Ladies and gentlemen, good day, and welcome to the Q1 FY 2023 e arnings conference call of Apcotex Industries Limited. 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 followed by zero on your touch-tone phone. Please note that this conference is being recorded. At this time, I would now like to hand the conference over to Ms. Chaiti Gujarati of Valorem Advisors. Thank you, and over to you, ma'am. Good afternoon, everybody, and a warm welcome to you all. My name is Chaiti Gujarati from Valorem Advisors. We represent the investor relations for Apcotex Industries Limited. On behalf of the company and Valorem Advisors, I would like to thank you all for participating in the company's earnings conference call for the first quarter of the financial year ending 2023. Before we begin, I would like to mention a short cautionary statement. Some of the statements made in today's conference call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ from those anticipated. Such statements are based on the management's belief as well as assumptions made by and the information currently available to the management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decision. The purpose of today's conference call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. I would now like to introduce you to the management of Apcotex Industries Limited participating in today's call. We have with us Mr. Abhiraj Choksey, Managing Director, Mr. Anand Kumashi, Company Secretary, and Mr. Sachin Karwa, Chief Financial Officer. I now request Mr. Sachin Karwa to give his opening statements. Thank you, and over to you, sir. Thank you, Chaiti. Good afternoon, everyone, and welcome to the earnings conference call for the fourth quarter of financial year 2023. I hope you had an opportunity to review the financial statements and earnings presentation, which has been circulated and uploaded on the website and stock exchanges. To brief you on the financial performance for the first quarter of financial year 2023, the revenue from operations grew 66% on year-on-year basis to around INR 307 crore. EBITDA grew by 66% on year-on-year basis to around INR 39 crore, with EBITDA margin reported at 15.86%. The net profit grew 53% on year-on-year basis to around INR 33 crore, with tax margin at 10.96%. The growth in the first quarter was driven by strong volumes across all industries, geographies, product groups, and also increase in the realization. On the CapEx side, the work on both the new expansion projects is running on schedule and is expected to be completed in full through your financial year 2023. Lastly, I'm happy to inform you that the company's Taloja plant has been awarded the award and Valia plant received CII Excellence Award during the quarter. With this, I would like to open the call for question and answer session. Thank you. Ladies and gentlemen, we will now begin with the question and answer session. Anyone wishing to ask a question may please press star and one on your 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 a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Ankit Kanodia from Smart Sync Services. Please go ahead. Thank you for taking my question and, congratulations for good set of numbers. My first question would be, so, when we are looking at quarterly results of most of the companies, they are seeing a lot of variation in margins when you compare it from Q4 of last year. Why we have almost similar margin? How much of that is due to product mix or cost control measures? If you can elaborate a little on that would be great. Yeah, thanks. Thanks, Ankit. Can you hear me? Yeah, yeah. You go ahead. Okay, good. This is Abhiraj. Obviously, I don't compare to other companies. When you're saying other companies, obviously there's a huge wide range not only in the chemical space but of course overall as well. I can't really comment on other companies. Our company, as I've told you before, and we've mentioned before that, look, we are trying to stay in this range of, you know, 15% ±. Like, we could have quarterly quarters where it's a little lower due to, you know, for various reasons. By and large, we have been able to pass along our cost increases, by and large, and therefore you see the EBITDA margins, you know, staying at reasonably healthy levels. Basically, the main reason for asking this question was because we have already seen, so crude is a big input for us, right? Crude has been very volatile in the last six months. That was my main reason for asking this question because, as you have rightly said that if you can pass it on, then it's fine. Yeah. Like, just to correct you, crude is not our main input. Downstream petrochemicals derived from crude are our main inputs. Yeah, yeah. Crude, I mean, crude drives very, very little. It follows crude exactly, you know. In the current context, for example, you know, from last few weeks, we are actually seeing petrochemical prices come down quite quickly. Whereas crude has been, you know, around the same levels, I would say 10% here or there. Yeah, I mean, it's our petrochemical prices is what, you know, we follow. Right. In our last call you mentioned to one of the participants that due to inflationary pressure you may have to look into some CapEx plans. Do you have anything extra to say on that? Or the CapEx plan are as per our- No. The CapEx that was already announced, the two CapEx projects that we announced, one in our Taloja plant, one in our Valia plant, both for latex manufacturing. Those are already underway and almost ready to be commissioned in the next quarter, as or by the end of this quarter and next quarter. Those are on schedule. This was for future CapEx plans, which yes, we have still not decided on the so you know final decision on that. However, we are in the design phase for NBR phase two expansion, which we are gonna start or we have already started. Okay, great. See one of the biggest risks for us was dumping. What we faced in the year 2019. Is it fair to say that if something like that happens today, we are in a much better position compared to 2019 or we face the same kind of risk even today? See, look, that's for our the dumping, anti-dumping that was there, or the anti-dumping case that was filed and the dumping that happened in 1920 was for NBR, which is about 30%-35% of our business. Obviously we're in a better position as a company than we were, let's say, 2-3 years ago. We are stronger as a company. We have more products coming up. But obviously that risk is there. Today there is no anti-dumping duty on those products, but we feel quite confident that, you know, we can compete anyway. We felt it was fair to have an anti-dumping duty levied given what has happened every now and then. We have learned to compete and we're gonna continue to compete. Having said that, yes, margins can be affected from time to time. We'll see. The matter is also a little bit subjective because we have appealed and it's going on, so I don't want to get into a lot of details about that. Right. No, you know, CapEx plan for NBR as of now. There is a plan, but we have not started. I would say we are in the design phase, so we're going to invest some money only for designing, but we're not going to. Well, we haven't decided on actually starting the