Ladies and gentlemen, good day, and welcome to Aarti Industries Limited Q2 FY 2024 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 call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Nishith Solanki from CDR India. Thank you, and over to you, Mr. Solanki. Thank you. Good afternoon, everyone, and thank you for joining us on Aarti Industries Q2 FY 2024 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 overview, progress on the growth plans, and outlook on the business. Post this, we shall open the forum for Q&A, where the management will be addressing queries of the participants. Just to share our standard disclaimer, certain statements that may 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 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 afternoon, and warm welcome to everyone present on the call today. We are here to discuss Aarti Industries Q2 FY 2024 earnings. Firstly, festive greetings to each one of you. I would like to take you through the performance, update on growth initiatives and strategies. We have exhibited strong resilience and delivered robust performance on a sequential basis, which came on the backdrop of continued external pressures, reflected by 16% gain in absolute EBITDA compared to the previous quarter. While the challenge with respect to global inventory, destocking, high interest rates, recessionary trends across various end markets, slowdown in export markets, and geopolitical tension persist, we witnessed some recovery on quarter-on-quarter basis. In light of this situation, I believe our teams have displayed remarkable agility to swiftly navigate to products that are experiencing more favorable demand scenario. This was possible due to our comprehensive understanding of the market conditions, coupled with dedicated efforts for enhancing our market position and driving operational excellence. While I anticipate this headwinds to persist over the next few months, we are witnessing gradual recovery quarter-on-quarter for various products. We maintain optimism about potential demand revival in the end-use segments such as agrochemical, polymer additives, and other discretionary application as we move forward. That said, we have observed some recovery in dyes and few specialty applications, while other end-user segments are yet to recuperate. We expect the worst to be over in FY 2024 and anticipate that it will take a few more quarters for normalized demand across various end segments and product lines. Thus, we expect consequentially better performance in FY 2024 and foresee FY 2025 to be a normalizing year, considering the current pace of recovery. We are continuously engaging with our customer to increase the market share and to widen the market base. Now, let me cover the key performance highlights. Financials are on consolidated basis. Our revenue increased by 2% to INR 1,597 crore in Q2 FY 2024 over previous quarter Q1 FY 2024. EBITDA grew by 16% on quarter-on-quarter basis to INR 233 crore in Q2 FY 2024. The better EBITDA performance was a result of volume expansion with near stabilization of realization for some products. Interest cost was higher on account of revaluation loss of about INR 12 crore with respect to unhedged long-term loans. Profit after tax stood at INR 91 crore in Q2 FY 2024, higher by 30% over previous quarter Q1 FY 2024. This was in line with better operational performance, further aided by lower tax provisions and accrual of deferred tax assets. I will now share the production details for Q2 FY 2024. Production of nitrochlorobenzene stood at 19,014 metric tons, as compared to 20,276 metric tons in Q2 of FY last year, and 17,293 metric tons in Q1 FY 2024. For hydrogenation, this came at 3,136 tons per month, over 2,558 tons per month in the same period last year, and 2,868 tons per month in Q1 FY 2024. For nitrotoluene, the production for Q2 FY 2024 stood at 7,560 metric tons, as against 4,954 metric tons in Q2 of FY 2023, and 9,320 metric tons in Q1 FY24. Moving your attention to updates on key projects. Our revamp of the acid unit has been completed recently. All the other projects, including capacity increase of ethylation and introduction of chlorotoluene value chain, among others, are progressing well and will start commissioning in a phased manner from next year. In addition to this, we are looking at unique opportunity in the sunrise sector. We'll delve more as we achieve some breakthrough. During the six months period, we necessitated a CapEx of about INR 575 crore towards various expansion opportunities shared previously. Our target annual CapEx will be in the range of INR 1,200 to 1,300 crore for FY 2024. Overall, we are committed to deploying INR 2,500 to 3,000 crore for the outlined growth initiative over two-year period as we anticipate rapid growth for the Indian chemical industry in the foreseeable future. This will not only enhance our proficiency and capability in existing as well as newer high-end capacity chemistry, but also expand our addressable market size. In line with current demand scenario, we believe FY 2024 to be a transitional period with moderated performance over last year. However, FY 2025 onward, we will see healthy accretion to earnings in a phased manner as the macro challenges ease out, on-ground demand improves, and also with newer projects beginning to contribute. I'll now conclude by saying that we are fully getting ready to unlock newer opportunities, as India remains a sweet spot for global measures. We continue to believe that this will be a golden decade for India, given its cost competitiveness, huge talent pool, growing domestic market, and favorable manufacturing shift from other Asian or Western countries. Aarti Industries will remain nimble and capitalize these opportunities, backed by its world-class manufacturing expertise and R&D capabilities. With this promise, we will be able to enhance value for all our stakeholders. This concludes my initial remark, and I now request the moderator to open the forum for Q&A session. Thank you. Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask questions may please press star and one on their touch-tone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We'll take the first question from the line of Vivek Rajamani from Morgan Stanley. Please go ahead. Um, hello. Mr. Rajamani. Hi, sir. Yeah, please proceed. Yeah. Sorry. Thank you, sir, for the presentation, and congratulations on the results. Two questions from my end. Firstly, if you could just touch upon the demand trends that you're seeing in October or, you know, this quarter for your end markets. I just wanted to get a sense which sectors are actually seeing the biggest recovery, and which are the sectors which are being the biggest drag? That was the first question. And secondly, sir, I think you mentioned in your opening remarks that you're starting to see some ASP stabilization in some products. So just from either an ASP or a margin perspective, if you can just talk about how it has moved on a Q on Q basis between your regular and your non-regular markets, that would be very helpful. Thank you. Yeah. Overall, you know, demand in discretionary sides, whether it's dyes, pigments, polymers and all, that we are seeing improvements in quarter-on-quarter, even in Q3. But, agrochemicals are still more on a molecule-specific. So, there we are seeing more challenges as far as segment-wise demand recovery is concerned. And what was the second question? Margin stabilization. Margin. We are seeing a margin improvement over last quarter by some. Excuse me, sir. I'm sorry to interrupt. Sir, you're sounding distant. Can you please come closer to the interview? Yeah, yeah. For margin, you know, yes, we are the margins per product. I think we are doing better than what we were doing in last quarter in this discretionary and this segment, which Mr. Rajendra Gogri mentioned. So we are doing better there. Where the demand is coming back, I think we are seeing some margin improvements, whereas some drag in agro and pharma end market, I think we are seeing. So that is the overall mix in terms of margin that we have. Thank you, sir. Just one small clarification. This margin improvement that you're seeing in discretionary segments, is that coming both from your regular markets and your non-regular markets? Be more on. Yeah, I would say on both. Both, yeah. Got it, sir. Thank you very much, and all the very best. Thank you. We'll take the next question from the line of Abhijit Akella from Kotak Securities. Please go ahead. Good afternoon, sir. Thank you so much for taking my questions. Just on the margin point, you know, dwelling there a little bit longer. So, the sequential increase in margins, what exactly would that be attributable to? Is it that, you know, there's been some favorable shift in product mix, or is it, you know, I mean, so it's an expansion in spreads in some of our base products itself or is it inventory gains on benzene, for example? What exactly might it be, and can we expect this to sustain into Q3 and Q4 as well, the same level of margins going forward? Product mix also is a factor, you know, where, you know, the more higher margin product sales is there. And specific product to product, you know, where there's some demand increase stabilization is taking place, you know, there, you know, some sort of a margin increase also we have observed. So as in general, you know, as the demand also starts recovery, we see that, you know, some margin benefit also starting to accrue. And we are seeing, like, you know, our we are seeing the recovery in our traditional market, and so this is not a dumping market that, you know, non-traditional market where we are seeing improvement. We are seeing improvement in the traditional market, which was always a better margin market. So again, the orders have come back so that our overall mix of margin has improved, basically. Okay, so sounds like this is sustainable in 2 FY 2024 as well? Yes. Yes, yes. Okay, okay. And also just sort of curious whether, you know, monomethyl aniline might be a product on which we make better margins than on our overall portfolio, or, you know, is that not the case? This is really basically, as we have been always saying, it is more on EBITDA per kg. As a percentage margin, you know, different product will have a different percentages. Ah, I see. Understand. Individual product anyway, so. Yeah, yeah, sure. Understood. Thank you. Then on the demand side, so, you know, you pointed to gradual recovery in the second half. So I mean, when we look ahead sequentially, 3Q versus 2Q, maybe 4Q as well, you know, how much of an improvement can we expect in the revenue or EBITDA run rate also? Or maybe if I could ask it another way, you know, what sort of EBITDA guidance should we work with for FY 2024 and then maybe FY 2025, please? So second half, you know, we see that, first half total is about INR 433 crore. So second half, upward of INR 500 crore. Overall, you know, annual, we see that, you know, around INR 950 to 1,000 crore, is the current, visibility, for EBITDA for, this year, FY 2024. And, FY 2025, it will be difficult to give guidance now, but I think, our general guidance earlier was, seventeen hundred crore. So we see that in, at least, 5%-15%, the maximum decline over that, number. And, but overall, FY 2025 also, you know, quarter-over-quarter, there will be increase. As the demand also recovers and our new plant of, ethylation and it gets, commissioned. So FY 2025, we'll have a quarter-on-quarter kind of an increase in EBITDA. Okay, great. No, that's really helpful. Thank you. Also just two last things from my side is that, okay? One is, if you could please just help us with the capacity utilization rates on your long-term projects, the, you know, one, the three long-term projects, basically. And number two, on the balance sheet, we see that, you know, the payable days have gone up quite sharply in inventory, offsetting an increase in inventories. So if you could please just highlight the reason for that. Thank you so much. Yeah. Capacity utilization of the long-term contract, in the first contract, you know, we got canceled. You know, that product we are, still we are suffering on the demand side, so not much