PCBL Chemical Limited (PCBL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to PCBL Chemical Limited Q2 FY '26 Earnings Conference Call hosted by ICICI Securities Limited. [Operator Instructions]. I now hand the conference over to Sanjesh Jain from ICICI Securities. Thank you, and over to you, sir.

Thanks, Danish. Good evening, everyone. First of all, happy Dhanteras and happy Diwali to everyone, and thanks for joining on to PCBL Chemicals Limited Q2 and H1 FY '26 Earnings Conference Call. We have PCBL Chemical Management with us on call represented by Mr. Kaushik Roy, Managing Director; Mr. Suresh Kalra, CEO, Aquapharm Chemical; Mr. Raj Gupta, CFO; Mr. Anand Kumar, Group Head, Investor Relations; Mr. Pankaj Kedia, ED, Investor Relations. I would like to invite Mr. Kaushik Roy to initiate the call with his opening remarks, post which we will have a Q&A session. Over to you, sir.

Good afternoon, everyone, and thank you for joining us for the Q2 FY '25 Earnings Conference Call of PCBL Chemicals Limited. It's a pleasure to connect with all of you once again as we share the highlights of our performance for the quarter and discuss key business developments. Our results and investor presentation have been uploaded on the stock exchanges and the company is site for your reference. In Q2 FY '26, PCBL Chemicals reported healthy growth in Carbon Black sales volume on both year-on-year basis as well as quarter-on-quarter basis. And improved capacity utilization across 3 product lines. However, the margins are impacted by continued pricing pressure in a relatively softer market environment, we believe that this phase has largely bottomed out and expect a steady recovery in profitability in coming quarters. This quarter, we achieved highest ever power generation and sales volume. Our working capital cycle improved by 12 days in H1 FY '26, releasing around INR 240 crores of cash and overall cash generation remains healthy, with the reduction in gross rate of over INR 300 crores since March 2025. Our Specialty and Solutions segment under Aquapharm witnessed a gross margin improvement by 10% on the back of a better product mix. Margins in Carbon Black during the quarter were influenced by a challenging lower environment following the imposition of high input tariff by United States. We have also noticed customers being quite cautious in their purchasing patterns, reflecting broader economic uncertainties and tighter inventory position across supply chains. Currently, our Carbon Black exports to U.S. accounts for around 5% of total volumes. And with the 50% tariff in place, the business remains constrained. However, as U.S. continues to be import-dependent for Carbon Black, we expect both volume and margin to recover once the situation stabilizes. Meanwhile, we are proactively taking steps to mitigate the impact and strategically rebalance our export strategy. Given this backdrop in this environment, we have identified specific areas where operations can be improved and efficiencies can be enhanced. Dedicated teams are already working and actively implementing initiatives across functions to optimize process, manage costs and strengthen overall competitiveness. These focused efforts are helping us stay resilient and well positioned for recovery. With the recent GST cut in India, we are already seeing signs of recovery in auto sector. Demand is picking up, and we expect this growth to sustain Domestic tire demand is projected to grow at 6% to 8% in FY '26, led by stronger replacement demand in the second half. Now coming to global scenario, major interest as companies have announced 15 business went to expand production capacity or ever projects planned through 2029. Just for instance, Goodyear is investing around $865 million. Hankook is committing $1.6 billion, Bridgestone is bringing in about $610 million. And Michelin plans to invest nearly $540 million, and some other tire companies together are investing approximately $4 billion. This reflects long-term optimism in the sector despite current demand softness. While this quarter reflected certain short-term challenges, including the impact of U.S. tariffs, temporary deferment of purchases following the GST rate cut and subdued overall economic sentiment, the long-term Carbon Black demand supply dynamics of the industry remains strong. With improving market conditions and expected pickup in demand, we are entering a phase of renewed growth momentum. In line with this, PCBL Chemicals is poised for an exciting period ahead with several strategic projects scheduled to come onstream in phases over the next 18 months, positioning us for sustained growth and long-term value creation. Let me share some of these projects with you. Specialty black line dedicated for superconductive grades of 1,000 metric ton per annum capacity will be commissioned in Palej, Gujarat, by this month end, and commercial production will begin from 2025 November, which is next month. Brownfield expansion of 90,000 tonnes rubber line in Tamilnadu is under commissioning stage and likely to be operational in the current quarter itself. Number three, commissioning of specialty black line, 20,000 metric ton power annum in Mundra is likely to be preponed to March '26. On the battery chemicals side, Nanovace's pilot plant project is on track, process patent for the nano-silicon for battery applications, already granted in U.S. and likely to be received in Japan, South Korea and Europe over the next 2 quarters. The company has also applied for 2 projects patents, namely carbon silicon composites and battery-grade graphic graphite from bio-sources. Acetylene Black plant of 4,000 metric ton per annum is expected to be commissioned over the next 18 months. We are on track to achieve our targeted capacity of over 1 million tonnes of Carbon Black capacity in next couple of years. The global conductive carbon black market continues to grow steadily, supported by rising electrification and the expanding energy transition