Ladies and gentlemen, good day and welcome to Aarti Industries Q3 FY23 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 this conference call, please signal an operator by pressing star 0 on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Nishid Solanki of CDR India. Thank you, and over to you, sir. Thank you. Good afternoon, everyone, thank you for joining us on Aarti Industries Q3 FY 2023 earnings conference call. Today, we are joined by senior members of the management team, including Mr. Rajendra Gogri, Chairman and Managing Director, Mr. Rashesh C. 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, update on growth initiatives, and outlook on the business. Post this, we shall open the forum for question and answer, where the management will be addressing queries of the participants. Just to share our standard disclaimer here, some statements that will be made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the results presentation that has been shared earlier and also available on stock exchange websites. I would now invite Mr. Rajendra Gogri to share his perspectives. Thank you. Over to you, sir. Thank you. Good afternoon, everyone, and welcome to our Q3 FY23 earnings conference call. We have shared our results documents, and I hope that you have had an opportunity to go through them. We reported resilient performance during the quarter and 9-month period under review, as reflected by higher share from value-added products driving better profitability. This was achieved despite a decrease in demand across some end user categories, which we believe will reverse back by next year. Our teams responded promptly to the dynamically changing situation and utilized their expertise to maintain a strong performance by optimizing the product mix and market opportunities. The share of value-added products in Q3 FY23 was about 81%. Our expertise and competency in multiple product value chains related to benzene and toluene remains exceptional. We are leveraging this strength to establish a solid foundation in newer chemical value chains, which will further boost the company's profitability. As you all know, during the quarter, we saw two key developments. The first significant event is that we signed a binding 20-year term sheet with Deepak Fertilisers for supply of nitric acid worth more than INR 8,000 crore. This is a historic partnership which will greatly help us in the long term and ensure that we have a steady and adequate supply of this crucial raw material. This comes into effect from April 1, 2023, as disclosed earlier, and eliminates the need to invest into backward integration for concentrated nitric acid. The second progress is the demerger of the pharma entity of Aarti Industries into a separate company, Aarti Pharmalabs Limited. The record date was 20th October 2022, and the new company was listed on the stock exchange, both NSE and BSE, on 30th January 2023. Coming to the financial performance for Q3 FY23. The financials for Q3 FY22 and 9-month FY22 have been recasted to consider the effect of scheme of arrangement for the demerger of pharma segment from the appointed date of 1st July 2021. We had looked to exclude the shortfall fee and the termination fee received in FY22 arising out of cancellation of the first long-term contract to draw an appropriate comparable. As per this, during the quarter under review, revenue increased by 12% YOY to INR 1,854 crores, with exports contributing over 48% of total revenue. EBITDA improved by 26% YOY to INR 289 crores. Profit after tax stood at INR 137 crores. Considering this performance, the board has approved an interim dividend of INR 1 per share, that is 20% of the face value of INR 5 each. Demand was steady for key products under the essential end usage, further aided by volume gains. As mentioned, demand for products pertaining to textile end users industry remains impacted, and to that extent, the performance appears tempered. We expect demand recovery to come in from the first half next fiscal year. Having seen some decline in the raw material prices in the last quarter, the impact of that might partly be seen in Q4 FY23. The price of few raw materials are seeing some upside in the last few days. Having said that, we have a robust pricing mechanism in place to mitigate the impact of inflationary cost pressure, whereby the same is passed on to customers, thereby protecting absolute profitability. Our profitability was further bolstered by the contribution of products with high growth and better margins. We are happy to report that against the guided EBITDA of about INR 1,100 crores for FY23, we have already achieved the EBITDA of about INR 837 crores in the 9 months FY23. We are constantly monitoring the development with reference to the ongoing global recessionary trends, and we will work to optimize our product mix to mitigate the same to be able to meet the guidance given earlier. As you would have noticed, depreciation for the quarter has increased and is in line with our expectation. This is on account of commissioning of our ongoing projects. With continuing depreciation of Indian rupee against US dollar, the mark-to-market loss of about INR 11 crores in respect of our enhanced ECBs were provided and has resulted in the increase in the borrowing cost. Now let me turn your attention to the production details for Q3 FY 2023. Production of Nitrochlorobenzene stood at 18,199 metric tons, while the same for hydrogenation came in at 2,995 metric tons. For Nitrotoluene, the production for Q3 FY23 stood at 7,528 metric ton. I'll now take you through some of the expansion initiatives announced and updates around that. We are pleased to announce that the plant associated with the third long-term contract has been commercialized by the end of Q3 FY23 at our Jhagadia facility. We expect that the ramp up as per contract terms will peak in from coming quarters. Other projects, including brownfield expansion of MCB facility at Vapi and few other specialty chemical blocks are progressing well. This will become operational in our next couple of quarters and start contributing from as to FY24. We have started the initial work around expanding the insulation capacity at Dahej SEZ by 3x with an investment of INR 200 crore. As shared last time with