Ladies and gentlemen, good day and welcome to the Q3 FY 23 earnings conference call of Deepak Nitrite Limited, 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. Ranjit Cirumalla from IIFL Securities Limited. Thank you, and over to you, sir. Thank you, Rutuja. Good afternoon, everyone, and thank you for joining us on Deepak Nitrite's Q3 FY23 earnings conference call. Today, we have with us Mr. Maulik Mehta, Executive Director and CEO, Mr. Sanjay Upadhyay, Director, Finance and Group CFO, and Mr. Somsekhar Nanda, CFO. We'll begin the call with opening remarks from the management team, followed by an interactive Q&A session. To begin with, Mr. Maulik Mehta will share his views on the operating performance and the growth plans of the company, followed by Mr. Sanjay Upadhyay, who shall take us through the financial and segmental performance. I now invite Mr. Mehta to share his opening comments. Thank you, and over to you. Good morning, everybody, a warm welcome to you on Deepak Nitrite's Q3 and nine-month FY 2023 earnings conference call. I trust you've had an opportunity to go through our results documents that were shared earlier. I'll begin by taking you through the key financial highlights and operational highlights for the period ended December 31st, 2022, some key developments and strategic approaches for the coming year. Mr. Upadhyay will present you with the financial overview about the period under review. The operating environment continues to be highly dynamic. The recalibration of global supply chains over the last year due to various points like the sanctions on Russia, China closing and then reopening, continue to play out. Further, as we have the Chinese economy reopening after very, very strict COVID protocols, it will continue to remain dynamic at least for the next couple of months as the situation gets normalized. Of course, these developments have certainly affected the supply and demand of key intermediates. This backdrop, we're pleased to share that DNL has demonstrated remarkable agility in capitalizing on pockets of opportunity during the Q3. Our global competitiveness and strong customer relationships ensure that we are called upon by customers for the requirement, while a focus on operational efficiency ensures that plants can be consistently operated at high utilization levels. This quarter, we have set new benchmarks in production and sales volumes for several key products such as DASDA, OBA, and phenol. Consolidated revenue for Q3 was INR 2,004 crore, higher by 15% on a year-on-year basis. Despite the recent cooling off in price on certain inputs, and by recent I mean, the last couple of weeks, they do remain elevated as compared to the same time last year. We had indicated that higher costs would be passed on to customers with some lag and the ongoing pass-throughs. Q3 EBITDA of INR 328 crore was higher on a sequential basis from the previous quarter of INR 283 crore by 16%. Consequently, the EBITDA margin too has risen over the previous quarter, though it remains below the elevated level of last year. Certain product margins were high last year but have normalized this year, causing margin compression compared to the base period. We're taking further measures to pass on increased input costs while also driving cost optimizations in order to protect profitability. I would also want to mention one important point that, and this is the base effect. From a standalone basis, every single kilo that the company manufactures has been able to maintain or grow its gross EBITDA per kilo. Naturally, with the higher raw material price and a higher finished good price, the percentage looks squeezed. Going on to the performance of the strategic business units, the advanced intermediates business delivered strong revenue despite inflationary pressures in the backdrop of strong demand. We have aggressively pursued opportunities both domestically and with international customers. There was a sharp rise in exports by nearly INR 100 crore in the same quarter when compared to the previous quarter. The segment is expected to continue to perform well due to the shift of global supply chains and positive demand trends. Further performance will be driven by new multi-year contracts, strong demand, and the ability to pass on cost increases to customers. As prices of products and raw materials stay at elevated levels, per kilo margins, as I mentioned earlier, are better even though the percentage looks deceptive. I would remind you that out of nine months, our Nandesari unit has operated for eight months, a little bit less than eight months, as one month, the month of June, was lost owing to a fire incident that took place. The phenolics business has demonstrated encouraging results with an average capacity utilization in excess of 117%. I would like to say here that while demand in India remains stable, weakness in global demand was observed. Many Asian phenol plants were operating at 60%-65% capacity. Nonetheless, we were able to manufacture and sell more than 117% of our production capacity. We saw an EBITDA margin improvement compared to the previous quarter owing partially to the moderation of raw material prices and partially due to the Indian demand remaining a bright spot in Asia. Deepak Nitrite standalone basis achieved for 13 consecutive quarters an ROCE of more than 