Vishnu Chemicals Limited (516072) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Vishnu Chemicals Limited Q2 FY '25 Results Conference Call hosted by PhillipCapital Private Client Group. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinion and expectation of the company as on date of this call. These statements are not guarantee of future performance and involves risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Apurva Shah from PhillipCapital. Thank you, and over to you, sir.

Yes. Thank you, Sifa. So good evening, everyone. On behalf of PhillipCapital Private Client Group, I welcome all of you to Q2 and H1 FY '25 Earnings Conference Call of Vishnu Chemicals Limited. From the management, we have Mr. Sidda Cherukuri, Joint Managing Director; and Mr. Hanumant Bhansali, Vice President, Finance and Strategy. I now hand over the conference call to Mr. Hanumant for his opening remarks. And then we will open the floor for question and answer. Over to you, sir.

Thank you, Mr. Apurva and good afternoon, everyone. We welcome you all to the earnings call update of Vishnu Chemicals Limited. I will start with the financial performance achieved during the second quarter of the current financial year. On a consolidated basis, the company recorded operating revenues of INR 343.8 crores in Q2 FY '25, an increase of 12% on a Y-on-Y basis. The consolidated gross profit was INR 147 crores in Q2 FY '25, an increase of 6% on a Y-on-Y basis. The consolidated EBITDA of the company stood at INR 45.1 crores, a decrease of 2% on a Y-on-Y basis. The consolidated PAT of the company Q2 FY '25 was INR 22.8 crores, a decrease of 5% on a Y-on-Y basis. On a half yearly basis, the company recorded operating revenues of INR 682.7 crores in H1 FY '25, an increase of 12% on a Y-on-Y basis. The consolidated gross profit was INR 298.8 crores in H1 FY '25, an increase of 7% on a Y-o-Y basis. The consolidated EBITDA was INR 100.8 crores, an increase of 4% on a Y-on-Y basis. The consolidated PAT of the company in H1 FY '25 was INR 53.3 crores, an increase of 1% on a Y-on-Y basis. The domestic to export sales mix on a consolidated basis was 57:43. This was driven by a robust demand environment in the domestic market. The company continues to remain cautiously optimistic about the recovery in the export market, which continues to face challenges due to geopolitical and inflationary pressures. The EBITDA and PAT margin of the company was impacted due to rising cost of raw materials, higher fixed costs due to steady maintenance began during the quarter and an impact on export due to multiple factors, as mentioned earlier, like higher freights, geopolitical issues and sustained increase in disruptions in global supply chain. On the Barium side, the profitability continues to improve due to process improvements, diversified product mix and operating leverage, improving in the business. Fundamentally, the balance sheet of the company remains strong with consolidated debt-to-equity ratio at 0.45x and current ratio at 1.58x, a consolidated net debt to equity stands at 0.32x with cash and cash equivalents at INR 100.1 crores as on 30th September 2024. I would now request Mr. Siddartha Cherukuri, Joint Managing Director of Vishnu Chemicals Limited, to share his views on the strategic expansions done by the company during the financial year. Over to you, sir.

Thank you, Hanumant. Good evening, everyone. In financial year '25, we have entered into a definitive agreement to acquire business that aligns well with our portfolio, enhancing both our operational capability and resilience to external pressure. On August 24, the company entered into a definitive agreement to acquire Jayanshree Pharma Private Limited, which helps in expanding our presence of the company in Visakhapatnam. On November '24, company has achieved a milestone by entering into a definitive agreement to acquire a Chrome Mining Complex through its subsidiary in South Africa. Our cash-rich balance sheet, coupled with a low debt portfolio continues to provide us with flexibility to invest strategically in assets that drive long-term value for our shareholders. Overall, we are pleased with the progress we have made in executing our enterprise strategy in a tough business environment. We continue to balance our long-term growth objectives with the realities of the current market conditions, positioning ourselves for sustained success as we navigate through these uncertain times. With this, I conclude my remarks. We can now commence Q&A. Thank you very much.

[Operator Instructions] We have first question from the line of Sagar Jethwani from PhillipCapital.

Sir, I have a few questions. Can you share the volume performance of chrome and barium segments? What led to the slowdown in chromium segments? Can you elaborate on that? Second is that the soda ash prices have been trending lower. So that is one of the important RM for us. So considering that fact, the gross margins were still lower. So can you provide the details of that as well? How did the RM basket move? Second -- third is that how do you see the H2? What is the visibility for remaining part of financial year '25. Lastly, there was a 20-day scheduled maintenance at our Vizag plant. So what was the requirement of this maintenance? Can you throw some color on that? That would be helpful. These are my questions.

