Ladies and gentlemen, good day and welcome to Deepak Nitrite Limited Q4 FY 2022 earnings conference call hosted by IIFL Securities Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Akul Broachwala from IIFL Securities Limited. Thank you, and over to you, sir. Thanks, Nirav. Good afternoon, everyone, and thank you for joining us on Deepak Nitrite's Q4 and FY 2022 earnings conference call. Today we have with us Mr. Maulik Mehta, Executive Director and CEO, Mr. Sanjay Upadhyay, Director Finance and CFO, and Mr. Somsekhar Nanda, Deputy CFO. We'll begin the call with opening remarks from the management team, followed by an interactive Q&A session. At the outset, I would like to clarify that certain statements made or discussed on the conference call today may be forward-looking in nature, and a disclaimer to this effect has been included in the investor communication shared with you earlier. To begin with, Mr. Mehta will share his views on the operating performance and the growth plans of the company, followed by Mr. Upadhyay who shall take us through the financial and segmental performance. The results documents have been shared with you earlier and also have been posted on company's website. I now invite Mr. Mehta to share his opening comments. Thank you, and over to you, sir. Good afternoon, everybody, and warm welcome to you on Deepak Nitrite Q4 and FY 2022 earnings conference call. It feels pretty good to be speaking without a mask on for the time being. We shared our results documents, and I hope you've had the opportunity to glance through them. Given the developments of the last few quarters and the Russia-Ukraine conflict in February, we've witnessed an increasing amount of disruption in the global supply chain for crude oil, fertilizers, and also specialty chemicals. In many cases, we've seen the supply chains not just stretched, but in some cases broken as well. As major consumers working on building alternate supply networks, the focus is on partnering with world-class players with integrated business models who are positioned with the assured supply of key inputs. Deepak is well-placed in such a scenario, and our outreach with a Depend on Deepak message has resonated extremely well with our prospective customer base. In this backdrop, I'll give you a brief rundown of our performance during the period under review and how we're preparing ourselves for the forthcoming year. Mr. Sanjay Upadhyay will then provide you with the granular detail on our financials. Now, given this volatility brought about by these extant circumstances, DNL sought to become more nimble over the quarter and the year. The external environment is being monitored closely, and every effort is being undertaken to maximize productivity. Despite the macroeconomic challenges, the company continues to operate at high productivity levels of its facilities. The DNL team is delighted to inform you that the company has reported its highest ever revenue, EBITDA and PAT, despite facing the kind of challenging macroeconomic environment you've been hearing so much about, driven by volatile raw material environments, higher crude prices and supply uncertainties which have been further accelerated by the ongoing war in Europe. We ended this year on a high note with a consolidated revenue increasing by 56% year-on-year, accompanied by 37% year-on-year growth in PAT. Now reflecting on the company's stellar performance, the board of directors declared a final dividend of INR 7 per equity share on face value of INR 2 per share. This is notably higher than dividends declared in the previous years. As a result, the benefit of sustainable growth are shared and the focus remains on value creation for all stakeholders. During the year, the company delivered excellent performance on the back of a phenomenal fourth quarter performance, the highest ever quarterly revenue in its vibrant history. The profitability trajectory remains strong and all efforts are underway to solidify this even further with expansion plans for key products. Revenue growth was driven by robust volume for several products, complemented by sharp realization gains. On the back of continued plant efficiency by the operational team, supported with effective material handling and logistics, the company was able to build on the present robust realization for Deepak's phenolics product portfolio. Given the challenging external conditions, our team and business divisions have been pushed to the limits, and I am pleased to say that we have evolved into a stronger, more competent enterprise with better collaborative practices between them. The growth trajectory we anticipate will be sustained across all strategic business units, supported by additional capacity and buoyant demand from end user industries. On the operational front, we notice growing demand for key products in the domestic market as well as specific export markets. In our domestic business, revenues stood at INR 440 crore in Q4, resulting in a 47% growth year-on-year. While the export revenues came in at INR 310 crore in Q4 compared to INR 227 crore in the previous year, higher by 37%. On a consolidated level, domestic to export mix stood at 80%, 80 to 20. Now moving to our segmental performance. The Basic Intermediate segment grew by 66%, driven by numerous debottlenecking exercises and capacity augmentation initiatives undertaken in key products. This allowed us to increase volumes towards the second half of the year. It was further aided by realization gains for key products in the BI segment. On the back of sharp rises in input prices through the year, the company was able to pass on most of the costs to customers with some timelines, resulting in sustained EBITDA without losing wallet share for all key accounts. Fine and Specialty segment reported a 10% revenue growth. The performance was propelled by strong demand and an appealing product lineup that tailored to a broad and diverse array of applications. During the previous year, prices of finished products were high, but the raw material prices were abnormally low. These have normalized, but in many cases raw materials are at all-time highs. The cost of input utilities has gone up substantially in the year, thereby affecting the profitability of the segment as compared year-on-year. Since the company has long-term contracts, in some cases annualized, in other cases multi-year contracts, wherein price negotiation is possible at a certain percentage increase in raw material costs and on a quarterly basis, we do see an improvement moving forward. This is the nature of the business, and we expect to see positive impact of this pass on in this quarter and the next. Costs of major raw materials, as I mentioned, have increased through the year, resulting in some all-time highs in Q4, and there has been some level of EBITDA normalization. As a strategy reset going forward, the company will increase its focus on annual and multi-year contracts signed up with leading customers who continue, as I mentioned earlier, to have a high dependence on Deepak. In every case, as I mentioned earlier, we have maintained or grown wallet shares. Performance Products segment reported healthy revenue growth at 74% in FY 2022, driven by positive demand trends for key products, resulting