Rossari Biotech Limited (ROSSARI) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Rossari Biotech Limited Limited's Earnings Conference Call. [Operator Instructions] I now hand the conference over to Anoop Poojari from CDR India. Thank you, and over to you, Mr. Poojari.

Thank you. Good evening, everyone, and thank you for joining us on Rossari Biotech's Q3 FY '25 Earnings Conference Call. We have with us Mr. Edward Menezes, Promoter and Executive Chairman; Mr. Sunil Chari, Promoter and Managing Director; and Ketan Sablok, Group Chief Financial Officer of the company. We'll begin the call with opening remarks from the management, following which we'll have the forum open for a question-and-answer session. Before we start, I would like to point out that some statements made in today's call may be forward-looking in nature and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. I would now like to invite Mr. Edward Menezes to make his opening remarks.

Thank you, Anoop. Good evening, everyone, and thank you for joining us on our earnings conference call. It's a pleasure to have you with us as we discuss our operational and financial performance. We are pleased to report another quarter of resilient performance, demonstrating the strength of our business despite a dynamic operating environment. All business segments registered healthy year-on-year growth, with exports playing a crucial role in driving overall performance amidst softer domestic market conditions. Our HPPC division delivered a steady performance across key product categories, while the Textile Specialty Chemicals business showed a strong uptick, supported by improved exports. The AHN business also performed well during the quarter, driven by increasing traction in select end user industries. Exports sustained strong double-digit growth with this quarter, reflecting our continued focus on scaling our presence in key global markets. By targeting high-potential geographies, we are steadily expanding our customer base and relationships with existing partners. Our efforts to invest in technology and enhance capabilities have enabled us to deliver innovative and customized solutions that cater to the specific needs of international markets. Innovation remains a key pillar of our strategy, and we are [ committing ] our R&D capabilities. Developing intelligent, eco-friendly and sustainable solutions have consistently helped us address evolving customer needs. These innovative offerings are enabling us to expand our presence in global markets, while the demand for sustainable specialty chemicals continues to grow. Our ability to cater to these markets with tailored solutions highlight our strength in aligning with global sustainability trends and customer expectations. With this, I would like to conclude my address, and now I hand it over to Mr. Chari for his comments.

Thank you, Edwardji. A warm [ namaste ] to everyone. I will begin by reflecting on Rossari Biotech's healthy growth trajectory, which continues to be driven by a combination of organic and strategic initiatives. This quarter, we are proud to have crossed the INR 500-crore milestone in quarterly revenues, and we aim to build on this achievement to deliver even stronger performance in the future. Our focus on diversifying our customer base and reach into new geographies has been instrumental in sustaining our growth and positioning us for long-term success. Exports have been a key focus area for us, and I'm pleased to share that we have made significant progress in developing our global markets. We have strengthened relationships with existing customers, entered new geographies and tailored our solutions to meet the unique needs of international [ markets ]. Our international business registered year-on-year growth of 21% during the quarter and 28% over the 9 months, providing strong support to overall performance. Meanwhile, we are making steady progress on capacity expansion initiatives at our Dahej facility and through Unitop Chemicals, currently in the execution phase, [indiscernible] in a phased manner in the coming months. Once operational, these expansions will enhance our capabilities across industries and enable us to cater to high-growth segments in both domestic and international markets. While our strategic investments have impacted margins this quarter, they are for laying the foundation for the [ future. ] These investments [indiscernible] capacity expansions and nurturing businesses in the growth phase position us well to unlock new opportunities and scale effectively. As these initiatives mature, we are confident that the resulting higher operating leverage will contribute to margin improvements in the long term. Looking ahead, we remain optimistic about delivering sustained growth across all our business segments. The HPPC segment continues to benefit from strong demand fundamentals and innovation-led offerings, while the textile business is showing early signs of recovery, presenting emerging export opportunities. In the AHN division, we have displayed further improvements as demand conditions strengthened. As business environment stabilizes, our focus will remain on improving capacity utilization, introducing innovative products and expanding our global and customer footprint to unlock new opportunities that drive long-term growth. On this note, I would now like to invite Ketanji to share his perspectives.