Thank you, Mr. Sagar your question. This is Hanumant with you. The volume in both the chromium chemicals and barium segment remained stable during the quarter. In fact, the volumes were quite robust in both the segments that we operate, that is chromium chemicals and barium chemicals. Despite the scheduled maintenance taken during the quarter, we had higher inventory of finished goods that helped us meet the requirement of our customers globally. Coming to your second part of the question, where you mentioned about the lower soda ash prices seen during the quarter and the impact of it on the gross margins. Your observation is correct. The soda ash prices have been on a downward trend for quite some time now. However, I'd like to mention that one of the major costs in raw material is the cost of minerals, that is chrome ore and [ branch ]. And the prices of both chrome ore and [ branch ] saw an unprecedented rise during the quarter gone by. And that led to a pressure on the margin profile. Having said that, we did not see any pressure on the volume front. As we mitigated the slowdown in the export market by shifting more volumes in the domestic market, thereby we did not lose any market share and also continue to remain available for our customers in the markets in which we operate. The visibility for the rest of the year -- the visibility for the rest of the year in comparison to the first half is on the positive front, especially because of the acquisitions that we have done. So taking this trend forward, we are looking to improve our operating levels as well as the margins in the overall business at a consolidated level during the second half of the financial year. Having said that, I would like to still emphasize on the fact that the key factor here for us to monitor would be the trend in raw material prices, the freight expenses expected to be on a downward trend. But still, we have to observe that more keenly as we step ahead because that is one of the key factors that is leading to changes in the global demand, especially from spot markets. And third, but not the last one is the geopolitical issues that are driving in the current environment. On the scheduled maintenance, we are a manufacturing company. In fact, it's one of the most heavy manufacturing plants that we operate in Visakhapatnam. And every year, we take a scheduled maintenance of close to about 30 days. Here, we took a scheduled maintenance of about 22 days in the second quarter and the next 8 days will be spent over the year -- will be taken over the years. So we don't see any major impact of the scheduled maintenance going forward in the second half of the financial year. I hope I've answered your question.

On the -- I just want to follow up on my first question. Can you give the volume numbers, chrome and barium -- chromium and barium segment?

Thank you, Mr. Fluor -- sorry, thank you, Mr. Sagar. But as a company, we do not share the volumes in both the segments because of our competitive reasons.

No. Growth numbers, I was asking, growth or degrowth.

It remains the same during the quarter. There was no change.

Just to add to that, the barium volumes have increased, especially on the barium sulfate -- precipitated barium sulfate. As you see, we have -- I mean, on a 6-month basis, we have recorded the highest revenues so far, which is our subsidiary company. So there is a volume growth, especially on the precipitated barium sulfate.

We have next question from [ Sudhir Beda ] from [ Beda Family Office ].

Just wondered how these 2 acquisitions will pan out in the next 12 months. One chrome mine and one a pharmaceutical company, how that will benefit you or how it will pan out in next 12 to 18 months.

Let me show some light on these acquisitions. Again, I'd like to clarify to you and to all that this Jayanshree Pharma -- don't get carried away with a nomenclature. It's not a pharma company. It's an inorganic chemical manufacturing company. Idea is to produce -- is to add another value-added additive in inorganic chemicals, which will -- which will add to the basket of our products, especially going into the ferrite industry as well as ceramic industry globally. So this is -- our plan is to manufacture this value-added product in this facility. Tentatively, we are expecting commercial production to happen in Q1 of FY '26.

And what would be the financial -- how it will be -- if we separate you or how it will be?

Cannot -- we cannot comment at the moment, and we'll come back to you once we get closer to the commercial production.

And mine complex if you throw some light on?

Yes, sure. So well, I mean, this plant has a has a reserve, which is sufficient for us for the next 30 to 40 years also has a very efficient beneficiation plant, which is suitable for the kind of raw material, which we are currently sourcing from South Africa. With that being said, it is a very suitable asset for Vishnu Chemicals considering a backward integration and gives a lot of certainty to the raw material supply in the years to come. We are expecting this plant to be operational in the next 6 to 9 months from now. The sale purchase agreement has been signed. And currently, the paperwork -- paperwork is in progress. The rest of the work is in progress.

