Tata Chemicals Limited (500770) Earnings Call Transcript & Summary

Good afternoon, everyone, and thank you for joining us on Tata Chemicals' Q3 and 9 Months Ended FY '21 Earnings Conference Call. We have with us today Mr. R. Mukundan, the Managing Director and CEO; Mr. Zarir Langrana, Executive Director; and Mr. John Mulhall, Chief Financial Officer. We will begin this call with opening remarks from the management, following which we will have the floor open for an interactive Q&A session. Before we begin, I would like to point out that some statements made in today's discussions may be forward looking in nature, and a note to this effect has been stated in the invite sent to you earlier. I now invite Mr. Mukundan to begin proceedings of the call. Over to you...

Thanks, Gavin. Good afternoon and welcome to our Q3 and 9 months ended FY '21 earnings call. I'm joined by my colleagues Zarir Langrana, our Executive Director; and John Mulhall, CFO, on today's call. I will start the discussion by highlighting some of the key operational development across our business, post which John will discuss the financial highlights for the quarter. Q3 on an overall basis was fairly stable quarter for us which showed a sequential improvement in the business following resumption of trade and commercial activities around [indiscernible]. Utilization level as well have started trending upwards with pickup in demand. Broadly speaking in terms of the segments, I will go into each one of them later. We are -- so broadly, what I was saying is that we are almost back to our pre-COVID levels in product segments. I will also speak about some exceptions which still are there which need to move forward into the next phase, but certainly as we look at them, the next quarter, I think we could probably safely say most business segments would be at par in terms of their volumes and numbers. Getting into specific segments and specific product areas. The -- if we look at our performance material area, where we have the soda ash as the main business. The soda ash has performed well during the quarter. And there's been a pickup in demand in all industries, in the end-use industries. And this, we have seen in all the domestic markets, especially domestic market in India, domestic market in U.K. and domestic market in U.S.A. They have continued at a fairly high utilization level and have clocked pretty similar to what the normal trend has been in the previous year. In terms of the TCNA performance, where we have the export as one of the key elements of their production volume and sales volume, the exports continued to have a subdued demand because the key export markets are still some distance away in terms of the volume growth to catch up with the previous year. We do expect that, by the time we go to Q4, that trend would have also caught up broadly. One of the key elements which happened during the quarter was on 31st of March (sic) [ 31st of December ] we did announce an exit from ANSAC, which will be effective from 31st December 2022. And broadly, I will say that nothing material would change for a couple of years, post which -- during which time we would have a transition phase where we will be ensuring that we get into direct -- connect with our customers and also build supply chain. And this allows us to build a bridge directly with customers and engage in a manner that we are able to use all the tools available with us in terms of ensuring customer intimacy, customer proximity; and also have more aligned businesses around the -- across the globe. In terms of Magadi, I think, while the container glass volume has improved, we do believe that it's got further scope for improvement. While they've done financially well within the current volume they've done, we do believe that it's got further scope to improve, especially in the Southeast Asian markets where the tourism pickup is beginning to happen slowly and will take some time. So overall, the way we see it is that the business is -- was already back to normal in the domestic market where export markets are there. The U.S. business also should get back to the normal clock speed by the Q4. With respect to the businesses in silica, which is part of the performance material, the market traction has been good. The response from our customers in rubber and tire has been good. And we will be looking at -- and this 10,000-tonne capacity which we have pilot foray into the business. We will be taking further expansion of capacity, and land for that has been already allotted by Tamil Nadu government. So we will come up with specific numbers in the subsequent quarters with respect to the capacity expansion plan and the investment and the return ratios on that. With respect to nutrition science. Salt has done well, as well as bicarb. And the volumes have done -- tracked better than previous year and margins have held up well, and this has been both in India and U.K. Bicarb business both in India and U.K. have also delivered good and healthy performance because they go into food and pharma sector. And they continue to be a greater portion of what we do in terms of as we switch the alkali business to more and more bicarbonate and, within bicarbonate, to higher-value food and pharma segments. And that would improve the margin profile in the U.K. going forward as they switch their product profile. In terms of the fermentation products which we have within India. So food, we have 3 platforms. One is the inorganic chemistry platform, which is basically salt, edible salt; and the pharma salt; and the sodium bicarbonate, which is also part of that same inorganic chemistry. The second platform we have is fermentation platform. And the fermentation platform, our business, has done well, especially with respect to FOS, the oligosaccharides. And the business continues to grow. And in fact, if we look at the overall number between silica and the specialty products, we had guided a number of 100 crores. That has been already crossed in the 3 quarters, and we expect it to do even better in the -- by the time the end of the year. And next year, again, I think this will clock a very, very high growth rate off a low base, though. And we are intending that this business should at least more than double going into the next year. In terms of agri science business. The performance [ of Rallis has been encouraging ] during the quarter. While the international growth has been strong in domestic business, international business has recovered well. We are undertaking required investments to enhance the product mix to reduce dependency in terms of sourcing of raw material and making sure that we don't have bottlenecks on their account. In terms of any -- the CapEx plan, which we have highlighted, which John will also highlight. Mithapur expansion plan is progressing well. And we have the CapEx spend, which we have already highlighted to you, of INR 2,400 crores. We already committed INR 800 crores, and balance will be spent over the next 2 years. And all the equipment orders and all the civil contracts have been done already, and they're all in the pipeline to be delivered to the market. Part of the revenue, very small number, will be coming in, in this year, towards the end of this year; and real notable value will come -- when I say this year, it actually means that -- the budget year which is happening in '21, '22. And bulk of the -- some revenue would also kick in, in '22, '23, and the full utilization will be in '24, '25. So broadly you would see that a substantial part of the element getting -- coming on stream between '22, '23 and '23, '24. And it will be in almost equal steps in terms of the revenue impact as well as in terms of the bottom line impact. Overall, we estimate that it will be about [ 1,400-odd ] crores of revenue and about 600 crores in terms of the contribution and slightly less than that in terms of the EBITDA and EBIT numbers. So to conclude. I will say that the business environment is steadily improving across geographies. We are well positioned to deliver consistent growth. And the business segments we've chosen are absolutely the right ones in terms of making a shift away from what we would call a slightly commoditized business between soda ash towards more value-added business within the inorganic chemistry and the new chemistries we've chosen to play in. And lastly, I just wanted to highlight that the -- our approach in terms of certain elements in terms of energy science. We have said that this is a very nascent business at this stage. We are here to firm up any plans on scaling up and we have not undertaken any major investments in this area. We believe electrification as a theme will be very strong going forward, but we will come back to you specifically on that piece of business only post presenting alternates and issues to our Board and our Board also agreeing to move forward in a direction which is comfortable for the company. So I will just emphasize that the CapEx investments which have been committed up till now are essentially towards the performance material and towards the nutrition science and to agri science, and that is up to the plans which have been cleared by the Board. With these words, I would like to now invite John to comment with more details in terms of financial numbers and walk you through the specifics of the financial performance. Over to you, John.

