Tata Chemicals Limited (500770) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 FY '24 Earnings Conference Call of Tata Chemicals Limited. [Operator Instructions] I now hand the conference over to Mr. Gavin Desa from CDR India. Thank you, and over to you, sir.

Thank you, Revanth. Good day, everyone, and thank you for joining us on Tata Chemicals' Q4 and FY '24 Earnings Conference Call. We have with us today Mr. R. Mukundan, the Managing Director and CEO; 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 would also add that this call would need to conclude by 7:45 p.m. IST. I now invite Mr. Mukundan to begin proceeding with the call.

Thank you, Gavin, and good evening, and welcome, everyone, for the Q4 and FY '24 Earnings Call. I have Nandu along with me for today's call. I will highlight with a brief overview of our market conditions and our operational highlights. Within India, I think demand for our main product, soda ash, while it was muted, it was showing signs of recovery, mainly boosted by detergent and chemical sector. The container glass demand remains steady, and we have continued muted demand in Europe. U.S., mainly, I think the demand, while being stable, there are signs of some bit of fall in the container glass, which we are watching very closely. As far as Africa and Middle East, there continues to be pockets of strength and pockets of stable demand. In South America, while despite weaker imports, the optimism is growing. And this is despite the fact that some of the lithium markets were challenged. The view is that in the long term and in the medium term, these markets would continue to be fine. As far as China's soda ash demand is concerned, it started on a strong note, and the apparent demand on January and February broadly grew by about 16-odd percent compared to last year. The supply side, the key challenge continues to be the European market, where because of the loss of market, the Turkish capacity is moving to the rest of the world. But I think the Red Sea conflict has put some higher freight rates and has meant a challenge for the material to move into the Asian markets and that has given a bit of cover. Mainland China did experience a higher soda ash supply, also because of the imports, and they remained a net importer in Q4 '24. We will continue to focus to monitor the European soda ash market, which continues to be the main cause for our worry. In terms of Tata Chemicals, the overall sales volume grew sequentially despite adverse price movement on account of market factor. In India, we saw the highest salt production and sales, and we had to moderate a bit of the soda ash volumes, mainly to make sure to maximize salt production, but with the incoming hooking up of the boiler, we expect both soda ash and salt to continue to grow. As far as U.S. domestic market, while the absolute volumes in the domestic may have fallen, the future trend is expected to be positive, and we continue to track very good production numbers, as well as we would be having very good shipment numbers going forward. In U.K., the soda ash did move to fixed price margin. Our demand and volume have fallen sharply and we continue to sort of maintain our production very close to the market demand conditions. Rallis had a soft quarter. And while domestic market is fine, the international market continues to have challenge. They are well positioned to continue to improve their performance and they have a new leadership, which is rethinking the strategy and approach to market. In conclusion, despite a difficult operating environment, company has continued to maintain stable performance. Global demand is showing signs of stability and a bit of recovery. But we need to be cautious because of the geopolitical instability and high interest rate environment still continuing. We expect sustainability to be a long-term trend and hence the market segments which we have stated that solar glass and lithium will continue to be the growth engine. Our focus is on timely execution of the expansion projects. Most of them are getting commissioned in the month of May. So towards the quarter 2, you would start seeing additional volumes being coming in the market. We also are continuing to focus on customer engagement and cost management. And this will be aided by our digitization effort. So despite the challenging condition, we continue to remain positive. We had to take a non-cash charge, which I'm sure Mr. Nandakumar will highlight during the Q&A session. And also, we would also address the issue of the NCD, the fund raise, which has been highlighted in the results meeting during the Q&A. So we would be happy to get into the Q&A session directly and address your queries as we move forward.

[Operator Instructions] The first question is from the line Saurabh Jain from HSBC.

So obvious first 2 questions are, can you provide more details around what is the purpose of these NCDs? And also explain more on the non-cash charge, please?

So I can take that, Mukund?

Yes. Go ahead, Nandu.

