Ladies and gentlemen, good day, and welcome to Chemplast Sanmar Limited Q3 FY 2023 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode. Endeavor to make opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ramkumar Shankar, Managing Director. Thank you, and over to you, sir. Thank you very much, Michelle, and good morning, everybody. On behalf of Chemplast Sanmar Limited, I extend a very warm welcome to everyone joining us on our call today. On this call, I am joined by our CFO, N. Muralidharan, Dr. Krishna Kumar Rangachari, the Deputy Managing Director in charge of the Custom Manufactured Chemicals Division, and SGA, our Investor Relations Advisor. I hope everyone had an opportunity to go through the financial results and investor presentation, which have been uploaded on the stock exchange and on our company's website. In an evolving macro environment, and as expected, the quarter gone by has turned out to be another subdued one for us as well as the industry. Our business continued to face headwinds for most part of Q3, with a revival in PVC prices only from December onwards. For the nine months in FY 2023, revenues were lower by 7% as compared to the corresponding period last year. However, sales volumes of all products were higher on a year-on-year basis. Falling prices of finished bleach, coupled with increase in energy costs, have resulted in a reduction of EBITDA margin, which stood at around 10% for the nine-month period. Taking a closer look at the performance and trends across product categories and segments, during the quarter, our specialty chemical segment saw a 5% degrowth in the top line on a year-on-year basis. This was largely due to the fall in Paste PVC prices. However, it is relevant to note that volumes grew by 38%, which partially offset the impact of the fall in prices. The suspension PVC segment delivered revenues of INR 673 crore in the third quarter, witnessing a degrowth of 28% on a year-on-year basis. This was also on account of price decline and was partially offset by a 35% growth in volumes. After the continuous fall from April 22, the prices for both Paste PVC and suspension PVC bottomed out by end November. Multiple price increases were seen for both the products in December and January. The situation for the PVC segment is turning favorable again, driven by robust domestic demand and the reopening of China. PVC prices have started moving upwards after nine months of fall. Restocking of channel inventory, which had dried up during this period, has recommenced, and volume uptake is back to normal. We expect the demand in FY 2023 for suspension PVC in India to touch the pre-pandemic levels of 3.3 million tons, which would mean a 17% growth over FY 2022. The custom manufacturing segment continued to achieve strong growth. During the previous call, we had mentioned our plans to increase the capacity in phase one and fast-track the expansion by setting up the civil infrastructure for the next phase as part of phase one itself. We recently received confirmation from one of our customers that we have been selected to supply an advanced intermediate for an already established generic AI. This was based on successful qualification of lab and pilot plant samples at the customer end. Based on this development, along with the announcement in the previous quarter of the signing of an LOI for another intermediate and a healthy pipeline of products, we plan to kick-start the next phase expansion of the multipurpose facility with immediate effect. The total CapEx outlay, including the next phase of expansion, will be around INR 680 crore to be spent over the next 15 months. While phase one is expected to come on stream by the second quarter of FY 2024 as originally scheduled, we are targeting to commission the next phase by end of FY 2024. In Q3 of this year, the other chemicals business, comprising our caustic soda, chloromethanes, refrigerant gases, and hydrogen peroxide, delivered revenues of INR 232 crores, a 4% growth on a year-on-year basis. This growth was largely due to the increase in volumes of all products and strong caustic prices during the quarter compared to Q3 last year. The outlook for this segment remains stable over the medium term, though there are some short-term challenges. High energy costs continue to remain a concern, though certainly there are some increasing signs with a reduction seen in coal prices. Overall, with recovery in PVC prices and healthy demand trends, we expect our Q4 FY 2023 performance to register a good improvement. We expect a better performance in FY 2024 driven by a combination of a rebound in PVC demand and prices, along with new capacities in Paste PVC and custom manufacturing coming on stream during the year. An update on our CapEx projects: both our CapEx projects, which pertain to the specialty chemical segment, are on track and slated to meet expected timelines. Now I will request our CFO, N. Muralidharan, to share the quarterly financial highlights. Murali? Thank you, Ram, and a very good morning to all the participants on the call. Chemplast Sanmar, on a consolidated basis, registered a drop in its revenues and their operating profits for 3Q FY 2023 as compared to the corresponding period last year. The revenue from operations for 3Q FY 2023 stood at INR 1,089 crores, registering a drop of 18% on a year-on-year basis. This was largely on account of lower realizations per ton for our PVC products. However, volumes