Thanks, Mukund. And good afternoon, everyone. As usual, I will go through a few highlights and clarifications before we get into [ the live ] Q&A session. Now that the timing of the dividend receipts, [ et cetera, were done through ] quarter 1 and quarter 2, we can really see the underlying gap in deposit income due to the falloff in rates. Of the reduction of -- in other income on a stand-alone basis of INR 9 crores, fixed deposit and mutual fund income held 15 crores in the quarter against the same period last year, but we did have some compensation through increased rental income and guarantee fee income. And on the consolidated statement, [ nonoperational ] income was down 15 crores against last year, again mainly the fixed deposit and mutual fund income. The rates have fallen substantially against last year and even against the first quarter this year. Operationally, the business has proved -- improved over quarter 1 and quarter 2 this year but, as expected, still lags the FY '19, '20 performance. Volumes are recovering in all regions, though pressure still remains in pricing and ultimately in margins. For the stand-alone business, quarter 3 production and sales were above last year's quarter, the first quarter this has happened, but net prices in India still continue to be under pressure. The adverse price bands in the quarter on soda ash alone was just over 30 crores against last year. And year-to-date, it's almost 100 crores, but interestingly prices in quarter 3 are pretty much on par with quarter 2 this year, so that price pressure seems to have stabilized. India soda ash volumes were up 10,000 tonnes in the quarter, improving on the quarter 2 variance which was 3,000 tonnes below quarter 2 last year. And on the flip side, sales of salt were up nearly 50,000 tonnes over the same period last year, and we continue to see a strong pull in that segment. Sales improved from our nutri business unit, up 20 crores over last year on higher volumes and disappointing insurance claim referenced last quarter relating to the flood in Mithapur. It remains under process, and we continue to provide appropriate insurance to the [ loss adjusters ]. From an international perspective, the market pricing related to really surplus volume continues to impact Magadi operations in Southeast Asia. Although contribution is better than last year by over $1 million, this is more to do with the poorer quarter 3 FY '18, '19 in volume terms. In the U.K., salt and soda operations were pretty close to last year better pricing in soda ash and bicarbonate. And improved energy costs, any costs, across both operations actually gives a better contribution than last year by over GBP 1 million, but it's in the U.S. where we've seen the biggest impact of volume. The operations there continued to experience volume-price issues in the international market. Domestic is okay. Overall volume is down 95,000 tonnes on quarter 3 last year, the same variance as quarter 2 versus quarter 2 last year. And pricing does remain under pressure. The price and volume variance against quarter 3 of last year was around $15 million adverse, but an important point to make here is that the U.S. production has increased within the quarter to 496,000 tonnes against 453,000 tonnes in quarter 2 and 372,000 tonnes in quarter 1. So the production is coming back up again. Working capital has improved. Stand-alone reported a negative working capital in the quarter of 11 crores and a 130 crore improvement over quarter 2, while consolidated working capital was up slightly at 31 days from 2018 quarter 2. That's really due to both inventory builds in Rallis and TCNA. As I said, we're expecting a stronger quarter from volume terms than we had in quarter 3. Our India cash position of cash, mutual funds and bank deposits moved to INR 1,965 crores in December compared to INR 1,817 crores in September. Capital spending in the quarter was 111 crores against 187 crores last year, again mainly in Mithapur, as Mukund referenced. Year-to-date CapEx is 343 crores against [ 530 crores ] last year and 694 crore for the full year to March 2020. On a consolidated basis, we had INR 3,118 crores of cash at the end of December, up slightly from September 2020's balance of INR 3,039 crores. Net debt was INR 3,743 crore, pretty flat with September's INR 3,767 crores. And consolidated CapEx was 232 crores in the quarter against 274 crore last year. And year-to-date, we've spent 776 crores against 898 crores last year. So with that, I'll close my comments and pass it back to the moderator to open up for questions. Thank you.