30%, including the current quarter. The results should be seen in light of unusually high base of higher margin in phenolics and recent supply side challenges for critical raw materials like nitric acid. While the world has witnessed volatility, Deepak's customers have not. The company has maintained or grown wallet share in nearly all its products. Its relationships with key accounts remain buoyant. As the domestic consumption in some segments has been subject to sluggish demand in the recent few quarters, the company has prioritized export markets and ensured that both production and inventory remain very much in control. We are also progressing well with our expansion plans with multiple projects in progress. The installation of capacity for our SAC plant is set to be commissioned this quarter. Our projects for MIBK and MIBC, which are derivatives of acetone, are progressing well and should be on stream as planned. Just to highlight that between these products and IPA, the company will consume 80% of the acetone that it manufactures. We are constructing a facility for complex fluorination and photochlorination that will go on stream starting early H2. Our project to internally manufacture key raw materials is progressing well and towards commissioning as planned. In addition, our board has approved a capital investment of approximately INR 1,000 cror, which will help the company's growth plans. Out of this, we have approved a project for manufacturing polycarbonate compounding at a world scale, which will add impetus to our move towards the polycarbonate business. This will help us in understanding the key marketplace, the niche players, the large players, and we will be manufacturing compounding products which will be used by growing demand in India in applications like 5G boxes, EV batteries, medical devices and much more. With the Nandesari plant back into full operations and other plants running at high utilization, we are operating our captive power supply enables us to do so consistently, and steps have been taken to create a short supply of critical raw materials while we further de-risk the business. With multiple plants set for commissioning in the ensuing quarters, we're very well placed to continue to deliver on our growth aspirations. One point that I forgot to mention also is that we continue to progress as per plan with regards to our plant in Oman that will manufacture sodium nitrite as phase one. Thank you. I would now like to hand the call over to our Director of Finance and Group CFO, Mr. Sanjay Upadhyay, to address this forum and take you through the financial performance. Thank you. Sorry to interrupt, but we are unable to hear you, sir. Is it any better? Yes, please go ahead. Deepak Nitrite reported an encouraging performance during the period under review. Despite the ongoing micro challenges, solid improvement demonstrated in both our business segments, aiding DNL's continued strong revenue growth. I may like to mention here that around this time, the macroeconomic situations of chemical energy as regards prices of raw material were not very supportive. However, in spite of such steep challenge, we could bring in a resilient performance owing to diversity in our product basket, reaching out to the customers not only at the time of their need, but always, hence increasing the wallet share, constant negotiation of price of major raw materials, making raw materials available at all times to see that we excel in our operations. All of these steps helped us deliver better and sustainable performance. While I take you through the numbers, in a key development during the period, the company was awarded an Excellence in Financial Reporting for its annual report 2021, '22 by the Institute of Chartered Accountants of India. We take pride in announcing this. This is a milestone achievement for us. On the operating front, the domestic business revenue stood at INR 1,574 crores in Q3, higher by 11%. On a cumulative basis, INR 4,898 crores, higher by 30%. Export revenue were at INR 417 crores in Q3 and INR 1,113 crores in nine months FY23. On a consolidated level, domestic to export mix stood at 79 to 21 for Q3 of FY23, whilst standalone DNL's export revenue was 45% of the total turnover. In nine months FY23, on a consolidated basis, revenues are up by 22% at 6,046 crores compared to 4,969 crores in nine months FY22. Robust revenue growth was achieved through increased volume across and especially in phenolic segments. Utilization level remained high with ongoing improvements throughout the year-to-date period. EBITDA stood at 976 crores in nine months FY23 compared to 1,232 crores in nine months FY22. PAT stood at 618 crores versus 799 crores in FY23. In Q3 FY23, on a consolidated basis, revenues grew by 15% at 2,004 crores as compared to 1,748 crores in Q3 FY22. The impressive top line performance was fueled by higher production volumes in several key products. EBITDA came in at INR 328 crores compared to INR 378 crores in Q3 FY22. PAT stood at INR 209 crores. Profitability is lower on YOY basis due to high base in the previous year. The company has improved profitability quarter-on-quarter in line with the sensational performance. Moving to our segmental performance. In our advanced intermediate segment, revenue has increased by 19% to INR 829 crores in Q3 FY23 versus INR 699 