in a sharp rise in volume accompanied by improved sales realization. This has also helped to improve the EBITDA margin. However, prices are expected to normalize in the forthcoming quarters because there is some sort of a tepid demand with regards to the products in the European market, which are currently experiencing some of their highest energy and utility costs ever. Overall, the wallet share with large customers either increased or was maintained. We have also increased our foray into new export markets which were hitherto untapped. Deepak Phenolics delivered an outstanding performance with revenue growth of 68%, while EBITDA expanded by 35% year-on-year, translating into a PAT expansion by 48%. This was achieved despite a sharp increase in key raw materials such as propylene and benzene, combined with skyrocketing prices of coal. Plant efficiency measures culminated in utilizations exceeding 118% of design capability during the quarter. As a result of healthy demand, revenue realization for both phenol and acetone increased substantially from the previous year. During the quarter, DPL commissioned its new captive power plant as well as its second IPA plant, which will all contribute towards higher plant efficiencies. A stable and assured power source, power supply will enable us to plan production schedules better without running the risk of costs, and repairs and maintenance coming from shutdowns. We have also commenced on the expansion projects, across segments approved by the board of directors, aggregating to some INR 1,500 crore, as we had mentioned previously. There is selective debottlenecking and capacity augmentation underway in addition to this, which will enhance our operations across all segments. Due to multiple projects of varied scale and complexity being undertaken, we foresee commissioning for these projects in batches, with the first bit of commissioning coming in Q1 this year. On that note, we believe that we're very well placed to exploit opportunities in end user's industries as we embark on the next financial year. DNL is an excellent candidate to lead the Indian chemical manufacturing trend due to its diversified yet integrated product mix and decades of manufacturing excellence. We're ideally placed to increase our wallet share and create value for all stakeholders as a result of contributions coming from our forthcoming brownfield and greenfield developments. Thank you. I'd now like to hand over the call to our Director of Finance and CFO, Mr. Sanjay Upadhyay, to address this forum and briefly take you through the financial performance during the period. Thank you, Maulik. Good afternoon, everyone, and thank you for joining us today on this call. I'll walk you through the highlights of the financial results for the quarter ended March 31 and the annual results. During the quarter under review, the company witnessed volume gains across most of the products, signaling a solid recovery. Capitalizing on the uptick in business growth and strategic efforts to elevate our operations, the company reported grand performance. Standalone revenue has expanded to INR 759 crore in Q4 FY 2022, while EBITDA came in at INR 213 crore, translating into an EBITDA margin of 28%. PBT stood at INR 194 crore while PAT came at INR 143 crore in Q4 FY 2022. On a consolidated basis, revenue grew by 28% to INR 1,876 crores in Q4 FY 2022, owing to a combination of high utilization level and focused pricing. This has enabled company to report highest of annual turnover of INR 6,845 crores. EBITDA was at INR 414 crores in Q4 FY 2022, lower by 10% year-on-year, higher and by 10% quarter-on-quarter. EBITDA margin climbed to 22% as a result of enhanced plant productivity and increased operational leverage. Despite the continued challenges to logistics and movement of material, the company was able to deliver higher margins on quarter-on-quarter basis, while also accounting for rising coal and RLNG prices, which impacted actually the utility cost and unusually high input prices on numerous key raw materials. PBT came in at INR 362 crores while PAT stood at INR 267 crores. Robust profitability was on account of strong operating results and a zero debt position. Moving to segmental performance. Basic Intermediate reported revenues of INR 399 crore in Q4 FY 2022, up 63% from INR 245 crore in Q4 FY 2021. The company's performance was supported by debottlenecking and capacity augmentation in key products in BI segment, which enabled it to increase volumes towards the second half of the year. EBIT increased by 37% to INR 97 crore with EBIT margin of 24%. Fine & Specialty segment revenue grew by 14% to INR 235 crore in Q4 FY 2022 as compared to INR 207 crore in Q4 FY 2021. EBIT is lower by 4% to INR 77 crore with EBIT margin of 33%. This is partly because of the higher prices, higher utilization, which were abnormal in the last year. Performance Products segment reported revenue of INR 161 crores during the quarter under review compared to INR 87 crores in Q4 FY 2021, representing a growth of 85%. EBIT improved manifold to INR 40 crores with EBIT margin of 25%. Deepak Phenolics registered a solid performance. Revenue is growing by 20% to INR 1,122 crores in Q4 FY 2022 versus INR 938 crores in Q4 FY 2021. As a result of healthy demand, revenue realization for both phenol and acetone increased significantly over last year. During the quarter, plant productivity measures resulting in utilization level going beyond 115% of the installed capacity. On the balance sheet, the company's financial status is very sound and progressively reducing debt through cash flows. Deepak Nitrite has not only attained debt-free status with this fiscal, but also steadily built up surplus funds of INR 430 crore, which have been invested in highly secured debt funds. In the future, interest rates will be significantly reduced as a result of this. On a standalone and consolidated basis, DNL is debt-free as of March 2022. Recognizing the discipline and improved financial position, long-term credit rating of DNL is improved from double A stable to double A positive by ICRA, and the same of Deepak Phenolics long-term credit rating was upgraded from double A minus stable to double A positive. These upgrades have been possible in less than a year's time. We continue to sustain the improved return ratios, and I'm glad to report that DNL has achieved ROCE of more than 30% on a standalone basis for more than 10 quarters now. The company has obtained all permissions from board of directors, shareholders and regulators for issue of equity, QIP and FCCB, and now evaluating the market conditions for appropriate time to launch the issue. With that, I would request the moderator to open the forum for question and answer session, please. The first question is from the line of Naresh Vaswani from Sameeksha Capital. Please go ahead. Yeah. Sir, congratulations on decent set of numbers in the current environment. Sir, two questions. First, on the CapEx of INR 1,500 crores, can you help us understand if you can breakdown between the projects and what are the timelines and the revenue that we expect to generate out of this over the next two years? Second, some color on what steps you have taken internally to mitigate the current environment, especially