[Operator Instructions] The first question is from the line of Sumant Kumar from Motilal Oswal Financial Services.

So can you please discuss about the -- more about the export business scenario in U.S., particularly [ latter ] market?

Okay. So just I wanted to say that I -- what I've mentioned, I'll continue to mention again without getting into specifics. The shortfall for Q3 is real that John alluded to and bulk of the shortfall in the TCNA volumes because TCNA is the one that serves the South American market largely and it goes through ANSAC. And we won't be able to get to know exactly what proportion went because, that part, as I mentioned, we don't have a direct visibility, which is one of the reasons why we want to be having a direct visibility into market by having direct connection with customers. And that was an agreed pathway with ANSAC to sort of move forward in terms of our marketing aspirations. So right now we don't -- but all we can say is that the shortfall is primarily coming from there and partly from the Far East and the Southeast Asian market where the material goes broadly [ out of band side ]. In terms of the numbers we have at least for Q4 and our understanding of the market, we are -- we will be back to where we were in the Q4 of last year. And all this is, as you know, with one ship leaves early or later, so it may be slightly ahead or slightly -- but it's going to be there and thereabouts by Q4. And we believe, after that, the market will almost be pretty much the same place as the -- in terms of the volumes. So in terms of international market. As John already alluded to, there are margin pressures because the cost and price are not moving in sync as we speak. The -- and the only way we can address the margin pressure is by focusing on cost efficiencies and cost improvement, which is what we are doing. Albeit that, I think the current-year contracts around the world have been at a lower realization than what they would have done before, and this varies from market to market. And Zarir, do you want to sort of input that of what really is deal contracted already? Over to you, Zarir.

Thanks, Mukund. So as Mukund mentioned, while we certainly are seeing demand recovery across markets, both home and deep-sea export markets, typically prices tend to lag recovery, demand recovery. As there has been pressure on pricing in the last quarter, we expect it will continue into perhaps Q1 and Q2 of calendar year. Contracts seem to have settled in, depending on markets, Southeast Asia and Latam, maybe about $10 to $12 lower than the 2019 pricing. In India, we've seen some pressure on pricing that John alluded to, but I think, as Mukund said, as demand recovers, with a lag, pricing will also recover because in many of these markets pricing is on a quarterly basis. So the freedom and to -- and the scope to move pricing up typically happens with the lag of maybe 3 to 6 months.

How is the China, the -- soda ash market? How is the supply scenario? You were talking in the past that supply is going to be lower. The smaller -- a smaller plant is going to be set. So can you discuss about that?

So I think that is still playing out and it's playing out more or less in the direction that we have indicated. We have seen plant closures not just of some small plants but some of the larger plants that are under environmental regulations. They have kind of shuttered. So last year, we saw about 1.2 million tonnes coming off. China domestic demand has recovered, especially on float glass; and specifically on glass -- solar glass, so glass for solar panels. Auto demand is back. Chinese exports have tightened up a little bit, all of which has led to an increase not just in China domestic pricing but also in China FOB pricing. As you all might be aware, container rates have gone up significantly out of China, and a lot of Chinese exports is on -- is done through containers, all of which have kind of impacted China supplies into the export markets. Chinese inventory, which at one point had touched close to in -- 1 million, 1.65 million tonnes, we believe, is now down to about 8 lakh tonnes, 800,000 tonnes.

