Tata Chemicals Limited (500770) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Tata Chemicals Limited Q3 and 9 Months FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Gavin Desa from CDR India. Thank you, and over to you.

Thank you. Good day, everyone, and thank you for joining us on Tata Chemicals Q3 and 9-month FY '24 Earnings Conference Call. We have with us today Mr. R. Mukundan, Managing Director and CEO; Mr. Zareer Langrana, Executive Director; and Mr. Nandakumar Tirumalai, the Chief Financial Officer. Before we begin, I would like to mention that some of the statements made in today's discussions may be forward-looking in nature and may involve risks and uncertainties. I now invite Mr. Mukundan to proceed with the call.

Thanks, Gavin. Good evening, and welcome, everyone, to our quarter 3, 9 months FY '24 earnings call. I'm joined by my colleague, Zareer and Nandu, for today's call. I'll start with the discussion with key operating highlights across business geographies, following which Nandu will walk you through the financial performance of the quarter. Firstly, an update on the overall soda ash industry. The market conditions remain challenging across all key regions and segments, especially flat glass has been impacted in Europe. LatAm also is experiencing a bit of slowdown, especially in the lithium sector, which is more recent. Consequently, there's been a surge in Turkish exports to Asian markets, which are pivoted from Europe to Asia market, especially India, China and Southeast Asia. China, while it grew overall, their flat glass was impacted in the construction real estate and the demand grew for solar glass. Solar glass also had a strong demand in Southeast Asia. Other sectors were flat. India demand was a marginal growth of 1%. The softness was mainly felt in export-facing sectors in textiles dyestuff and ceramics. South African demand, there was a bit of a decline in mining sector, overall, the customer sentiment is bearish with approximately 12- to 18-month recovery period in our view, as we explained in the last call. The company's performance is lower as compared to previous year, due to pricing pressure in all regions and lower volume. Especially in U.S., volumes were lower due to plant shutdown and railcar, which led to lower contribution, lower absorption of fixed costs and increase in fixed cost during the quarter. The shortfall is about 18-odd thousand tonnes. Input costs continue to be stable. We prepaid a debt of USD 25 million. Our endeavor is to continue to maintain our share through customer engagement and have steady contribution margin with focus on cost and higher value-added products. Our focus will also be to deliver on investments on time, conserve cash and continue to deleverage. We have seen good performance in Rallis amidst challenging external environment. Domestic business has registered growth. International business there, again, is facing challenges, but we do believe which will revive in a few coming quarters. Management there has undertaken steps in recent years to improve profitability of business. We expect that to translate in coming years. We anticipate in the short term, current demand supply situation is likely to persist but should stabilize and improve over long term, driven by sectors, which we continue to engage with, which is sustainability sectors, which is solar and lithium, other related sectors. As we strategically expand the core business capability through cost effective debottlenecking, where we are equally committed to rivers cost management, debt reduction and bolstering of cash flows. Our aim is to sustain market share through customer engagement and maintain stable margins with keen eye on controlling costs. Going forward, we do expect next few months to be challenging due to subdued pricing of soda ash. This is more so for the U.S. export markets, while domestic seems to be stable. That concludes my opening remarks. I now hand over the floor to Nandu, who will walk you through the financial performance.

Thanks, Mukundan, and good evening, everyone. Let me walk you through the performance, after which we call the Q1 session. Starting with the headline numbers for the quarter, our revenue was there for the quarter was INR 3,730 crores against INR 4,148 crores last year Q3, lower by 10%. Decrease in revenue was driven mainly on the lower soda ash volumes and pricing pressure in all regions. EBITDA for the quarter was INR 542 crores as against INR 922 crores in the last year's Q3 lower, lower by 41%. The PAT for the quarter was INR 194 crores, lower by 55% compared to last year's Q3. Coming to India, revenues for the quarter were INR 1,093 crores. Soda ash volumes were 7% down compared to last year's -- sorry, soda ash volumes were up compared last year's Q3. The pricing pressure has been there because of which we had lower realizations on account of import onslaught and drop in pricing. Salt and bicarb saw steady volume during the quarter. Moving to U.S., export prices saw a sharp decrease versus previous year. However, both domestic price and market share were stable, but absolute volumes have fallen. EBITDA margins was at 12% for the current quarter. In U.K. business, revenue was impacted as compared to last year's Q3 because of lower volume of soda ash, which led to the revenue being lower by 20% in the current quarter. EBITDA was 10% for the current quarter. As far Kenya is concerned, both volumes and realizations saw softening, which in turn impacted margins and profits for the quarter. As far as HDS and Nutra are concerned, both the business had a stable performance in this quarter. In Rallis, our revenues were at INR 598 crores, 5% drop compared to last year's Q3. EBITDA of INR 61 crores in the quarter, higher 14% compared to last year's Q3 and PAT was INR 24 crores. Our cash at a gross level was INR 1,535 crores in December ending. CapEx was INR 492 crores. Net debt was at INR 4,377 crores. With that, I close the comments and hand it over back to Gavin to open up for the Q&A.