worldwide. Demand is being driven by multiple sectors, including electronics, energy storage, EVs and industrial applications. Three key megatrends, the global shift to renewable energy, increasing electrification and rapid expansion of data centers. are reshaping the need for advanced conductive materials. Asia Pacific remains the largest production and consumption hub while the U.S., the United States and Europe continue to be strong, high-value markets. PCBL Chemical's expansion into superconductive great Carbon Black will position us to tap into this growing global market and cater to next-generation high-performance applications. We are expanding our capabilities by our customers to offerings and continued innovation, particularly in high-performance applications like battery chemicals and energy storage. We are the first company globally with all 3 advanced technologies, namely Super conductive Carbon Blacks, Nano-silicon and Acetylene Black catering to conductive solutions and next-generation battery applications. In our Specialty Blacks business, we maintained growth despite current market challenges, demonstrating strength of our supply chain and customer solution while continuing to expand product coverage and applications. We have strengthened our sales force, warehouses, technical support and distribution network to enhance customer connect and service. Our successful EU strategy now serves as a blueprint for the Americas, EMEA and Asia with a focus on service excellence, faster turnaround and portfolio expansion. The aim is to position PCBL as a local player in each region, defend our stronghold in the Indian subcontinent, at the same time, expand into high potential markets like ASEAN, China and the EU. During the quarter, PCBL achieved 2 significant milestones in its sustainability journey. The company successfully registered under the International Renewable Energy Certificate, I-REC platform, entitled to credit for clean energy generated across our plants. In addition, PCBL was once again honored with the gold medal in the EcoVadis sustainability rating for financial year '23-'24, placing us among the top 5% of companies globally. Together these achievements reinforce our commitment to sustainability and further strengthen PCBL's ESG profile and brand positioning globally. PCBL Chemical has established a resilient and far-reaching global footprint, supported by a seamlessly integrated manufacturing and distribution network as the company scales into high-margin, high-growth segments, it continues to demonstrate discipline in capital allocation and agility in responding to evolving demand cycles. Now coming to the quarterly performance. During the quarter, our consolidated sales volume in Carbon Black business increased by 5% quarter-on-quarter, to reach 1,61,728 metric tons. This translates into a capacity utilization of over 99% during the quarter. Consolidated revenue from operations during the quarter was INR 2164 crores, and consolidated EBITDA was INR 278 crores. PBT stood at INR 78 crores while PAT stood at INR 62 crores. Of the total Carbon Black sales volume, domestic sales volume stood at 99,549 tonnes while international sales volume stood at 62,179 tonnes in Q2 FY '26, which means a 6% year-on-year growth. Now moving on to our segmental performance. Tyres accounted for 93,892 tonnes. Performance Chemicals stands at 50,331 tonnes, while Specialty sales volume was 17,505 tonnes. We expect this share to continuously ramp up over next few years with increasing demand and capacity addition. During this time, we also achieved the highest ever power generation and sales volume during the quarter. Power generation increased by 7% year-on-year from 209 million units to 223 million units with an external sales volume growing by around 10% year-on-year to 138 million units as against 126 million units in Q2 FY '25. Coming to the 6 monthly performance during H1 FY '26. Consolidated revenue from operations stood at INR 4,278 crore as against INR 4,307 crores in H1 FY '25. Sales volume for Carbon Black increased 4% year-on-year to 3,15,821 metric tons in H1 FY '26 as against 3,02,610 metric tons in H1 FY '25. The consolidated EBITDA for H1 FY '26 stood at INR 603 crores in as against INR 738 crores in H1 FY '25. Power generation went up by around 9% and sales volume by 11% in the first half of the financial year. Despite macroeconomic volatility and evolving trade barriers, PCBL is strengthening its position as a multi-chemistry platform focused on innovation, scalability and localization, by expanding capacity, leveraging digitalization and automation and partnering with global technology leaders, we are creating future ready solutions. Let me now hand over to my colleague, Mr. Suresh Kalra, CEO of Aquapharm Chemicals, who will update you on Aquapharm's performance and outlook. Suresh, good evening. Thank you for joining us. Over to you, Suresh.

Thank you Kaushik. Good evening, everyone, and thank you for joining us on this call. I will update you on the Aquapharm Chemical Limited, especially for Q2 FY '26, Aquapharm navigated a challenging external environment, the digital dynamic shaping performance across our key markets. I'll take one by one. So India delivered strong growth which was supported by expanding reach and deeper engagement with key customers, while Saudi Arabia continued to scale on the back of strategic accounts. Our U.S. business faced some near-term softness being a cyclical business and the oil prices were almost at very low from a longer time on a WTI index basis, but the sales trend seems like improving in August and September. Our Home Care business delivered robust growth of 18% Q-o-Q, so quarter 2 financial year '26 versus quarter 1 financial year '26 in quantities sold, and it's driven mostly by expanded reach and stronger engagement with our key customers, especially all large key customers like P&G, Unilever, et cetera. Our Water Solutions maintained strong momentum, also...