Yes, just to supplement that: I think the -- going forward, the key element in international player, as far as the what we call deep-sea markets, which is markets where there is no domestic production, it's going to be played between the Turkey and the U.S. players largely. And that play is what is going to determine the international pricing, not the Chinese numbers. They will have a role, but it's not going to be substantial in terms of the way the markets move. Zarir, do you want to add anything to that?

Absolutely, absolutely. In fact, we've seen the effect of China on international markets for soda ash over the last 4 or 5 years has been -- consistently been -- has consistently been dwindling primarily because of the strong demand in their own domestic market and the realignment of supply and demand in the domestic market. Absolutely right, Mukund. The 2 contenders that will set international pricing would be North America and Turkey.

Any update on bicarb CapEx in U.S. and U.K.?

No. In terms of the bicarb CapEx in U.K., I think it's on schedule. I think the investment is proceeding as we planned. We've had a small incident of flooding in the beginning of the year. There was a storm which the Manchester costs had to hit, so there may have been -- there probably is going to be a delay of a week or so, which we will see how much we can capture, but we don't anticipate any large changes on that number. As far as U.S. is concerned, I think plans are under evaluation. I think we -- as soon as there are -- anything is confirmed to that nature, we will come back to you. We are currently evaluating our plans and looking at where to sort of set these elements. What we have done in the meantime is we are also set out to convert part of the CRS which we make in Magadi into bicarb within India. And if that process comes out to be more positive, then our plans may be that we add capacities closer to market. The Asian market is the one which is growing. And bring the material from international market into India to process it for the markets which are growing, but leave it with us as an issue. We will come back to you specifically on the U.S. case which you're referring to, where and how it will get implemented.

When the U.K. bicarb is going to start -- okay, just a follow-up question of when the U.K. bicarb plant is going to come.

Zarir, do you want to address this?

Yes. So as Mukund said, there has been a slight delay, but I think our carbon capture units in the U.K. should be up and running maybe by April or May of this year.

Bicarb.

Yes, the carbon capture that moves into bicarb, that's right.

[Operator Instructions] The next question is from the line of Madhav Marda from Fidelity.

My question is just that we are seeing a bit of commodity cost inflation across the board. And then some of our contracts are seeing a bit of pressure, at least near term, so could we have for the next couple of quarters some margin pressure on the soda ash business? Is that a fair assumption to make?

I think that's absolutely fair assumption to make. And I will say that that's what we've said very clearly, that -- the only thing you need to factor in is that we do have -- similar to the contracts which we have signed, as Zarir highlighted, there are annual contracts in -- mainly in U.S.A. and U.K. Rest of the world is in quarterly contracts. So as the world begins to absorb the material which is coming on stream and as demand keeps doing -- tends to move up, the pricing will then move in tandem with the cost structure. And our understanding of that point where this will be reached, with the current pace of the pandemic and restarts and the second wave and we put all that together, including vaccine and everything, we believe it is likely to be somewhere in the region of Q2 of next fiscal year. And that will be the best judgment in our view. Now that clearly means some of the contracts would start resetting on -- which are on quarterly basis would start resetting and where we will be able to claw back some of the margin pressure which we will face in the internal. As far as the U.S. and U.K. are concerned, there are annual contracts, but they are also backed parallelly with annual contracts on the energy side. So I think that commodity pressure, to an extent, in those businesses are to the extent what we alluded to in terms of those numbers, which Zarir already referred to. We don't see anything beyond that because, to the extent they are annual contracts, we also have the input materials in about the same proportion so that we don't leave ourselves exposed.

Okay, got it. And my second question was on the speciality products, if you could give us some sense in terms of by when we expect it to reach optimal utilization in the -- in both the new segments. And by when -- is there like any sort of thought process by when we announce a larger CapEx in each of them?

So the larger CapEx is certainly an issue for the silica business because the 10,000 tonnes is only a proving ground for -- and the optimal CapExes would either be 25,000 tonne additional or 50,000 tonne additional. I think we would certainly announce that during the course of either next quarterly results, hopefully, by then. We should certainly be coming back to you with specific numbers on that, or at least a very specific time line and a number so that you can at least put that in the planning process. In terms of the nutraceutical, also I think it may be a little longer because I think we do have some distance to go in terms of pushing the product and moving ahead with our customer engagement. And that, we would also come back to during the course of next year itself. In terms of the business scale-up, as I mentioned, our anticipated trajectory for this business was we were expecting to clock about 100 crores. We -- by the end of the year. I think we'll clock more than what we have anticipated. And going into next year, we certainly would want to keep an ambition of doubling that number, whatever number we get, or get close to double of that number. Because I think at a low base it's a good ambition to at least grow at 100%. In terms of the margin, we do expect at least the nutraceutical piece to turn EBITDA positive in the coming -- the next budget year. And the Cuddalore one, which is the silica piece, will follow once the new investment comes on stream and that capacity start get utilized. That's broadly the trajectory.