[Operator Instructions] We have our first question from the line of Saurabh Jain from HSBC.

I have 2 questions. Number one, can you throw some light into what kind of contracts you must have entered starting of this year in both U.S. and Europe?

So I think the bigger issue is in the U.S., let me just highlight broadly. I think on the domestic front, I think contractually, we are more or less stable both in volume and pricing. On exports, what we do see because these are reset sometimes quarterly, sometimes semi-annually, there's been a sharp erosion in the next year. We expect a blend of -- because some of the material also is going to China now. And we expect a blended erosion of the approximately $100 of export contribution and realization.

So domestic realizations, are they still closer to what realization we have delivered in the previous quarter?

Yes. They will continue to be almost same. Not a big shift in them. The contribution will remain almost same. Whereas exports is where the erosion of contribution, approximately I would say, nearly $100. It's slightly less than $100, but I would say a figure of $100 would be an approximation.

Okay. Understood. So still -- it is still kind of a fixed pricing on track for the domestic business for 2024 in U.S.

So far, 3 -- basically for the full year, which means for the large quarter of this year and 3 quarters of the next year.

Correct. And what is the situation in Europe? How is the contract structure over there for this year?

Europe is a bit of a different story. Let me just say this. I think there broadly, we are now -- while some customers are on the energy price investment and a longer-term duration. Many customers have moved to what we call it a fixed pricing contract, where the risk is with us. And hence, we have been very cautious about it. Our bigger issue there is in terms of pounds, if you say, what is the erosion. And erosion and pricing is close to about GBP 100.

Versus 2023?

Yes. Compared to previous year, same period.

Average of previous year, right?

Yes.

So what kind of margins do you think are more likely to come through in U.S. and Europe for FY '25? Any sort of guidance on that will be helpful.

Yes. So I would say that in terms of broadly, the domestic should be stable in U.S. As I mentioned, the export margin -- I was given the contribution number only. It was down approximately about $100. It may improve with the contracts, if the pricing environment around the world improves. But these are the current situation. And in U.K., it's about, I would say, GBP 100 compression right across.

We have a next question from the line of Abhijit Akella from Kotak Securities.

One on the U.S. business. Would it be possible to quantify maybe the profit lost during this quarter because of the 80,000 tons approximately of volumes that we lost? And also just to check, U.S. domestic volumes seem to have fallen a lot more than the export volumes this quarter. Any specific reason for that?

Yes. In terms of the -- while you were seeing the domestic as compared to the previous year. More or less, if you look at a trailing quarter, it has almost been flat so we haven't seen any major shift there. . There is an overall reduction in the market volumes, which is reflected in our volume. In terms of pricing it is stable. Your first question was on the 80,000 tons. Approximately, if you broadly take about an $130 or $150-odd dollar of contribution, we are seeing an erosion of close to about $10 million on that account.

Got it. That's helpful. And also one question on how much of China's demand for soda ash comes out of the lithium and solar segments? If it may be possible to shed some light on that. And also whether you would have some projections for what it might be for India in the coming years.

Can we come back to that a little later? We'll just get the data and we'll flash it to you during this call itself.

We have a next question from the line of Vivek Rajamani from Morgan Stanley.

Sir, apologies if this was asked. But just in India, it appears that the implied pricing and margins appear to have improved sequentially. Could you just talk about what has been different this quarter? Because all the literature seems to point that it's been a tough backdrop for this part of the world.