significant improvement. Second contract, which is, the way it is structured, it is more or less, you know, capacity utilization agnostic. And, third contract, you know, we are just, commissioned. So this year is more of a product, stabilization, so we don't see any significant, EBITDA coming in, from the, third contract in FY 2024. The major thing will come in, FY 2025 for the third contract. On the payable days, we had a couple of imports happening, where the credit period is generally more than the domestic sourcing. So that's where the payable days are higher than the previous quarter numbers. Okay, okay. Is this more of a tactical shift towards imports, or is this more of, you know, like we are going to explore that option? Some of the raw materials, not the major one, and not the benzene and other one, but for a couple of other raw materials, we do have imports coming at a better pricing. As of now, that seems to be the strategy. Okay, understood. Thank you so much, sir. Wish you all the best. Thank you. The next question is from the line of Rohit Nagraj from Centrum Broking. Please go ahead. Yeah, thanks for the opportunity. So the first question is on the first contract. So we were planning to change the structure of the plant so that we can manufacture something else from the dedicated plant. So any more, you know, new things that we have worked on? And is there a possibility that next year we will be able to at least use part of that plant for manufacturing any new products? So any thought process on that? Thank you. Yeah. No, we have not taken any firm decision on that yet, you know, we are still evaluating the possibility of using it for the same product. As I mentioned earlier, also, maybe, you know, a couple of more quarters we'll need for us to know whether we should do partly use it for some other products or something. So that call has not been taken yet. Sure. Second question in terms of our guidance. This year, we are planning to reach about INR 1,000 crore, next year, 1,700, minus something. From 1,000 to 1,700, what could be the increase from the base set of capacity that we are currently having? And what could be the contribution to EBITDA from the newer projects that will get commissioned during next year? Thank you. The ramp-ups, you know, of, like, nitrochlorobenzene has been expanded, so that ramp-up will happen. This, contract 3 also will, come into the picture. Next year, a major project which will go and get commissioned is, ethylation expansion. And, some, other debottlenecking. So that will be the mix, ramp up of, the product, project, which has been commissioned in FY 2023 and, FY 2024. As well as the new project of this, ethylation and, NT, which will be commissioned in FY 2025. Also the expectation on the volume, which has currently not been there, so the recovery of the global volumes will also add on to this. Right. Right. And one just, last clarification on the debt front. So again, by first half, the debt has gone up to INR 3,200 crore. Now, what is the peak debt that we are looking at, and when are we likely to hit that run rate, maybe in FY 2025, 2026? Any thoughts on that? We do have a cash of INR 400+ crore, so the net debt would be around INR 2,700 something. I don't think so the debt numbers will significantly go up from here towards the end of FY 2024. So on a net debt basis, we should be somewhere between INR 2,700-INR 2,800, INR 2,900 worst case scenario. Sure. That answers my questions. Thank you so much, and best of luck, sir. Thank you. The next question is from the line of Ankur Periwal from Axis Capital. Please go ahead. Yeah, hi, sir. Thanks for the opportunity. First question on the, the global demand as well as, you know, supply scenario. If you can, you know, share your thoughts on the overall competitive intensity, the demand slowdown, as well as, you know, intensity, especially from China. Are there any new capacities coming in or shutting down? Your thoughts there, please. As we mentioned, global demand is gradually recovering. We see in the next 2-3 quarters there will be a demand revival. Obviously, because of the Chinese economy also going slowdown, in general, the Chinese competitive intensity has increased in the last few quarters. But as global demand improves, we see that competitive intensity also will reduce. So that's how we see that there'll be both the demand revival as well as some decrease in competitive intensity. Any change in the global supplies capacities there? No, no significant new changes. Okay, great. So secondly, on the pricing bit, there has been pretty, you know, volatility across the pricing for our products. Do you believe more or less that there is stability now or probably, you know, looking at maybe October or the recent trends, that price volatility still remains? So generally, prices, we have a raw material pass through. So, raw material volatility is not impacting much. Generally the little bit margin improvement, as I already mentioned in earlier question, for some of the products we have seen. Sure, sir. Lastly, on the CapEx bit, so around INR 1,200 to 1,300 crore for this year, and I think you had guided for around INR 2,500 crore of CapEx over FY 2024 and 2025. How much of this will be on productive CapEx and expected asset turns there? Yeah, total was 2,500-3,000. You know, that, the new, asset which are coming up in our new zone, there it is more a high value-added product, so there, asset turn will be more towards, you know, around 1.2-1.3, kind. Okay. And, presumably this will be margin negative to our current business? Yes. Okay, great, sir. Thanks for it, and all the best. Thank you. The next question is from the line of Aditya Khetan from SMIFS Institutional Equities. Please go ahead. Yeah, thank you, sir, for the opportunity. So my first question is, sir, when we were listening to all the global and domestic agrochemical and the pigment companies, so most of the companies have given out a very weak guidance onto the demand side, and most of them have also shifted the improvement in demand outlook towards the first half of the next calendar year. So