Ladies and gentlemen, good day, and welcome to the Aarti Industries Limited Q4 FY22 earnings conference call. 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, please signal an operator by pressing * then zero on your touchtone telephone. Please note that this conference is being recorded. I now hand the conference over to Mr. Nishit Solanki from CDR India. Thank you, and over to you, sir. Thank you. Good evening, everyone, and thank you for joining us on Aarti Industries Q4 and FY22 earnings conference call. Today, we are joined by senior members of the management team, including Mr. Rajendra Gogri, Chairman and Managing Director, Mr. Rashesh Gogri, Vice Chairman and Managing Director, and Mr. Chetan Gandhi, Chief Financial Officer. We will commence the call with opening thoughts from Mr. Rajendra Gogri, who will take us through the performance, key milestones achieved and outlook on the business. Post this, we shall open the forum for question and answer, where the management will be addressing to the queries of the participants. Just to share our standard disclaimer here, some statements that may be made in today's call may be forward-looking in nature, and the disclaimer to this effect has been included in the results presentation that has been shared earlier and also uploaded on stock exchange website. I would now invite Mr. Rajendra Gogri to share his perspectives. Thank you, and over to you, sir. Thank you. Good evening, everyone, and welcome to our Q4 and FY 22 earnings conference call. We have shared our results document, and I trust you had an opportunity to go through them. Financial year 2022 was highly unpredictable and challenging period for everyone. What started with a resurgent second wave of COVID-19 pandemic turned into a significant inflationary surge in input crisis, and then the Russia-Ukraine conflict, which disrupted the global supply chain and resulted in elevated price of crude oil and other petrochemical intermediates and other fuels such as coal, et cetera. Given this backdrop, I am delighted to share that we demonstrated agility and navigated through this pressure to deliver robust financial performance during the period under review. We scaled new peaks backed by our high quality business enterprise that has been built over several decades with solid execution capability. Let me share some of the key numbers for FY 2022. Our revenue increased by 58% to INR 7,919 crore, while EBITDA came in at INR 1,930 crore, higher by 96%. Profit after tax stood at INR 1,307 crore, higher by 144% over last year. FY 2022 financials include an impact of termination fee received with respect to the first long-term contract to the tune of INR 631 crore. Excluding termination fee, our annual revenues were at INR 7,288 crore, while EBITDA was at INR 1,320 crore. We achieved this highest ever EBITDA in the company's history in FY 2022, even after netting off the impact from termination income. Normalizing the termination income for FY 2022, the EBITDA growth for FY 2022 was about 35% over FY 2021. In Q4 FY 2022, we registered 50% gains in revenue to INR 2,018 crore, driven by better realization trends owing to our ability to pass on sharp spikes in raw material costs and other utilities. This was supported by healthy volume uptick during the quarter, led by continued demand outlook in the key end user industries. EBITDA enhanced by 30% to INR 339 crore, while EBITDA margin stood at 16.8%. Having said that, we were able to maintain the absolute delta margin despite cost pressure in the system. Further normalizing the impact of the shortfall fee of INR 37 crore for Q4 FY 2021, we recorded about 52% YOY growth in EBITDA for Q4 FY 2022. Also, when compared with Q3 FY 22, which included the shortfall fees of INR 47 crore, the QoQ EBITDA growth net of termination income and shortfall fee was about 11% for Q4 FY 22. Also, the commissioning of a few projects resulted in increase in depreciation and fixed overheads during Q4 FY 22. Our profit after tax enhanced by 39% to INR 194 crore in line with operational performance. In light of healthy performance during the year, the Board of Directors approved a final dividend of INR 1.5 per share of FY 22. This is in addition to an interim dividend of INR 2 per share distributed during the year. This leaves the total dividend in FY 22 at INR 3.5 per share, that is 70% of the face value. During Q4 FY 2022, we witnessed significant volatility in the prices of key inputs, largely due to various issues, including the one pertaining to the Russia-Ukraine conflict. We wish to clarify that while we don't have any significant businesses in the region, and I see no significant impact of the same in our business. Moving to the segmental performance overview, revenue from specialty chemical business in Q4 FY 2022 increased by 49% to INR 1,629 crores, while EBIT expanded by 19% to INR 246 crores. As highlighted, we were able to pass on this variation to our customer in a structured manner. More importantly, our ability to suitably optimize the product mix helped sustain the overall volumes. Having said that, we are closely monitoring this development and will take appropriate steps as and when required. I now share the production details for Q4 FY 2022. Production of nitrochlorobenzene was about 19,551 metric ton compared to 19,100 metric ton in the corresponding period of last year, and close to 18,504 metric ton for Q3 FY 2022. Likewise, for hydrogenated product, we attained a production run rate of 3,029 metric ton compared to 1,935 metric ton last year and 2,878 metric ton in Q3 for FY 2022. For nitrotoluene, the production for Q4 FY 2022 stood at 5,155 ton compared to 2,935 ton in Q4 of last year, and 3,633 metric ton in Q3 FY 2022. The quarter saw some production and revenue impact due to supply shortage of key raw material nitric acid as indicated in the previous call. We have been closely working with the supplier to minimize the impact and optimize the product mix to protect the profitability. We continue to be engaged with the supplier to find alternatives to improve the situation, which has a significant bearing on our performance. Turning your attention to projects commissioned during the quarter. We began commercial manufacturing in respect of the project related to second long-term contract in Q4 FY 2022. This will add incremental revenues to the tune of over INR 500 crore by end of FY 2023. Other major projects such as project linked to the third long-term contract at Jhagadia, the NCB capacity expansion at Vapi, etc., are expected to come on stream in FY 2023 and will see ramp up over FY 2023 and FY 2024. Further, with respect to the unit, with respect to the first long-term contract, we had seen some volumes in FY 2022 and expect a