Thank you, Mr. Chari, and good evening, everyone. Let me provide you with a brief overview of the financial performance for the quarter ended December 31, 2024. We delivered a good performance during the quarter with consolidated revenues increasing by 10.5% Y-on-Y to INR 512.7 crores. All business segments reported growth with exports driving the overall performance amidst the challenging domestic business environment. Our HPPC division delivered 9.6% Y-o-Y growth, achieving revenues of INR 390 crores. The Textile Specialty Chemicals division recorded revenues of INR 95 crores, reflecting a 14.5% Y-o-Y increase, again, primarily driven by exports. While the AHN division reported revenues of INR 28 crores, a 12% Y-o-Y growth, supported by stable performance in the end user markets. In terms of segmental contribution, HPPC accounted for 76%; Textile Specialty, 19%; and AHN, 5% of the overall revenues. Our gross margin improved by 137 bps Y-o-Y during the quarter, supported by a favorable product mix and operational efficiencies. However, higher expenses related to ongoing growth initiatives, capacity expansion in certain businesses in their growth phases, such as our Institutional Cleaning vertical, impacted the EBITDA margins, which stood at 12.6% compared to 13.7% in the same period last year. We remain confident that these initiatives achieve scale and reach operational maturity. They will contribute to margin improvement in the future. Furthermore, the shift of our new office and leasing of 2 warehouses impacted depreciation and interest costs due to the adjustments made under Ind AS Lease Accounting Standards. Consolidated EBITDA was at INR 64.8 crores with PAT at INR 31.7 crores. On our CapEx project, including the ethoxylation capacity expansion at Unitop Dahej facility and the Dahej expansion of HPPC, both are progressing well and are on track for commissioning in a phased manner in the coming months and some of them in Q1 of FY '26. These new capacities will enhance our ability to cater to high-growth segments, including Agrochemicals, Home, Personal Care and Specialty Chemicals, while positioning us to capture emerging opportunities across both domestic and international markets. We remain focused on achieving consistent growth and profitability by leveraging strategic investments and maintaining operational excellence. As we progress with our capacity enhancement initiatives and drive innovation, we are confident in our ability to tap new opportunities, strengthen our position in key markets and create long-term value for all stakeholders. That's all from my side. I would now request to open the forum for any questions the participants may have. Thank you.

[Operator Instructions] The first question comes from the line of Rohit Nagraj with B&K Securities.

And good to hear that the exports have been growing. So first question, again, on the exports front, a, which geographies are particularly seeing the traction? And out of the 3 segments, which segments and maybe if it is HPPC, which subsegment is seeing the traction in a particular geography?

Rohitji, the export geographies continue to remain -- our major exports are to the Americas, which includes Latin and South America to Europe and also to Turkey. But now we are opening up geographies also in the Gulf area. So basically, I think geographies remain the same, but we are trying to add new customers and new segments in the businesses. In terms of HPPC, the surfactants business, which is there, which is our core business continues to dominate our everything else.

All right. Got it. Second question is largely from FY '26 and onwards perspective. Given that during this year, we had constraint on the ethoxylation capacity and still we have been able to grow reasonably at 10%, 11%. Given that we will be having the capacities in place sometimes during the next few months, is it possible that next year there could be significant improvement as far as performance is concerned given that ethoxylation capacity is available at the same time, even we are going ahead with geographical expansion as you just earlier mentioned?

Yes, Rohit. This is Ketan here. Some of these planned geographical expansions, which we started a couple of quarters back, what's -- keeping in mind the new capacities that are going to come up, we should have this capacity that I said in my opening remarks, some will come probably in this quarter, around March, and some will come in the first quarter. So given that it will take us a couple of months, at least a month to stabilize the plants and get the product quality, so we should have at least 9 months minimum is what our plan is that we'll have capacities available. And we will slowly scale up the production in these plants. And next year, we should see the revenue numbers ramping up with these additional capacities that will come up.

Sir, got this. And any sense in terms of, again, just to support this particular narrative on the margins front that given that the margins have been slightly depressed during the quarter and even for the 9 months. And ethoxylates, in my opinion, would be high-value and high margin product, there could be improvement in margins as well as we scale up further?