our NT capacity reaching over 90% utilization, we have commenced the works related to debottlenecking of our Nitrotoluene capacity. We target the capacity increase by about 50% with an objective to cater to certain high growth application in agrochemicals. We expect both these units to commercialize in H1 FY25. During the nine-month period, we assessed CapEx of about INR 840 crores to our various expansion opportunities shared previously. Our target annual capacity will be in the range of INR 1,100-1,200 crores for FY23. Our volume growth from new capacity will occur in the coming two years, but the fixed cost will generally tail the macro inflation, thereby yielding a robust growth profit to EBITDA conversion starting FY24. Based on solid business visibility, our EBITDA growth guidance for FY 2024 and 2025 stands at CAGR of 25%. The collective capital expenditure target for FY 2024 and 2025 remains unchanged at about INR 3,000 crores and will drive strong momentum going forward. This will be aimed towards developing new chemical value chains and introducing high potential products that will broaden the addressable market size and respond to increased demand from customers. As a company, we have set our sights high for growth and have taken decisive action to ensure that we remain at the forefront of our chosen chemical skill sets. Additionally, we see great potential to new chemical value chains and are poised to leverage our expertise to capitalize on this opportunity. The results of our past initiative will become evident in the next 2 years. We are confident in our ability to deliver on expectation. This confidence stems from our commitment of best-in-class manufacturing processes, continuous process enhancement, strong R&D focus, robust customer relationship management, and unwavering commitment to sustainability and innovation. Our objective is to create value for our shareholders by taking advantage of favorable industry trends. That concludes my initial thoughts and will now request the moderator to open the floor for the Q&A session. Thank you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and 1 to ask a question. The first question is from the line of Rohit Nagraj from Centrum Broking. Please go ahead. Yeah, thanks for the opportunity and, good afternoon, sir. First question is, on a QoQ basis, our gross profit has been more or less flattish, rather marginally declined. However, we have said that, the value-added products, contribution has been higher during the quarter. Does it mean that the discretionary, part of portfolio actually had more impact during the quarter and because of which, the gross profit, absolute gross profit has been flattish on a QoQ basis? Thank you. Hello. Rohit, sir, you're audible. I think discretionary is little bit pressure on the dye side, but other sides didn't see much impact in Q3 overall. Sure. Sir, second question is, now earlier we were targeting that part of our CapEx will also go for the nitric acid part of the business, either on weak nitric acid or concentrated nitric acid. Now since we have got this deal with Deepak Fertilisers, still our CapEx remains unchanged for FY 2024, 2025. This allocation, capital allocation, which was probably earlier done for nitric acid, which part of the business will it be allocated now? Thank you. This is our current product. You know, more or less all the CapEx is ongoing except the two for Nitrotoluene and the installation block, which will be commissioned in FY 2025. Everything else should get commissioned in Q4 FY 2023 and FY 2024. The new product line for chlorotoluene and multipurpose plants, which is where the additional CapEx will go. Sure. Thank you so much. I will come back in the queue. Best of luck, sir. Thank you. The next question is from the line of Pranita from Morgan Stanley. Please go ahead. Pranita, may I request you to unmute your line for Mr. Arun to go ahead with the question, please. Yeah. Hi. Hi. Hi, sir. This is Vivek from Morgan Stanley. Sorry about that. Two questions from my end. Could you provide a bit more color on the kind of demand trends that you're seeing in your key end segments? Particularly if you could just clarify on what is specifically driving the weakness you're seeing on the textile side. That's the first question. Yeah. Textile slowdown has been going on for a couple of quarters. I think that's because of global demand slowdown because of I think the high inflation and all, you know, even country like Bangladesh, Turkey, everybody was facing problems. Now currently some global recessionary trends are also visible in other segments also on auto, et cetera. Sure, sir. Sir, from a second question, could you also maybe touch upon, you know, once all of your ongoing projects are progressively commissioned over FY24 and possibly FY25, could you maybe talk on, touch upon how your revenue exposure could change in terms of your end, segment exposure? Thank you. Yeah. End segment exposure, you know, more or less, you know, it will be around 50/50 with current ongoing expansion. Our FY 2025 number will be more towards similar 50/50. Chlorotoluene and multipurpose plants I think will have been more on pharma and agro. Going forward, I think there'll be some increase on pharma and agro beyond FY 2025. Sure, sir. Thank you. I'll rejoin the queue. Thank you. Next question is from the line of Niteen from Aurum Capital. Please go ahead. Yeah. Thank you for the opportunity. My question is that how much, you know, CapEx is spending now, including the maintenance CapEx, and what is the revenue there Will have it from this CapEx? Yeah. No, this year, we have spent around INR 840, and this year around INR 1,100-INR 1,200 crores. Next two years, got we have guided with INR 3,000 crores. Current ongoing expansion, I think, except the Nitrotoluene and ethylation, more or less, you know, everything will get commissioned by first half of FY 2024. Okay. What is the revenue there that we are expecting considering the current prices? Yeah. We are targeting, you know, about, INR 1,700 crore EBITDA by FY25. Generally revenue guidance, we, depends on the raw material, but, it should be upward of, you know, if you take 5 times INR 8,500 crore plus. Got it. Thank you, sir. Thank you. The next question is from