The next question is from the line of Abhijit from IIFL.

Just a couple from my end. One was with regard to the Mithapur plants. The outline regarding the new capacities coming on at Mithapur in the presentation was very helpful. I did, however, want some more color regarding the power cost reduction initiatives that are also at play there. I believe there are some turbine installation, et cetera, so could you possibly give us a schedule for when that might happen and when and how much we could expect a reduction in power cost consequent to that?

So I think the question which you're asking is there's a blended power which will happen broadly because, I think, whatever incremental power we are putting, we needed for the expanded capacity. So I'm not aware whether any of the current generator turbines are going to be decommissioned and new commissioning going to come. And if at all there is going to be any change, you can link it to the input energy prices directly. So I would not move in that direction. And our plans, at least in terms with the financial planning model, don't assume any movement beyond that the expanded capacity also would produce power around the same costs as we are incurring today, assuming the coal and gas prices remain around the same number. So I hope, that piece, I've addressed. And in terms of the volume numbers, I think, to the best understanding, we have already shared that in the presentation for at least giving a greater visibility to you where the project is. The CapEx rephasing which you see in vacuum and bicarb, that's largely driven off a constraint which we are having in terms of power and steam. And that's why they've got pushed a little bit. And overall, I think, rather than getting to specifics of what these numbers would be, I had already mentioned that our current understanding is that this is -- all put together, when all these units are firing in the sense that they are sending the products to market, there will be incremental revenue of about 1,400 crores and incremental contribution of 600 crores, with some marginal costs being adjusted for some increase -- some margin or increase in the fixed costs and some depreciation. That's broadly the number.

Got it. That's clear. And my second question was just with regard to the performance of a couple of subsidiaries' quarter. So the U.S. business has reported surprisingly strong margins. I believe EBITDA per tonne was almost $45 even though the business hasn't really recovered fully in terms of volume. So just wondering what happened there. And similarly, IMACID, I was actually expecting better profits given that phosphoric acid prices have been so firm, yet it doesn't seem to have done as well as I thought. So any color you could provide there?

So IMACID, I think, would -- I think you should wait for the IMACID numbers coming next quarter, to take a view on it, because I don't want to give any forward-looking view. Certainly the market was fairly difficult in the first half, and it has started improving and it is probably doing well in the current period. The issue fundamentally for IMACID has been that the offtake in India for its phosphoric acid has been an issue that the -- one of its customer which used to be our Haldia unit, we have sold it, as you know. We have exited the business. And that, the loss of that unit, they need to figure out who will be the customer they will need to support. As of now, they are doing tolling with OCP, which is our joint venture partner. And that tolling has a lower margin than what we would get if we bought the material [indiscernible]. The team is actively working to resolving that issue over a period of time, and that will explain the margin issue. Not because of demand, but it's basically one large customer which was our unit is no longer there as a customer because we have moved out of that business. But the numbers will continue to improve. It is not as difficult as it was in the first 2 quarters. The second question of yours, with respect to -- sorry. Could you repeat that? What was it?

Yes, this was the U.S. business which reported surprisingly strong margins.

U.S. business, I would request John because there was -- John did allude to the insurance claim which came in this quarter. John, do you want to add to that?

Thanks, Mukund. Yes. I think there are probably 3 things that are going on here. One is a focus on fixed costs management; higher production in the quarter, slightly better [ off that recovery ] both in the mine and in the surface operations; as well as we got about 27 crores of insurance received, as we did -- some issues we had in November 2018 and March 2019 come through in the quarter as well.

The next question is from the line of S. Ramesh from Nirmal Bang Equities.

So if you were to look at the next 2 years, what is the kind of sense you have in terms of the soda ash volumes edging close to the peak volumes you've done in the past of maybe 3.5 million to 3.6 million tonnes per annum? Is that something which we can do by FY '23, or will it take maybe another year?

So I would only say that it may be earlier than what you say, but in terms of margin, as Zarir highlighted, the trajectory would start following. From Q2 of next year, it starts moving up on the pathway in terms of the pathway to the peak margin. Now in terms of the way I would look at the numbers, this is broadly, I think you should look at a combination of bicarb and soda ash together because what's happening is some of our units are actually moving actively to convert their base product into bicarb, which is more value added. And if you look at that, certainly we will be doing better than what we did at our peak because that conversion also helps us in terms of tonnages which we can extract. So that's where I would leave this point.

So if you're looking at the conversion of soda ash to bicarb in the U.K. of, say, over the next 2, 3 years, would you convert the entire thing? What is the proportion of soda ash volumes that is going to bicarb in the U.K.?