project yet. Although we have received all the environmental clearance, by the way. That is another one piece of news that we may not have covered earlier in the opening statement, but we have also received the environmental clearance from MOEF for that project in this last quarter. Great. One last question, regarding ApcoBuild. How has been the performance, in terms of growth, percentage, this quarter? No, really good. Fantastic. We continue to grow quite well in high double digits last quarter as well. Of course, in that market, the margins have been under pressure because it's a consumer product, you know, we're not able to raise prices as quickly. With raw material prices having increased in the last six months, the lag effect is a little bit more. Now, we have taken some corrections in the last couple of months, last month or two. Overall, you know, we're focusing on growth. We are adding new geographies and it's going quite well. We're quite happy with the progress. The same four states or we are adding more states there? No, same state, but within the states we've added more territories. Okay. Thank you so much. I'll come back in the call. Thank you. Thank you. Thank you. The next question is from the line of Sandeep Abhange from Anand Rathi. Please go ahead. Yes. Can you hear me? Yes. Go ahead, Sandeep. Yes. Hi, Abhiraj. I had few questions. My first question is majorly towards the demand side. As you mentioned, in your presentation as well that you have seen 32% volume growth during this quarter. Just wanted to understand whether this kind of volume growth is sustainable or not. Apart from that, what are the industry-wide trends like paper, glass, and textile? Like, can you give a heads up on growth in these industries? Like how has been the demand trend in these industries? As well as, you know, some growth numbers on your EBITDA pipeline which you cautiously track. Is there a strong double-digit growth there as well? Okay. I'll take your questions one by one. Yeah. As far as growth of 32%, look, we did two, three things. One is all the debottlenecking projects that we took up, which were commissioned or which were started last year between, let's say, July and September. Obviously, we are running at full capacity for the last couple of quarters. Between Q4 and Q1, we are at, you know, pretty much full capacity and full volume. Now, whether that growth continues, for sure not in the next quarter. Or not in this Q2 because we are at full capacity and we don't have more capacity in this quarter. More capacity will be added in Q3, which will slowly, obviously it will take us time to ramp up, you know, six months, nine months to ramp up slowly in both our plants, which we will continue to do. Of course, the uncertainty levels now as you all know, as everyone knows, going forward the next six to nine months with a lot of issues, of course, the war as well as America, you know, recession fears and what's happening in China and the slowdown and lockdown. Obviously globally there is a lot more pessimism. We're not sure if this kind of growth will continue, but we're hoping that we'll, you know, we'll maximize the growth that we can. That's overall our growth. As far as industry-wide is concerned, look, every industry goes through ups and downs, and I think for example currently the glove manufacturing industry is going through a really tough time because post-COVID I mean, during COVID, the first two years, 2020, 2021, a lot of gloves were manufactured and a lot of inventory was created. Now obviously that's reversing and at this stage, you know, gloves as well as latex margins and supply demand is, you know, a lot more on the favored to the buy side. It's buyer's market right now. That, those kinds of ups and downs and therefore I think Apcotex is well-positioned because we are in, you know, 7 or 8 different industries that we cater to. That kind of up and down will happen. Your last question was, I believe, on EBITDA per tonne. Now we don't give the EBITDA per tonne number, but again between Q1 this year and last year we have grown at a healthy double digits upwards of 25%. One follow-up on the gloves. Like, in the gloves you have also products in the construction gloves. Are you not seeing any good demand over there? Look, I think industrial gloves. I think that's what you mean. Yeah. is a much smaller portion of the overall glove market. It's less than 10%, right? It won't have a major impact either way. One last question I had was, you know, trends in the prices of styrene, butadiene, and acrylonitrile. Are you facing any, you know, supply constraints for importing these raw materials? Is there any influences related to that? Not really. Not at this stage. I mean it's okay. We do have sometimes often on some supply constraints, especially with shipping and all delays for imported petrochemicals. But by and large, I mean it's been okay. Okay. That's all. I will come back in the day. Thank you. Thank you, Sandeep. Thank you. The next question is from the line of Aditya Khetan from SMIFS Limited. Please go ahead. Yeah, thank you for the opportunity, sir. My first question was on the volume part. What was the quarter-on-quarter growth in volumes and realization for the quarter? The volume growth was about 32%. The rest 32% was on year-over-year basis. On quarter-over-quarter basis what was the growth in volume? As I told you, we are running at 100% capacity utilization, so it was fairly flat. Q4 and Q1. We don't have any more capacity. Yeah. 10% of the revenue growth, so that is contributed by the realization? Absolutely. Okay. Okay. Thank you. Sir, secondly on. Okay. Go ahead, Aditya. Sir, secondly on to the Nitrile Latex CapEx side. This CapEx of INR 1.8 billion-INR 1.9 billion, how much have you incurred it to till date and how much is left to do? 1.8, 1.9 is between both factories. Valia is for nitrile gloves and Taloja is a flexi mix manufacturing facility. Sachin, would you have approximate numbers out of this INR 180 -INR 190 crore, how much would have been invested or spent so far and, how much is pending approximately? Approximately, we have spent around INR 100 crore. Okay. Around INR 90 crores will be spent in the rest of the quarter, months coming. Yeah, next 3-4 months. Yeah. That's the cash outflow. Yeah. INR 100 crore has been spent. Sir, when I look at your balance sheet for the last two years, including the CWIP, we had done CapEx of roughly around INR 80 crore - INR 90 crores. This also includes the NBR capacity expansion of 5,000 tons. That we bought only. No, no. That's done. Yeah, that's done. This INR 180, INR 180 crores is only the two new projects. Okay. The expansion, sir, so when you had started doing this expansion? We started it last year in 2021. Okay. On to the number side, like I was looking on the balance sheet, so that number was not quite visible. Okay, no issues. I'll check again. Sir Maybe you can send an email. Maybe there's some confusion, so, in your mind, but maybe you can send an email to our CFO and the finance team. They will revert with the clarification. Sure. Sir, one more question on to the pricing part. When we compare the Nitrile Latex pricing, so that could be at a premium as compared to our, so to our basket of the synthetic latex or the