Ladies and gentlemen, good day and welcome to Alkyl Amines Q2 FY25 Earnings Conference Call hosted by Ambit Capital. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Kumar Saumya from Ambit Capital. Thank you, and over to you, sir. Thank you, Bill. Good afternoon, everyone. Welcome to the second quarter and first half FY25 post-result earnings conference call of Alkyl Amines. From the management, we have with us Mr. Kirat Patel, Executive Director; Mrs. Kanchan Shinde, Chief Financial Officer; Mr. Udit Agrawal, Chief Commercial Officer; and Mr. Chintamani Thatte, General Manager and Company Secretary. I'll now hand over the call to the management for an opening remark post which we'll open the floor for Q&A. Thank you. Over to you, sir. Thank you, Kumar. Good afternoon, everybody, and thank you for joining us on this half-yearly investor call. Belated Happy Diwali and a prosperous New Year. With me are my colleagues, Kanchan, Udit, and Chintamani, and we are here to respond to any queries you may have about our half-yearly performance. A few opening remarks: the half-year has been relatively better than our last year's half-year, as you must have seen from the results, largely because our volumes have been more than satisfactory. And unfortunately, of course, the prices and margins have been under some pressure. So with those few words, I would throw the floor open for specific questions which you may have. Thank you, Kumar. Can we proceed with the questions? Yes, sir. Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Meera Midha from Anvil Research. Please go ahead. Yeah, good afternoon, sir, and thanks for the opportunity. So I have a few questions. The first is on the volume growth for the first half of FY25, and if you can also share the volume growth for the second quarter on a YOY basis, that would be helpful. Yeah. So half-yearly basis, the volume growth is about 8%-10%, okay? And compared to last year's quarter, it is 17%. Okay, so second quarter, we have actually higher volumes of 17%. Yes, yes. But keep in mind, Meera, that the similar quarter last year was not a very good quarter for us. Correct. Sir, any guidance which you can share in terms of volumes for FY25? I think last year we clocked something close to around 8%-10% volume. What sort of volume growth are we expecting for FY25? I think this year also we hope to clock 10%. Okay. Okay. So second is on acetonitrile. So just wanted to understand something on the technical part. Whatever are the imported volumes coming to India so far as acetonitrile is concerned, does the quality match in terms of what we produce? Because the purity level also matters when we sell acetonitrile in the market. So just wanted to understand from you that when the material comes to India, it's more through that acrylonitrile route as a byproduct, or it is through the route where we are producing through acetic acid route? So if you can just share your views on that. And in terms of our purity levels, have we improved over a period of time? Have our effluent costs reduced for acetonitrile? If you can share your views. This is Udit Agrawal here. Thanks for the question, Meera. The material which is acetonitrile which is coming into India is coming from which is produced using both the routes, the acetic acid route and the acetonitrile route. Just remember in mind that before we came into the market, the only acetonitrile which was being used by customers, everything was based on the acetonitrile route. So the customers know what they are using, and so for most part of the applications, both routes are acceptable to the customers. The second part of your question was that have we improved on our process structure or the quality? Yeah. So I would say that for sure on the quality part, there are some specific emerging trends in the market for which there are differentiated quality or higher-grade requirements out there. We are working on those areas to create some kind of a differentiation for our product. And sir, so far as the market in India is concerned, it is still 30,000 tons. And what sort of utilization levels have you been operating our plant, let's say in H1 of FY25? I think market remains around that level. So your market estimation is pretty good. Congratulations. You're keeping a good track of what is going on. So good numbers there. So ballpark directionally as market remains around 30,000 tons there. And you know what kind of imports are also coming into India. So you can have an estimate of our kind of utilization, and there's room for us to grow further. Correct. Correct. Sir, just to add here, there was an oral hearing in October so far as anti-dumping duty on acetonitrile is concerned. So have we heard anything ahead of that? Where's the process currently in terms of anything which can come up on acetonitrile anti-dumping duty? Yeah. So after oral hearing, now they will come for investigation of our client and as well as cross checking records. And then MOC will issue their findings. After that, MOF generally takes three to four