crores in Q3 FY22. The growth is going to sustain healthy demand from key customers, while the rise in EBITDA was 2% to INR 172 crores during the quarter under review. As Maulik mentioned, growth in EBITDA has not kept pace with revenue growth due to significant increase in input costs compared to the previous year. Although input prices have moderated recently, the company is working to transfer the elevated costs to its customers. By and large, we are successful in achieving this. If you see on per ton basis, we have achieved higher contribution. In terms of percentage, because the total revenue is also going up, you are seeing marginal impact on the percentage. In nine months FY 2023, revenue grew at 27% to INR 2,263 crores and EBITDA came in at INR 470 crores, translating into margin of 21% despite the current environment and challenging circumstances. Deepak Phenolics delivered an encouraging performance with revenue growth of 13% to INR 1,187 crores in Q3 versus INR 1,050 crores in FY 2022. The company has operated all plants at high utilization rates. The phenol plant has clocked in average utilization of 117% for the quarter and achieved highest ever quarterly domestic sale and highest production per day of phenol. In spite of that, and this achieving 117% doesn't mean that we are, I mean, we are debottlenecking the phenol capacity further, and you can further expect some further growth in the volumes. EBITDA stood at INR 157 crores and EBITDA margin came in at 13% in the quarter. In nine months FY 2023, revenue stood at INR 3,812 crores, and EBITDA came in at INR 508 crores, translating into margin of 13%. During the quarter, DNL witnessed extreme volatility in exchange, which peaked at 83.03 and bottomed at 80.81, recording a volatility of 2.75%. For nine months FY23, the exchange rate moved between 75.33 to 83.03, recording a sharp volatility of 10.22%. The company implemented dynamic hedging strategies to mitigate foreign exchange risk, resulting in a gain of INR 3 crores in Q3 FY23 and INR 4.62 crores in nine months FY23. Company continues to remain debt-free with a net worth of INR 3,850 crores, thereby strengthening the balance sheet for future expansions. I would now request moderator to open the forum for question-answer session, please. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use answers while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Nirav Jimudia from Anvil Research. Please go ahead. Good afternoon, team. Sir, I have two questions to ask. Sir, first of all, the details on the expansion program. I think we have got almost now all the details of the INR 1,500 crores CapEx which is currently undergoing. Just wanted to ask you, like, you have mentioned one of the point in terms of the backward integration in fluorination space and the acid plant. If you can help us explain the rationale over here, like in terms of, let's say first on the fluorination side. Are we producing some of the products where, entering into fluorination would be a first step to assist our current product profile, as well as the newer opportunity size which we will be addressing with this? Foring into the complex fluorination complex, which you just mentioned in your opening remarks. This is on the fluorination side. On the acid plant, if you can just give some bit of understanding, like what could be the size of the plant? Out of around 460-470 crores of raw material cost, which we have reported in the standalone business for Q3, how much would be the contribution of, or the raw material composition of acid out of this 470 crores? This is question number one, sir. Okay. I'll answer the first question first. You, you rightly pointed out our strategy when it comes to photochlorination and fluorination. About a few years ago, this was imported 100% by us, not just the fluorinated molecule, but the downstream as well. We used that as a feedstock for you know, for a few of our agrochemicals. We started facing pricing pressure from China. Hence, about a year, a year ago, we stopped using some of our existing assets and repurposed them to make the upstream ourselves partially. Okay. Right. That, those steps require nitration, they require reduction, distillation, purification, those things. Those were processes which Deepak is intimately familiar with. We shifted from manufacturing ABC other products and started using them here in order to de-risk our supply chain. We started with 50%. Today, we are manufacturing 100% of our internal requirement. We were still, you know, at risk for the basic feedstock, which again came from China. Okay. Now with this, what we aim to do is have a 100% de-risk model all the way from the petrochemical source to the, you know, the final, advanced intermediate. Mm-hmm. More than that, we recognize that these are competencies which we are adding to our portfolio. It was important that we start with, you know, products where we ourselves would be the anchor customers, it would essentially not require a market discovery process. While we would sell a good amount of volume to strategic customers, we would also be our own customer. Right. Nonetheless, this was never the end intention. This was the beginning. All of the assets that we are putting up are up-engineered in that sense to be able to do a lot more, to be very, very flexible and fungible. With