pricing would be same as it? You know, pricing and margin. Are you asking about margins or pricing? Pricing. Pricing. That is typically a little bit higher. Nitrile Latex is a little bit higher than the other latex products. Obviously the rubber products being 100% solid, they are, you know, maybe more than double of latex products per kg. Onto the gloves part, there are a lot of, like, tough side which is going on. Have you witnessed that the pricing has cooled off from the peak line? Absolutely. I mean, last year was the absolute peak in terms of pricing. Pricing and margins have considerably cooled off. As I mentioned, you know, obviously, yes, in a way, we are coming into the market in a not so favorable pricing environment and not so favorable economic environment for this product. You know, look, when we are investing in something, we look at the long run. We still believe in the long run, the medical gloves industry is going to grow at double-digit pace. Nitrile Latex is gonna be the raw material that will be required for this industry. This industry is going to be Asia. We feel this is, you know, for the long-term strategic growth of the company, it's a product and we're looking forward to coming to the market. Okay. The guidance of INR 500 for revenue, that would not bring down the- No, not really. I mean, look, as I said, pricing has come down somewhat, but it will be around INR 500 crores ±5-10, you know. Yeah. Okay. Sure thing. Thank you. Okay. Thank you. Thank you. The next question is from the line of Rucheeta Kadge from IIFL. Please go ahead. Hello, sir. My name is Rucheeta. Actually my question was on the side of the capacity that you're putting for this Nitrile Latex for gloves. There is an article that I read a few days back, which has mentioned that the industry is promoting the use of natural rubber for gloves in place of synthetic rubber. How much do you think this will impact our business and the capacity that we're putting? On the contrary, it's exactly the opposite. I'm not sure what article you have read, but the gloves were initially invented with natural rubber gloves. Yes. or natural latex gloves. Over time, due to supply constraints, pricing constraints, as well as certain allergy that natural rubber latex was causing, the over the last 15, 20 years, there has been a shift to synthetic latex, which is Nitrile Latex. In fact now, you know, a majority of the gloves are made from synthetic latex. Of course, there are other types of latexes as well, not only Nitrile Latex. Mm-hmm. A majority is made from synthetic latexes, and a majority of that synthetic latex is Nitrile Latex. It's a market that we have entered. I think that article is inaccurate. Okay, because I just read it like two, three days back, and I think I even sent it to your CFO because, you know, in that article they had clearly mentioned because synthetic rubber is, you know, it's not very environmentally friendly, and in order to move towards that, they were saying that we should be using natural rubber. No, that's also a misconception. Okay. It is not that synthetic rubber is less environmentally friendly than natural rubber latex. Natural rubber latex is also not extremely environmentally friendly. Everyone is working on how to make these gloves biodegradable, what kind of materials used and so on. It's a longer-term project in there. Again, a misconception. I think I know the article you're talking about, and I think, you know what I mean. Well, everyone's free to write what they want. I think it's a little inaccurate. This Nitrile Latex capacity that we are putting, so are we making it only for domestic market or, you know, it is for overseas? Domestic market is very small for this. It is largely for export market. Okay. I would say 90% would be for the export. 90%. Under the current context. Thank you. What is the market size for this Nitrile Latex? You know, what we are coming up with will not be even 3%-4% of the total market size. You can just extrapolate that. Maybe 2%-3%. Probably, you know, 50 times what we are coming up with, 50-60 times. Okay. Thank you so much. Thank you. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in this conference, we request you to limit your questions to two per participant only. The next question is from the line of Dhaval from PhillipCapital. Please go ahead. Mr. Dhaval, your line is on the talk mode. Please go ahead. Good afternoon, sir. Thanks for the opportunity. What was the export contribution in Q1 and the growth on a YOY basis? Export contribution in terms of revenue I think was 18%, 18%-19%. The growth, Sachin, do you have these numbers of- Yeah. When I talk about 2027. Yeah, 20%. 27% is the export book in value. Yeah. 27% growth on a YOY. Yes, in value terms. Okay. Do you feel this Nitrile Latex incremental capacity, we can register any volumes in Q3 or it will come from Q4? No, we will be able to register some volumes in Q3. As I said, it will be a slow ramp up. Q3 will again, you know, even though we have some approvals, you know, whenever there's a new plant in our industry, any new plant requires, I would not say approval from scratch from all customers, but customers would want. Because the way we are manufacturing the material is going to be different from the way we manufacture. It's going to be a better process and more stringent quality norms and such. I think it will take, as I've mentioned before, 6 to 12 months to ramp up slowly. Yeah, I mean, for all practical purposes, I think, you know, Q4 where we would see some numbers jump. Okay. Lastly, how much pricing has came down in the Nitrile Latex from the peak that you are talking about? Quite a bit. I think about 15%-20%. I don't have the exact numbers, but more than 15%-20%. What is the current pricing, sir? You can look it up. It's all published. We're increasing it frankly month-on-month, so, it's all published. You can find it anywhere. Now the current prices are sustainable going ahead, do you feel, sir? I mean, I think all industry reports say this is really the rock bottom. Yeah, it should be sustainable and hopefully should improve over the next 6-12 months. Is it better than the pre-COVID level, sir? No, it's in fact worse than the pre-COVID level. Okay. Yeah. Okay. Thank you so much, sir. Okay, thank you. Thank you. The next question is from the line of Karan Bhatelia from Asian Markets Securities. Please go ahead. Hi, sir, thank you for the opportunity. Sir, can you help me out with the revenue mix, between rubber and latex? I think it remains about the same. It's about, you know, 55% or so latex and 45% rubber. Right. Sir, now it's m ore than seco nd quarters there that we are running at peak utilization in the latex business. Any capacity expansion plans? No, no. In all business, even rubber, yeah, rubber and latex, we're running at full capacity. While we are evaluating CapEx on NBR and on SBR latex. Anything on the legacy business of latex? Yeah, yeah. The one that is in Taloja that we have invested in, out of the INR 190 crores, about INR 45 crores is in that Taloja facility, which is a multi-purpose latex plant. We can manufacture Nitrile Latex and, or other latexes. In the current environment, in the current context, we would sort of allocate that capacity to our