So I think in terms of overall cases, I think it is absolutely fine. I think -- we -- because of our contract structuring, we have benefited other than the rest of the pack, what you must be putting in. So that's where it is. If you strictly go by the market position, I think we should be in our own analysis shows compared to -- because the domestic industry is also into contracting structures, which are different. Through that, we've been able to sort of protect our annualized number of about, I would say, if you take we have priced it at import parity versus where there our contractual pricing is, there's a benefit of approximately INR 100-odd crores. That's an internal working, but I don't want you to go by that. But broadly, I think it's all the result of the contracting structures.

Sure, sir. So I wanted to just get a clarification. I mean, going forward, I mean, should we kind of look at it from a sequential perspective or maybe just look at it from an annual perspective that at the end of the full year, you'll probably be more stable, irrespective of what happens on a sequential basis depending on imports exports. Would that be a fair statement?

Yes. Sequentially, I think we should be there. I think that is a fair statement.

Sure, sir. And the second question was, obviously, I think you've spoken about the new contracts on the pricing, and we've obviously seen some erosion or a meaningful erosion over there. . Just wondering, given that we are in an environment of falling energy and all the other costs, would you be able to offset some of this ASP declines by way of lower costs over the course of the year?

See, on export, I think what I did mention the erosion for U.S. exports is our understanding of where energy will land and the pricing in the market, the $100 erosions I spoke about. So it includes that. It's slightly lower than $100, but I'm saying for ease of discussion, we should just round off to $100 and keep it there.

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

So if you were to get some update on the Inner Mongolia capacity addition, is there any update on that in terms of how much they've added and what is the progressed slightly on their 5 million ton expansion there?

So I think their situation seems to be more or less static in the sense that the capacities which were supposed to come in have come on stream and there have been some challenges for them in terms of reaching that capacity to market and quality as we mentioned. Overall, we think China market remains either balanced or slightly short which is why a lot of the -- I also mentioned this includes a blended sale to the Chinese market. US exports are headed to China only, but we think it will get balanced over a period of time. I think the real challenge for us has been coming from, again, as I mentioned in the last call in the Western Europe, where we've lost about 1 million tons of demand. And that 1 million ton needs to find a home somewhere else, especially coming out of Turkey and which is what is depressing prices. So we need to work our way through that.

Okay. So second thing is if you look at your average inventory cost of coal, it would have got some benefit from the decline in coal from some April. But what is the impact of the current increase in freight because of the Red Sea related prices? And do you see your input costs, particularly for coal going up, say, over the next 3, 6 months? And would that squeeze your margins further in India?

No. I think as I mentioned to the previous question, the margins sequentially is going to be stable. We have all the numbers. They are not impacting it overall.

Okay. So what about the other markets like U.S. and Europe? Would the freight would -- cause any additional strain compared to what you have mentioned in terms of the erosion in margins?

See, the erosion of margin includes part freight part energy -- benefit in energy and also includes the reduction in prices. Put everything together is what is the contribution number we just spoke about. So it's all embedded inside that.

We have a next question from the line of Riya Mehta from Aequitas Investment.

My first question is on the India business. How much percentage would be in the contractual basis, short or long?

Quarterly contracts in India would be approximately 50% of our volume.

50% of volume. And these are annual contracts? Or what would be the...

Quarterly.

Quarterly contracts. In India, how are we seeing the demand side scenario? So like you mentioned, we saw a 1% increase in the demand. Going forward in the month of January, how are things getting?

Yes, so I think the demand challenge is deep in Western Europe. And now because of the lithium prices in these Latin American markets. But otherwise, Asian market is not a demand problem. It is either growing or it is flat. But it's more a pricing problem here because of the excess supply coming in out of the lost demand in Western Europe.

Right. What would typically be the consumption in Europe? And what has it reduced to? If we can get some numbers? Loss of demand in Europe.

6 million tons, right? Yes. It's about 6 million tons. I think it's 6.5 million tons. So it's down to, I think, about 5.5 million tons or so.

6 million ton per annum loss of demand?

6.5 million ton approximately. I mean -- and then it's down to about 5.5 million ton. So 1 million ton reduction.