across all product segments registered a growth on a year-on-year basis, with an overall volume growth of 27%. On the expenses side, our employee costs during the quarter was INR 34 crores. This was marginally higher on a year-on-year basis and lower on a sequential basis. Other expenses increased on a year-on-year basis, largely due to higher energy costs. EBITDA for the quarter stood at INR. 78 crores as compared to INR 363 crores in the corresponding quarter last year. EBITDA margin for the quarter was at 7%. This was more or less in line with the EBITDA margin for the previous quarter. Our finance costs for the quarter stood at INR 39 crores. This was marginally lower than the previous quarter, and our PAT for the quarter stood at INR 27 crores as compared to INR 237 crores in the corresponding quarter last year. Looking at the nine-month numbers, revenue from operations of INR 3,794 crores was 7% lower as compared to the corresponding period last year, and EBITDA for nine-month FY 2023 stood at INR 371 crores, with a margin of 10%. Finance costs dropped sharply from INR 287 crores in nine-month FY 2022 to Rs. 116 crores in nine-month FY 2023, mainly due to reduction in borrowings using the IPO proceeds and renegotiation of better terms for the existing loans in FY 2022. Net profit for nine-month FY 2023 was at INR 106 crores as compared to INR 417 crores in the corresponding period in the previous year. Given the reversal in the PVC pricing trend, as also the expected commissioning of the expansion projects in our specialty chemical segment, the outlook for the business looks positive, and we expect a gradual uptick in operational performance in the coming quarters. With a healthy cash balance of INR 1,167 crores, the company continues to be net cash positive on a consolidated basis. As mentioned earlier, we are kick-starting the next phase of CapEx of our custom manufacturing business and are actively exploring other expansion opportunities as well. This, coupled with our strong balance sheet, puts us in a comfortable position with a high degree of flexibility in a dynamic macro environment. With this, I conclude the presentation and open the floor for further discussions. Thank you. Thank you very much, sir. We will now begin the Q&A session. Anyone who wishes to ask a question may press star and one on their touch-tone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants, I request you to use the handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have the first question from the line of Sanjesh Jain from ICICI Securities. Please go ahead. Good morning, sir. Thanks for taking my question. I have a few of them. First, on the specialty chemical business, on the INR 680 crores of CapEx that we have announced, which is an expansion from some INR 300 odd crores, which we were talking earlier, can you help us understand what will be the asset turn on this entire CapEx of INR 680 crores and what will be the time frame in which we anticipate this entire capacity to run at a peak utilization? That's one. Number two, I know we don't segregate the EBITDA margin, but from the profitability on an ROIC or an IRR basis, can you help us understand what does this INR 680 crores mean in terms of financial implication on the P&L side? So that's my first question. Thank you. Good morning, Sanjesh. This is N. Muralidharan. The asset turn on this investment, to start with, maybe it would be around 1, and at a peak, it will go to 1.3, 1.4, 1.4 times, and over a period of 2-3 years. It will evolve over a period of 2-3 years, right? And as far as the return, these are specialty chemicals custom manufacturing business, so the returns are quite healthy, and they will definitely be significantly accretive to the financials of the company. The returns will be way above 25% IRR return, so they will be definitely financially accretive to the financials of the company. The payback period will be less than four years at a peak utilization? Yes. Okay. Okay. Got it. Thank you. Second, on the product pipeline in the specialty, we did mention in our opening remark that we have a very strong pipeline of the products in the specialty chemical. Can you help us understand in terms of the areas where we are seeing traction? It's largely agrochemical, or it's a mix of agrochemical, pharmaceutical, and the performance chemical? That would be useful. Thank you. And number of products and those parameters as well. Sanjesh, this is Krishna Kumar. The pipeline is very healthy and strong. Most of the majority of what we have in the pipeline is agrochemical, but we do have some pharmaceutical as well as other fine chemical applications in the pipeline, and it's moving quite rapidly. But by rapid, I'm saying that it's on track. In prior calls, I've elaborated that it takes anywhere from 12-18 months from an inquiry point to get to an initial validation campaign, and it goes through multiple stages during that timeline. And so the products that we have in the pipeline, they're all moving on track as per our expectations. Krishna, how many products are we working here? This particular product, what we have announced and the previous one, how many years did it take from, say, when we started the discussion with the customer to signing of these contracts? The one that we just now announced, I would say around 12 months from inquiry to get to this point. We will wait for the commissioning of the new plant to make the