sort of legacy emulsions that we make for paper, construction, carpet, textiles and a few specialty applications. Okay. Taloja facility as of now is multipurpose and we will use it for, you know, whatever makes sense at the time. Right. We've done strong volume growth. Can you attribute back to a couple of industries or you think all the user industries contributed equally? Yeah, pretty much across the board, I would say we have grown quite well, yeah. Okay. Yeah. Thank you for. Yeah. Thank you. Thank you. The next question is from the line of Anmol Grover from Albatross Capital. Please go ahead. Hello, Anmol Grover. Yes, go ahead. Yeah. Sir, I just wanted to understand, your margin has been holding up pretty well. How are you managing your raw material volatility, if you could shed some light on that? You know, this is nothing new. I mean, raw materials have been volatile for the last 15, 20 years. There's always something or the other, right? In 2008-2K09 there was a crash and then sudden pickup after that. Then we had COVID in 2020, again crash and sudden pickup. In between also there have been two, three cycles. We manage it a couple of different ways. One is we have some of our customers are on formula-based pricing, in which case whatever raw materials, however volatile they are, whether they go up or down, it's just a formula, and the margin remains fixed for a certain period of time, whether it's six months or one year. For some others, you know, even though it may not be a formula-based pricing, it does follow these petrochemical norms, and the whole industry works on that. Our competitors as well will increase or decrease prices depending on what happens. We have not found it to be. While the volatility, of course, is challenging to manage, and sometimes it, especially when prices go up very quickly, you know, there is a time lag between which we get the price increase with the customer. There is a time lag, and therefore I've always mentioned that quarter on quarter we could see even when prices come down, sometimes we're stuck with high cost imported raw materials, especially in this scenario, you know, where everything is delayed, we are our inventory norms have increased. Consciously we've increased inventory norms for many of our imported raw materials. Now in that case, if there is a crash, we're stuck with some high cost imported raw materials, then that may affect our margin. but by and large, you know, in the long term, we always look at the long term and we'll think strategically. We don't worry about too much what happens quarter-over-quarter basis, you know, because that can happen in all kind of business. Okay. Second question is, where are you funding the INR 100 crore CapEx from? Partly internal accruals and partly debt. Can you be more specific on the mix if that's okay? Approximately 50/50, I would say. Yeah. All right, sir. Thank you. That's all from my side. I'll get back to you. Okay. Bye. Thank you. The next question is from the line of Nikhil Chowdhary from Kriis PMS. Please go ahead. Yeah. Hi, sir. Good afternoon, and congratulations on a great set of numbers. I wanted to understand in the Nitrile Latex, I understand we are, I guess, the only guys who are doing this in India. Wanted to understand, has it got application in medical or it has got application in the industrial? Because I understand since the CapEx cycle, like probably we understand if you'll be picking up, then probably the industrial gloves will be the one that will be picking up really fast. If you probably focus there, we may have some stable demand coming from that end too. Yeah, absolutely. There's grades that are there for medical gloves and obviously grades for industrial gloves as well, depending on thickness, application, you know, there are a range of maybe 10, 12 different types of grades of this Nitrile Latex. Obviously, we have products for both applications. Having said that, the industrial gloves is a much smaller percentage of the medical glove market compared to medical gloves, it's much smaller. It's maybe in single digit, less than 10%. Understood. Obviously the focus is on both. But you know, the larger industry is for medical gloves, so we can't ignore that for sure. Okay. Considering the economies that probably used to dump in India, so how is probably been the dumping lately? Like any You know, I would rather not talk about that. As I said, the matter is in appeal and it's sub judice. We, you know, I'd just like to pass on that question, please. Sure. No problem, sir. Thank you so much, and wish you all the best. Yeah. Thank you. Thank you. The next question is from the line of Kewal Asher from DSP Investment Managers. Please go ahead. Thanks. Yeah. Thanks, Kewal. Go ahead. Sorry to interrupt, Mr. Kewal. We are not able to hear you. Hello, am I audible now? Yes, sir. Please proceed. Yeah, sure. Sir, NBR is contributing 45% of our total revenue. No, no. Synthetic rubber is contributing 45%. NBR is maybe NBR and allied products, which includes powder. Yeah. Polyblends, all that is about 35%. Less than 35%. Yeah. 35%. Yeah. Yeah. It seems that the realizations have inched up significantly in FY 2022. Are your prices cooling off in this or is it still at the same levels, realizations? Well, I think, yeah. I mean, you're right in that sense for all our products, not only NBR. The peak pricing, I would say, was in Q1. Okay. Since the end of Q1, we are seeing a reduction. I would not say a sharp decrease, but a consistent decrease in our raw material prices. When that happens, you know, automatically our finished goods prices also do come down. I think I don't know what will happen tomorrow, but this is more recent. I would say last few weeks things have been cooling off. Realizations are coming down as of today. We have seen in the past that we think realizations are coming down for a few months, a few weeks, and then suddenly, you know, they go back up. Yeah. It's hard to predict. Correct. Hard to predict. Got it, sir. Sir, the second thing is that currently borrowings are at INR 50 crore at the end of FY 2022. What could be our peak debt, if you have any estimates? What would be the what? Peak debt. Debt level. Yeah. I mean, I think INR 50 crores probably includes our working capital as well, right? Is it? Yeah. It would include. Yeah. You know, working capital is a factor of what happens with our raw material prices as well. Obviously due to the war, all our raw material prices have been much higher and our working capital requirement has been much higher than what we had anticipated, let's say even six months ago, pre the war, right? I mean, no one had predicted oil prices of $120 and plus, you know. It's hard to predict on the working capital front what would happen. If I were to just take the term loan debt, I think the peak would be at about INR 110-115 crores. With working capital, probably obviously a little bit more, you know? It's hard to predict. Understood. Understood, sir. The last question on the latex, Sorry, I didn't quite catch you. Your voice is breaking, Kewal. Are we going forward for the NBR CapEx for which we've went to EC? We have started the design phase already, and we have received the environmental clearance for NBR in the last month, in June. We're