Got it. Got it. And what will be the imports which are happening in India on that account, like increment? I think earlier, it was around 60,000 to 70,000 tons were imported from outside. What would be the current level of imports?

The incremental -- what would have been a normal run rate versus where we've ended the year -- calendar year, I'm speaking is about 600,000 ton addition.

600,000 tons per annum incremental in India.

Imports, yes. About 200,000 tons or 250,000 tons, I think we are close to about 850,000 tons approximately, current run rate.

Sorry. I couldn't hear the last line, could you repeat.

It used to be between 200,000 tons and 250,000 tons. I think we ended the year with the calendar year with around 800,000 tons or some 850,000 tons somewhere there.

We have a next question from the line of Saket Kapoor from Kapoor & Company.

Just a data point. Firstly, sir, you mentioned about $10 million hit on the bottom line on account of the lower sales and -- from the U.S. facility?

Yes, approximately. I think that's what it comes to. I think our contribution broadly is about, let's say, $125, $130 per ton. 80,000 tons is about $10 million.

And despite -- and the part about the European part, what is exactly -- what has exactly led to this contraction in demand in terms of the Western Europe, which you are articulating to earlier reply? And how are things going to shape up in terms of the -- this demand is permanently launched? Or what is the nature of this contraction in demand, if you could explain?

I think most of the consumption industries are in stress. And I think just in our view, is the current energy environment if the current European environment continues, you could say, in the medium term, it is lost. So effectively, I think the European -- I don't want to use the word, but European supply has to rationalize itself.

Okay. So they are -- just like the Solvay part, we will be seeing further rationalization of capacity going ahead to even the market -- to balance the market?

I see many of these capacities not being able to survive with the current pricing and demand environment. So I think it is going to be challenging for them. So there will be certainly rationalization but I can't speak for the industry, I can only see the numbers are headed that way.

Right. And then the next question is pertaining to the solar demand that is expected domestically in the country, for our country, India. So what are we currently anticipating? And what are the pillars in terms of the solar lines that are envisaged to be set up in, say, 2, 3 years down the line? And the incremental demand in terms of million metric tons that is expected out of this solar initiatives taken by the government of India.

So I think if you don't project too long. Because say, what is the demand -- incremental demand is going to come on stream on the announced lines and the lines which are currently underbuilt and will be operational in about 18 months or 24 months. It's about 0.25 million tons, 250,000 tons.

250,000 tons.

And in China, the lithium plus solar demand is about 2 points -- somebody had asked it before. It's about 2.75 million tons.

Sir, here it is 250,000 tons you are mentioning.

In India solar demand on the basis of announced projects, which are under implementation, which will get commissioned in the next 24 months, in our estimation, is about 200,000 tons to 250,000 tons, about a 0.25 million tons.

So this unabated import, which is routing from Turkey, will create more price distortion. There will be -- the prices will be trending, will remain lower for a longer period of time. This should be a better understanding going ahead?

See. I won't comment about pricing, but all I can say is that I think if you really say the -- on an overall basis, if the European rationalization of capacity gathers pace, I think it will be shorter. It will depend fundamentally arising out of that. because that's where the material will get absorbed. So we have to just wait for those processes to continue during the year.

[Operator Instructions] The next question is from the line of Santosh [ Kesari ] from [ Kesari ] Finance.

My questions are already answered. So I can pass it on to someone else.

We have our next question from the line of Sumant Kumar from Motilal Oswal.

You talked about the slowdown in lithium demand. And we have seen a slowdown of EV sales in developed countries. So the way we are talking about lithium is going to have a more contribution in glass, in the battery side and sort of uses of soda ash. So do you think the near-term or maybe midterm challenges of slowdown in EV is all because of slow -- because of current scenario or they are just structural changes?

So see, the projects which are already commissioned, they continue to get -- run at whatever capacity we need to run because we're really on stream. So we don't see a reduction in demand because these are continuous process plants. And the current pricing of lithium, I think new capacity is coming on stream. We will find it challenging because the return environment will be subdued for some time. So they may just postpone. But we think this is a long-term trend. We really don't believe it is a permanent situation.

Any alternate commodity, which is going to replace lithium or some changes happening in the market?