the line of Archit Joshi from B&K Securities. Please go ahead. Hi sir. Thanks for the opportunity. Sir, in this quarter, I think, some revenues must have also flown for the second contract. If we were to, adjust for that, has our base business seen some volume growth? Given that we are still seeing some challenges from the dyes and pigments portfolio, have we been able to mitigate the effect of those, pain points by addition of some other products? If you can guide something on that front. You know, if you remove the shortfall fee and the termination fee, overall EBITDA growth has been about 26%. There is a growth because of the second contract as well as increase in the volume of our regular product also in Q3 compared to the YOY numbers. Got it, sir. Sir, in this volume growth that you're talking about in the base business, is that seeming to be sustainable maybe in the next Q2, even until, you know, as we have mentioned in the presentation for Q2-Q3 we are seeing some challenges again in the dyes and pigments portfolio. Even without that, would we be able to maintain this volume growth? Yeah. Overall, we'll see that volume growth will happen, but sometimes some of the products we may have to put into non-regular markets. Generally we'll try to keep the volumes, but non-regular market may tend to have lesser margins. Understood, sir. Sir, another thing that I noticed in the presentation was a couple of new technologies that you've spoken about the vapor phase and the continuous flow. I think this is the first time we have mentioned of such a thing in the presentation on the concalls. Sir, any color that you can give on this? Is this going to be embedded in our existing facilities or is there going to be a change in some process, or is this going to be targeting a completely new product set? Sir, anything on that end? No. This will be part of the new product lines. Basically existing product, we are not going changing any processes. Right, sir. Some more elaboration, sir, if possible. What kind of streams we have in this technology? This chlorotoluene will be going a lot of downstream production also, and a lot of new chemistries will come. Also in our multipurpose plants also we have identified some products, you know, which will be have this kind of chemistries. Understood, sir. Thank you. Thanks. Thanks for this. That's it from my end. Thank you. Next question is from the line of Sagar Sanghavi from J.P. Morgan. Please go ahead. Hi, sir. Thank you for the opportunity. Am I audible? Yeah. Okay. I have 2 question. One is on the very long term. We'd earlier given a guidance for FY 2024 and FY 2027, where our bottom line kind of increase is up to 2x or 3-4x. Does that still remain the same and what will drive it? The second is, you'd mentioned about a turnaround in discretionary demand in the next 2-3 quarters. Again, what will drive this turnaround, given that there's a recessionary environment looming? Thank you. Yeah. Overall, you know, guidance both, FY 2024 and FY 2027, I think we should be able to achieve. General slowdown, what we see from the customer end and everything that can last about next Q2-Q3. I think that is a broader feedback what we are getting, from the customer side. Okay. If I can just slip in one more question. On the tax rate, how do you look at tax rate going ahead because you've been getting some tax breaks? Does that continue with these new plants which are in commission? Basically the new plants have a bit of a higher depreciation for IT purposes. Sorry to interrupt you. Sagar, may I request you to mute your line from your side, please. Lot of background noise coming from your end. Thank you. Sir, you may continue. Yeah. That, the new facilities have for the initial period, there's a higher depreciation, and this is where there'll be certain tax benefits available. We have few units operating in SEZ and couple of other tax ops, which will be there for a few years. The tax rates will continue to remain softer. okay. it should be in the ballpark 20% range. I guess it'll be lower. Okay. all right. Thank you, JP. Yeah. Thank you. Next question is from the line of Surya Narayan Patra from PhillipCapital. Please go ahead. Yeah, thanks for this opportunity, sir. Just a couple of questions. First question is about crude price correction and the significant correction in the freight cost, what we have seen in the recent past. Whether the full impact of this has been seen already in the revenues and the product prices, or that is yet to be seen in the subsequent quarters, sir? Generally, no. For domestic, it gets passed on a month-to-month basis as per the benzene, toluene prices are concerned. Export, it tends to have somewhere via contractual, it gets passed on with a quarterly-lag basis. Benzene again has started showing some upward trend in month of January. February prices again gone up. Freight has further softened in Q4. I think overall, yeah. In fact, sir, that was a kind of a concern that possibly the growth number, revenue growth number will be impacted because of the sharp correction in the freight as well as crude. What we are seeing this quarter is that the growth is largely contributed by the stronger almost like 34%-38% kind of growth in the exports. Whereas the domestic prices, possibly we have seen the impact of this correction already. Hence, the growth has got softened. Now considering the kind of slowdown concern what you are indicating and this quarter's performance and also the likely repricing of the products driven with the crude and freight. Should we build any kind of concern for the export growth in the subsequent quarter? As far as the freight is concerned, generally freight has been also more or less passed through with the customer, sometime with a lag, you know. Because the kind of freight which has increased in the last couple of years, there is no option but to pass it on to the customers in that sense. Because some decline in regular export market is there, we will have to reshuffle the products. There'll be some impact on the export demand in coming quarters. Okay. Since, you know, while the export demand could be a kind of a concern, but considering the ramp-up in the sub multiyear supply contracts, what we have just initiated or the third contract