months. Got it. Got it. Next four to five months, we should expect something. Got it. One more question, sir. Sir, in one of the earlier calls, you mentioned that 80% of our power cost is towards generating steam for boilers, which generally runs on coal. So if you can share what was our average coal cost in FY24 and how it is currently looking in H1 of FY25, or possibly if you can share the figures for the second quarter of FY25? Okay. So first thing is 80% of the power water fuel cost is due to steam, which is largely produced in all three plants from coal. So the coal prices have been more or less stable across the two years we have, plus minus 10%. So there is not much of a price difference between the two. Whatever changes you see in the numbers are due to volume increases in production. Correct. Correct. So safe to believe that the coal cost for us is close to around INR 9-INR 10 currently? Sorry, the what? Please repeat. Coal cost for us is currently around INR 9-INR 10 a kg. Correct. Yes, the coal is INR 9-INR 10 a kg. Yeah. We have to look at metric tons, so INR 9-INR 10,000 a metric ton. Got it. Got it. Sir, a few more questions to ask, but I'll join back in a few. Thank you so much and wish you all the best. Thank you, Meera. Thank you. A reminder to all the participants that you may press star and one to ask a question. The next question is from the line of Kumar Saumya from Ambit Capital. Please go ahead. Hi, sir. So my first question is, if you could please throw some light on the underlying demand trends that we're seeing in the industry, specifically from agrochemicals and pharmaceuticals? See, we all know about the macros which are there in the pharmaceutical industry. And pharmaceutical, also every day a little deeper, we talk about two segments. One is the API manufacturing, and the other is the formulation segment. And within that, we also talk about domestic consumption and exports. You all know that India is a big exporter of the generic APIs from India. I would like to say at a macro level, the issues which we had a couple of years back in terms of the so much of inventory in the pipeline and things like this, within the pharma sector, we see that it seems to be easing a little bit. But the other part of the life science, which is the agrochemical segment, still continues to remain under pressure, both from the inventory point of view and also from the cost pressure which is coming in from China, both at the intermediate level and also at the finished agrochemical. So this is where the strain is coming in the industry from China, particularly in the agrochemical. So that continues to remain a little bit subdued. Okay. So secondly, on the margin side, so we have seen some Q1, Q2 and dip in the gross margin. How much of it was led by raw materials, specifically ammonia prices, and how much was it due to coal? The finished goods prices have dropped a little more than the raw material prices over the half year to half year, and therefore, the margins have got squeezed by about 2 percentage points. They say the finished goods prices have dropped by an average of 5-6%, but the raw material prices have dropped 3-4%. Half year to half year, we have increased margins. Okay. Half year to half year, the margin is dropped. Margins have increased. Quarter to quarter. Quarter to quarter, there is a little bit squeezed. Yes, sir. So ma'am, lastly, what is the outlook for the second half for the margin side? Sorry, come again. Please repeat the question. Yeah. What would be the outlook for the second half? Do we plan to maintain the current trend rate, or we are looking at some improvement in profitability side? It's difficult to say at this point in time whether we will be able to. We are always optimistic that we'll try to improve the margin, but we don't want to sacrifice volume because of it. So our focus will be more volume than margins. But of course, at the same time, we try to expand the margins. But it's difficult to say where we will in the end land up. Hopefully, better margins and better volumes. And lastly, sir, on the CAPEX side, the CAPEX that we have announced, if you could throw some whatever products that we are eyeing and whatever markets that we are targeting? Yeah. You must be aware that we do not talk about the products which we are going to launch until they are actually commercially in the feed. That's our policy. But I can broadly say it's in the same region of market that we now supply to, the same kind of customers. Thank you. Thank you. The next question is from the line of Meera Midha from Anvil Research. Please go ahead. Yeah. Thanks for the opportunity, sir, again. So one question on the different amines which we produce, like methyl, ethyl, monoisopropyl amine. So last time you mentioned that monoisopropyl amine didn't do well in FY24, and because of which our volume got impacted. So if you can share your views on that. A and B, how has been our new ethyl amine plant operating yet? So has the utilization levels improved over FY24 in H1 of FY25? If