progressive ramp up of the same over next two years, targeting the utilization to be about 70%-80% by FY 2024. I believe that we are well poised to capture incremental market opportunity in the specialty chemical space based on our leadership position and expertise in chosen chemistry. This including healthy demand in both domestic and export markets, combined with capacity expansion initiatives, will elevate our performance momentum in the continuing years. Now shifting focus to the pharma business. We reported 52% revenue growth to INR 388 crore in Q4 of FY 2022. EBIT came in at INR 67 crore, higher by 30% YOY. In line with the overall operation, we are able to pass on spike in raw material cost and other utilities in this segment as well, resulting in better realization. We demonstrate strong volume growth backed by continued positive demand landscape and higher offtake from generic pharma companies and benzene businesses. Business visibility continues to be high, and we are very well-placed to realize the growth potential in this segment based on our strong product lineup. Timely introduction of newer products and attractive pipeline of approvals in cardiovascular, antihypertensive, oncology, and corticosteroids. With respect to expansion of the new block at the U.S., FDA-approved API facility at Tarapur, we are in the final stage of commissioning and expect this to be commercialized in the current year Q1 of FY 2023. Moving on, as you are aware, we have witnessed significant inflationary trends in the input cost, logistic cost, fuel cost, commodity price, et cetera, over FY 2022. For instance, for various key raw material input, the price has gone by about 50% to 100%. It may be noted that while a significant part of this price increase is passed on to the customer, there is a working capital cycle gap for some claims to get converted into cash, which enhances the company's resources getting deployed in working capital. We are closely examining the same and taking efforts where possible to reduce it. Overall, we entailed a CapEx of over INR 1,300 crore in FY 2022, with about INR 360 crores spent in Q4 FY 2022. This was in line with our planned CapEx outlay for the year. As you are aware, over the years we had invested into various projects, of which few had been commercialized during the last 12 to 15 months. The ramp up of these projects had been impacted due to the challenges faced due to the pandemic, availability of key raw material, and also partly due to the cancellation of the long-term contracts. We are now witnessing a good ramp up of this capacity and expect most of these to see its capacity reach about 70%-90% utilization by FY 2024. Going forward, we remain committed to investing INR 3,000 crore+ by FY 2024 to achieve our growth aspirations. Our focus will be to undertake R&D and innovation-led projects where we have 40+ products for specialty chemical and 50+ products for pharma in the pipeline. This will lend visibility and help achieve our growth guidance for FY 2027, as shared earlier. To manage and execute this, we have also onboarded close to 1,500 personnel in FY 2022 across various functions. Before I conclude, let me share a couple of important developments. As you are aware that we had been witnessing shortages at multiple times for availability of one of the key raw material, concentrated nitric acid. This had a significant impact on our operations. In order to mitigate this risk, we propose to set up a backward integrated unit for concentrating nitric acid from dilute nitric acid with a capacity of about 225-250 TPD to partially meet our requirement. The feedstock for this is expected to be sourced from India or from global market. We are tied up with a technology partner for the same and expect the facility to be commercialized by end of FY 2024, which will assist in easing of our challenges with reference to the sourcing of nitric acid in future. During FY 2022, Aarti Industries was awarded the prestigious Responsible Care status by Indian Chemical Council. Responsible Care is a global initiative to drive continuous improvement in safe chemical management and achieve excellence in environmental, health, safety, and security performance. Further, with reference to our ongoing process for demerger of pharma business into Aarti Pharmalabs Limited, we wish to apprise that the NCLT Ahmedabad has scheduled the hearing on our application in June 2022. We are hopeful to get favorable approval from NCLT in the aforesaid meeting. Subsequently, it would take two to three months for completing the formalities related to demerger, allotment of new shares, by Aarti Pharmalabs Limited, and listing of those in the respective exchanges. As you are aware, India is at a very sweet spot, and the road ahead appears encouraging. We are excited to lead India in its aspiration of becoming a preferred market partner for global chemical majors. Our focus on value addition and product expansion will steer the momentum in the ensuing years. This will further cement our leadership position while enhancing value for all the stakeholders. With these rationale and the stronger visibility available, we are better placed to meet the guidance for FY 2024 and FY 2027 as shared last year. This concludes my initial thoughts, and we'll now request the moderator to open the floor for the Q&A session. Thank you. Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question may enter * and one on their touch-tone telephone. If your questions have been answered and you wish to withdraw yourself from the queue, you may enter * 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. To ask a question, you may enter * and one. We have the first question from the line of Umesh Patel from Reliance Nippon Life. Please go ahead. Thanks for the opportunity. Congratulations, Rajendra, for reporting good numbers. Couple of questions. As you mentioned about backward integration, I just need to understand that 250 TPD that you mentioned that translate into 60,000 metric tons per annum for nitric acid. What would be the CapEx that will be incurred? Hello? Yeah. Hello. This will be basically a concentration plan from weak nitric acid to concentrated nitric acid. We are overall, you know, evaluating the entire nitric acid scenario. I think by Q1, you know, we'll be able to guide on the CapEx front on this. It'll be more, you know, around this plant itself cost maybe around INR 150 crore-INR 200 crore range. Sure. That will take care of the entire requirement of your nitric acid, or it could be something like 50%-60% of your requirement? No, actually, this will be more of a balancing, you know, where we cannot get nitric acid from the market. We can buy weak nitric acid and concentrate it to concentrated nitric acid. This