which is getting initiated now. Considering that, the demand concern will be overcome by this new product introductions. Is it fair to believe so? This will be just, still, will be first quarter, so it will take ramp-up will take a time, because of this new contract. Okay. sir, just an extension to this one. for like, what is the cumulative CapEx that you would have done for all these three multi-year contracts? whether, because the third contract is also now commissioned. Hence, if you can share that what is the cumulative CapEx that you would have done for all the three. Also we know that these multi-year contracts are the downstream products of our existing line of products. what is the complementing CapEx that we would have done in our existing products along with the multi-year contract CapEx? If you can share these two things, that would be really helpful. Actually, second and third, is not of a downstream kind. This is more of an independent second and third contract. The first contract which got canceled was more of a integrated. Direct expense of all the 3 contracts will be maybe around INR 1,000 crores. If you take indirect, maybe another INR 300-400 crores extra, because of that. Okay. That means the INR 1,400 crore kind of CapEx, which has not kind of contributed anything, likely to be the growth driver for 2024. No, the second contract is already contributing, right? Yeah. Yes. That is in the initial stage of a ramp-up, right, sir? No, no. Second contract is already fully ramped up. The third contract, which we have commissioned now- Okay. in Q3 of FY 23, which will be going on a ramp-up phase next year. Okay. Just another one thing, regards the margin outlook. How should we think, since you had indicated that the newer projects which will be starting from FY 2024, are likely to have margin profile in the range of 25%-30%? Since we are almost now approaching FY 2024, currently our blended margin, what we are witnessing is in the range of around 15%, 16% level. The, the newer projects are likely to have the margin profile of 25% plus. The blended kind of scenario, what should it be? Could you give some sense on that? Because it is quite clear that the growth on the EBITDA side, it is, you have already indicated, and that is likely to flow in. On the margins front, how qualitatively that it is going to be changed? The value-added product sales will be starting mainly from FY 25. The impact of high margin will be coming, you know, post FY 25. Slowly that the% share of this high more value-added product goes up and overall gross margin at the constant raw material will increase, you know, beyond FY 25. Okay. Okay. Just last small question, sir. Is it possible to say what is the cumulative R&D spend? Although it is not a line item for us, what is the R&D spend that we should be doing for a year as a% to sales? It will be about 1%. Okay. Okay. Yeah. Thank you, sir. Wish you all the best. Thank you. Next question is from the line of Abhijit Akella from Kotak Securities. Please go ahead. Yeah. Good evening, sir. Thanks for taking my question. Just first of all, on the EBITDA for the quarter on a sequential basis, it is up about 7% or 8%. 8%. It seems to be driven primarily by lower other expenses which seem to have fallen quarter-on-quarter. Is this margin expansion largely due to the fall in freight costs and, you know, maybe power and fuel costs as well? Would we have passed this on to customers and, you know, instead grown volumes on a sequential basis? What exactly is the reason for this? In case it is related to a decline in expenses, do we need to pass this on to customers in the subsequent quarter? The expenses are generally not passed down, you know. If you see the Q2, we had that maintenance shutdown, which has resulted in higher expenses. That partly got corrected in Q3. It is the raw material and the freight which gets passed on to the customers, in general. There was some volume growth and some saving in expenses now, which is part of the contribution on EBITDA side. Okay, understood. This can be retained. Yeah. On the second long-term project that has been commissioned, is it possible to just share what the, you know, revenue run rate it is operating at right now? That we'll not have an immediate number from that, I think. You know, even the first one, you know, has it ramped up compared to the 15%-20% utilization rates it was at earlier? The first one is still slower. You know, we had taken a shutdown in this Q3 for that. The demand of that downstream product is slow overall. Okay. Okay. On a YOY basis, is it possible to share some volume growth number? We have got too many different products. Generally the volume growth numbers we are not sharing or taking out. Overall value-added percentage was about 81% in this quarter. All right. One other thing was just that you've spoken about the softness in textiles, which will probably, you know, hopefully fade away in Q2-Q3. You also spoke about auto showing some signs of softness. There's also a lot of talk in the industry about agrochemicals sort of seeing some demand weakness because of high inventories worldwide. So are we seeing some, you know, signs of softness there as well and how do you expect these softer end-use industries to shape up in coming quarters? Yeah. Agro is more molecule specific. Some molecules we are seeing that. Other molecules, they are quite strong. It becomes very molecule specific inventory impact. We don't see that impact maybe not more than a quarter on inventory correction on agro plus some of the product, but not all of them, you know, in that sense. Okay. One last thing. Just on the CapEx that's being incurred on chlorotoluenes and then on the asset up gradation initiatives. Is it possible to share some figures with us regarding how much is being spent there and what sort of economics we are expecting from that in terms of maybe revenues and profits? Thank you so much. This chlorotoluene and all, spending will start from the next year actually, FY 2024. Up till now the major expenses has been on our existing product line. All these contracts and expansion, some asset restoration on the existing product line and some few specialty chemical blocks. Is it possible to just break that up, sir, for us, the asset