Yes. So Rohit, since it will be the first year of the capacities coming up, we would like -- not like to guess on really where the margins would go. But I think on the gross margin front, we should definitely see some improvement. On the fixed cost side, because it's a new plant, we may end up -- some costs may come up. We've already hired a lot of people in our R&D and in the production side, given the capacities coming up. There will be some new more hires coming up next year as these plants start getting operational. So currently, I think we would still be okay to -- at least for the first year to come off a similar kind of margin levels, [indiscernible] plus/minus percent.

The next question comes from the line of Ankur from Axis.

First question, in terms of the growth revenue that we are seeing. So we have been seeding newer products, newer segments across different segments as well, apart from increasing the distribution in terms of the global markets. So if you could share your thoughts, any new verticals or segments, which offer a good promising growth for us apart from the Specialty Chemicals as well as the Performance Chemicals here?

Ankurji, [Foreign Language], this is Sunil Chari here. We continue to focus on our core segments of HPPC, Textile and AHN. HPPC, as you know, has grown stellar growth in the last 4 years since our IPO. We believe the surfactants businesses, basically the ethoxylates and propoxylates would be our core areas of growth for the future. So our capacity expansion is also happening in the surfactants area, [indiscernible] surfactants, which we think could grow in the future. The new Rossari [indiscernible], which we all call as Rossari Professional now, the Institutional Cleaning Chemicals, hygiene and which has some connection but also the consumer businesses is something which we feel will grow. This year, in the first 9 months, Buzil Rossari has done INR 200 crores, which is like a 50% growth over last year. And this is a segment where we think -- and we have put the maximum number of employees also in this year in this segment, 100 people we have added in Buzil Rossari. We feel this could be a big growth area for us in the future. Normally, these are all seeding opportunities, where we -- if you see this INR 200 crores, practically which has very low EBITDA, but it could create a lot of value for all of -- in Rossari terms of growth and profitability. If you remove this INR 200 crores, the rest of the business looks like a very, very good position. And Animal Health and Nutrition should, of course, grow. And Textile has grown already, and we see signs of growth in the textile industry in India and abroad. Exports have done well also. Overall, I think across the company, we see possibilities of growth in all the divisions, primarily Buzil Rossari and then the surfactants and then followed by Textile and AHN is what we see.

Sure, Chariji. The reason I asked that was because if I look at Textile as a business, YTD, we are largely flattish here. Is it that -- and even same in AHN as well, the growth has been slightly lower versus even HPPC, which has been driving the growth largely for us. So is it that there is a pricing correction and probably from a volume growth perspective, things are better here? If you can highlight maybe the volume-led growth, let's say, YTD in 9 months across the 3 segments: HPPC, Textile as well as Animal Health.

So Ankur, I think it would be fair to say that the YTD 9 months growth that we are seeing about 11% kind of growth, the entire growth has come out of volumes. So prices have not really played a key role in terms of the growth. So I would say the volumes would have grown about 9% to 10% and a couple of percent increase would have come from pricing. And this has been across the 3 verticals.

Yes. Ankurji, I would like to add here to Ketan sir is our gross margins for the first 9 months of this financial year compared to the gross margins of the last financial year have been nearly 30% up. I think it has been substantially increased in gross margin. So this is something which is very happening. Of course, we have spent more on recruiting people. We have spent more on travel. Freight has gone up a little. But the gross margin increase is something which is -- which gives us strength that the future looks good.

Sure, Chariji. Ketan bhai, just a follow-up on that. So my question on volume growth was more specific to the business segments. So if I look at HPPC, broadly 13%, 14% growth in 9 months. Textile is largely flat. Animal is up by some 5%, 6%. So will it be fair to say that this will also be largely the volume growth across all the segments?

Yes. So if you see on a YTD basis, HPPC, as you rightly said, has grown about 12%. Textile has grown about 6%, 5%, so is AHN. Most of this growth, I would be okay to say and all come out of volumes in all the 3 divisions.

Sure. And just on the margins front, especially EBITDA margin, the reason on a consolidated basis we are seeing slight dip like in margin is essentially -- probably if I do A minus B, which is your subsidiary performance, which has seen a decline in EBITDA margin despite gross margin expansion there. So any specific reason you could highlight why the overheads being higher -- which have been steadily higher over the last couple of quarters?