weak nitric acid also can be imported from outside India. Whereas concentrated nitric acid cannot be imported into India. That is one of the reason why we are putting up this facility, so that even the weak nitric acid importing and then converting to the concentrated nitric acid will become feasible. Sure. The second question was related to your pharma segment that you mentioned about, you know, API facility that will, you know, get the approval from U.S., FDA, and that is in the final stage. I just need to understand what would the revenue potential of this, you know, facility and what would be the EBITDA margin that will contribute to your company? Yeah. Basically, you know, the new facility will start operationalizing. I'm sorry to interrupt, sir. The next quarter. Mr. Rashesh Gogri, your audio is not coming through clearly. If you could, speak a little louder. Yeah. The new facility is going to come on stream from, you know, the current quarter, you know, later. It is going to add initially. It will be a ramp-up in next three years that we'll be able to utilize the total potential. Total revenue potential is $25 million-$30 million. EBITDA margin will be in line with our current EBITDA margin of 17%-20%. Sure. The last question is related to, you know, the recent. If you look at, you know, the China recently, if I recollect properly, in 2019 when there was an issue in China, it helped us in, you know, reporting very good set of numbers and in terms of, you know, profitability. Again, you know, in this quarter also, April to June, there was a supply disruption and China lockdown that has happened. Definitely, you know, do we expect that, again, the similar kind of situation will arise for RP industry being, you know, market leader in most of the, you know, toluene base as well as nitrogen-based derivative products? No, currently we are not seeing any significant impact of this Chinese lockdown. Actually material going into China is a bigger problem than material coming out of China in general. Okay, thank you. That's all from my side. Thank you. We have the next question from the line of Surya from PhillipCapital. Please go ahead. Hi. Yeah, congratulations on the good set of numbers. Particularly on the margin front, what I see that, okay, if adjusted for the termination fees what we have or the compensation what we had received in the corresponding previous quarter, I think our margin almost remained flat. Despite also this elevated cost in terms of logistics, utilities and all that. I believe a portion of the elevated RM cost is possible but may not be the case for utilities and all. If you can talk something on that, how did you manage that margin remaining same, or what has contributed incrementally otherwise? Yeah, generally logistics costs get transferred because the ocean freight has increased so much, you know, it become difficult for us to bear the ocean freight charges. Utilities mainly, sir? Utility sometimes, you know, becomes difficult, but I think utility was already high. On a QOQ basis, there is not much change in utility cost. Okay. Now, sir, having seen whatever kind of a cost situation now and it seems that the elevated cost situation is likely to prevail mostly possibly entire of this year, FY 2023. Given that, could you give some sense on your cost line item, sir? Because you are also indicating that you have added some 1,500-odd people in FY 2022, possibly throughout the year that you would have added. The incremental cost will be added because of that. What is the kind of change that we should be seeing in terms of the cost with it? And can we maintain or see some improvement in the gross margin front, having seen the peak of RM cost scenario currently. Some sense for FY 2023 will be very much clearer to take, sir. Yeah. Actually, this number of people which have been added, also for, you know, whatever was commissioned in the second contract, as well as some of the people have been onboarded for, you know, startup of this third contract and some of the other projects, you know, which are going to get lined up. They'll be utilized mainly for the newer facility, and I think corresponding expenses will be absorbed in the volumes generated out of it. Obviously you did not guide on the margin front, sir. Given the kind of absolute expense cost expansion what is visible, do you think your absolute EBITDA growth will be in line with the earlier guided trend? Yeah. You know, overall, you know, because correspondingly there will be a volume increase also. At the EBITDA level, you know, we, you know, feel that, you know, whatever the guidance which we have given on FY 2024, you know, we should be able to reach those levels in next 2 years. Okay. Sir, in terms of the people, now with this 1500 addition, what it becomes total? I have to check the total maybe. Yeah. It will be around 9,000. Yeah, it'll be roughly around 8.5 thousand in total workforce. Okay. About the second contract that you have commissioned, given the challenging situation that is prevailing, do you think it will be a kind of very staggered one than the earlier expectation? Versus the INR 500 crore kind of run rate. Are we going to start the year with, let's say, 50% utilization of that captive program or some sense will be useful, sir. No, it will be very high level of percentage utilization from the first year itself. The way the contract has been structured, there'll be significantly high percentage utilization. Since it is a plastic-oriented, sir, and so don't you think given the weakness that is visible in the global economies, okay, so there will be a kind of a moderation in the volume expectations out of that segment also? No. Overall, you know, the way, you know, we have that contract structured, we don't see much issues there. Okay. I'll be there with you. Thank you so much. Thank you. Ladies and gentlemen, to ask a question, you may enter * and one. We have the next question from the line of Aditya Khetan from SMIFS Limited. Please go ahead. Yeah, thank you for the opportunity. My first question is on the API capacity expansion. If you can highlight the absolute capacity figure first in liters, and how much in terms of percentage also if the capacity is increased. How much would be that in terms of percentage increase? The API capacity, basically we are putting a high volume line, and the products which we will be manufacturing there will be $200-$500 a kg product. What we are doing is from the current line we are moving the high volume products into dedicated lines. We will have very high occupancy overall because of that, because we already are having significant occupancy of these in our current multipurpose lines. We have now graduated to a level where the products will shift to dedicated