upgradation and the specialty chemical lines, how much have you spent exactly? That bifurcation, we'll not have an handy on that. Okay. fine. Maybe I'll connect separately with you then by on this. Thank you. Yeah. Yeah. Thank you. Next question is from the line of Key ur Pandya from ICICI Prudential. Please go ahead. I think it has been partially answered. Just wanted to understand, probably if you can give some idea on contract 1 and 2, what we had earlier guided versus what the rendered right now we are running at as far as contracts 1 and 2 are concerned. Yeah. Contract two as such is more of a, we are as per the, our original guidance. Contract one, you know, the demand of is slow. In general, what we had guided was about maybe 30%-40% this year may not materialize, as far as contract one is concerned. Contract two would be INR 200 crores when stabilized. Is that INR 200 crores per annum? No, that was more about INR 500 crores. It is not purely directly related to top line, the way it is structured, the EBITDA. sorry, I couldn't understand. It is more of, you know, not directly related to the top line as far as when we consider the EBITDA coming out of, second contract. Okay. Sir, on contract one, you mentioned that probably the end product is also facing some slowdown. In absolute terms, what kind of revenue should we expect, either say FY 2023 or say FY 2024? Mm. After considering that slowdown. FY 2024, I'll have to look at some number out of that. Maybe around INR 200 crores. The margins and all are still under pressure in those lines. Okay. Understood. Okay. sir, thanks a lot. I will contact you separately for the details and all the best. Thank you. Thank you. Next question is from the line of Rohan Gupta from Nuvama. Please go ahead. Good evening, and thanks for the opportunity. First question is on our, in the start of Q1, before pharma demerger, I mean, after pharma demerger in Q2, we mentioned a free INR 1,100 crore kind of guidance for EBITDA for FY23. Looking at the current number, and you mentioned that there's some pickup in demand environment. What kind of numbers one can expect now? Is there any upward revision to that given the 9 months number? No. Overall, I think, as mentioned, you know, there are some global slowdown, we are not revising guidelines. Overall, you know, we'll try to reshuffle the products and everything, you know, to meet the guidelines of about INR 1,100 crores. Okay. Second question is, in terms of our Aarti Pharma. What kind of sales are we do from there? I mean, we are supplying some intermediates to them. Earlier there was some inter-segment sales was there. What kind of business is coming right now from Aarti Pharma? Do we have anything on that? No, we don't have any significant sale to Aarti Pharma. There is not any significant revenues coming from Aarti or going to Aarti Pharma. No. Sir, just observation on the current quarter numbers and trend, like, you know, that purchase of stocks in trend, in trade. That has gone up significantly with roughly INR 126 crore, while we always had a just INR 60 crore kind of trading business. What is this, sir? Why all of a sudden sharp increase in purchases of stock in trade? Any particular product commissioning or lack of any existing intermediate which we were manufacturing and have to buy from outside? I guess one of the reason for this increase in that was the transitionary period because the demerger was effective on 20th of October. There were certain orders which would have been issued by us in the name of Aarti Industries for the pharma business. Those orders we still have to continue servicing from Aarti Industries. It's more of a transitionary period activity, nothing beyond that. Okay. Also just last from my side on the contract. One, you mentioned that the project one that, after the termination, we are still running only at 40% kind of, 30%-40% kind of utilization. You mentioned that there's a global weakness in the demand environment for the Dicamba intermediate. Do you see that this environment or the sluggishness in the Dicamba intermediate will continue? Or you see that there is some pickup happening? Or are we evaluating any further possibility of further forward integration in complete Dicamba, which we had once planned for that? Or, or can we break it in part and use partially these capacities also, facility also for making some other chemicals as well? Yeah. Currently, basically we are looking at slowdown in that. Even FY 2024, we don't expect that, what we had guided 70%, may not happen. Overall we are evaluating, you know, entire our strategy on that, whether we can go downstream or we can try to convert the other line into some other products. Because we have two different lines in that. That detailing we are trying to work out on how to optimize those assets. If I understand rightly, sir, I think that including the peripheral investment in excess in, along with this contract we had some INR 800 crore-INR 850 crore investment made in this and that at a current level, 34% utilization or maybe even not looking at 70% utilization next level, next year. It means that it will not contribute anything to the bottom line with this run rate and INR 800 crore-INR 900 crore investment will not fetch anything. Is that understanding correct, sir? No, no. These are the downstream component which will not be utilized. The upstream, you know, we'll be starting to giving to the other products. This particular molecule doesn't have much use, but the precursors, you know, we are now going into the other markets. Okay. The ancillary investment which we have made along with this project, that is being utilized now. Yeah. It's only the INR 600 crore investment which is yet-. That's what it will get. Yeah. Yeah. Yeah. Correct. That will get ramped up in next two years to almost fully utilized levels. Okay. Uh, and then- It is only related to this plant because I think the investment was INR 600 crores, if I am not wrong. It's around INR 500 crore was coming from this plant. Yeah. Okay. That investment will still fetch a lower utilization of just only 70% and where we are evaluating further possibility of getting into other products. Yes. Yes. Yes. Yeah. Just one more thing on this. As regards that investment, just to