So as Mr. Chari also said, we've been in the process of adding in terms -- if you see, there is an increase in the employee cost. There is also an increase in the other expenses. So our overall expense market has gone up. So if you see the employee side, quarter-to-quarter, if I say, our number of employees have gone up by about 35, 40 people. And on an annualized basis, year-on-year, almost 190 people have been added. Now most of these new additions have come up in our consumer or the Rossari Institutional Cleaning business. So we've added -- if I say out of the 190, we would have added about 120-odd people in that division itself. These are the employees across function in sales, marketing, business development. So this is one business I think we are -- as we've always said that this is a business we believe in. And we are taking these initiatives to set up this business from a very long-term view. And we are seeing good traction in this business with the top line growing quite well. Currently, we've already crossed INR 200 crores in 9 months. We would have done -- we had done about INR 158-odd crores last full year. So our hope is that we should be closing this year INR 250 crores-plus in this business. Currently, this business is giving us a very low EBITDA because of the nature of the business. It's more consumer-focused business. So that's where the costs have majorly gone up. And apart from that, yes, we're also bringing in a few people, keeping in mind the new projects that have come in. We have also strengthened our R&D. So we brought in some senior people in the R&D division also. And in the other expenses, which has gone up, the Y-o-Y increase is high because the expenses on freight forwarding travel, we've attended a lot of [ exhibition ], export commissions have gone up. So as the business is taking traction, some of these costs are now getting played into the numbers. I think this rate, the expense rate for this quarter should be what we will now be incurring mostly on a quarterly basis. Because a lot of these expenses have been placed into the numbers of this quarter. And then hopefully, once -- as the top line starts showing its growth, the leverage will start playing out.

Sure, Ketan bhai. Pretty clear. Just last bit, the limitation of ethylene oxide earlier, to my understanding, that concern is sort of largely over. Given that scenario, what should we look at in terms of our revenue growth over the next, let's say, 2 to 3 years, given there are new capacities also which are coming up?

We are waiting for newer -- new capacity to come up in Reliance. Reliance has still not confirmed by when they will start giving. So this may be a constraint until we have clarity from Reliance on the higher allocation of EO.

Chariji, this was supposed to conference come in Q4, right? Are there some delays there?

But Reliance is delayed. So we are waiting for confirmation from Reliance.

Okay. But over a 2 to 3-year basis, what should be your target revenue growth? What should we be building in broadly?

So this new CapEx which we have put in, we had estimated that over a period of 3 to 4 years at its peak utilization, it should give us an asset turn of about 4% -- 3.5% to 4%. So assuming these constraints, even if they are there for the first year or so, but we'll be able to scale up the capacity over a period of around 3, 3.5 years, we should be able to scale up to full capacity.

The next question comes from the line of Sanjesh Jain with ICICI Securities.

I have a few of them. First on the exports business. On the EBITDA level, is this export business accretive to the margin or dilutive to the margin because that continues to grow quite strong and probably that requires a lot more effort to push in because these are new geographies, new customer and all? How are the margins playing out in the exports market?

So Sanjesh, the export margins are -- in terms of gross margins, I would say, are slightly better than what the domestic margins are. And you are right, since it's the growth phase for us on the export side, so a lot of the costs have now started coming in, in terms of commissions, et cetera, setting up the business, traveling, a lot of sales and distribution related expense, exhibitions, et cetera. But I think these are the expenses which we need to incur to keep -- to bring this export business to a certain level. These expenses, we think that over a period of time, it will definitely pay off. And given that the domestic market is not really showing much sign of growth for us, I think we've taken the right decision to set up the export business. And we've already set up offices in Vietnam, in Thailand, and we are in the process of also setting up an office in Turkey. So a lot of these initial costs and all will play into the P&L for a few quarters and then the leverage will start paying off. And also in Dubai, we've also set up in Dubai.

That's clear. But on the Textile side, we were running to building the larger team in the Bangladesh market and [ Vietnam ] market and Turkey market. Is this the offices what we are referring is all focused on the Textile business?

No, no, no. These will play out for all businesses, Textile and the HPPC. Some of them will be more textile focused, especially, say, Vietnam office and the Turkey office. And we'll also be promoting all our products through these branch offices that we set up.