validation quantity. Theoretically, we could be making it now, but the customer is very clear that they would like to have the first trial from the new asset. Again, 12-18 months is what it looks like. Will it be backward integrated fairly, or we are doing only a couple of steps? How should we see this chemistry? So the chemistry, I don't know what you mean by backward integration. This particular product, for example, part of it is based on a technology package given by the customer. Part of the synthesis is based on what we have developed in-house. And so there's no backward integration play per se on this particular one. Got it. Got it. Thanks, Krishna. I think you had a question on number of products. Pipeline is healthy. I mean, we have, I would say, over 7-10 products that we are actively working on right now. Okay. Of course, the most are already commercialized. These will largely be, again, pharma, or it's a decent mix of pharma sorry, agropharma and performance? It's mostly agro. There are some pharma as well, but mostly agro. Got it. Got it. Thanks, Krishna. Coming back to the PVC business, Muralidharan, can you help us? What was the inventory loss in this quarter? And now that the prices have gone up very sharply, do we expect any kind of inventory gain in Q4 from this phenomenon? I wouldn't call it inventory gain. Some of the write-offs we have taken something exceptional of inventory losses in the previous quarter. Do we expect some reversal of that in Q4? On the inventory loss, Sanjesh, actually, we did make a positive contribution from Suspension PVC this quarter. So effectively, there was no specific inventory loss for this quarter. As far as the possible gain going forward, as you would know, the write-off that we did was in the first quarter, April-June quarter. The stock we had carried at the time has been entirely sold by this time. The stock we are carrying by this quarter end, the summer end, was very limited. Actually, it was only for three- or four-day stock. It's around 2,700 tons of Suspension PVC and around 500 tons of Paste PVC. So effectively, even though there is an increase in price, we may not be able to gain on the inventory. We will realize the higher margins on the future paste. Fair enough. Fair enough. Ram, what is the spread being right now, and what is the spread expected in FY 2024 to remain? This year has been a very strong volume growth for the industry. What is the expectation for FY 2024, and what is the import situation from China and US? I think as far as the market is concerned, we expect the market in FY 2023 to be around 3.3 million tons, which effectively this is for Suspension PVC, which effectively takes us back to the pre-pandemic level of around 3.2 million tons. In fact, up to December itself, total demand in India has registered a growth of around 20%. If we are at 2.5 million tons, it's against 2.1 million tons year-on-year. So this is definitely likely to continue given that this is a strong demand quarter. Next year, we expect that the traditional growth of anywhere around 8%-10% should be restored given that there is a lot of pent-up demand that is there and very little stocks that are there in the trade channel. So this is something that we expect as far as Suspension PVC is concerned. In terms of imports from different countries, the Chinese imports in the nine months so far were around 440,000 tons as compared to a full-year import of around 250,000 tons in 2021-22. That was really the extent of the issue that we faced in these nine months. We expect this to go back to earlier levels given that China has now reopened and the Zero-COVID Policy has been reversed. Fair enough. On the spread? Sanjesh, I'm sorry to interrupt, sir. I would request you to kindly rejoin the Q, sir. No, this is just, I already asked the question. I'm just seeking the answer first. Okay. The PVC VCM spread is anywhere around pre-duty. It is anywhere around $200-$225. And if you include the duty as well, it will be anywhere around $275-$300. This is expected to custom, right? This is expected to custom. Thank you, sir. Thank you very much for all those answers. Thanks, Dr. Krishna, for the time today. Thank you. Thank you very much, sir. Ladies and gentlemen, in order to ensure that the management will be able to answer questions from all participants in the conference, please limit your questions to two per participant. Should you have a follow-up question, please rejoin the Q. Thank you. We have the next question from the line of Ankur Periwal from Axis Capital. Please go ahead. Yeah. Hi, sir. Good morning, sir. Thanks for the opportunity. Just continuing on the PVC side, globally, any comments there from a China revival perspective? Is there a significant demand which has come in, or probably it's still slow and steady? And maybe the dumping that we are seeing in India, will we see an immediate reversal, or probably it will take some time? Thanks, Ankur. Good morning. We are seeing a revival definitely in China. Domestic prices in China have gone up. There was, as you know, an extended holiday in China in January towards the end of January for the New Year. So all activity has been pretty much muted over that period. But we are seeing that the domestic prices have been pretty much going up. We believe that given the fact that the Chinese government has also announced an incentive for the real estate sector, which is very important to their economic