the volatility in all the cost items which one is witnessing. What all steps have you taken over last six months, which has helped us perform decently, reasonably well in this quarter? Okay, I can answer this question. Sir, first of all, this was also the most despondent sounding congratulations. Nonetheless, I will try to answer. Now, as we have mentioned earlier, INR 1,500 crore of CapEx is what has already been announced. That is spanning across products that are into the life sciences space from Deepak Nitrite downstreams as well as from Deepak Phenolics. There is some amount of investment here which will go into downstream of phenol and acetone, which would go into the advanced solvents space. Deepak Nitrite, which would go into the agrochemical and pharmaceutical space. This does not include brownfield expansions and CapEx that would be required for you know, small projects up to you know, INR 40-50 crores each. Those will be separate, and they are not announced like this. Now, with regards to the schedule, they are broadly on track. As we mentioned, one of our CapExes, which is the capacity of which is already tied up for multi-year contracts with pass-through pricing, will commission over the next month or two, and the others will commission, you know, between the next 12 to 18 to 20 months, as normally these greenfield CapExes are. Now, by and large, this is on track with regards to, in some cases, the civil work has already been started and it's well in full swing so that we can take certain milestones that happen before the monsoon onset. In other places, we are at a very advanced level of tie-up with key technology suppliers, or we have finished the tie-up and we are in the process of equipment ordering. Now, construction, equipment ordering, and delivery both happen simultaneously, so we are as excited as you about ensuring that these are completed without any undue delay. Keeping in mind also the kind of escalations that we see in the cost of commodities like cement and steel, we're ensuring that what we are paying for is being done at the right time. For example, if you all had asked me to spend on a lot of nickel, which is one of the products that we have to buy, you know, for our equipment construction, and you had asked me to buy it at $100,000, that would not have been the best decision. I could just have waited until the next day or the day after that to buy it at $25,000. Anyway, this happens, and as we said earlier, by and large, the project execution is on track. Now, of course, you have events that can derail this. For example, what we faced in the last couple of months was a you know chip shortage, a semiconductor chip shortage. Otherwise, the project that we're looking at commissioning in the next month or two months would have been commissioned as we speak. With regards to your third question about what we are doing in order to manage our short-term and medium-term supply chain, we are working with key suppliers, not only in India, but worldwide, to ensure that our supplies are coming in at index-linked pricing with certain volume commitments coming from Deepak, where we're able to leverage our, you know, positive cash flows into offering into being able to get discounts against payments made upon delivery of the raw materials. Along with this, what we are doing is we're also ensuring that at various locations we rent the kind of port facilities for storage so that we are able to buy the materials in the manner that is best suiting our consumption requirement. Like this, there are several steps that we are taking, including talking to shipping lines for annualized contracts with minimum container offtake over the year. We are seeing that there is a positive demand and a, you know, a sustainable demand for our products, not only in the domestic market, but internationally as well. While these raw material price increases hurt us, the kind of relationship that we have had with the customers has allowed us to have very honest and open discussions with them. They certainly are accommodative, at least right now. Let's see how the situation unfolds. It is a competitive market space, but Deepak maintains its wallet share. Sure. Sir, all the best. Thank you. Thank you. The next question is from the line of Andrey Purushottam from Cogito Advisors. Please go ahead. Thank you. I have a question. First of all, a great set of numbers given the situation. A follow-up to the previous question. You know, because of the peculiar situation that you inherited in the last few months, your profit growth has lagged behind your revenue growth. Now, if you were to give some kind of broad guidance in the future, when do you think that this trend is likely to reverse? Do you think it'll take a couple of quarters for us before this happens? Can you just give us a flavor on when, you know, operating leverage, as we understand it, will really kick in to give a profit multiplier? I feel this is really a situation where I don't really know what to say because we I mean, even today, even with what you call profit lagging in comparison to revenue growth, I think we have over the last couple of years, set new standards with regards to the kind of EBITDA margins and bottom lines as a percentage of top lines. Yes, there will always be some movement up or down. The reality of this is that with the kind of critical cost increases that we're seeing. Just to give you a couple of glimpses. Ammonia, which is normally being bought at INR 26. I remember that my procurement person came to me about six months ago and said, "This is really, it's a lifetime high. We're paying INR 32 now. Just to give you a perspective, in Q4, ammonia prices world over were in excess of INR 100. Now, other than that, soaring benzene, xylene, and also on products like caustic lye. These are commodity products which we consume to give value-added intermediates to our customers. We've been seeing price increases of more than 100, 200% over previous quarters. If what you are seeing is a margin compression, what I can also tell you is that on an absolute basis, most of our customers today are paying almost twice for the same, pro- Sorry, I'm unable to hear you. Hello? Hello. Hello. Participants, please take a minute while we rejoin the management back to the call. Ladies and gentlemen, thank you for your patience. We have the line for the management reconnected. Hi. As I was mentioning, in many, many cases, the customers are paying almost twice as much for Deepak's products as they were just a couple of quarters ago. They are continuing to buy the same volume. This is, I mean, is this not a good example of resilience and their need and their ability to depend on Deepak for their, you know, feedstock which they get from us? If I was to actually ask you this question. What is the kind of margin that you would normally expect from a company in the same space? If this is margin compression, what is the target margin that one should look at? I'm not an expert in this. I'm simply asking a question of when do you think that this trend might reverse? This is not a reflection on Deepak's strength. It's more a commentary on the environment that I'm asking. Is this likely to continue for the next six months given the uncertainties of the Ukraine