Okay. And sir, Q2 H2, do you foresee increase in EBITDA because the onetime charge will not be there. So the percentage term, what kind of growth do we see in EBITDA?

I would like to say, I mean, it's also updated in our news report that the domestic markets are resilient. I think that keeps -- I mean that gives us a lot more confidence in terms of maintaining volumes and increasing volumes. Export markets are -- we are still facing certain headwinds because of aggressive pricing pressure from the peers in certain country and also some logistical advantages they have, especially being in Africa and Europe, which they are able to leverage on the lower logistics costs, which we are trying to address to some extent. And also since we are witnessing some fee freight adjustments downward adjustment, that's also giving us some benefits, which we are able to pass on to the end users. So we are expecting some a marginal volume growth in chrome business during H2 and a sizable volume growth in barium business during H2. That's what I can take. I would not be able to comment on EBITDA at the moment. We don't know where the rupee-dollar would be in the raw material costs side.

And can you quantify what was the onetime charge was in Q2?

This is Hanumant with you. The onetime administrative expenses were towards the acquisitions that we made during the quarter. So it was -- it was already expensed in our P&L in the Q2, and there won't be any further expenses.

Quantify that amount-wise, if you can quantify it so that we get clarity on the EBITDA margin?

We -- I don't have the exact number in front of me, but probably I can get back to you later on this.

We have next question from the line of Rohit Sinha from Sunidhi Securities.

Thanks for taking more question, sir. Actually, my line is dropped in between so maybe sorry for repeating question. One is on the Barium side, as we have added our PbS capacity. So I wanted to know how the PbS volume for utilization levels are there. And excluding the previous -- how the Barium segment has performed in this quarter.

PbS for the whole financial year, I mean, during H2, we are expecting a volume growth of close to 40% compared to FY '24. Also, the order book is looking quite solid, strong as we move forward into H2. Currently, the operating levels of the plant are at 65%, 70% level. We are undergoing some debottlenecking to get it up to 80% to 90% levels. And given the fact that we got approval from all the MNCs, paint companies as well as mid-level power reporting companies in India. We are also looking at adding capacity in the next 2 years from now. Because the current capacity, we'll be able to only service the domestic demand. With that being said, I think probably in FY '26 or FY '27, we'll be looking at adding capacity in barium sulfate.

Okay. And that the capacity size would be roughly how much?

We are planning to double the capacity by FY '27 of the stated barium sulfate. Currently, which we are seeing is 50,000 tonnes considering operating level of 80% to 90%, we will have to take it up to 60,000 tonnes considering operating level of 80%. So we're looking at least 50,000 tonnes of precipitated barium sulfate in the next 2 years.

Okay. And I just wanted to know in Q1, we have more than INR 80 crores kind of top line from facility, this quarter slightly on it was down. So is it because of the volume side or the pricing was on the retail side?

Sorry, please repeat your question.

On the subsidiary side, last quarter -- from last quarter, the revenue was slightly down, so is it on the volume because of the volume issue or there was some pricing decline also?

Good afternoon, Mr. Rohit. The impact of -- [ there was 2 ] decline in volumes or the value in our barium business during the quarter. There's a marginal impact of less than 2% on the operating revenues in the barium business, which we have -- which we are anticipating to cover up in the quarters to follow with both higher volumes and value realizations to improve. I would also like to add that during the quarter gone by, leading business achieved one of the highest pads in the quarter in the last 12 quarters that we saw. And the EBITDA margins in the business were in excess of 16.75% in Q2 FY '25 for the various business. So we are quite upbeat around the business and we hope to continue delivering value to our customers for the rest of the year.

Okay. And is it expecting better volumes, better utilization levels, so are we expecting further improvement in the EBITDA margin for the subsidiary? Or what sort of range we should be expecting on barium business?

Correct. The EBITDA margins for the subsidiary business is expected to improve. And from the current levels of around 16.75%, we expect it to increase over the next 2 quarters by 100 to 200 basis points.

Okay. Okay. Great. And just on the overall business, just one question from the revenue issues we have been taking for some time. So are we seeing any improvement in terms of shipment or how we are still looking at the situation is now and maybe down the line in the next few months? How we will be looking at it?

