Ladies and gentlemen, good day and welcome to Chemplast Sanmar Ltd Q2 FY 2024 Earnings Conference Call. This conference call may contain forward-looking statements about the company which are based on beliefs, opinions, and expectations of the company as of the date of the call. These statements are not the guarantees of future performance and involve risk and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode and there will be no 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 from Chemplast Sanmar Ltd. Thank you and over to you, sir. Thank you very much. Good afternoon, everybody. On behalf of Chemplast Sanmar Ltd, I extend a very warm welcome to everyone joining us on our call today. On this call, we are joined by our CFO, N. Muralidharan, Dr. Krishna Kumar Rangachari, the Deputy Managing Director of the Custom Manufactured Chemicals Division, and SGA, our Investor Relations Advisor. I hope everyone has had an opportunity to go through the financial results and investor presentations which have been uploaded on the Stock Exchange website and on our company's website. In line with our earlier guidance, Q2 FY 2024 was relatively better as compared to Q1. While the top line was flat, EBITDA was back in the black during the quarter. We achieved an EBITDA of INR 46 crores as compared to an EBITDA loss of INR 35 crores in Q1. This was due to the bottoming out of PVC prices towards the end of June and the increase in prices in July and August. The domestic demand outlook for both suspension and specialty-based PVC resin continues to be strong with a boom in the infrastructure and real estate sectors. However, the imports of both suspension and paste PVC witnessed an increasing trend towards the end of Q2 with heavy arrivals from China. This trend has spilled over to Q3 as well, resulting in correction in prices in the early part of October. While PVC prices have started moving up again from end of October, the scale of drop in the early part of October will impact our margins in Q3. Based on our assessment, the recovery in the PVC business will be gradual over the next two or three quarters. Talking about our segmental performance during the quarter, on a sequential basis, our specialty chemical segment witnessed a 4% uptick in volumes. Prices of paste PVC saw a marginal 4.5% increase in Q2 of FY 2024 on a sequential basis. Despite global cues of weakness in the end markets, the inquiries from potential customers of our Custom Manufactured Chemicals Division remain robust. To effectively address the growing demand, we continue to enhance our capabilities. Overall, this business is on track to achieve 20%-25% growth during this year. With the recent signing of the third LOI with a global agrochemical innovator for an active ingredient, we have strong visibility with respect to steady-state capacity utilization of the new production block and are on track to achieve INR 1,000 crores revenues from this business in the next three to four years. Phase I of the new multipurpose block, which we inaugurated in Q2 of this year, has been commissioned and is being ramped up. Deliveries of the two molecules for which LOIs have been signed in the recent past will commence from the second half of this year. The chemical industry is experiencing a phase of broad-based weakness globally. On a sequential basis, our other chemicals comprising caustic soda, chloromethane, h ydrogen peroxide, and refrigerant gases posted a flat performance in terms of revenues despite an 8% increase in volumes. Prices of both caustic soda and chloromethane witnessed further correction in the second quarter compared to the first quarter. There are some initial signs of recovery in prices, and we expect normalcy to restore in the next two to three quarters. On the suspension PVC side, we observed a similar trend in terms of pricing as witnessed in paste PVC. The overall demand, however, continues to be strong. Coming to our expansion projects, both our projects are on track. Completion of phase II of the multipurpose block is anticipated by the end of financial year 2024, and the paste PVC capacity expansion by 41,000 tons will be commissioned in Q3 of FY 2024. I'm happy to report that our Karaikal plant and two of our plants at Mettur have received the prestigious Sword of Honour Award from the British Safety Council. Another plant at Mettur and our Karaikal plant have already received this award in earlier years. While we continue to face headwinds in the near term, we expect a recovery over the next couple of quarters. The business prospects for our products continue to be strong in the medium to long term. With the projects on track for commissioning as per stated timelines, we are confident of delivering a healthy performance in the future. I will now request our CFO, Muralid haran, to share the financial highlights for the quarter and the first half of the year. Murli? Thank you, Ramkumar, and a very good afternoon to all the participants on the call. Talking about the quarterly performance in the second quarter of FY 2024, the revenue from operations was flat on a quarterly basis and should have reached INR 988 crores. Our gross margins, which dropped to near historic lows of 27% in the last quarter, showed a decent recovery to 34% in Q2 of FY 2024. This was largely due to some improvement in prices of both suspension and paste PVC, coupled with lower feedstock prices during the quarter. Employee expenses during the quarter remained flat as compared to Q1. We, however, saw an 8% decline in other expenses sequentially, mainly due to a 10% reduction in energy costs during the quarter. Due to the above-mentioned factors, we reported an EBITDA of INR 46 crores as against an EBITDA loss of INR 35 crores during Q1 of FY 2024. Our finance costs for the quarter should have been INR 39 crores, and PAT for the quarter was at INR 26 crores. While the correction in prices, PVC prices in October 2023, have reversed partially towards the end of the month, the scale of correction will impact the margins in Q3. For H2 FY 2024, we recorded a revenue from operations of INR 1,984 crores, EBITDA of INR 11 crores, and PAT loss of INR 38 crores. With the commissioning of phase I of the custom manufacturing project in Q2 and the expected commissioning of the paste PVC project in Q3 of this year, the volumes are expected to go up in the coming quarters. With respect to the balance sheet as on 30th September 2023, our consolidated net debt should have been INR 321 crores. This is mainly due to the project loans drawn during H1 of FY 2024 combined with a slightly lower cash balance. With this, I conclude the presentation and open the floor for further discussions. 