Ladies and gentlemen, good day, and welcome to the Aarti Industries Limited Q1 FY25 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 call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Nishit Solanki from CDR India. Thank you, and over to you, sir. Thank you. Good afternoon, everyone, and thank you for joining us on Aarti Industries Q1 FY25 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. Mr. Suyog Kotecha, Executive Director and Chief Executive Officer. Mr. Chetan Gandhi, Chief Financial Officer. We will commence the call with opening thoughts from Mr. Rajendra Gogri, followed with highlights of the quarter being shared by Mr. Kotecha. Post which, 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 conference call may be forward-looking in nature, and a disclaimer to this effect has been included in the results presentation, which has been shared with you earlier. I would now like to invite Mr. Gogri to share his perspectives. Thank you, and over to you, sir. Thank you. Good afternoon, everyone, and welcome to our earnings call. I hope you all would have gone through the quarterly update presentation, which was uploaded on Exchange earlier today. As you would have noted, we continue to deliver yet another quarter of sequential growth. This performance came despite rising RMs as well as supply chain pressures. Additionally, continued global challenges from overcapacity in China affected demand-supply dynamics. Nonetheless, we remain focused on execution and anticipate a volume-led recovery in this year. Recognizing this evolving market landscape, we have undertaken a strategic transformation. In addition to strengthening our senior leadership team, we have forged strategic partnerships to offer customized solutions from concept to commissioning sales. Our goal is to deliver sustainable growth while maximizing our potential. Today, we are a future-ready organization committed to exceptional customer value. Now, let me share a few significant developments from the past quarter. The first one being landmark achievement, wherein we took a promising lead by entering a 50/50 joint venture with UPL. This JV is a first of its kind and pathbreaking development that builds on the synergies and competencies of two leading Indian chemical companies to support the manufacturing of critical chemical products in India. We have very long-standing relationships with UPL, and this JV enables us to combine our individual strengths to create globally competitive businesses. We believe that the unique collaboration between Indian chemical players will contribute to the growth of the Indian chemical ecosystem. The JV, that is Augene Chemical Private Limited, shall engage in supply of downstream derivatives of amines that have a diverse application in agrochemicals and paints. Both the companies are expected to invest about INR 150 crore each to this JV over the next two years. The commercial supplies are expected to begin by Q1 FY 2027, targeting peak annual revenue potential of about INR 400-500 crores within the next 2-3 years. Further, as our endeavor to bring in quality leadership with high engaging professionals leading the key functions of AIL, I'm delighted to have Mr. Suyog Kotecha joining us as an Executive Director and Chief Executive Officer of Aarti Industries Limited. Suyog joined our team on June seventeenth, bringing with him extensive expertise in strategy, innovation, and business transformation. His profound understanding of the chemical industry through his past experiences at Reliance Industries and McKinsey, et cetera, and global connections, make him the ideal leader to guide AIL towards a successful future. In addition to overseeing Aarti's current operation, he will be instrumental in sparking new growth opportunities. I warmly welcome him and would request him to share more about the business and the quarterly update to you. Over to you, Suyog. Thank you, Rajendra. Warm welcome to all of you who have joined this call. I feel honored to be part of the AIL family and to be associated with you all. Let me start with the performance for the quarter and the review, and then we'll follow that with the evolving macro situation. As you would have noted, on most performance parameters, we were able to deliver QoQ sequential growth. Our revenues for the quarter were around INR 2,012 crore, 3% higher on QoQ basis, 28% higher on YoY basis. Volume growth on QoQ basis was about 6%, while on YoY basis it was over 30%. We also witnessed our EBITDA to grow by about 10% on QoQ basis to INR 311 crore, registering over 55% growth in YoY terms. Higher volumes led operating leverage with favorable product mix was a major contributor to EBITDA growth. Depreciation, interest cost remains higher on the back of capitalization of projects, and it's in line with the prevailing interest rates. Our PAT overall was reported at INR 137 crore, higher by almost 4%, QoQ basis. Coming to macros, I think the global macro environment still remains challenging with lingering Middle East tensions, Red Sea disruptions, they continue to pose challenges. We have been witnessing positive demand momentum in key end-use applications like pharma, polymer, additives, dyes, and pigments. Even agrochemicals, there are small green shoots of demand recovery. However, pressure on margins remain, and it's mostly driven by Chinese competition, which continue to dump products in global markets due to their domestic overcapacity situation.... Further, energy as an application has become relatively large application for us, which is bringing additional volatility to the business performance, as it is linked to external factors like crude, gasoline cracks, naphtha cracks, which have their own element of volatility. At the same time, let me also state that our long-term, most of our long-term contracts continue to deliver both volumes and margins within the expected range. Coming to key production data, NCB, nitrochlorobenzene production volumes stood at 19,503 metric tons versus 17,293 in Q1 FY 2024 and 17,646 in Q4 FY 2024. Nitrot oluene saw production of 7,637 metric tons against 9,320 in Q1 FY 2024 and 6,675 metric tons in Q4 FY 2024. And hydrogenation output stood at 3,428 tons per month in the current period, compared to 2,868 in Q1 FY 2024 and 3,399 in Q4 FY 2024. But most of the products, I think we saw a sequential volume growth on Q1, Q2 basis. Coming to project updates, I think all major CapEx projects remain on track. Our acid unit expansion was commissioned in the last quarter. We are on track to commission our expanded Nitrot oluene installation capacity towards the end of current quarter. We will also commission our new pilot plant at Zone 4 within this quarter, which will support in accelerating commercialization of new products developed within our R&D and technology. The larger CapEx program at Zone 4, the new greenfield site, is progressing as per plan. We are expecting to phase-wide commission that from next financial year. From overall