Vishnu Chemicals Limited (516072) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning, and welcome to the Q4 FY '22 Earnings Conference Call of Vishnu Chemicals Limited. We have with us today, Mr. Siddartha Cherukuri, Joint Managing Director; and Mr. Hanumant Bhansali, Vice President, Finance. This discussion may include forward-looking statements regarding business trends or activities. Such forward-looking statements should not be taken as a representation that such trends or activities will continue in future, and no undue reliance should be based on them. [Operator Instructions] Please note that this conference is being recorded. I now invite Mr. Hanumant Bhansali to begin the proceedings of the call. Thank you, and over to you, sir.

Thank you, Ms. Margaret. Good morning, everyone, and welcome to the conference call of Vishnu Chemicals Limited, where we shall discuss our results and developments for the quarter and year-ended 31st March 2022. Our investor presentation has been uploaded on the stock exchanges for your ready reference. Moving on to key business and financial highlights. For the first time, Vishnu Chemicals has achieved a historic milestone of INR 1,000 crores in sales. This is the best ever quarterly and annual performance by the company since inception. We believe that this is a satisfactory performance, as both the domestic and export sales grew by 56% and 58%, respectively, in FY '22. In fact, the demand environment is as good as it gets. We continue to receive inquiries from customers for our products, as they're essential to extending the life, imparting colors, and also improving the performance of many pharmaceutical, consumer and industrial applications. The consolidated revenues for FY '22 was INR 1,075 crores as compared to INR 682 crores in FY '21, registering a growth of 58% year-on-year. The consolidated EBITDA margin for FY '22 was 15% compared to 11.8% in FY '21, an increase of 317 basis points year-on-year. This was aided by multiple factors, some of which were still: our quality of products, our operational flexibility, our focus on supply chain and better procurement planning. We registered the best ever PAT in FY '22 at INR 81 crores compared to INR 34 crores in FY '21. During the year, the PAT margins also increased by 250 basis points. Speaking about the quarter 4. The consolidated revenues were INR 336 crores compared to INR 215 crores for the corresponding quarter previous year, up by 56% on a year-on-year basis. On a Q-on-Q basis, the revenues grew by 12%. EBITDA for FY '22 also was INR 53 crores compared to INR 26 crores for the corresponding quarter previous year, up by 106% year-on-year and 16% Q-on-Q. The EBITDA margin was 15.8% on a consolidated basis in this quarter. The consolidated PAT for the Q4 FY '22 was INR 29 crores compared to INR 11 crores for the corresponding quarter previous year, up by 163% Y-on-Y and 16% Q-on-Q. The net profit margin of the company in Q4 FY '22 was 8.5% compared to 5.1% in Q4 FY '21, an increase of almost 340 basis points. We believe that this performance is truly holistic, and we have improved in all the key metrics, not just in terms of P&L, but also the balance sheet of the company. With this, I conclude my remarks, and now request Ms. Margaret to commence the Q&A session. Thank you.

[Operator Instructions] The first question is from the line of Anshul Verdia from Edelweiss Wealth Research.

Congratulations on the good set of number. Just a couple of questions, Hanumant, sir. Could you please help us with the volume numbers for both the segments in the fourth quarter and the full year?

Anshul, thank you for your question. On the volume numbers, right now, we are not disclosing the numbers in terms of production levels in both the segments, chromium and barium. But on an overall -- if I just take FY '21 as a base, from FY '21 to FY '22, we saw increase of 20% in our chromium chemicals production level. From FY '21 -- sorry, if I take FY '20 as a base, from FY '20 to FY '21, we increased about 20% in our chromium chemicals volume. And from FY '21 to FY '22, we increased by 22% on a year-on-year basis. On the barium chemicals, also, the volumes have gone up. And this year, the volumes are upwards of 10% in barium chemicals.

That's really helpful. Just 1 follow-up. Could you please comment on the barium segment EBITDA margins, where we have seen slight moderation quarter-on-quarter? And any numbers you would -- any EBITDA margin number you would like to assign a sustainable margin for this particular segment?

Thank you again for this question. Yes, in the Q4 in barium chemicals, we registered 9.5% EBITDA margin. If you would recollect, then in Q3, we had mentioned in our press release that there was a little bit of issue with the monsoon in Srikalahasti in the third quarter, due to which we had to carry forward some of the orders in Q4 and honor them at the same prices that were entered into in Q3, while the prices of raw materials due to global phenomena has increased in Q4. But we decided to absorb the prices of renegotiating the existing contracts with our customers. So that's the reason why we have seen a little bit of -- there's been very little increase in the realization per tonne in barium in Q4, where the raw material prices have gone up. But having said so, we have increased the prices effectively from April.