I am really sorry to interrupt you, sir, but your voice is echoing.

Just give me one second. I hope it's better I took it off speaker phone it's on normal phone. Okay?

Yes, sir.

Okay. So our Water Solutions maintained also very strong momentum, growing at about 16% Q-o-Q, driven by strategic accounts. Our another segment, the food segment is application-specific solutions, which were almost flat a bit a slowdown in the domestic textile industry. And while oil and gas segment, which is, as I said, our U.S.-based business with the plant, their volumes were a little down by 14%. So overall, all of our 4 market segments, Home Care grew very robust growth. Water Solutions grew very strong growth. Application-specific solutions were flat and oil and gas saw some volume downtrend because of the cyclicality of the oil market in U.S. Geopolitical tensions continue to remain elevated as we understand, and the recent 100% tariff imposed by U.S. and China actually created some good opportunities for Aquapharm's phosphonate and green chelates business because the U.S. customer is now also looking forward to diversify sourcing beyond China. There were a lot of dependence on China for them. So that's creating an opportunity. At the same time, the recent application of tariffs by the U.S. on India, especially on the bio side and select polymers exported from India has impacted a portion of our business. which leads to some temporary headwinds in the near term. In spite of that, Aquapharm delivered a steady performance in Q2 FY '26, closing the quarter with a revenue of INR 395 crores with a growth of 9% on top line and an EBITDA number of INR 48 crores. During the quarter, our focus remains on strengthening our commercial capabilities and technical depth to support long-term sustainable growth. We also recently onboarded a very senior-level industry expert as Head of our R&D and innovation center, a very experienced guy from the industry. And we are now going to steer our innovation efforts also for the future, which help us advance our next phase of product development. We also have enhanced our sales organization in the U.S.A. As I said, the business is driven by cyclicality, so sometimes you really need to work on very strong opportunity pipelines. So we are enhancing our sales organization with very strong technical orientation people with some great customer engagement focus, laying the foundation for improved market reach in the affiliates in the coming quarters. That effort has already been taken, and we are going to see benefit of that in the coming quarters. A few more key business updates, I would like to share. One is Aquapharm now offers a complete green chelate portfolio. So Aquapharm is possibly the only company today in the entire industry, which has the entire portfolio of green chelates. So green chelates like GLDA, MGDA and IDS. They are ready for commercial sales. Alongside two new polymer products, one of them is [ Pesa ] granules, which is used in auto dishwashing like Racket kind of customers. And second is PM3004, which is used in water treatment like Ecolabs type of customers. So these trials and discussions are underway with multiple customers. We have now the complete range ready with us. We also have commissioned a new plant of PBTC. If you have seen before, it was a traded product for us for a long time, and now we have commissioned a plant, so it's going to move from a traded product to a manufactured product for us. Sampling has been initiated for all strategic accounts and discussions around going for the global water treatment players. We are also undertaking a debottlenecking initiatives, which is also complete for acetyl chloride. This is one of the product lines that were completely sold out. So we undertook a debottlenecking operations, which is complete now. and that will increase the efficiency of our business. Along with that, we're also putting granulation lines to support our new granulated products. Coming to our segmental performance in terms of volumes. Home Care, which is our product line, basically for fabric care and home cleaning that reported 10,000 tonnes of volume. Oil and gas reported 6,500 tonnes of volume. Water Solutions reported 5,000 tonnes and the application-specific solutions reported 4,000 tonnes of volume. We are pretty confident now of delivering a visible EBITDA improvement from Q3 onwards because of all the initiatives, which are complete. We are building new opportunities and have already seen some tender wins, especially a very large tender at Saudi Water Authorities. Our purification plant has already win and we are also participating in tenders with Procter & Gamble for the green chelates for the U.S. operations. Our focus on expanding the customer base is across key regions coupled with very strong distributor partnerships. We have also entered into a new distributor partnerships in Africa with Solevo and a couple of other distributors, which we are currently being appointing in the Latin American market. At the same time, there's an extensive workshop style approach, which we have taken for our new product development to identifying new molecules through close collaboration with our customers. We have a very strong standing with a lot of our customers, and we are using the voice of customer there to identify the new products acquired in that approach. Our core commercialization efforts would be going along with it, strengthening our NPD pipeline, looking forward to enhancing the profitability and supporting our sustained growth momentum. With this, I will conclude my remarks. Thank you for your attention. I would now welcome for any questions to Kaushik or myself.

[Operator Instructions]. Our first question is from the line of Aditya Khetan from SMIFS Institutional Equities. Please go ahead.

Just a couple of questions. Sir, in your initial remarks, you mentioned this U.S. tariff impact and GST-related changes has led to slower volume uptake. Sir, if you can quantify like if the situations were normalized, if these were not about to happen, how much volumes we have lost in this quarter?

This is a question for our Aquapharm business, right?