Okay. So on the NCD being issued going forward, that is basically to look at where we can use the money for deleveraging other geographies, where are the arbitrage opportunities available in terms of interest rates. The purpose is that. On the impairment, we do an annual impairment exercise every year-ending in March based upon the trigger. And in U.K., there are 3 plants, one is in salt, one is bicarb, one is soda ash in Lostock, all are nearby. So this plant in Lostock has been impaired as per IND-AS 36 last quarter as per the accounting standards, because the future cash flows at this point of time are lower than what the holding value of the assets are. It's a noncash onetime charge in the books of accounts. So it's one particular plant mainly in the U.K.

So when you say the write-down of these assets, is it the inventory or -- we need more clarity on that side.

So it's fixed basically. So you see we check for all the balance sheet assets in terms of what they are actually worth. So inventory checks for the NRV, so like that. So fixed assets are checked against what is the future discounted cash flow of the assets, which is going to perform over a point of time. And every March, as per the part of account position we need to look at each asset we have across the globe, which is in the U.S., India, and Kenya. And this particular asset in Lostock had an impairment based upon the projections of cash flows which we have done based upon the view of the market in soda ash as of now.

So this is essentially -- all of it is relating to plant and machinery, no inventory, nothing, right?

Point number 5B explains the exact impairment in the notes.

This is not inventory. This is mainly plant and machinery, you're absolutely right.

Okay. And can we expect more of such adjustments in future? Though you have said once in a year, but do we expect any surprises from any other geographies or U.K. on the side?

Nothing. In fact, our view has been that Europe has been challenged. And I think this is a reflection of the challenge which we have been sort of highlighting to all the analysts. And it is tested -- all the assets are certainly tested, but I think in terms of the pressure on that, in terms of future cash flow, pricing and the contribution, I think this is the one which was under pressure and would take up a charge this quarter. We do not anticipate any major asset or anything under pressure, including our operations in India, Kenya, or in U.S., or all our operations. Saurabh, even within U.K., our operations in Salt, Middlewich, are absolutely fine. I think this is mainly related to the soda ash plant in Lostock. Our pharmaceutical salt plant, our hybrid bicarb plant, they're all absolutely in fine condition. We continue to operate these plants. It is only that the contribution these plants can generate cannot support the value of the fixed asset which is there in the books.

Understood. And on the NCD, it is just a kind of refinancing, right? There is no fresh investments that you are going to deploy with this money?

The purpose right now is to look at opportunity for refinancing debts overseas by borrowing in India to cut this arbitrage.

And any time lines on this side, have you decided yet?

I think in the next few months.

The next question is from Abhijit Akella from Kotak Securities.

On the world demand and supply environment, if you could please help us with your estimates of what the demand situation -- demand decline might have been in CY '23 and your outlook for '24? And also, you have mentioned that the market is oversupplied. So is it possible to quantify how much the extent of oversupply is right now in the market?

Yes. I think, Abhijit, the broad oversupply, demand-supply mismatch is about 1 million tonnes to 1.2 million tonnes in the European market, because that's the demand destruction since happened and the supplies have remained, and unless the capacities go out, and we haven't had any announcements of any capacity go out, I think this environment will continue and this material will tend to flow out. The other big demand-supply area has been China, where we had 5 million tonnes come in. But effectively, that material is still finding its home only in China. It is not finding it's home outside. And that is mainly because I think it fulfills some local requirements and local logistic requirements. We anticipate that if at all there's any pressure which can come, it will be from the Chinese market in case the real demand there falls. As of now what we can only say is that the Chinese prices have more or less seemed to have bottomed out. They were close to about CNY 1,900 or CNY 1,950. And they have moved probably to about CNY 2,000. They are range-bound in that number. Last year, same, I think this number was close to about CNY 2,400. So there is a dip, there is a fall, but I think what we are seeing on the ground is that this has probably hit the bottom. And the same is the pricing commentary as far as India is concerned. The prices, including the import prices, are more or less holding, and demand environment continues to be fine. So really, as I mentioned in all the calls, the trigger for demand-supply balancing has to start from Europe, and hopefully that will get addressed over a period of time.

And just one other thing on our capacity expansion plans. In the context of this oversupply, any sort of second thoughts you might have about some of the expansions in the U.S. or Africa or...