still, sir, we had witnessed improvement in volumes and margins. So just want to know the disconnect between the global commentaries and our improvement in volumes. Yeah, basically, you know, we have a very wide spread products and wide end use market that is, you know, kind of helps us, you know, to put the products, you know, where there are more demand. Overall also, generally, it also becomes product specific. In general, you know, obviously the improvement will come more in FY 2020 this calendar year, FY FY 2025 FY 2024, because the last quarter generally multinationals tend to buy less. So, you know, Q3 FY 2024 the general international buying is less. So calendar year FY 2024, first half, we'll see more demand growth. Okay. And so the volume improvement on quarter-on-quarter basis into the NCB and into the hydrogenation business, so which are the, like, major geographies wherein we have, like, increased our exports? Because, because of what we believe that U.S. and Europe, so these markets so continue to remain weak. And, so which are the markets like, which have shown an uptick, like, in terms of your volume growth? Yeah, no, we have been exporting to various markets, including China and other Asian and European countries also. We are a very well spread geographical basket. Any specific geographies at all, so, so which has witnessed an improvement? That's what, I want to know. Yeah, some of the Asian markets, you know, we have been able to see improvement and some European countries also. Okay. And sir, if you can share the PDA volumes for the quarter, sir? This PDA volumes were 316, 316 tons per month. 316 tons. Okay. Sir, just one last question, sir, into our end user industry. So, sir, home and personal care business, sir, how much would be that contribution? And sir, since for the last few months, we were witnessing that, so because of higher inflation, the volumes were not able to pick up. So how this segment is like changing now? And can this be a segment which can like further lead to improvement in volumes going ahead, or it could be at the same level, which is at currently? Yeah, our exposure to home and personal care is very limited, so I will not have a very detail. But some of the products more we see, some pressure is there in the demand. But overall, as a company as a whole, you know, that's not a very big output. Got it. Thank you, sir. Thank you. We'll take the next question from the line of Huseain Bharuchwala from Carnelian Capital. Please go ahead. Mr. Bharuchwala, I have unmuted your line, kindly proceed. As the current participant is not answering. Hello. Oh, Mr. Bharuchwala, if you can hear me, I would request you to kindly rejoin the queue. Thank you. We'll take the next question from the line of Rohan Gupta from Nuvama. Please go ahead. Hi, sir. Good evening, and thanks for the opportunity. Sir, first question is on our end user industry-wise, growth, which we have seen in a Q-on-Q basis in volume. I understand that global agrochemicals is still challenging. Can you give some sense that which were the end user industries which have given a sharp growth, and how has been the agrochemical industry growth for us? Yeah, agrochemical is continuing to be challenging, but you know, on polymers and additives and dyestuffs side and all, we have seen growth. Sir, any ballpark number end user industry-wise, like, you know, how much agrochemical was the growth, and what kind of volume growth we have seen in polymers and additives? A very ballpark number. That number we'll not have ready. Okay. Sir, we have seen that the crude oil has started going up, and that may have some follow-up impact on benzene prices as well. Have you seen any kind of improvement so far in our margins because of low raw material cost benefit? Or do you expect going forward, we will have some benefit because generally we tend to gain in a rising raw material price scenario? So generally, basically, we have a pass-through, so raw material pricing impact is not there. Locally, it gets immediately passed through and export sometime on a quarterly pass-through. Okay. Sir, third question is on net debt. Chetan sir, you mentioned that maybe we can see net debt peaking at INR 2,700 to INR 2,800 crore. While, given the current weakness, we are still looking at maybe a best case EBITDA of almost INR 1,450 to INR 1,500 crore for FY 2025, while we are continuing with the cumulative CapEx of INR 2,500 to INR 3,000 crore. So that seems that our cash flow may not be sufficient enough to meet this CapEx, including working capital requirement. So any change there? Because earlier the projections were on higher side, but now given the weakness, so we are expecting a lower cash flow generation. So how we see that our peak net debt or net debt level next year with the keeping the CapEx same? No, I believe the question which was there earlier was reference to the debt numbers for this year and not on a peak net debt. So it was more related to by end of FY24, where we see the debt numbers. Since we, as you rightly said, that we do have CapEx of plans, and there are also the volume uptake is going to be gradual over next few quarters. So the debt level will increase. At this point of time, it will be a bit difficult to work on a net debt basis because we still have a lot of areas to look into, such as the raw material prices have started moving up. The impact of that will have to be evaluated and seen. So on a debt numbers basis, I guess the net debt would increase in FY 2025. I believe it should peak out somewhere in FY 2026, and from there it will start tapering off. Putting a number at this point of time would be a bit difficult. Probably we can take it up at some other time, next, in maybe next quarter also. Okay. So just last from my side, and I'll come back in queue. Sir, in terms of our capacity utilization level, so we have already definitely increased and have invested significantly, and our CapEx plans are still going on, while we see that the recovery will be slower... and China, where the competition is still pretty large in terms of commodity side of the business. So