refresh, that is largely, I mean, there's a significant component of termination and shortfall compensation. The investment is substantially funded out or cashed out. Technically, there's no cash flow which has gone into that. It is completely. Yeah, that we understand because we already got the termination fees along with the... Yeah. Q2 and EBITDA numbers. That comes. That we understand. Yeah. That is already money sitting in the balance sheet, right? So... Yes. Yes. Yes. Yeah. just last from my side, sir. last time we guided for the further reduction in debt, and you mentioned that roughly last quarter debt was at peak level. do we see that the and the working capital which has gone up in between, what kind of debt level we are looking at year-end? I guess the debt level should be virtually be a bit lower than what we had seen on the peak, but maybe around INR 2,600 crore-INR 2,700 crore of debt level could be seen. Some part of it is because of reduction in the commodity prices or the freight cost and other thing which is resulting in the reduction in working capital. Still it will be INR 2,700 crores. You're talking about gross debt. What was the net debt number? No, I'm looking at. More or less gross and net will be similar. This I'm asking because we looked at when in Q2 con call you mentioned this is a peak debt and we will see some reduction in debt level, in net debt level and it can come down by year-end. It's already been in reduction. Yeah. Okay. Thanks, sir. Thank you so much. I'll come back up for any follow-up question. Thank you. Thank you. Next question is from the line of Ankur Periwal from Axis Capital. Please go ahead. Ankur, your line is unmuted. I will mute it after you've made your question. Unmute, please. Yeah. Hi. sorry. I'm audible now? Yes, you are. Thank you. Yeah. Okay. Thanks for the opportunity. First question on slide number 9, wherein we are saying that 50-plus products are, you know, in the pipeline from R&D perspective. Are these products largely for the existing value chain or these are the new value chain that we have talked about? Yeah. These are mainly from the new value chain, but some from the existing value chain also. More than three-fourth will be of Okay. value chain. Sure. From a timeline perspective, these will be FY 2024 onwards, you know, getting commissioned, right? Yeah, FY 2025 onwards. Yeah. 25 onwards. Okay. Sir, second question on the volumes front. While I understand near-term slowness in terms of, you know, macro, et cetera. From a medium term, let's say from a 3, 5-year perspective, what should be our volume growth on a like-to-like basis? Yeah. Basically, what we are seeing that in around 40%-50% volume growth. That's it. That's what we are guiding in EBITDA. More or less, that volume growth will transfer on our existing product line about 40%-50% growth. The new products will come in. If I got you right, 25% CAGR, which is 50% almost growth, is largely volume driven, largely from the existing product segments. Yes. Yes. Any top up there from chlorotoluene or, you know, the other initiatives will be, inching up the growth further. Correct. Correct. That will be more of FY 2025 onwards. It will be commissioned in FY 2025, we don't see much coming in from both in FY 2025. It will be a commissioning year. The new product real contribution towards EBITDA will come from FY 2026. Fair enough. Here we are largely gaining market share because the reason I checked on this was, you know, historically, looking at the chemical business a bit, the growth has not been as sharp versus what we are guiding now. Is it any specific area wherein we are gaining market share globally? If you can help us understand that. Yeah. You know, some of the products, upstream capacity, which will now, you know, we'll try to fulfill. Nitrochlorobenzene new capacity which are coming. That ethylation plant. That is a totally additional volumes which we are tripling. Nitrotoluene also we are expanding. Across the board, you know, somewhere, the new will get, start, in FY 2024 and 2025. Rest, you know, which is already commissioned, so there'll be some ramp-up on this, first contract related upstream capacities. Okay. Okay, that's helpful. Sir, lastly, if I may. On a 9-month basis, if you can, you know, define how should one look at the volume growth here? I understand it's a mix of, you know, multiple products, but broadly directionally, what should be the range? No. That it has become difficult. Again, you know, contractual, new contract is a different kind of volumes and also. Overall, you know, the value-added percentage has increased to 81%. The specific number we'll not have on volume growth. Okay. No worries, sir. That's helpful, my second. Thank you. Thank you. Next question is from Rajiv Ranjan from IIFL Securities. Please go ahead. Sir, thanks for giving this opportunity. Firstly, on the second long-term contract, if we understand this right, there was an advance that we have got for setting up this particular contract. To that extent, this should be a largely non-cash flow, at least for this particular year. Is that understanding right? Correct. Correct. Okay. How long would that be? Whether we would be exhausting that this year or the. Sorry to correct that. It won't be a non-cash flow thing. There will be cash flow coming in from the contract. The advance doesn't get adjusted against the supply. It gets partly adjusted, and it will be there over a period of fairly a longer period of time. Okay. How long would that continue? Over the next two to three years or? no, it'll be more than years, but we can't give the exact details on kind of confidentiality purposes. It'll be there for more than three years for sure. It will be gradually phased out over time. Can you put a number to that gradually? Probably 20%-25% each year or even less than that? Mm. It'll be lower than that. Okay. The rest would be, kind of a cash flow. Yeah. Okay. Good. Second, we have said that most of our projects would be kind of commissioned in the first half of FY 2024, and we continue to have the guidance impact of a 25% CAGR. Would it be safe to assume that probably the bulk of this growth would largely occur in FY 2025, given that you will have these overages in FY 2024? Yeah. Can you repeat