I think -- so Abhijit, the point is that I think we will continue to expand where it is competitive in terms of serving the market. I think we've got very good markets in India and U.S. These economies are doing very well. And I think these are also -- in terms of cost to serve, the local as well as international market is very competitive. So our work in this direction continues. Kenya, as you also know, is a low-cost asset, which is able to serve Indian and Southeast Asian market very competitively. And ours is a dispersed expansion. It is not concentrated on one side. So the expansion of 250,000 tonnes in India is almost -- it's done. Actually, it's getting commissioned as we speak. The hookup should be happening in the month of May. And in terms of the next phase of another 300,000 tonnes, that work is a pace in India. Kenya also would increase the capacity by 300,000 tonnes, and 400,000 tonnes in U.S. This we are continuing to pursue. These are all in design phase now and implementation will start shortly, and we will start highlighting the CapEx and the other numbers to all of you. And since all these are brownfield, they are very value creating.

The next question is from Vivek Rajamani from Morgan Stanley.

So in your comments, you mentioned that you're expecting the U.S. domestic volumes and volumes in general to be positive going forward, and expecting good shipment numbers. Just wanted to clarify where you're seeing these demand trends that support this assumption of yours? That's the first question.

Yes. The issue is about our own capability in terms of operation and delivery. I think the plant has had record numbers actually in the month of February and March, and the operations continue to post record production numbers. And as you know, the U.S. operation, because of the cost structure, is able to move the material in most parts of the world. So it will continue to sort of serve the domestic demand as it continues to grow all along North America, which is in U.S. and Mexico and Canada put together. In addition to that, we will also be able to ship this material to our customers overseas, mainly in LatAm, Asia Pacific region. And some part of it would certainly go to Europe. We've already shipped one shipment to Europe and also one shipment to China in the last quarter and this quarter.

Sure, sir. And just one clarification here. You did mention that container glass is still a bit of a struggle in the U.S., correct?

Yes. This continues with respect to, I think, what started off as a bit of a challenge in the beer demand, I think, is continuing. And we do hope it will stabilize because the market conditions from the broad economic point of view does remain positive. We do know that we will have even greater positive bias once interest rates start to trend down, which has been long coming, which is why I was a bit cautious in my commentary, saying that one is on the geopolitical conflict depending on what happens and which region could provide us opportunity. For example, the Red Sea conflict in some markets has given us a better opportunity. But some of the points about interest rate, if it sort of starts to trend, I think would also be an opportunity. But if it remains high longer, I think we will have to continue to watch our consuming markets. But as of now what we are seeing is that there is no more increase in interest rate. We seem to have peaked. The prices of the soda ash have almost bottomed out. So from all perspectives, we are at a point where it can only trend a little bit up.

Next question is from the line of Ankur Periwal from Axis Capital.

Just continuing with U.S. Given that last quarter of the sales volume that we do are long-term in nature, contracted, will it be fair to say the quarterly EBITDA run rate will be similar as what we see in this quarter?

Yes. So I think broadly, if you look at the domestic, I think for the first 3 quarters, the numbers are more or less contracted. I think there is some open quantity in this Q4, which we will close during the course of the year. And exports also, for example, in Q1, it is fully contracted. Q2, I think, it's close to about 18% contracted. So we would continue to see similar trends here.

Sure. And the same breakup in terms of no short-term or long-term contracts. How do we stack up in U.K. given the profitability has been slightly under pressure there and the demand outlook has not been as great as well?

Yes. I think the customers are now -- because they also understand that the prices have more or less bottomed out, they are beginning to engage on a longer-term contract now. Because you see, normally, the customer behaviors when the prices haven't yet bottomed out, they would want to test whether it's a bottom. Since the prices have more or less hit the bottom, most customers are willing to engage on a longer term. Our team always wants to have a mix. But really, we would continue to sort of work on a combination of the 2. But I want to give the flexibility to our sales and marketing team in the way they want to sort of build this whole piece. But usually, we tend to keep at least 50% to 60% of that contract, which are longer term in nature, so as to provide stability to our sales outcomes.

The next question is from Riya Mehta from Aequitas Investment Consultancy.

So my first question is when we see soda ash volumes for India, they have declined on a quarter-on-quarter basis. With us ramping up the new brownfield capacity of 250,000 tonnes in May, how do you see the volumes turning out to be and capacity utilization?