Okay. Still the Textile business continues to remain not so impressive. That means that the exports on textile has not picked up, probably other segments are doing much better overall for a price [ tag? ]

So in textile, if you see Y-o-Y, we've grown at about 14% kind of growth. And most of this growth has actually come up out of exports. So the export is something we are not tracking very, very diligently for the textile because domestic market is growing at a very low single-digit kind of a number for us. So all this growth is mostly coming out of exports.

Got it, got it. So textile domestic is still not growing for us.

Not really -- yes, not really the way we would want it. It's for us at about 5%, 6% kind of a number.

Got it. Second, on the Buzil Rossari, where we tend to invest a lot and growth is coming in. A lot of this margin expansion is because of Buzil because that will have 50%, 60% kind of a gross margin. I can understand at the EBITDA level. But at the gross level, that should boost margins, right? And hence, why we see gross profit margin growing so sharply in ex of the stand-alone business, while it's still not translating into EBITDA growth?

So see, the Buzil Rossari business, as we are expanding, we are introducing a lot of new products. So we introduced products for these segment disinfectants, hospital segments. And we have -- as we have talked earlier, so we are trying to get into a complete hygiene solution kind of a company. So just selling chemicals to the institution is not going to really propel the growth. Because we segment -- the Institutional Cleaning segment includes all sorts of cleaning, and most of the institutions want a complete solution. So you'll have to give them cleaning equipment, you have to give them tools, some machines also for cleaning, you have to give them products like cleaning tissues, papers, everything. So now as this business is growing, a lot of these products are also getting added apart from the cleaning chemicals. So while earlier when we are pure chemical cleaning company, we used to have margins -- gross margins of 50%, 55%. Now with this entire basket coming on, the gross margins have come down to closer to 35%, 40%. So that's why the -- this expansion is not really completely at that 60% kind of margin levels.

But Ketanji, then this business is becoming more trading from manufacturing for us, right? Chemical, we are backward integration. For equipment, paper, tissues and all, we are just buying from somebody and selling it. We will become trader, right? I understand...

[ The EBITDA...]

[ EBITDA ] will be much higher because there is no investment to it. EBITDA is a cash flow for us. But purely from the business mode perspective, this transition is not so great. That means the quality of that 50% growth in Buzil Rossari is more coming from the traded products.

Traded or -- we are getting at all [ job ] through some companies. But the way this business is going to grow is once you have these other tools and equipment supply, that's when the chemicals also start going to these institutions. So this business just per se chemicals will not grow. It will remain at that INR 50 crores kind of level. For this business to completely grow as a consumer-based business, we'll have to give this higher set of services, and that is what the competition is doing. So we have to match what the competitors are doing. We'll have to give this entire market and the entire service. And that's where finally, as a consumer business, this will bring in value to that.

That's fair. That's fair. And on the earnings growth side, I completely appreciate the revenue growth where we are delivering probably in a challenging market, we are outperforming. But when it comes to earnings, I think we are catching up on the investment and hence, it's dragging the PAT. Do you think FY '26 will be a year where we will at least start growing the PAT at the rate of revenue growth?

See, that is what we are expecting. But now, as Mr. Chari just said, we are still waiting feedback from Reliance on the -- on where your capacity is coming. So if those capacities get delayed by a quarter or 6 months, then we could -- our plans of bringing in that additional revenue and margins with the additional capacity could be -- could slow down a little bit and could get delayed. We'll get a better hang of this probably by the end of this quarter or early Q1 that what Reliance is planning to do with their EO expansion. So we have timed our CapEx closer to what we got an understanding from them that their expansion is going to come.

No, no, I understand you said this when you made the announcement on the CapEx that our CapEx will come in line with Reliance's expansion on ethoxylate, which is our EO. Assuming they get delayed by 6 months, do we have any other option in terms of procuring EO? Or we have to just run an underutilized plant?

Yes. So we do not have any option because Reliance is the only supplier of EO and we cannot import or transport EO. We are already discussing with Reliance, so -- and we are asking them for a higher share in terms of the EO that they have given us this year. So as I said, we will get complete clarity on this probably later end of this quarter or maybe early next year whether they will allot us additional quantities of EO or not.

Got it, got it. And one last point. You said that we have moved to a new office. Congratulations on that. And 2 new warehouses, which has led to the depreciation, amortization and interest cost, which has gone up. Can you give us how much has that added the cost below EBITDA?