The -- see, the point you are mentioning is that there is -- for example, when we bring CRS from Magadi to Mithapur and we use that as a base material to convert to bicarb, we are releasing the soda ash which was being used for converting to bicarb for release in the market. So that adds to the quantity and that's one additional number. And every tonne of soda ash which is converted to bicarb gives us close to 1.3 tonnes of bicarb. So I think that is sheer stoichiometric equations which we can see. So Zarir, do you want to add specific to U.K. what the numbers are?

Specific to U.K., as I mentioned, we are on that expansion path. And one would imagine that, over the next 2, 3 years, we would continue on that trajectory, perhaps reducing soda ash by another 10%, 15%; and taking that similar stoichiometric conversion back into the bicarb [ space ].

Yes. Just one follow-up on the U.K. business: Is it possible to give some sense in terms of the contribution of salt in the U.K. revenues?

John, do you want to take that? Is that something...

[indiscernible]

Yes...

], yes. So it's probably about 1/4 of the U.K. sales.

In terms of value.

In terms of revenues.

The next question is from the line of Prasenjit Bhuiya from AMBIT Capital.

Ritesh here from AMBIT Capital. Sir, just one question on the soda ash bit. So did you say that, given that the volumes have started to recover in India and pretty much things are coming to normalcy, the pricing realizations will start improving sequentially in the upcoming quarters? And my understanding was there were a lot of contracts which were done annually towards the beginning of the year. So what's the status there? I mean, are you kind of delaying some of those annual contract signings to -- as more visibility comes in? Or is it a formula-based pricing or something like that?

So I think -- I have contracts with big customers. I think usually the behavior is, if market is having -- tending to go dip, they would certainly not sign up an annual contract. And if the market is going to go up, they would tend to sign up an annual contract to protect themselves from [ moot ]. So I think the very fact that most customers have signed up -- I think they too -- I think their view also -- they probably think that the market is -- would probably sort of tend to tighten somewhere during next year. So that gives you an indicator of where their data is coming from. Having said that, I think -- those customers with an annual contract that we have signed up, I think we tend to keep them as our base load. And our view is that those who are on quarterly pricing -- that those prices will start, as Zarir has already alluded to, by Q2.

Yes.

Understood. And just on the earlier participant's comment on the China bit: So you are saying basically that the production rationalization, et cetera which had to happen in China and -- probably we'll have seen as a good lever for soda ash prices to go up. Are you saying that the driver has already played out in a way that driver has been negated by increased capacities in Turkey, et cetera, starting in...

No. I think...

Sorry. Go ahead. Go ahead, Mukund.

Zarir, go ahead. Go ahead...

No. As I mentioned, that's still playing out. I think it might be another year, 1.5 years before it fully plays out, but as I also mentioned, the China impact on export markets has -- over the last 2 or 3 years may actually have been coming down. And obviously the reduction in Chinese soda ash capacity, which is our estimate is over the last 3 years it might be close to 2 million, 2.5 million tonnes, in a sense is beginning to now negate out the excess capacity -- not the excess, the new capacity that came up in Turkey, yes. And you might recall that, before the pandemic, there were already announcements in place in North America for expansions happening predicated off of increasingly tight market that people were looking at. So that might get delayed by 2, 3 years, but that's the general direction.

Understood, understood. And just on the battery bit: I mean in the newspapers at least, there has been a lot of buzz around recycling of lithium-ion batteries and a couple of initiatives actually on the battery side. So can you just highlight in terms of what's related there? And you made some comments in the beginning, but probably if you can just throw more light there. And how -- I mean, how are we looking at that opportunity? Or is it something that where we are going to tie up with automotive divisions within Tata Group as well, which is, let's say, Tata Motors, et cetera?

So on the battery recycling, that's a business which we think in any case makes sense for us to sort of move into because, I think, right now the battery, let's say, collection and recycling is a very small number coming off mobile and the laptop batteries, but that number only will go up as the population of vehicle increases. And it's part of work which we have done in terms of having a very environment-friendly process which we can execute. And we are doing what we call is a proving ground in terms of what technologies will be needed in future. Real volumes will come broadly 7 years after a battery is playing out in a vehicle. So India sold, let's say, 5,000 vehicle with batteries. 7 years from there, we would start seeing some part of it getting retired and getting into the recycling business, so it's really preparing for a business which will play out in the long run. Also, as battery manufacturers set up shop in India, I think they will need this recycled material because that is -- that saves them from the whole trouble of going into mining and getting the fresh extraction of fresh material. So that's the piece which we have already embarked upon, and our technical approach has worked well. And it will be a small business but could shape out to be opportunity which we will want to any way tap into because we have skill sets in that. As far as the battery business is concerned, as I have mentioned, I think that we would not make an -- we would not make any statement on that till our Board has reviewed the plan and has fully cleared those plans. We always review various businesses for business outcome. So this is another set of businesses which we will certainly keep on radar, but broadly speaking, I think we haven't reached a stage where we can come with specific numbers to you in terms of what that investment is likely to be or what that number is likely to be.