that, we intend to get into more advanced processes which require the same chemistries. As I mentioned, the first step was to do something where we have a very, very high chance of success. As we are succeeding and as we have established the key infrastructure which is required, we are working with strategic in order to develop products that they want, which would utilize some of these trains into supplying their requirements, which would be very different from the product that we are going to be making, which we will self-consume. Got it. This gives you a good understanding of how we are looking at investments, first by either having an existing strong competency or building a competency by targeting a strong customer, in this case us, ourselves. Got it. Building up that competency horizontally by ensuring that the process knowledge that we are able to gain allows us to make more complex molecules with niche applications. Mm-hmm. That answers your question about fluorination and photochlorination. Both of these are built in multiple trains so that there is a level of flexibility. We have purification towers along all of these so that it allows us a greater sense of flexibility in making one set of products and another set in parallel, if we so choose, or we can make a higher volume of a smaller number of molecules. This choice will remain ours, and the plants are engineered to be modular in that fashion, even moving forward. Similarly, as you asked about the backward integration, what I can just share rather than going into very specific numbers- Yeah is that the capacities will address not only all of our requirements today, but all of our requirements over the next few years. Once we have our own internal supply, we will naturally work towards expanding its consumption. There will be ample supply for us even with the expanded capacities. Got it. Sir, if I understood your answer correctly, in the fluorination space, some of the products what we are already producing, 100% of that product backward integration we are doing, but we are going one step ahead and building up the capacities to assist the 100% backward integrated product also. Safe to understand that that product or the capabilities what we are building can suffice newer number of addressable products, which then we may approach to the markets for agrochemicals or maybe pharma and a new stream of revenue could be opened up for us. Absolutely. We are already in active conversations with specific strategic customers to develop products for their niche applications. They happen to be in the life science of the agro and pharma space. We're working with them. We cannot talk specifically about the products, but rest assured that these will be, you know, with a long-term focus in mind. Correct. This ASIC plant would also have a WNA plant for our CNA requirement, right? Not going into specifics, let me just tell you that we will be no longer subject to the vagaries of the market. Got it, sir. Understood. Right. The point is to de-risk, and we've been working on this for a while, and, you know, it is, something that we expect to see very soon, and it will allow us to be on very, very firm footing. Got it, sir. Sir, second question is on putting up a sodium nitrate plant in Oman. I think we are a substantial player here in India for sodium nitrate. Our last quarter press release says that we'll be infusing something around $15 million as the initial amount for that JV, where we'll be holding 51% stake. If you can just help us through the rationale of putting up a plant over there, why we have been putting up a plant in Oman, what could be the size of investments which could be happening? Let's say if our current capacity X is, let's say X, how much it would be the addition happening to overall Deepak Nitrite portfolio so far as sodium nitrate is concerned, from Oman? Basically, this is something that we have been, you know, working on for a while, but we were doing it in a soft manner. As we saw the situation, you know, all over the world with regards to the energy crisis develop and, you know, become. In the beginning it was more of, you know, a short-term threat, but then it turned out to become more of a systemic challenge. We activated, and we started fast-tracking a lot of the initiatives that we had been working on anyways in Oman. The reason that we've targeted it is clear. Oman is a country where the energy that is available is used both as a feedstock, as a raw material in the form of ammonia, as well as an energy source. Okay. It also has, you know, trade agreements with various countries of interest worldwide. Now, one thing that happened over the last two quarters or three quarters is, while the Indian domestic demand was temporarily subdued because of XYZ reasons, we targeted more and more of the export demand, which was earlier maybe, supported by European manufacturing because we saw the systemic shift. Today, we have, I think we have more than doubled our export volumes compared to the same time last year. Okay. This will continue. We are running our plants on full right now, so we cannot wait for this facility in Oman to come up. We really need it to come up very quickly so that as we see the Indian market also recovering, we don't need to let go of the, you know, the export market which we have been able to capture. That