lines. Okay. This figure of $200-$500 per kilo, this would be done from the existing like, so from the increased capacity so how Mix of everything and mix of existing products and mix of new products. Basically largely the volume will be filled by existing products and one or two high-margin new products for which, you know, we have already done the validation and other things. The products are now, you know, getting launched or mature. Okay. Sir, second question is from the raw material part. What we are witnessing is that in China, there are some of the raw materials which are imported from China, so there is a disconnect in domestic pricing and China pricing. Because of this, we are witnessing that imports have started to increase and China is offering at a much lower price as compared to the domestic players. Because of this lockdown and all, there is a disconnect in many of the raw material prices. Are you expecting for the next quarter there could be some sort of impact from the China shift if suppose they are offering at a lower price, so volumes can be shifted towards China? This you are asking pertaining to pharma or chemical on the. Sir, for chemicals specifically. No. Chemicals basically, as such, we are totally backward integrated, and we don't see, you know, any movement, any shifting towards China for our product line. In terms of pricing, so there is a disconnect, no sir, between so for the raw materials. Is this data point correct, sir? It may be for some specific products, but no, overall, we are not seeing any significant impact. Okay. On the revenue part, so for this fiscal year, clocked roughly 42% revenue growth. This is excluding the termination income. How much of this would be from the volume and realization? Just a ballpark figure would do, sir. Chetan, you will be able to guide on this. Yeah. The volume growth would be in the range of around 12%-14% kind of stuff. Ten to twelve percent would be from the volume. Sir, my next question, when we look at this revenue growth, majority of the part is from the realization only. Sir, for the last two years, we have done CapEx of roughly INR 3,000-INR 4,000 crore. I think that number has not flowed into our financial yet, considering we are only clocking 10% volume growth in the year change. In terms of numbers, sir, by- Talking in terms of the annual volume growth or what? Annual volume growth only, sir. Means for the last four, five. That would be in the range of 18%-20%+. Okay. 18%-20% is the volume growth for FY 2022. Okay. Your question on volume growth, you know, the first contract because it got canceled, we already got the assets online. Those assets, you know, we have just started the production in that plant. As I mentioned in our speech, you know, by FY 2024 we'll have 70%-80% capacity utilization for that product. Actually, that's a value-added product of four steps. The corresponding backward impact of the entire value chain volumes will come in. The second contract has been commissioned in Q4, so that volume will come in. This year, you know, partly nitric acid also had impacted. Even once the nitric acid stabilizes, we expect, you know, that 70%-90% capacity utilization by FY 2024 for most of our plants. Okay, got it. On the nitric acid part only, when I was looking at your numbers for the last 7-8 years. Nitric acid contribution in the overall raw materials is only about 7%-8%. Considering if there is a shortage also, does it impact us much on to the cost front like that I wanted to know. Nitric acid is a key raw material. Price is one factor, the availability is a bigger factor. If you have less material available. Overall, we see that nitric acid situation will improve because in second half of this year, some new nitric acid capacity will come up in India. We feel that, you know, availability front should ease out in FY 2023. Okay. Sir, just one last question from my side. Onto this INR 2,500 crore to around INR 3,000 crore of CapEx for the specialty chemicals, which we are doing from FY 2022 to FY 2024, if you can give some rough breakup on this, sir. Of INR 3,000 crore revenue breakup of CapEx onto the specialty chemicals. No, the existing activity and our, like, running contracts, you know, what we had guided was, you know, around INR 1,500 crore. The rest will come up for the new products, which the sales will start coming in, more in FY 2025 onwards. There will be a much better. The breakup, sir, which we had planned. The 3,000 crore of CapEx for specialty chemicals. I believe one part is for the chlorotoluene, second is for the universal multipurpose plant. Which are the other projects, right? Some of the existing product downstream also, we'll be expanding capacity. In addition to the new range of products. In terms of numbers, if you can give it, sir. That would be. I think that we'll have to work out and then come out in maybe next few quarters, the detailed breakup of this CapEx. Got it, sir. Thank you for the. Yes. Thank you. We have the next question from the line of Ritesh Gupta from Morgan Stanley. Please go ahead. Yeah, hi, sir. Thanks for taking my question. I just wanted to understand couple of things. If you look at the last two quarters commentary, you talked about nitric acid, challenges and logistics cost, et cetera, had also gone up. Going forward, the challenge also lies in terms of, probably the U.S. recession, et cetera. I just wanted to sense that, if I sum up all the run outs in last six months, and then I see the headwinds in the next six months, what looks better? I mean, the kind of margin pressure you saw in last six months or probably next six months again, energy costs, et cetera, have also been higher or probably the running quarter, energy costs, et cetera, are also on the higher side. Should we see... What I mean to ask you is that from second half as we go to the first half this year, should we see momentum improving or should we see, you know, similar sort of challenges continuing in the first half? Yeah. Basically, overall, you know, the discretionary side, demand has some impact. You know, we are able to rearrange our product mix. Agrochemical side, demand is quite strong, I think because agri commodity prices are also strong. Overall, you know, we see, as far as, volume possibility, there should not be, much issue. Nitric acid may still, you know, this year, at least first half may still remain challenging, you know. Maybe second half, the capacity in India will increase. This will stabilize the availability. Got it. If I just extrapolate your guidance of EBITDA doubling over 2021 and 2024, are we looking at a 20% growth over the two years in terms of EBITDA? Is it something that. Given that even when I look at your FQ3 commentary, you have said nitric acid issues