you can share your views. Okay. First question about the monoisopropyl amine. Yes, the issues which we pointed out six months ago still continue. We haven't yet received any protection from the government against the Chinese imports. We have applied very recently for protection, and we hope over the next maybe nine to 12 months, we will get some protection. But till then, the pressure on monoisopropyl amine will continue. On the second question about ethyl amines, yes, the new plant is performing very well, well above our expectations. And in terms of ethyl amines, also the market seems to have improved compared to 2024. Correct. Correct. So if you can share at what level of utilization rates we are currently operating at, because I think the older plant we have closed and possibly could be used as a swing plant at a later date, possibly for methyl amine. So A, what was the utilization rate currently? And if you can also share about the market size in India for methyl amines. The market size in India, a bit difficult to say because there are exports, and our competitor is always there. But I would say it would be about 30,000 tons in that region, maybe 25,000-30,000 tons. And utilization has been, as you know, that the new plant is a very large plant. Yeah. Correct. We have plenty of headroom in that plant still for the next, I don't know, three to four years. We don't see any pressure on capacities at all. Got it. Correct. Correct. And sir, on the monoisopropyl amine, you mentioned that the volumes are still under pressure. So in terms of application-wise, which of the industries it generally goes into? Yes. Major use of monoisopropyl amine is in the field of agrochemicals. Okay. Yeah. And a little bit into pharma, but large chunk is into agrochemicals. Got it. Got it. And sir, you mentioned that we have clocked something close to around 17% volume growth. So this was predominantly from the domestic market, or had the export volumes grown for us substantially because of which we have seen such sort of volume growth? I think we see growth across both in domestic market also and in exports as well, so it's a combination of both. Got it. Got it. Sir, last two from my side. One on the scenario for raw material prices, predominantly for ammonia as well as for ethanol. I think because of the current ongoing crisis in the Middle East and everywhere, we have seen some spiking in the prices for ammonia. So how we are placed here for ammonia as well as how do you see the scenario emerging out of for ethanol also? Ammonia, you're right. There's been a little bit of pressure, but ammonia is something which we cannot store. So we are not able to cover for a longer period. So we do expect a little pressure on ammonia because of whatever reason. But these crises just come and go. So you may expect a slight bump in the price, and then they may also drop. So as far as ammonia is concerned, we played almost month to month. While ethanol is concerned, currently, the imports are cheaper than the domestic prices. And we have been covering them steadily as we go along, covering our requirements. And we are well covered for the next maybe six months or five months. So that is the situation on ethanol. Of course, the prices may change. Correct. Correct. Sir, lastly, on the cost side, in terms of efficiency-wise, have we improved anywhere, let's say, on the process side or let's say on the operating cost-wise? Have we improved at any point of time which could be permanent to us and could lead us to permanent savings to our cost? So anywhere, if you can share your views or any initiatives which we are currently taking on in terms of controlling our operating costs both by way of product innovation as well as by process innovation. This is a very complicated and long question because, as you know, we have a separate team, what we call the Process Engineering Group, which just focuses on improving yields and specific consumptions for existing products. And this is little projects which go over a long period of time in saving small amounts of benefits in every product that we make. And this gradually becomes permanent baseline for the next year. So every year, we have been improving our yields and specific consumptions across products regularly. So though they may not be very dramatic, there is every attempt to make both through the Process Engineering Group and the R&D group trying to improve our cost structures from the point of view of consumptions regularly. It's a very constant practice. And in fact, we pride ourselves that improving our yields on a year-to-year basis in all products. Got it. Got it. Sir, last thing, if you can share the revenue mix for the first quarter, in terms of sector-wise, how much from pharma, agrochemicals, rubber chemicals, foundry chemicals? If you can give some overview in terms of our revenue mix for H1 of FY25? They haven't changed at all from our regular life sciences accounting for 65%-70% of our turnover, and the rest all, as you can see from our website or wherever. It doesn't change dramatically. Even the domestic export sectors are more or less the same 80/20. Correct. Because you mentioned that agrochemicals was a bit under pressure. So I think that mix was being taken over by pharma in that life science division. Yes. That's on a longer-term basis. It's happening over a period of time. But it is, again, year to year. Correct. But year to year, still about 65%-70%. Correct. And sir, any update on the DEK plant? I think last year we operated at just 20%. And because it also finds application at agro level, have we seen some improvement there or the utilization rates improving there for DEK? The utilization rate has improved not as much as we expected to. But going forward, we think it will improve even further, and hopefully, the worst period is over, and we are a lot more optimistic on the product now than we were before. Got it. Got it, sir. Thank you so much, sir, and wish the entire team all the best. Thank you, Meera. Thank you. A reminder to all participants that you may press star and one to ask a question. The next question is from the line of Rohit Nagraj from Centrum Broking. Please go ahead. Thanks for the opportunity. So the first question is on the CapEx front. So just to get a perspective, obviously, we will not be able to delve into more details in terms of products. But are these overlapping products with our current set of products, or are these new products? And just to get a perspective that whether these products, these are import substitutes and will not face competition as what has been faced by some of the other products because of China issues. So just to get a broader understanding of the same. Thank you. The first question is not part of our existing portfolio. It's a new product. It is going to be manufactured in Dahej, as has been stated in the SEBI notice. And what is the other part? Yeah, it is an import substitute product. Yeah. Fair enough. Fair enough. That's fair. Now, sir, during first half, what has been the overall capacity utilization? And given that for this new facility, it will be taking anywhere between 15 to 16 months, would it, in that time, we will not have any challenges in terms of the existing capacities to grow us beyond, say, 10% plus over the next, say, two to three years? Okay. There are two parts to this. The existing capacities, on an average, would be 65%-70% utilization. But it varies from product to product. Some we have very tight where we will be doing bottlenecking, and there is some CapEx involved in that. But of the major products, as you have known, the ethyl amines, last year we commissioned the new plant. So there is plenty of headroom in ethyl. And similarly, the other products, we have some headroom. So that has not the investment which you talked about earlier is a completely new product. So it will not detract from the existing line. Right. So just wanted to make sure that for the next two to three years from the existing capacity, we will be able to achieve the normalized volume growth. Yes, yes. Barring some small amount in debottlenecking of a couple of products. This new facility, will it be coming in phases given that you have given a timeline of 15 to 15 months? Yes. Yes. The first phase will be in about 15 months, and we are hoping that if the product does well within the next three to four years, we may have good debottlenecking and expand the capacity. The technology is completely indigenous or? Yes. It's our own. We developed in our own R&D. As we have mentioned earlier, that barring the initial technologies which we imported from America, all the products we have gone through the last 35-40 years have been with our own R&D and engineering efforts. Fair enough. I think that's helpful. Thanks a lot and all the best. Thank you. Thank you. The next question is from the line of Aman Chowdhary from Motilal Oswal Financial Services. Please go ahead. Yeah. Hi, sir. Hello. Hi. I'm good. I'm good. So with respect to the previous participant's question on this new CapEx, we had also announced a CapEx of around INR 250-300 crores in September 2022, if I'm not wrong. So this is a completely fresh CapEx, or it is a part of that INR 250-300 crores CapEx that we had announced a couple of years back? No, this is a part of that 225 crore project. The other part, we are still on the R&D stage. This is one of the two lines of products which we were looking at at that time. Sure. And in the meantime, of course, costs of plant and machinery have gone up. So I think that 225 was an underestimate. So whenever it comes up, it will be probably more than that. But of course, it's been delayed a bit. Sure. So out of the five announced molecules or products in specialty chemicals or allied chemicals that we had announced a couple of years back, this is the second molecule after DEK that you will be commercializing in the next 15 months? Yes. After DEK, this will be the second one after. Sure, so has the market improved in terms of demand, supply, margin realization, or what is it that now we have taken this decision after two years? Because previously, in all our interactions, we had said that the market has declined, and that is why we are not going forward with the other four molecules as of now. So, just wanted to understand our thought process that now it has been finalized, and the CapEx is also quite big. Yeah. So as you mentioned, Aman, earlier we had said that two to three products, one was DEK, which we had launched already and are stabilizing it and looking forward to it doing well. The second product which we are going to do in the next 15 months, which we've been talking about, yes, the market has been strong. So we feel that there is a good return to be made out of that product. And the other two, we are just holding our breath to see how the market goes before we take the plunge. Sure. And those two products, are those two products the one that we had talked about in our fourth quarter concall FY24, that an FID would be taken with a CapEx of around INR 75-INR 200 crores? Yes. I think that is the one we are talking about. Yeah. So we are holding back on some investments in the next two products. Okay, so there is still some time before we go and announce those two products? Yeah. It depends on the market, perhaps in the next six months, perhaps a little later. Sure. And with respect to Acetonitrile, again, is our market share similar to what it was previously, 50%-55%? And secondly, again, on the utilization levels as well, is that also at 55%-60% it used to be in the past three, four quarters? You're talking about acetonitrile, right? Yes. Yeah. So I think the market share remains in that region. As earlier stated by management that the market is in the region of 30,000, and you can see that the imports are coming in from the Chinese. So we are in that region. The utilization levels? I think we have two plants, one in Kurkumbh and one in Dahej. We use them at maybe, I think, overall 60%. I think capacity would be in that region. Okay. Sure. And just on the export versus domestic needs, obviously, it remains similar 80%-20%. But again, in second quarter and in the first half of 2025 also, was it on a similar level? Yeah. I think it is on similar levels. What happens is quarter to quarter, sometimes we are fulfilling one commitment to the export. So sometimes it goes to 21-22%, and sometimes it drops to 18%. But it's overall about 20% annually, 20-21%. So between quarters, there is not much. It's not a significant change. Yes, we would like to push exports, but given the global situation, we don't want to push it too much. Sure. And with respect to CAPEX, any guidance for FY27? FY27? Yeah. No guidance. We're too far off. Sure. So thank you. That's all from my side. Yeah. Thank you. The next question is from the line of Dhruv from HDFC Mutual Fund. Please go ahead. Yes, sir. Thank you so much. So the first question is the pricing pressure that we see across some of our products, say, ethyl or acetonitrile or some of the other products. How much of that would you attribute to the general weakness in the market, say, for AgChem or for, say, some of the pharma molecules? And how much of that could be attributed to the overcapacities probably that would have come up? I'm just trying to dissect what are the key variables one should look for. I mean, is it the industry recovery, or is it an oversupplied market? And until that becomes utilized, probably that pricing pressure continues. Thanks for the question. I think it is more the latter that the capacities in China are at a very, very high level. Their own consumption is also not so high. We also see the global agrochemical situation or global agriculture situation, which also has an impact on the overall demand. I think it is more of a capacity issue right now. A little bit of inventory effect is still hangover carrying on. Got it. So this capacity issue is because they have set up new capacities, which is, say, they were 100 earlier, and they have increased it to 150. Or is it because the demand itself is amine and demand is weak, so hence they're not operating it? Yeah. I think it's more of a capacity expansion issue. There are overcapacities. They have put on more capacities in the last few years. And the demand has really not picked up so that all those capacities are utilized. And we see such an immense pressure across the value chain. I mean, it's not only our kind of products. The other products also and our customers' products also, we see this kind of pressure. Okay. So if you have to take a very rough view in terms of how long will it take, assuming we have seen how the AgChem market grows globally, 35%, and pharma also grows at a similar rate. So if you have to take a view, when does these capacity utilizations come to a very normalized level so that the industry is able to enjoy reasonable margins? Also assuming probably some capacities could close in some of the regions, probably US, Europe, I'm not sure. So what's your sense in terms of some broad sense? I understand this would be a very rough, but some sense of how long this could take? As you already mentioned in your question, it's very hard to say how long it will take to get some kind of normalization to happen. But it also depends on quite a bit of other factors. You know the chemical industry, what is going on in some parts of the world. Europe, for example, is having their own issues with respect to the large energy cost for agrochemical and chemical production in general as well. And also on the same way, on the user side, they are pushing for more of the so-called green chemistry-related products, eco-friendly products. Both these factors are putting immense pressure on the industry in terms of coming out with the new technology products which meet the new requirements on the greener side. But at the same time, the existing capacities remain underutilized because there is a subdued demand. It's very hard to say, but I don't know. I mean, I would be very happy to see if it happens sooner than later. But I think all our customers, also our major agrochemicals customers, are also trying to answer the same question, how long it will take. Got it. And sir, last question. I think in the last few calls, I have understood that your ethyl amine plant is seen as reasonable expansion and is not operating at the fullest optimum level for now. And it will grow in three, four years. But sir, how should we think of as the utilization improves? Is there a meaningful efficiency gain that happens? Say for example, if you're operating at 50%-60% versus you operate at 80%. I'm asking at a gross margin level, probably at a better level, of course, it will improve. But at the contribution level also, does it see a meaningful improvement? No, no. You have to understand how our plants operate. Our plants are campaign-based. So when they run, they run at 100% capacity, and then we shut down and start. So there is no question of improvement in efficiencies as such. Got it. And the start. The utilization optimal keeps going up. Got it. So we stop and start is quick. It is not a meaningful drive. Yeah. It's quite quick. It's not a meaningful number. Got it. Perfect. As long as the gap is long enough. Perfect. So thank you so much in all the ways. Thanks. That's helpful. Thank you. A reminder to all the participants that you may press star and one to ask a question. A reminder to all participants that you may press star and one to ask a question. The next question is from the line of Kumar Saumya from Ambit Capital. Please go ahead. Hi, sir. Just one bookkeeping question. What is the CapEx outlook for this year and next year, sir? This year, it will be around INR 80-100 crores, and next year, maybe a slightly larger, about INR 100-120 crores maybe. Okay, and then we have seen some improvement in the working capital side, so should one expect this to remain here, or is it just the half-yearly that you're seeing? Sorry, can you repeat that, Kumar? Yeah. So we have seen some improvement in the working capital side. So should one expect working capital requirements to remain here, or is it just the first half of the business, and we should wait for the full year? Yeah. So. I think the working capital cycle, number of days of creditors and all, I think more or less stabilized. Maybe an improvement marginally as volumes grow, but nothing significant. I don't think there's been any change in working capital. Okay. Thank you, sir. That will be all from my side. Thank you. A reminder to all participants that you may press star and one to ask a question. The next question is from the line of Rohit Nagraj from Centrum Broking. Please go ahead. Yeah. Thanks for the follow-up. So after this new CAPEX at Dahej, how much of our land will remain unutilized for our future CAPEX requirements? We have land available in Dahej and in Kurkumbh for at least another two to three years. I don't think we expect there to be any major issues. After that, perhaps we will have to look for new land. But that depends, of course, on our CAPEX programs as we go along. But I don't think in the next two to three years, we will require any more land. We have enough both in Kurkumbh and in Dahej. So including this new specialty chemical. Including this new project which comes up, we will still have land available. Right. Fair enough. That's all from my side. Thank you. Thank you. A reminder to all the participants that you may press star and one to ask a question. Kumar, it looks like I think we are done with the questions. It seems to be we have answered most of the relevant questions that people have come up with. So should we wind up the call now? Thank you. As there are no further questions, I would now like to hand the conference over to the management for closing comments. Thank you, everybody, for listening into our investor call, and as we have mentioned earlier, we look forward to the future with cautious optimism and hopefully to get better volumes and better margins when we meet next. Thank you. Thank you for listening. Thank you. On behalf of Ambit Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.