excited about that. Now it's up to us. We have started the design phase, which should take a few months. I think over the next few months, once the design phase is over, which is expected in the next 3-6 months, then I think by the end of this calendar year, we would perhaps take a call. We are also, you know, conscious of the fact that our entire team is focused on commissioning these two significantly large projects of latex right now. We want the focus to be on that. We will take it up after those two are commissioned. We also want to see the overall macroeconomic environment globally and in India, given the uncertainties, you know, that everyone is reading and talking about. We'd also have to see that. We'll keep everything ready, and then we'll take a call on when to actually sort of invest. As I mentioned last time as well, we'll take a look at quickly the CapEx costs, you know, which had, I mean, just a few months ago, steel and a lot of the commodity prices were at its peak. At that point, we felt that it was not a prudent decision to look at CapEx when commodity prices were their absolute peak. I think it's expected to correct significantly. You know, CapEx costs also may be lucrative or may be down to make the project lucrative. Yeah. We'll take a call over the next six months. Got it, sir. Thank you so much, and all the best for the company. Thank you very much. Thank you. The next question is on the line of Alisha Mahawla from Envision Capital. Please go ahead. Hi, sir. Good afternoon. Thank you for taking my question. I hope I'm audible. Sir, just wanted to check, you know, while you were mentioning to an earlier participant with respect to our margins where it has been slightly volatile, especially because of the raw materials. What's the sustainable gross margin for our business? Because I agree that last quarter we were sitting on some low-cost inventory. The kind of numbers we're doing right now and how does it change when our product mix changes? You know, it's hard to predict. I mean, we focus on EBITDA margins. Of course, gross margins do change depending on you know, overall macroeconomic environment, supply, demand, and so on. We feel very confident that our EBITDA margins would be you know, around that 15%-16% mark. As I mentioned, you could have some quarters where it could fall, some quarters where it's even much better. You know, you could go to 17%, 18%, 19%. With the current volumes, yeah. As we grow over the next 1 or 2 years, obviously this should hopefully improve further. Yeah. That's what we're looking at in terms of EBITDA margin. Gross margins can vary depending on several factors, yeah. Sir, if I just look historically, we've got, we go between, for instance, say, 30%-38% at gross margin level, and that is a pretty high range. Just wanted to know what would be a more stable number assuming crude is stable, and with the kind of CapEx that we're doing in our latest Nitrile Latex, what is a kind of sustainable number? Yeah. So I think, look, it'll be a range. Around that range. Obviously, yeah, it will be around that range, yeah, I would think. Hopefully towards the higher end of that range, 35%. Yeah. Okay. In the previous call, you were mentioning that there is some competition in Europe which was shut down. Just wanted to know, has that come back? What's the competitive intensity at a global scale? Are we benefiting with regard to that? I don't remember the context, but for which product had this shutdown happened? Because I know in the last year that happened couple of times for various reasons. I don't recall. As of now, all our competitors are, I mean, working. I know last year there was some couple of competitors and a couple of products had shut down for some internal reasons for 2-3 months. I think as of today, everything is on again. Competitive intensity as of now is, as you can see from our margins, we have done quite well. It remains quite stable. Sure. Just one last question. While the Taloja plant will be a multipurpose latex plant, the Valia plant will be dedicated for, well, for medical use? That's right. The utilization, the ramp-up. All kinds of gloves, medical as well as industrial. Industrial, yeah. Yeah. Medical ramp-up over there could probably take some time, depending on demand. That's right. Okay. Thank you. Thanks. Thank you. We'll move on to the next question. That is on the line of Manav Vijay from Deepam Financial Consultants Private Limited. Please go ahead. Yes. Thank you very much for the opportunity. Am I audible? Yeah. Hi, Manav. Go ahead. Hi. Subrat, few questions from my side. First of all, now, like the way you mentioned that you have received the environmental clearance for your NBR project. You were supposed to do a second phase in your Valia, in actually your Valia plant for your XNB latex. Now, does this approval stands true for that expansion as well? Yes, absolutely. Yes, that's true as well. That decision we would probably take after maybe more than a year. First, we would have to see how the current once we commission and start selling from our current new plant. Once we ramp up and get closer to full capacity utilization, then we can add a couple of more reactors. I mean, it's obviously not as long a project. Maybe a 6 to 8-month lead time, I would say. The lead time is mostly because of our vendors not being able to get it done quickly these days. It's taking a long time. 6- to 8-month lead time on that. Yeah, but you're right. The EC covers both. Second thing is that this expansion will generate close to INR 500 crore for you. I believe that in last quarter call, you had mentioned that roughly 60%-70% of sales will come in FY 2024. Does that statement still stands true or you believe that you could have some deviation from that? Well, you know, look, compared to last quarter call and this con call, I would say the only thing that has changed is the macroeconomic mood in the world. Obviously we are cognizant of that as well. We will continue to maximize our sales and try and make sure we are on budget. Having said that, we are cognizant of the current macroeconomic environment in the world, and so we'll have to sort of keep adjusting to those realities as well. Okay. Okay, fair enough. Yeah. This is clear. Okay, my next question. My next question would be actually a couple of question that I have from your annual report and P&L statement that you made in even in your in your AGM. You mentioned in your annual report that you are looking to install renewable energy sources and also exploring a direct feeder line for your Valia plant. Now, I believe that in Valia a couple of years back, once you acquired the plant, you had installed a captive power plant. I believe that power plant became operational a couple of years back. Mm-hmm. If you can explain this renewable part and also this direct feeder, what does this lead to basically? Yeah. The captive power plant was for a certain amount of production. At some point, you know, our plant teams have worked out that the captive power plant will not be sufficient for our total power requirement in our Valia plant. As a result of which, we will have to rely on power from the grid. We are investing in a direct feeder line because we are in a rural area. What used to happen