Well it has been a matter of concern for the last -- especially the quarter 2 because the sea freights have been quite volatile and upward trend especially in the quarter 3 towards the end of quarter 3, what we are witnessing now is the sea prices have come down and kind of stabilized, although they are not to the level what we have seen before the Red Sea issue, but we are hoping it will get there probably by quarter 4. And most importantly, as a shipper, we would expect the freights to be stabilized and have more certainty on the availability of the equipment and the price and rather than continuing to be volatile. So this has been a concern, especially during the quarter 2 and things have kind of settled come down and settle at the moment. We are hoping they will get better in the quarter 4 as we get into quarter 4.

Okay. And one last question if I can squeeze in. Just on this mine acquisition being relevant. Once this benefit would be coming into the business. Probably, obviously, we have a proposal of looking at a better margin after that. So on that question only, I mean, what best margin expenses we can expect?

Let me start off by saying this acquisition will improve our cost position, not just locally, but globally, we will be the lowest cost producer especially coming to all chromium derivatives. That will give us a lot more leverage in terms of increasing volumes, improving the margins, better operating leverage and having a strong position in certain derivatives as we move forward. Most importantly, this will give us a lot more certainty to the critical raw material, which is chromite over and it makes a significant difference, especially on the operations point of view when you use a product which is a lot more consistent than coming from different mines. So from the operation point of view, there will be a lot more stability and certainty on the yields. Definitely, it will improve EBITDA margins. I won't be able to quantify right now, but I would say, at least to a level of 2% to 3% at a full operating level in 2 years from now.

We have next question from Darshil Jhaveri from Crown Capital.

So sir, just wanted to like get a sense like in case -- so this quarter, our margins have gone down a bit. So just wanted to know in the 25-day shutdown, how much revenue impact would have happened? And what would be the onetime administrative costs that will not come in the next quarter? So could that be quantified?

Thank you, Mr. Darshil for your question. As I answered during the call earlier, that there is no impact of the scheduled maintenance on the revenue side of things because we were holding a higher inventory of finished goods, as we had already mentioned during the Q4 of last financial year and Q1 of the current financial year. To maintain continuous supply to our customers globally, we were making higher inventory of finished goods, which help us in this entire base of shutdown for the scheduled maintenance to our Visakhapatnam unit. And the impact was more on the expense side as we had to incur more fixed expenses without production. So that added to a little bit pressure on our EBITDA margins. And having said that, most of the impact is because of the higher raw material costs as you could see in our gross margin profile and the slowdown in the export market, which led to a little bit shift in demand from export market to the domestic market. On the administrative expenses, as Mr. [ Beda ] had asked this question earlier, the amount is suboptimal. It was close to about INR 50 lakhs and that we had incurred for the acquisition and the advisory fees that were paid during the quarter.

Okay. Fair enough, sir. So just wanted to know like in terms of can we have a guidance in terms of revenue margins for the full year FY '25? I think most of our cost has gone that everything that's even the maintenance shutdown has been already incurred in H1. So overall, H2 could you just give us our guidance, how will the revenue pan out and margins that we can expect going forward? Can we come back to 16% margin that we did in Q1?

The current situation is quite similar to as it was in Q2, except for the freight that have started to coming off. However, we are yet to see the full impact of lower rates on the demand from the export market and thereby it's imperative for us to be very watchful and diligent in this current situation. We won't be able to give you a guidance, but as a company, like we highlight both the negatives and the positives with the headwinds and payments, we are sharing with you whatever data is available with us. And if things improve from here on the chrome side, you will see that the stand-alone profitability also improves. Now we are quite confident about the improvement in the barium business as we are progressing. But on the chromium side, we will be continuing to monitoring the situation and keep you updated on the quarterly calls as we progress.

We have a question from Chirag from White Pines.

Sir, the first question is on the chrome imports that you do. So how frequently you do it? So did it happen every month, it happens once a quarter?

We do it quarterly.

So -- and is that you had a high cost inventory, which we absorbed or content, there will be some spillover effect in Q2 also?

There could be ...

Q3 also, Q3, sorry.

Yes. They will get spillover effect. But since it's not for a 6-month or a yearly period, it could be a marginal spillover effect.

Okay. So the large part of the -- the large part of the high-cost inventory is there in Q2. That is the right way to understand?

No, it will be in Q3 as well, not extending beyond Q4.

Not extending beyond Q4.

Not extending beyond Q3, excuse me, not extending beyond Q3.