Yes, so this quarter, as I mentioned, we did ramp down a bit of the production. It was actually constrained by production, not by market. And largely, because we had a certain amount of utility shortage, because we had not -- our hook-up of the boiler had not happened. It's happening in the month of May fully, and the expanded capacity is also coming on stream. So we did increase the production of salt to ensure the shipment and the market needs are fully met. Having said that, I think these constraints will not be with us post May, when all the capacities are hooked up. So really, the number which you're seeing in Q4 is a constrained number because of our utility constraint which we had faced during the quarter.

Okay. And how do you see the ramping up of the brownfield capacity of 250,000 tonnes in India? When can we see the full capacity utilization?

Yes. Once the capacity is hooked up, I think we would probably tend to sort of see full capacity reaching in about 90-odd days or so, not more than that.

The next question is from S. Ramesh from Nirmal Bang Equities.

So if you look at the Chinese capacity addition of 500,000 -- 5 million tonnes. Wouldn't that be driven -- if it operates at full capacity, wouldn't that actually add to the excess supply given whatever consumption, if you take 60 million tonnes, 65 million tonnes consumption, it's about 10%. So how do you see that full production in China and Mongolia in coming in, to the extent that although it's consumed in China, or the overall Asian consumption, it kind of replaced whatever is being imported by the production. So wouldn't that lead to excess supply in Asia?

So you would normally tend to state that. But I think if you really look at what has happened in the marketplace, the Chinese material has tended to continue to be in the same proportion as they've been exporting in the past. That has not been the case. And the reason for that is, I think, some of the units are beginning to operate at a lower operating rate, so moderating into the level. And I mentioned this also in the last call. The natural capacity tends to put pressure on the synthetic capacity. Most synthetic capacity are near the coast. Further, when they export, they come under even more pressure because they get lesser net realization. So the incremental volume they move from domestic to export, because of the pressure they face from natural capacity, tends to be at a lower pricing. So this is an issue -- phenomenon we have seen in every market. So this will play out, and is playing out exactly in the manner which we had highlighted. Now the issue, which we need to worry about is not so much on the supply side. I would rather be focused on the demand side. If the Chinese real estate and other elements in the marketplace play very negatively for them, and the real demand starts to compete, that's when we should be worrying. As of now, China has been positive in demand growth. And more or less, I think from our perspective, it has not played out the way at least the 5 million tonnes capacity coming on stream should have played out. So I would fundamentally say that we are watching the situation closely. The Chinese demand in terms of the real estate cost initially balanced out by the increase in solar glass demand. Also, the demand for lithium carbonate, they're booming EV sales, but we need to watch all these sectors. So I'm for not once saying that it is going to be -- there may not be any impact from the Chinese market. All I'm saying is as we are observing the market trends now, the continued pressure seems to be coming out of Europe and not all of China.

So the next thought is around if you look at U.K., before this impairment, you were bringing cost down Y-o-Y. So in the U.K. and U.S., what is the kind of reduction in the contract prices, and how do you see the margins play out in U.K. and U.S. from the current margins, which are obviously in that low range of around $40, $50?

So I think there has been a compression in terms of the contribution margin in U.K. And I think Nandu can correct me. It has broadly been in the range of about $30 to $40-odd per ton, and that has created a pressure on the financial numbers to do the impairment charge. We as of now do not anticipate any major change in that number, it will continue to be under pressure, which is why we've taken the call to impair the -- take the financial charge.

The next question is from Arjun Khanna from Kotak Mahindra Asset Management.

Sir, given where the market is right now, how would we envisage our debt structure? We are raising NCDs, but if you look at the debt, it's roughly up INR 265 crores year-on-year. So what is our thought process in terms of the net debt situation?

So broadly, this is also another issue which you've highlighted, Arjun. See, because our debt is denominated in dollars, I think there is also value increase which happens due to depreciation of Indian rupee. So once we sort of substitute this with Indian debt, I think at least that increment will stop happening. And the idea is to -- as Nandu has highlighted, there is certainly a benefit to having Indian rupee-denominated debt and pay down the dollar-denominated debt. I think that's the opportunity we are looking at. This is not to fund any expansion. Expansion will continue to be funded through internal accruals. This is to replace some of our existing dollar debt with rupee debt. Nandu, if you want to correct me if I am wrong.