from the grid power is, it used to go down quite a bit. There were a lot of trips. In a month, there were quite a few trips, and in a continuous plant, it's very difficult to manage if there are multiple trips every few days. As a result of it, this direct feeder line will eliminate or significantly reduce those trips, and this is for our future power requirements. This direct feeder line, we can also invest in renewable power elsewhere in the state and then, you know, use that power through this direct feeder line. Yeah, this feeder line is just for security of power for the future beyond 2024. Okay. Renewable power, we are looking at more from, you know, just being a responsible corporate citizen. Yes, currently, you know, the power that we use largely is not renewable. We do have a windmill, and we do have some solar panels that are on all the rooftops at our Taloja factory. But going forward, we are looking at investing in sort of larger renewable projects, which will mean that a significant portion or we would like to over the next 4-5 years. It's a much more longer project. Over the next 4-5 years, significant portion of the power that we are consuming should come from renewable resources. That would be our longer term target. It's part of our ESG targets as well. That's what we meant by looking at renewable sources for the long term. Okay. Fair enough. Now in the AGM, you mentioned about actually looking at a third land for expansion because once you are done with your NBR rubber expansion in your Valia plant, you will not have any space. So any thought process that you can share on third land? Now, I mean, again, this is a long-term, longer term thing. We believe that with these 2 latex projects that we have undertaken, and then, you know, when we do undertake the NBR project, this should be enough for the growth, for the next 3 years or so. Beyond that, if we want to grow, you know, we have to really start thinking from now because, of course, we want to grow beyond that. As you know, in India, acquisition of land takes time, followed by, you know, environmental permissions. Preparing the land for use could take. The whole project could take up to 3-4 years. We are looking ahead and sort of, exploring different options, you know, for future growth. Okay. Nothing on table as of now concrete that you can share? No. My last question is in your annual report, there's INR 3.45 crore of actually export incentive that forms part of your sales. I have not seen this number ever in your annual report, at least of last 5, 10 years or so. Was it a one-off something of that sort, or am I reading too much into the numbers? you know, I will have to check, but from what I understand, there is an RODTEP scheme. Correct. That the government has introduced just last year. That is what maybe is INR 3.45 crore. Sachin, Suraj, would you guys have anything to add to this? No. It's the scheme which was introduced by the government. Yeah, also our export turnover is going up, so we'll see this number better than the last financial year. Yeah, my only point is that this was not a one-off. It will continue as your export sales moves up. Yeah. Yes. Okay. Yeah. Anubhav, one last, maybe, I mean, a very broad question. Few days back when actually BASF released their numbers in Europe, they mentioned that actually they're witnessing, let's say, the demand slowdown and they're actually witnessing more prominence of that in Europe. For the fact that the way energy prices have moved up in the entire Europe, they might look to shut down some plants. Now, we have seen instances of dumping happening, let's say, from Europe in India. You believe that let's say if BASF or other let's say industries were to face this kind of an issue in Europe on a at a very broad level, this is positive for you or negative for you in both SBR as well as your NBR latex? You know, hard to say. First of all, as far as exports is concerned, Europe makes up a very. As you know, 80% of our sales is in India. Twenty percent is all over the rest of the world, but Europe is obviously a smaller percentage of that remaining 20%. For as far as exports is concerned, slowdown in Europe, while it may affect us, it's not going to have a significant impact. Number two, as far as competitors shutting down, you know, anytime a competitor shuts down, I guess theoretically it's a good thing for the other competitors. You know, we focus on our own business and we build on our own strength. If external environment favors us, so well and good, but we have not factored that into any of our business plans. We have assumed business as usual. I frankly don't know whether it'll benefit us. I don't think it will negatively impact us in any way, but I don't know if it'll benefit us. Sure. Thank you, and I'll be back to you. Thank you. Thank you. The next question is from the line of Archin Pathak from Centra Advisors LLP. Please go ahead. Good afternoon, sir. A large part of my questions have already been covered. Just one question. I just wanted to know on the revenue front, would it be possible for you to share that what percentage of your revenue for the year will be coming from the automobile segment or tire segment in general? Automobile maybe 10%-15% of our revenue, 10, 12%. 10%-15%, somewhere between 10%-15%, I would venture to guess. I mean, I'm just guessing because NBR is about 35% of our business, and maybe 1/3 of that is auto. That's why I'm saying 10%-15%. Tires is about 10, 12% of our business, which is Tyre Cord. You know, we have supplied the Tyre Cord manufacturers who in turn supply the tire companies. Right. Okay. Yeah. That's it from myself. Thank you. Thank you. Thank you. The next question is from the line of Anubhav from MC Pro Research. Please go ahead. Hello. Yeah, thanks for the opportunity. One question, again, related to whatever is happening in Europe regarding the, with respect to energy crisis and all. I think broadly you've covered on, the export opportunity and all. Wanted to understand that, what kind of impact you're seeing on the, you know, the entire value chain, for us in terms of pricing as well as realization for the end products. Is there any impact or is there already in the market or anything which you are anticipating because of this? I'm sorry, can you repeat? I'm not sure if I understood the question properly. If you can just repeat it one more time. Yeah. It chiefly because of the energy crisis in Europe. Right. Given the likelihood that some of the plants probably operating there may not be running at full capacity, may have to go for a force majeure. I want to understand that, is there an impact already being seen in the market, with respect to the entire value chain right from raw materials to the final product pricing? So far, no. So far, we have not seen any impact. We do import some raw materials from Europe, and we have not heard from any of our vendors about anything. Of course, in many of those cases, we always have a second supplier from another part of the world. That's something that we've been working hard on for the last year or two. That's on the raw materials front. On our finished products as well, we have not seen any impact, positive or negative, as I told the previous caller as well. Right. Chiefly