No, sir, this is for the Carbon Black business and for the Aquapharm business.

Sorry, then I'll go to Kaushik first.

Yes, specific to U.S., we have cut down our volumes by about roughly about 2,000 tonnes in this quarter. And so far as GST impact is concerned, so while we have not lost volume, in fact, our domestic volumes have gone up, but it was a lot of sales in the spot market, and we did face pricing pressure. So the impact of this deferment of some of the auto purchases kind of was felt not directly on the volume, but on the pricing. Specific to us.

Okay. Okay. And sir, this is our gross spreads, like what we understand that market demand is also soft. Comparatively, is there also higher supply, which is coming from Russia, we knew like earlier, the share was lower. Now it has doubled up. So because of higher imports, coupled with lower demand, is this the reason to blame for lower spreads?

We don't see a structural change in the demand supply scenario. But last 5, 6 months, the market and the industry has been facing a lot of headwinds. Everything came together kind of this U.S. tariff, which were initially introduced at a lower level than increase when GST rate cut announcement, which also kind of resulted into some deferment of auto purchases. Russian imports have been happening since last 1 year. So overall levels have not gone up. So India still is importing almost about 8,000 to 10,000 tonnes a month. which is not much, honestly. But of course, I mean, these imports are happening at a lower price, so which is kind of creating pressure on the spot prices. But we don't see anything which is kind of destabilized our plan going forward. We have our own strategy to deal with all these headwinds. But of course, I'm going to take some time to respond to the situation, but we remain very optimistic about our performance in the ensuing quarters. Do you want to add anything to that?

Got it. Sir, earlier -- like, in earlier calls, we used to highlight that from our commodity Carbon Black Space only, we have some specialty products also over there. That will also help to improve EBITDA by INR 1 per kg. I believe sir, like for the last 1 year, we were highlighting this point. So is that thing taking place right now? Or you see like that will be slow from hereon?

Our specialty volumes are going up. Even this quarter, if you look at our volumes, they have gone up Quarter-on-quarter, we have a 9% increase. Then year-on-year also, we have increased. And on a full half year basis, you will see that there is an increase. This year, based on our capacity, we can reach maybe about 72,000, 73,000 tonnes, and we are on track to achieve that volume. So the product mix is changing for better. But of course, the current situation is not a usual one, and therefore, the impact on the margin.

Okay. Okay. Sir, on initial presentation you highlighted. So there will be a visible EBITDA improvement. You mentioned like -- I believe, sir, for the last few quarters, we are in the similar EBITDA in Aquapharm we are clocking around INR 20 per kg for EBITDA you see like, sir, most of the negatives like earlier, we used to mention about higher cost and lower product mix. All these things are there in the current spreads and EBITDA and you see how much jump if you can quantify like for FY '26 and for FY '27?

Yeah sure. Our business is divided into 4 major market segments. And also right now, it's aligned pretty well geographically. So India business, which is basically, we call it Aquapharm India is manufactured in India and mostly supplied in Europe, to some extent in U.S. So I would say, for example, Aquapharm India businesses, 20% of the revenue comes from U.S. So that is the only business which is impacted due to tariffs. If you see the global level, that business becomes only 9% in that okay? So the tariff situation on India product is impacted for sure. Some of the products, for example, also. So the impact is they are still limited, okay? On the other side, the benefit to us due to tariff is because we have a manufacturing location for oil and gas for a plant in U.S. in Houston and most of the customer also in U.S. in Permian Basin. So we have a benefit over Chinese and suppliers. Now right now, our India business is clearly showing clear improvement, already visible improvement, but the overall numbers are still looking the same to you at an EBITDA level because our U.S. business right now is going through a low end of cycle because of the oil prices are staying between $62 to $65, which is possibly one of the lowest. Usually, the sweet spot for oil prices is between $75 to $80. And the better it goes, the better efficiency products are needed. So right now, we are facing headwinds due to the type of business in our U.S. manufactured business -- while India manufactured business is seeing quite a growth. And overall, it is still offsetting and that's why we are seeing -- looking at the normal. If I take a number, for example, the India business alone EBITDA grew at INR 28 crores in Q1 and INR 33 crores in Q2. So a very clear visible improvement in the India business. So we are -- when we are saying that overall improvement would be visible in the coming quarters because we know oil is a cyclical business, and it has to change in the coming quarters.

Got it. Sir, just a follow-up on this, sir, is what the crude oil price level we would start getting operating leverage?

Yes. So it's not always directly as such linked, but this is very clear that the crude oil price, so we talk about Brent and WTI, WTI is about $4 lower. So WTI today is about $62 to $65, it was $62.9 last night. So the moment it starts improving, the efficiency products because we make efficiency products mostly, which are basically scale inhibitors, corrosion inhibitors and H2S scavengers, they are used more and more and especially the high end of the ones that required more when the efficiencies are needed more and that linked with oil prices, but not a linear, I would say, comparison which we can make, but we definitely see the improvement when the oil prices goes up.