See, for mobility application today for passenger vehicles or light commercial vehicles, and light vehicle, the lithium is the best solution. . We know for the commercial segment, heavy truck segments hydrogen is a solution. And for stationary, there are many solutions including sodium and some -- China has started to see some sodium chemistry come onstream, but these are in early stages.

Okay. And last, what is the sustainable EBITDA per ton for U.S. business we can see going forward [indiscernible] and tons to $100. So what is the sustainable EBITDA per ton in this current scenario for U.S. business?

Yes, EBITDA figure, I think we have -- usually should be delivering anywhere around $35 or $40-odd and if times are good it' will be higher. If times are bad it can trend turn down from there. I mean we've always maintained the U.S. business should deliver an EBITDA of about $100 million with the current capacity. So either it will be little lower or a little higher depending on if the market environment is very positive it'll deliver very high. And -- but the range around which we tend to examine the U.S. operation is around that ranges.

We have a next question from the line of Ankur Periwal from Axis Capital.

Just a clarification. For the U.S. business especially domestic, you did mention that there are quarterly contracts there, while the [ government ] export business is largely on spot, as I understand. Typically, we take a repricing of these contracts in December or in the month of January. A clarification here, whether the repricing has already happened or probably we'll see another repricing happening this quarter, which is January onwards?

So U.S. domestic is annual. It runs for the calendar year, which is starting Jan to December and the pricing has already happened. And what I mentioned was the average rate within U.S. is almost stable. Minor changes here or there. If you adjust for energy and all other benefits the unit is going to have all of the changes, I think we will have stable margin. it is an export, which I mentioned that the current quarter, the coming quarter is likely to see $100 erosion. But going forward, it depends on quarterly movements, which you have to wait and watch in the market.

Okay, sure. And we have lined up our capacity expansion in U.S. as well. Any change in the time lines there? I think we have mentioned earlier on 1, 1.5 years for those capacity to come up, but given the macro any changes there?

No. I think let me just to explain overall capacity expansion in India, I think the power plant is already commissioned and it is already delivering steam and power to the system. So the soda ash should be finished by May of this year. So those volumes -- additional volumes will come. And salt also, we expect additional volume. Overall, we expect about these capacities during the year will yield incremental numbers for the next fiscal year. And in India, we have started the detailed engineering and examining of another 300,000-odd tons which the work will commence shortly. In U.S., similarly, the basic engineering has -- in India, the basic engineering is complete for the next stage. We are going to go through detailed engineering. In U.S., the basic engineering work has commenced for their 400,000 tons. And then Kenya the detailed engineering will also commence for their 200,000 tons, so for 100,000 tons two sites the detailed engineering will be commencing now that we have the support of the Board. And U.S. has just moved forward with the basic engineering.

The next question is from the line of Rohit Nagraj from Centrum Broking.

Sir, first question, you mentioned that there has been demand side challenges. How has been the capacity utilization across different geographies? And is there any issue in terms of excess inventories in the global system for soda ash?

So there is inventory in pockets. I'm not going to say they're exactly it is. But I think if you see the capacity utilization of the industry as a whole, it is somewhere close to 90% utilization.

That's -- I mean aggregates all across the geographies we are considering, right?

Correct.

And the second question in terms of different region-wise demand challenges. So are there any specific challenges in certain regions that the user segment demand is getting hampered? Any...

I mentioned in terms of demand side, the challenge is mainly in Western Europe. And what you call is Europe. I think that's where the demand challenges are highest. Rest of the world, demand is either flat or the sentiment is flat. I mean, we're probably at the bottom end of the curve everywhere. It's in Europe, we need to be more watchful.

The next question is from the line of Abhijit Akella from Kotak Securities.

Two questions from me. One is just to clarify the U.S. export price erosion that we are [indiscernible] in about $100, the reference point for that or the base is basically the third quarter, the quarter has just gone by? Or we're referring to last financial year as a whole?

This is referencing what you would have seen in the previous year, fourth quarter.

Okay. Understood. Got it. And the other thing was just given the fact that U.S. domestic prices -- contract prices seem to have corrected far less than export prices are. Is that because basically the year ago period, exports were at a significant premium versus the domestic market and now that gap is normalizing? Is that how we should read it?