Because if it's a quarter with help that it should consume, okay, circa half of this quarter and half about Q3 is how should one try to understand.

Yes.

Okay. And you indicated it has reverted back to its normal pricing, right? There is a decline in the chrome ore pricing significantly?

Yes. So your question is the price decline is the reign -- I mean, the raw material prices declined and the finished power price behind what you're asking?

No. Raw material. I'm just focusing on raw material because you sort of gross margin issues.

Yes. The price of chromite ore has come down mainly on account of raw material -- mainly on account of sea price adjustment that's going to reflect in quarter 4.

And if I understood your point correctly, while you had a high cost inventory, you were not able to pass on the prices because of higher competitive pressure in the export market.

In so mines and subdued demand in the export market as well.

Subdued demand in the export market of that. But that would be the case in Q1 also, right, sir?

Yes, that's right.

So sequentially, demand pressure has not aggravated.

The demand pressure has not aggravated, it is where it is, but it's just -- what has added to it is the logistical challenges which added to the demand pressure as a headwind.

Okay. Because sequentially, also, there seems to be pressure on gross margins. That's why I am asking. So I thought is there any increased pressure coming from competition to...

Because as you see, our other costs have increased mainly on account of logistics.

So I'm looking at gross margins. Only gross margins.

Understood.

And second is, if you can just help us give a refresh on the acquisition that you did that Jayansree Pharma, so how does it benefit? When does it -- will start trickling down in revenue and any initial investment costs that could have an impact on P&L before it really helps us in generating revenue and profitability?

On the acquisition of Jayansree Pharma, it's a strategic acquisition, primarily for 2 reasons. One is we have acquired a gross loss of nearly INR 80 crores and a net loss in excess of INR 50 crores for an enterprise value of INR 51.99 crores. The acquired unit is going to produce a new inorganic chemical, and it will be our foray into strontium chemistry, which is a chemistry where we are already built sufficient expertise that is to convert minerals coming out from the planet into different chemicals. And here, we are starting with strontium carbonate. Strontium carbonate has a global demand of about 2.5 lakh tonnes and celestite is the main mineral used in the production of strontium carbonate. There's a huge demand of this chemical in sectors such as electronic industry, flexible and permanent magnets like ferrites and also the ceramics industry. It's a complete import substitute. Right now, there is no other player that's producing this in India. And from what we are seeing, it is going to be a play on the growth of electronic manufacturing in India and it will be useful in producing ferrites which in a way, is going to be consumed in areas such as automobile industry, in the electric motors used, in the 4-wheeler segment in, speakers, in all the electronic devices, sound systems, wherever there is a demand for specialty magnets. And also it goes into ceramics and tiles industry, where we are already having a good marketing presence in both chromium chemicals as well as barium chemicals. Strontium carbonate is very useful in the placing and enabling of ceramics. And it will be an addition to our portfolio once it starts operating probably in the Q1 of the next financial year.

And the imports will be coming from...

Yes. please.

Sorry, please continue

So we are quite upbeat about this acquisition, and we'll start work on the plant and equipment to meet certain upgradation and start the production from Q1 of next financial year.

Sir, is there some incremental costs that could bring P&L, which you would like to call out because it is better to indicate the impact because it's kind of one-off, right, before the revenue starts flowing in.

It will be CapEx. It will not be a cost that will be expensed other than the CapEx.

Okay. Sir, and the import is happening from China?

No. The top importers of strontium carbonate as for the data that is available in FY '24, were Mexico -- yes, Mexico and Germany, which was nearly about 77% of imports in India.

Okay. And once we have a local plant ready, we would be definitely cheaper than them. That will go the right way?

We will be a lot more competitive.

Okay. We'll not be cheaper than them. We'll be competitive. That's how we are...

We will be competitive, yes.

I don't -- given it is important, we are doing domestic manufacturing, ideally there should be significant cost difference in our favor, right?

Yes, yes, but we'll follow where the market is.

Yes, that's different. That will reflect in the profitability.

Yes.

And what kind of revenue can be generated from this INR 50 crore, INR 80 crore product?

It's hard to quantify, but at the peak at the full operating level, considering a 10,000-ton production probably 2 years down the line, we'll be looking at INR 140 crores to INR 150 crores of revenue from this product. So we are part of that, but conservatively.

I understand is also a function of what is the realization and all that. But ballpark, INR 150 crores based on current prices. That's how one should look at it.

Yes.

Secondly, a fairly different question on the South Africa mine. So what is your thought process in terms of challenges in operating the mine in a country like South Africa where labor challenges have been there? And why was the mine shut for such a very long -- for a very long time and nobody was interested in looking at it? So these are 2 separate questions on which to be comfort but we understand that it is a reasonable challenge to manage labor in South Africa.

I partially agree with you but beg to differ on certain observations which you have made. South Africa as a home to the world's largest reserve of chrome ore, making it a key global supplier. The mineralogy of chrome ore that region is very much suited for our production. Additionally, the mining is deeply embedded in the culture with a very skilled workforce and a good logistics support internally. And relatively, I would say, relatively stable business environment compared to the other Africans like West or East Africa. And most of the mining is operated by multinationals who are listed companies in Europe, like Anglo Platinum and Samancor and Glencore. So I think -- I mean the business is operated in a very structured basis, especially with the MNCs being present and very active.

And then why was the mine shut for such a very long time? Nobody other -- nobody was keen on looking at that asset. So there to be some specific issues that would be there, right? Because we have got a reasonably good price.

I can only share with you what we hear from the management during our discussion, it was more strategic reason because this company has been taken over by other multinationals. We are acquiring this from a listed company in U.S. So they have taken over another company in the year 2016. So it was not strategic for them to operate this asset. So it has more to do with the strategy on how the particular organization looking at this particular asset. That's why it was under care and maintenance, so they are not selling this asset for financial reasons -- financial challenges.

Okay. So is this helpful to clarify. So initial, what kind of OpEx, CapEx do we have to do because the mine was not operational for a reasonable time, initial OpEx, CapEx that you will have to? And also the time you will require to get a manpower and everything in place. So if you can just -- so once you get a handover of the asset, how do you -- what is your initial estimate on that in terms of time frame in terms of investment?

Currently, on care and maintenance, the plan is to restore the mine and processing plant post completing of acquisition. We've already quantified the investment. It is marginal, but I won't be able to give you the exact number at this moment. We are still working on it. but it won't be a substantial amount. That's what I can say because it's been kept in a very, very good condition, even during the care maintenance time. Of course, we have to do some improvements to get the mining output of the facility, which we definitely work on. And like I said, the acquisition will be completed within 12 months from the date of signing and subject to customary closing conditions, including regulatory approvals.

Yes, fair point. That's a good reason. And getting the manpower...

Sorry for interrupting, sir. I would request you to rejoin the queue as we have more participants.

Just 1 follow-up, it was pending. So on the manpower side, how much -- so it's not a challenge for you to get the manpower, right, over there to start the work on the mine?

Manpower are already there. They have not fired in the employees during care and maintenance.

Next question we have is from [ Kushal Sharma ] from Equinox Capital.

Yes. So actually, as we have 2 type of products like barium and chromium, so could you please explain the current capacity and in terms of metric ton per annum and the capacity utilization and what is the size of the respective industry in India and globally? And my second question is relating to our working capital side. So if we see that our inventory levels and rental levels have been stretched out from 2020 to 2024. So could you please explain the reason of that. And my last question is on the related party side. As I can see in your consolidated balance sheet that we are having some transportation cost from our -- some of the concerns in which KMPs investing around INR 38 crores. So could you please explain what is the rationale of this kind of transactions in our books?

On the chromium chemical side, we have a capacity of 80,000 tonnes per annum measured in terms of sodium dichromate, which is the primary chemical manufacturer in the entire universe of chromium chemicals. And in barium chemicals, we have a total capacity of close to about 90,000 tonnes per annum, comprising of 2 products, barium carbonate and precipitated barium sulfate with capacities of about 60,000 tonnes and 30,000 tonnes, respectively. In chromium chemicals, we are the largest producer in India. And so is the case in barium chemicals. In terms of market share, nearly 50% of the market in India is catered by Vishnu Chemicals and chromium chemicals vertical, and the balance is catered by imports from geographies such as South Africa, Turkey, Russia, Kazakhstan and United States of America. On the barium chemical side, we have 2 products, like we mentioned, barium carbonate and precipitated barium sulfate, both of them have different end-user segments. And while barium carbonate goes into industries such as ceramics and tires, building materials, construction of bricks, water purification or brine purification in the caustic line industry. Precipitated barium sulfate pools in the industry, such as powder coating paints and batteries. In barium carbonate, we are the largest producers in India with a market share of close to about 40% and in precipitated barium sulfate, we are the largest producer and the sole manufacturers in India. Last year, we had a market share of close to about 15%, which is currently expanded to close to 30%, as I speak to you. The balance 70% of precipitated barium sulfate requirement is met through imports in India. The inventory levels, as you mentioned, have increased compared to our historical years, primarily in line with, like we mentioned, the increase in raw material prices. and the increase in transit times over the years. So we are needing more inventory for both raw materials as well as finished goods to meet the requirements of the customers and have sufficient raw materials at disposal to manufacture even if there is a lag in logistics or if there is a delay in logistics. We hope that, that situation improves from where it is today. But we have been seeing higher raw material costs for nearly 2 quarters now. On the related parting expenses, like you mentioned, it's towards the transportation cost that's paid to Vasantha Transportation, a company that is promoted by our promoter group. And that is mainly for the movement of raw material and finished goods from the port to the factory and from the factory to the customer side. We have been compliant with the disclosures. And overall, it's all the transactions done with the related party company is in line with industry standards and on a arm's length basis. And overall, there are less than 2% of our overall turnover for the company in terms of expenses.

And can you please let me know about the industry size in terms and how is it they growing their respective products like chromium and barium? How is the industry size in India and how is it growing?

On the industry side, chromium chemicals has different products and on an average, these products are growing in the range of 3% to 6%. There's a global volume market size of close to about 800,000 tonnes of sodium bichromate. And in that context, with our 80,000 (sic) [ 800,000 ] tonnes of capacity, we have a market share of close to about 8%. And we are present across the entire value chain of chromium Chemicals and have been the largest integrated producers of chromium chemicals in India for quite some time now. Till FY '16, we, as a company, are very much focused on 2 products, sodium dichromate and basic chromium sulfate. In the last few years, as a company, we have pivoted our strategy and now invested and focused on different derivatives and value-added products. That has helped us expand our customer universe and also mitigate any cyclicality that arises out of the end user industries. We have built quite a few unique capabilities over the years, and some of them are like scale, self-sufficiency in some of the key raw materials, our focus on return on capital employed or assets sweat. And all of these are making us one of the lowest cost producers of chromium chemicals in the world. And we are working more towards enhancing this position through the acquisitions that we have made in the current financial year.

And sir, could you please explain maybe to me the raw materials or more of the products. So that we can...

I request you that we can connect offline as there are more questioners -- as more people on the queue. So probably, we can take it offline and I can run you through the company.

Next question we have is from [ Rohan ] from Total Capital.

I was dropped from the line so some of my questions would be repetitive. So my question is that some of like a couple of quarters back, you gave a guidance that we would be achieving a top line growth in FY '25, around 30%, 35%. But seeing that our half -- H1 performance, it looks like what's the plan? Like can we be able to do that?

Good afternoon, Mr. [ Rohan ]. For the first half of the financial year, we have achieved a top line growth of about 12.2%. And we have witnessed revenue growth in both chromium chemicals as well as barium chemicals. Particularly, we are expecting that the barium chemicals revenues are expected to improve in the rest of the financial year. And we are still looking to improve our overall top line growth compared to the last financial year.

Yes. So considering that what you explained as the industry dynamics. So we might have cut down on our guidance from before it was from 35%. So can we expect a 50% growth this year?

The guidance was not for the top line growth, the guidance was on the volume growth in variances. So we had guided for improved volumes on a year-on basis in the barium Chemicals business as we launched precipitated barium sulfate last year. So that is giving us increased volumes as well as revenues in our barium chemicals vertical.

Okay. Okay. And what we have observed is that over say, next last 10 years, seeing that how our gross margins have increased -- and what CapEx we have done for improving our operations and we are backward integrated, the margins are not being reflected into -- I'm talking about chromium side, the margins are being not reflected -- so where has been like where have the issues been that we cannot solve?

Mainly on -- due to the subdued demand in the export market, the prices in product prices are under pressure on account of softer demand and higher logistics costs. But thanks to the backward integration, what we have done 2 years ago. I think that is really supporting the gross margins to stay at the range of 40% levels where we are. But we are anticipating improved demand environment during FY '26. And also the logistics cost seems to be coming down. Hopefully, by quarter 4, it is back to the pre-Red Sea levels.

