NOCIL Limited (NOCIL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 and 9 months FY '22 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.

Thanks a lot. Good morning, and a very warm welcome to everyone present on the call. Along with me, I have Mr. P. Srinivasan, our CFO, and SGA, our Investor Relations Advisors. Hope you all have received our investor presentation by now. For those who have not, you can view them on the stock exchanges and company website. I hope you and your loved ones are safe and doing well in the current challenging times. In our yesterday's Board meeting, Board has decided to appoint Mr. Anand V.S. as Deputy Managing Director. I would like to welcome Mr. Anand on the Board of the company. Just to give you a background, Mr. Anand is a chemical engineer with Post Graduate Diploma in management from MDI Gurgaon. Prior to joining NOCIL, Mr. Anand was Managing Director of Chemetall, a BASF company. Mr. Anand was associated with BASF from 1997 till date. He has over 2 decades of diverse experience in chemical industry. He will be joining the company in first week of March. This appointment is in line with our long-term strategy planning for the company. I thought that I need to share this first before I touch upon the Q3 results. Now coming to the Q3 results. We achieved an all-time high revenue of INR 389 crores in Q3 FY '22 on the back of improved realization by 3% and marginal volume growth of 1% compared to the previous quarter. As a result of the global inflationary trend and a sharp rise in commodity prices, the prices of our key raw materials and sales have risen sharply. This unprecedented rise in raw materials, freight and other input costs continue to put pressure on our margins. Our company is committed to improving operational efficiencies on a regular basis and to always keeping costs under control. We continue to review the situation and to cover the higher raw material costs, we have increased our selling prices again in Q4 FY '22. In the current market environment, where input costs have skyrocketed, it is difficult to forecast margins for the future. I would like to reiterate our expectations of more than 10% volume growth and more than 50% revenue growth in FY '22 as compared to FY 2021, would be achieved during FY '22. Coming back to the industry scenario, we believe that Omicron Variant has set up a new wave that has potential to disturb various industries, including tires. The tire industry is relatively better protected from any potential impact of Omicron due to its reliance on stable demand from tire replacement. According to a reputable rating agency, the Indian tire industry is expected to grow at a rate of 13% to 15% in volume for FY '22 and 79% for the period of FY '22 to FY '25. With the increasing acceptance of Indian tires in overseas market, tire exports have increased sharply in the current year, owning to strong demand from destinations such as United States and Europe. The increased outlay in the road sector and infrastructure development augurs well for the tire industry. The tire industry is seeing a revival in CapEx spending towards capacity addition as the demand outlook remains favorable despite the threat of a third wave of pandemic. Over the next 3 years, the company's proposed CapEx is estimated to be more than INR 20,000 crores. Our new capacity addition aligns with several tailwinds in our business, allowing us to grow our revenues and profitability at a faster rate in the coming years. Our presence in the export market has been improving, and we are very optimistic about our export business. The global consumption of rubber data, both natural and Synthetic rubber continues to show signs of an upward trend. The annualized rubber consumption for the annual -- on the annualized basis, based on January to September 2021 period, shows a growth of approximately 9.6% compared to calendar year of 2020, a degrowth of 6%. When we look at our volume growth, our volume growth for calendar year 21% is more than 3x industry volume growth. That's all from my side. Now I would like to hand over to Mr. P. Srinivasan to give you an update on the financial performance. Thank you very much.

Thank you, Mr. Deo. Good morning to everyone. Hope you all are safe and in good health. As Mr. Deo just said that the quarter ending December '21 of Q3 FY '22, we have registered the highest ever quarterly revenues of INR 389 crores. The performance has been -- on a sequential basis has been stable on the profitability front. Now let me run through the brief financial highlights. These volumes for Q3 FY '22 grew by 36%, taking base of Q1 FY '20. Whereas in sequential quarter as compared to the Q2 FY '22, it's about 1% growth. The net revenue from operations for Q3 FY '22 stood at INR 389 crores as against INR 375 crores in Q2 FY '22, a sequential growth of 4%. The sales growth has been driven by a marginal increase in sales volume and the price hikes taken during the quarter more specifically for the stock market, which we announced in the previous investor call. Net revenue for the 9 months FY '22 stood at INR 1,109 crores as against INR 603 crores in 9 months FY '21, a growth of 80-odd percent, 84% to be precise. Coming to the operating EBITDA -- the operating EBITDA for Q3 FY '22 stood at INR 50 crores as against INR 49 crores for sequential growth of 1%. For 9 months FY '22, it is about INR 172 crores as against INR 77 crores in the corresponding 9 months period of FY '21. EBITDA margins for the quarter stood at 13% for Q3 FY '22 as compared to 13% in Q2 FY '22. For 9 months, this is at 16% as against 13% in the last year's 9 months period. As stated in the previous call and EBITDA for this quarter was under pressure, primarily driven by a surge -- sudden surge in input cost, energy cost, et cetera. The profitability aspects profit before tax for Q3 FY '22 stood at INR 40 crores as compared to INR 41 crores Q2 FY '22. PPT for 9 months, April to December '21 stood at INR 144 crores as against INR 62 crores for 9 months FY '21. On the profit after tax parameters, the December quarter Q3 FY '22 stood at INR 30 crores as compared to INR 31 crores in the previous quarter. The profit after tax for 9 months stood at INR 107 crores as against INR 50 crores for the 9 months FY '21. With this, we would like to open the floor for question and answers.