Yes, you could say that. I think last year, the export numbers were at a premium. But this year, they are at a discount going forward.

We have our next question from the line of Vivek Rajamani from Morgan Stanley.

Just 2 small clarifications. Just on Europe, when you mentioned Europe is also seeing $100 (sic) [ GBP 100 ] per ton erosion compared to last year. This would be across the board? Or does Europe also have a concept of contracted and spot?

I did mention that U.K., our business will see erosion of GBP 100 probably.

Sorry, GBP 100. So that would be across the board, across all the volumes. Would that be fair?

Across the U.K. business and the U.S. business would be -- U.S. export will be $100.

Got it, sir. And just a second clarification was in the presentation, you've given a figure of INR 2,000 crores of CapEx F '24 to F '27. I just wanted to double check if this also includes the expansions that are coming up in India, U.S. and Kenya?

This is mainly India, which has been cleared. The U.S. is going through basic engineering. We will come back to you with those numbers shortly. And Kenya, we have mentioned it is a CapEx of about $20 million to $25 million, but we will come back again because a detailed engineering is underway there. This number is reflective of India, which we have [indiscernible].

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

Yes. So in terms of follow-up, if you look at your future expansion once the detailed engineering is on, when do you expect to incur the CapEx, would it be from FY '26? Or will it start from FY '25, second half? Any time line you can give on how you approach the [ same ]?

See, this is been -- so I would say given the experience of the team, once it is finished we expect our execution time of either 24 to 30 months broadly.

Okay. And the second thing is you booked some savings in the power and the fuel cost in your India business. So is that run rate which you see in third quarter likely to sustain in the fourth quarter? And can it sustain for FY '25, given the current cost structure for your core inputs?

This is -- you're referring to consolidated?

No the standalone, India power and fuel.

Yes. India, I think we more or less would be having the same run rate because our contracts are more or less..

Okay. Just one last one. On the U.K. specialty salt, the pharma salt and other specialty salt, any indications you can give in terms of the volumes and the kind of pricing or delta in margins you can expect and when you can expect to see that in the U.K. P&L?

The U.K. salt, the pharma is under commissioning or close to getting commissioned fully. We expect the U.K. salt volumes, which used to be around 75,000-odd tons, probably will creep up to 80,000 tons, 85,000 tons.

Okay, this is per annum?

No, I'm talking per quarter.

Per quarter. Okay. There's a 10,000 tons per quarter.

Part of it will be pharma, part of it will get sold as technical because we have to develop the market. So the pricing will come back to accuracy maybe in the next call.

The next question is from the line of [ Ramana Murthy Malla ] from [ Ramana Murthy and Company ].

Good presentation. A lot of my issues were clarified. I have 2 points to ask. One is this consumer-related business of Tata Chemicals has been more to Tata consumers. Now what elected with the subsidiary sectors are there. Are there any plans to consolidate the domestic operations, meaning the subsidiaries merging with the Tata Chemicals as a part of cost rationalization. Second question is Rallis India remained a small comparing to competition. So are there any plans to expand Rallis as an individual company? Or are any plans to merge with Tata Chemicals to make it a slightly bigger company? Because part of the business has already moved to funding related to Tata consumers. So therefore, are there any plans to further consolidation of Tata Chemicals? That's what is my question. This will help the company to grow and reduce the costs.

Yes. So on the -- any listed, unlisted subsidiary, I think the Board takes a call from time to time. As far as Rallis is concerned, our intention is to support the management to grow their business. and we'll continue to support Rallis to achieve its true potential. That's all I can comment sitting on the Board of that company.

We have a next question from the line of Bhavin Soni from Anand Rathi.

Just need to -- a clarification on the capacity utilization figure that you have mentioned above, if you can just repeat it?

I think broadly, they tend to be closer to 90%. I think whether it was 89% or 88%. We expect by the year finishes we will be close to that number. And next year also, we expect a similar sort of number.

And this is on a whole like each and every geo combined basis, right?

This is on a global basis.

The next question is from the line of Riya Mehta from Aequitas Investment.

My first question is in regards to the current expansion. We are doing around 1.85 lakh metric tons in India for soda ash by H2 FY '24. And over and above that, we are planning for another 300,000 tons. Is my understanding right?