Okay. And considering that now we have did a acquisition of a chrome mine and processing plant that now we have now completely, we can say we have went that were integrated by securing our raw material supplies. So like how much of our requirement will be catered by this chrome mine? Will it be complete?

Yes. Well, that's the plan to acquire this mine to suffice 100% of our requirement. But obviously, it'll be in a phased manner. I mean probably will take a year, 2 years from now to get to that -- to suffice 100% requirement from this particular asset, which we own in South Africa.

Considering now we have secured our raw material supply. So what are your plans for chromium downstream products? Like are we planning any expansion in some of our downstream products because now we have our supply secured as well as you guided that you wanted to take our market share, international market share of 8% to say, 12% to 13%. So that's something like 40% increase in our market share.

It's very likely to happen. Currently, we are working on it and also looking at another value-added product, chromium metal to be launched during Q1 of FY '26. That's where we are quite busy with this new product line FY '26 as well as this Chrome Mine acquisition, which we'll also control hopefully, by first quarter of FY '26.

Okay. So can we expect that all of these actions will take us 2 to 3 years to start reflecting in our financial like improving margin, new avenues, new CapEx coming into play?

Sooner would be better, I would say. I think we are expecting this to fall in place by H2 FY '26, especially with partially the mining complex operating and giving us able to feed a sizable volume of requiring by H2 FY '26 and also chrome metal falling in place as an other value-added product, which is also margins. I think this should definitely see some improvement in terms of revenue as well as EBITDA margin growth by H2 FY '26 is what we are anticipating.

Okay. And considering that current market situation are very volatile, it might be difficult for you to also answer this question. But I just wanted -- like considering all our CapEx and what plans we have in place as well as the operating leverage that will play out, so where can we see is chemicals, the same 3 years underlying, where would it be from current INR 1,200 crores of top line and say, 16% of normalized margin, how can we see that plan out in the next 3 years.

I think let me go back to what we have said, our objective is to grow at least at a 20% level year-on-year. Maybe in certain challenging years like this, we have to revise our guidance. But I think our idea is to grow and be sustainable as we move forward. With that being said, with this value-added products, there will be a value-added product, there'll be at least a 15%, 20% growth on a year-on-year basis. And definitely, this Chrome Mine acquisition will become will underscore the sustainability in the margin profile as we move.

Okay. And just one last question on barium side. What we observed is that a quarterly basis, the gross margin on barium side is not volatile or if you compare last 5, 6 quarters, it has been from the range of 40%, 44% to 73%. Now it's 250%. So can you explain this volatility in gross margin?

On the barium side, the gross margin is improving because of the improved product mix. We have diversified our portfolio and that is still overall better efficiencies in running the plant as well as we are operating a plant at a higher level of utilization. At the same time, the gross margins have also improved because of the acquisition that we did in the last financial year of Ramdas Minerals Private Limited, that has reduced the overall cost of production in the barium vertical.

Okay. So considering going forward, the stability in this barium division, can we expect margin expansion from Europe?

Yes. So we are anticipating an increase in the barium chemicals margins and profitability as we go ahead.

We have a question from [ Akshat Goyal ] from [ Nishin ].

So sir, regarding the mine that we have acquired, so are there any plans to like sell the chrome ore that is produced outside our own business, the revenues of the mines can generate for us?

Yes. Mr. [ Akshat ], it's Sidda with you. Well, considering short to medium-term perspective, I would say, no because we need to size the operation and first feed our furnaces probably in a medium- to long-term perspective, there will be -- there might be some material available to the market. But like I said, this is a medium to long-term perspective.

Okay. And so sir, can we also like I expect that by the end of FY '26 for H1 FY '27, we will source all our chrome ore demand internally with the acquisition of mine? Is it something like that?

That will be our endeavor, but I think in practicality, we have to see, like we said in our -- the thing that the expected cost of this mining deal will be within 12 months from now, including regulatory and other customary closing condition. Hopefully, it should happen sooner than that, but this is where we are today.

Participants, that was the last question for the day. I now hand the conference over to management for closing comments.

Thank you very much. In conclusion, kindly note that our results and investor presentation have been uploaded on the stock exchanges and the website of the company. We appreciate your continued support as we are working towards a future of sustained growth in both the chemicals that we operate. If there are any further questions, please feel to reach out to us on [email protected]. Thank you, and have a good day.

On behalf of PhillipCapital, that concludes this conference call. Thank you for joining us. You may now disconnect your lines.