war and et cetera, or do you think that there'll be some reversion to norm within a quarter or two? See, today we are operating in such a volatile situation. To give you any indication is extremely difficult, whether you call it Deepak's system or the general. Yes, that is the trend industry and maybe, I mean, when situation will normalize, we don't know, but maybe it will take couple of quarters from now. In spite, first of all, as Maulik was mentioning, actually, margins can go up and down because situation is volatile. We are not compromising on our market share. In fact, we are debottlenecking the capacity, increasing the market share, because this is where the company's strength lies. We cannot control external environment, but internal environments very well, you know, on the production and productivities and all these things. This is what is going to help us in future. We cannot comment how it will win. Our revenue growth is certainly, it's a very good indication that we have, in spite of such challenges, we have grown so much. Margins, we cannot comment today. Right. Another thing that you alluded to in the presentation was the fact that you're expecting the lag in passing on the price hikes to the customers should reduce in the light of new multi-year contracts. Can you explain a little bit more? Do you have a higher proportion of multi-year contracts? And what is there in the provision in this multi-year contract that enables you to reprice your product to the customers quicker as compared to the past? No. Let me correct that misconception. There's no improvement in the lag. The lag is a lag, and normally speaking, most contracts are built with a, you know, a price review clause every quarter. Right. Many of our customers are, you know, they are export customers, so they buy on a calendar year. Right. We think of everything happening starting from April, but they think of it starting from January. March is when, normally you would have this kind of a discussion with customers. Now, what I said is that we have increased our bias towards getting into multi-year contracts, which is something that we earlier shied away from. These multi-year contracts or annualized contracts, whatever you call them, generally have a clause which says that if, your cost of production goes up by more than, you know, 4% or 5% within a period of time, the price revision clause will automatically be invoked at the next review opportunity. Right. Now, customers are also aware that these are not situations which are unique to Deepak. For most of our raw materials that we buy today, let me tell you that we are best in class. Even if we compare to other producers who might buy the same raw materials for other products, maybe three or four times as much as we buy. We are still matching, or in many cases, lower than the price at which they buy. Right. This has been by and large a skill that we have developed. It's not an individual person skill, but it's a culture that we have been imbibing over the last many years. Right. Customers are also well aware that whatever happens, Deepak will work hard to ensure that they are as reliable as anybody out there in the industry, and they appreciate this. Now, in fact, unfortunately, in Q4, we have lost some volumes in some of our segments because it didn't matter what the price of the raw material was. There was some volume that we were just not able to mop up. Right. Therefore, we have been, in fact, engaged with customers in telling them that don't worry, moving forward, we will ensure that we buy, you know, we will work even harder. We will see what we can do to invest more in, international import infrastructure if required, but we are there. Because they were ready to pay more. The problem is that we wouldn't be able to deliver, you know, more than how much we did, even though the requirement was more. Right. This is a kind of honest, transparent relationships that we have with our customers. Let me tell you, Q4, I would say that this is really dedicated to the customers of Deepak. This is how much they have trusted us despite this kind of raw material volatility and other volatilities, that we have been able to maintain, in some cases, grow our market share, our wallet share. I'm very, very grateful to our customers and our internal team to be able to maintain a relationship in this environment. Right. Thanks very much. In any case, if the focus is on retaining wallet share, as you've been consistently saying over the last five years, all of us, including shareholders, must be prepared to take some degree of quarterly fluctuation. Let me also just point out that, yes, while there may be some degree of quarterly fluctuation, you can continue to bet that Deepak will be a standard by which, you know, performance is seen. We are one of the leading companies in the chemical space with really strong ROCE, really strong order books, and really strong finances. I mean, we are now at even a consolidated level debt-free. Our growth trajectory continues to expect this kind of fiscal prudence. Right. This is why we are shareholders of you, sir. Thank you so much. I really appreciate it. Thank you. Thank you. Thank you. The next question is from the line of Nirav Jimudia from Anand Rathi. Please go ahead. Good afternoon, sir, and congratulations for the healthy show. Thank you. I have two questions. First is like, last two years have been very eventful for us. 2021 being a demand-led problem and 2022 being a supply-led problems. But if I can ask, like from Deepak's point of view, what were the key learnings and the opportunities, with reference to the probably products or the processes and the cost savings, which now we can say that it has now become a permanent for us and can create a base for us for our future growth. This is question number one. Sure. One thing that we have learned, which I think I hope that a lot of other companies in our space are also learning is, you know, in the past, we have always focused on things like raw material costs and consumption norms and these things. Never really focusing so much on things like freight costs or packaging costs and these things, because they were always seen as, you know, the 3%, 4%, 5%, 6% at the bottom of our total cost pile. Whereas nowadays, this has increased substantially for most chemical manufacturers and has actually become a major cost center. We have to see what we can do to really invest in the right kind of infrastructure, have the right kind of arrangement set up, whether it is on freight or whether it is on packaging material. This has been a learning for us this year. Going forward, we have also broad-based our options with regards to all of these things. The value will be first felt in the level of consistency and sustainability. Then perhaps over a period of time will be felt also with regards to, you know, price improvements and these things. Second thing that we have learned is, at the end of the day, you know, utilities, which has been, again, as I mentioned in the with regards to packaging and freight, it has always been something that was considered as a fait accompli. You didn't think so much about it when the cost of power was INR 6, and you didn't think, you know, when the cost of steam was INR 1, and