do you see that the threat from China is likely to continue in terms of the pricing? Because we have heard that there is a huge capacities have built up in China, at least in a lower end of the product value chain, where 25%-35% of our product basket compete. How do we see, and is there any possibility that we may rejig our CapEx plan over the next two years and slow down a little bit? Basically, the impact of this Chinese competition increase is already there, so we don't see any further change much in that. These projects or whatever we are doing, we have already started, you know, working on that, and we don't have any plan to change on overall whatever we have guided, INR 2,500 to INR 3,000 crore over this two-year period. Okay, so that's it from my side. Thank you so much. Thank you. The next question is from the line of Surya Patra from Phillip Capital India Private Limited. Please go ahead. Yeah. Congratulations for the good set of numbers, sir, in the difficult time. So my first question is on the export and domestic mix. So there is a 10% swing in this quarter from the earlier period. In fact, there is a strong growth in the export that, that is what we are witnessing, while the domestic market is remaining subdued. So how should one read these? One should think that, okay, the domestic market is suppressed by the dumping, Chinese dumping and all that. Whereas, you would have seen some export demand in, let's say, hydrogenation-based products, aniline and all that. So in the export side, that would have supported the export mix. So practically, your sense, how should one really read this? So basically, you know, overall, direct export and indirect export is one component. So we are majorly, you know, being a global player, so we'll have to count both direct export and indirect export. Indirect export, which is counted in local sales. Other thing is, which is purely for local demand. So sometimes this, you know, decrease in local sales is maybe is also because of the downstream pressure, especially in the agrochemical side. Our customers buy the product locally and then make the product and export. So that's our situation in there. Okay, but so that means, is it fair to believe that the, the direct export is seeing a kind of a stronger momentum than in the domestic market? Yes, yes, yes. This mix is likely to sustain in the future, going ahead again, sir, or it may correct? No, overall, we see that, you know, we'll have this kind of good export. Because, in fact, so for a very long period, we always used to have a revenue mix of, means export mix of more than 50%. But, when we witnessed, post-COVID or during COVID, domestic momentum gaining, then the, there was a kind of 10% swing downward for the export that we had witnessed, which is reversing again. So that's why my question is: So is it, is it now fair to think that export will be a dominant piece going ahead? Yeah, currently, but then again, once we have our contract three is there, that is full export. So generally, you know, we don't see on that way- Okay. Okay. Export or local as a more depending on, you know, where our product demand is there. Sometimes, end-use consumption shifts, then, you know, the product gets sold locally a nd the finished goods get exported. But overall, we have been saying, you know, this 40%-50%, 40%-55% range of export, that kind of thing, you know, should continue. Okay. Just a clarification relating to this fact only. So this contract two as well as contract three, both are in the optimal utilization level for the quarter? No, contract three is still on. It's a first year. It's more on stabilization. Okay. So, the recovery means that we will see a kind of gradual ramp up even in the second half versus the first half? Yeah, yeah. Major again, will impact will be in the next year for that. Okay. Sir, second question is on the volume mix. So, what we are witnessing that there is a kind of a strong recovery in the PDA sequentially. And even in the hydrogenation, as well as nitrochlorobenzene, while Nitrotoluene on a temporary peak base of the previous quarter, we have seen some sequential this thing. But otherwise, across port, there is a kind of a more than strong double-digit kind of recovery in the volumes that we are witnessing. So, is this indicate that, despite this demand weakness, what we are generally witnessing in the global market, we are kind of displacing some Chinese competition, and hence this is, this position, and that's why this can sustain even in the second half. Is it the right understanding, or how should we think this volume recovery quarter-on-quarter? So basically, overall, the volume were down and the recovery is taking place. Then ultimately, you'll have to move from company to company, within company, product to product. So the kind of product what we have, we are seeing that, you know, the demand is picking up. And we see that quarter-on-quarter, from Q2 to Q3, Q4. Generally, the demand forecast, what we are getting from customer, is getting more and more normalized. Okay. One question on the margin, sir. See, in fact, we know that your model is a pass-through model, where it is better to look at the absolute EBITDA basis. But given the fact of this crude fluctuating, appreciating because of the geopolitical tension, then normalizing again, during that situation continuing that way, then the recovery what we are witnessing in the in for our products, basically, and the China dumping aspect, which is still continuing. Considering all these factor, and the recovery what you are guiding for the second half, so at least on the margin front, it is fair to believe that you're you have already bottomed out in the first quarter in terms of the margin, which was the lowest ever? Yeah, you know, per KG margins, what were there in first quarter were lower, and margins are, yeah, you can say it is bottomed out. Okay. Just last one clarification then, sir, from my side. See, obviously, we know that, while the base business is likely to see a kind of sequential progression, both in terms of volume as well as margin now, in the way that you