No. In terms of the expansion, what we are doing is close to 250,000 tons or 230,000 tons. And we will be -- so it is basically 250,000 tons an additional stream of about 300,000-odd tons which is under plan. This is under execution.

So by H2 FY '24, we will be around that or we are currently [indiscernible] ...

Will be slightly upward of 1 million tons.

We got 11 lakh tons right -- right now?

We were at about [ 8.50 lakh tons ] now, [ 0.85 tons ] also effective utilization capacity as will go to 1 million tons -- [ 1.1 million tons ].

By H2 FY '24?

That's correct, yes.

Got it. And are we planning any further price erosion in India business since the demand is like in low single digits and we are planning for expansion as well?

No. I told already that the margin is expected to be maintained.

We have a next question from the line of Saket Kapoor from Kapoor & Company.

So when we look at the power and fuel line item on a Q-on-Q basis, that has gone up from INR 650 crores to INR 700 crores. Is this better in the U.S. shutdown? What explains this increase?

Sorry. The...

Sir, I'm looking at the power and fuel line item. On a Q-on-Q basis, it has gone up by INR 50 crores.

Yes, correct.

So if you could explain this increase, sir. What are the factors that have attributed to it?

I think this is just in terms of the gas pricing and the oil consumption in Magadi and some bit of -- and energy costs in UK put together. This is where I think the hedging of these commodities have come off and now they'are paying the full market price.

Okay. So this will be the run rate going ahead also, keeping the capacity utilization levels at the current level?

I think so. I think broadly, we should track in that range between INR 650 crores and INR 700 crores.

We have a next question from the line of Saurabh Jain from HSBC.

One clarification that there was a disruption that you mentioned in the U.S. business for Q3. Are all the disruptions sorted in the fourth quarter? And would it be a more normalized quarter from volumes point of view?

Only thing which we are clear is that our shutdown got extended by about 3 or 4 days more than what we planned, which was accounting for 50% of the lost revenue. The balance, 50%, has been because of the rail car shortages. We are working with Union Pacific and other logistics service providers to improve. So that's as always a challenge because it is not fully within our control, but we are hopeful it will not -- they've also done the needful to sort of support the industry.

And also, can you give some comments around how is -- how the headwinds in the bicarb business, if at all, in terms of demand absorption? And also how is the profitability, how does it look like in the bicarb business? Some comments on that side will be helpful.

In bicarb and in salt we are not seeing any such challenges. It is mainly in the soda ash business.

We have a next question from the line of Rohit Nagraj from Centrum Broking.

So the seen last year, China has coming out with capacity in Inner Mongolia, and they have further plans to expand the capacity next year as well. So will that reflect in terms of benign price environment in 2024 and '25? So any color on the same.

As I mentioned, even in the last quarter, I think we are actually focused on what's going to unfold in Europe, and we remain focused on that because the challenged part of the world is actually Western Europe. And hopefully, if the issues are addressed there rest of the world probably should rationalize.

Sure. Second question is in terms of the lithium battery space. I think earlier a couple of years ago, we had indicated that we will be putting up a lithium battery recycling plant. Any progress on that front? And beyond that, do we have any other area which we are looking at from an EV battery space, except for supplying say soda ash from the lithium carbonate manufacturing prospective.

Yes. We are engaged with our group company, Agratas. And as I said, as and when we have any finalized plans, we'll come back.

Ladies and gentlemen, we'll take that as the last question for today. I now hand the conference over to the management for closing comments. Over to you.

Thank you. So I just wanted to say that we did face a fairly challenging quarter this quarter. And most of the challenges have been met positively by the management team, but we remain focused on our long-term strategy. We think while the short-term challenges remain the long-term future of all the parts of our businesses are positive. So our growth plan are continuing at pace as planned before. And fairly, I just want to say that even though we know that the next few quarters will be challenging, we will continue to focus on what we can control, which is our customer engagement, fixed cost and cost competitiveness and pay down of debt. At the same time, remain focused on long term. Thank you.

On behalf of Tata Chemicals Limited, that concludes the conference call. Thank you for joining us, and you may now disconnect your lines.