capital expenditure point of view, we had projected INR 1,500 crores-INR 1,800 crores in the financial year, and in Q1 we have already spent INR 270 crores. On time completion of all of these projects will fortify our strength within the global chemical value chain, and will also support higher volume requirements from our customers going forward. Before I conclude and we move into the Q&A, let me say that we remain focused on delivering sustainable growth over mid to long term. Our goal, as stated earlier, is to deliver 20%-25% CAGR growth in EBITDA, which, if you take a five-year view, then it's almost 2.5-3x growth in EBITDA. And to deliver this broadly, there are three themes we are focusing on. First one is on time at cost execution of all of our expansion projects. We will be adding a sort of completely new series of products based on our chlorotoluene value chain and also from multipurpose plant at Zone 4. This will also broaden our product portfolio by going more downstream in existing value chains. Second theme is around leveraging our cutting-edge R&D and technology development capabilities to make investments and build portfolios in new sunrise sectors, which have significant growth potential over the coming decades, likes of circularity, renewables, battery industries, Li-ion technology. And the third, and, maybe one of the most important themes around retaining and nurturing the existing culture of founders' mentality and value orientation of care, integrity and excellence. I think this has played a very critical role in AI delivering significant growth and also shareholder value over the last two decades. And as a relatively young organization, with an average age of 32 years, we not only plan to retain but nurture this and operate with the same ethos which will deliver growth over mid to long term. I think that concludes our initial remarks. We'll now request the moderator to open the forum for question and answer session. Sure. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask questions may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from Vivek Rajamani from Morgan Stanley. Please go ahead. Hi, sir, thank you so much for the presentation and all the very best to Mr. Kotecha. Two questions from my side. Just with respect to the demand trends that you've seen so far and the conversations that you're having with your customers, do you feel that, you know, you can deliver the higher end of your EBITDA guidance of INR 17 billion that you've given for fiscal 2025? And what factors do you think going forward would be critical for that? That's the first question. So, look, I think, when it comes to performance and expectations for this year, as I've been saying, even in some of the morning calls, we have to segregate demand and margin. I think on demand front, we are pretty confident of delivering growth in the range of 20%-30%. And this is coming with a combination of commissioning of some of the new projects, as well as better capacity realization in some of the existing product chains. So that story remains very robust. I think, but on margins, I think the story is different. I think the pressure from China is actually not sort of going away. And we have, we have seen that across broader product portfolio, not in a specific chain, but across broader, product portfolio, the pressure on margin is still very intense. And that coupled with, you know, the volatility that is coming from energy application, which is now forming different part of our portfolio. I think makes it difficult to, commit on sort of the, EBITDA guidance for the year. I think we would like to watch out, especially the margin trends over the course of next two, three months, before we, before we commit on EBITDA guidance for the full financial year. Sure, sir, that's clear. And just as an extension to that, I think a few quarters back when we were in the midst of the extremely difficult demand conditions, I think you mentioned in the calls that, you know, you've had to kind of rely on maybe your not like Tier 2, Tier 3 customers. Basically, the customers where your pricing power is obviously not as great, and they were not your regular customers. I just wondering, given that you've started to see demand green shoots come through from across the board, I just wanted to get a sense if you've been able to, you know, go back to your more normal customer profile, or do you think you're still having to rely on such a Tier 2, Tier 3 customers to kind of push volumes? Thank you. Yeah. So look, I think the story is different, value chain by value chain. Yes, broadly speaking, as we see demand recovery on many of the end-user markets, we prioritize our sort of Tier 1 customers in those chains. There are some chains where tactically we may still have to go back to, you know, Tier 2, Tier 3 customers, sometimes including that in China. And that decision we continue to take on month-on-month basis to optimize our inventory and production pattern. So overall improvement, and I think the share of Tier 1 customer volumes increasingly we will see going up, but I would say the problem has still not completely gone away. Sure, sir. And just one last clarification. Would it be possible to give any rough sense of how much these Tier 2, Tier 3 customers would be making up of your portfolio? I know it's very dynamic, but any rough sense be possible? Frankly, difficult to comment, right? I think from product by product, the percentage will change even, you know, month on month, we see a different volatility. Maybe we can go back and do a detailed analysis, but at offhand, it's difficult to give that number. Sure, sir. Very clear. Thank you and all the very best. Thank you. Thank you. The next question is from Abhijit Akella, from Kotak Securities. Please go ahead. Yeah. Good afternoon. Thank you so much for taking my questions, and welcome to you, Mr. Kotecha. So from my side, you know, just to understand this commentary about the pricing headwinds and the overcapacity from China, are there specific categories of ours where, you know, these pressures are more apparent, or, you know, is it pretty much across the board, across the NCB, nitro toluenes? No, just sort of hoping to understand a little bit better. So I think the pressure on pricing from Chinese capacity is across the board. It is much more aggravated in the aniline chain from application standpoint. But but the pressure is there even in other segments. I think the intensity of the pressure there is aniline being most sort of impacted. But given their overcapacity across a broad range of sectors, I think it remains throughout the portfolio. And I think it has nothing to do with specifically with our peer. In broader chemical industry, it's struggling with this issue, and we continue to figure out how to address this challenge. But I hope that gives you a sense in terms of the intensity of pricing pressure. Yes, sure. No, that's helpful. And then on the, sort of EBITDA outlook for the subsequent