you would be sourcing acrylonitrile from Europe? Not really. No, no. There are some specialty products. Otherwise, most of the other major raw materials like acrylonitrile, styrene and such all come from Asia. Mostly come from Asia. Okay. Mm-hmm. Okay. Yeah, that's helpful. Another question on the NBR thing. Though I understand that there's a bit of a delay you're anticipating because of macro as well as the calculation on the IRR side given the CapEx cost and all. Want to understand, is there a clarity that directionally you are going for a NBR project? Because I think one of the calls you also alluded that you know, given the supply available and a possible demand impact in the auto space due to EV transition and all, that is something you will have to evaluate if you have to go for it. Are you right now clear on that business prospect? Look, I mean, we're staying ready. Let me put it that way. We're staying ready. We're moving ahead with the design phase as well, which is obviously a small cost. But we have not taken the final call yet on it. Yes, we're gonna watch it from, you know, the macroeconomic environment, the raw material environment, CapEx costs, all that. Then take a final call at the right time. Okay. Okay. As of now, we have our hands full with our current two projects. I think for the next three, four months, that's gonna be the focus anyway. Yeah, yeah. Absolutely. Absolutely. Okay. My last question is on this, how much your nitrile gloves will be contributing to our total sales as well as to exports now? It's in single digits still. It's probably, you know, I don't have the exact number, but in the current context, we have sort of modified our current reactors to manufacture Nitrile Latex for gloves. Once the new plant comes, obviously it will be significant, but as of today, it's still in the single digits, you know, 6%-7% I think. Okay. Largely it is for export, right? I mean, whatever we are That's right. Okay. That's largely, yeah. Okay. Got it. That's very helpful. Thanks so much. Thank you. Thank you. The next question is from the line of Aditya Khetan from SMIFS Limited. Please go ahead. Yeah, thank you for the call, sir. On to the margin side, quarter-on-quarter basis, we are witnessing that the EBITDA margins are flattish, but on gross margins there has been a dip of almost 3%. Can you quantify what this dip is due to? Majorly because of the employee cost and other expenses. Is there a one-off in this quarter which you have taken? Sorry, you're talking about gross margin dips? What are you talking about? EBITDA margin has expanded. This I want to know. There is a one-off which we have taken into employee and other expenses for this quarter. I'm not sure I've understood the question. Sachin, do you understand the question and whether you can answer it? No, the costs are in line as such. Yeah, that's what I thought. Gross margin have dipped, but the EBITDA margin has been almost flat. This is led by the decline in employee cost and other expenses. And so gross- One-off Gross margin, yes, that could have dipped a little because of overall, you know, raw material prices going up. Sometimes there's a lag. Margins could have come down a little. Yeah, maybe there is some. Sachin, do you know this question? I'm not sure. I don't have the numbers in front of me, so- So- I don't know if you can answer this question. I can answer it too right now. One is, yeah, compared to last quarter, the employee cost has come down, but it's primarily because last quarter has been the year-end quarter, a bit more of provisioning cutting in, and now this quarter is perfect. In terms of volume, yes. In terms of material cost, there is increase because obviously increasing because of the product mix also because, the material cost is keep changing. Yes, we have improved on efficiencies along with that. Other expenses are everything we keep a check on. Yeah. As rightly said that we focus on EBITDA margin, and that's what our focus is on. Maybe Q4 we had some employee bonuses and all paid out, which have been, may have been little higher. But, yeah. Okay. Okay. Does that answer your question, I hope, Aditya? Yes, yes. Okay. Thank you. The next question is from the line of Tej Kumar Pandya, an individual investor. Please go ahead. Good afternoon, Mr. Abhiraj. That, in the last virtual meeting, it was pointed out that outstanding payments have increased substantially. Now, what is the situation? These outstanding payments are under control? First question. I think you may have misunderstood this. I don't think outstanding payments have increased. What, you mean payments to vendors or payments from customers? Payments from customers. No, overall, I don't think the payments were delayed or anything. I think overall realizations have gone up, so therefore the, you know, what used to cost INR 100, let's say a year ago, is now costing INR 150, right? As a result of which the total outstanding receivable, the receivable numbers look big. In fact, number of days we have done a reasonably good job in reducing those, the number of days outstanding. Suppose if you raise an invoice, so how many days does it take for it to get back the money? Sachin, do you have the average number? I think it's about between 50 and 60 days, right, Sachin? Right. How much is it, Sachin? You know the better days. Yes. It's right, Abhiraj. Between 50-60 days, depending on the terms. Around 55 days. Yeah. What is the average? Was some 51 or 54 or something, right? Last year it was 62, and now it has come down to 56 in this quarter. 56. Yeah. It's between 55 to 60. Do you think it's okay for the industry? Because if you calculate the interest cost from 50-60 days, that means two months interest. Do you work it that way or you do not work it that way to find out the cost of the capital which is lying with the customers? Yeah, absolutely. Look, we would love to make this zero as well, but this is a sort of industry standard and a lot of our competition offer similar terms. So I would say. Sure. We would be a little better off than most of our competition, given how we collect and some of the incentives we offer customers to pay faster. In fact, I would say the industry norm is 60-90 days, and we are under 60 days. Okay, fine. The second question is, the market size of the construction chemicals is estimated to be INR 5,600 crores. How much percentage of this market is Apcotex's share? How much of the market share do you think you'll be able to get given? The third similar question I can say, how much capital expenditure will be required to develop the production facility and when would this facility be completed? As far as construction chemicals are concerned, we supply to some of these construction chemical manufacturers that have the brand. We have a few years ago started our own brand, ApcoBuild, and I think that's what you're referring to. Yes, yes. ApcoBuild, we are not looking to compete in the larger big space and become, you know, compete directly with the brands. We have certain niche products in waterproofing and repairs that we are focusing on, where we are backward integrated and focusing on a few geographies in the western part of the country so far in a few geographies, and really building the business from there. We're