I think it's correct, Mukund. So Arjun, in terms of the reason, it is to refinance some debt. And if you look at it going forward, as of now, in India, the major CapEx is over. Mithapur is getting capitalized now. So we will be having a bit lesser CapEx going forward that will help us in the overall FCF being better. So therefore, that's where we are in terms of the overall debt number. As rightly mentioned, if the price improves, we can start repaying more debt. As of now, we are looking at the free cash flow, which would be slightly better than past because of lower CapEx.

So what does that mean, sir, slightly better than past?

See, if you look at the CapEx we had in the last 2 years' time, we had the expansion happening in India at Mithapur. That has been more or less done. And we have just capitalized some part of it in March and some part in May or June. So the next stage of CapEx will start happening now over a point in time. So the major bulk of the CapEx in India has got done now.

I mean, we have mentioned in the slide that we are doing INR 2,000 crore of CapEx FY '25 to FY '28...

Yes, that's over next 4 years. But as we had the last expansion over the last 3-4 years' time, so the pace of CapEx was much, much higher last 2 years' time. So the next phase will happen over 3 or 4 years' time, Arjun.

And the expansion in U.S. and Kenya, which we had announced for INR 700,000?

That also will happen over the next couple of years' time. Mukund, you can add.

Yes, yes. So I think, Arjun, let me just highlight that what Nandu is saying is that the debt between India and Singapore is not likely to move up. In fact, it probably is likely to trend down as we start to have positive cash earnings, because the bulk of the CapEx cycle, large CapEx growth cycle is almost over, and we will capitalize all of this in the month of May-June period. In terms of the U.S. and the next phase of expansion, as I said, it's a design phase. So there will be a lull in between. The CapEx expenditure follows the S curve, which starts slow, picks up very rapidly, and then starts to slow down towards the end. And this S curve normally runs for about 18 to 24 months. So we expect the lean period to continue at least during the course of this year and maybe part of the next year before it ramps up again, by which time we would probably have enough visibility and also positive earnings across the board. In terms of pay down of debt, the only one which we probably need to sort of look at pay down, Kenya is already having no debt. Rallis has do debt. India has no debt. And Singapore debt will be partly addressed through the NCD and we'll pay that down in India. In terms of the U.S. debt, I think we had committed 3 years to pay down that debt and the first year of debt cycle is over. We had committed $100 million. I think we have repaid about $95 million at the end of this period. And we will continue to look at opportunities and our own -- sorry, we paid down $110 million as against $100 million. And we will continue to look at opportunities during the next 2 years. The maximum we see it increasing, instead of being 3-year pay down, it may have become 4-year pay down. Our calculations are landing somewhere there. So there is a change, but I think we will work our way to make sure to keep the commitment we have made to pay down in 3 years' time. First year has run well. The next 2 years may get extended by another year. That's the maximum we see, but we'll work our way where we can keep it to 2-year periods.

The next question is from Sumant Kumar from Motilal Oswal.

Sir, my question is regarding U.S. We have seen a Q-o-Q improvement in U.S. soda ash volume. But still, EBITDA per tonne -- per kg, per tonne, we are still subdued. And in Q3, we have an exceptional loss also, onetime expense or onetime loss for the U.S. business when we -- so what is going ahead in next couple of years EBITDA per tonne we are expecting? And what are the key reasons for that when you subdued the EBITDA per tonne in this quarter?

So on the volume, let me address that broadly. If you look at the last quarter, Q3, our export volumes were broadly 298,000 tonnes. This quarter, the number is 370,000 tonnes. So there is an increase. There's also increase in the domestic, which was 231,000 tonnes to 256,000 tonnes. Sequentially, there is increase in those numbers. And as I said, our unit is doing well, and they are trending well. Lastly, last quarter, certainly there was an issue of broadly about 50,000 tonnes, 60,000 tonnes getting [ wasted ] because of various shipments as well as the Union Pacific as well as internal maintenance extended shutdown, which we had, but that is now behind us, which is why you see the numbers trending up. As far as EBITDA is concerned, largely, I think the domestic EBITDA is stable. We haven't seen anything more than $4 or $5 change in the EBITDA number compared to last year. The biggest fall has been on the export side, where the EBITDA number has almost dipped by about I think anywhere between $90 to $100-odd, in terms of what it was previous year to this year. So overall, I think it's a blend. So I'll just leave it at that point.

So you are saying that quarter-on-quarter export margin has deteriorated. When we talk about what we are getting, China is doing good in demand side of solar glasses, okay? And then you are talking about Europe is a problem. So what are other factors impacting export business for us?

So fundamentally, I think, if you look at it, the export realization overall has dropped. I think the international prices overall have dropped in all markets. While in some markets it may be less so, in other markets it may be more. But I think it has overall dropped by anywhere between $100 per ton to $120 per ton, and that continues to reflect in the export pricing and in the contribution, and it sort of straightaway pours into your EBITDA margin. More accurately, if you look at it, the current quarter, the NSR is down from the previous quarter in export to almost $60-odd. And the fall between the same quarter last year, because last year, this quarter was a peak, because the prices were reset down by $150 broadly on the export side. But on the domestic side, it is hardly a movement of $2 from last year, and it's hardly a movement of $8 from the previous quarter. So really, the change is not in the domestic pricing, or domestic realization. It is mainly on the export. And this is likely to sort of continue in the near term. And we do expect at least some positive changes happening only towards the Q4 of this current financial year. The next 2, 3 quarters will trend to the similar number.

The next question is from Rohit Nagraj from Centrum Broking.

Sir, my first question is, you mentioned in your opening remarks that China demand improved by about 15% during the first 2 months. So could you just help us to explain which and all segments are doing well in China in terms of user industry given that real estate has not picked up. Plus, on EV side also, there has been some slowdown. So just your perspective on the same.

So I think it is across all sectors, Rohit. And I think this is why the numbers from China are not matching the commentary we hear on real estate. They do seem to be doing well on solar glass, they do seem to be doing still on the lithium carbonate processing, even though the prices have fallen. So most of these sectors seem to be doing well, but we need to sort of watch out, mainly because if this persistence continues, my understanding of the real estate there in China is that the commentary is negative because the debt portion of anybody's wealth is wiped out. The equity is still left in the unit. So they have seen a reduction in the pricing, which would ultimately lead to some bit of erosion in the demand. But more importantly, it's going to be very important to watch out how the unbuilt, let's say, units there in residential are dealt with by government. Do they take it through a mechanism for completion, or they don't take it through a mechanism for completion, like it was done in India, especially if you look at some of the projects in and around Delhi and Noida. So we still have to watch that resolution. It remains an issue of pressure. So we will watch that space.

Sure. Sir, second question is, you mentioned, generally, the European demand remains the key driver. And if that demand doesn't improve, probably given the market is oversupplied, will the pricing environment generally remain benign throughout 2024?

See, the basic issue for that has been the supplies out of Turkey, which normally would have gone into Europe are now moving into other parts of the world. And that number is fairly high and that is causing a bit of dissonance in all parts of the world. For that to correct itself, it is not a demand question, because we are not even questioning whether demand will go up. Our view is that the supply within Europe has to come down, which means some of the units have to slow down or may have to take a very difficult view of what they do with the capacities there. And we have to watch that space. That is a process which will happen or maybe most likely to happen.

The next question is from Nitesh Dhoot from Dolat Capital.

Just a quick one from my side. Typically, how many days of shutdown is taken in Q1? And will it be sufficient for integration of new capacity with the existing plant?

So this quarter, in Mithapur, where the recovery is happening with broadly a 10-day plant shutdown. We are building out the inventory to make sure our customers are fully serviced. And it should normally be around that period, not more than that.

We'll be able to take one last question. We take the last question from the line of Saket Kapoor from Kapoor Company.

Sir, you did mention about lots of material moving from Turkey to other parts of the world, as there is a demand destruction in Europe. So my question is particularly what has led to this demand destruction in Europe? And how will this situation improve going ahead? And what has been the import into India for the last quarter and for the full year as a whole? If you just allude to the...

Yes. In terms of the demand in Europe, Saket, I think the main issue is they have lost the access to -- because of the conflict there, unfortunate conflict, they've lost access to the cheap Russian gas and energy that has an important role in most industries, including our consuming industry, and that creates its own set of stress, and the high inflation environment, and that creates a cycle of demand for all sectors. So it has driven off the consequence of what is happening in that space. And we have seen that there's been no resolution in for almost 2 years now. And while the gas prices in Europe have come down, they are still 3x the peak level. So really that is the key driver why the European situation is really difficult. And the reason I said that it may lead to some kind of a permanent shift of, let's say, active capacity is mainly because many of the units will find it challenging, including the consuming industry of the soda ash itself. So let me leave it there, because I think we've got to watch it sector by sector and space by space. And that is something which will play out. This has not been the situation in other markets, which are supplied by a very different level of energy source. U.S. is very competitive when it's the gas energy source. China continues to have a mix of coal and renewable and gas now increasingly coming from the Russian side. And also, India was not exposed to this. So these markets were not exposed to the -- so I think they are coping better than the European market. In terms of consequence of that what has happened in India, broadly, we've seen about 0.5 million tonne additional imports. And in a market which is close to about -- so it used to be in the range of broadly 600,000 tonnes import, that has crossed 1 million -- 1.1 million tonnes, and the market demand in India has been fairly stable last year. Compared to the year-ended '23, where the demand was 4 million tonnes, the demand this year has been 4.056 tonnes. So there's been a 20,000 tonnes, 30,000 tonnes increase in the demand condition in India. It has not fallen. It has remained stable. But the domestic player sales to the market has been depressed because of the almost to the tune of 500,000 tonnes increase in the imports, which have primarily come from this source.

Right. And sir, if we look at the freight and forwarding charges, that has gone up above INR 100 crores Q-on-Q. So can you please explain the reason for the same? And in continuation to that, the carbon capture program, which we have done for the U.K. government, has this done for the plants where we have taken the impairment also?

Sorry, on carbon capture, what was the question?

Sir, on the carbon capture, we have done some work for the U.K. government, and we have spent some money on the carbon capture. Now when we have taken impairment, does that value also goes down? Does it have any correlation with carbon capture program also?

Yes, there is no impact of that. In fact, even the units which have been impaired are continuing to produce, Saket. It is not related to operations. So we'll continue to serve our customers as long as it is profitable. But the soda ash plant, which is in Lostock, is not making adequate margin to cover its asset base, which is why it has been written down. Operational CCO has no bearing on this. That continues at pace, as well as our bicarbonate and salt production continue as planned before. And in fact, I think to clarify your point, Saket, U.K. will continue to focus on the more value-added space of bicarbonate salt and pharmaceutical salt. They'll continue to run them very efficiently, and they are profitable. Out of GBP 25 million EBITDA, which we normally telegraph as a sustainable number there, GBP 15 million usually should come from the other 2, which is bicarb and salt. And we think that, that would continue to clip. In fact, client further, as the pharmaceutical salt plant also covers momentum.

Thank you very much. We'll have to take that as the last question. I would now like to hand the conference back to the management team for closing comments.

Thank you, and thank you, everyone, on the call. I think there's been several queries on the NCD as well as on the impairment. Let me again reiterate that the NCD is primarily for deleveraging or financing the external debt with Indian debt. And I think we would want to make sure that in rupee denominated remains constantly paid down with the cash earning capability out of India. In terms of the noncash write-down, it is primarily on soda ash, where as Nandu has explained, the underlying asset versus the cash earning capability, I think we have to match it and we took the write-down. Our strategy in U.K. continues to be the focus on the value-added products to grow further, and we continue to engage on that piece. Rest of the parts of the world and our operations, salt will continue to get adequate support and continue to grow. Our focus on bringing on stream the current project within Mithapur, I think will show fruition during this quarter. And the next phase of expansion, I think the design work is at pace, and we will come back to you with specifics. But broadly, these will be highly value creating because of the brownfield nature of these expansions. We continue to remain focused on our customers. We continue to watch them very closely. As of now, the market is in a very stable, let me put it this way, in a stable bias. And while there are certain headwinds, we need to watch out high interest rates and the element of some sectors in some of the markets coming under pressure. The overall demand situation continues to stable. There is a continued focus on making sure that our cost structure is addressed and most cost competitive. At the same time, we are continuing to focus on our sustainability effort in terms of decarbonization and digitization. Thank you all, and we look forward to meeting you once again at quarter 1.

Thank you very much. On behalf of Tata Chemicals, that concludes this conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.