periods, while I understand, you know, it's hard to commit on the full year at this point. At this point, given that half of the second quarter is behind us, more or less, should we expect more or less a similar kind of number, or, you know, are we seeing, I mean, should we just expect some modest sequential improvement? Is that how we should think about it for 2Q? We would have loved to give you better clarity, but the situation is actually quite volatile and dynamic. I think the two aspects which, we would again reemphasize that, we need to start appreciating is, one, overall volume on a YoY basis, we will continue to see decent amount of growth, right? Pricing pressure from, China, sort of will continue to remain. I think the biggest unknown factor for which we need to get better handle on, is, is energy application, given it's also a new application for us. And there I said one is the linkages to the external factors, which is the gasoline, naphtha, cracks, and the good pricing, which is, you know, historically, you know, hasn't impacted us that significantly, but going forward will impact us. And there's also a bit of a seasonality expected, right? Gasoline is ultimately a seasonal business across different geographies. So we are just watching out, and we are learning more about this particular application. And with experience, we will be in a better position to give you guidance. No, that's fair enough. Just to finally, on the, you know, energy segment itself, with gasoline, naphtha, cracks, do they impact sort of the demand for the products we are selling, which are, you know, primarily fuel additives, but... Or is it more on the spread side, you know? Where, where exactly is sort of the, volatility creeping in? So there are three, four different applications of these fuel additives, right? There is sort of one particular application in sort of cargo blending, which is sort of different grades of gasoline and sort of finishing up the different gasoline grades. There's a particular application around upgrading the overall different cuts that you get from refineries, including that of naphtha and gasoline. And the third one is on the refinery optimization itself. And this, all three applications get impacted differently depending on how the upstream markets are moving. So, yes, even naphtha gasoline cracks does impact the demand for this particular product, because depending on the incentive available to upgrade certain qualities of naphtha to you know, to make them ready for blending into gasoline, will be determined by the naphtha gasoline crack at that particular point in time. It does impact the demand for this particular product. Got it, sir. Maybe just one last thing, if you'll allow me, before I get back in the queue. Just in the context of the situation in Bangladesh, from your sort of, you know, customer conversations, is there—what's the situation like in the dye industry, which is another important end-use application for us? So we don't have direct exposure to Bangladesh or, any significant exposure to Bangladesh. So right now, we are not seeing any risk, from the particular events happening in Bangladesh. And I think, the exposure is less than 1% of, you know, total business portfolio, so no major risk seen so far. But on the dye industry overall, you know, is the environment more uncertain at this point because of this or not really? At this point in time, we haven't seen any indication from our customers, right? We'll continue to watch out for it, and we are in conversation with our customers. I think the events have also happened very recently, but so far, we haven't got any feedback from customers. But we continue to monitor it and see if there will be impact going forward. Got it. Thank you so much, and wish you all the very best. Thank you. Thank you. The next question is from Nitesh Dhoot from Dolat Capital. Please go ahead. Hi, team. Good evening, and thank you for the opportunity. Welcome on board, Mr. Kotecha, and wish you all the best. Thank you. So my first question is, you know, if you could just elaborate on the sequential decline in other expenses to around INR 281 crore from INR 319 crore, despite the increase in volumes that we've seen, especially on the export side. In the previous quarters, Q4, that is, I mean, the reason for higher OpEx given out was the Red Sea related freight cost increase. And, freight cost increase, you know, freight costs have, you know, only increased further in Q1. So what explains the decline in OpEx? Yeah. So, hi, Nitesh, it's Chetan here. So some of the annual costs which were there in Q4, related to employee benefits and other stuff, would not be there in Q1. So that is some component. And in some pockets, the, the freight, freight has been lower. So if you would have looked at it, we've got a bit of, increased share of business with, Middle East Asia, where the incidence of freight on an average is a bit lower as compared to other parts of the world. So that is where you see some changes which is happening. Okay. All right. And secondly, sir, I mean, what explains the fluctuation on the gross margin from quarter to quarter? You know, in the last three quarters, that is, you know, since we started executing the long-term contracts. You know, so 41 going to 36, coming back to 40 and again 38. You know, prior to that, if I look at the entire FY 2023 and first half of FY 2024, the gross margins were largely stable in the 41, 42% range. So I think there it's a combination of multiple factors, right? I mean, if you look at it from a key raw material point of view, benzene, aniline being two of the largest raw materials for us, there has been some volatility. We have seen prices going up for benzene and aniline on a QoQ basis, as well as on YoY basis. Even in terms of our final product mix and geography mix, as Chetan mentioned, there has been substantial churn. Our geographical footprint has changed from an export point of view, and our product mix has also changed quite significantly. So, I think, you know, overall portfolio has become a bit complex. And, given some of the part of the portfolio is linked to volatility in the external market, I think, you will see variation. But over the period, as we understand this dynamic much better, you know, there will be clarity whether these are seasonal or they are QoQ variation. It's a combination of raw material, product mix, and our geographical footprint. All right. Thank you. Thank you so much, sir, and wish you all the best. Thank you. Thanks. The next question is from the line of Archit Joshi from B&K Securities. Please go ahead. Hi, good evening, and thank you for the opportunity. So my first question is on our model of the pass-through mechanism that we used to enjoy. I think we used to maintain our EBITDA per kg, our EBITDA per ton. And currently, given the comments that you have made earlier, that we see a good volume growth visibility, the suppression in margin is something which is kind of holding us back to give