the cost of gas was whatever it was. Today, these have become huge problems, not just for chemical companies like Deepak, also for power companies all over the country and in fact, all over the world. Right. Looking at how to optimize this, significantly enhance the way that we consume energy, our energy footprint, our carbon footprint, these are things that we have been working hammer and tong on in the last quarter. We've actually seen already a substantial improvement over the previous quarter with regards to our consumption norms. But I can just tell you that we have just managed to touch the tip of the iceberg. We have further invested into, you know, conducting audits across all of our sites, energy audits, you know, consumption audits, with regards to leakages of power, steam, water, and we're working to tighten all of these things. That's the right thing to do for the environment. Luckily for shareholders, also the right thing to do with regards to the bottom line. Mm-hmm. It will yield benefits, as we move forward. These will of course be sustainable. These will of course be part of the new culture of Deepak. Correct. There are many more learnings also here, Nirav, on supply side also because dependence on one supplier is actually very difficult today because Correct. Anything can happen to him. It cost us a lot. Secondly, earlier we were managing, not too long back because it was only just in time inventory. Now that time has gone. We have to see that we run our production, we have enough inventory to carry because shipments are delayed, ships are canceled. So many things. I mean, there are a lot of challenges the world is facing in last two years. A lot of learning from all this. Correct. Sir, the second question is, we have been alluding in almost all the presentations, the press releases and the conferences that our focus is on import substitution. If I can ask, what can be our addressable market out of India's $50 billion of imports? If you can correlate it with our downstream phenol acetone or the standalone Deepak Nitrite businesses. This is one. In addition to this, if you can relate this in context with our new R&D center, which we are coming up with. How this R&D center would help us to take a pie of this $50 billion of imports coming to India. Thank you. See, this import is coming into India anyways. Yeah. When we invested in phenol and acetone plant, it was always with the plan of it being just the first step. Today, if I want to expand my capacity of phenol and acetone, it is at a fraction of the cost that it would be for someone to put up a greenfield plant. That's the value of the entry barrier. Now, even the downstreams of phenol and acetone, and there are many, they are being imported into India. As India further develops a significant manufacturing, you know, prowess for, you know, a lot of things which, require solvents, you know, epoxies and some such, which are anyways part of the government's, plan to, you know, promote Make in India. Correct. What our goal is, you know, every single time we look at these, our first target is not just Atmanirbhar Bharat, but we. Yeah. Anyway, we look at Make in India, make for the world. Correct. For that, we are tying up with technology suppliers in some cases. In other cases, you know, through our own internal processes, the right kind of technology that we can set up plants which will have global capacities and which will allow us to maintain a very small energy and water footprint. These are the right steps, and we believe that there will be opportunities not just in India, but also for exports across the world. Nonetheless, the world has turned towards India more and more over the last few years. Mm-hmm. as a good, dependable, democratic source for partnership for key raw materials in the chemicals space. Correct. Sir, suffice to summarize that we are probably, in terms of setting up the import substitution capacities here in India, try to grab those market shares, further capitalize on those capacities and be cost efficient to compete with the global markets. Is it fair to assume, sir? Yes, yes. That is. Also one thing that we are seeing is there's a lot of international players, MNCs in many cases in the life sciences space, that are looking at significantly increasing their investment and their base in India. What we may have earlier assumed, we may start off with, we have contracts with many of these customers. We may start off with exporting to them, but then over a period of time, they may also look at, increasing their requirement inside of India for the same molecules which they will continue to depend on Deepak for. This is part of that, discussion that we have anyways with our customers. Correct. Thank you so much for answering the questions in detail, and best wishes for the future, sir. Thank you so much. Thank you, Nirav. Thank you. Next question is from the line of Rohit Nagraj from Emkay Global. Please go ahead. Thanks for the opportunity. My first question is, you talked about the pricing dynamics on the RM front. How about the demand dynamics? Are we seeing any kind of slowdown in any of the segments, because of several issues like geopolitical issues, high energy prices, logistics costs? Is there any demand side setback that we are observing currently or how the things are moving across our segment? If you could just give a broader perspective on this. Thank you. For a couple of products, what we are seeing is while demand is good, in general, the demand is good. For a couple of products, what I can tell you is that customers are unwilling to give us, you know, long-term visibility. What they would earlier give for a minimum of six months, one year. Now they are only giving us for like a monthly or three monthly or things like that, because they are seeing a severe volatility in their environment. Today the demand is good. Let's remember that many of our customers also require key co-products that come from China or other parts of Europe, which may be severely affected with energy cost increases. Now they are hoping for the situation to normalize, but until it doesn't, they continue to buy from us. There is a small risk that they have shared with us that the situation could get worse. Although more and more it seems like, Europe is becoming a little bit more resilient than it was. They are not in a position today where they can give us that level of confidence and commitment, and we appreciate that they are telling us this transparently well ahead of time. Demand remains, what it has been in Q4, but in a few products, we are seeing a drop in visibility for a longer period of time. Rohit, certainly this is happening. You know, this, as in our commentary, we said 80% is our domestic sale and 20% is export, if you see the consolidated. Now, in domestic demand we don't see much of an issue. We have clear visibility. This is happening in Europe, as Maulik was mentioning, and that 20% and that too in some of the products. By and large, yes, most of the products were under control. Maybe few of the products we are finding this, particularly in abroad and Europe. All right, sir. Got it. This was really helpful. The second question is, in terms of capital allocation. Now we are definitely on a consolidated basis. The cash flows will be substantially higher and we are also, you know got approval for QIP. Is there any inorganic initiative which is also we are currently considering, given that we are already, you know, having INR 1,100 crores of CapEx plan on track and there will be QIP which is coming up hopefully in the next few quarters. Are we looking at, you know, inorganic initiative as also one of the expansion, you know, plan for us? Thank you. Yeah, yeah, we do look at these opportunities. I mean, we are not averse of any inorganic growth also. In fact, it works faster in case we get a good opportunity, you know. Greenfield projects always takes time. Yes, if there are good opportunities and as you rightly said, we have a very strong balance sheet, so we will certainly be interested in this kind of opportunity also. No doubt. Thanks, sir. Got it. Thanks a lot and best of luck, sir. Thank you. Thank you. The next question is from the line of Dipak Saha from Savart. Please go ahead. Hi. Thank you for the opportunity and congratulations to the entire team for ending the year on such a strong note with global revenue growth and fair margin despite such macro volatility. My question is, Maulik specifically, if we simply assume that raw material prices are going to stay elevated at this point of time and you know, at least over the medium term. Do you intend to continue being largely focused on growth with some hit on margin? Or do you intend to focus on growth in a measured manner while towards higher margin? This is my first question. Look, this answer is different for products that we're getting into, which are greenfield products, and different for products which we are already well entrenched in. Raw materials cost is at an all-time high right now. At the same time, we are seeing certainly a level of improvement right now, which is not on prices, but which is with regards to availability. Normally what we see is availability improvement precedes price improvement. Nonetheless, our focus will always be on ensuring that we continue the quality of relationships that we have with our key customers who have, you know, remained on this journey with us, even during this kind of price escalation. We believe that margins in some cases should certainly improve. In other cases, they may, by and large, remain the same. It's in this kind of volatility, it is really I mean, even claiming safe harbor is very difficult to give you any sort of confident answer. What I can tell you is Deepak is very good at doing what it does, and it will continue to excel in doing what it does. Rest assured on that. However, it would not be a responsible thing for me to answer this question and tell you that margins will substantially improve or there will be this huge new, you know, 20% addition to the ROCE. No, that is not going to be the case. We have good ROCE anyways in the organization across the board. The new products that we are adding will continue with those kinds of percentages. In some cases, maybe a little bit higher. As a company, we maintain the kind of philosophy that we have with regards to what we expect in terms of payback for new projects as well as brownfield projects. To answer your question, Deepak, growth is certainly will be there and should be there, you know. I said in the first remark itself that we will continue to grow. Margins can, because the availability of raw material and these things can, it's a volatile market. It can happen. You cannot lose your customers. You cannot lose your market share. These are all very important for us. There could be 1% or 2% margin here and there. That's a different thing. Growth remains our focus, no doubt on that. Thank you. Thank you. Thank you. It's really helpful. Margin, that's a different thing. Otherwise, we are not averse of picking up the business. Makes sense, sir. That's clear. My second question is on the Performance Products. If you can share some color regarding the levers that might play out in terms of- Performance Products contributing much more higher to the overall revenue. Some guidance regarding if the margins will sustain for Performance Products, because we have done really good on the Performance Products front. Do we think that we'll be able to sustain this kind of margins going ahead? Then also some color on the growth front, sir. Thank you. Categorically, I can tell you right now the visibility is, no, we don't expect the same kind of margins as a percentage. However, we are increasingly looking at a higher base. Now let me tell you why. The situation right now is from the perspective of Q1. We might see that it, you know, it maintains a certain level of trajectory. However, our customers are facing huge cost increases when it comes to energy costs. This is for us it is one of the costs. For them, it is probably one of their top three costs. Now, especially in the export market, especially in Europe and in a couple of other export markets like South America and in the U.S., energy costs have increased far beyond what they had originally thought likely. For them, there is always going to be a much longer lag to be able to pass these prices on because they are B2C. Therefore, while demand is strong and while, you know, margins are good, moving forward, we don't know whether they will be able to continue to consume product at the same rate that they have in the past, in the recent past, simply because this demand resurgence that has come about in the last couple of quarters, as I mentioned earlier, it might be dampened if energy costs remain high. If they improve, as many of them are hoping, but are not willing to commit to, of course, we will continue to see good demand in terms of volume. As I've alluded to before, volume growth is always preceded by margin growth. Today, I would say we need to be very cautious on performance. Okay. Thanks. Thanks, Maulik. Thanks. Thank you. Thank you. That's really helpful. All the best for FY 2023. Thank you. Thank you so much. Thank you. The next question is from the line of Naushad Chaudhary from Aditya Birla Sun Life AMC. Please go ahead. Yeah, hi. Thanks for the opportunity. Just one question on the phenolics business. Wanted to understand, as we can see, there is consistently the margin of phenolics business are normalizing. Just want to check if we are, you know, satisfied with the last two quarters EBIT margins run rate and or do we see there is any scope for improvement from here on, assuming all the cost pressures gets normalized. Just wanted to have your comment and how do you see this margin of your phenolics business? Since you're asking us if we are satisfied, I can tell you that we are always satisfied and we're never satisfied. There are opportunities to improve. In this case, most of that comes from, you know, further tweaking our operational excellence. That is already a very strong forte. Nonetheless, phenol as a business, the demand for the product is good, continues to be strong, but is very significantly affected by raw material prices, which are of course petrochemical, as well as, energy prices which come from coal and electricity. While coal and electricity are as challenging as they are, what we can tell you is that the Cogen plant will allow us to, you know, have fewer shutdowns, unplanned shutdowns, which create a lot of internal cost escalation for a short period of time and, you know, disruption in kind of our efficiencies of production. Once that gets normalized, I can tell you that our productivity will certainly improve. With regards to margin, too much rise also on the cost of things like coal and benzene and propylene. Demand for the end product is good. Right. Can we assume with the existing capital deployed to your phenolics business, in a normal scenario, can we again do it, INR 250 crore or so quarterly EBIT business from this segment? See, we will continue to have this, turnover and, our capacity is going beyond 115%-120%, we'll continue to run. We can't comment on INR 250 crores or INR 260 crores because that is something which is, an outcome of how, it is, you know. I repeat, margin, we cannot give you any this thing that this margin remain or that margin remain. Our effort will be to run the plant at full capacity. We are in fact we can further debottleneck and increase the capacity, our, well, share. These things will continue, our efforts on this. Margins can be 20%, it can be 22%, it can be 18% also. We will not like to comment on this aspect of. Because there is no control over the raw material and price can move up and down. We have no control over that. Okay? We should not answer some questions which are beyond anybody's, Absolutely. Understood. Thank you so much, sir. Thank you. Thank you. I request all the participants, please restrict to two questions per participant. If time permit, please come back in the question queue for a follow-up question. The next question is from the line of Bal Krishna from Axon Investments. Please go ahead. Good evening, sir. I have a couple of questions. First question is, does any of our products have application in making batteries used in the e-mobility? Maybe forward products or anything? No. You know, this industry, which is nascent in India, has a lot of utilization of processes which we are very competent in. For example, hydrogen reduction, for example, nitration. Moving forward, it's certainly not something that we have a high level of competence in, but we'll work towards developing our competence in fluorination as well. This is still a nascent market in India. As it grows, we will be looking at it with interest to see whether there is a role that Deepak can play. Okay, with regard to epoxy or the adhesive products, I mean, how much this demand because of significant government infrastructure spend can have on the demand of our products? I mean, how much significant it is to our market? Significant to our downstreams rather than currently phenol. Because phenol or acetone or IPA, they go into a whole variety of downstream applications, some of which are linked to epoxies. Our downstreams will have a more direct interface with these products. I think once we are close enough to commissioning or post-commissioning, some of our investments, this will be a very interesting conversation to have. I mean, do we make BPA or its related product which are used in adhesives? No, we make acetone. Okay. Okay. Thank you. That's all from my side. Best of luck. Thank you. Thank you. The next question is from the line of Samir Palod from AUM Fund Advisors. Please go ahead. Good. Hi, Maulik. Congratulations on a good set of numbers. Sorry to interrupt you, your voice is echoing. May I request you to speak through the handset? Is this better? Thank you, sir. Much better. Yeah. Hi, Maulik. Congratulations on a good set of numbers. My two questions, more sort of forward-looking in the sense that given that you already have a debt-free, net debt-free balance sheet. Hello? What would be the use of proceeds that you have in mind, if you can throw some light on that. Samir, sorry to interrupt you. We lost your audio in between. May I request you to repeat your question once again. Sorry. Is this better now? Yes. Maulik, my question was, given that you already have, at a consolidated level, a net debt-free balance sheet, why would the company consider a QIP, and sort of what would be the use of proceeds that you are envisioning for that? We have plans. It is QIPs and this, of course, that's why we are waiting for the market to settle down. We have definite plans. Of course, our balance sheet is strong, our cash flows are strong, but no harm in making it stronger, you know. If you have war chest, as somebody was mentioning, if there is a right opportunity of inorganic growth or is the right opportunity to go ahead with the major expansion, you are ready. You cannot go into the market when you need funds. You know, you have to have war chest ready to go and expand or set up a greenfield facility. This is just for a it's a so much stronger balance sheet what we are creating for further opportunities in India and in particular in our kind of products, there are many opportunities. I mean, there is nothing. If you have strong balance sheet, one can definitely go ahead with that at any time whenever we find an opportunity. Now given that you already have, you're saying you have a lot of opportunities, what sort of CapEx can we expect the company to do other than the INR 1,500 crore that is already mentioned in the presentation, which will come on stream over FY 2023 and 2024? Anything over and above that you can guide us, saying that these are the projects that you have in mind, or from a quantum perspective, how much would that be? And for these projects, what sort of fixed asset turnovers are you looking at, given that they're likely to be far more downstream, et cetera. Are they gonna be lower fixed asset turnover but much higher margin than the company's current averages? I think it'll be too early to comment on this aspect now. Let's first do our 1,500. We have already shared with you. We'll share with you all this information at the opportune time when we clear from the board and other things, you know. Today it will be premature to tell you anything on these aspects. Hello? We will not share until we have tied up our technology supply, whether it is internal or external, our customer interface, our raw material supply, and ensuring that we have the right team internalize so that the team will be able to run it with the kind of safety and sustainability that we run all of our plants. Until these four pillars are properly tied, it will be premature for us to announce. Maulik, for the INR 1,500 crores that is going to come on stream starting in FY 2023 in the next few months, given that everything's already tied up, would you be able to guide us on what sort of fixed asset turnover ratios and margins will be for these products for this first phase of CapEx? There are projects which are backward integrated in that. There are certain greenfield. Normally, we have asset turnover ratio of 2 to 1. Of course, backward integrated projects will certainly add to our margins as people are more questioning on margins other than top-line growth. That will certainly add to our margins. The balance, when we look at any project, it will be 2 to 1 asset turnover and a return on capital employed about 20%-22%. That's how we select a project and payback of say three to four years. These are the numbers you can consider. We've already shared that this will be our guidance for most investments that we make. These are some of our internal Lakshman Rekhas, where we have to answer our question about what is Deepak's right to win. These are some of the questions we ask ourselves. Do we have a payback of, you know, three, maximum four years? Do we have an IRR target? Do we have an asset turnover ratio, which is between, whatever, 1.75 and 2? You know, what is the level of confidence that we have with regards to movement to customer? Now, of course, that's an easy answer when the customer is Deepak itself. Thank you. Samir, I'll request you to come back in the question queue. I request to all the participants, restrict to one question per participant. Next question is from the line of Saurabh from Asian Markets Securities. Please go ahead. Thank you for the opportunity. Just wanted to clarify on the commissioning timeline of the downstream project and the specialty project. Sorry? Just wanted the update on the commissioning timeline for the downstream project, INR 700 crore downstream project, as well as another INR 300-400 crore of specialty chemical project. By when this plant should be commissioned, and will it be in a phased manner? We've already addressed that question. There will be one commissioning that happens in the next month or two months. There will be more that will be commissioned over the next 9-12 months, and then there will be some more that will be commissioned at a longer timeline that maybe between 18-24 months. In the interim, there are certain CapExes that we are already executing, which are smaller CapExes, which are more brownfield related. The ones that I have mentioned are more greenfield. Okay. Which project is the immediate commissioning in next 1 quarter? It's an agrochemical intermediate. I mean, the entire production has already been tied up with multi-year contracts. Okay. 12- to 12-month timeline would be for the specialty chemical, and then 12-18 months will be downstream. Is it fair to assume? 18-24 months for the upstream. 9-12 months for the, Specialty. specialty chemical. Okay. Thank you. Thank you. Thank you. Next question is from the line of Reena Shah from Elara Capital PLC. Please go ahead. Hi, sir. Thank you for the opportunity. I just wanted to ask you something on your fluorination project. Do I understand this fluorination, where you are targeting to enter first? Will it be more in agrochemical space or in pharma space or in something else? The bulk of the project is focused on the agrochemical space. However, you know, there are assets included in it which are multipurpose, which will service some pharma applications. However, if we look at it is biased towards agrochemicals. Both agro and pharma form part of what we call life sciences as a space. These are products, you know, like a lot of Deepak's products, they have multiple end applications, but the fastest growing ones today certainly are agro and a little bit of pharma. Okay. Sir, by when do you expect this project to get commissioned? Any timeline? 9-12 months. 9-12 months. Okay. Sir, maybe you would have said, but I would have missed. Any CapEx guidelines for next two to three years? No, you haven't missed anything beyond what we have said. Okay. CapEx guidelines, sir, for next two years. Yeah, yeah. You haven't missed anything. Yeah, yeah. We have only announced so far about INR 1,500 crore. We will announce more as and when the time is right. Okay. That's it from my side. Thank you, sir. Thank you. Thank you. The next question is from the line of Madhav Marda from Fidelity International. Please go ahead. Yeah. Hi, sir. Good evening. Thank you so much for your time. I just had a quick question on the fluorination project that we are undertaking. Given that in India there are a few players which are, you know, backward integrated in the fluorine value chain, how does our competitiveness stand versus them as they also address agrochemical as an end market in a good way? Just wanted to understand is it a different product portfolio or do we have a different kind of process chemistry that we're doing here? Yeah, just wanted to understand that better. Thank you. No, I think we would compare quite well. What we are looking at manufacturing as a phase one from these products are ones where we have a strong degree of competency in processes beyond fluorination. The investments that we have made, we're confident about you know, maintaining the kind of internal target, the financial target that we put for any other business, which would not be fluorination. If we were to invest in nitration or reduction or diazotization, et cetera, et cetera, et cetera, we would have the same kinds of you know, targets that we have here, and we're confident about being able to achieve them. While there are other players in that space, that does not bother us too much. There are other players in the nitration space or in the hydrogenation space. I don't know whether that's a conversation that investors have with them about whether they should invest in, seeing that Deepak is already nitrating products. No. Actually, the reason I ask is because at least my limited understanding is that in the fluorination business, having access to the raw material is a bit of a challenge. It's a fairly concentrated sort of part of the market to get the raw material, which is why I asked that question to get HF. No. That's a good point, but it's a misconception. It is, it's absolutely available. It's available worldwide also. You can happily import it. You can buy it from domestic sources as well. There's absolutely no problem with material availability. What one needs to be very careful about is with handling and safety. That is one of the reasons why we took such a long time to announce that we're getting into this space, because we wanted to make sure that we have the right people and the right SOPs to ensure that when we are handling this product, whether transporting it or consuming it or storing it, we'll be able to do it in a good way, seeing that we are going to be doing these processes in a site that is going to be an integrated site that will have a lot of other production. Do you plan to import the? We have the right people and the right supply sources also. I can assure you that availability of the raw material is not a problem. Do you plan to use an imported source for the raw material, or it's gonna be domestic source for the raw material? I'm assuming it's HF. We took a strategy to have both. Both you have. We don't want to be dependent only on domestic, nor do we want to be dependent only on imports. We have both import and domestic sources. These are HF-based fluorination products only, or it's like a broader portfolio of products? To start off with, they're HF. HF. Okay. All right. Thank you so much. Thank you. Thank you very much. I now hand the conference over to Mr. Akul Broachwala for closing comments. Thank you, Nirav. I would like to thank the management team for taking the time to participate in this call, and I would also like to thank all the participants for joining in. Thanks again. With that, we conclude this call. Thank you so much. Thank you, everybody. Thank you very much. On behalf of IIFL Securities, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.