have indicated, the additional or the incremental, earning boost to the, performance, is likely to come from the ethylation and the ethylation products and the nitrotoluenes expanded base. So, which is practically, I believe, scheduled from FY 2025. So if you can give some sense of, in FY 2025, when do you really expect these, incremental ethylation one and the nitrotoluenes expansions are likely to contribute? So we are currently targeting commissioning in Q1 or FY towards the end of Q1 of FY 2025 for this ethylation and nitrotoluenes. So progressively, that's what I mentioned earlier also, that FY 2025 also will see a progressive increase in volume and EBITDA. So second half will be better than the first half- Okay. Because of this, volume. Okay. So here, sir, basically, you are saying this will start from the first quarter, but since these are like ready projects for us, and we have been working on this in some time, so do you have a contract means order book basis here about the ethylation and the nitrotoluenes downstream products to give a kind of guidance here, or any order book position that you are already having, or how is it, sir? Yeah, we have a good volume visibility on this expanded capacity. Irrespective of the demand situation, whatever that is prevailing in the market currently? Hopefully, by the time the demand also is expected to get normalized, right? Of course. Calendar year, first half, so. Uh, 24. Sure, sir. Wish you all the way, sir. Thank you. Thank you. Ladies and gentlemen, in order to ensure that the management will be able to address questions from all participants in the conference, please limit your questions to two per participant. Should you have a follow-up question, please rejoin the queue. Thank you. The next question is from the line of Nitin Agarwal from DAM Capital. Please go ahead. Hi, sir. Thanks for taking my question. Sir, on the, you know, there has been over this first half reasonable control, which has been there on the staff cost and other expenses. So on the other expenses, barring, you know, the reduction in power costs, is there any other factor which is contributing? Freight is a major component of the other cost actually. Okay. Okay. Sir, are there more opportunities to optimize costs on staff costs and other expenses for us going forward? Yeah, basically, we'll as we had mentioned earlier also, this operating leverage and everything will kick in, and we'll be more or less stabilizing on our employees level. So some more optimization may happen. Yeah. Okay. Sir, on the volumes, is there a volume growth number that you have in mind for next year, or that the business can overall can deliver? Oh, because it's become difficult, too many products, you know, at, to, to different prices. But overall, in general, the volumes across the board, we will see growth. Okay, thank you. Thank you. The next question is from the line of Sanjesh Jain from ICICI Securities. Please go ahead. Yeah, good afternoon, sir. Thanks for taking my question. First on the volume growth, on the industries where we are seeing recovery, is that they are now hitting a favorable phase? Because I think the destocking phenomena started in polymer and dyes and segment ahead of the agrochemicals. And, the rise in crude price is also driving the restocking because, they fear that the prices may remain high. Is that what we are seeing or do you see there is a strong underlying demand recovery? Because if you look at the, pigment rise in sales or the, textile, that doesn't show the optimism we are sharing on the volume side of it. Yeah, I think once the inventory kind of reaches to an optimal level, it was mainly of an inventory correction, and I think different product that is getting, you know, to a level. Some actually end user demand also is a factor, because overall, you know, through crude inflation and also. But the major demand issues were mainly because of this inventory correction. And I think that is getting now known. There is a level for different products. I think it is reaching a level where they have to operate at that particular level of inventory. No, I appreciate that, but then my, my whole question was, on our confidence of, CY 2025 having a strong volume recovery. If it is a restocking-based volume recovery without underlying completely recovering, are we still very confident of the volume delivery? Yeah, the volume degrowth this year also is also substantially driven by inventory correction. If you see FY 2024, the amount of volume degrowth has taken place. So, some demand increase underlying also, but it will be still mainly, you know, that inventory correction-related degrowth, which will be coming back. Fair enough, sir. My last question is on the margins. Are we sitting on any of the inventory gain because there was a sharp rise in the crude derivative prices? And, has that given any tailwind or that is not really a major factor in the margin expansion? No, no significant inventory gains. Great, sir. That answer solved my question, and best of luck for your coming quarters. 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. So just prying a bit on the margins front. Earlier, sir, we used to sort of give us, give a split of, our five blocks wherein we used to operate, wherein, we used to classify chlorination and nitration, more of commoditized products, and the hydrogenation, ammonolysis and Halex chemistries, more of specialized, wherein the split used to be somewhere close to 80/20, 80 in favor of specialty, of course. Would it be safe to assume that maybe in the first half, we have experienced more of specialty products in the mix, and the inferior margin products are not a part of the current first half sales, which is why we have been able to see, decent margins for, for this quarter? That was not specialty, what we call a value-added. Value-added, yeah. Right. Right. In general, the value-added percentage are increasing, overall. So that value-added percentage increase gives a increase EBITDA margin to sales in general. So that is where the impact comes. Right, sir. So we have seen that impact. Got it. Sir, just another confusion that I had, on the CapEx front, we have mentioned that INR 1,200 to 1,300 crore of CapEx for this financial year, and INR 2,500 to 3,000 crore of CapEx. Would that be on the top of this? Would this be FY 2025 and FY 2026, or the current INR 1,200 to 1,300 crore are part of this INR 2,500 to 3,000 crore CapEx? Yeah, current INR 1,200-1,300 for this year will be part of that. So we have been guiding for the two-year period. So, 2,500-3,000 guidance includes the FY 2024 numbers also. Understood. Got it. Sir, so, I think, previously when we had met during the plant visit, we were expecting, CapEx from, asset restoration, debottlenecking, sustainability and plant infrastructure with some R&D related CapEx. That got capitalized in FY 2024, and currently we are largely working on the NT and, ethylation loop, coupled with, the zone three or site three projects for MPDA and, chlorotoluene, which is what is either a part of the CWIP or it's, some of it is capitalized. Would that be a fair assumption? Yes. Most of the CWIP is all the ethylation and zone three, and some of the regular, also sustainability related CapEx, and other value added products also is part of the CWIP. So I think but by FY 2024, and I think a lot of that will get capitalized. Understood, sir. Thank you, sir. Thanks for the clarification and happy Diwali. Thank you. The next question is from the line of Nitesh Dhoot from Dolat Capital. Please go ahead. Yeah, hi. Thank you so much for this opportunity. So my question is, in with reference to one of your products which goes in for octane boosters. So if you could explain the demand for this, this particular product, and is it part of any, any contract, long or short term, or, or you know, how sustainable is the ongoing demand that we are witnessing there? It's a growing product, and we see that, you know, on the kind of demand what we have seen, we should be able to sustain and maybe grow also. And it is also other end use also the product. Okay, so, sir, next of this product, has there been a significant, you know, growth in the other exported products also, or this has been one of the, drivers, if I may ask? Yeah, there is a growth in other also, and this one also is a substantial part of it, yeah. Sure, sure. Okay. And so just lastly, on the Sunset Review on MPDA, I mean, just trying to understand if, you know, if MPDA's contribution in the overall, you know, revenue is anything significant? Or, you know, whether the non-acceptance of this review by CBDT would impact us in any way. No, the demand has been very slow on that, especially in the local. So this Sunset Review is not going to, you know, have any significant impact. But I think we should be able to continue that anti-dumping duty. All right, sir. And just lastly, maybe, you know, I mean, if you could just explain, you know, on the sequential decline of 17% that we are seeing on the domestic side, you know, which would which end users would have, you know, would have been the key contributors there? The agrochemical is a major contributor. On the domestic side as well? Yes. Okay. Okay, sir. Thank you so much for answering my questions. Thank you. The next question is from the line of Krishna Kumar from Avendus Spark. Please go ahead. Good evening, and thanks for your time, sir. Sir, following on the previous caller's question on the top, one of the key products that we are ex- our export growth has been good. Any key reason why we are gaining market share on this particular product? Is it the competition is slow, or if you could just give us, help us understand reasons why we are, we are growing, good traction on this, this particular product. We are trying to spread our market base and develop newer markets for this products. But this is primarily any particular end market segments of this product that goes into? No, it is a specialty product going into different, end users. Understood. Sir, if I see your export, I mean, domestic and export run rate, our exports are more or less holding around this INR 800 crore run rate mark, whereas our domestic realizations have come from INR 950 crore run rate to INR 750. Now, we understand if, let's say, pricing is actually coming down and exports is the only one that is holding. And if our agrochem is not doing well globally, does. Is it that dyes and other markets we are kind of gaining market share versus other countries? Any specific reason for this export shift, if you could help us understand? No, basically the demand contraction, whether it happens in domestic or export, that what becomes important. Some of this decline in domestic sales is because of the ultimate agrochemical demand in the global market is impacted. So our customer who are buying within India and then exporting the product, those have got impacted. That's what I earlier have also mentioned, that because we have a lot of domestic sales which is indirectly exported, and that is where the impact is. So the export sale is also not for any agrochem markets, it's just for the other sectors where we are gaining? No, no, that also we have. You know, there are so many different products, so sometimes what happened that agrochemical intermediate going in export, their impact, if it is less than intermediate, which is going in domestic market, impact is more. So that's how, you know, the things move. Understood. It become very product specific, ultimately. Got it. And sir, in one of your previous comments, you mentioned that the INR 1,700 crore run, the guidance that you had given, that can be down by 5%-15%. Is that what we heard, right? I mean, if you are seeing that guidance could be 5%-15%. Yes, yes. The new. This is the current estimate, and then we will see how we are able to get fine-tuning as we go on. Understood. So basically the INR 1,700 crore can read as INR 1,450 to INR 1,600 crore then? Yes. If we take that 5%-15%. Understood. Thank you, sir. Thanks a lot. Thank you. We'll take the next question from the line of Ranvir Singh from Nuvama. Please go ahead. Yeah, thanks for taking my question. So to clarify. One, the fixed contract revenue from units 2 and 3, so what was the total contribution of those two units? That this contract three, as I mentioned, you know, it is more on stabilizing. Contract two, the way it is structured, that, you know, the EBITDA is not directly connected to the sales. Yeah, just I wanted to understand. I understand this is fixed EBITDA, but what portion of it is currently contributing to our total, either in revenue or EBITDA? That I wanted to understand. That number we will not have readily available right now. Okay. Okay, fine. And, and secondly, on, when we say that the FY 20 25, we'll see the normalization of business. So exactly what is in our mind, what, what is the normal level? What kind of growth normally we consider in normal? So that is, I understand there should be a gradual improvement there, but, is there any number in our mind that we are expecting in FY 2025? No, whatever is the sudden decline which has happened in this year, you know, very, very sharp decline in demand for various products which we have seen in this year because of the destocking. So those kind of should become a normal. So those are the inventory can decrease in sales because of the inventory correction, I think will get normalized, and we'll move to a consumption and sales kind of a matching. Okay. Fine. And the last one, that you mentioned the production number of nitrochlorobenzene and hydrogenation and nitrotoluene. Actually, I missed this number, so if you could help me again to, you know. nitrochlorobenzene is 19,014 tons, and hydrogenation is 3,136 tons per month. Okay. And just for basic understanding of these three category, which one is a better margin product? Just to understand that how the mix is actually impacting our margin. So whether it's a nitrochlorobenzene that gives us better margin than hydrogenation or nitrotoluene is a better margin bucket. nitrochlorobenzene are, you know, on base products. So there in a margin per kg per rupee will be lower. And hydrogenation and those are more value-added products. So that as a percentage to sales, those margins are higher. Okay. Okay, thanks a lot, Abhishek. And that's it from my side. All the best. Thank you. We'll take the next question from the line of Nirav Jimudia from Anvil Research. Please go ahead. Yeah. So thanks for the opportunity. So, sir, on the Nitrotoluene side, our volumes have fallen on a Q-on-Q basis. So is it because of our ONT OT chain not doing well, and that's why we have restricted the production and sales of NT, or it's because of the TNT and the other products which come along with the production of NT and those products not doing well, that's why we have restricted the production of NT in this quarter? It's more related to agrochemical side, demand. So we have taken some shutdowns also to, so the production was impacted for nitrotoluene. Yeah. Sir, was there any restrictions on the sale of metolachlor in Europe or predominantly in France, and because of which probably the demand restriction or demand fallen would have happened on the OT chain? Is this a right understanding on the fall in the volumes for NT? No, I'm not aware of, you know, any of those specific geography, any restriction. Okay. Okay. And, sir, on the nitric acid side, the prices have fallen. So last year the prices were very high, now the prices have fallen. So, does the raw material benefit of the fall of those nitric acid prices are reflected fully in Q2, or further improvement in our margins could come up with the fall in the prices which have happened in the first half of FY 2024? We basically, we have a contractual structure, so it is more or less, you know, ammonia linked. Ammonia prices, okay. Okay, okay. So just a last clarification on the number which you mentioned that next year we could do INR 1,700 crore ±5%-15%. So, hypothetically assume that margin per kg improvement in the margins with the product mix also changing next year, what sort of volume growth we would require to do so that that sort of number could be achieved? So across the board, you know, various product line, there will be volume growth, as we have mentioned earlier also, that nitro- Some rough understanding of the blended volumes which need to be clocked so that we could achieve those numbers of EBITDA. No, that we are not taking out those kind of a blended number. Become very difficult because the total product range is very wide and the pricing of the products are, you know, INR 1,000 plus to INR 5 sulfuric acid, so that volume become difficult. It will be more margin improvement as well as volume improvement. So it is a mix of both that we expect, that will improve our numbers. Got it, sir. Got it. Thank you so much, and all the best. Thank you. The next question is from the line of Siddharth Gadekar from Equirus. Go ahead. Yeah. Hi, there. So just wanted to understand the split between in the exports between our regular markets and the non-regular markets. It's more or less substantially on regular market. Non-regular will be more about 10%. So because we had highlighted that in the non-regular markets, our margins would be 10 percentage points lower. But despite some higher exports, we are not our margins have improved substantially. So is there any particular reason behind that? No, the non-regular market margins are generally lower. So that impact is there. That is what we see, that once we move towards more regular market, that benefit is going to accrue in future. Okay. Got it. Thank you. Thank you. Ladies and gentlemen, that was the last question. I would now like to hand the conference over to the management for closing comments. Over to you. Thank you everyone for taking out the time to join us on our Q2 FY 2024 earnings conference call. Hope we have addressed all your queries. If you have any further questions, please feel free to contact our investor relations team and we will address them. We look forward to connecting with all of you again in the next quarter, and thank you once again. Thank you, members of the management. Ladies and gentlemen, on behalf of Aarti Industries Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.