a premature full year guidance on EBITDA. So has that construct changed at all, that we are unable to maintain that absolute EBITDA on the products we are selling? That would be my first one. I think, there on benzene downstream, we have decent amount of portfolio where we have a pass-through pricing mechanism, and we are able to retain that. On aniline downstream product portfolio, I think some part of it is linked to raw material, some part of it is, it is not linked to directly raw material, where we take market exposure. And that's where I think some of the volatility comes in. ... Sure, understood. So secondly, the contracts that we had signed earlier, I think the one that we had with SABIC, and then the other third one, the INR 90-INR 100 crore annual sales exposure towards. Has there been any change on those accounts? Are we realizing the full potential of that? If you can comment something on that, please. So I think, both these contracts continue to do very well. In fact, the contract with SABIC, has, ramped up quite significantly. I think, indication of demand from their side, start of this calendar year versus now, there has been significant improvement. I think the plant is running at full capacity now. From an EBITDA point of view, it, does not make much difference given the nature of the contract we have with them, but it just shows us a confidence in terms of actual pickup in demand as far as polymer end application is concerned. The other contract that you talked about also, I think, whatever was expected from a revenue potential and a volume potential point of view, the current trajectories we are, we are on track in terms of revenue and volume expectation as part of that contract. Sure, sure. Sir, the next few projects that we are commissioning, the Nitro Toluene one, the Ethylation loop, followed by an entire range of new products and chlorotoluene and the Multipurpose Plant. Within all this, do we continue to expect, or rather, the margins that we had envisaged earlier, be it percentage or per kg? Will that also be subject to the volatility that we are experiencing now, with respect to pressure on margins? So, Ethylation and Nitro Toluene capacity will get commissioned as per sort of original timeline indicated, which is towards the end of this quarter, and the volumes will ramp up gradually over the course of quarter three, quarter four, and then subsequently in the next financial year. We are expecting somewhere in the range of sort of targeting up to 50% capacity utilization within this financial year, and then taking it all the way up to 60%-80% capacity utilization within the next financial year. So from volume point of view, they will continue to deliver as per original plan. From a margin point of view, yes. If you go by today's pricing, I think there is some compression if I try and see what's the China price trend happening. So profitability might be slightly skewed towards a bit of a downside compared to original business plan. But again, you know, this is something that we will evaluate on a month-on-month basis and see what all we can do. Again, all of these products are targeted towards our Tier 1 customers. And in that context, we are hoping for recovery in the margin in a relatively near-term timeframe. On Chlorotoluene value chains, I would just say that we are sort of a bit further from actually realizing the potential of that CapEx. Today, we are in a sort of construction phase. That capacity is expected to get commissioned in a phase-wide manner only from a next financial year standpoint. So from a timing point of view, we remain on track. I think from volumes and margins point of view, it is still some time away, to have a proper commentary on the same. Sure, sir. A very small last one, if I can squeeze in. While you are speaking of unable to maintain that per kg margin on the aniline derivative side, is that because if I just connect the dots to what you commented earlier, we have done some sort of a B2B downtrading there, going from tier one customers to tier two, tier three. So is that exposure hurting the margins as of now? And as we ramp up to go back to the same kind of customers who were catering to earlier, the lumpiness that we are seeing in margins is expected to wither off. Would that be a fair assumption? Partly, but I would also say, look, it's a new business we are building, right? I think, this application, particularly in the energy segment, was not part of our portfolio, you know, in a significant way, let's say, two years back. So it's a new business we are building, the new customers we are discovering. It's a sector where drivers of our profitability and drivers of our clients' profitability are different, right? We are linked to aniline, but our customers are linked to, quote-unquote, upstream refinery, oil and gas market. So we are also figuring out how to right structure these contracts and sort of these transactions. And, we're gonna go through that learning journey and hopefully, in a span of next couple of quarters, we land at an arrangement which is a win-win, for both sides. But I would say it's more of a learning and a development journey for the new product that we are trying to scale up. Sure, sir. That's it from my side. Thank you, and all the best. Thank you. Thank you. The next question is from Aditya Khetan, from SMIFS Institutional Equities. Please go ahead. Yeah, thank you, sir, for the opportunity. Sir, my first question is, in this quarter, we had witnessed a good volume growth in MTD and MTD Nitro Toluene business. So this improvement in volume is largely because of the better availability of nitric acid, or there is a structural improvement in demand? I think it's a combination of both, but I would rather give credit to better structural demand in the end market, because that's what we are seeing in our customer conversation. As I said, we see genuine volume uptake across end markets. Even Agchem, which was stressed for quite some time, we have started to see some green shoots. The volumes have started moving. So, you know, while both elements are right, we would give more credit to actual genuine demand growth in the end-use market. ... Okay. And sir, the non-discretionary segments, so which were not performing like agrochemicals and pharma, as you mentioned that you are starting to witness an uptick. So into the recovery cycle, so we are at the bottom, and how much improvement can we expect from here on? In terms of margins also, can you highlight how much improvement could be witnessed? So look, on margin front, we still have a long way to go when it comes to non-discretionary segments. As I mentioned earlier, you know, the pressure on pricing and hence on margins is significantly high, especially on the agrochemical side from the Chinese competition. We are nowhere close to our cycle average margins. If you ask us at this point in time, we don't see within 1 or 2 quarters the margins going back to normal. We see this is a sort of long