the question? Yeah. Our EBITDA CAGR for the next 2 years is 25%. We have also said that most of our CapEx is likely to come on stream in the first half of FY 2024. I assume that there would also be an higher overage on account of capitalization. To that extent, the EBITDA growth should be a bit lower. Would it be safe to assume that the 25% CAGR that we are guiding would be skewed towards FY 2025? Yeah, it will be more towards the FY 2025. Yeah. Yeah, of course. Lastly, the way I understand the business is, we generate a lot of isomers. We carry out 1 reaction, and there are multiple products that we generate, be it chlorination, nitrogenation or nitration process. When we say that, we are exposed to the discretionary is around 15%. So the question is that would that 50% inherently also impact the other 50% of the business where there is a demand, but there could be a situation that we might not be able to cater that because we are contained by our ability because beyond a point, we might not be able to produce because there is a slowdown in the larger part of the portfolio. Generally, we are able to place it on a non-regular market. Generally, you know, we are able to manage, if a particular segment has a lower demand in a regular market, we try to place it in a non-regular market. That's what we did during COVID as well. Yes. In the initial part of the COVID. Correct. Correct. Cool, sir. That answers my question. Thank you. Thank you. Next question is from the line of Nitin Agarwal from DAM Capital. Please go ahead. Thanks for taking the question, sir. Two things. One is, A, you've talked about this 25% EBITDA CAGR over the next 2 years. You also talked about certain softness being there in some of the segments like textiles and autos. What is the risk in your assessment on this guidance? Or what should we be mindful of? We expect the normal demand situation should resume. At least FY 25 should see a totally normal demand. It is mainly based on that. Sir, what could drive upsides to this? I mean, is there any source of upside to this guidance? Which element can surprise us, on the positive side, to the guidance? Yes. I mean, overall, you know, if there are certain products where some shortages are created and then higher profits can come up because of that. Sir, have you been seeing any instances of these in recent times, you know, where, or supply in certain products where, because of various reasons, issues in China or Europe, there have been shortages and price improvements, or the supplies have been largely normal across most of your products? Yeah. Currently, most of the products are in a normal situation. Lastly, this whole, you know, talk which has been there about China plus one, later Europe plus one also. In your assessment, how much of that has played out? In which shape and form are you seeing it playing out? China plus one is a very long-term structural thing which is going on for last maybe 5, 7 years, and I think will continue to happen for next 5, 10 years. Whereas the Europe plus one is long-term, you know, some of the energy intensive products, you see that the investment in Europe might become less because the energy will become costlier. That may open up opportunity for India. That Europe plus one also may take 2, 3 years, you know. That, you know, you have to identify the products, where, you know, this will open up a long-term opportunity. Have you had any conversations with your clients around this, you know, the potential fallout from this Europe plus one, or this is right now largely a concept and it's not much really translating into numbers for industry, Indian industry just yet? It's just discussions are going on of these possibilities in that. That impact may come only after two, three years. Except, you know, some people have surplus capacity and you temporarily put up. In general, I think, for the newer capacity, it will take two, three years. Sir, this last one. On FY 2024, you said bulk of the growth will be driven by your current products, and FY 2025 is where some of the newer products will start to contribute in a more meaningful way. That understanding is correct? Even up to FY 2025 will be more of the current product line, because FY 2025, the new product line, it will be the 1st year. We don't see any significant EBITDA coming from new products in FY 2025. Some volumes will start coming in in FY 2025 from the new products. Sir, on that, you know, the fact is we have the same product lines, as you're saying, which have been driving growth for in 2024, 2025. I mean, sir, what has been the reason that, you know, our growth has been relatively little contribution for some of these existing products have been little on the muted side over the last, few quarters. I mean, what is gonna change in your assessment over the next two years on this current portfolio, which can drive up such a, you know, reasonably strong growth versus what we've done in the recent past? Basically, this entire, the first contract backward chain which we had expanded, you know. That we expect that to get filled in. This new ethylation and Nitrotoluene, that is a new capacity which we are adding based on the more visibility. Nitrochlorobenzene expansion will happen, so those are the things, you know, which will lead to this volume growth. Some other specialty chemical also we have added, so that will also drive the growth. Sir, last one, sir. On pharma business, how are you planning to share more details of the business? Is there anything which is planned, sir, if you can just share it on this call? Basically, nine-month results are already in public domain in pharma. The EPS for nine months was about 16.6. Annualized EPS about 22 for pharma. On an absolute number, PAT is about INR 151 crore and EBITDA is INR 264 crore for nine months in pharma. After Q4, obviously there will be a regular interaction for pharma also. Okay. Okay. Thank you very much, sir. Thank you. Next question is from the line of Ritesh from Morgan Stanley. Please go ahead. Sir, just one quick clarification. Did you say that your FY 2023 to 2025 growth, 25% CAGR is more FY 2025 driven rather than FY 2024 driven? I got confused when you answered to a. Yes. FY 2024, you know, even some slowdown might go on in maybe Q1 or Q2. FY 