not really looking at market share. We'll be a very small percentage of the market. If you are saying it's INR 500-600 crores, I've seen different numbers being thrown about, depending on what. No, no. This was 5,600. I still say it is in your annual report. It has been said in the annual report. Okay. 50- Yeah. INR 5,600 crores is approximately 1.1 number. Yeah. We are very small. As you know, our whole company turnover is only INR 1,000 crores last or close to INR 1,000 crores last year, out of which most of it is B2B sales. We would be a very small percentage. One second. This raises a very important question that. Hello. Mr. Tej Kumar Pandya. Hello? Yes, Mr. Tej Kumar Pandya, are you able to hear us? Yes, yeah, I'm able to hear you. May I request that you return to the question queue. There are participants waiting for their turn. Okay. My only question is about this nitrile. Sorry to interrupt, sir. We have participants waiting. Okay. Go ahead. Please finish your last question. Go ahead, finish one first. I just want to know that for this Nitrile Latex, have you applied for patent because it has been developed in-house? It has been developed in-house, but it is a product which has been around for many years, so it's already off patent. It has not been invented by us. It was already there also in the market. Okay. Thank you, sir. Thank you. Thank you for your question. Thank you. The next question is from the line of Amar Maurya from AlfAccurate Advisors. Please go ahead. Hi, Abhiraj. Hi, Amar. Yeah, thanks a lot for the opportunity and, you know, congratulations for a good set of numbers. Thanks. I mean, I have one question. Basically, you know, what I can see is that from last three, four quarters, on an average, we are maintaining a very strong EBITDA per kg kind of a number. Given that now the new product which we are launching is likely to be a better margin product. I mean, first thing is that, are we confident to maintain this kind of EBITDA per kg? And secondly, can we see some inch-up from here on, let's say once the new product get launched? You know, it will depend. As I said, in the current context, if you are to see the latex products that we currently already manufacturing, margins are reasonably strong, or stronger than what they were earlier. That, I think, will continue for some time. Okay. Subject to the whole macroeconomic situation in the world. You know, I'm not sure what will happen in the next 3-6 months because there's gloom and doom talks everywhere else, you know, in the world as you know. Right. Right. China, Europe, America. As far as Nitrile Latex for gloves is concerned, obviously the margins peaked last year, you know, when COVID was, I would say, you know- Mm-hmm. Sort of pre or around the time the first vaccination happened. Post the first round of vaccinations, in fact, demand has come down significantly, which has led to lower margins. As I said, look, those kinds of cycles will happen from time to time. Mm-hmm. In fact, we look at the long term. We think it's a good market for the long term. Mm-hmm. We believe we can add value in this market, so therefore we are in it. It's very hard to predict what the margins will be, you know, quarter-over-quarter or month-over-month. Okay. If you look at more long-term, we are trying to maintain margins of 15%-16% and slowly grow them as well. As volumes grow, what happens in our kind of business is the fixed costs get, Absorbed. You know, yeah. No, divided within larger volumes, you know. Even if contribution margins drop, you could still see EBITDA margins being quite healthy. Okay. Yeah. Like, do you look margin as a thing or do you look EBITDA per kg as a thing? Well, we focus on both, I would say, obviously. EBITDA per kg is what would be our primary sort of focus on. Primary focus. Yeah. Yeah. Yeah. Yeah. Yeah. That is what my question is like. You know, whatever the current EBITDA per kg we are maintaining, I mean, that is likely to be maintained like from here on or do we see some- We don't do forward-looking statements. It's hard to say, but obviously our endeavor would be to maintain it, right? Okay. Okay. Yeah. Second question is, in terms of the new capacity which we are putting up for the latex in Valia, for the gloves, I mean, how the utilization would be like, it would be gradual, let's say if it comes in third quarter, should we expect, like, say, third and fourth quarter, what would be the kind of utilization and how the utilization would move in 2024? As I told in the previous calls, I cannot predict quarter-on-quarter exactly, you know, what would happen because we are dependent on customer approvals. Mm-hmm. Under the current context I mentioned this is quite a challenging environment. Mm-hmm. We are going to try and push through the customer approvals in Q3, and hopefully start seeing some sales in Q4, but it would take us 6 to 12 months to ramp up slowly. Mm-hmm. Now, exactly at what pace that would happen is very difficult to predict. Okay. Are you saying? Sorry to interrupt, sir. Sir, this is the last question that we could take. Let's finish one question he was in the middle, and then we'll, I think, end the call, right? It's already 3:10 P.M. Mm-hmm. Sure. Yeah. Yeah, go ahead. Finish the question, Aditya. Yeah. Sir, basically, what I was trying to understand, like, you know, approval time, I believe already you are with the same, dealing with the same customer. Once this new plant come, you have to again send the product for the approval or the product is already approved, right? Well, there are two things. Well, the product is already approved, but the new plant, the way of manufacturing, is different. It's not going to be exactly the same. Customers do want to feel comfortable for any new plant that comes up. Even for any of our competitors, if they were to start a new plant in the same facility or in another location. Mm-hmm There will be some sort of approval process, maybe a shorter one, not a longer one that has to start right from scratch, but some kind of approval process has to go through. Also, please keep in mind that we have only got approval from a certain set of customers. A lot of customers we could not get approval because, you know, we didn't have material. When we approached them for approval, their first thing was, "Look, you're not able to give us material. You have limited capacity, so come to us closer to the time when your plant is commissioning." Now over the next 2-3 months, we will approach them, start with the lab approval, then the plant will commission, and then we will, you know, get some bulk approval. That takes time. There are a few customers where we do not have full approval, but we feel fairly confident that given some time we will get approval from them over 6-8 months or so. Okay. Thank you. One thing, the ramp-up will be 6-12 months, right? Yeah. Thanks a lot, sir. Thank you very much. Okay. Thank you. Thank you. Bye. Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for the closing comments. Thank you all for participating in our Q1 FY23 conference call. We look forward to seeing you again in Q2 and thank you once again. Thank you. Ladies and gentlemen, on behalf of Apcotex Industries Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines.