Ladies and gentlemen, good day, and welcome to the Chemplast Sanmar Ltd Q3 FY 2024 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 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, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to management of Chemplast Sanmar Ltd. Thank you, and over to you. Thank you very much. Good morning, everybody. This is Ramkumar Shankar. 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, and Dr. Krishna Kumar Rangachari, the Deputy Managing Director of Custom Manufactured Chemicals Division, and SGA, our Investor Relations Advisor. I hope everyone has had an opportunity to go through the investor presentation and financial results, which have been uploaded on the Stock Exchange website and on our company's website. In line with our earlier guidance, Q3 of FY 2024 performance was adversely affected due to the continuing challenging environment. We faced further correction in PVC prices on account of dumping at lower prices from China and other countries, slowdown in the other chemicals, comprising of caustic soda, chloromethanes, hydrogen peroxide, and refrigerant gases business due to the oversupply situation in India, the increase in key feedstock prices, and adverse impact of the lag effect in correction of VCM prices. We recorded a top line of INR 888 crores, down 10% quarter-on-quarter, with an EBITDA loss of INR 7 crores. The silver lining, however, is that there is a strong demand growth in PVC, led by an increase in activity in infrastructure and real estate. We expect this healthy demand to drive the recovery in prices and margins over the next two to three quarters, with serious efforts also being taken by the industry to address the issue of dumping. During the quarter, prices of both suspension and paste PVC were lower by 8% and 6% respectively on a quarter-on-quarter basis. EDC prices witnessed a 12.5% increase during the third quarter compared to the second quarter, while VCM prices remained flat during the quarter. Sales volumes of suspension and paste PVC were also slightly down compared to the previous quarter. The lower volume of suspension PVC was mainly due to reduced production on account of weather-impacted delays in feedstock arrivals, while paste PVC volume drop was more due to inventory movement. All of these factors resulted in compression of margins during this third quarter. Subsequently, though, both suspension and paste PVC prices have moved up in February. While the prices of caustic soda and chloromethanes were stable during the quarter, the excess supply situation continues, which is sustaining the pressure on prices and margins. The other chemicals business witnessed a 14% quarter-on-quarter increase in the top line because of steady prices and 10% volume growth. In our Custom Manufactured Chemicals division, the pipeline is healthy. We commercialized three new products this year, and a number of products are under various stages of development. Despite the challenges on account of the downturn in the global agrochemicals industry and the consequent inventory rationalization internationally, we expect this business to deliver a reasonable growth during the year. While commercial production Phase I of the expansion project has commenced, Phase II is expected to be completed in Q1 of FY 2025. The 41,000 tons per annum paste PVC project is expected to start commercial production in the fourth quarter of the current year. This will further cement our position as the leading paste PVC producer in India, taking up the capacity to around 110,000 tons per annum. Despite the recent uncertainty in the industry, we are confident of the long-term potential of all our businesses and are strengthening our capabilities and relationships to grow in a sustainable manner. I now request our CFO, Muralidharan, to share the financial highlights for the quarter and nine months of the year. Thank you, Ramkumar, and a very good morning to all the participants on the call. Talking about the quarterly performance in Q3 FY 2024, the revenue from operations stood at INR 888 crores versus INR 988 crores in Q2 of FY 2024. During the quarter, our gross margin dropped by 200 basis to 32% compared to the previous quarter, mainly driven by contraction in spreads, as we highlighted earlier. Employee expenses increased marginally, whereas other expenses remained flat on a sequential basis. We reported an EBITDA loss of INR 7 crore as against an EBITDA profit of INR 46 crore during Q2 FY 2024. Our finance costs for the quarter stood at INR 47 crore as against INR 39 crore in Q2, mainly on account of higher interest on term loans, post capitalization of Phase I expansion project in the Custom Manufactured Chemicals division. The net loss for the quarter was INR 89 crore as against net profit of INR 26 crore in the previous quarter. For the nine months, FY 2024, we recorded revenue from operations of INR 2,872 crore, a decline of 24% on a year-on-year basis. Other expenses dropped around INR 88 crores on a year-on-year basis, primarily due to the reduction in power and fuel costs. EBITDA, which is INR 5 crores and PAT loss, we reported an EBITDA of INR 5 crores and a PAT loss of INR 121 crores, for the nine months, FY 2024. While this year results are subdued given the current market conditions, with the ramping up of custom manufacturing business as per plan. The incremental volumes that are expected from the paste PVC projects, which is getting commissioned this quarter, and the margin expansion in, that is expected from our products on account of the various initiatives that we are working on, the outlook for the business continues to remain strong. With this, we conclude the presentation and open the floor for further discussions. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask question may press star and one on the touch-tone telephone. If you wish to remove yourself from question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for the moment while the question queue assembles. The first question is from the line of Kirtan Mehta from BOB Capital Markets. Please go ahead. Thank you so for this opportunity. In terms of the results show the quite significant pressure on the margins this quarter, the way you elaborated, is primarily from the price decreases as well as the delayed lag impact. So how much of the lag impact will reverse in the next quarter? While I do understand that the margins could remain muted over the next couple, two, three quarters, but how much of this lag effect could at least reverse during the next quarter? Okay. Good morning, Mr. Mehta. This is Ramkumar Shankar. The next quarter, directionally, we expect that the next quarter will be definitely better than Q3. We have, like I mentioned in my opening comments, seen an increase in PVC prices in February. But if you look the, in absolute terms, it might not be very significant. We expect a significant recovery more from Q1 of next year, which is when we will start seeing the impact of this current uptrend, if it holds. The bigger question that we need to address is the question of dumping, and to ensure that this dumping is arrested, and this is something that, as I mentioned, as an industry, we are working on. Right, sir. So in terms of the dumping, could you indicate the sort of the level of imports that we are seeing in both suspension PVC and paste PVC? How was the trend sort of last quarter in relation to the earlier trends, and how are you seeing that evolving in this current quarter? So, let me make one thing clear right up front, that we are not against the imports coming in, because India is a market where the demand is well in excess of supply. So we do need imports till such time the market the domestic capacity is built up. What we are objecting to really is the dumping of very, very low cost, artificially priced imports, and that is what as an industry we are objecting to. If you look at the imports that have come in, in the last nine months alone, we have seen around 2 million tons of imports coming in, into the country. A lot of it, around 30-odd% of that comes in from China, another 17% is from Japan, and 15% is from Taiwan. Korea accounts for another 12%, and the U.S. accounts for around 8%. So if you take the top five countries, we are seeing around 85% of our imports accounted for by just these five countries. And some of these countries, like, for instance, China, has significantly gone up in exports to India. In 2019, 2020, they were just at 30,000 tons for the year as a whole. In 2021, that was only around 70,000 tons. In 2022, 2023, they grew to around 780,000 tons, and this year they're expected to be close to 1,000,000 tons. That is where the issue is, because that is where the prices are coming in at far lower prices and which are not subscribing to any economic rationale. As far as paste situation is concerned, the exports in 2022, 2023 have been at around 86,000 tons. And this year, in the first nine months... the imports, I'm sorry, have been at 86,000 tons, and in the first nine months, it is around 62,000 tons. Lastly, here it is a little bit more widely spread in terms of arrivals. We see imports coming in from Taiwan, Korea, Thailand and China, and to some extent Malaysia as well. And if you take Europe as a block, then you have the significant imports coming in from Europe. Thank you, sir. Just one more question on the custom manufacturing side. You alluded to the fact that the global agrochemicals is seeing a downturn and in turn the inventory rationalization. So, could you sort of highlight the impact of that on our revenue during the first nine months, and what is the level of growth that we envisage during FY 2024? ... Good morning. This is Krishna Kumar. In our last call, it will be highlighted that, you know, there was an impact even on our existing business, but that is largely mitigated by the growth in the pipeline products that we were working on and that we were commercializing. So wele continue to see the same sort of trend. What we are noticing is that there is a deferment of volume or orders from one quarter to another. So we're not seeing a drop in the volumes itself, but just a postponement in terms of moving the orders between quarters from a rationalization standpoint. Many of the products that we are working on, that we are commercialized, they're all new molecules, new pipeline molecules. The impact has been largely muted in general. Just one follow-up in terms of how far we are here from the restocking in the global chain. How many quarters of pressure that you see under because of this restocking? So it's tough for us to answer that question, because it's linked to, you know, how much of our business is, you know, existing molecules and how much is new, newly launched molecules. The benefit for us is, majority of our growth and our sales is going to come from, pipeline molecules or new molecules, which they are in the launch phase. So the impact, overall impact, you know, is, as much as, a long, longer term established, player would, would face. So that's, that's all I can, sort of, answer for the time being. Thank you, sir. Thanks for this call. I will get back in the queue. Thank you. Participants may press star and one to ask questions. The next question is from the line of Raj Mehta from Wisdom Advisors. Please go ahead. Hi. Good morning, sir. Thanks for the opportunity. I wanted to know that, currently, how are end-user industries like infrastructure, pipes, leather industries, et cetera, doing, and are they facing any challenges due to a price rise of a commodity or logistic cost? Sir, sorry, could you repeat that question? It was not very clear. End user industry in which, for which line of products are you talking about me? Like infrastructure, pipes, leather industries are doing. Okay. Yeah. So they are actually doing quite well in the sense that we believe, like I mentioned, there has been actually a 20% growth on suspension PVC demand within the country, if you look at the apparent consumption in the nine-month period. So that is a significant growth. There is a lot of latent demand, both in infrastructure and in construction, that we see. And we believe that the end user sectors are quite healthy, and they will be growing. Of course, there will be one particular government project that could be coming to an end, but then further projects have been announced. The Vote on Account that was announced recently also laid special emphasis, a continuing emphasis on providing housing. All of that will need PVC consumption. So I believe that the outlook is quite healthy, and our per capita consumption as a country of PVC resin is way below even regional averages, leave alone global averages. We are below 3 kilos per person. That is, if you take China, it is above 12, and even Southeast Asia and comparable countries in Latin America, et cetera, it will be anywhere from 6.5-8. So I believe that demand in India is still nascent, and there's a lot of room for further growth. Got it, sir. But are they facing any challenges due to a price rise of the commodity or logistics cost? There is not much of a challenge that I see in that sense. I think, as you can see, PVC prices have been inordinately pressured, and it has—they have come down. So our end use industries would not have any need to complain about any high prices as such. They have been enjoying the benefit of these low prices. So I do not believe that there is any great challenge there. Got it, sir. My last question was: How has the agrochemical industry put pressure on our business? Like, do we expect similar pressure on our custom business? Krishna, would you like to take that? Yeah. I didn't understand the question. You said agrochemical putting pressure on the what? On your business, yeah. Could you please repeat the question? Yeah. How has agrochemical industry put pressure on our business? Do we expect similar pressure on our custom business? So, Krishna, the impact of the agrochemical slowdown on our custom manufactured chemical business. I think that's the question. Okay. Okay. Thank you, sir. That's it from my side, and all the best. No, Krishna, are you on the line? I'm sorry, Dr. Krishna Kumar Rangachari is taking this call from Europe, and I think he just dropped off. We will try to connect him again. My apologies for that. ... Thank you. The next question is from the line of Rajesh Jain from NB Investments. Please go ahead. Can you hear me? Yes, please. Hello? Hello, yes. Participants have left the queue. We will move to the next. Before that, a reminder to all participants, you may press star and one to ask question. The next question is from the line of Rajiv Shah from Opal Securities. Please go ahead. Hello. Yeah, am I audible, sir? Yes, please. Yeah. Hi, sir, thanks for the opportunity. Sir, I have a few questions. My first question is: how has it been impacted due to the Red Sea crisis? I mean, how much have our exports been impacted by that? Regarding the Red Sea crisis, have our exports to, you know, Europe, have they been affected? No, not really. We have not seen any challenges in terms of the, on account of the Red Sea crisis in terms of our exports. As far as the imports are concerned, we don't have any immediate shipments coming through that side and, to that extent, we are recently affected. But just to give you some color on that, we do have, you know, in some of our other businesses that there are, you know, outside of the listed company, there are shipments going that side, and we haven't seen any great impact there. The attacks seem to be a bit targeted and sporadic and not really very widespread. Understood, sir. Thank you for the detailed answer. My next question will be: what will be our revenue target for in the next three years, and, like, what kind of growth are we targeting? Just to follow-up on that would be, what will be our sustainable margins we are targeting for the next three years? I got the first part of your question, which is about the revenue target for the next few quarters. The second part was not clear. Sustainable margins going forward. Sustainable EBITDA margins. Sustainable? EBITDA margins. Margins. Okay. On the revenue growth target, currently, the way we are looking at it, it's there are two parts to it. One is as the PVC business sort of turns around, and then we expect the prices to move up, that will add to the revenues, going forward. Apart from that, we are also bringing in two new projects, which is the paste PVC project, which is adding to the volume, and we are also adding the custom manufacturing business. The custom manufacturing business, we already guided that we expect to reach around INR 1,000 crore in the next two to three years. So in the paste PVC, we are investing around INR 360 crore, and that will give us a return of roughly around 1-1.25. So that again will add to the volume. So it'll be three prongs. Well, I'll be, sort of refrain from commenting on the growth from prices currently. These two will certainly add. These two will certainly add around INR 1,500 crores of turnover in the immediate, in the next couple of years' time. And the second question on the sustainable EBITDA margins level, again, we can split that into two parts. Chemplast Sanmar, actually, historically, has been reporting somewhere around 25% above its, EBITDA margins historically. The last two years have been one-off. The margins Chemplast Sanmar standalone entity, last two years have been one-off, and, we believe that this is temporary, and it will get corrected because of the mix of products it has on the complementarity of those products, as well as the focus on the custom manufacturing, which by itself is a high-margin business. We believe we will be able to sustain this 25% EBITDA margins in the coming years. May not be in the immediate year, but going forward, that could be a sustainable EBITDA margin. As far as the subsidiary suspension PVC business is concerned, somewhere around 12%-15% would be the EBITDA margin because there, we are in the last leg of conversion. It’s basically an asset-light model where we import VCM and convert to PVC, so the asset turn is quite high. It's almost five times. And even with a 15% EBITDA margin, our return on capital employed will be quite high in that business. Understood, sir. Thank you very much, and all the best, sir. Thank you. A reminder to all participants, you may press star and one to ask questions. The next question is from the line of Rohit Nagaraj from Centrum Broking. Please go ahead. Thanks for the opportunity. So my first question is on custom manufacturing. So in terms of composition between agro and pharma, what would be the current composition in terms of number of products? Maybe if you can give general sense about the revenues from both these two. No, there was a lot of disturbance up with... What we could gather was that, we wanted to know the, the breakup of the contribution to custom manufacturing from agro and pharma, right? Right, sir. Okay. Great. Actually, significantly skewed towards the agrochemical business. Almost, 80 to 85% of the volume is from the agrochemical. And the rest of it is spread among pharma, and we also have some performance chemicals contributing to the rest of the volumes. ... Right, got that. And sir, one allied question to that, in terms of our incremental pipeline, how does composition is spread? I mean, are we now, going more towards the, you know, smaller part of the current, basket, that is pharma and, other performance chemicals or whether it is still skewed more towards agrochem? Thank you. I can answer that, Murali. So in the near term, it will continue to be skewed towards ag -chem, but we do have a number of projects in the pipeline which are, you know, other than, other than agrochemical. But those would take some time before they materialize into, you know, into commercial orders. So, so again, near term, we will be significantly in the, in the agrochemical space. Got that, sir. Sir, second question again on the custom manufacturing front. So we had signed the LOIs for three molecules. So where are we currently in terms of the progress? Thank you. Okay. So yeah, we signed the three letters of intent. Two of them were for intermediates and one, the most recent one, was for an active ingredient. The first two are already commercial. We are actually in the process of making and selling commercial quantities. And that is happening from our new production block. The third one, the LOI that we recently signed for an active ingredient, so that's, you know, that will go through a development stage in terms of we have to work on lab and pilot, generate materials in the lab and pilot quantity, and then qualify them at the customer place. So those would take a little bit more time in terms of commercialization. Sure, sir. Just one last, if I can squeeze in. Generally, when we are signing such LOIs, what is the kind of revenue potential we look? I mean, is there any minimum threshold that we look at a, you know, two to three year perspective, that the molecule we will reach maybe INR 50 crores, INR 100 crores, and based on that it is screened? Thank you. No. So we don't look at it that way. I mean, we look at these molecules much more on a strategic level. For example, the third one that we just signed out, it's a pipeline molecule, and it's an active ingredient. So, you know, generally, something like an active ingredient is something that, you know, most folks in this business, you know, they die for, because a customer coming to you to make an active ingredient by itself is a big significant step in terms of the relationship, and it reflects the confidence of the customer that he has in your ability to be a long-term partner. So our criteria in when we work with our customers on such projects, what is the long-term potential? What is, you know, what is the stickiness with respect to the molecule, whether it's a pipeline or whether it's established, and not just necessarily, let's say, volume or revenue, any fixed volume or revenue targets per se? Sure, sir. That's helpful, and best of luck. Thank you. Thank you. The next question is from the line of Rajesh Jain from NB Investment. Please go ahead. Thank you for the opportunity. I'm extremely sorry the last time the line got disconnected. So I have these questions for custom manufacturing business. You had mentioned that there, you know, we would be achieving around 25% growth in this business during the current year. So with the change scenario, are you still confident of achieving this growth? Hello, this is Krishna here. Yeah. Can you hear me? Yes, sir. Yes. Okay. Yeah, there is some moderation. I mean, again, it's sort of an evolving situation. And, you know, the moderation will not be because the volume is going away, but more, you know, there would be movement of volume from one quarter to another, or a postponement of offtake from one quarter to another. I mean, we went through that, depending on where our customers are, you know, what sort of financial year they practice. You know, there was initially some requests to move from calendar year, last calendar year to the next calendar year, and similarly, we are seeing some requests in terms of moving from, you know, this financial year into the next financial year. So, you know, so, so we, you know, we are not very clear of the net impact of that, but I believe there will be some moderation when compared to our previous, previous guidance. Okay. Fair enough, sir. Sir, my second question is, you had mentioned that, you know, the three LOIs that we have received or signed will be able to take up the new capacity that has come up in Phase I. So what... My question is, how much time that it would take to ramp up to full capacity under the current scenario? And if you would guide us, how much revenue we can expect from Phase I capacity? ... sir, I didn't understand the first half of the question. I'll repeat it. Yeah. Sir, you had mentioned in the earlier calls that the three LOIs that we have signed up would take up the new capacities that has come up in Phase I. So what I wanted to know was, in the current scenario, how much time would it take to ramp up to full capacity utilization? And as and when it is done, how much revenues we can expect from Phase I capacity? Yeah. No. Okay, got it. So no changes from, you know, what we had indicated, in prior calls, and I think Murali mentioned this also in today's call. The two LOIs that we've signed, out of the three, the two are linked Phase I capacity, the first two that we, you know, that we've talked about in the past. And we are still confident that those two will ramp up, and steadily within the next two to three years, you know, we will sort of fully utilize Phase I capacity. And our thinking, again, is that, you know, this would get us to close to INR 1,000 crore turnover over the next two to three years. So that is where we are. Phase II is going to be commissioned, I mean, it's progressively being handed over, you know, the assets are being handed over, so we expect completion Phase II sometime in, you know, sometime in the first quarter. And we have products in the pipeline that we are working on, that you know that would be housed Phase II, the capacity. So we will have more updates on that when we have clarity on, you know, when that pipeline moves towards commercialization. Sir, a small follow-up. You mentioned that INR 1,000 crore turnover in the next two to three years. So is it that you're saying for the entire custom manufacturing business, or is it from the Phase I CapEx only, capacities only? What we are referring to as INR 1,000 crore is broadly from the custom manufacturing business. From the next Q2 to two years time, two to three years, we'll be hitting a revenue of at least around INR 1,000 crores in the custom manufacturing. Got it. Okay, fair enough. Correct. So now, after completing Phase II expansion, do we have any more space at the current location to expand in future? Yes. We have enough space available in the existing site to put up additional production blocks. No, no concerns about that. Rather like the one what we have in Phase I and Phase II, to that extent, we can add more capacities? All I can tell you is at least more than that, so. Okay. Fair enough. Okay. Sir, my last question is, now that you have given an indication that maybe in two, three years, this custom manufacturing business itself can reach INR 1,000 crore of turnover, if there is any thinking in the management to demerge this business and separately list it out? So those are, those are more strategic questions. We will address them. Right now, there is no such, plan. Okay. Thank you very much, sir, and wish you all the best. Yeah, thank you. Thank you. Thank you. The next question is from the line of Ashwini Aggarwal from Demeter Advisors. Please go ahead. Good morning, sir, and thanks for the opportunity. So the question I had was on CapEx. Once Phase II CapEx gets over on the custom manufacturing and, you know, your paste PVC CapEx gets over, how are you thinking about the next two to three years from a CapEx perspective? And linked to that is what is the debt position of the company on a gross and net basis as of 31st December? As far as the CapEx is concerned, that in these projects will get executed in the next quarter or so, by Q1 of this year. As we had indicated earlier, we are evaluating number of projects, one on the PVC side as well as in the custom manufacturing group. As we had mentioned earlier, our first preference for capital allocation would be towards custom manufacturing, and that is an area for growth. Once we have visibility for almost 60% of Phase II capacity, we will sort of go ahead and announce next phase of expansion. That build will happen in due course, and that, the... We do see continuous growth in the custom manufacturing business in the coming years. As far as the PVC is concerned, as we indicated earlier as well, we are in discussions with various strategic players for tying up the required feedstock, and once we have comfort around that feedstock, we'll look at the expansion opportunities in that business. Sir, gross debt and net debt position as of 31st December? Gross debt position as of December is INR 1,405 crore, and the net debt position is around INR 650 crore. One more question I had. So when you look at the custom manufacturing business, I mean, you know, what is the potential EBITDA margin? I mean, because some of these services, especially in the early stage, will be FTE equivalent, but when they're going through LOIs and production, they're probably on a cost-plus basis. So how should we think about the margin on this INR 1,000 crore revenue, which you are hoping to achieve in the next two to three years? I mean, will it be somewhere in the ballpark of 30%, which is what we see in several other companies? Is that, you know, is there a number that you would like us to think about? On the custom manufacturing business, normally on a contribution basis, I'm not getting the EBITDA margin. On the contribution basis, we generally work on a 40% contribution basis. I'm not talking about just the variable cost, conversion cost associated with manufacturing the product, excluding the employee cost and maintenance and other expenses, which are the fixed costs. If you exclude that, broadly on a contribution basis, we look at a 40% as the number. I mean, that will be much lower than what we typically see in CMC, you know, in the pharma and the agrochem space, where contribution margins are somewhere in the ballpark of 50%. Would that be correct? So the EBITDA margins would be somewhere in the region of 18%-20%. Generally, the agrochemical space, the margins are having in the range of, EBITDA margins are having in the range of 23%-25% levels, and contribution margins close to 40%. I think broadly we'll be there in the industry for right now. Okay. Perfect. That's all I was looking for. Thank you so much, and all the best. Thank you. The next question is from the line of Archit Joshi from B&K Securities. Please go ahead. Hi. Good morning, sir. Thanks for the opportunity. Sir, I just was seeking for some clarification, especially in the CSM business. You've mentioned that maybe over the next two to three years, we might be able to clock close to INR 1,000-odd crores of sales. Is it fair to assume, sir, a clarification that, the three LOIs we have signed mostly cover this INR 1,000 crores that we might be expecting over the next two to three years? Or that because we are planning for some few more molecules, as you have mentioned in the press release that are in the pipeline, that also will eventually contribute towards INR 1,000 crores. Can we look at it in this way, that the next few molecules that we launch might take the INR 1,000 crore number to a slightly higher sales potential? You want to answer, Murali? Yeah, sure. So this is Krishna, you can hear me? So what I think we are, as we again indicated, with the three letters of intent and what we have in the pipeline, we are reasonably confident of getting to that, getting to INR 1,000 crore. I think we would like to leave it at that point, rather than break it up between, you know, between the letter of intent and the pipeline. So we have a healthy pipeline, and, you know, we have reasonable visibility from these three letters of intent, and, so that forms the basis of our projection and confidence in getting to that number. Right, sir. So for now, we are just taking the three LOIs, which can potentially contribute back? No, I think we get it. What we said was, with the letters of intent and the status of the pipeline that we have, you know, we are reasonably confident about that INR 1,000 crore number. Sure, sir. Understood. Understood. So just one more: If you can, explain the competitive intensity around the global PVC industry, because I can see from your comments and from the press release also, that the dumping from China is rather prevailing even in the current scenario, and we have seen this happen over the last maybe 12, 14 months. What is the sense that you are getting, and what might be the lead indicators according to you, for this level of dumping that is happening in PVC from China to alleviate a bit, which also might reflect into some positive pricing scenario going ahead? Okay. So, you are right in the sense that the Chinese situation has impacted, this entire industry globally. In fact, China accounts for around 40% of the global capacity of PVC, and they also account for an equally percentage of proportion of the global demand of PVC as well. Unfortunately, their property sector, which accounts for around a quarter of their GDP, has not been doing too well, as we all know, over the last, one and a half years. And that is really what has pulled down their own domestic market for PVC. This has led to a lot of, production of PVC out of China, which is, coming out and hitting global markets and pulling down prices significantly. Now, there are two or three things that can happen. One is, of course, the recovery within China itself, which is something that is always around the corner. There is the government there has been working on stimulus measures to you know reincentivize the property sector, which is very crucial for them. Nothing seems to have worked very well so far, but there is some kind of a recent measure that has been announced, seems to be a bit more positive than usual, so we are waiting to see the impact of that. The second, of course, is the fact that 80% of the Chinese PVC capacity is based on coal, and it has obviously a much higher carbon footprint than the rest of the PVC industry worldwide. And also the fact that they, they are bound by the Minamata Convention to reduce their consumption of mercury into the industry. Now, that is expected to have some kind of an impact on the capacities in China itself. The timing, unfortunately, is not very clear as to how soon that rationalization, the expected rationalization of capacity in China will happen, though it, it does seem likely that it will happen at some point in time. Now, we're not able to put a date to that. The third, of course, is what we spoke about. We are not waiting for all of this to happen as an industry. We need to ensure that the economic interests of producers within India are protected, because that is only good for the further capacity addition and employment generation within the country. The industry has filed for anti-dumping duties to be levied on this excessive dumping into India, not just by China, but also by other countries. And we are pretty confident that this will start bearing fruit sooner than later. And, and here, it should happen within a quarter at worst, too. Sure, sir. Sir, another way maybe to put this entire scenario, would it be again, like, safe to assume that the concentration of Chinese capacities in PVC, like you mentioned, is more towards the carbide-based capacities? Is the cost arbitrage in terms of manufacturing PVC through that route far better than the petrochemical route that Indian companies are largely a party to? It's probably one reason why the level of production in China, compared to maybe the rest of the world is higher because the costs over there are lower. Maybe is that one reason that one can allude to? That used to be the case. You are right. When they set it up between 2005 and 2013, that used to be the case, but not any longer. Today, coal prices have also gone up, and environmental needs within China have also become much more stringent, and therefore, it is not as easy as it used to be to produce carbide-based PVC without mitigating measures, which costs money. Therefore, I believe that the economic advantage that carbide PVC used to have over ethylene-based PVC, while at some point in time, depending upon the relative prices of, say, crude oil and coal, while that might still be a reality, but it is not a permanent reality. It keeps changing with the relative changes in prices of coal and crude. And one thing we should not lose sight of is that 25% of the carbide PVC manufacturing capacity in China is based on calcium carbide, and they are the ones who are most susceptible to movements in the prices of coal and therefore carbide. So it is not a very cast in stone kind of economic advantage that they have. Sure, sir. So one last question. The general premium that we used to enjoy of paste PVC over suspension PVC, in terms of contribution margin, as we used to mention on the calls previously, has that sustained in this quarter also, or there is some weakness on that front also? Maybe the $150-$200 premium has that compressed or what are your thoughts, sir? PVC usually is around $200-$250, more than suspension PVC, and that differential is still there. These are different products going into different end users. So, you know, while the base, you may say, is, they are both polyvinyl chloride, but they are actually the last stages of finishing are very different. They go into very different end users as well, and the pricing is different. For instance, today, we're talking about, suspension PVC being around $780. PVC is around $1,025-$1,050, so there is a difference. Understood, sir. Thanks a lot for answering all the questions, and all the best. Thank you. Thank you. The next question is from the line of Madhav Marda from Fidelity International. Please go ahead. Hi, good morning. My question was just on the previous one, actually, on the Chinese carbide-based prices. Could you give us some sense in terms of how these prices have moved in the last six months? If my understanding is right, some of these prices have come down a little bit. Is our understanding right, which is probably enabled a little bit extra aggressive dumping by the Chinese players? Or have you seen these spreads for the carbide-based capacities coming down a little bit? If you could give some sense there, that would be great. And my second was just on the profitability for some of the Asia-based PVC players in the Eastern Hemisphere. They also seem to be struggling a little bit, so, some sense on when you think margins could recover for the sector? Thank you. See, as far as PVC prices are concerned, the peak, of course, was reached in October 2021, when we saw PVC prices go all the way up to almost $1,900, $1,900 or so, $1,700, we had that. But since then, they have corrected from January 2023 to January 2024, prices have gone down by around $100. They are from $895 to $790, but in between, they had gone up to $970 as well, and now they've come down to $790. Large, large part of this drop in price is being driven by China. China is leading it, and then the rest of the producers in the region are following, largely because China has the volumes and therefore the clout to set the prices. So this is really why we are, as an industry, concerned about the dumping from China and why we are, working on measures. We are, working on, ways and means in which we can stem this. As far as margin improvement is concerned, so long as we have stable prices, you know, the margins will, fall into place, because VCM, as I've often said on these calls, is really a one-trick pony. It, it goes largely into the manufacture of, PVC, and therefore, it will not stay out of, step with PVC for too long. It is only a lag period of maybe, four to six weeks. And once it stabilizes, and then even if it starts going up, we will start seeing the benefit. So, we have started to see some upturn in February, but we need to really wait and watch and see if it lasts and it becomes a trend, because we have in the past also seen some uptrends and then very quickly that again corrects. But we do believe that some kind of a bottom has been reached in prices. I think the bottom is really set by the cost position of carbide PVC producers, and I do not think that even they can go down any further. So from here on, we should see stability first and then an upward movement. So I think that we are at an inflection point, but it will take a quarter or two. Hello? Hello. Yeah, my question has been answered. Thank you. Thank you. Thank you. The next question is from the line of Prolin, an individual investor. Please go ahead. Yeah, hi, team. Thank you for taking my question. So a lot of questions have been answered on the CMO part. My questions are more pertaining to your core PVC business. And taking the question of previous participant a little bit forward, what we have seen in other industries is that because of this fall or the Chinese dumping, there are some capacities which are facing existential issue, maybe on a temporary basis or on a full-time kind of basis, because of their balance sheet not strong enough, their cost of production being very high. So are we seeing any instances of such kind of things happening, either in terms of some of the domestic competition that we face or in terms of even the international competition that we face? And just to link to that, what we are also seeing in the industry is that, in China, after COVID, there have been a lot of new capacities of chemical which has come up. Is that the case also for PVC, or it is just incremental quantity which they have not been able to, you know, supply, or the domestic market is not capable enough to take that is dumped, or there is a incremental supply which has also come up because of the additional capacity? So first would be these two questions. Okay. So I, as I see it, there are two parts to what you've asked. One is on the operating rates of existing plants, and as a subset, whether there are any closures that are there. The second part is on capacity additions in the last two years, across the industry globally. So as far as operating rates are concerned, you are right. In countries like China, which are, which have excess supply as compared to their own domestic demand, the operating rates have come down to some extent. Not all the plants are running at 90% or 95%. This is true of not just China, but also equally also for countries like the United States, where there is significant overcapacity. By contrast, in India, plants in India are running at full tilt, except where some have some technical issues, but none has, no plant has reduced operating rates because of inability to sell. All of us, in fact, our inventory is less than half a day's production. Given the extreme undersupply in India, selling PVC is not a problem. So, we do not have any reduced operating rates in India. Sorry, sorry, just one more question. Sorry, just to add to that, not just operating rates, I was talking about the profitability as well. I mean, do you see that because of profitability impacting some of these competitive capacity, can there be some closures going forward? Just to add to that question. Going forward, I do not think there will be closures in India, because India, like I said, has only 1.5 million tons of capacity against a demand of 4 million tons. So I don't see any closure in India. What is going on is really temporary. We believe that it will recover, and hopefully, if the dumping is arrested, then we will start seeing a very different story in India itself. Obviously, if you have this much of excess demand, that should augur well for the domestic industry. It is only a question of the dumping that is holding us back. As far as permanent closures are concerned, we've not seen any major permanent closures anywhere. One or two are being spoken of, but not in India, outside of India. We need to wait and see whether they actually pan out that way. As far as new capacity in China is concerned, there is no new carbide-based capacity that's coming up. There has been, in the last couple of years, some new ethylene PVC capacity that has been put up, but even that building was all what was announced four years back or five years back. We believe that that current cycle of building is coming to an end by the current, you know, FY 2025, and after that, there is nothing really new that has been announced yet. The only new capacities that have been announced are within India. Great, sir. Thank you for that clarity. The second question would be again, how you define your specialty chemical, and there are two segments there. One is the paste PVC, and the second is the, CMO part. And, I mean, you have answered adequately on the CMO part. My question to you would be on the paste PVC and our definition of that as a specialty chemical. So is it only realization, due to which or margins due to which we call it specialty chemical? So what I want to understand was that how difficult is it for our customer to switch from, we being a supplier to a competitor who is offering at a lower price? It is quite difficult. I, you know, I will not say anything is impossible, but it is quite difficult. In fact, these are all products that are specced into the formulas of the customer's product. And having dominated this industry in India for the last 55 years, we are part of that product spec sheet for most of our customers, and that is one reason why even today we still command a premium over import parity with every customer that we have. And that is something that is, you know, the quality of the product, the proven quality, as well as the fact that this fits their requirements that well. It is not that easy to change. Sure. This would be for just paste PVC or also for suspension PVC? This is only for paste. Suspension is a commodity. Suspension is a commodity polymer and, you know, there's... It, it, it is not, there is no such, you know, speccing in, et cetera. Understood. You mentioned that in suspension, you have an asset-light model. Margins are low, but asset turns are high, right? I mean, and that's why you make ROCs which are decent. Does that mean that we don't take any commodity risk there, or that's not how it works? I mean, what I was trying to understand is that even in an environment where there is dumping happening in the overall PVC industry, because of our being an asset-light model, do we still make decent ROCs in our suspension PVC business? We will make decent ROCEs there, once price is settled on. The volatility is really what is hurting us. There is an increase in one month and then a decrease in the next two months. Every time it decreases, then on the, you know, whatever we have in stock, of the feedstock, as also what is on ships coming in here to India, we tend to lose out on those. So that is really what has been hurting us a lot over the last 18 months or so. The minute we have stability and, even a minor uptick, I think we will start to see our returns come back. But yes, the asset turn, because it's an asset-light model, the margins per se will be lower, but the relative margins would, would definitely... The return on investment would be higher. Understood. So just to conclude, what I understand is that for suspension PVC to be profitable, we need a stability of prices. Even if they are stable for one, next one year at the current level, we would be making profits there. And for our paste PVC, it's an upside or, you know, some upward movement in prices that we are expecting for us to improve the profitability. Is that a fair summary of your answer? That's a fair summary, and of course, the arresting of dumping would help us- Yes. In terms of overall margins. Fair point. That's it from my side. Thanks a lot and all the best, team. Thank you very much. Thank you. The next question is from the line of Rahil Shah from Crown Capital. Please go ahead. Hi, sir. Good afternoon. Just one question. So, out of these two major, you know, investments, one is specialty paste PVC and one is custom manufacturing, so the investment outlay which you've given. Now, out of that, you've explained on custom manufacturing and how you have an estimate that you will reach INR 1,000 crore in two to three years. So similarly, what kind of an asset turn you're expecting from the specialty paste PVC investment, let's say, in similarly two to three years down the line? How will be the growth trajectory over there? So we would normally have, like Murali said, around 1.2 here, as far as an asset turn on this is concerned. And, our timing is, in a sense, we are coming in at an inflection point. Hopefully, very, in the near future, we would start to see, the entire mode, changing, once the dumping again is addressed. And we would have the volumes, the additional volumes, coming in at exactly that right moment in time. So we, we should see, a decent, increase there. At these prices, we are talking about a 1.2. If prices, correct, to the normal levels where we've seen it in the past, that could be even more. Okay, so but then... So when do you expect to reach, like, peak utilization then? So- We expect- so that the revenue potential at the highest? By the second half of FY 2025, we expect to be at 100% utilization new capacity. All right. For the specialty paste PVC. Okay. Right. All right. Thank you, and all the best. Thank you. Thank you. As there are no further questions, I would now like to hand the conference over to management for closing comments. Thank you, everyone, for joining us today on this earnings call. We really appreciate your interest in Chemplast. If you have any further queries, please do contact SGA, our investor relations advisor. Thank you once again, and have a pleasant day. Thank you. Thank you. On behalf of Chemplast Sanmar Ltd, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.