2024 is I think will be more of a turbulent year in that sense. That clarity we'll be able to give in Q4. Yeah. Understood. Oh, thank you. That's it from my side. Thank you. Next question is from the line of Vishnu Kumar from Spark Capital. Please go ahead. Good evening, and thanks for your time, sir. When we see the nine-month sales number versus 2022 and 2023, roughly about INR 860 crores is the increase, which is completely driven by exports, which means domestic seems to be flat for nine months. Considering that commodity prices have generally gone up, and also some new plants have kicked in for you, it appears that your volume growth overall seems to be negative. Is this only? I mean, is the number quite large in textiles, so we are not seeing any growth in domestic or other segments are also not doing great? Any thoughts or color on this, sir? No, textile is generally domestic. textile has a very less export component. overall, I don't think there'll be a negative. We have not looked at that way actually, by aggregation of export and local. If we just look at the nine-month number, 22-23, it is practically flat. I mean, obviously commodity prices have gone up, so it appears that, at least the volume could have been negative. Yes. That is in general, we always try to reshuffle depending on the market trends. If there are more potential in export market, we'll push it there. It has not been analyzed that, you know, there'll be a decrease. How much would be textile out of our overall domestic sales? Any rough idea if you could give us? Overall, you know, it's more, we are more around, you know, 15%-20% range. Textile market in domestic will be around 20%-25%. Okay, sir. Thank you. Thank you. Next question is on the line of Mehul Vora from Axis Capital. Please go ahead. Just trying to understand behind. Mehul, sorry to interrupt you, but your voice is breaking terribly. May I request to come in a better reception area, please? Hello. Am I audible now? Yes. Just wanted to understand our thought process behind tying up volumes of nitric acid with Deepak Fertilisers. Earlier we were contemplating at 1 crore of CapEx for setting up a concentration plant. In last call we mentioned that this plant has been ordered. Now, you know, given that as we grow our business, nitric acid is our key RM, and even Deepak Fertilisers is now expanding their capacities. How do we see this, I mean, will we be able to suffice our volumes from this agreement? Yeah. Basically, you know, they'll be expanding capacity. Deepak Fertilisers also plans to expand their capacity. Overall, you know, because Deepak Fertilisers is multi-location, multi-plant for both weak nitric acid and Concentrated nitric acid. It kind of derisk us rather than having a one single stream plant for us. That is an advantage, you know, sourcing from Deepak Fertilisers as compared to our own single plant, you know, dependency. Second thing, you know, it frees up the cash flow for, you know, more on value-added specialized chemistries. These are the two main reasons which are driving this. Sure, sir. Secondly, we have highlighted that this quarter performance has been aided by newer capacity additions. Is there any other capacity addition except for first long-term contract and the second and third long-term contract? Other than that, may not be any significant capacity addition in this quarter, no. Sure. This nine-month performance has been aided by second and third long-term contract addition? Yeah. Okay. Thanks, sir. That's all from my side. Thank you. Next question is from the line of Rohit Nagraj from Centrum Broking. Please go ahead. Yeah. In our presentation, we have mentioned that in FY 2022, 5% revenues came in from China. Given that recently the restrictions have been over, have we seen any demand pickup particularly for the exports in China? Yeah, I think, demand from China is now normalized overall, I think. All right. Okay. Thank you. That was the only question. Next question is from man of Suryanarayan Patra from PhillipCapital. Please go ahead. Yeah, thanks for the opportunity again, sir. just I wanted to check about the cost component relating to the energy and rate. say in fact FY 2024 put together this, two component put together was about 8%. For FY 2023, the cost share would be, what should be the percentage, as a percentage to sales, sir? I think that detail may have to be taken out specifically. ers out for that. Yeah, yeah. Okay. Separately. Okay, so that is one. Secondly, some clarifications are just what we are trying to say is that this third contract what we have commissioned, this year, we may not find any meaningful contribution even in thE Q4. Practically, that will be contributing from the Q1. Is that right, sir Yes. Yes. Yes. Yeah. Okay. Even the new projects, so you have said in the... for FY 2024, the chlorotoluene project, the MPP project, and the expansion of the MCB. These are the 3 key kind of commissioning that we should be seeing along with the specialty chemical project. Is that the kind of right understanding, sir? No, no. Multipurpose plant will get commissioned in FY 2025. Okay. chlorotoluene will be FY 25 and FY 26. There'll be multiple blocks for chlorotoluene. Over that 2-year period, we'll have a commissioning of various chlorotoluene blocks. What are the projects that you are indicating for FY 24, sir? Nitrochlorobenzene and some other specialty chemical blocks which are currently under construction. Yeah. Okay, okay. Okay. Just last one question. This year, the first agrochemical dicamba project utilization should be in the range of around 20% or so. That is the kind of sale number we should consider? Yeah, yeah. Okay. Got it. Yes. Thank you, sir. Thanks a lot. Thank you very much. I now hand the conference over to the management for closing comments. Thank you everyone for taking out time to join us on our Q3 FY23 earnings conference call. Hope we have addressed all your questions. If you have any further questions, please feel free to contact our investor relations team and we'll address them. Stay safe, and we look forward to connecting with you, all of you again in the next quarter. Thank you once again. Thank you very much. On behalf of Aarti Industries Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.