growth given that it accounts for, I believe, around a quarter of their overall GDP, we believe that the demand for PVC should be healthy in the months ahead. Okay. Sure. And sir, on the margins front for SPVC side, we were seeing some softness there. And especially if I look at the subsidiary P&L, the other operating cost is significantly higher. Is this largely because of the power cost which you highlighted earlier, and when do we see a reversal there in margins? The power cost is largely affected. It will affect the parent company a little bit more than the subsidiary company because the parent company is where we consume most of the power given the fact that Caustic Soda, which is a highly power-intensive product, is there in Chemplast. But the coal prices have come down significantly, and that is what is encouraging. In the first quarter of the year, coal prices were at around $160, and that kept fluctuating. In the first nine months, it dropped to $125 and then was around $140. It is now back to around $115 levels, and that is quite significant. We believe that this could have a good impact on our other operating costs going forward. There was also an increase in natural gas prices. As you would possibly be aware, the government had commissioned a study by the Kirit Parikh Committee on natural gas prices, and they have come back with their recommendation, which suggests a floor and a cap on gas prices. These recommendations have not yet been accepted, but if they are accepted, that could also result in quite a substantial reduction in gas prices and the impact on customers like us. Sure, sir. Just last question on the CSM side. You did mention that initially, we are expecting an asset turn of 1x for the INR 6.8 billion CapEx, which will gradually increase to 1.3x-1.4x. Correct me if I'm not wrong. In the first phase of CapEx, we were expecting an asset turn which was slightly higher than this number, maybe more like 1.5x-1.7x. So if you can highlight on the chemistry bit, is it a slightly more complex project, or how many steps does it have, and maybe some details on that side? Ankur, the asset turn sort of evolved, and the business methods also. So on an overall basis, between the phases, I think it's not that the chemistry is too different, but gradually, as we evolve, I think we believe that the asset turn on an incremental basis would fall somewhere between 1.3-1.4 and should be somewhere around 1.7 or so. That is slightly being on the conservative side as well. If you look at the asset turn of our existing business, it's way above 2. So obviously, as we mature and we move in the coming years, maybe a few years down the road, I think the asset turn could even be much higher. But we wanted to sort of present a reasonably conservative picture. Sure, sir. And since it's a running product and established Generic AI, the ramp-up should be faster here? Yeah, ramp-up would be faster because there is an existing demand. It would depend on how the customer moves from their current supplier to us. But the demand is fairly established. Sure, sir. Fair enough. Thank you, and all the best. Thanks. Thank you. Thank you. Thank you. A reminder to all the participants, anyone who wishes to ask a question may press star and one now. We have the next question from the line of Niteen Dharmawat from Aurum Capital. Please go ahead. Yeah. Thank you for the opportunity. Am I audible? Sir, your volume is too low. Okay. Is it better now? Proceed. Please proceed, sir. Yeah. Okay. So first question is that we are making some CapEx now. So what was the CapEx amount we spent last year? These projects were announced four slides today. One is the Paste PVC project. The second one we announced is the debottlenecking of suspension PVC. Third is a custom manufacturing project. Originally, we announced a project CapEx of INR 260 crores, and it has gone over time to INR 680 crores now based on the traction that we have got on the business. So in terms of CapEx trend, the INR 23.5 crores we had announced on the debottlenecking of suspension PVC, that has been fully completed. The next CapEx, which is on the Paste PVC, which is around INR 360 crores, which is currently under progress, it will get commissioned in the third quarter of this year. The other project, which is the custom manufacturing business, phase one is progressing. It will get commissioned by the second quarter of this year. The recent one that we announced, it will get commissioned at the year-end. As far as actual capital outgoings, we are looking at actual cash outgoings. It is around INR 225 crores till now. Got it. Okay. And this next round of CapEx that you are announcing today, is it through internal approvals or through debt? How much debt we are taking for this, additional debt we are taking? As we had mentioned in the earlier calls as well, we believe that debt is an integral part of capital structure. So even for these projects, we would fund it using a mix of debt and equity. Debt would range between 60%-70% depending on the project. Got it. Got it. My final question is, since you mentioned that you see some price improvement in the product, so what is the guidance that you have for the next year for top line as well as for EBITDA margin? We generally don't, Nitin, we generally don't provide any specific guidance. But what we do is provide directional guidance. So as we have said both in our release as well in the opening remarks today, we believe that Q4 will definitely be better than what we have registered in Q4 or Q3. And FY 2024 should also register better performance, the usual caveat applies, of course. Got it. Thank you so much. All the best. Thank you. Thank you. The next question is from the line of Pritesh Chheda from Lucky Investment Managers. Please go ahead. Just one quick clarification. Now, the capacity which is supposed to come up is the Paste PVC capacity of 460. What's that number? Can you just tell me what exact? Yeah. Yeah. Paste PVC capacity is 41,000 tons. We expect it to be commissioned by the end of September, early October. Okay. The presentation, the capacity that you are mentioning, we just have to add this Paste PVC 41,000 which is supposed to come up next year, right? Yeah. But 41,000, the entire thing will not be available for the entire obviously, since we are coming up in October. So there will only be a limited quantity that will be there for the financial year, FY 2023-24. The full impact will be seen from the next year. Okay. And one other question, if you could give us the usual CapEx cost, that is incurred or replacement cost, if any, for a specialty paste PVC and the suspension PVC capacity, so either express it as per ton or your complex? Yeah. I think you're referring to the regular normal CapEx that we incur year-over-year basis? No, no, no. I am referring to, had you put up a greenfield like this, someone puts up, so what is a per-ton CapEx cost for a specialty paste PVC, and what is a per-ton CapEx for suspension PVC? See, I would not say a per-ton capital cost. But if you look at, for instance, if you do a 300,000-ton suspension PVC or a 350,000-ton suspension PVC project, it depends on whether you have already it's a brownfield, it's a greenfield, all of that comes into the picture and where you do it. But if you perhaps visit to what you do it in India for a PVC plant that size, maybe it would cost you around just the PVC polymerization alone would be around $125 million-$140 million. If you do it in the Middle East, it would be maybe $200 million-$225 million. If you do it in the West, it would be somewhere around. Sure, sir. Sir, in India, if you were to put up a greenfield project like you, just take that example and give me the number. So it will be $150 million for a 300-ton? Yeah. It would be around $125-$140. Again, it would depend on whether you need your own captive terminal, whether you invest in that, or you have an existing captive terminal or a public terminal close by for the import of EDC, etc. So there are a lot of configurations. It's very difficult to just give you a number without knowing what configuration you have in mind. That's why I assume your capacity, if someone has to replicate, how much input? My capacity, with the capital terminal, if somebody has to replicate, it would possibly be closer to $175 million. Okay. That's a very simple way to answer. The specialty paste PVC capacity, what will be the replacement cost there? Specialty Paste PVC, at the end of our expansion, we would be at 100,000 tons. There it will be a little bit more complex because we are also integrated on 60% of our capacity all the way down to EDC, and 40% is based on imported VCM. So that would be a bit more involved. I don't think I can tell you offline. We would need to maybe I can take a call from you later, and we can go over this. This 41,000-ton capacity that you are putting incrementally, is that INR 680 crore? No, no, no, no. 360. That is at 360. 360? Yeah. The INR 680 is for a Custom Manufactured Chemicals business. Okay. So this is at INR 380 crores, 41,000 tons. For a brownfield? 360 crore for 41,000. Okay. INR 360 crore for 41,000 tons. It's a brownfield, and it has its own VCM, or it will be an imported? Imported VCM. Okay. It will be imported. Okay. Thank you very much. Here we share the VCM import infrastructure, so we do not need to invest really in our terminal and stuff. Whereas if somebody were to set this up by themselves, greenfield, then the cost goes up significantly. Thank you, sir. A reminder to all the participants, you may press star and one to ask a question at this time. May we request all the participants to limit their questions to two per participant? Thank you. The next question is from the line of Nitin Tiwari from YES Securities. Please go ahead. Good morning, sir. Thank you for the opportunity. I hope I'm audible. So my question is related to the CSM business. So how many products are actually contributing to the revenue as of now, and what's the revenue contribution? If you can help me with that and a broader margin guidance. Currently, like we had mentioned earlier, we have nine commercialized products which are contributing to the revenue this year. As far as the revenue numbers, we have indicated to you that we are looking at a 30% growth this year, and we still maintain that. We will definitely achieve the 30% growth this year. As far as the margins for confidentiality reasons, we would like to refrain from giving out the exact margin levels. As you know, this is a specialty business, and we do make the margins in line with what the industry makes. Sir, actually, I wanted to understand the revenue contribution. I mean, what is the revenue contribution in the nine-month period that we are getting from the CSM business, either in percentage terms or the absolute number if you can provide? And a broader understanding of the margin is understanding that. I don't have to give the specific number. Now, if you look at the overall revenue of Chemplast Sanmar, it will be slightly lower than 10% currently. It will be around 8%-9% levels as of now. Overall revenue, consolidated revenue of Chemplast Sanmar, on a standalone basis of Chemplast Sanmar, it will be close to 15%-16%. Okay. And on the margin side, sir, a broader understanding? Margin, obviously, this is a specialty business. Obviously, this will contribute more to the margin than the Suspension PVC business. So obviously, the percentage is at 8%. Obviously, the margin contribution will be even higher. I would like to refrain from going into the exact details of the margin if it's fine. Understood, sir. And moving ahead, once our CSM expansion comes into picture over FY 2024, so what is the sort of revenue growth you're looking at in FY 2024 and 2025 from this business? Like we have said, we are investing close to INR 700 crore now, almost INR 680 crore. We are looking at a per-ton of 1 to start with and gradually increase to 1.3, 1.4. That will give you an indication of so we are definitely looking at once we reach a steady state, well above INR 1,000 crore in terms of revenue. That is broadly the outlook based on the current investment. Right. That part I understood, that per ton is about 1.3-1.4. On the relevant years, actually, we refrain from giving guidance for the relevant years, like Ram also mentioned earlier. I would like to refrain from giving any specific number guidance for finance FY 2024, FY2025. So in that case, then, what is the time frame in which we are looking to achieve a per-ton of 1.4 times? The INR 680 crore is what we're investing. On a per-ton of 1.3-1.4, that itself will give you INR 950 crore on a steady state basis. Like I had indicated, this will happen over a period of 2-3 years. To start with, it will be at roughly around 1-ton. So that will be the starting point. So we are commissioning the project this year in 2023-2024. So obviously, we'll start seeing the results from 2024-2025. So we'll maybe gradually ramp it up to 1.4 times over a period of time. And we also have the current turnover which we have discussed earlier as well, and about INR 300-and-odd crore. So that will give you a feel of the overall turnover that we will be able to achieve. Understood, sir. And so my second question is with respect to the SPVC expansion that you had earlier indicated that where the plans are right now on the drawing board. So any updates on that, please? Could you repeat that, please? We lost you a bit there. Oh, no, no. Sorry, sir. So I was asking about the SPVC expansion which was on the drawing board there which you were considering. So any updates on that point where you were looking to double the capacity in the business? Sure. We had mentioned that we did have the environmental clearance to go up to 600,000 tons from the current 300, but we have not announced any plans to actualize that. We have, in the interim, did a debottlenecking at very minimal CapEx at around INR 23 crore and taken up a capacity to around 330,000 tons, which would have a payback of around six months. And that has already been actualized. Any further expansion is dependent on feedstock type, which is a little bit more involved. And unless we do that, we will not be able to announce further expansion. Understood, sir. Thank you so much. Those are all my questions. Yeah. Thank you. Thank you, Nitin. The next question is from the line of Chintan Chheda from Quest Investment Advisors. Please go ahead. Yeah. Hi. Good morning, and thanks for taking my question. My first question is on the Paste PVC business. So this 41,000-ton additional capacity that we are bringing in FY 2024, so where do we see full utilization of this plant going? We would be at maybe around 25% of that coming in this year. That is in this year meaning FY 2024. And then the very next year onwards, we will be at 100%. Okay. Sir, what is the demand supply currently in the Paste PVC industries right now in India? We were facing some headwinds from dumping from China. Has that eased out specifically in the Paste PVC segment? Yes. The total demand for the Paste PVC in India is expected to be around 150,000 tons in FY 2023. This is actually more than the pre-pandemic levels. Paste PVC recovered a little faster than suspension PVC is as far as the recovery during the pandemic itself. And here, if you look at the total inputs, China doesn't play that big a role as far as Paste PVC import is concerned. This is a little bit more spread out over Europe, Thailand, Korea, Malaysia, Taiwan, and China. And the total inputs, roughly, the domestic production is roughly around 65,000 from us and maybe another 13,000-14,000 from the other player, so around 80,000 tons. And the balance, 60,000-70,000 tons, is being imported. And this is spread over these six countries. So how do we see the margin getting recovered in this segment? Because we always said that this is basically a specialty product for us, but over the last couple of quarters, the hit over here in the margin was much more severe. So now, where do we see the spreads, or you can say per-ton kind of data over here moving? Directionally, it is moving up. You're right. In the last three quarters, we did have a hit there. In fact, the previous two years, we had excellent performance in this segment. In this last three quarters, the hit has been largely because of the Zero-COVID policy in China to some extent, but also equally because of the increase in energy cost. Like I mentioned, this is a segment where you have significant energy because we are backward integrated all the way to caustic soda. And therefore, the energy cost increase affects the cost of production in this product. And that is what is really affected. But we are seeing with the recovery in Paste PVC prices, we are seeing the margins going up as we speak. Is it higher than Suspension PVC, or still lower than that? Suspension PVC was lower than that, but suspension PVC, again, is picked up very smartly in December and even more in January. No, no. My question is, the spreads in Paste PVC, are they higher than the levels we are seeing in Suspension PVC, or still below that? It will be higher. It will be higher because one is, of course, the fact that this is a product that comes with premium over the price of suspension. Secondly, we also have a greater level of integration on Paste PVC as compared to suspension. Suspension, we just input the VCM and polymerize and make PVC, suspension PVC. Whereas in Paste, for our existing capacity, we are fully integrated on VCM, and we have a significant integration back into EDC as well. Okay. The last question is, what is the current cash and bank balance on books as of December 22? We have INR 1,167 crores on a consolidated book. Okay. We are still going for, say, earlier, you highlighted that 60%-70% of debt component in this custom manufacturing expansion. So any rationale behind that? If you look at the cash of INR 1,167 crores, roughly around INR 500 crores is at the holding company. The rest is at the subsidiary level. So in the holding company, as you would see, we have announced CapEx to the extent of almost 1,000-odd crores primarily on the specialty side. And that would need investment from internal growth side. So obviously, we believe debt is an important part of the capital structure to fund these INR 1,000 crores of products. Because out of INR 500 crores, we would always like to retain some liquidity reserves to sort of take care of any volatility. So that leaves some amount of cash to be used for equity purposes. The rest being managed through the debt. Okay. Thanks, Raman. Thank you. The next question is from the line of Rohit Nagraj from Centrum Broking Limited. Please go ahead. Yeah. Thanks for the opportunity. So my question is on CSM part. So currently, what would be the domestic and exports mix? And once we are through with the INR 680 crore CapEx and achieve a peak turnover of, say, INR 950,000 crore, what is the mix that we are looking at? It's 100% exports. Okay. So all the time, I mean, incrementally also to the 100% exports? Clearly, it will be for exports. I mean, some of the sales could be made domestically, but the intent of all of this would be for the export market. Right. And let's see. Last quarter, we had mentioned that phase two will start sometime later. And this quarter, we have received this customer approval. So is it that a significant part of our INR 680 crore CapEx capacity will be occupied by the two products where we have received the LOIs? And would it be a dedicated facility for any of these products? It won't be a dedicated facility. It will still be a multipurpose facility where we can make different products. These two that we have, the LOI we signed last quarter and then this new development, between both of them, steady state, we believe the majority of the Phase-1 capacity will be occupied. Our approach is to trigger additional capacity as and when we have clear visibility on such a high level of occupancy, let's say. That is the reason we are triggering the Phase 2 as well. We have a high level of visibility of some of the other products moving through the pipeline, which would require additional capacity. So that's the rationale for moving forward in triggering the Phase 2. Right. Just one clarification. So at peak utilization level, what is the kind of product rollout that we are targeting from this multipurpose facility? I'm not clear. Currently, we are having, say, nine products from our existing facility. This new facility, INR 680 crore. Do we expect a similar set of products, or there will be limited products but with better revenues or higher revenues? Yeah. I think the way I would look at it is when the investment is complete in both these phases, probably I would expect maybe 5-6 products occupying the new capacity coming on stream. Sure. That makes sense, sir. Thank you. And better flexible. Thank you. The next question is from the line of Raj from Arjav Partners. Please go ahead. Mr. Raj, I have unmuted your line. Kindly proceed with your question. Hello. How do you hear your Q&A going? Sir, your audio is not clear. May we request you to use your handset to ask a question? Internet? Please proceed. Okay. I wanted to ask regarding your Q4, given the expansion you have done. So how do you think your Q4 is going? Okay. The expansions are going to come up only in next year, by September of 2023. So essentially, in 2023, 2024 is when the expansions will have their impact. But Q4 is, like we had mentioned in the opening remarks and also in our earlier interviews there, it is definitely looking better than either Q2 or Q3. All right then. Thanks. Have a good day. Bye. Thank you, sir. Thank you. The next question is from the line of S. Ramesh from Nirmal Bang Equities. Please