road ahead. We continue to watch out for it and build our strategies to optimize cost and figure out how within the existing product portfolio we can optimize margins better. But there is still significant scope for margin recovery. Whether it's visible immediately in the next quarter or next 2 quarters, we don't think so. I think we think it's gonna be a long haul. Okay, sir, onto the aniline downstream, you mentioned there has been some moderation in spreads. So as a percentage of EBITDA, how much this segment can, so this segment will contribute? At this point in time, frankly, a bit difficult to comment. We have multiple products downstream of aniline, right? It's not one product. It's a complicated product portfolio with also lot of linkages as we go more and more downstream. So at this stage, difficult for me to give an exact percentage of EBITDA coming from aniline, downstream derivatives. Okay. Sir, onto the CapEx part, sir, now we are close to completion of the nitro toluene and the ethylation facilities. Sir, is it possible to share the breakup of the INR 1,500 crore CapEx which you will be incurring in FY25? No, I think at a higher level, I can give you at a higher level. I don't have exact project-by-project CapEx number at this stage. But out of INR 1,500-1,800, whatever we have spent in Q1 has practically gone into blocks which are getting commissioned, likes of ethylation, NT, and then a pilot plant in Zone 4. I think the remaining part of, you know, INR 1,200-odd crores, so slightly more than that will bulkily go into Zone 4. That's the significant chunk of our CapEx now, which is going into chloralkali value chain. You know, exact project-by-project CapEx, you know, we at this point in time not in a position to share, but broad split is that. Bulk of it, bulk of the CapEx in the remaining financial year will be spent on Zone 4 chloralkali project. Okay. Okay. Sir, just one last question. Sir, because of this moderation in spreads which we are witnessing in aniline, is this one of the reason why we have dropped the EBITDA guidance? Like last quarter we are, so we were maintaining this, so the guidance of INR 14.5 billion-INR 17 billion EBITDA. Any particular reason, sir, we have dropped this guidance? I think it's volatility that we are observing in the business. And I think, as I said, it's a new business application for us, so we are learning. And because of the volatility, we just think we need to get a better handle and better understanding of this market before committing on our guidance. Okay. Thank you. Thank you. Thank you. The next question is from Nitin Dharmavat from Aurum Capital. Please go ahead. Yeah, thank you for the opportunity. Am I audible? Yeah. Okay, sir, regarding this UPL joint venture, so is there any overlap with our existing business, with the joint venture revenue that we'll be having? Yeah, the products what will be manufactured from that joint venture, you know, there is no overlap. It is not... Actually, our current aniline will be consumed in that joint venture. I understand. What is the debt level we'll be having now, with the new CapEx that we are planning? The debt level will be roughly around INR 3,300 at this point of time. Okay, and it is likely to increase, right? Yeah, it is, because we have substantial CapEx coming up in this year also. It will be. It will increase in this year. What is the peak debt level that we are targeting currently? I think that this year, I expect it to be anywhere between INR 4,500 crore-INR 3,800 crore. It depends on how the raw material prices and the working capital play around that. I understand. And what is the trend in the raw material prices? That also I had a question. So, if you look at last three, four quarters, at least the two key raw materials, benzene and aniline, I'm sure you guys also track this information. But on benzene, we have seen sort of sequential increase in prices going, you know, up to Q1 FY25 level. But in this quarter, in the current quarter, we have started to see some softening in the benzene prices. I think aniline has remained quite volatile. If you compare on a QoQ basis, then there is an increase in the prices. But again, we see some softening on the raw material pricing within this quarter. I understand. Thank you so much, and wish you the best. Thank you. Thank you. The next question is from Ankur Periwal, from Axis Capital. Please go ahead. Yeah, hi, sir. Thanks for the opportunity, and congratulations, Mr. Kotecha, for your new role and responsibility. First question on, you know, the margin outlook here. You did allude it towards the volatility expected, given the macro that we are in. Just trying to break this up into two parts. One is the end use mix, wherein energy is a bigger contributor now. Going ahead, do you expect energy to be as high a contributor or probably this, probably, you know, given maybe dye segments, agro, other segments pick up, this segment's share will come down a bit? So I think, let me answer that question in two parts. In the near term, I think energy will remain, significant part of our application mix, but even within that, you will see volatility, right? As I said, given the nature of the business, and also some aspect of seasonality involved in that market, I think you will see this number going up and down, for the next few quarters. But it will remain, you know, one of the largest, if not the largest end application for us, at least for next few quarters. Over the longer term, we expect as the remaining part of the product portfolio sort of comes back, especially from a, margin standpoint, and as we are seeing demand recovery, broader demand recovery across end segments, including the non-discretionary segments of agrochemicals and pharma. This share, on an average, sort of might get bit moderated. The energy segment share might get bit moderated, but that is sort of 1-2 year down the line kind of story. Sure. So the volatility probably can continue for, let's say, 1-2 years, let's say 2025 and 2026, and beyond that, maybe things will pick up. Sure, sure. So, just moving to the next one. So on the CapEx guidance that we had, this INR 15 billion-18 billion CapEx is for FY 2025 only, or is it an annual run rate that we should presume now? No, I think it's only for this FY25. In fact, I think, from an annual CapEx point of view, we will peak in this financial year. I think our CapEx for next financial year is expected to be significantly lower, compared to current level. Sure, that's helpful. And, lastly, on the volumetric growth that you mentioned, around 20%-25% for this quarter, this number I presume is year-on-year. Am I right on that? Yes. On a quarter-on-quarter, it's a 6% volume growth. On a year-on-year basis, it's in high twenties, as we mentioned. Sure. So, from a demand uptick perspective, you know, if I look at absolute revenue, domestic is still weak. Or is it just because of the realization that the reported numbers look weak, and maybe this 25% growth is across both domestic and exports? I think, again, it's a combination of a product mix. I think energy application, which has now become significant part, where larger share comes from export, and that's why you will see compared to last year average, where I think our overall business, overall share of export was I think roughly 52 odd%, has gone up to 60% now in the Q1 FY25. So, and as I said, you know, this will keep varying, depending on our sort of, application mix and product mix. Sure, great. And just lastly, given that, you know, the China-led capacity expansion and lower realizations are here to stay probably for a while, what is your thought on the overall ROC profile for the CapEx that we are putting in? Any change in thought there, versus, you know, the numbers that you were thinking of earlier, or broadly, we are in that same range, and what will that be? So look, I think, it's our endeavor to improve our ROC performance, and we remain very focused on that. All of our CapEx decisions, it becomes one of the important factors as we consider, you know, putting together sort of new projects for expansion point of view. I think large chunk of CapEx expansion that has happened over the last 3, 4 years had also gone into, you know, operation of existing assets, improving reliability, and not necessarily purely growth-oriented CapEx. Versus the CapEx that you see in towards the end of last year, current year, and next year going forward, so predominantly growth-led CapEx programs, right? So with all of that, we expect improvement in our ROC performance. And as I said, we will peak in terms of CapEx in the current financial year. Next year onwards, our CapEx numbers will go down significantly, and that's where we should also start seeing a decent uptick on our ROC numbers. Great, sir. Thanks a lot for the clarification and all the best. Thank you. Thank you. Thank you. The next question is from Surya Patra of PhillipCapital. Please go ahead. Yeah, thanks for this opportunity. So, first question is about the production numbers for NCB, I guess, and if you can also share the PDA number. Surya, could you just repeat your question because your voice is not coming out clearly? Okay, just a second. Yeah. Is it fine, sir? Yeah. Yeah. So, I was saying, can you repeat the NCB number and also share the PDA production number for the quarter? So NCB number for the Q1 FY25 was 19,503 tons, against last year's same quarter number of 17,293 tons. And the PDA number is roughly around 206 tons per month for the current quarter, against you know last year same quarter this number was 135 tons per month. My first question about the trend and the performance is that, excluding MMA, what is the kind of volume growth that you have seen for this quarter, sir? So if you're talking about Q-Q volume growth, then actually the volume growth is quite consistent even in non-MMA portfolio. It still remains in the range of 5%-6%. So volume growth has actually been broader across the portfolio, not specifically linked to one particular product. ... Okay, even on a YoY basis, the base business excluding the MMA, would have seen the similar 30% kind of growth. Is that fair to- We talked about QoQ numbers. I think on a YoY basis, there will be significant difference because, you know, on YoY basis, our energy application has scaled up quite significantly. There, MMA would take significant chunk of the YoY growth. Okay. So my second point was just, in fact, we have seen obviously the volume recovery that is clearly visible from the MCV and all those hydrogenation numbers, PDA numbers, and all the nitro volume over the last couple of quarters or three quarters. Do you really see, or when do you see the scope of price recovery happening generally for our portfolio? Or would you really see significant challenge given the kind of aggression of the Chinese? Because long back, if I remember, we, because of our cost leadership and also in our product basket, or because of the end-to-end integration model that we have been having, we've still been a kind of a exporter of a product to the China, despite the kind of pricing situation there and the competition and all that. But, now what is the difference, and what is the change that we are kind of finding? And hence, any scope of price recovery that you think that can come up, given the kind of backward integration and forward integration that you're talking about? It's, frankly, difficult to comment, right? As I said, you know, our expectation was we should start seeing the recovery in margins and prices, in this financial year. So far, it has not been visible, and it looks difficult for the next few quarters. But I also want to answer the broader question you are raising, right? I think the backward integration and the, so the, the through and through value chain integration that we have is actually, genuinely giving us a competitive advantage. And that is one of the reasons, despite so much pressure from China, we are still able to deliver volume growth, and we are still able to maintain, sort of our current level of EBITDA margins, right? That shows that we are able to compete. At the same time, no doubt that, we get pulled down on prices and margins, because of Chinese competition. So the margins that we enjoyed, let's say two, three years back, or even before that, today, we are not able to enjoy those margins because of this competitive intensity in the price. And, you know, whether it takes, you know, two quarters, three quarters or five, six quarters, difficult to judge and difficult to comment at this point in time. Okay. We are closely watching Chinese capacity utilization on many of these products, and see sort of how it is ramping up, ramping down versus, you know, so, sort of what is the outlook on that front. That's the only indication that we continue to monitor to see, potentially a leading indication of, in terms of where the pricing recovery will happen. Yes. My next point was about the business mix. So, what is the current and non-benzene, non-toluene value chain in terms of sales mix? And, what is that likely to be, let's say, over the next two-year period or three-year period? No, I don't- Because- We don't have these numbers offhand right now, Sudhir. I'm afraid, we may not be able to give you, those exact sort of numbers. Sure. My basic point here I was trying to understand is that we are now obviously talking about the new products development, the collaborative development with partners, new downstream value chains. Zone 4 are now getting commissioned, and potentially this should be contributing incrementally beyond the existing product chain. So hence I was trying to understand that, let's say the base... excluding the base business or the beyond the base business, what is the new business segment that is likely to contribute, and how significant it could be in the business mix over the next three-year period? Yeah. So I think maybe in the next conference call, we'll have better information regarding the same. But broadly speaking, look, we remain benzene, aniline, and toluene downstream value chain-focused companies. And there we have multiple chemistries downstream of those three basic building materials. But given the different nature of the chemistries we operated, even within these three value chains, there's a lot of interplay of products, right? You know, so sometimes it becomes difficult to segregate impact of one particular value chain over the other. And as we are getting into some of these partnerships that we are doing with global majors or some specific capacity expansions that we are doing for a few specialty chemicals, I think the share of these value chains will decrease, as we have indicated. But still, today, these three value chains, so maybe not that much toluene today, but today is dominated by benzene and aniline downstream. Once our Zone 4 commissions, I think toluene downstream will also become significant part of the business. Okay. So just last one small point, in fact, do you find any challenge to your, or the challenge to the ramp-up of this new project, ethylation one and, nitro toluene one, given the market situation or demand situation? Because, my understanding was that, for ethylation project, there is already been, kind of a contract, available, for, offtake and all. So hence I'm asking that, okay, do you find any challenge to the, the ramp-up or scale-up of these two units, which is going to be commissioning soon? ...So it is the same story as the, as the broader business. I think from a volume point of view, we will still meet our target. I think our target of reaching, you know, 40%-50% capacity utilization within this financial year itself, I think we feel confident that we'll be able to achieve that. We may not achieve our targeted margin, in terms of INR per kg that we are targeting for this particular product, and it will take some time to reach that level. But our focus remains on, full utilization of that capacity as soon as possible. We do have contract with, you know, two large customers, and then we continue to engage the other customers for this product to ensure that, you know, we start getting good market share from at least all the major tier one customers. Sure, sir. Thank you. Wish you all the best for the early future. Thank you. Thank you. The next question is from Siddharth Gadekar from Equirus. Please go ahead. Hi, sir. I just wanted clarity on your previous comments, where you mentioned that the energy, that part of the revenue is very dynamic in nature. Our understanding was that the long-term contract that we signed in December was mainly pertaining to the energy contract, so how should we look at that volumes and the ramp-up in that contract? So look, there's just one contract in that end application. It doesn't mean that we are relying only on one customer for that particular application. I think we are developing a broader footprint of customers for application in the energy segment, and that's where you see variability. So one customer, as per contract, might be going a bit smoothly and maintaining their commitment in terms of volumes. But given we are trying to develop a wider basket of customers, that's where we see volatility. Okay. So, so broadly, the contracts that we announced in December and January, they should be on track to deliver the announcements that we had made, right? Like 1,500 loads for the December contract. Yes. Okay. Thanks, sir. Thank you. Next question is from Rohit Nagaraj, from Centrum Broking. Please go ahead. Yeah, thanks for the opportunity, and, congrats on your new role, Kotecha, sir. The first question is, how much of our product basket has a direct competition from China? Well, I would say, anywhere in the range of 70%-80% is where we would expect that all of these products will also have competition from China. Just an allied question, given that there have been new capacities which have come up in China, so structurally, the EBITDA per kg, which was there pre-COVID and now, has come down, and, I mean, what is your understanding of the same, given that the demand supply side is now, more tilted to supply? So probably the EBITDA per kg or EBITDA per ton, will slightly moderate, than the previous period. Your thoughts on this? Thank you. So look, I think again, the story will change product by product, but there are many products in which our EBITDA in terms of rupees per kg has come down compared to, let's say, pre-COVID levels. But I think our endeavor has always been to find new applications, new products, and new set of customers, where we have certain differentiating advantage over China, and that's a continuous exercise, right? Something where we had this advantage two years back, you know, if the capacity gets built in China, at some point in time, they get closer to commoditization. So that situation also evolves every two years. So we have to be continuously on the front foot in terms of building differentiated offerings for our customers, where we enjoy that premium, at least for certain point in time, before it gets copied. On a broader level, yes, EBITDA at a rupees per kg level for many of the products is not equivalent to where it was, you know, 3, 4 years back. And that's also reflected in our EBITDA margin percentages. Right. So second question, again, on the similar line. In terms of the newer products and technologies, so ethylation, chlorotoluene, whether we have seen new capacities coming up in China, and will again, that have some bearing, at least, in the initial period, till we get to a, you know, a reasonable operating level? No, not at this stage. We haven't seen any new capacity coming in China in the recent times. But what we need to understand is ultimately it's a value chain, right? I think we are a supplier to an agrochemical formulator, and they have to also understand the dynamic of their products in different global markets, where there is a substitutability in terms of what final formulations they are making. So, I wish it was that simple, but, you know, even if there is no ethylation capacity that has come up in China, there are few products which are ultimately going into downstream aromatic formulation. And if there's a competition from different substitutes for those products, it does impact our ethylation capacity. I'm not saying that's the case, but I'm just sort of making a point that, you know, a point-to-point comparison in terms of ethylation capacity is fair, and we don't see any recent capacity on that front. But we also have to look at the broader value chain angle to understand where there might be competitive intensity and accordingly pressure on pricing and margins. Thanks, sir. This is helpful. All the best. Thank you. Thank you. Thank you. The next question is from Rohan Gupta, from Nuvama. Please go ahead. Yeah. Hi, sir, good evening, and thanks for the opportunity. Sir, first question is that, your guidance, you mentioned that even in, apart from the other, discretionary industries and all, you have also started seeing pick-up in agrochemicals, which was seeing, weakness so far. So with this, pick-up, do you see that, our volume growth, can ramp up? Higher than what we were looking earlier, because we are sitting with idle capacity even at the ramp-up in plant three. You see that there is an opportunity to ramp up that plant as well. Just wanted your clarification and your guidance on that. Look, our current target to deliver anywhere between 20%-30% volume growth on a year-on-year basis for the full financial year, I think is aspirational and is challenging. But I think we are taking that as a target. I think beyond that, frankly, difficult to sort of judge at this point in time. But 20%-30% is what is seeming sort of possible and achievable at this point in time. So, that plant one, like the Dicamba, project, there any chances of that plant seeing any ramp up, because it was still going through the weakness because the global agrochemical weakness going on. So how we plan to ramp up that plant, and in the current environment, can we see the faster ramp-up of that? So we are evaluating the multiple options to ramp up utilization of that particular asset. I think that asset has different capabilities and, you know, even in that value chain can be broken down into two or three intermediates. We have also started ramping up our sales for one or two intermediate, which ensures utilization of part of the assets. And hence, you know, from a total plant point of view, there are parts of the plant which are now utilized to a very good extent. There are still some parts of the plant which are not utilized to the full extent, but we continue to look out for options which will allow us to utilize that asset fully. So since we are getting into chlorotoluene also, I think that there is some other place also in Gujarat-based, like, they are also getting into chlorotoluene space, which earlier this space was not touched by many Indian players. So do we see that the competitive intensity in that segment, chlorotoluene also, is increasing and, and more players can enter into that? Can that have an impact on our growth plan? Because, after 25, a lot of our growth was expected to come from the chlorotoluene project. Yeah. Look, there is competition, but I think the way we have structured our growth project is fundamentally slightly differently. I think we are building an integrated chain. We are not stopping at, you know, the first two steps in the chain. We have a portfolio of 40 different products as part of that investment. And we will go significantly downstream into specialty derivatives, right? We will not stop at sort of first two levels of derivatives. In that context, we feel confident about our investment and ability to generate returns as well as sort of volumes and margins out of that investment. So competitive intensity, yes, for sure, but I think we have a unique strategy which will you know allow us to fight in the market. So just last week from my side, that we also have a significant exposure to textiles, dyes, paints, pigments, which has seen some impact from the Bangladesh going on right now, the issues. So do you see that, though maybe early, but do you see that there is some possibility of some business in the textile can be impacted in near term? No, as I said, I think we continue to monitor that trend. So far, we haven't seen any red flags. And based on our conversations with customers so far also, there are no major risks highlighted. As I said, our direct exposure to Bangladesh is relatively limited. In fact, you know, it's close to negligible. And even indirect exposure-wise, so far we haven't seen anything. Thanks, sir. That's it from my side. Thank you, sir. Thank you. Thank you. The next question is from Abhijit Akella from Kotak Securities. Please go ahead. Yeah, thank you so much for taking my follow-ups. Just two here, one on the Nitro Toluene and ethylation project. If you could please just help us with the final, you know, CapEx numbers, the capacity, and the revenue potential from the project. So the capacity which we're targeting on Nitro Toluene, currently the capacity is around 30,000 tons, and we're looking to ramp it up to around 45,000 tons. And for ethylations, we have a capacity of around 8,000-10,000 tons, and it is expected to go up to around, go by around 3x, maybe around 35,000 tons, roughly around that magnitude. Okay. So, 50% expansion in Nitro Toluenes and about 3x in Ethylation. In ethylation capacity. Got it. And what would the CapEx on this have been, combined? It would be in the magnitude of around INR 400 crore-INR 500 crore. Okay. And full utilization, you think would take, like, two, three years, or could it be- Yeah, as I said, this year the target is to ramp them up to 50% capacity utilization, and next year we will take it up to 70%-80%. Got it. Which is good utilization for this kind of asset. Sure, sure. Understand. Thank you. Thank you so much. And just the other one was on the energy, you know, derivatives, the products business over there. Just wondering from a really long-term perspective, if we think about, say, the next decade or so, you know, in the context of this global move towards electrification of vehicles, you know, vehicle fleets across the globe, sort of how do you see the long-term demand outlook for, you know, the fuel additives business in that context? I think, we are actually very optimistic, on that front. I think I understand, you're, you're hinting towards sort of overall trend towards EV versus sort of ICE engine. But, I think we think from an absolute volume point of view, still ICE engine with capacity, remains in the market. This fuel additive is actually much more sustainable compared to other options available today in the market, right? There is a general trend to replace metal-based fuel additives with more cleaner, more sustainable fuel additives, and this product fits into that bucket. So, we remain pretty confident and optimistic about the demand growth potential for this particular product. Okay, got it. Thank you so much, and all the best. Thank you. Thank you very much. That was the last question. I would now like to hand the conference back to the management team for closing comments. Thank you, everyone, for taking out time to join us on our Q1 FY25 earnings conference call. As we embark on our fortieth year in specialty chemicals, Aarti Industries is stronger than ever, with renewed vigor on excellence, innovation, passion, and determination. As a global partner of choice, we will continue to serve and expand our robust client base while ensuring sustained value creation for our shareholders by optimizing our assets and venturing into newer business opportunities. 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 you again in the next quarter. Thank you once again. Thank you very much. On behalf of Aarti Industries Limited, that concludes the conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.