and then lack of operating leverage, you know, higher fuel and power costs and, you know, logistics costs, et cetera, as well. Do you think that there could be a potential upgrade to the 2024 numbers? I mean, or is it that you want to, I mean, conservatively stick to it or is there some sort of upside which is there, which let's say FY 2021, all your Bayer contracts and, I mean, the contract one, contract two contracts you all signed up within. Plus some of the capacity expansion that we're seeing and the kind of discretionary demand issues that we have seen in the last year normalize. Or is there something else which I need to keep in mind when I see your guidance of doubling the EBITDA up to 2024? Yeah. I think more or less we can still maintain the same guidance. Overall, I think 1.7-2 times what we have added by FY 2024. Roughly, you know, I think, those are the kind of number we should be able to hit. No. The question is that when I look at the lower end of the guidance, when I look at 1.7 number, you already moved to 1.34 this year. When I look at the lower end of it, we're talking about a 35% improvement on a base of 135. You are talking about like a total of 35%, 20, 27% EBITDA growth over the next two years combined. This year, you know, there was a INR 138 crore shortfall fee, which is part of the EBITDA of this year. Right. Oh, yeah. That gets knocked off in FY 2023 and FY 2024. Okay. Understood. That's it. That's all from me. Yeah. Thank you. We have the next question from the line of Abhijit Akella from Kotak Securities. Please go ahead. Yeah. Good evening and thank you so much. Sir, for FY 22, you know, you had guided to 25-35% growth. Of course, you've, you know, exceeded those numbers. Is there a rough number you could, sort of guide us to for FY 23 as well on revenue and EBITDA growth? No. Overall, as I just mentioned, you know, that this FY 2022, we had about INR 138 crore shortfall fee for our first contract, which was mainly accounted in the first three quarters. Which will not be available going forward in the next year. I mean, we have a volume ramp up for lot of projects. This will be more of a consolidation. We see a high single-digit growth in EBITDA for, you know, FY 2023. High single-digit growth in EBITDA. On revenue, should we expect a similar kind of growth rate as well? High single-digits or- Revenue growth may be higher because that shortfall fee was without any revenue. Revenue growth will be more. Understood. Yeah. That's helpful. Just on the situation in the export markets, particularly Europe, you know, where, I mean, there has been talk of, you know, significant impact to the economy because of gas costs and everything. If you could, you know, please just help us understand what the situation is like there, in terms of our key customers or end-use industries and, you know, whether you're seeing any softness and, if so, I mean, does that impact business in the year ahead? Actually, because we make the value-added intermediates and then subsequent value addition, whatever is done in the requirement of energy in that value addition will be limited. Actually, energy requirement in our range of product is more. We see that, you know, some of the products where we compete with Europeans, there may be some issues. Whereas our customer side, we don't see much issue on the demand front. Okay. Understood. The European companies are making. Most of our customers, they make the product for global market. It's not for European market. The way chemical industry is structured, we may supply something to North America, Europe, but the product what they make there, that is for a global market. I see. One last thing from my side, sir, just on the nitric acid project. If you could please just share some information about, you know, what our total requirement is, on an annual basis, and how much of that will be catered to by this expansion that is coming up. Yeah. This will be more of a backup kind of an arrangement. You know, if CNA is not available, we can import weak nitric acid from overseas also and convert it into concentrated nitric acid. This will be more of a kind of as a backup arrangement. We are yet to work out the overall comprehensive nitric strategy that is still in a development. You know, what should be our long-term strategy on nitric acid. Okay, I understand. Thank you so much, sir. All the best. Thank you. We have the next question from the line of Rohit Sinha from Sunidhi Securities. Please go ahead. Yeah. Thank you for taking my question, sir. Mr. Sinha, your audio is unclear, sir. Hello? Yes. Yeah. Is it okay now? Yes. Please go ahead. Yeah. Thank you for taking my question, sir. Just wanted to understand on this employee cost, as you have mentioned that you added 1,500 also. Probably, I think, it has been added in the second half of FY 2022. Since Q2 contract was executed, so most of that was maybe dedicated to that side. Just wanted to understand at which level this large number is being employed and probably with the third contract coming up and obviously other projects are commissioning. Do we see another addition on these numbers? Yes. This number 1,500 was for throughout the year. For the projects which were commissioned and also the projects which are going to get commissioned over this third contract and some other intermediates plant, which will be mostly commissioned in the first half of FY 2023. We have already onboarded, you know, the people for, you know, the plant which are going to be commissioned mainly in this first half of FY 2023. You see, overall now there is a talent pool in the chemical market because a lot of investments are coming up by a lot of companies. One of the key challenges going forward will be how do you manage the talent. That's why now we, you know, we like to have, you know, some cushion in the talent, and also do a continuous, internal, training, so, you know, to upgrade the people. You know, as we are coming up with a very large expansion, it is very important, you know, that human resources are, you know, properly taken care of. Hello? Sir, this is the operator. It looks like this participant got disconnected. We'll move to the next question. Before we move to the next question, we would like to remind participants to ask a question, you may enter star and one. We have the next question from the line of Ashit Joshi from Dolat Capital. Please go ahead. Thanks for the opportunity, sir, and congrats on the good set of numbers. From the presentation and from your introductory remarks, you had mentioned that there are about 40-odd products in the specialty chemicals division that we are targeting to introduce. Just would like to understand if there's any particular chemistry that we are focusing on, or if you can