Understood, understood. And just one quick one on the silica...

[Operator Instructions] The next question is from the line of Rohit Sinha from Emkay Global.

Most of my questions are already answered. Just wanted to know 2 things, 1 on the salt business. I mean, this quarter, we have seen some strong number in terms of sales. And even the [ realizations ] part also, I think, there has been some uptick. So just wanted to know the reason behind the better [ realization ] there.

So I think it's a part of a structured agreement which we have. And I think part of that also would move -- would be countered by the costs which we will be incurring to deliver to the customer. So I think that's broadly the way it is. So -- and the 2 big costs in salt broadly are centered around the energy cost and the cost of logistics and, of course, the cost of getting that off the salt pans. So these are the 3 broad costs, but logistics is a big cost. So I think that really is the way one should look at that piece of business. And in terms of volumes, we've always guided that, that business would continue to grow because India has a huge unbranded market. The -- our brand now is with Tata Consumer, but we know that business intimately well and we know the pathway to that business. We have said that our current plan broadly takes us to something close to 1.5 million tonnes, and the -- but that brand can go even beyond that. So we are in the process of looking at even steps to be undertaken even beyond the plans we have shared. But those plans are built out beyond '23, '24, so we have not put them formally in the sheet which is shared with you.

Okay, okay, fair enough. And just on this previous participant asking about that vital part on the EV side or the overall lithium-ion batteries and what we are looking at. So just wanted to understand when -- I mean, as you said, I mean, for the replacement side this is, I think, a 7-year cycle, but apart from that, what kind of revenue contribution we should be expecting from the overall -- I mean, that battery part from next 2 to 3 years? And how much CapEx would be there overall, I think, if you can help us on that?

So we have already mentioned in several forums our approved business plan which we have from the Board gives us a line of sight close to about 16,000 crore to 17,000 crore of revenue, and that does not include battery. And we will not comment on a business which is not cleared yet by the Board, at least in the broad contours. We, of course, explore every business opportunity; and that, we will continue to do. And as and when we reach a stage which we can -- we have done all that and we've got the approval, we will disclose. Because it's a very significant disclosure input. And I think there is nothing which has happened in that business for us to make any disclosures in terms of those numbers. In terms of what are the capital needed in that business and what is the revenue, I think there are several public listed entities there which -- and nothing in India is going to be different from what other entities would incur.

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

Sir, can you provide some color on the global demand-supply dynamics on soda ash? And given that there will not be any new capacities coming in the next 1, 2 years, how would it shape up? And a concurrent question to that, at what price of soda ash the new capacities would be [ feasible ].

I think Zarir has already highlighted that the absorption of the capacity -- or if everything had gone -- I mean this is pre pandemic. If it had gone. The world was looking at a very -- tightening market. And hence, several people had announced expansion, which were all shelved because there was a sharp fall in demand. Almost 10% of the demand went out. On 60 million tonne, broadly 6 million tonne went out, and that's still coming back. So the key issue is -- as Zarir highlighted, was how quickly will the Turkish capacity get absorbed. And with the Chinese capacity being taken out, that process would have normally played out over 18 months to 24 months. And that process is being played out even as we speak. And as plants restart, that could happen, and at that point, you would see a tightening. And as utilization hit a level of global utilization, not specific company, global utilization, hit close to 85% or so, you will see the prices becoming very much in the supplier's favor rather than buyer's. So that's how the market plays out. And that really is my understanding. And anything beyond, I think, would be difficult. Zarir, do you want to add anything specific beyond...

No. I think that's absolutely a fair comment, Mukund, exactly as saying that's how we expect the market to play out going forward.

All right. That helps. Sir, the second question is on the lithium battery front. So I think, earlier, we had indicated that we had introduced since InsperiCo recycled cobalt brand. So any more understanding on the same? And we had started lithium battery certainly in Q2. So how that particular business is likely to shape up. Any color on that?

Yes. So the recycling piece is continuing. I think we are still -- we do recycle and supply to customers who want it. So within India it's going to specific customers because we don't have a battery unit here. It is going to other applications. And there are enough applications for the quantities we are recycling as of now, which is very small. And also, the issue with recycling [ with the current thing ] with respect to mobile and laptop is we have to ensure that -- ensure the recycling chain is fairly ethical. That means issues related to unacceptable practices. Like child labor and all are not involved in that whole collection and recycle process. So it is a process which is evolving. As the vehicle batteries come on stream, I think that process will get straightened out because, auto makers, it's been their interest to get it done with an entity which is reliable. And they would ensure the supply chain -- or the reverse supply chain, I would call it, is having a great visibility and does not have elements which may be unacceptable. So I think that broadly would be the way that business would go. And that business, we will -- from time to time, we will start to indicate a number. As of now, it is in a pilot proving phase which is worked out well. And that is what we -- that's why we introduced the brand in the market, and those sales will continue. And it is in preparation for the big numbers which may start coming in as the auto vehicle batteries start coming into the market for recycling. That's my understanding. As for other one, I've already addressed, about the lithium battery piece. And we will come back to you as soon as we have any specific or appropriate elements to share.

The next question is from the line of Saket Kapoor from Kapoor Company.

Sir, in your press release part wherein you have mentioned that during the latter part of Q3 there has been a significant increase in the import of soda ash as well as bicarb. And there has been the rejection from DGTR on the antidumping duty. Some specification was mentioned, so could you throw some light, sir? What is reasons there? And how are you looking with the realizations going forward, sir?

Yes, yes. I think, Zarir, do you want to take that?

Sure, sure. So let me start with the antidumping duty, please. As you all might be aware, the DGTR had come up with a provisional finding on dumping on imports from Turkey and North America, pending final hearings and pending a final determination. They have now, I think, about a week ago, after hearing all interested parties, importers, exporters and users, determined that antidumping duty should not be imposed. I think that follows a process of going to finance and final ratification of finance, so we're waiting for that. I don't think it's going to make too much of a difference on pricing in India. Certainly, it will open up the market again to Turkish and North American imports, but that has been coming in, in any case, over these last few months. We saw a little bit of a spike in the months of November and December, but that typically tends to happen when sometimes the supply chains get clogged up, right? They have -- global supply chains haven't still completely opened up. There's pressures on containers, on shipping, et cetera. Some of the ports still have congestions, so that could be a temporary spike, but as Mukund and we have maintained, there will be some degree of pricing pressure in the Indian market even moving into the next 1 or 2 quarters, after which, we should, as demand picks up, begin to see the pricing also moving up.

Sir, my second question relates to the debt on the U.S. part and a holistic approach of the company Tata chemical towards its subsidiaries. And the -- we have taken steps to restructure the U.K. operations for -- are they yielding the optimum result? And what are we -- how far have we reached to sweat these assets in the best possible way? I think, sir, the major debt is on the U.S. subsidiaries. And what steps are we taking for the noncore investment -- divestment [ or contracts ]? These 2 points.

I don't know. [ I'm not ] -- we evaluate constantly the portfolio which we have, and that is reviewed by Board. That is reviewed by us. And I think we have been consistently ensuring that we make sure that the -- whatever comes to our light in terms of opportunity in terms of realizing value which can be added to the balance sheet and then shared with the shareholders is done. So that has been our effort and that effort will continue. I don't want to specifically say what elements are there. In terms of investments today which we have on the portfolio, which are operating investments, the large one will be IMACID. And I think it's a 3-way joint venture. As of now, it yields good dividends, and it's something which we can examine from time to time. So I don't want to put a timetable, but having -- I think we are comfortable today with the scale of businesses we have and the business lines which we have. And I think we -- our effort will be to scale up in terms of the -- each of the verticals to much higher revenue and profit numbers. Now in terms of the U.K. and U.S., Zarir, do you want to address it?

On the debts piece, Mukund?

No, on the sweating the assets to the level which we need to. I think that was...

Yes. So I think, sweating the assets, if we look at the U.K.: Really the plant has over these last few months almost reached capacity, yes. And obviously, when that happens, all of the benefits that flow in from [ operating of plant at capacity ] tend to kick in. [ There really the ] focus then turns to how do you control your fixed costs. And actions are in place on that. In North America there is still headroom, but as demand increases and as you've seen from the presentations that we've sent you, sequentially production has also moved up. And we expect that trajectory to continue till we hit [Audio Gap]

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

Thank you very much. And just wanted to close by saying that we've had a quarter which was better sequentially. And we believe that the volumes and the market, the demand is going to sequentially continue to improve. There is going to be margin pressure in the first 2 quarters, and we will have to address that. And the team is well on its task to address that, the margin pressure coming both from pricing, which will sequentially continue to improve as market demand continues to improve; and secondly -- especially for soda ash; and the cost pressure, which we will -- in terms of input costs, especially on the energy side, which we will address. As far as the long-term strategic plan view is concerned, our verticals are all geared to making the shift from commoditized to more specialized businesses and continue to scale up in that direction. Our nutritional and agri portfolio are absolutely on the specialized field, Specialty Chemistry field. In the performance material, I think the transition is already underway, including our investments in silica. So we have a portfolio and a plan. And we have also shared with you the specific investment plans in Mithapur. And we will continue to execute this to best of our ability and continue to engage with you and look forward to suggestions on improving performance. And thank you all for your support.

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