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 one on your touch-tone telephone. If you wish to remove yourself from the question queue, you may press star 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 Sanjesh Jain from ICICI Securities. Please go ahead. Yeah, good afternoon, Ram and Murali. Thanks for taking my question. I got a few of them. First, on the PVC, though India demand remains strong, I think globally, particularly China, remains on the weak footing. How sure are we of a recovery until China real estate completely recovers? And it appears that that itself may take a few more quarters. So what gives us confidence of a sustainable spread in the PVC? Good afternoon, Sanjesh. Good afternoon, sir. That is a very valid question. What we really need to have is a stable margin and stable price level. Volatility is what is the problem. As we have discussed in past calls as well, so long as the prices are stable, the margins would also tend to stabilize because the feedstock VCM prices normally follow PVC pretty closely. It is only when prices keep yo-yoing that margins are affected because of the time lag between the drop or the correction in PVC prices and the correction in VCM prices. The second action that we are as an industry are looking at is to file for anti-dumping and to have quantitative restrictions. There are a variety of measures that we have asked for, and we are hopeful that some of them would come through. I think the government has notified some quantitative measure, but it's been taking a lot more time than what we would have anticipated for that to get implemented, right? That's right. The DGTR has notified the quantitative measures, and it normally has a certain process time. That process time will take its course. But we are confident that something will come through soon. Got it. We have to be notified finally. Ram, my question on the standalone still remains. It's a fully integrated facility paste PVC. We have a very good specialty chemical business there. EBITDA loss in that scenario because I don't think people are making losses in caustic and chlorine, EDC, and Shriram is still making profit, that indicates that the profit cannot be in the red without paste PVC not doing so well. So what is dragging the performance for us in standalone and an integrated facility itself means that it cannot go into a red, right? See, the prices of paste PVC are also, to some extent, being influenced by the sentiments around suspension PVC. So while we saw the July-August upward correction in prices for both suspension and paste, the subsequent slide in suspension PVC prices has impacted paste PVC as well. So this is something that in times like these, when the largest producer and consumer of PVC in the world, which is China, is going through some toughness, this is having an impact on the region. It's not the world as a whole. And that is really what is impacting us. If you look at just the standalone, caustic alone, you sell the caustic and then look at the margins on just that, you may see that that is looking very good for that company. And depending on the chlorine margins outside, the chlorine price is bad. There, maybe the chlorine is being sold at negative price as well. But if you look at for us, even for us on a standalone basis, caustic is making money. It's just a question of the rest of it coming together and the prices of paste PVC actually settling down. Once that happens, I think we will be back to the normal business as usual. Now, Ram, I'm sticking to this again. We are not making any losses in suspension. I hope we are making profit in the specialty. You said we are making profit in caustic chloromethane. Then what explains the loss in the standalone business? It's also a question of timing, right? For us, the volumes also will need to come in. In a custom manufacturer business, volumes will come in towards the second half of the year. So that will also start kicking in in the second half. So there are multiple things that are involved here. One is on the timing of sales in the custom manufacturer chemicals business. The second would be volatility in paste PVC prices. So it is a mixture of all of this, I guess. Got it, sir. Next, on the specialty chemical side, we said that agrochemical inquiries remain strong. How many products are we developing today? And we also were eyeing to expand our presence in the pharma as well. Where are we in that journey? Okay. This is Krishna Kumar Rangachari. On the custom manufacturing, the inquiries and the pipeline is very strong. In the past, we have disclosed we have an existing 8 number of products. This quarter, or since last quarter, we are in the process of commercializing 3 more products. That will take our count of existing products to 11. The pipeline remains very strong and healthy between agrochemical, pharmaceutical, as well as from other fine chemical inquiries. We do have an active initiative underway to diversify beyond agrochemical. We will keep updating you as we make progress on those developments as they move through the pipeline. How many products are in the R&D stage? This is just the last one. This is just the last one. Yeah. So that's what I meant. In our pipeline, the over 15 are in the various stages of development. 15 products are in the various stages of development. Yes. Got it. Thanks all for answering my question. Best of luck for the coming quarters. Thank you. Thank you. Thank you. Ladies and gentlemen, in order to ensure that 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 Tarang Agrawal from Old Bridge Asset Management. Please go ahead. Hi, sir. Good afternoon. A couple of questions from my side, all relating to custom chemicals. If you could give us a sense whether the molecules in question, the 11 products that you have currently, 8 + 3, while the customer is an innovator, but are largely these molecules in the post-patent space or in the patent space? Okay. So it's a blend. It's a mix of the final molecules of the 11. I would say it's a mix of both generic as well as pipeline. So that's about as much information I can give. But the three letters of intent that we announced over the past 12 months, two of them, so, for example, the first two, one of them is an intermediate that's going to a new molecule that has just recently been launched. The other intermediate is for an established generic active ingredient. And then the third LOI that we just announced earlier this week, that is going for that active itself is a new pipeline molecule. Okay. Got it. These customers of yours, are they largely of Western origin, or you've got Eastern customers also? They're all innovators, based out of Europe and North America. So we don't sell anything in India. Okay. Got it. And just if I go to a couple of them, as you reach 4,500 metric tons of capacity in Berigai, what would be the total gross block for this business? And if you could give us a sense on what is the workforce currently for this business? So the 4,500 metric tons would depend on the blend of products we have. It's an estimate which may change depending on the complexity or the simplicity of the molecules that we commercialize. So it's just a number based on an estimate of volume mix. So that is. And that will be available only after the commissioning of the phase II of the production block that's on the phase II of the multipurpose block that is under various stages of commissioning. And. The gross block of that will be INR 680 crore that we are investing now. Earlier, we had around INR 85 crore. 680 plus 85, that would be the total gross block number for that business. Okay. Just wanted to understand the workforce for this business. Yeah. So the workforce is at the site, it's all pretty much chemists and engineers. Today, an approximate estimate would be close to around 400 of a combination of mostly chemical, mechanical engineers, and chemists. Wonderful, sir. All the best. Thank you. That number will keep increasing as we bring in that phase II gets commissioned over the next six months. Thank you. Thank you. The next question is from the line of Jatin Damania from Svan Investment Managers. Please go ahead. So thank you for the opportunity. Pardon me if I'm repeating the question. So I just wanted to understand the average suspension and paste PVC spread in the last quarter. And with the dumping that's coming from China and the pricing crisis that we are witnessing, what are the current spreads right now? Yeah. Sorry. Could you repeat that, please? It wasn't very clear. I was just asking you just wanted to understand the suspension and the paste PVC spread in the last quarter, Q2. And with the decline in the prices in the month of October because of the high import, what are the current spreads? Yeah. In Q2, the PVC VCM spread was around $200.99, to be precise. And as far as the paste PVC is concerned, it's an integrated facility. So we don't look at the spread. We look at the contribution that we make, which is after considering variable conversion costs, packing costs, all of that, that was close to $200 in Q2 of FY24. As far as the current suspension PVC spreads are concerned, the CFR Asia price I'm talking about, pre-duty number. CFR Asia price is around $770. CFR Asia VCM is around $615. So pre-duty spread is around $145. Okay. So probably we can see some pressure in the Q3, but sequentially, it was higher. So one question on the custom manufacturing front. Now, in the previous participant, you indicated there will be that 9 molecules were already there, and you will be doing 3 more during this year. So these are largely into agrochem front. So want to understand the intention of the management that's going ahead. Are we going to diversify from the agrochem, or we will be focusing on the agrochem only? Yeah. This is Krishna here. Yes, the intent and a lot of efforts are being focused on diversifying beyond agro. We do have a significant presence in pharmaceuticals right now. If I look at what we have in the pipeline, we have a healthy mix of non-agrochemical products under various stages of development as well. Okay, sir. Thank you, sir. That's all from my side. And within the entire team, happy Diwali. Thank you. Thank you. Thank you. Thank you. The next question is from the line of Ankur Periwal from Axis Capital. Please go ahead. Yeah. Hi, sir. Good afternoon, and thanks for the opportunity. First, on the PVC bit, continuing with the earlier discussion, if you can share your thoughts on the demand recovery in the global markets, especially in China, probably because of which things are getting dumped in India as well. Yeah. All right. See, China is definitely going through a slowdown right now. Basically, China accounts for around; it's around 40% of the world's capacity of PVC and maybe around 35%-40% of the world's demand as well. And a lot of the PVC in China goes towards the construction sector. And as we all know, their construction sector, which accounts for around 25% of their GDP, is going through some tough times. However, that said, there is definitely a concerted effort by the Chinese government to stimulate this industry because that accounts for a fourth of their economy. There have been, even as recently as September, a lot of stimulus measures that have been announced, which are making it easier to buy property, etc. But it is expected that for that to translate into actual demand on the ground for PVC will take maybe a couple of quarters. So that is the period that we are looking at for some kind of a recovery and for these measures to translate down. Now, the Chinese futures prices could be a good indicator, a forward indicator, or a lead indicator of what is happening in the industry. They were languishing at RMB 5,500 just about six to eight months back. They did go up to around RMB 6,500. Then they swung back down to RMB 5,900. Right now, they are at RMB 6,200. So I think it is still better than earlier, but I believe that it will take that few months for the stimulus measures to actually translate to demand for not just houses, but also PVC on the ground. Sure. Would it be fair to conclude then that till the time we do not see recovery in China as a market, these PVC spreads will remain volatile, and hence, it will have an implication on our spreads per se as well? Okay. Till that time, I believe that there will be Chinese material that is available. But what we are looking at is a reduction in volatility and a greater stability. As I keep saying, stability is all that we want. It doesn't necessarily need to be at high levels. It can be even at lower levels of prices because since the feedstock also follows the PVC prices very closely, the margins would still be there even at the lower levels. So whether it is $1,000 of PVC and $800 of VCM or if it is $1,500 of PVC and $1,300 of VCM, we are really agnostic in that. So I think what we need is only stability. And I believe that if the bottom is reached and you have, as it increasingly looks like it has, then I think we will get to that stability. That should be good enough for us. Also, the measures that Ram mentioned earlier in terms of the various measures the industry is looking at and in discussions with the government, those measures will also help support the margins and prices going forward as a non-destructive measure. Sure, sir. Second question on the CSM side, the LOIs that we have signed, the recent one as well as the two earlier ones, and the 15 more products which are a work in progress here, would you please help in terms of how complicated these products are? Maybe single chemistry, multiple chemistry, how many steps typically are required in these products? Yeah, sure. Yeah. The LOI that we just recently announced, it is an important milestone, and we're extremely pleased with the development. It's important for many reasons. Number one, it's our first active ingredient molecule that we will be commercializing. The second aspect is that it's a new pipeline molecule for the customer. And the fact that we are getting involved in the initial stages means that there is a long runway for us to participate. And third, as you asked, it's also a molecule with a large number of chemistry steps. And what that means for us is it's a reflection of our customer's confidence in our ability to handle such complex chemistry. And the other aspect that we like about this is this will involve Chemplast Sanmar and the customer extensively working over the next few months in commercializing this. And so we like such partnerships where there is a significant involvement of our chemists and engineers with their counterparts at the customer end. And lastly, I mean, the fact that it's an active ingredient means that this is a validation of our stated intent of being only in the custom manufacturing space and not compete with our customers. And so because of this, they trust us in the manufacture of the final product. So we are extremely excited about this particular opportunity. And so the other, I mean, you're asking the complexity of chemistry. So what we have in the pipeline is as well a blend of more complex chemistries and a significant number of new pipeline molecules. And then so when some of them materialize, our belief is there is a long runway for us to participate. Sure, sir. Just one clarification. For LOI 1 and 2, the complexity is also similar, or they are relatively limited, lower number of steps? So a little bit lower number of steps, but we talked about this in the past. The LOI 1 was for a new intermediate for a new recently launched active ingredient by the customer. And the LOI 2 is for an established intermediate for an established active ingredient. So what we like about those two is the fact that we have a blend of new and then established means that the demand or the requirement is fairly well established. So we like them for those respective reasons, I suppose. But the complexity would be maybe lower than what it is, but still fairly complex chemistries. Fair enough. That's it from my side. Thank you, and all the best. Sure. Thank you. The next question is from the line of Kirtan Mehta from BOB Capital Markets. Please go ahead. Thank you, sir, for giving the opportunity. One question. Coming back onto the paste PVC business, you indicated that we had the contribution of around $200 in Q2 FY 2024. What is the level of contribution we'll need to sort of have the specialty business back in black? Yeah. Specialty business, actually, it's a combination of products, not only paste PVC. It has paste PVC, custom manufacturing, caustic soda, CMP, all of that mixed together. I think it's a unique set of circumstances that the caustic prices are also slightly soft, and CMP prices are significantly soft. That is the reason you are seeing actually lower profitability. But as you would see in terms of the current year numbers, if you look at only paste PVC increase, how much should it increase? Maybe another $200 increase in the paste PVC contribution would certainly help. What would be contribution for the paste PVC in the FY 2023? In FY 2023, paste PVC contribution FY 2023 was around $400. Fine, sir. Thank you. At that level, definitely, Chemplast will be needed. Thank you, sir. Thank you. The next question is from the line of Dhwanil Desai from Turtle Capital. Please go ahead. Hi. Good afternoon, everyone. So, sir, my first question is on the CDMO of business and slightly wanted to get more texture on the client side of it, the customer side of it. So what we observe is that there is a very high dependence on the CDMO side on a single client, the European client. So as we move forward in the product pipeline, will this concentration go down, or most of the product pipeline also is with the same customer? Mr. Desai, yes, the concentration or the dependency on one or two customers will definitely go down as the pipeline moves, which is why the milestone regarding the commissioning of our new production block is very important. If you recall, prior to that, our existing facilities were completely occupied. But now what we have is an opportunity to take the available capacity and have active discussions with a number of potential customers. But obviously, it will take time for the pipeline to move. And so that will, I mean, as I've discussed in the past, that's typically a 12-18-month time period from an inquiry and then to commercialize. So the near-term dependency would be there, but medium-term, long-term, there will be a significant diversification of the customer base. Okay. Okay. So even the three new LOIs, even with that coming into play, the customer dependency will remain, right? That's the right way to think? Not very clear. Sorry, I cannot even hear you clearly, sir. What I'm saying is that with the three new LOIs that we have got, will the customer dependency go down, or that's even far off when the three LOIs coming into commercial production? So as I said, near-term, it will continue to be the way it was. But medium and long-term, it will change significantly because what we have accomplished so far is based on the relationships that we already have in place. But the relationship with others will grow because now we have demonstrated the availability of new production blocks. Okay. Got it. Second question is that on the custom manufacturing side, whenever we reach INR 1,000 crore three to four years out, so do you think that the current nine molecules plus the three LOIs will be sufficient to take us there, or we'll need more molecules to kind of fructify? How should we look at that? Yeah. I think, yeah, what we have accomplished over the past 12-14 months, the three LOIs, our thinking is the steady-state capacity, including the new production block, would probably get fully utilized. And so we would have to start thinking about, again, in the medium and long term, what our next set of plans would be for additional or new production capacity. Okay. Okay. Sir, another question is at a business level, at a company level, even if we reach INR 1,000 crore three, four years out, we will still be significantly dependent on suspension and paste PVC. So going forward, when things normalize, what are the typical ROCs that you guys look out for in this business? I think you had indicated that in custom manufacturing, we typically aspire to do 40% ROC. So what is that number on a normal market condition for the PVC business? It could actually keep it. It depends on the margins on an annual basis. For us to sort of give one number, it's also a mixture of businesses. If you look at it as a combination of businesses, paste PVC, custom manufacturing, caustic soda, all of that combined together. So to give one number would be a bit of a challenge. Okay. So let me put it differently. So across cycle, the PVC business, can it do 15%-16% ROC? Is that a fair assumption to make? That's what it should do. That is what it should do. In fact, just to give you a perspective, the Chemplast Sanmar business, if you leave out 2022, 2023, and the current year, till then, at least for the past seven years, they've been consistently doing EBITDA margin of over 25%. So that would certainly, given the capital employed, also, these are plants which are built long back and obviously depreciated plants, definitely, the return on capital employed will definitely be higher. Okay. So, essentially. Quarters. I'm sorry, sir. I missed you. No, no. This is an unusual scenario. Over the last few quarters, if you note these and look at the return on capital employed, they have been doing quite. It has been doing quite well. Okay. Got it. Thank you. Thank you so much. Thank you. The next question is from the line of Nitin Tiwari from Phillip Capital. Please go ahead. Hi, sir. Good afternoon. Thanks for the opportunity. I have two sets of questions, one for the suspension PVC business and one for the custom manufacturers. So taking up the suspension PVC part first. So I suppose the demand in this quarter, at least the domestic demand, was fairly strong. It was at least 30% of YoY. So why is that? Our production or sales level is not close to the peak that it had hit. So I suppose if you look at peak volumes, we are about 12% lower than that peak. And the reason I'm asking that is that while prices could be lower, but certainly, a higher production and sale could provide you the operating leverage. So why are we not moving in that direction? That's one. Related to that, in the last call, there was a data given out in terms of how much Chinese imports are coming on a month-on-month monthly basis. If you can help with that data, again, what kind of imports in volume terms have we seen from China in this quarter? That would be the first question. Okay. In terms of the volume of imports from China on suspension PVC, I'll give you the numbers for the last three quarters itself. So in the January to March quarter, we had around 333,000 tons coming in from China. Between April and June, this dropped down to 164,000 tons. And July to September, it has moved up to 269,000 tons. All right. There is imports coming in from China. The overall imports also obviously move in that line because China is a significant part of overall imports. You were asking about suspension PVC production, right? Right. Actually, if you look at the half year, the suspension PVC production has actually gone 165,000 tons in the first half of this year as compared to 159,000 tons in the first half of last year. So, sir, I was referring to the production that is seen in the second quarter of 2022. It was about 93,000 tons. Right now, we are doing about 82,000 tons. So why are we not hitting that peak production levels right now? Of course, I mean, if we can hit 93,000, then why not? No, no. We wouldn't have done 93,000 tons of suspension because that's not our capacity. We did 77,600 tons in the second quarter of last year. The second quarter of this year, we've done 81,800 tons. All right. So I'll take it offline. Maybe that's it. Then secondly, on the custom manufacturing side, so you mentioned about the capacity of 4,500 tons and also the revenue target of INR 1,000 crore. So where are we in terms of achievement of those milestones? If you can just give us some indicative number. I understand that we don't give out the custom manufacturing revenue on a quarterly basis. But I just wanted to understand that in percentage terms, where are we versus those milestones? And after the phase II of custom manufacturing commissioning, what will be our capacity at Berigai? We have talked about and I have mentioned that we don't want to give out the quarterly numbers. We will certainly give the annual numbers for the custom manufacturing business. As far as the traction, like you had indicated earlier, we are on track to sort of achieve 20%-25% growth this year compared to last year. We are well on track for that. Last year, we indicated our turnover was somewhere around INR 325 crore. That gave an indication of where we'll end up this year broadly. So that is how we can guide you today. At the end of the year, obviously, we'll report the actual figures. Understood. And in terms of capacity? So the capacity, it's got to be linked to the capacity after we commission the phase II of the new production block. We have indicated a total capacity for the entire site at around 4,500 tons. But that number is a notional number depending on and some assumptions related to the product mix, right? So that would change the actual would be depending on which product we slot from a campaign standpoint. But that would give you a reasonable indication of what the volume is. Right. Right. So while on the suspension PVC national number, still, I'm being on that number. So in the third quarter of 2023, again, we had done about 88,000 tons of sales, right? So we are still not there. That's what I was trying to get at. If we are capable of that kind of sales, we are still lower than that, right? Even though the demand in domestic market is certainly higher. Now I understand. Because you were talking about production, so I gave you the production number. Sales actually depends on how much of stock is built up in the previous quarters and therefore how much of stock is available for sale. So if you look at that, sale is entirely dependent on that. We will only have to look at the production and then have we sold all that we have produced and are we producing to capacity. So right now, in suspension business, we are operating at less than a day's inventory level. So whatever we are producing up to the last day of the quarter, we are selling. So the sale difference between a particular quarter in the past and the current quarter would largely be because of stock differences. In that quarter, we would have drawn down some stock. So that matters. Right. Understood. So right now, we are holding just one day of inventory, is what you are saying? Less than one day of inventory. In fact, our one-day production is around a little bit close to 1,000 tons, and our inventory is much less than that. Understood. Thank you so much, sir, for all the answers. I'll get back to you. All right. Thank you. Thank you. The next question is from the line of Archit Joshi from B&K Securities. Please go ahead. Hi, sir. Thanks for the opportunity and Susan's greetings to you all. So just one question on the CSM business out of curiosity in the recent light of events with respect to the number of LOIs we have been able to garnered. Just wanted to understand the process in the entire business development cycle. Has this been due to our existing forte in chemistries like cyanation, hydrogenation, or these contracts that we have won are on the basis of our longstanding relationship with the customer? And if suppose we were to take it in terms of our growth trajectory, if suppose to take it to some new innovators or new customers, how would that fructify into? So just wanted to kind of understand your thought process and the process in this entire business cycle. Yeah. So the way this works, as I've indicated in the past, to get a relationship going with one of the innovators or with any innovator, you have to establish your ability to deliver what they want. So the sequence of this is typically, let's say, they give one inquiry. They see how we deliver on that inquiry. And that may be, let's say, a 12-18-month process depending on the complexity of that inquiry. If you execute, then the one becomes two. The next set of inquiries will flow in. And so it just cascades in that manner, right? And so the fact that we secured three new molecules over the past 12 months was linked to the fact that if you have noticed our communications in the past, we commercialized, let's say, two products the previous year or the previous 24 months. That's the way this builds one after another. That's pretty much the model. You have to establish the trust, the belief on the customer part on your ability to deliver what they want. One thing leads to another, and it just keeps cascading. Sure, sir. So just a supplementary one to this, is it more inquiry-led, or we are able to also find out certain gaps, let's say, certain molecules going off-patent, and we could have the ability to manufacture a few of them, and then we take it to the customers, or it's the other way around? It's the other way around because the second option is more like a needle in the hole that you have to. It's a needle in a haystack or whatever. You have to keep searching back, I mean, searching for an opportunity to participate about which you. I mean, okay, it could be based on the chemistry capability you have, but invariably, the customer may not be interested in switching to a new supplier. So a lot of what we get is inquiry-based based on the customer's understanding of your chemistry capabilities and your scale-up capabilities. Got it, sir. Thank you. Thanks for the clarification, and happy to give that to all of you. Thank you. Thank you. The next question is from the line of Meet Vora from Emkay Global. Please go ahead. Yeah. Hi. Thanks for the opportunity. Sir, I had just one question regarding the quantitative restrictions in form of anti-dumping duty that had been levied in May 2023. So why is it that it is not playing out, or is it playing out slow? Because we are still seeing large imports, say, 270,000 tons in Q2. Now, is it that a lot of Chinese capacities have already been converted to less than 2 PPM of VCM content? Because today, as we speak, the restriction is on more than 2 PPM of VCM content because quarterly, restriction on imports is around 20,000 tons for China, Taiwan, U.S., and Russia. So how do we look at it? The quantitative restrictions have not been brought into effect yet. The final findings were notified by the DGTR, but they need to be getting it. That is the final step. That is what we are waiting for. Sure. But still, your thoughts on the total imports, do we see a large part of the Chinese capacities which are getting imported in India less than 2 PPM, or these quantitative restrictions will put a lot of restriction on overall imports because they are more than 2 PPM of VCM content? The quantitative restrictions, like you rightly said, is on all imports from anybody which is above 2 PPM. There are some four countries mentioned. If it goes above residual VCM content of 2 PPM, then the restrictions will come into effect. But largely, you are right. It would possibly be applicable to a lot of the carbide PVC imports. Understood. Understood. Thank you, sir. That's all the questions here. Thank you. Thank you. The next question is from the line of Rohit Nagraj from Centrum Broking. Please go ahead. Yeah. Thanks for the opportunity. So my first question is on the custom molecules. Now, we have seen in the recent past that there has been an inventory destocking situation at the customer's end. However, we have a very strong revenue guidance for this year from the agro CMC molecules. So is it because of the newer kind of molecules that we are, I mean, rather the early-stage molecules where we are supplying these intermediates? And this is backed by some firm POs from the customer. Just your thoughts on this. Thank you. That's a good question. Yeah. I mean, it is indeed tough times on the agchem side. There is destocking going on. Last quarter, we also indicated that we were also impacted by that. But our impact has been sort of compensated by the fact that we have additional molecules that we are commercializing this quarter and selling both this quarter as well as the next quarter. So we have been impacted. And what we hear is that this particular issue is probably going to be resolved or in the process of being resolved. Demand on the agchem side seems to be reversing, but we'll have to wait and see. Sure. Got that. The second question is on the LOIs. So typically, what would be the contract period for these LOIs? Maybe three to five years. And secondly, again, in terms of commitment, is there a volume commitment here on a yearly basis? And generally, where are we in the cycle? Are we the first or second, third supplier for these LOI molecules? Thank you. Yeah. So the LOI, the letter of intent, precedes a formal supply agreement. So we are in the process of working on or finalizing a supply agreement for each of the LOIs that we have been announced. And typically, both the LOI and supply agreement would be for a three to five-year period with some commitments on volume and a price formula as well. And so that is on the nature of on the agreement that would come in place. Now, with respect to are we the first or second supplier? Again, in this business, typically, the customer would have just two or three suppliers, not multiple suppliers. And what I can state is in each of these molecules that we have announced, we would be the major supplier. Sure, sir. Got that. Thanks a lot, and best of luck. Thank you. Thank you. The next question is from the line of Rohan Gupta from Nuvama. Please go ahead. Hi, sir. Thanks for the opportunity. And taking forward the previous question and a little bit more clarifications on this, in our CMC division, we have received the order and this LOI. Sir, what I understand that this new AI is basically still under the development from the customer. And over the next five years, we will be participating in the growth of this product along with the customer, or we have taken this order from some of the existing manufacturer which are already manufacturing for this company or this customer. Yeah. So yeah, this is a new active ingredient that the customer is in the process of launching. So our understanding is that we would be the first one to manufacture or the first supplier to manufacture. It's possible that the customer himself may be making some quantities of this right now, but we would be the first supplier to manufacture. So they're not switching from another supplier to us. And the second is, yes, this is a new molecule, and so there is a long runway which may go well beyond five years. As you may be aware, some of these molecules last much longer time because they're patented and they're not generic. So we would anticipate that we would participate in this well beyond five years. Sir, the nine products which we are already doing, I think that all of them are so far now intermediates. This is the first active ingredient? You're absolutely right. This is the first active ingredient. Okay. There's three to four more in pipeline. Any of them are in AI? I would just wait till next quarter. I may be able to answer that better. But right now, no. Okay. And sir, the nine products which we are doing right now, in terms of the customer profile, so this AI which we are doing is the new set of customers or from our earlier existing set of customers only? That is one. And second, what kind of value addition which we could bring for this product? I mean, because this product is a new product, the development. So the technology or the product process is shared by the customer, and we are just going to be a contract manufacturer, or we have been involved in the journey of this product development for the customer, and we have evolved this product either in terms of process or whatever the contribution? These are my two questions. Sorry. The first part of the question was. Sir, this is a new customer, or it was from the existing nine products which you're already doing from those? It's an existing customer because so we have been working on this for almost two to three years from the inquiry side standpoint. So it is from our existing basket of customers. And so in this particular case, the customer actually has a technology package that they have developed and that they have shared with us. So we will obviously spend some time in optimizing that further. So the chemistry and the package was given to us by the customer. Like I said, drill down a little bit deeper. I believe they must have been working with many other suppliers for giving or sharing this technology. Any particular reason for we have been chosen? Either we bring any cost advantage, or the product is related to the existing chemistries which we are doing, or we have done some remarkable work earlier for the customer that has given us some advantage. It's a good question. I mean, could be multiple reasons which I outlined earlier in the call. So again, the customer, we know for sure that they worked with a few suppliers or fewer. I mean, maybe two or three before they selected us. They obviously don't tell us exactly why they selected us, but our thinking on this, as I outlined before, is number one, it's an active ingredient. So before they give an active ingredient to a supplier, they need to be extremely comfortable with the supplier on many aspects. One, the supplier's ability to protect the intellectual property. The second is they don't want a supplier who may end up competing with them. So our stated intent to not compete with our customers could have played a role. This is a fairly complex chemistry. So this also means that they selected us because they were confident in the ability of our chemists and engineers to both develop this and scale this up. So all of these could very well have been factors that played an important role in their decision to work with us and the fact that this is going to be a long-term relationship, partnership. So I'm sure the customer is confident that our intent to be in this business for the long term. Thank you for that performance, sir. Thank you. Thank you. The next question is from the line of Rishabh Shah from Prabhudas Lilladher. Please go ahead. Thank you, sir. Hello. Am I audible? Yes, please. Yeah. Thank you for this opportunity. Most of my questions have been answered. I just want to know your thoughts on the other chemical segment, which is caustic soda, chloromethanes, and hydrogen peroxide and refrigerant gases. As it has been mentioned that right now, we are witnessing a pricing pressure in this segment. And I would like to know that the. You say only here. I would like to know that the. Go ahead, sir. I would like to know that the capital, are we doing the capacity additions for these chemicals in that zone? Okay. See, as far as hydrogen peroxide is concerned, prices are pretty much stable. There is not so much of pressure there. If you look at chloromethanes, it's a family of three products, and those are the ones or two out of those three are really facing the pressure. That is chloroform and carbon tetrachloride. And the last one, carbon tetrachloride, is largely related to certain pressure on agrochemicals in Latin America, and therefore, impacting the demand for our customers' products. But this is again expected to get better in the next quarter or two. Methylene dichloride is still strong, and there is no pressure in methylene dichloride. But if you look at it as a basket of products because these are all joint products, there is pressure because of chloroform and carbon tetrachloride. Again, it is a question of a couple of quarters before we see the recovery. For caustic soda, actually, there was a bit of a recovery in September, but then it again corrected a little bit in October. In India, again, there is overcapacity on caustic soda, though the operating rates are not so high. There is a little bit of balancing that's happening because of exports that are happening off the western coast of India by the producers on the western part of the country. When that balance is there, then the prices do correct. But if you look at the medium to long term, there is a significant increase in demand expected from caustic soda because of the demand increase from the EV side. Because be it nickel mining or even various additives during the EV battery manufacturing process, you do need a lot of caustic soda. That is expected to drive demand going forward apart from the usual demand drivers like aluminum, paper, and textiles. We believe that the caustic story is quite intact. It is only a question of a few quarters. Okay. Thank you. As far as the other one expansion you were asking about, no, we are not expanding on hydrogen peroxide or on chloromethanes. We are restoring some old capacity that we had temporarily mothballed in caustic soda. That will come up from January onwards. Okay. For the estimated project CapEx mentioned in the investor presentation of about INR 744 crore, what is the asset turn, and what will be the CapEx break-up? Can you please have a view on this? There are two parts to the CapEx. One is the custom manufacturing business CapEx, where we have sort of indicated an asset turn of roughly around 1.3 times on the custom manufacturing side. And as far as the asset turn on the other CapEx, this is the Paste PVC business that is coming up. That's around INR 360 crore of CapEx. There, the asset turn is expected to be roughly around 1.2 times or so. Okay. And. So depending on the prices, prices that improve, but roughly around 1.2-1.3 times. At current price levels, it's around 1.2 or so. But as prices improve, obviously, this will get better. Okay. Okay. Sorry to ask this question, but I just want to know, what is the variable cost in the operating expenses? Can you tell me what is the variable cost? How much percent is? Yeah. Actually, variable cost consists of feedstock as well as other conversions also. It will keep varying with the change in feedstock cost, but it's a bit of a detail. Would it be okay to take this offline? We can always connect with you offline and discuss the details. Okay. Okay. Thank you. Thank you very much. Thank you. Thank you. Ladies and gentlemen, due to time constraints, that is the last question. I now hand the conference over to the management for the closing comments. Thank you. Thank you, everyone, for joining us today on this earnings call. As always, we appreciate your interest in Chemplast. If you have any further queries, do contact SGA Investor Relations Advisor. I take this opportunity to wish everyone a very happy Diwali. Thank you very much. Thank you, members of the Management Team. Ladies and gentlemen, on behalf of Chemplast Sanmar Ltd, that concludes this conference call. We thank you for joining us. If you now disconnect your lines, thank you.