just throw some light on what kind of products will these be that might be coming in the next 2 to 3 years. Will it be application specific or chemistry specific? You know, if you can also mention the rationale as to why we are introducing them. Yeah. Basically one big range will be entire chlorotoluene range, you know. The chemistry what will come is First will be our, what we call a ring chlorination, which is different than the what GHCL has announced. They have announced is which is called side chain chlorination. First will be a ring chlorination, which is similar to what we do for benzene. There'll be a new chemistry. First time will be, you know, photochlorination, then chlorination using anhydrous hydrofluoric acid, then ammoxidation, Grignard reaction, bromination. These are the kind of chemistry which will be there. This is again an integrated chain. Most of the products in this will be going in mainly pharma, agro, and dyes and pigments. That will be the major outlet for this product range. The main drivers here is again, you know, there will be import substitution as well as, you know, customers wanting to, you know, shift. Global customer wanting to shift some of the demand from China to India. That is a major driver in this entire new chain. Understood, sir. Sir, just out of curiosity, in the earlier chemistries that you were into, we had, you know, some sort of a dynamic model that we had adopted, you know, from ammonolysis or nitration or chlorination. This is a completely different basket of chemistries that you are speaking about right now. How different would it be from our existing business model of, you know, manufacturing those five chemistries in which we were in top three, maybe top four, globally. How will we be placing ourselves? Would this be again through, you know, having dedicated plants for certain chemistries? Because you are also speaking about setting up a universal multipurpose plant, and these chemistries are completely new to what we were doing compared to in our existing business model. If you can also share some of your thoughts. This, you know, photochlorination, what we call it, will be single chemistry, multi-product plant, you know. We'll be running on campaign different photochlorination products or anhydrous hydrofluoric, AHF chlorination. This will be dedicated chemistry with a multi-product line. Ammoxidation will be also again a totally dedicated multi. We never did a dedicated chemistry multi-product. There'll be a, this multipurpose, you know, where we'll be able to do multi chemistries. You know, where we can do the Grignard and all other brominations and all those chemistry. Where, you know, more advanced chemistries generally typically are then done in a multipurpose plant. We also have those kind of a complex chemistry in our existing business, but they are like diazotization and all. The rest, most of our plants up till now were dedicated to do those chemistries. Now, you know, we'll have a more of a additional multipurpose kind of a facility on ground. Got it, sir. That was helpful. Just one last question. I think in some of the previous calls you had already mentioned about the kind of market from the import substitution angle for chlorotoluenes. If you can similarly also speak about this new chain that we are targeting in photochlorination. What kind of applications and what kind of size we might be targeting, and if you can just speak also on the competitive analysis of the same. Thank you. This photochlorination is part of chlorotoluene chain itself. Okay. Basically we will be doing ortho-chlorotoluene and para chlorotoluene photochlorination. There you know we can also do direct toluene photochlorination, which is also being done by LANXESS and which GHCL also is planning to do. Those kind of products also can be done because this will be a dedicated to the chemistry where we can move products around. Understood, sir. Also, this being a part of chlorotoluenes itself, would there be any difference on the chemistry side or, you know, this is just like a whole, you can say so photochlorinated products? Simply speaking, will photochlorination be a subset of chlorotoluenes? No, no. You see, like PNCB or other things our nitrochlorobenzene and all, we do first chemistry, then some product will go to the second, third, fourth, fifth chemistry itself. Understood. Got it. The photochlorination is the second chemistry after chlorine chlorination. Okay. Basically this will be quite similar to our existing model, you know, from transferring certain chemistries from one block to another. Very similar. I think that is a very, very robust model what we see, you know, because that we have done for two benzene and one nitrotoluene and I think. Got it, sir. Thank you a lot, sir. Thank you. That's it from us, sir. Thank you. We have the next question from the line of Rohit Sinha from Sunidhi Securities. Please go ahead. Yeah. Thank you for taking my question again, sir. Sorry my line got disconnected last time. Just on the, I mean, as we were talking about this employee thing, I was also looking at this thing that the competition right now in this chemical segment has quite intensified, and talent and retaining the talent has been a challenge as of now. Maybe going forward it could be more like that. That is where I think I don't know whether you have commented on that part or not, since my line got disconnected. If you can touch upon that part also. Yeah, yeah. The same thing I was mentioning, that overall, you know, because a lot of investments are coming in chemicals and specialty chemicals, and there is obviously a talent shortage there which is expected going forward. Our idea will be always to be one up on our manpower requirement and also do a lot of internal training. Because howsoever you may do, there will be some turnover which may happen. We have a dual strategy. One is to keep robust internal pipeline ready, and also try to proactive in filling the requirement at least 5-6 months in advance. Secondly, on the R&D side, I mean, how much has been our total spend for this segment in FY 22? How we are basically planning with this R&D thing going forward with lot of new chemistries we are coming up. I mean, just kind of investment would be a bit on the higher side on this R&D side, or it would be in line with what we have in there. If there at all, we have also onboarded some of the maybe scientists or research personnel. Yeah, we have already also onboarded a lot of people in R&D also. The R&D spend will be, you know, around, you know, INR 60 crore-INR 80 crore range. may go further ramped up a little bit in next one or two years. Okay. Thank you, sir. That's it from my side. Thank you. We have the next question from the line of Rohit