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

So I have 2 questions. So one to Mr. Srinivasan and then to Mr. Deo. So sir, in 3Q FY '22 when we see our investor presentation on indexation of volumes, we were at 149 in Q3 FY '21, correct, if I see your investor presentation correctly. So at 149, we were in Q4 FY '21, my mistake, sir. And currently, we are at 136. So when we compare this indexation of 149 to 136, our conversion cost in Q4 FY '21 was INR 92 crores. But with the drop in volumes in Q3 FY '22, our conversion cost has gone up to 108. So if you can help us explain where the conversion cost has gone up even with the fall in volumes, some understanding on the same, sir?

Conversion cost, I think post value addition.

Yes. So post value addition. Correct?

Okay. You were saying in Q4 FY '21 is about INR 92 crores, and now it is.

INR 108 crores.

INR 108 crores, yes. I think basically, there are 2 parameters. When you -- 1 is the surge in the freight costs, which is evident in the ocean freight or maritime freight cost, which has won significantly. This is also compensated by appropriate price rise in the selling prices. Secondly, we also see the energy cost going up significantly because of the way energy prices have moved in the last 2, 3 months. So these are the combination of 2 factors, which has enables -- taken the cost for about INR 15 crores, INR 16 crores for the quarter.

Correct. So if you can give us some broad breakup in terms of how much the power cost has gone up from Q4 FY '21 to 3Q FY '22? And how has been the situation currently?

I think Nirav can I come in, I think I can give you a very broad view of the...

I want a broad understanding only, sir, not specific numbers.

Okay. So basically, I think this is all published information on which I would like to share it with you. First thing, if you really look at the cost of coal in April 2021, it was about INR 5,000 a tonne, it touched as high as INR 15,000 to INR 16,000 a tonne with availability becoming an issue. And currently, it hovers at about INR 11,000 to INR 12,000 a tonne. So that's the way the coal cost has gone up. If you really look at the cost of natural gas, which at the beginning of the year was about INR 32 to INR 33 per standard cubic meter, it has gone to INR 66. So I think this will explain the cost of energy going up for practically everybody. It's not for NOCIL.

But I think you have to see from a revenue perspective, the revenue has also correspondingly gone up. If you look at in absolute terms, in terms of the volume parameters as well as the revenue parameters, it is compensated by the appropriate price hike in the revenue parameters. So despite the conversion costs going up, what we are seeing is this has also shown an increasing trend.

Got it. Because then probably. Our volumes would have come down. So on a per kg basis, if you see those sort of increases we have seen because of this increase in the power and the freight cost. So I was just trying to understand that where this cost has gone up in the power. So what Mr. Deo has rightly mentioned that even the natural gas has also played a part in terms of increasing the cost of production. So I was trying to understand that aspect, sir. And sir, second question to Mr. Deo, sir, in Slide #18 -- on Slide #18, you have mentioned that our R&D capabilities have led to the significant reduction in the cost of production. And if you can explain this with respect to the product and the process innovation, what we have been doing at NOCIL. And if I can just add one more point. Even if we see in last decade, even our intensity of R&D expenditures have gone up. So like from INR 2 crores, INR 3 crores in 2009, 2010 to INR 5 crores, INR 6 crores in 2021. So if you can relate this aspect with the statement made on the Slide #18, that would be helpful.

Okay. Nirav, I think I would not like to share a very specific information in terms of what technological changes, which we have done in the processes. But I can give you a broad guideline -- in our research center, there is 1 group which continuously keeps on looking at the process efficiencies. The process efficiencies include 2 or 3 aspects. First thing, it includes the consumption of raw material and how we can keep on optimizing the consumption of raw material. The second aspect, which is being seen is can we keep on adding creeping capacities in the same hardware by making some minor process changes. And this yields a lot of significant reduction in the cost of product share, okay? And this is what we call it as a continual improvement in technology in terms of products and processes. Of course, there is 1 more aspect which more is in terms of marketing side, that is the quality of the product because as far as we are concerned since we are in a global market, we continuously keep on benchmarking our quality and our research center keeps on looking at how we can be #1 in quality and keep on changing the process changes. So these are the aspects which we handle in our R&D. Obviously, what you are saying is right. Our R&D expenses have gone up because when we start building up these capacities, we have to bring in hardware, we have to bring in software, and all these things will continue to increase the R&D expenses. But of course, I think those expenses as compared to what benefits we get in terms of our business are much, much higher.

Correct, correct. And sir, if we see going forward, because these expenditures are -- will go up based on the commentary, what you give. So would it be more towards developing more products or adding more products to our product basket of '23, or would it be further more towards reducing our cost of production? So how our future R&D expenditures would look like?

Nirav, I think it will be multifold. It will not be in 1 singular direction. So as I told you, these efforts in terms of improving the capabilities in terms of significant reductions in cost. That is a continuous process and it will continue to happen. As far as the development of new products and the development of new processes also an extremely high emphasis in terms of effluent treatment and actually developing green technology that will continue, but it's a long-term perspective, okay. So both the things are being handed simultaneously in our research center.

The next question is from the line of Shivan MS, from JHP Securities.

Sir, am I audible?

Yes, yes please.

Yes, sir. Sir, a couple of questions. One is you mentioned about the improved traction in the exports market. So if you could give some color on the percentage of exports that we've done in this quarter compared to what we were doing pre-COVID, and how have the realizations been there?

Okay. I'll just give you that. Exports, we have improved from a level of 100 index. We -- I believe we are already in the region of 150, 160 thereabout. For indexation. Secondly, on the pricing parameters, I think that is very evident. One need not do any simple mathematics. If we at 149 -- we were at 149 -- what is that index volume of 149, which is what Nirav was referring in the previous question, Q4 149 index was shown as a revenue of INR 270 crore or INR 320 crores thereabout. And today, at 136 or thereabout, it is already 389. So it answers -- speaks for itself the price corrections have happened. And it has happened not only in Indian market, even in the international market. So that, I think we have been giving you the guidance all along that the market conditions have changed. The Chinese competition has also started correcting prices from last year onwards, say, end of December '20 or early '21 onwards. So that action continues to be in place, and we are also changing in line with those parameters.

Sir, my question on the realization was as compared to what we sell in the domestic market, are they better?

These are all international CI based prices, obviously, it will be international equilibrium. We cannot not have a disparity in that -- in 1 market, you get better prices, in other markets you get a lower price, no. I think it's more or less constant pricing for the same product, adjusted for duties.

Okay, sir. Got it. And sir, coming back to the domestic market, sir, could you give some idea on how the imports into India been and our market share over the last few quarters?

42%.

See, basically, before Pre-COVID, we -- our market share dropped down to as low as 35%. From 35%, we have already improved to 42%, 43% today.

Okay. Got it. Got it. And sir, regarding the increase in the energy prices. So are we looking at some CapEx on that front to have in-house power or something of that sort to reduce?

I think Mr. Deo will answer that.

In fact, I think we have already taken a lot of initiatives in terms of having captive power. We already have power generation through steam turbine at the Dahej. We also have, I would say, a reasonably good amount of power generation at Dahej through solar. And of course, this we did it much ahead of this power crisis or the power problem. And this has been the strategy of the company. And as we start growing in terms of manufacturing, this strategy would continue.

The next question is from the line of Rohit Nagraj from Emkay Global.

Sir, the first question is on the demand environment. Given that there is a high input cost raw material, which is coming in, -- and in the recent past, also, we've seen that crude oil prices have now jumped more than $90. So given the historical evidence, maybe sometimes in 2018, when the crude prices were closer to $80, $85 -- how does the demand usually shapes up? Is there any impact on the demand side. And again, given the historical perspective, do we have the ability to continuously pass on the increase in input cost with a lag effect?

Okay. I think I would split your question in 2 parts. First thing is you are talking of demand. Now let me tell you 1 thing, if you really look at the core industries like automobile and tire industry, which is all related, except for last 8 or 9 months when there is a crisis of chips availability. This continues to grow in line with GDP of the country. And this I will see -- you will see it as a historical data. So as far as the demand is concerned, if FY '22, '23 GDP growth is expected to be somewhere close to 8.6% as estimated by our honorable finance minister. We are very certain that the growth of tire industry would be higher than that, and of course, the rubber chemicals. So demand is basically actually the economic indicators of the country. That is one thing. Second thing, as far as the crude oil price is going up is a concern, yes, that's a concern because the overall energy costs are going up. The crude oil prices are going up. Whether we will be able to pass on these inputs to our customers, I would say we are optimistic. We cannot give a definitive line of action on this -- but looking at the markets, looking at the China Plus strategy and various other economic and political factors, we feel that we should be in a position to pass on the prices to our customers.

Rohit, I would like to add here, if you see the data of last 1 year, in the last 4 quarters and especially from the international competition like China, we have seen China has been correcting its prices in proportionate to increasing raw material costs. So even they have also feeling the pinch and they are also responding appropriately.

Right, sir. Got it. That's very helpful. Sir, the second question is on the utilization front. Now Deo sir mentioned that tire demand is going to be higher than the GDP growth rate, which seems to signify that volume growth will continue. And as for our continuous guidance that by September '23, we'll be able to utilize the expanded capacity or other full capacity optimally. Any further thoughts on the CapEx plan -- and generally again a coronary to this is generally, how much time does it take to go in for a brownfield expansion? Because given that the lead time could be 12 to maybe 18 months, we may have to start off with the at least initial part of the CapEx process in the next few months. So just your thoughts on this?

Okay. I think first and foremost thing, our earlier guidance that we would be able to achieve our capacity utilization by September 23. We are pretty hopeful that we should be able to achieve the target. Okay. So that guidance remains constant. Now as far as the CapEx is concerned -- okay. I think, of course, we continue to plan the CapEx. But as I was answering, Nirav, we also have a huge research capacity where we start looking at creeping capacity increases through debottlenecking. These are small CapExes, but it gives a lot of returns. So simultaneously, we'll continue to plan a long-term CapEx. And once it is consolidated approval by the Board, we will share it with you. But as day-to-day work, we continue to work with our research center and continue to increase the creeping capacity if we find that a particular product, the demand is more than what we have estimated. So it's both ways we are working in it. But the objective is very clear, okay? The objective is we would like to continue to be a strong player in rubber chemicals market.

I'd like to add that we would -- we have still an unfinished agenda in the rubber chemical space, and we believe we have enough space to grow there.

Right, sir, got it. Sir, just 1 small clarification on number. Srini sir, what would be the cash on the books by the end of 9 months FY '22?

I don't think so we normally give that in December '21. We have given -- already the investor presentation talks about what is there in September.

The next question is from the line of Dhaval Shah from Svan investment.

Sir, a couple of questions. Firstly, by the time we reach our full utilizations on the capacity side, what sort of gross margin improvement should we see provided and assuming we are able to pass on almost everything on the raw material inflation. So that's my first question. And on the second question, in terms of -- the -- how is the business trajectory you see,, how is the recovery on the volume side happening over the next 1 to 2 quarters?

Dhaval, we would like to answer 2 folds. We have been giving guidance that ideally in a stable market regime where the input price on the lower end and the increased crude prices was on the higher end. We were having a 50% target on value addition margin because the levels -- level playing field was at the lower end. But when your input cost goes up significantly and if you see in the last 1 year, it has gone up by almost 60% to 75%. You cannot expect a value addition percentage to be maintained at 50%. So therefore, we have to necessarily look at protecting the value addition margins per kg is what we normally look at. And we can reasonably confidently say that we are in the best place. We are continuing to maintain the margins even today. So to that extent, we can assure you that we are maintaining the same level of absolute per KG margin, what was being reported in the good old days also. That's number one. Coming to the second part, as far as the volume growth is concerned, Mr. Deo just alluded to that when the GDP is expected to grow at 8.5% to 9% growth per annum and with the tire expansions in place, with -- the credit rating agency is talking about a good tire demand in the next few years. We don't see any harm in placing additional volumes, and we believe our volume growth also will be significant.

Got it. Got it. And sir, just 1 more question. Sir, when we think about the next leg of expansion, will our mix of product be same or our -- or it will be more towards specialty or high-margin products than what the current basket is?

I think we would like to clarify here. Whenever, we are taking on a specialty application, it depends on the market, how it unfolds. So you cannot say that it has to go sequentially. It has to have a specific application and the need for application. So whenever such a need arises, we will definitely participate in that. So obviously, we would endeavor to do more of specialty chemicals that's anyone's dream. But market conditions also needs to be studied. And depending on the market conditions, we'll decide the mix.

So to go in differently, say, for example, you're expanding by 100 tonne, for example, so what is the minimum of the basic -- the PX13 and the basic chemical we need to have at any time in your capacity?

I think Dhaval, I would prefer to answer in a different way. When the rubber consumption goes up significantly, along with the rubber consumption, your rubber chemicals -- conventional rubber chemicals also grows sequentially, exactly the same pattern. So for example, if the rubber consumption goes up from 30 million tonnes to say, 35 million tonnes, which is about 15% -- 15.5% growth. Same means PILFLEX 13 demand also goes up by 15.5%. There is no direct correlation there or the conventional rubber chemicals, PILFLEX 13, TDQ, such products. When you talk about specialty applications, these are all specialty applications. So depending on where the applications, where the customer and depending on their needs, the demand will pick up. So I hope we have clarified to that extent.

Okay. So one step -- so you can -- so there would be an element of eligibility so you can make more specialty when the demand arises?

We -- in our setup, we have dedicated plans. We don't have flexibility in the same plan to have a specialty in a conventional thing. I think that is not a viable solution.

The next question is from the line of Dhimant Shah from OneUp Finance.

Again, delving on the previous question as my previous participant. On the expansion, can you just throw some light as to why would we not have fructified? Is it because by this time, you have already, if I understood correctly so far, we have already seeded most of our products, and now we cover all the categories, be it accelerator or specialty or vulcanizers, antioxidants, everything. And possibly, we have got acceptance in the export markets, where you alluded that possibly the growth is going to be very wide range. Then what are the -- is it that we will still take only debottlenecking and not the minimum economic size of jump and kind of again expand maybe by 25%, 30%, 40% to whatever extent our cash flows do a lot.

I think I have explained this to the earlier question. There are always 2 strategies because one must understand that what you have rightly said is a minimum economic size of the plant. Now when you get into minimum economic size of the plant, you also have to look at the utilization, the return on investments, okay. And it takes a longer time. Whereas if you continue to do a debottlenecking, and debottlenecking also has a limit, but if you continue to do it, then I think on a very small CapEx, your returns are very high. So what we do is we ad hoc both the strategies. So we continue to do debottlenecking. And since we have put the latest plant, we see some scope and elbow room in terms of debottlenecking those plants. But obviously, we are also planning a long-term CapEx. And as I said, as the -- our CapEx ideas looking at the market -- because currently, you must also understand the markets are very, very volatile, both in terms of supply chain, also demand. And of course, we will continue to work on that. We are working on that. And at an appropriate time, we will share the CapEx ideas with you.

Great. Just let me rephrase that, sir. Sorry for being persistent. Suppose these supply chain and the high oil prices and raw material prices, I mean, basically, the volatility does come down or recedes significantly as of today, then what is the capacity that you would possibly envisage?

I think I would not be able to answer this question right now because we will continue to work on that. And at an appropriate time, when we have the right numbers and the right investment propositions, we will definitely share it with you.

Second question is your ability to pass on the price hike, if you take the export market vis-a-vis the domestic market, where do you think you have more ease of pass on in terms of the ability to convince the end customer?

Dhimant, I think that question has been answered to the previous participant. Basically, what we are trying to say, this is an international parity prices. And when you have a lead market producer from China participating with 75% market share, he will definitely dictate the price terms on conventional rubber chemicals. And if you are able to match those prices and still make money and make your protection, I think we are reasonably doing a good job. And we believe at all the markets, whether it is export or domestic, it is always parity prices, obviously, adjusted for duties in respect to the consumer markets, but we have to supply before duty at what prices. So that's there, and we have to match it. And we have been matching that only. So there is nothing extra we have to put an effort to that.

And lastly, on the working capital cycle, can you just give a brief comment? How do you see that come by?

I think we have given a clarification to the investors at large in the past previous calls also. Working capital cycle for our business is typically 20% to 25% of your net revenue. So in other words, if my revenue goes up by say INR 100 crores, you can expect INR 20 crores getting into working capital cycle, assuming we are not taking any bank finance. That is a business requirement.

The next question is from the line of Sanjaya Satapathy from Ampersand Capital.

Sir, when I look at the volume data that you have given in terms of -- in your chart, in quarter 3 about 6% decline is there on a year-on-year basis. And the guidance that you have given about 10% growth implies some 30% kind of decline in quarter 4. So how do you really kind of explain this?

I think we did not -- we said it will be 10% plus. We never said it is 10% flat.

So sir, basically the...

We said it will be 10% plus. We don't want to specify the numbers. That's for you to guestimate, but we said it is 10% plus.

Okay. So basically, it has no meaning in the sense that we cannot really guess what is going on.

That's -- I mean we don't want to give specific numbers for obvious reasons. So -- but we have given an indicative trend where we are heading for this year. That's all we said.

And the decline that we are seeing in -- we saw in quarter 3, is there a declining trend, which is going to persist or we are going to see improvement in volume going forward?

See, basically, if you recollect at the beginning of quarter 3, we did announce that we started with this quarter 3 situation with a high -- abnormally high input cost and energy cost. So obviously, certain contracts, which we have priced at old prices, we couldn't recover the pricing. But on the spot market, we could pass on. So some customers who could not afford that did not take those volumes. So that's why we consciously participated in volumes where we were able to pass on. In certain volumes, we consciously took a break. So that is one part. Going forward in Q4, we don't see much of a change in volume paradigm.

So that contract cancellation, et cetera, which affected quarter 3. So those things are behind us and it will be back to normal business and normal tire -- sorry, rubber chemical demand outlook that will decide the volumes....

Yes, yes. I think we also clarified in investor call presentation, that presentation, we said EBITDA margins got affected in quarter 3. We gave the reason specifically for quarter 3.

Yes. It is because of this guidance that -- which is really confusing because if it is so off the mark, then probably it would be better for us not to get any guidance than something, which is of little help because 30% kind of a decline is like really huge. And as I said, it would better be explained that we put in the guidance number, particularly when you are talking about 9 months or over and we were talking about that number of...

Where is this 30% decline you are talking about? We have never given a 30% decline. I don't know where -- which one you're referring to.

You have given a guidance for the full year of 10%.

I said we have given a guidance of 10% plus over previous year. We never said it is 10% flat.

10% over previous year.

Okay. I would argue to really look at this guidance number because it has to be a little bit more accurate of what is going to happen than being very wide. But I don't want to really lever on this topic little more. What I have understood from you, you have given this comparison with GDP, et cetera, et cetera, to estimate the domestic demand which, if I understand you correctly, that if India's GDP is growing at 10% next year, then your demand could grow 10%. Is that correct? That is what you said?

That is perfect.

Yes. Correct.

And how about export market, how do you kind of estimate what will go into -- what will happen to the export outlook? How will that grow?

It will go as for the international demand. And as we have announced in the past, we have relationship expanding. And customers, international customers are suggested to NOCIL to expand their service point to various locations, not restrict to one continent. They want global skill. So we continue to do that, and we are in that direction only, in the consolidation phase only.

So my question is that will exports continue to grow at a faster rate than in domestic or it will be something similar?

I think we have already given you guidance in the past that today, our export basket out of total revenue is 33%, 35%. Long term, we are looking at 40% thereabout. So we are in that proceeding towards that journey.

Understood. Understood. And lastly, my question is that will -- when -- because we saw an announcement that you have got a new Deputy Managing Director. And it looks like some management change. And you have also mentioned that you will continue to be in Rubber Chemicals, but will you be able to move beyond automotive sector in a meaningful way?

Mr. Deo will address that.

See, basically, as you see, I think our core competence continues to be chemicals. And we are not only in automotive sector, we also have a very large business in latex sector, okay, which are entirely different sectors. So I think this is something which will continue to happen, okay? And that is going to be the growth engine of the company. You must also understand that we have a very large research center, and we also understand chemistry. And chemistry has nothing to do with rubber chemicals, it's chemistry. So we also, in future, could look at various avenues of exploiting our chemistry knowledge and our market knowledge, maybe to look at different products, but it's true preliminary to share with you. So our core competence on one side in terms of market is obviously the rubber chemicals. But on the other side, the core competence is in terms of developing new products and these new products could be anything, okay. So we are looking at the complete basket and our strength to grow the business.

Understood. So essentially, what I wanted to get an understanding is that how the addressable market of NOCIL can expand meaningfully? And we have seen such a massive increase that has happened into your sister concern, that is Navin Fluorine, so I am just trying to get a sense that how the long-term path that will be tackled by NOCIL?

I cannot comment on what's happening in Navin Fluorine because I think that's a very different business. But I can tell you one thing, if you really see from last 5, 6 years journey of NOCIL, NOCIL administered INR 450 crores CapEx to growing Rubber Chemicals business. If you really look at our volume increases, because of these investments, our volumes have been continuously increasing. If you look at China plus strategies, our exports have been growing. And as we have been saying that this is the business which grows with GDP all over the world. So we see that we have sufficient room to continue to grow in this business, okay. Obviously, we will continue to grow because that is a business which we know from last 40 years. But besides that, we will also look at various avenues where we can work with our own strength, okay, maybe for different products in different markets.

Just to add a bit, Navin Fluorine is no longer a part of the AMG Group. The group got -- this company got separated in -- the group got split in 2016 thereabout. So we are no longer connected with them in any manner.

[Operator Instructions] The next question is from the line of Rahul Jain from Credence Wealth.

Sir, given the rated capacity of 110,000, we should be currently at around 70%, 71% utilization. Is that a correct number?

Yes, you can say that, around 70%.

Because quarter 2 also we were around 70%. And maybe this quarter, it will be higher at around 70%, 71%. Is my assessment correct?

Yes, your assessment is correct.

Sir, you've earlier replied with regards to the guidance of 100% transition by September 23rd, which is about 3 quarters I feel. So the way I'm trying to work out the calculations of the direction, the ballpark figure, which I arrive it is probably in the next 3 quarters to reach that 100% utilization. And I'm assuming a 100% utilization, we are talking about the entire utilization of almost 110,000. So we are talking about roughly 9% to 10% volume growth or otherwise if it is okay the total volume growth at the summer -- at the end of September, your volume production should be around 35%, 40% higher than what it is today. Is my understanding correct?

We are talking about 7 quarters from now. We are not talking about 3 quarters. We are talking about September '23. So that's the first correction we would like to clarify.

Okay. Okay. Sorry, I missed the quote there. I'm so sorry about this.

No, no, not an issue. I just wanted to give you a clarification. This is January '22. We are talking about September '23. So we have over 21 months away thereabout. So it's about 7 quarters.

I'm so sorry about it.

No, not an issue, not an issue at all, no problem.

Somewhere I made a mistake of the year. That's wrong on my part. And sir, with regards to the demand side on the export, are we adding still some new customers or within the customer set, are we getting some increased contracts, the size of the business is growing within the existing customer. How is the export market panning out now, sir, for you?

It's a combination of both. We are expanding in existing customers, and we are also adding new customers.

Next question is from the line of Nitesh Dhoot from Prabhudas Lilladher.

So just wanted to know what percentage of our total 110,000 MTPA capacity is for manufacturing intermediates, that is for captive usage?

I think we have already been given that, it's about 1/3.

Okay. Okay. Okay. So sir, my next question is, basically, I'm sure even Chinese players are aware that customers are increasingly looking to diversify their sourcing to vendors outside of China, especially after the pandemic. So then why are not Chinese players like China Sunsine adding so much capacity. So they have added around -- I mean they are adding around 50% of their FY '20 base with some capacities already commissioned and the balance to be done over the next couple of years. So how should one view this? Is it there -- is it like there's some kind of an industry consolidation or any existing players shutting down? Or is it like the demand prospects are anticipated to improve very significantly because if you see global rubber consumption, it should be growing at only around 2%, 3% per annum. So your thoughts on this piece.

I think when we conceive the expansion plan, we had given our clarification in the past. Basically, when we conceive the expansion plan, we were conscious of the fact that the demand is going to be expanded and China will continue to expand there, and we have factored China participating as high as 70%. So we are not put out by there, and it is part of that strategy only. So when you anticipate the competitor is going to expand, then your -- the plans are in place. So we created a plan assuming the competition is also going to expand. What we are trying to say is that what is the incremental demand, our supply, additional supplies, accounting for how much incremental demand or how much market share, so we calculated something like 15%. So we were not even looking at big numbers. So that being the case, we are reasonably confident of getting all those numbers without any difficulty. And we believe that's the reason Mr. Deo has been saying that we still have unfinished agenda in rubber chemicals expansion.

China Sunsine is only accelerator.

And second thing is the competitor, which you are referring to, these are players who are in a specific field of rubber chemicals, not in the entire spectrum of rubber chemicals. Say for example China Sunsine is primarily an accelerator player. He is not in the complete antioxidant business or in a significant manner, whereas NOCIL is coming in as a complete integrated complex. We're one-stop shop to the entire customers.

Sure. That's helpful. So one final question, sir. So what is the current status on the antidumping duties? I mean, are we enjoying any kind of protection currently? And anything expected in the near future? And any quantifiable benefits from the same?

So I think we already announced in the past that PILFLEX 13, we got an anti-dumping recommendation from the DGTR. But unfortunately, the central government did not accept the recommendation. So we did not get any benefit out of that. Secondly, we have 3 other products which are under investigation with DGTR, which the final results are awaited in the next shortly, maybe in a quarter or thereabout. So as of now, no benefits accrued to the financials or business.

All right. All right. So one final thing, if I may. So what will be the maintenance CapEx going forward, so for FY '23, '24, what kind of maintenance CapEx numbers should be considered?

Basically, it is not more than INR 15 crores.

The next question is from the line of Dhaval Shah from Svan Investments.

Yes. Sorry, I was on mute. Yes. Sir, 1 follow-up question on the CapEx. In my interaction with few companies, they mentioned that they are currently watching this -- the Winter Olympics and how China's policy towards pollution pans out over the next 3, 4 months. And then they would think of get some expansion plan. So are we also thinking on the similar line and then for our expansion?

It is not appropriate Dhaval to share what we are thinking and how do we share because as this is a public forum. So please give us some -- respect some confidentiality, please.

The next question is from the line of Ravi Mehta from Deep Financial.

Just one small question on the Specialty Chemicals side. So I believe the mix has improved over the years from 12% to 25% in our sales. What I understand this is more of non-tire application, as you also shared a while ago in the call. So are these applications -- I wanted to know where are we in this market? Are we as strong as we are in the tire market? Or we see a lot of scope to grow this part of the business?

To clarify, one, it is not only non-tire application. It is a specified high-performance tire application as well as certain non-tire sectors latest application. It's a combination of 2, 3 segments in Specialty Chemicals. In the global scheme of things, this particular product components overall Rubber Chemicals is not even 10%, whereas we are already in the region of 25% plus. So just to give a perspective, we are much ahead of the global standards of parameters. So -- and we intend to maintain this percentage, if not improve. So if we can -- if there is a scope to improve further, we will definitely go for it.

Sure. That's helpful. And also 1 follow-up to this is with a lot of innovation in the tires itself, kind of heavy-duty tires and stuff like that, so are these special chemicals, what you make, does it has higher application in the same tires? Or how is the trend, if you can highlight on this, just to get a sense on how this piece is moving?

Deo will answer that.

See, I can only say one thing. Yes, I think what you are saying is tire industry is going through a transformation in terms of EVs and the requirement of EVs of future. Now whether the specialty application will increase or not, we still need to watch. And I think as the EV markets -- EV tire market starts growing, we will be able to comment on that. But one thing I can say that whether it's a traditional tires or whether it is the new EV tires with new dimensions, all the tires will require rubber chemicals, okay. So rubber chemicals market is completely secured. Whether the specialty markets will grow, I think maybe as this segment starts growing, we will be able to comment only when the segment grows.

The next question is from the line of Bhargav Buddhadev from Kotak.

My first question is that given this almost an inflationary situation, are you seeing any Chinese destocking at your customer end that they have reduced the inventory significantly?

Yes, can you repeat the question? We were not able to clearly follow.

Sir, given that realizations have increased in high double digits this year, have you seen inventory levels of your customers reduce because of this high pricing scenario? So do you mean your customers who have maintained...

We don't have right now exactly because no customer will share exactly their internal details. But we have to judge, and we judge based on interactions, we try to take a call.

Okay, understood. Secondly, is it possible to share within exports how much is the share from the U.S. market? And how much has that business grown in the last couple of years?

I think you can just say from an index parameters, U.S. has grown from 100, which started -- if you say 100, it has already touched 300.

This 100 was 2 years back?

Three years ago, 2018, '19, we started with 100 maybe '19 thereabout, and we are already at 300.

Ladies and gentlemen, due to time constraint, we take that as the last question. I now hand the conference over to the management for their closing comments. Over to you, sir.

I take this opportunity to thank everyone for joining the call. I hope we have been able to address all your queries. For any further information, kindly get in touch with Mr. Srinivasan, myself or our strategic growth adviser or our Investor Relations adviser. Request all of you to be safe under the given circumstances. Enjoy your weekend. Thank you very much.

Thank you.

Thank you. Ladies and gentlemen, on behalf of NOCIL Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.