have a premium to -- say what's the export realization are at the higher value versus domestic, that still continues?

No, no, no. I think it's basically a composition of the product mix. So it's not -- if you are talking about a likewise same commodity, obviously, export pricing will be lower than the domestic pricing. Because in India, we have the basic custom duty at 7.5%. So obviously, that 8% or 9%, 10% factoring will be there.

The next question is from the line of Ashish Kacholia from Lucky Investment. [Operator Instructions] Due to no response, we'll move to the next question, which is from the line of Aditya Khetan from East India Securities.

Sir, questions are, so are we witnessing any decline in imports from China post the India-China tussle?

I think it's too early to comment on it. Let's report -- data come, then we'll probably analyze and get back to you.

Okay. And sir, my second question is, sir, so are you witnessing any capacity addition in the globe?

We have heard reports on 2 players from China who are in the mood to expand, but not certain given the current circumstances, whether they are serious enough to do it or not.

Okay. So can we -- so can we share the name of the competitors?

There was this -- in fact, 2 or 3, if I'm not mistaken. But China Sunsine had some capacity expansion plans. I'm not sure whether he has capitalized commission or not, I'm not sure. It was supposed to be in June, July is what he was announcing, I'm not sure. There is a company called [ Veling ] or someone in China, who is also -- had a plan to go into the market and do it, but I think he was not successful in IPO, along with another company called [ K-max ]. 3 companies were there.

Okay. So sir, can we share the quantum of the jump in the capacity addition post this?

Let's repeat the question, please?

Sir, can you share the -- so the quantum of the capacity addition post these 3 players, if they add the capacity, so how much the capacity addition would come then?

I don't have the details because they included in their scheme of things insoluble sulfur, rubber chemicals, some specialty chemicals as well. So I don't have the split up right now. So maybe as and when I get it, I'll share with SGA.

Okay. Okay. And sir, my last question is, sir, what is the final dividend that has been declared by the company in this quarter?

No. We have already declared an entering around 2.5 in March, and that's the final. That has to be ratified with the -- or approved members of the AGM.

The next question is from the line of Nitin Gandhi from KIFS Trade Capital. [Operator Instructions] The next -- we'll move to the next question. The next question is from the line of [indiscernible]

So my first question was on the CapEx that we've undertaken, the INR 450 crores. And in your presentation, you mentioned an asset turn of about 2x our FY '18 prices. So I just wanted to understand what is the kind of payback period that we had looked at when we started off on this CapEx, just sort of ballpark, if you can share?

I think we have announced in the -- answered this question in the past. We were talking about 3 years from the date of approvals from the customer, that was the original plan. But given the current slowdown, which happened, we gave a guidance about a few months back, it would be -- it could take 4 years or thereabout. What is more important is in this CapEx plan, it is not that we have to look at the financial parameters of justification that this is the best or something like that. It's about how you want to place yourself in the global market in the global space. And that was one of the objectives, and we want to give a message to the customer that or other customers that we are a serious non-Chinese player in rubber chemicals space.

Great, great. So my second question actually is on your export story. So in your presentation, you mentioned that the global market is kind of growing at 3% a year and adding about 35,000 tonnes of new demand every year. So I just wanted to -- I was wondering if we could get like a ballpark range of what kind of volume growth you could be targeting over a 3- to 4-year period just for us to kind of put it in perspective and understand what kind of growth can come from that market?

I would answer little differently. We have given the answers in the past that today, our scheme of -- in our scheme of things, the revenue spread up was 70% local and 30% exports. In the larger scheme of space or the longer -- medium term, we were looking at 60% domestic and 40% exports. I think that answers the question?

And this would be over a 3-year kind of period?

Yes, that's a 3, 4-year time.

Thank you. Ladies and gentlemen, due to time constraints, that was the last question. I now hand the conference over to Mr. S. R. Deo for closing comments.

Thank you very much to all of you for attending this con call. We had very interesting discussions, and questions were very interesting. I must thank each one of you that you actually attended this con call in the evening and could spend 1.5 hours discussing about NOCIL. Let me tell you one thing. As I said, we are pretty optimistic in terms of the business, the way in which that things are going on. It may not be immediate, but in long term, we see that NOCIL has a good prospect in the rubber chemicals business. With this remark, I once again thank all of you and also my colleagues, Mr. Srinivasan and the SGA team. Thank you very much.

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