Nagraj from Emkay Global. Please go ahead. Thanks for the opportunity, and congrats on good set of numbers. First question is. We have completed two months of current quarter. From the demand side or from the logistics and the war issues, have you faced any challenges in terms of deferment of orders or any translation of orders? Thank you. Yeah, we missed the word. We are talking about Russia-Ukraine war? Right. I mean, that is one part, plus the logistic challenges and the increase in, you know, raw material because benzene, I mean, crude has gone up and subsequently benzene, toluene has also gone up. Overall, this has not impacted much in demand side. That's just because the finished product, the impact of our increase in this cost in the finished product is not very high. In general, overall inflation increasing, seeing some pushback in demand on the dyes and pigment side. In general, that is with the broader inflation, you know, which is kind of some of the discretionary spend. We are seeing that some pushbacks coming in. Agro side is more robust for us. We are continuously trying to, you know, reshuffle our product mix as well as the geographical mix, you know, to have a high capacity utilization. All right. Right. Second question is, for the second long-term contract, I understand that we were supposed to get the CapEx upfront from the customer, I think close to about INR 445 crore. We have commissioned the project last quarter. Have we received that particular amount, which will probably get adjusted in incremental invoices? Yeah. I think we have received almost 80% plus. Okay. Fairly. You also mentioned that we have added a significant amount of, you know, employees, during last year. Q4 is the base, you know, employee, cost run rate that will continue given that incremental additions will be relatively limited as we have, you know, sufficient, you know, bench probably created. Some number because in Q4 some of the projects. These costs. Employee for contract 3 and all, their costs will right now go in your capital WIP. There you know some number in employee cost will increase in next year. Substantial portion come as a revenue expenditure in Q4. Right. Sir, just one last clarification on the guidance of high teens EBITDA increase. Does this on a basis of FY 2022 base of organic EBITDA excluding the INR 138 crores fee plus the INR 610 crores termination fee? No. Termination fee is obviously excluded, but the INR 138 crore shortfall fee will be considered a part of that, FY 2022. Okay. On that, high teens, high single digits was clear. Yes. That is what we are looking at. Yes. Thank you so much for all the clarifications. Best of luck, sir. Thank you. Thank you. Before we move to the next question, we would like to remind participants to limit their questions to two during the initial round. We have the next question from the line of Siddharth Gadekar from Equirus. Please go ahead. Sir, I just had one first question was pertaining to the capacity utilization. Now, if we look at your gross block over FY 2019 to FY 2022, we have added roughly INR 3,000 crore of gross block, out of which I think INR 500 crore would be for that Bayer contract which was terminated. Over FY 2019 to FY 2022, how has our capacity utilization grown? Yeah. It will be on, always on, product to product. Like, you know, nitrotoluene we have reached almost 80% capacity in Q4. Individual process block-wise, the capacity utilization will be different. That's what we are saying, you know, by FY 2024, virtually all the blocks will reach 70%-90% of capacity. That is what is capitalized in FY 2022. Is that understanding right? No. What will be capitalized in FY 23 also? Okay. By FY 2024 we will be in the range of 70%-80% capacity utilization. Yes. Yes. Yes. Okay. Secondly, in terms of volume growth over FY 2019 to FY 2022, how has our volumes grown? A ballpark number also would do. I think we'll have to work on that. It will not be very simple to give that number right now. Oh, okay, sir. Thank you. Thank you. We have the next question from the line of Ranjit from IIFL Securities. Please go ahead. Yeah, sure. Thanks for this opportunity. The first thing, you have said a different chemistry reaction that you intend to take, in future. Would you able to give some idea, on the realization, maybe a ballpark or an EBITDA on a ballpark, thing? The idea is to understand whether these are going to be structurally different from what we have been doing till now. Thank you. Yeah. Basically, this will be more value-added products. EBITDA to sales definitely at the constant raw material prices will be higher in this range of products because the value-added composition will be significantly higher in that. Being a more advanced chemistry also tend to give a higher EBITDA to asset. Just to put the number to it, would it be safe to assume that it could be at least 30%-40% higher than what we are doing currently? Yeah. Generally, now, if it is 20%, then it can at the similar level, this will be more toward 25, the incremental, this kind of range of product. Hello? Mm-hmm. Hello? Operator. Moderator missing. Danielle, I'm sorry. We move to the next question. Mr. Narayan? Yes. Mr. Gogri, on to the new chemistry, could you please tell us what are the user industries involved? Which kind of sectors would you be addressing? Yeah. It will be basically mainly in pharma, agro and dyes and pigments. Pharma and agro will be more or less maybe 70%-80%, and maybe 20% will be other sectors. All right. These would be growing volume? Oh, yeah. The molecules which are there in this both for pharma and agro. Pharma will lead to a lot of import substitution and agro molecules are growing molecules. Very good. Thank you very much. Thank you. We have the next question from the line of Nikhil Vora from Axis Capital. Please go ahead. Thanks for the opportunity. Just wanted to understand one thing again on nitric acid. Basically just wanted to understand the cost dynamics between importing dilute nitric acid and then concentrating it versus if we are directly procuring concentrated nitric acid from India. At the same time, since we are having nitric acid as a key raw material for majority of our products, why don't we set up a plant for manufacturing nitric acid itself rather than setting up a plant for concentrating it from the dilute nitric acid? As I mentioned, you know, we are in process of developing the comprehensive strategy for, you know, both ammonia to weak nitric acid as well as weak nitric acid to concentrated nitric acid. The first phase now immediately we have decided to go ahead with. There are two separate parts, you know. In a nitric acid plant, they are two separate plants. One is to make the weak nitric acid. Many companies make weak nitric acid. Fertilizer companies make weak nitric acid and use it for fertilizer. Some of the companies, they make concentrated nitric acid. They are two different parts. At the first phase, you know, what we have decided that immediately go ahead with putting up a concentrated nitric acid from weak nitric acid and which can be imported also. This will be more, you know, your availability mitigation. Longer term, a comprehensive strategy is being worked out, which we should be able to clarify maybe by Q1. Sure, sir. The concentration part that we'll be doing right now, our plan is to import that entire dilute nitric acid, or we'll be procuring it locally? No, it can be procured locally also, but that is at least one raw material which can be imported also. Whereas nitric, concentrated nitric acid in principle cannot be imported. You know, that kind of really restricts. Here now we can import, so that availability will not be a problem. My price may be INR 5-INR 10 rupees higher. Mm-hmm. You know, the multiplier effect for us is much more if the material is not available. Sure, sir. Sure. Understood, sir. That's a good step. Thank you. Thank you. Ladies and gentlemen, to ask a question, you may enter * and one. We have the next question from the line of Aditya Khetan from SMIFS Limited. Please go ahead. Yeah. Thank you, sir, for the follow-up. Sir, I have the question on to the volumes thing. I missed your initial comment. If you can share the volumes for nitrotoluene, MTB, TBA, please. Yeah. Suyog Kotecha, you can give the volumes. Yeah. For the nitrotoluene, we had volumes of around 5,155 tons for the quarter. You want it for which product? TBA and NCB. TBA we were at roughly around 527 tons a month, and NCB we were at 19,550. INR 97,550. Excuse me. 19,550. 19,550. On to the EBITDA side, we are witnessing only 11% growth and on to the revenue there is only 15% growth. When we look for the last three years in terms of your CapEx, roughly we had done from FY 2019 to 2022 some sort of 27% is the CAGR growth into our CapEx. Considering this, it seems that the CapEx what we have done for the last three years has not yet flowed into your top line and consequently into your EBITDA. There's a disconnect we're seeing in terms of numbers. If you can highlight a bit more, like, which are the CapEx which we had done in the past and will it get to, like, give out the numbers if you can dig out more on this, sir. That would be. Yeah. As we mentioned, you know, earlier this year, you know, again, because that order cancellation, that contract, will be still at around 35%-40% utilization in FY 2023. Just as the FY 2023 guidance also we had given, only a single-digit growth because there'll be higher depreciation and other expenses. At, beyond FY 2023, FY 2024, FY 2025 we will see a significant increase in EBITDA because depreciation and manufacturing expenses will be more or less, you know, will be covered. There'll not be much increase in that. Significant jump in the next three years in EBITDA will happen. Because, by that time, you know, our capacity utilization will reach 80%-90%. Sir, suppose if I include that contract figures also, that was roughly around INR 490 crore for the dicamba plant. For the second was also roughly around the similar range. Since there are large part of the CapEx what we have done that seems yet, the numbers would still come onto the top line. Is there any sort of additional CapEx we had done, like in, on, onto the specialty chemicals or pharma which is yet to flow into our numbers? contract is a five-step process. We have this CapEx done through the entire chain. That entire chain will get ramped up. That is the one dichlorobenzene chain which is at a slower ramp rate right now. This we'll see in the next two to three years. We should 90% of capacity utilization in that chain. Since you are talking also, so roughly what would be the CapEx. What we had taken which historically into our numbers, rough CapEx figure would be, sir, for this. Yeah, I know. Overall, this entire CapEx, some of them is still in our WIP. This chain CapEx will be of the almost INR 800,000 crore CapEx will be in this chain. INR 8,000 crore CapEx, sir? INR 800-INR 1,000 crore range. INR 800 crore-INR 1,000 crore. Okay. That would flow into our numbers for the next two years. Yes. Since your guidance for the next year in terms of EBITDA, that you are saying that is into high single digit change. Considering the flow- Yes. Yeah, yeah. That's what I was trying to mention, that next year is still a ramp-up. Previous year INR 138 crore was a shortfall fee which is going off. Okay. We are showing, including shortfall fee number, we are saying a single digit growth in EBITDA. Okay. The major jump will come in FY 24 and FY 25 subsequently. Okay. Got it, sir. That's it from me. Thank you. We have the next question from the line of Abhijit Akella from Kotak Securities. Please go ahead. Thank you, sir. Sir, just wanted to clarify on the previous point you mentioned. For the dicamba project, overall it's INR 800-1,000 crore CapEx, is it? Because earlier I think you had guided to a revenue of about INR 400-odd crore from the project. I just wanted to sort of reconcile those two numbers. No, this is the entire chain. Dicamba, the last step is INR 400 crores. You have a chain of, you know, there are three more chemistry before that. This entire plant, entire chain is moving in a ramp-up phase. That's how we are seeing. on the revenue from the, you know, previous chemistries, I mean, what will the revenue from the entire chain be? That number we'll have to dig out. It will be in the same ballpark of, say, 1:1 CapEx or so, is it, as returns? We'll have to see the number. Okay. It's fine. Maybe I can connect offline. Thank you so much. Yeah, yeah. Thank you. Ladies and gentlemen, that was the last question, and we will now close the question queue. I would like to hand the conference back to Mr. Rajendra Gogri for closing comments. Please go ahead, sir. Thank you everyone for taking out the time to join us on our earnings conference call. Let me close by saying that we are moving in the right direction and all the ingredients in place to demonstrate superior performance trajectory in the forthcoming years. Not only will this amplify our leadership position, but also enhance value for all the stakeholders. I hope we have addressed all your requests, questions. If you have any further questions, please feel free to contact our investor relations team, CDR India, and we'll address them. Stay safe, and we look forward to connecting with all of you again in the next quarter. Thank you once again. Thank you, members of the management. Ladies and gentlemen, on behalf of Aarti Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.