Sir, just one last question. With acetyl chloride, you had mentioned in your earlier remarks. So this expansion figure is included in our numbers like we have stated to double from 1.4 lakh tonnes to some 3 lakh tonnes. So this debottlenecking is included in that figure?

Yes, that is included. But it's not -- yes, it's just debottlenecking. It is not completely expansion projects, but yes, that is included. You're right.

Our next question is from the line of Sanjesh Jain.

First, on the carbon black side, again, the spread appears to be quite subdued. I think this quarter, we did EBITDA per kg, which is under INR 15, one of the lowest in so many quarters. And there has been general commentary that globally, there is a slowdown in auto. Even some of your peers have called up that in their earnings call previously. Do you think this situation is temporary in nature or at least FY '26 appears to be, what, subdued than what we thought and that should be a fair assumption?

Well, at this point of time, there are a lot of uncertainties in the market, as you know. One is, of course, U.S. tariff. And specific to India, it is also about GST. And beyond that, even the global economies, if you look at, you talk about U.S.A., you talk about Europe or you talk about Asia, including India and China. Other than India, in the first quarter, we had shown a good number, 7.8% GDP growth, economic growth. Most of the places, the fundamentals are a little soft and consequently, the growth is not very strong at this point of time. The projections are also a little soft at this point of time. But having said that, we feel that we have kind of reached a level from where it will start improving, will start improving. How fast the recovery can happen, that is something possibly time will tell. But a lot of actions are being taken internally to manage or sell through this difficult headwinds -- strong headwinds what we're facing at this point of time, more focusing on the operational excellence. So that is one initiative. So that should take care of the challenges what we are facing. But these things do take time. I'm sure all of you will appreciate. But on the other side, since our feeling and we are quite clear about it that going forward, things will improve, and therefore, our expansion plans are all in place. The CapEx are on in place. As we explained a while back that 90,000 tonnes of Tamil Nadu is coming on stream within the next few weeks' time. Similarly, in Mundra and Palej, both the places, specialty lines are coming up. Nanovace pilot plant is on. So overall, in nutshell, our thinking and our outlook is very positive. And we should be able to overcome. I mean it is a global phenomenon at this point of time. So I'm sure it's a matter of time, things will get sorted with even U.S.A., and U.S. is a potential market for us going forward. So we should be able to recover fast. I mean we are all ready with all our arms and ammunitions in place. We are making sure that we are fully geared up. The moment the opportunity comes, we should be able to capture that opportunity. So that's our -- that's the overall outlook. And in a way, you can see the positive thinking from our side. Some headwinds are there, but we should be seeing better times going forward. And not too far off. It's just around the corner possibly.

Got it. One additional question. Last quarter, we spoke elaborate about one of the competition reducing the capacity in the Western world. And now again, you spoke about almost $7 billion, $8 billion of investment is going in new tire manufacturing. So this, in a way, is good for us. Are we in early stage with any of these CapEx, which is coming in terms of supply agreements, long-term supply agreement, which we are trying to compete with post that capacity, and by what time line you're expecting these capacities to be operational?

Yes, you're absolutely right. Some of the not-so-viable production lines are under -- going under closure in near future. I'm not taking the name, but you are fully aware of. Some of them are based out of U.S. Some of them are based out of Europe and also South Africa, in Africa and South Africa. So which is kind of advantage for us, of course. And since the efficiency level of manufacturing is pretty high with the Asian manufacturers, particularly, and we are adding capacity. We are already in discussion with some of the global players for our next year contract, which is just another 2, 3 months away. So that discussion has already started. So now this capacity utilization will take time. 90,000 tonnes is like a plant. It is almost like a plant, equivalent a medium size plant. It will not happen overnight, but gradually, the consumption will go -- the production will go up, in line with buying from the customers. We have started discussion of that and trials will start now. As soon as the lines come on stream, which is end of this month and commissioning early next month, we'll start the trials. And thereafter, it is more about discussion with the customers, tying up the volume and quickly scale up. And our endeavor is to utilize capacity as far as possible in the next financial year itself. It should be more than 50%, I guess, in next financial year. And by exit, we should be -- by exit of next financial year, we should be touching the run rate to achieve full 100% utilization. That is the level of confidence we have.

Got it. One last question on the superconductor grade, what we spoke earlier. When should we see a material contribution?

Yes, we are not able to hear you actually. Some problem, I think, with the line.

Can you hear me now? Hello?

No. No.

Sir, we can hear you. Mr. Sanjesh Jain, I can hear you.

Let's do one thing. You go on with the call -- next caller. Let me come back in the queue.

The next question is from the line of Radha from B&K Securities.

Sir, for Aquapharm-based products, what percentage of the U.S. market is being catered by China directly or indirectly. And now if there are 100% tariffs on China, how much volume growth as well as any margin expansion that you're expecting due to this?

Yes. Thank you. I'll answer this question. So U.S. market, as I said, is divided into -- for us, divided into 2 major parts. One is oil and gas. Oil and gas is where we manufacture locally and we supply locally, all right? So we basically do not compete with a lot of Chinese products there. We rather use them a lot for our buying raw materials, okay, for the oil and gas market. A lot of production happens in oil and gas, but a lot of imports also come. So it's a combination. So we get some benefit when we are competing with them and the duty becomes very high. But at the same time, if the raw material for us get expensive also because of the duty on China, then also we could get impacted. So it's kind of an offsetting impact. While our other business, which is Home Care business, there, we are going to see a lot of benefit coming to us, although we are supplying from India. But right now, at this moment, and we know that it is uncertain, it is changing every day. As of now, the duty structure on China on these products has become 100% effective last week. If that continues, we are going to see a significant benefit. Now how much to quantify it is that we are looking at all the pluses and minuses. For example, we are seeing some demand drivers also in our favor with smart appliances for the home care industry coming and the phasing out of the EDTA, mostly in the phosphonate side of the business for the home care. So net-net, overall, we are looking at currently, we are at an average of INR 50 crores EBITDA every quarter. We look forward to end our -- this financial year with INR 75 crores of EBITDA overall in the global business for a 12-month basis. So that's an exit we are looking at today, comparing all the pluses and minuses coming towards in the business.

Yes, sir, just to confirm, INR 75 crores of EBITDA, you want to end it on a quarterly basis by this year end?

By this year, and that's correct. So that's where our exit is planned at this moment.

Okay. Okay. Great, sir. Sir, second question is on nano-silicon. With regards to nano-silicon, the company is investing INR 500 crores in a rapidly evolving technology and targeting a substantial INR 1,200 crores EBITDA by 2030. So can you please highlight any customer approvals or feedback that have been received in the initial stages as of now?

Hello? Radha, can you repeat your query?

Yes, sir. I wanted to understand any customer approvals or feedbacks we've seen with -- in terms of nano-silicon?

Radha, we are waiting for the pilot plant of ours to get commissioned. And once the pilot plant is commissioned, we will be sending the approval-grade material to a lot of customers, and then we hope that in the next 6 to 9 months post sending of the approval-grade material, we will be able to get product approvals. The interest level on this product remains high. And so sometime by the second half of next year, we look forward for a lot of positive news around this.

And in addition to that, based on our lab samples, we have already started producing this mentioned in our lab. So we have kind of approached some of the global names. I cannot take those names for obvious reasons. But there's a lot of excitement with this product. They have shown a lot of interest. And as Mr. Pankaj just now mentioned, now as we are moving from lab to pilot, once the pilot is ready, which should be by FY '27 -- sorry, FY '26, another 2, 3 months' time, thereafter, we'll start submitting the sample and then the engagement will be much deeper. And we are pretty confident that we'll get a very positive response from most of them.

The next question is from the line of [ Dhruvin Kadakia from SKP Securities ].

I just wanted to confirm that given the current situations that are going on overall in the market, for carbon black as well as for Aquapharm, for the next 2 years, what are our expectations with respect to sales realization per tonne, EBITDA per tonne?

Well, it will also depend on the level of crude and raw material prices. At a steady level, we believe that whatever drop we had to absorb because of the current market condition, I think we can get back to there in a couple of years' time. So our EBITDA, which used to be around, say, INR 20-odd-thousand, for the first half, it has come down to about INR 16,000. So that loss margin of INR 4,000, we are fairly confident of recovering, once the market stabilizes.

Okay. That is for carbon black. And Aquapharm in particular?

Suresh, would you please answer that question?

Yes. Raj, I think the principle remains the same. So in that sense, a lot of our business actually depends on how the crude oil moves. So net-net sales realization would definitely be also part of that. It doesn't mean that it improves the EBITDA level. So I mean, of course, I mean, this is another metric which we used. But at the same time, I would say that we'll be focusing more on how much per tonne we are going to make as profits. And that's what we are currently mostly planning because the product mix also changes significantly. So the average selling price becomes less important. Right now it's about INR 115 per kilo. I mean if I just go by that, then we'll be looking at improving it to more than INR 200 actually with the product mix which we are planning, yes.

Our next question is from the line of Krishan Parwani from JM Finance.

So I actually joined the call late, so I'm not sure whether you have answered any of these. So just first on the carbon black side, there has been a sharp decline in per kg EBITDA. So do you already respond to that. Why is that?

Yes, Krishan, we kind of responded to that. 2, 3 things. One, we had to bear the burn of U.S. tariff. And just to give you a sense, in Carbon Black business, annually, we were doing about INR 350-odd-crores of business there. In our case, the effective tariff rate is 20%. Though it is 50% but we get some exemption, but it is still 20% and which makes it kind of a INR 70-crore a year kind of an impact at EBITDA level. Now part of that hit, you know, our numbers this quarter. So operating expenses to that extent are higher. So that's one. The second is, if you look at crude, it came down steeply in last quarter from about $72, $73 in the previous quarter to about $63, $64 in June-September -- July-September quarter. Now when that happens, then some of the operators who can buy oil from spot and sell in the spot market, they price their product differently, and we have to compete with them, especially considering that the market conditions currently are soft. I mean the GST deferment also had some impact in pushing the auto sales towards the last part of the quarter. And consequently, I mean, market was kind of oversupplied and which further created the pricing pressure. So all of these conditions kind of hit us in one quarter and therefore, the impact on the margins.

Okay. Great. Just on that particular inventory losses, if I may, I mean, if I call it that, how much of a impact do you think it would have made on your per kg EBITDA, let's say it is ex of other income, INR 14, INR 13.5. So ex of that inventory losses, would you have been around INR 15, INR 15.5? Just the...

I would not -- Krishan, I would not call it inventory losses because it was not a write-down that we had today. But it is only that it gave opportunity to some of the producers to buy lower-priced oil, produce and sell at market at a lower rate. And we wanted to keep our capacity utilization high and consequently, we had to compete with them in the spot market. So it was more of that. But if you look at our volumes, volumes have gone up. I mean despite all the challenges, all the headwinds that we are facing, we could still keep our capacity utilization at almost full level. I mean we were at about 99% in this quarter.

Got it. And just a clarification on that front because I think you mentioned about U.S. tariffs. And as I see, your exports sequentially has declined to about 62 KTPA compared to 65 KTPA, 63 KTPA. And how much of a volume is to U.S.? Because as far as my understanding, it's probably not more than 5% to 10% of the overall carbon black sales? Or is it higher?

No, no, it was 5% only. We were doing about 30,000 tonnes. Last year, we did 30,000 tonnes, and that was the run rate. But -- of course, I mean, we see U.S. as a large market, large opportunity for us. U.S. imports about 200,000 tonnes a year. And once the tariff settles to some lower level, we obviously would be doing more volume there. But again, for this 30,000 tonnes, it converts into almost INR 350-crore of sales, of revenue.

Got it. And second question is on the Aquapharm. I think I did hear that there is a tariff impact also there in the Aquapharm. But when do you think you can get to a INR 70-crore, INR 80-crore EBITDA run rate, I think, which we had initially planned or hoped that by FY '26, we'll see somehow like a INR 70-crore, INR 80-crore EBITDA run rate. So are we still on track to achieve that?

Yes. Thank you. So as I said earlier, we are kind of hovering around INR 50 crores EBITDA. And with all the initiatives which I discussed, without repeating them, we are looking forward to reach at end of this year, financial year with an exit of INR 75 crores of EBITDA. So while we maintain our current set of business, the new product lines, which we have produced and looking at the positive demand drivers, which are coming from Europe and looking at the additional business, which we are going to generate from Saudi side, I think with that pipeline, it seems right now very confident for us to reach an exit rate of over INR 75 crores, which is something which we promised to you earlier. So not changing. Just as I said again, with the U.S. change in the cyclicality of the business and the tariff situation uncertainty slightly delayed our plans. So something which you would have achieved by quarter 3 now possibly we would be achieving in quarter 4. It's the only change. And earlier as I said about the net realization, I think also I want to clarify pretty much. There are a lot of things going to change in the product mix in the future. But I don't see any significant change in the net realization in the coming quarters. We are looking at a lot of new product development in the next year and 2 years for which I already discussed that we have -- in our innovation center, we are putting a workshop style approach. With that, we are going to a lot of new end of products with very high utilization. But in this coming 2 quarters, I see a lot of improvement from our EBITDA perspective, for sure. At the end of quarter 4, as I said at the beginning, we'll be close to about INR 75 crores.

Got it. Got it. And one last clarification, if I may, or rather a question, small question, that is. So with the kind of EBITDA decline and net debt not going anywhere, do you want to rethink your dividend policy? I mean do you want to conserve that INR 200-crore, INR 300-crore cash, whatever that you have? That's my last question.

Raj?

Krishan, frankly speaking, in this quarter itself, we saw a significant improvement in the working capital days. And we don't see the current quarter's performance as a indication of performance going ahead. The fact remains that we are running at over 99% capacity utilization on the Carbon Black business. And in a matter of -- going forward, you would see significant improvement in the performance. So cash generation is likely to remain healthy. And that probably gives the confidence to the Board to maintain a strong dividend payout policy.

Okay. Got it. Wish you and the entire PCBL team a very happy Diwali. Thank you.

Thank you, Krishan.

Our next question is from the line of Shashank Kanodia from ICICI Securities.

Sir, firstly, just wanted to check, is anything to call out in the employee costs, employee expenses because it is a sharp 25% jump on Y-o-Y basis.

Shashank, our appraisal cycle is July to June and therefore, typically in second quarter, employee expenses go up. Now I mean if you compare year-on-year, it has also gone up because of some fresh hiring. We are building -- we are expanding both organically and also, we are investing in technology. And therefore, we will require more talent in the organization. And some of this hiring has happened in last 1 year's time. And consequently, the effect is visible in the employee cost.

So sir, should we assume this as a new run rate for us, quarterly new run rate for us?

Yes. It will be kind of quarterly run rate. There is some onetime also because some senior level employee joined during the period during the quarter and there were some joining bonuses, et cetera, but that's not much, that's INR 2-crore, INR 3-crore. But more or less, this is indicative of the going forward run rate.

Secondly, sir, as you rightly mentioned, in the first half, EBITDA per tonne on the Carbon Black business is roughly INR 16,000 to a tonne. So given the fact that you mentioned the things been bottoming out, so for the full year basis, can we clock an annual rate of INR 16,000 as EBITDA per tonne for this fiscal year and then returning to a course of INR 20,000 plus kind of a thing '27 onwards? Any take on that front?

We are -- though it is early in this quarter and the major issues like U.S. tariffs and all, those are still unresolved. But what we are seeing is that crude has stabilized kind of around $60, $62. And the disadvantage that we faced last quarter because of steep decline in crude price is not likely to be there this quarter. Basis that, we have confidence that quarter 3 EBITDA per tonne should be better than this quarter.

Sir, for full year basis, can we do something like INR 16,000? Or is it still early to take a call on that?

I guess we should do better, Shashank. But I mean the situation globally, I mean, both in domestic market as well as in international market, a lot of things are happening one after another. If you assume a steady state kind of a scenario, if you assume that this Europe -- U.S. tariff situation is going to be resolved with some kind of rational tariffs, I think we can do much better.

Right. And sir, usually, we maintain our target like being at INR 20,000 base case EBITDA per tonne to improve around INR 1 to INR 2 per kg every year taking us to INR 25 to a kg by FY '20 and FY '30. So does that really alter that game plan? Or is it still very much possible for us to really traverse that journey?

No, long-term guidance remains same and we remain on track. All the initiatives that we discussed with you all, those have already been initiated internally, and we are pretty confident that we'll deliver those numbers. But those numbers, again, I mean, when we were at INR 20,000, the market conditions were different. We did not expect so many disruptions. So this, again, INR 16,000 is not a normal margin profile of the business. This is due to that. And we, therefore, expect the company to come back to the previous run rate level once we have some solution to these issues. And with all the changes that -- those are happening at the product mix level, operating leverage and then yield improvement, et cetera, operational efficiency and all, we expect us to be on track for that INR 29,000, INR 30,000 -- sorry, INR 24,000, INR 25,000 EBITDA per tonne.

Right. Right. Sir, just a small feedback. It has taken a -- knowing personally, I think for the last 7, 8 years, it has taken a long time explaining to the investment community the main strength of the business in a noncommoditized nature. But this kind of performance really -- don't really match up with the initial commentary and the things. So just a small question, if you can be a little more realistically, if you can give us guidance to the community in future. That's the only feedback from my side.

Actually, Shashank, when we give guidance, those are based on some basic assumptions, right, like external situations remaining stable. And of course, I mean, today is not a normal situation. If you compare our current year's performance, with say, 3, 4 years back performance, even in a good market, we used to deliver about INR 12,000, INR 13,000 kind of EBITDA. And now even with so many headwinds, we are still able to deliver some INR 16,000 kind of EBITDA. So definitely, there is improvement in our operating efficiencies in our size of business, in our product mix. So those changes are visible. And we are pretty confident that the numbers that we have communicated to you all, we will deliver them. Long-term guidance, we are on track. We are pretty confident, but short term, this disruption, it takes us some time to respond to the headwinds. But we are confident of our capability as an organization and as a team and God willing in a couple of quarters. will again show improvement -- start showing improvement.

Next question is from the line of Mr. Kumar Saumya.

Sir, just one question from my side. This quarter, we had a healthy growth on the domestic front. So how sticky is that? And how do you see the domestic volumes panning out in the due course of the business?

See, market was soft during the quarter, and we -- of course, our focus was there on to utilize our capacity, but then we also had to compete with some of the spot players and which is reflecting in our margins. It will take some time for us to reroute our materials to the targeted markets. We'll have to move more volumes out of domestic market because if we continue to sell more here, it will further impact the pricing and the margins. So I would not call it a very steady state or steady numbers. Of course, we'll ensure that our capacities are utilized to full, but it will take us a couple of quarters before we can find the right market mix -- market and customer mix.

Got it. And sir, my second question, the point that you highlighted, the effective tariff that you have is 20%. Is that because you're sourcing raw material from U.S.?

Yes. We are importing that raw material from -- yes, so we are importing raw material from U.S. and 50% of the -- 60% of the price at which we sell our material in the U.S. consists of inputs from U.S. So raw material part of that is about 60%. And therefore, that portion becomes exempt from tariffs. So it is only the balance 40%, which gets tariffed at 50%.

Thank you so much. That was the last question. On behalf of PCBL Chemical Limited and by ICICI Securities Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.

Thank you.