go ahead. Good morning, and thank you very much. So on the CSM business, obviously, it is taking a chunk of your capital allocation. So if you look at the companies over the next five years, would this be the order of magnitude in terms of capital allocation for CSM in terms of expanding this business further? And in terms of your tonnage, from the tonnage you have disclosed in the presentation, what will be the additional tonnage you will add in the CSM business in the MPP based on the INR 680 crore CapEx? As far as the capital allocation is concerned, CSM business will be our number one priority in terms of capital allocation. And we will keep investing in this business once we have clarity. We had indicated that once we have clarity on filling up phase one, we'll immediately kick-start the next phase, which we have announced now. And similarly, once we have sort of reasonable visibility, at least 60% visibility on the next phase in terms of occupancy, we will definitely kick-start the next phase of expansion. So this is going to be a number one focus area for growth. And as far as the tonnage, I would request Krishna to tell us about it. Okay. Tonnage would depend on the product. But just to give you an order of magnitude, the two products that we are commercializing or that we have talked about over last quarter and this quarter, each one of them, order of magnitude of steady state, would be 600-700 tons. So that is the kind of volume that we are talking about. Yeah. That's useful. So in terms of synthesis in share, whether there is any additional synthesis capabilities we are adding in this CapEx or within the existing domain? Okay. That's a good question. So this business is all about the chemists and the chemical engineers. It's about leveraging the chemistry and the process scale-up capabilities. So some of the investments that we are doing is also in augmenting our R&D lab, our pilot facility, and other infrastructure related to enhancing the breadth of capabilities we have. And the inquiries that we are working on more and more are also larger molecules of number of steps are more complex chemistries. And so we are sort of resourcing both on the people side as well as on the asset side. Okay. Thank you very much. That was very useful. I wish you all the best. I'll come back with you. Thank you. The next question is from the line of Saket Kapoor from Kapoor & Co. Please go ahead. Yeah. Namaskar, sir. Thank you for this opportunity. Sir, firstly, when we look at our standalone numbers, that mainly represent our customer revenue, or what constitutes the revenue from operations? If we look at Chemplast's standalone numbers, largely, you would have Paste PVC and caustic soda and custom manufactured chemicals being the bulk of the numbers. Okay. In the mix, sir, can you provide the split-up of how much is caustic soda contribution out of this INR 630 crore revenue? Caustic soda would be around, I think, 25% around there. 25%. You did speak about and alluded to the fact that there is some near-term pressure. So if you could elaborate more on the same, I think so, more than one million tons capacity has been added domestically. And also, sir, as you mentioned about coal prices and then gas prices globally softening and coming to levels, I think gas prices in Europe have come to levels even pre-COVID levels. So how do you see the caustic market, particularly shifting up globally? And some more color on the same. And how does the ECU behave currently, sir? How are the ECU prices? Yeah. Caustic really has softened a bit as far as prices are concerned. Caustic prices, in fact, have been moving in a counter direction to PVC, which is pretty much normal. So when PVC was down, Caustic was up. And this was further accentuated by the situation in Europe because of the Russia-Ukraine war and the run-up in energy costs in Europe. Therefore, the Caustic prices in Europe went up as high, especially in the Mediterranean region, of around $1,200-$1,300 per MT. And that presented a very good arbitrage window for Asian sellers of Caustic products. That window is now closed because the energy costs in Europe have come down. So Caustic prices have fallen off. And in Asia, the prices are right now around $550 or so. And India itself is around 5 million tons of capacity with the 4 million tons of demand. But most of the capacity is largely concentrated in the western part of the country. And caustic being a very regional product, given the fact that it is transported 50% of water, it is a problem that is very regional in part. As far as the southern part is concerned, it's not reflected so much. And for us, we are not really a caustic company. We are more a PVC company where we consume 100% of the chlorine that we produce. And caustic is, for us, treated like a byproduct. Thank you, sir. Ladies and gentlemen, due to time constraints, that was the last question for today. I would now like to hand the conference over to Mr. Ramkumar Shankar, Managing Director, for closing comments. Over to you, sir. Thank you very much. Thank you, everyone, for joining us today on this earnings call. We appreciate your interest in our company. If you have any further queries, please contact SGA, our investor relations advisor. Thank you, and have a good day. Thank you. Thank you, sir. Thank you. On behalf of Chemplast Sanmar Limited, that concludes this conference. Thank you for joining us. You may now disconnect your line.