That's really helpful. So any guidance on the EBITDA margin for this particular segment? Can we assume 15% plus, which you have guided earlier?

We have actually not given any guidance on the EBITDA margins per se. But we truly believe that the margins of barium chemicals are sustainable in the range of 16% to 20%. It will be in that range.

The next question is from the line of Ravi Naredi from Naredi Investments.

First of all, thanks to full team of Vishnu, MD. Sri. Krishna Murthy, Siddartha, Joint MD, for nice performance and achieved milestone of INR 1,000 crore top-line, and we hope we touch INR 100 crore top, bottom-line soon. Sir, higher EBITDA margin of quarter 4 will be maintained in current year? I'm not asking percentage, what margin percentage you will achieve EBITDA. But this margin will be achieved in quarter 4, financial year '23?

Hello, Mr. Ravi. This is Siddartha Cherukuri, Joint Managing Director of Vishnu Chemicals.

Yes. Yes. Yes. Welcome, sir.

Yes, we are very positive given the order book and in general demand environment, we are very confident to be intend with EBITDA margin. Perhaps we are expecting a further improvement given that our backward integration is going to come online in the coming quarters.

Right. Right. Right.

So that -- with that being said, I think we are very confident on improving EBITDA, not just EBITDA but also on the top-line, given the order book in both the verticals.

Yes. Yes. And how much the barium chemical will be the -- our whole turnover percentage terms?

Good morning, Mr. Ravi. This is Hanumant here. Base term, it's 15% to our consolidated revenues.

You're voice is breaking. Can you repeat it?

The barium because it's 15% contribution to our consolidated revenue.

15%. And sir, any CapEx plan for financial year '23 and probable top-line, if you can give?

Sorry, the CapEx plan for?

'23 financial year.

Yes, we do have CapEx plan for this financial year '23, both on the chromium chemical side and the barium chemicals side. On the barium chemicals, we are very excited to enter into a new product, which is an import substitute in India. And at the same time, in chromium chemicals, we are expanding our capacity.

Okay. So how much CapEx we will do?

Yes. Our overall CapEx this year will be in the range of INR 120 crores on a consolidated basis.

How much, sir?

INR 120 crores consolidated.

INR 120 crores. Your voice was breaking, hence I'm again requesting. Thank you very much. And all the best, sir.

The next question is from the line of Pritesh Chedda from Lucky Investment Managers.

Congratulations for a significant progress. Sir, on the chromium chemicals side, what is the progress on the backward integration in the quarter 4? Because I was just trying to analyze the number. And when I look at the Q-o-Q absolute raw material costs, there isn't any significant change. So if you would comment on the backward integration side? My second question is with respect to barium. So has that incremental capacity expansion kicked in? And once it kicks in, does it mean that -- that it means about 40%, 50% absolute jump in EBITDA because of the capacity getting added? These are my 2 questions. I have 1 follow-up, which I'll take after you answer these.

Thank you, Pritesh. This is Siddartha with you. The backward integration, it's as per the plan. We are currently operating at upwards of 80% level. We have seen this kind of operating levels in the month of March, that's an update on our backward integration. When you're saying that these numbers are not reflecting, as you know, on an absolute basis, the virgin soda ash prices have increased substantially over the second half of last year. So I mean -- so it's hard to kind of correlate with those numbers because we still have to use virgin soda ash to produce [ sodium dichromate ]. So if you go by numbers, I think it will be -- it's hard to correlate, I think.

Which means if it is operating at 80% in March and if it continues, will it continue to operate at higher utilization now? Has the backward [ integration ] stabilized?

Yes, we are confident. But still, like I said, it's a complex process. As long as we achieve upwards of 80%, it means that the operations are going well.

So will incrementally -- obviously, this backward integration started in your quarter 4, and March was the quarter 1, where you would have a higher -- so incrementally, when we move in the forthcoming quarters, we will start seeing the benefit of that backward integration in absolute terms?

Absolutely. That's very likely.

Okay. Okay. What kind of gross margin change do you see or envisage incremental in the incremental quarter once this is fully reflected?

I can't give you guidance on a quarter-on-quarter, but if you -- I can comment on the overall year, we have seen improvement of 300 to 400 basis points for the current.

Versus the exit quarter?

Correct. Correct.

On the chromium side?

Correct.

Okay. My question on barium, has the capacity got added? And what is -- does it mean that you will see a 40%, 50% jump in barium EBITDA?

Yes, the capacity has gone up by 60%. I beg your pardon, to 60 -- from 36,000 tonnes to [ 16,000 tonnes. ] And we are planning to operate it at 80% of the installed capacity during this financial year. So in terms of volume, we are looking at a 40% increase in the volume, and we are seeing a very good demand. And since the operating levels are increasing at a better operating -- with that means a better operating leverage, I think definitely, we'll see good EBITDA improvement during this financial year. However, we have been very cautiously optimistic about the raw material costs, especially on the energy side. That's something which we are very carefully analyzing. So that's why we can't give you a guidance on EBITDA, but we are very confident on the value and the volume improvement during the quarter. And EBITDAs will follow.

Okay. So this being a brownfield, I'm hoping that the capacity would have already stabilized, right?

Yes.

Okay. And sir, my last question is, you mentioned INR 120 crores CapEx. So this barium CapEx is already capitalized, right, in '22. So where are you spending incrementally this INR 120 crores now?

Good morning, Mr. Pritesh. This is Hanumant with you. Out of this INR 120 crores, we have kept aside INR 90 crores for the Blanc Fixe, a new product in our barium chemistry.

What it is?

Blanc Fixe. It's precipitated barium sulfate, mainly as a filler in the paint industry. So this is another value-added products in the barium vertical. So idea is very similar to what we have done in chromium chemicals to add related derivatives in barium. So this is a very interesting and at the same time, it's clear, it is an importer place product.

Okay.

So the work of that has started, Mr. Pritesh, and we have completed the financial closure of it. So INR 90 crores will be spent over that. Out of this INR 90 crores, it will be partially funded by debt and partially by equity. It would be completed by Q4, and it should be commissioned in H1 of next financial year. The balance, INR 30 crores, is in chromium chemicals business, which is kept aside for our expansion from 70,000 tonnes of installed capacity to 80,000 tonnes. So this would be completed in the next quarter or so. Part of this has already been spent last year, and part of it will be completed in the first 6 months.

Okay. This precipitated barium sulfide, does it add extra volumes in that 60,000 or it means more value addition within that overall barium capacity increase that you took from 36 to 60?

If we add capacities by additional 30,000 tonnes at barium sulfate. But currently, I can't -- I won't be able to give you a guidance on what would be the operating levels on 30,000 because we have to take it step by step. It's a new product, the specialty chemical. And so we'll have to scale it up. Probably, we'll start at 15,000 to 18,000 tonnes and thereafter, scale it up. But we are very excited about this new project and very happy to add a new product to the barium vertical to improve the value.

Okay. And lastly, sir, on chrome ore, any impact? Or how are you managing the chrome ore price increase or if there is any price increase? Because we keep on getting confusing trends, so your comments on the chrome ore side.

I'm not sure why it is confusing because most of the chrome ore is very much indexed. And we are able to pass on most of the price increases to our end users. So I don't see any complexity.

How much was a chrome price increase?

I would say the increase was mainly on effect of the freight cost, which our end users understand. But we have mitigated it in a way that since we are bulk buyer. So we have pivoted in terms of instead of using containers, we have started using breakers. That's a prudent call which we have taken to bring down the cost in terms of transporting the material. So still, there is an impact of about 20%, under purchasing which we've been successful to pass it on to the end users.

Okay. Okay. Thank you very much, and all the best.

The next question is from the line of Sudhir Bheda from Right Time Consultant Services.

And hearty congratulations to team Vishnu for outstanding numbers, sir, particularly good cash flow and Q-on-Q as well as year-on-year increase in the margin, where other companies are facing a lot of margin pressure. So congratulations once again, sir.

Thank you very much for your warm comment.

Sir, I have 2 questions. Actually, 1 question is already answered. So see, there is a geopolitical uncertainty as well as some report of disruption on demand in view of high interest. So what are the growth triggers which led you to believe that we will continue to grow in the same pace as we are growing in the last financial year? So if you can throw light on the growth figures going forward for our products.

Thank you, Sudir-ji. To answer your question, in fact, it's worked in our favor. Reason being we have a strong peer in Russia who is having challenges to produce and export the chemicals out of Russia at the moment. So that has definitely supported overall demand environment globally. But as such, even during the peak COVID period, the end use market which we are catering has not been impacted to a large extent. And in fact, we are seeing this because most of the countries have come out of COVID restriction in exception with China, which has never been our end user market. So that gives us more confidence on the year to come.

So demand side, do you foresee any challenges? As far as...

As of now, no. As of now, it looks very resilient, I would say.

Great. Great. And sir, my last question is like, as you said, network integration will have its full impact from April 1. So you see what kind of incremental EBITDA that we can cash due to this backward integration?

Sorry, can you repeat your question?

Full impact of the backward integration will kick in from the 1st of April for the financial year '23. So what is incremental EBITDA that we would get out of that backward integration plan as compared to last financial year?

Well, I suppose I've already answered this question. We can't give a guidance on a quarterly basis. But for a whole year, we are expecting at least 300, 400 basis points improvement in the overall EBITDA.

The next question is from the line of Rikin Shah from Omkara Capital.

Congrats on great set of numbers. Just wanted to understand, given how global events have unfolded in the past and your competitors in probably Turkey and U.S. are now facing challenges, and now CapEx in chromium chemicals seems a little economically unfeasible, how long do you expect the realizations to be favorable now?

Well, we don't expect too much -- I can answer it this way, Mr. Rikin. We don't expect too much of capacity additions in the short-term. And when we mean short-term to me it's about broadly 18 to 24 months globally. Inflation is an issue globally with interest rates are going up. Our input class are fluctuating to some extent. But having said that, structurally, we are much better placed than our peers. Exports out of China are not a concern for us. Russia is a competition, but they are affected for now. So for multiple reasons, the demand and supply is far better balanced, I would say. So from a capacity point of view, there is very little excess capacity going around, which will keep the demand intact. However, we feel the demand is going to come from different sectors. Especially, let's say, to talk about India and government focusing on infrastructure spending across the world is good for us. So with higher commodity prices, what we are seeing right now -- and also the mining activity continues and with the government focus on infrastructure. Construction activities will bound to continue. That will eventually drive the demand. So in a nutshell, we are much better placed, and that will reflect in the numbers in the years.

Right. All right. I have another question, sir. So now that you are pursuing debottlenecking in some chromium chemicals. So this additional 10,000 metric tonnes, how much of it can we ramp-up in FY '23? Because it will start maybe midway this year?

Good morning, Mr. Rikin. This is Hanumant. So yes, it's a valid point. The good part is we have already started -- we had already started working on it in the last quarter itself. So we are progressing well over there. And we are very confident of completing this exercise in the next 3 months. So it has taken us close to 7 months to do it, and we are confident that we'll start full operations in this by Q2 or towards the end of Q2 of this financial year. Assuming that I have shared that we'll see a volume increase in chromium chemicals to the extent of at least 10% on a year-on-year basis.

All right. All right. So on the barium sulfate, can we see that a more material impact in FY '24 because you have maybe alluded to the fact that it will come on stream in Q4 FY '23?

Yes. It would also -- while it would come on stream in Q4 or Q1 of FY '24. The point over here is that we have already started the groundwork over there. We are very happy to inform all our shareholders and investors on this call that we are progressing very well on the CapEx. It's been thoroughly planned. It's -- it was part of our expansion plan for quite some time now. And now we have already started working on it. So we will see a material impact of that on our consolidated as well as Vishnu barium's EBITDA from next financial year onwards.

All right. That's it from my side.

The next question is from the line of Shivam Vashi from Inga Ventures.

Just wanted to understand on Slide #13, you mentioned that there is a debottlenecking, given the surge in demand, sir. So can you just help me understand why, this demand is from the export market or is it largely from the partnership market, sir.

Yes. It's from both. We see demand coming from the domestic market as well as the exports market.

Because what your presentation mentions is in the chromium segment, chemistry segment, given the market demand of at least 3,000 metric tonnes, whereas we are already at 70,000. And we are -- with this, we are 80,000. So this incremental demand, I was just trying to understand whether our export share will increase Because of this debottlenecking.

It's like -- again, like I said, it would be hard to give guidance in the percentage, but I can say that the demand is from some domestic as well as export market. But what -- from -- if I like -- if I can talk about the specific sector, we are seeing more from the electroplating side as well as the wood preservation chemistry and and pigments and dyes where we are witnessing a strong demand.

Great. And firstly, what kind of revenue that we are expecting out of this debottlenecking to this additional 10,000 tonnes?

Let me answer it in a way that -- we won't give any guidance on the EBITDA margins and everything, but again, we can't give any guidance on the profit line and on the EBITDA margin. But let me put it in such a way that -- then as a management where we are making investments, we're very clear on the return. So when we are looking at today, you -- we have -- I mean, we've already shown significant improvement in ROCE from 13% to 25%. The additional chemicals, we are targeting upwards of 30% of ROCE in the years to come. At the same time, very much focused on the fixed gross fixed assets we are creating to the turnover ratio, targeting it too. And at the same time, focus on improving further interest coverage ratio to 8x to 10x. And at the same time, we're very conservative on bringing the inventory days down. If you are seeing from 186 days of inventory has come down to 1. And if it -- not it -- we're going to see a further improvement on the inventory days coming around to perhaps close to 80. That's the kind of guidance we can give.

Okay. Okay, sir. Got it. Just -- I think the question was answered in the last thing. It is -- this will be funded by around INR 30 crores internal accruals, right? This debottlenecking?

Yes.

The next question is from the line of Dhruv Bhimrajka from Monarch AIF.

Sir, as on date, what is our installed capacity for both chromium and barium?

Good morning, Mr.Dhruv. The installed capacity in chromium chemicals is 70,000 tonnes per annum, and the installed capacity in barium is 60,000 tonnes per annum. It was 40,000 tonnes till Feb, in March. We added another 20,000 tonnes. So effective this year, it's 60,000 tonnes per annum in barium vertical.

Okay. And as per your expansion plan, you said chromium will go to 80k, right?

That's right.

Okay. And barium, there is no additional capacity coming in expected for the new product launch that you're going to do?

I think that is a very big project for us. It's not like in terms of volumes, while the volumes will also go up by really 30% from 60,000 tonnes to 90,000 tonnes plus. But this key part was here that I'd like to correct this narrative is that this is a value-added product. It is not manufactured by any key player in India. It's a import substitute. It goes into automobile paints as a filler. So there is a -- for powder coating. So there is a huge demand for this, not just in India, but globally. So this was earlier relying on international paint manufacturers and even the Indian paint manufacturers were relying on international producers for this chemical. Now there will be a self-reliance in that matter from an Indian perspective also. So this is a very niche product in this category. And the key part is it would also diversify our portfolio in barium chemicals. What we have learned from our experience in the past in chromium chemicals is having a concentrated portfolio can give you the upside for x number of years, but having the diversified portfolio, especially in our kind of business, it gives you that cushion against industry risk or end user risk or currency risk. So that's the reason why we are venturing into a new product.

Correct. And sir, what would be the new capacity for this product?

It would be 30,000 tonnes. So from 60,000 tonnes, we'll be at 90,000 tonnes from next financial year, FY '24.

Okay. Okay. And how much time would it take for the optimal utilization for this new capacity?

We will have to wait a little bit. Probably, we'll be in a better position to answer this in the next conference call.

Right. Okay. Okay. And just 1 last thing. On this new product, how has been the customer response? Because I understand that you would have been talking to prospective clients and customers about this. So I just wanted to get a sense on that.

I mean, we've already spoken to some big end users. The response is good. However, they would like to test it and see the end product. That's the kind of response we have got from some big end users. But I think definitely, there's a lot of interest because people, they are looking forward to move away from import because it's getting more complex to get materials to containers. And also given the China issues. Because 70%, 80% of this plant is coming from China, and rest is coming from Italy. And not just in terms of this thing. Also the quality, what we're going to produce would be superior. And we'll give them a better finish compared to what they are sourcing from China. So that's also interesting for them to source from us.

Okay. So you said the product mainly comes from China and Italy?

Yes. Product mainly comes from China and Italy. 70% from China, 30% from Italy. The Italians, they are producing a certain higher-grade quality. That's what we are targeting to offer in the market, and we are very confident about achieving those quality.

Okay. Italy has the higher grade product.

Right.

The next question is from the line of Vivek Gautam from GS Investment.

First of all, congratulations once again for sustained set of numbers and for this opportunity. My question is how sustainable is this growth? And the factor responsible for its current headwinds Russia is facing, is it helping us out? What is our USP on this front? And will it sustain in future?

Thank you, Mr. Vivek. On the sustainability part, I will just reflect on 1 point. What we are seeing is not just an uptrend because of global demand and supply scenario, but because of the improvement in our own operations that we have cemented in the last few years. Just for the context, so from being a 2-product company like we have been saying, we have diversified our portfolio. And that gives us more customers to cater to. That gives us more industries to cater to. That gives us more ability to mitigate large pricing pressures from the commodity side as well as currency rates globally. So with this in mind, few years ago, we had pivoted our strategy to produce more diversified range of products in chromium chemical business, and that has now resulted in terms of the growth that you're seeing in our margins. So across the world, our customers are looking at rising from the point of view of end-user demand, consistent supply and how the supplier can mitigate shipping delays. I think all these factors are helping us -- helping us believe that the margins are going to be sustainable going forward.

Yes. And what is the opportunity size for us both in India and outside India for both chromium and barium and expected growth rate in future?

I think over here in India, we are the largest producers of chromium chemicals. And in barium also, we are the largest producers of the products that we are manufacturing. So the industry is growing at a faster rate compared to what is being suggested in terms of global industry rate. So India growth story is very much intact. What we believe is the emphasis of Make in India or manufacturing in India is also going to have a multiplier effect on a company like us because our products goes into multiple sectors, be it pharmaceuticals, be it industrial, or be it consumer applications. So that's the reason why we are very optimistic about the demand being intact going forward.

And exports?

Absolutely. From an export point of view, also like we have mentioned before, we don't see too much of capacity being added, and that will help us grow in the export markets as well.

I believe our new Vizag plant order, which is stabilizing that has been the key factor behind the improvement of our performance in recent times. And I believe the learnings from there, we have been able to do it in the other segment also. So how is our Bhilai plant performing? And how helpful is this location of Tatva mines in close proximity to us for our barium business, sir?

I'll just summarize this. The Bhilai operations are also doing well. We produce a very important derivative product out of Bhilai, which is exported in excess of 65% compared to domestic consumables. So that gives us a leeway into export markets. And like you mentioned, yes, in Vizag, we have added a backward integration project that is integrated into the same unit. It's not a new plant.

The next question is from the line of Yogesh Tiwari from Arihant Capital Markets.

First of all, congratulations for a good set of numbers. Just 1 question. So in Q4, there is a negative other expenses of about INR 1.3 crores. So just wanted to understand that?

Yogesh, thank you for raising this question. It's a good observation. Basically, we have spent excess in CSR this year. And as per the provision given by the accounting standards, we are carrying forward the excess spent on CSR, and we'll be utilizing it over the next 3 years. So that's why you see this reversal.

[Operator Instructions] The next question is from the line of Anil Jain, from Free Fashion Capital.

I just wanted to know what is our net debt as on March '22? And how do you see it moving to the next year in FY '23 and FY '24.

Mr. Anil, thank you for your question. Our consolidated total debt as of 31st March 2022, INR 352 crores. And from a debt-to-equity point of view, it is 1.3x. We knew that over the next year, the debt to equity could -- I mean, we are targeting internally to bring it down to less than 1. As we can see that there is CapEx going on in our barium subsidiary. So there would be a marginal increase in our total debt in absolute terms, but it would be still under the range of debt to equity of 1. So we are going to see a increase of close to about INR 30 crores to INR 35 crores in debt over the next 1 year. But since we are repaying close to about INR 30 crores in principal repayments in our chromium business this year, we are going to see a marginal impact.

kay. You are targeting 1:1 by March '23?

We are targeting less than 1:1.

Okay. Great.

We're hopeful to achieve that. We are very confident of what we have seen in the past should defy into good deleveraging in the coming year also.

The next question is from the line of Anurag Roonwal from Moneybee Investment Advisors.

This is Manan here. In the earlier for a participant, you mentioned about 1 of our competitors in Russia who is facing issues. So what sort of capacity must have gone offline through this? And has this resulted in any spike in the realization of our products?

Anurag, we're talking about a capacity of close to 80,000 tonnes is what is coming out of Russia. So that's as of now, how we see this is out of the market.

Okay.

In terms of realization improvement, we are already witnessing it as we speak. However, the freights are still -- the sea freights globally are still playing a spoil sport. When I'm saying that, we, as a exporter out of India are more impacted than others because the outbound price in Asia, even compared to China now, is higher out of India for some reason. So that's something we are dealing with.

I was under the impression that upon freight pass on...

Sorry, your voice was cracking.

I was under the impression that upon freight are passed on to our customers. Is that understanding, correct? Or...

Yes, we did pass on. We did pass on, but if you calculate it, let's say, we had a lower freight, the margins would have improved also, right? We are able to pass on a CIF increase. But on an absolute basis, in case the prices were lower, our margins would have improved. Because we are working on a CIF base, although it's FOB protectors. But -- there has been an improvement on the sea price, but not to the extent we are -- not to the extent of what we are seeing in China because China the sea prices have reduced. But that's not happening completely in India yet, but we are hoping that it will happen in a few months time from now.

Okay. And so this capacity -- so is this mainly because they are not able to source raw material like this capacity has gone offline? Or is it that due to the sanctions on the Russia they are unable to export?

It's a combination of everything. It's also, the customers are shying away from sourcing from Russia. I think it's not a short-term impact we see because where the things are going. I don't think Russia is going to take a back foot on what they have embarked on. So I'm sure the -- I mean, not -- U.S. will continue to put pressure and they will be isolated from the global market in terms of supplying chemicals of any other related products manufactured in Russia. I think they will have a long-term impact. When I say long-term just few years from now. And also to source the containers a lot of big names are shying away from going from Russia -- going to Russia and shipping out of Russia. So they are finding challenges to source a container.

Okay. Got it. Okay. And then on the barium side, a big chunk of our exports is to Europe, as highlighted in the presentation. And we are going through the geopolitical issues as well as energy crisis. So are we seeing any slowdown on the demand side on that part? And again, on the chromium side, has there been any further price hikes in quarter 1?

I'll start off by answering the barium. We are not seeing any slowdown in the demand. It's still -- I mean, the order book is looking good and we are receiving more inquiry. However, what we have been very careful is about the euro-dollar conversion rate, which is a bit of concern right now. So we are discussing with our customers to work on a dollar basis versus euro because euro has been kind of under pressure as we all are aware of. So that's a matter of concern, but we are taking care of that. Regarding chromium chemicals, what was the question?

Have there been further price hikes in the quarter 1?

There has been a price hike in quarter 1, but I mean not in all the products, but a few of our derivate.

Okay. And then I had a bookkeeping question. In our P&L, we mentioned this consumables. So if you can just highlight what are things are booked under this consumables?

Mr. Anurag, this is Hanumant, with you. On the consumables, we have the energy consumables, similar to -- I mean, I'll just name a few, like Petcoke, Coal, Husk. It is already provided in the schedule to account the breakup of all these top 5 consumables that we have.

Right. So when we talk about backward integration under what line item would we see the benefits of that flowing in? Would it be already consumables? Or would it be under the cost of goods sold?

Under the cost of raw materials consumed.

Okay. Okay. And if you can just -- lastly, what was the exit utilization rates in both the chromium and the barium side?

The utilization rates in chromium chemicals were close to about 90%. And in barium side, the utilization was close to about 85%.

Okay. And the debottlenecking exercise, would it result in any sort of downtime or anything on the production side?

No, nothing at all.

Okay. And the power issues that were going on in Andhra Pradesh, have they been resolved? Or are we facing any issues on that side?

Yes. Can you repeat?

There was news flow that there was power issues that were going on in Andhra Pradesh. So just wanted to confirm if Vishnu is facing any issues on that side? Or are we able to procure power? And is there any escalation that we're looking on that side?

Overall, our power cost as a percentage of revenues on a year-on-year basis have come down from 4.6% to 4.2% in FY '22. And at the same time, we understand that there are concerns about power outages in Andhra Pradesh and other areas -- in certain areas in Telangana also. But we have already planned for it. We have been planning for it. And that's the reason why we are now moving to solar power in our Vishnu barium subsidiary. This will help us maintain the power cost for FY '23 and beyond. At the same time, it also is a step towards self-sufficiency and sustainability. So from an industry point of view, of course, it is tough. But what is more concerning to us is that, okay, we have the ability to absorb the power cost due to our improved realizations and operating leverage. But if I -- if you can ask me what is a concerning point and that is if the power outages affect our customers and all of them are not scale -- are not operating at scale. So there are industries which are subscale and they might be impacted by great powers. So that's the reason -- that is something that we are watchful about, and we are supporting our customers who are getting impacted due to such power outage issues. So in a nutshell, we don't see a significant impact on a year-to-year basis in our power costs.

And new production side issues, right? So power is available for our requirements?

Anurag, just to answer that question. And since I'm on record, I say that we have not lost any production on account of power shortage. The reason being we produce 40% of our own power. That is through turbine rolling. We produce about 5 megawatts of power per day. So the investments which we have done over the last 4 years has really helped during this challenging time. And at the same time, there was no power cuts in Andhra Pradesh. There were restrictions on the power usage that we are using, just to give you an example, 10 megawatts of power. We are entitled to use about 5. So there was no power cuts, there was load shedding on a day basis. So -- I mean, so how we mitigated these challenges since we are producing our own power up to 5 megawatts, but that really supported during the shortage time. And also at the same time, we do have a direct feeder where we are entitled to source power from outside.

Okay. On the barium sulfate, if you can just throw some light on the market size and the opportunity that we are looking at over here?

The total global market for barium sulfate is close to 140,000 tonnes. In India, there is a demand of close to 25,000 tonnes, and everything is imported, there is no domestic producer. That's the sort of guidance we can give you.

Okay. And our capacity would be primarily catering to domestic or would be a mix of domestic and exports?

Well, to start off with, I think domestic will be our market of focus. But as we progress, it could change.

The next question is from the line of Kaushik Dani from Satco Capital.

Kaushik Dani, here. First of all, Siddartha and team, congrats for a great set of numbers. Okay. Just a couple of questions. When we mentioned the volume growth let's say, around the teens and around 20% for chromium for the coming years, are we expecting this sort of volume growth from the same set of clients? Or we expect some new clients to get added in both the segments?

Kaushik, this is Siddartha, with you. We're definitely targeting new clients. And at the same time, we are receiving additional demand from the existing clientele as well in certain.

Okay. Okay. Fine. And then sequentially, what was the realizations of the barium?

We don't give a guidance on that.

Okay. But is it an increasing trend? Or was it flattish or something? Any color?

It's in an increasing trend. But let me put it this way that I mentioned during this call today that volume, there's going to be a substantial volume increase by virtue of which better operating leverage, so our pricing power will improve.

Okay. Got it. Got it. And see, typically, with regards to this precipitated barium sulfate, typically, we have seen OEMs are usually not so keen on changing the vendors. So how much do you think are the OEMs ready to select new vendors, whether there would be a material price difference in our cost versus Chinese or Italian producers, how does it happen?

That's a very good question. Definitely, they would contemplate since this is a specialty product. It takes time for them to homogamete into their recipe. But since we had discussions, we have been having a discussion with the end users, they are really serious to consider as a supplier and speed up the process of homologating in their paint in use. So especially in India, that's what I'm saying. Our target is to start off to cater to India because the capacity we are creating, let's say, eventually, let's say, we're able to achieve -- cater to 100% of market, that will be it, what we can produce and supply. But I mean the idea is to, again, to create a balance of 50% export, which would give us in domestic. But to start off with, I think domestic market is interesting. We are hearing a lot of -- seeing a lot of interest from the end users, and they're looking forward to get the samples and homologate and get it approved by their end users. So however -- like you said, it might take a few months' time, but we can definitely speed it up. They're interested to speed it up.

Okay. So in terms of, basically, any stats on what is the sort of India demand for this barium sulfate?

I did mention it is 24000.

25,000 tonnes. Yes, I just got it. And...

Based on the -- this is based -- this information is shared with you after referring to the import tax and speaking to the customer. Everything is imported, there is no precipitated barium sulfate producer in India.

Got it. Got it. And we said we are going to begin this somewhere in Q1 of FY '24. So that would be what the QC side or it would be commercially beginning from Q1, '24?

Commercially beginning from Q1 '24. Like you said, yes, it'd be hard to give you a time line probably towards end -- towards first -- after our first semester of this year, probably we can give a better guidance on that project, how it's progressing.

Okay. Okay. And I think this time, you have declared equity dividend, right? Yes, yes. So any preference dividend is also declared?

Any, sorry, what?

Any dividend on the preference capital?

Yes. Kaushik , last year, the -- the promoters of the company for though 6% of the 10% -- 6% out of the total preference dividend of 7% that is a part of the prep capital allocated by them in the company. So they have taken 1% for the last year.

Okay. So FY '22, it is 1%.

Correct.

Okay, fine. And typically for FY '22, what has been the power cost as a percentage of total revenues?

It's been about 4.2%.

4.2%. Okay. Great. Thank you so much Hanumant and thank you, Siddartha. Wish you the best.

Thank you so much.

Thank you so much. Thank you everyone for your support. Thanks a lot.

Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Hanumant Bhansali for closing comments.

Thank you, Ms. Margaret, and thank you, everyone, for joining the conference call of Vishnu Chemicals Limited. This is our second conference call, and it means a lot to see such participation from all -- from different different funds, different research houses, everyone. I'd like to thank all of our colleagues in Vishnu, whose dedication and expertise has helped us create the value for the customers and the shareholders. One thing that we obviously don't talk too much about this, but it means a lot to us at Vishnu and that is safety and well-being of our talent and people. It is going to be a very important and key priority for us going forward also. So I can't help but to reemphasize my pride for our Vishnu team and what we have and will be able to accomplish for our shareholders and investors now and going forward. So I'm just going to say thank you to all of you for your interest today. Our next conference call will be post our second quarter results. We do it on a semiannual basis. So if you have any questions in the meantime, feel free to contact us. Over to you, Ms. Margaret.

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