So this quarter, if you see, we have this office that we took, and we also took 2 warehouses near our plants. So one for Rossari in Unitop and one for our Institutional Cleaning business. So all these 3 leased properties, the impact of -- under the Ind AS come as an asset and then charge-off in depreciation. So we had a 6-month -- 9-month charge, which has come in this quarter. So there is a onetime charge in depreciation of about INR 1.5 crores, INR 1.6 crores kind of a number, which has come in this quarter. Going forward, the charge that will come in depreciation will be about INR 1.4 crores kind of a number. So if you see in totality this year -- this quarter, we've had a total charge of about INR 3 crores in depreciation, out of which about INR 1.6 crores is a onetime change.

The next question is from the line of Bhavin Soni with Anand Rathi Share and Stock Brokers Limited.

I just wanted some clarification on which geography specifically contributed to the growth in Textile?

Yes, for the Textile, we have focused on 3, 4 geographies in the last quarter. One of them is Egypt, the other is Turkey, and the third is North Africa. So these are the 3 geographies that we are focused on. And fortunately for us, the Bangladesh business where we have a new leadership in place, they have also performed well. So even though Bangladesh was a bit disturbed, but still the orders were good from Bangladesh, especially because the new leadership has penetrated key accounts. And so these orders are also expected to be stable in the near future. And as the dollar crisis in Bangladesh becomes better, I think Bangladesh will also contribute to growth of Rossari exports.

Okay. And just wanted some clarity that you had mentioned that you want to make Bangladesh INR 100 crores geography in coming years. So is that target still intact?

Yes, the target is intact. The time lines have changed. So our plan initially was to do at least INR 3 crores to INR 4 crores of monthly target of -- in Bangladesh by the end of this year. So we have yet not actually reached that target because of the issues that are there. But we are working on some other plans. So we have plan B to address Bangladesh. So we are working on that. So our goal of INR 6 crores, INR 7 crores of monthly sales to Bangladesh is still there. I think it will take a little more time now given the current situation there.

And sir, with respect to the Institutional Cleaning business, so since you mentioned that it's contributing very less on the EBITDA front, so what are the targets with respect to where you want to reach on revenue trends in 2 years? And then how can it contribute in a positive manner to the EBITDA like at what time will it contribute positively?

So in 2 years, we want this business to be double of what it is today. So our 2-year target is, if you see, we should be closer to INR 450 crores, INR 500 crores kind of a revenue. And we expect that once it reaches that number, it will start contributing to the EBITDA. At least currently at INR 200-odd crores, we are really at EBITDA breakeven. A lot of expenses we've already factored in, in this number. So once the business reaches a size of, say, about INR 500-odd crores, we should see some good EBITDA numbers coming out of this.

The next question is from the line of Ganesh Nagarsekar with Bharat Bet Research.

My question is regarding the textile recovery this quarter. So as you said, the domestic textile business is not kind of growing too fast. So how sustainable do you think the broader recovery in the Textile segment could be? And over the next few quarters, do we have some visibility about how this segment could perform?

So thank you for the question. In the Textile business in the domestic market, we are focused very strongly on the product mix, especially the Institutional Chemicals. And this quarter and the next quarter, we will be paying additional attention to the pretreatment segment because of our backward integration into surfactants. So we have this advantage of our own in-house surfactants manufacturing. So we have strategized that in the next couple of quarters, we will focus on the pretreatment. So here, we have gained traction which have contributed to volumes. However, value is under some pressure. But because the success comes from corporate customers in these segments, in the pretreatment segment, where there are continuous bleaching ranges, continuous dying and printing. So there, the corporate customers, the business is very sustainable. And the corporate customers demand a particular -- they demand a particular quality. And because of this demand,and Rossari's ability to provide that quality, we are confident that the growth is going to be sustainable as this business comes from key corporate customers. So that is as far as the domestic business that goes. Like I said, in Bangladesh, in Egypt, we have a new leadership. And because of that, we've been able to crack or penetrate a lot of key accounts. And the customers in these countries are large. That means they may be double the size or 4x the size of customers in India. And therefore, that has given an impetus to grow in these countries. And again, just like how we can sustain customers in corporate customers or key accounts, this business is also going to be sustainable. So that's the idea. And besides this, the company has also planned to enter the spin finish business for synthetic fibers as well as regenerated cellulose. And we are well on track with this product range. And in this quarter, these products are going to be launched. Whereas another initiative which the company has done is to produce all the silicon-based raw materials in-house. Just like the surfactants, we have backward integrated. And finally, now we produce all silicon-based products in-house. Another segment that company will focus in the future is for coating chemicals in the technical textiles as well as the silicon wax lubricants. So in all, we see that we are very positive about the growth in the Textile business.

Understood. And sir, just a follow-up question on this. So you mentioned in the mix, we are focusing on the finishing chemicals segment. So this is typically a higher-margin segment, if I understand correctly. So going forward, will this be a larger part of our mix? And will that incrementally help our textile margin?

Yes. That's one of the reasons that we have grown in textiles because of being able to penetrate large corporates with our finishing products. And the product mix offering will tilt towards finishing chemicals. Having said that, we will also be very competitive in the pretreatment segment because of our backward integration into our own surfactant manufacturers.

The next question comes from the line of Nitin Gandhi with Inoquest Advisors Private Limited.

Yes. I would like to understand like what is the team's spend, which we have done who yet to start contributing to the revenues. You said like the expense, salary expense and other things have gone up, but if you can quantify to help us out of 120 or 70 people for others and institution.

No, I have not got your question. Can you please repeat?

Yes. Okay. Let me reiterate. During the commentary, we were told that approximately 190 people have been hired, 120 in institutions and 17 other. And some of them are yet to start contributing to the business because they are expansion related, which we are coming up in the next quarter and the quarter thereafter. And -- so basically, they are doing the events and other things. So I just wanted to know what is the amount spent on these people for which business is yet to flow?

Yes. So some of the 110 people that have joined in the consumer business, they have joined over -- between last year and the current year. So we have -- we are expecting much more contribution from them in terms of top line and revenue since they have just joined over the last -- some of them have joined recently, some have joined last quarter. So their actual potential will start showing in the next few quarters. So that's what we said that a lot of investment in people has gone up. And we've also added people in R&D and projects. So they -- some products are coming in, some products, they will start contributing and developing as the projects come up. So I cannot quantify that exactly in terms of numbers that we will give how much.

Okay. So there are a team, which is yet to be for the new products of the new expansion. It's already institution, which is existing that I can understand which will move from INR 200 crores to INR 450 crores over the next 2 or 3 years. But besides that, is there a team which is yet to have the product or something or there's nothing like that?

No, no, there's nothing. We have, as I said, brought in people in R&D and in projects. So these people are in the process. They will be -- new products will come up. We cannot quantify that number. If somebody -- as a scientist is working in R&D, he may bring in one product. Next quarter, he may bring nothing. Next quarter, he may bring -- develop 5 products. So a lot of these investments are keeping in mind the long-term growth story. So that's what we've meant when we talked about this.

Okay. So post the expansion, 2 units which are going in next 2 quarters, what is the peak revenue potential at existing prices?

At peak capacity, they should be closer to 4x the asset turn.

No. So can you quantify the blocks? What is the total amount spend there?

It's about INR 140 crores.

Okay. So INR 140 crores to maybe INR 550-odd crores will flow from that side. And institution will give an additional, right? INR 200 crores?

Yes. Yes.

The next question comes from the line of [ Tikshan ] with DB Wealth.

Am I audible?

Yes, sir, Please go ahead.

Congratulations, management. We are as well also looking for growing opportunities in these environments. Firstly, is my question on our expenses. So do you think that on our employee benefit expenses and as well as other expenses, is it the peak of expenses that we are seeing? Or do we think that we need to spend more in order to cultivate our relationships for the new businesses?

See, people cost is such that as we grow, we'll have to keep adding resources, and resources will not only be in marketing, but also in other functions like production, quality, R&D, et cetera. So for me to say today that this is going to be the peak of employee cost would be a little difficult for me to say. But at least for the next couple of quarters, I think we should be around the same number. Once the projects come in and as they come in and as we -- also as we grow the overall market in other geographies, we'll keep adding a few people. But maybe the rate of adding people would be slightly lesser than what we have done in this year.

Of course, of course. I mean, in order to grow, we must use our resources for sure. The idea of asking the question is that is this the sort of expense that we can -- plus/minus 10%, I mean, on the plus side,for the next 4 to 5 quarters. Do you think that this is the kind of expense plus 10%, 15% maximum that we can expect in the going 4 to 5 quarters?

Yes. At least for the next year, we should be around this range, plus/minus 10%. Yes.

Got it, sir. Sir, the next question is on front of a capacity utilization for HPPC, [ TSC ] and AHN, could you like just give us a breakup of what is our current capacity utilization? I'm asking this, of course, post our CapEx cycle has been completed.

So currently, if you see in our ethoxylation business, our capacity utilization is almost close to 80% plus. So if I break it down in terms of the companies, in Unitop, we are almost at 80% -- 80%, 85% capacity utilization. In Tristar, we are at about close to 90%, 95% capacity utilization. So in the core ethoxylation, we are almost fully utilized in terms of capacity. So that was the reason why we decided to set up this new ethoxylation capacity. So that was the plan.

Of course. And sir, on our CapEx right now, how much capacity are we looking to add? And what could be our utilization? I see from our last conference call, we had said that in Q3, Q4, we've been revising -- we'll be looking at how much more capacity to add. Could you give us some color there?

So we are adding about 30,000 tonnes of ethoxylation capacity. As I said, it will take us about 3 years or so for these capacities to get fully utilized.

Got it, sir. Got it. So when can we see the new capacity actually starting to take the actualization on numbers in our book? I'm not saying from a revenue side, but maybe from a cost side because, of course, adding new capacity will lead to maybe more cost to us on a running basis, right?

Yes. So the revenue should start showing up from Q2 of next year.

Okay, sir. Okay, okay. Sir, last question is basically, apart from our Institutional Cleaning customers that we're focusing on, what other growth drivers should we be looking for in the coming FY or in the coming 5 to 8 quarters?

I think in terms of growth areas, apart from the Institutional business, export is a geography that we are very keen to grow. We've seen a good growth in the last few quarters. And that's going to be one area where we're able to push products across all our verticals. So both HPPC and Textile, the growth in the coming quarters will mostly come -- at a higher rate, it will come from the exports. We already, as we discussed, setting up in the process or have already set up various offices across key locations, where we think could be the 3 business hubs. So for Textile, we are looking at Southeast Asia, Vietnam, Thailand on setting up offices. And for both HPPC and Textiles, we are also looking at Turkey, where we are -- we'll be soon setting up a base. And when I say base, I mean, we may have an office with people over there who can help in the business development. We already set up in [ there ]. So these are some of the initiatives which we are taking, keeping in mind the growth that we anticipate in the next 5 years. And as I said, a lot of this will happen through the traction we get from the export market.

Amazing, sir, amazing. Sir, just a last follow-up on the particular export front that you have mentioned. Do you think that this for us -- the next 4 to 5 quarters is going to be for us consolidating our forces and expanding on the exports. So the numbers we might start seeing maybe at H2 of FY '26? Or is it going to take some time?

You're talking about the export growth?

Yes, sir, because we are just starting the ramp up. So just...

So yes. So you are right. We will probably start seeing some good traction H2 onwards.

The next question comes from the line of Rohit Nagraj with B&K Securities.

Just a couple of bookkeeping questions. One is what was the exports quantum during this quarter and for the 9 months in absolute terms?

So Rohit, this quarter, we have done about INR 156 crores of exports. And for the 9 months, we are at about INR 405 crores.

Right. And one last question, in terms of the debtors and inventory, how it has changed over the last 3 months? Have there been any material changes post the first half?

So debtors have been slightly better for us. We have -- debtor days has come down about 4, 5 days, it has come down. Inventories are still high. We have maintained some high inventory because we were getting some raw material at good pricing. So as of December end, we had slightly higher inventory levels. But hopefully by the end of the year, we'll be able to streamline the inventories and the receivables for the -- bring it in line with -- or better than what it was last year.

Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments.

So thank you, everyone. I hope we have been able to answer all your questions satisfactorily. Should you need any further clarification or would like to know more about the company, please feel free to contact our team or CDR India. Thank you once again for taking the time to join us on this call. Good evening.

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