market will be serviced by our facility in Oman, whereas the resurgent Indian demand will continue to be met by our plants in India. Correct. With regards to size, today, Deepak is already a world-scale manufacturer of sodium nitrite. What I can say is that the Oman facility, to start off with, will be of, you know, a reasonable size compared to the Indian plant. It will not be exactly as large, but it will have the capacity to ramp up production rather quickly, depending on the demand. We take a balanced approach, so we can say that the plant in Oman will be world scale. To start off with in phase 1, it will be somewhat smaller than the plant in India. It'll also have ample room to grow in terms of the infrastructure, along with have the opportunity to set up other products in phase 2 and phase 3, which may have something to do with sodium nitrite, nitrate. May not necessarily, but may follow a similar philosophy where we are able to use the Omani advantage to our benefit. Sir, is there any timelines we have set internally for this project to start in the phase 1? We're targeting to see how we can do it in two years or so. Got it, sir. Thank you. The earlier, the better for us. Yeah. Thank you, sir, for answering the questions in detail, and all the best to the entire team. Thank you so much. Thank you. The next question is from the line of Vivek Rajamani from Morgan Stanley. Please go ahead. Hi, sir. Thank you so much for the opportunity. The first question was on the advanced intermediates performance, and it's a bit of a 2-part question here. Obviously towards the end of last quarter, you said that your Nandesari facility was now operating fully. I think even during the comments you mentioned that you've had high utilization rates. So the question was, if I see this quarter, it's obviously still quite a bit lower than the peak that you saw in the Q4 of 2022. Would it be fair to say that this is purely based on the margin and price compression that you've seen since then? If you could just elaborate on which products are causing this, that would be great. The second part of the question was, you obviously mentioned very high utilization rates across the board. Would it be possible to give a bit more specifics for some of your bigger plants? That'd be really helpful. That's the first question. I did not understand the first part of your first question. Are you comparing- What was the reason? -our quarter three performance to our quarter four performance? Are you talking about this particular quarter that we're speaking about, meaning Jan to March, 2023? Because, I mean No. We very know our internal numbers. I'm surprised that you know this. No, sir. I was just referring to the December quarter performance and comparing it to the March quarter of 2022, which was obviously the peak for that segment. Right. Let me also point out that, to a certain extent, last year we had, you know, some of our raw materials on formula link, whereas that is not the case in today's. Sir, he's talking about top line. Yo, are you talking about top line? No, sir, I'm talking about your EBIT. EBITDA. Right. That is one of the factors. The other factor, of course, is that last year, you know, before the Ukraine war broke out, the price of several commodities like oil and therefore petrochemicals, BTEX, were definitely lower. Along with that, there was, generally speaking, an optimistic atmosphere where the, you know, the domestic market dive and intermediate segment, all of these, you know, segments were quite buoyant in terms of their expectations and outlook through the year. Also one thing that is always there is while, you know, Q4 is in that sense a relatively normal year, in any normal quarter in any year, the first two months of any, you know, the Jan and the Feb months are normally affected by uncertainties owing to China's New Year's and all of those things. Beyond that, what ends up happening is that a lot of customers of ours are looking at the year afresh. They are done with their previous quarter, which would be on a calendar basis, the non-Indian customers. They have finished, now they are looking at new volumes, new contracts, new this and new that. In most cases, it has allowed us also to have, you know, slightly higher prices and slightly improved margins as per a renegotiated contract. These things happen, and I would not read too much into this, to be honest. What I can say is that, you know, quarter four has just begun. It begins with some rays of optimism, but it's too early to call the quarter as a normalized quarter. Nonetheless, it does point to, generally speaking, greater consumer confidence in various countries across the world. We see how it goes. I remain cautiously optimistic. With regards to our plant utilization, our plant utilization is good across the board. In most of our plants, all of our large volume or high value plants, we're doing well. I can give you one example. You know, in the month of December, when we commissioned in November and December, when we commissioned a facility that goes into manufacturing of an agrochemical intermediate. This was an expansion project. Once we commissioned it, we were able to ramp it up to 100% utilization within a few days. By the end of the month, we were able to ramp that up further to 120% of the design capacity. We were able to do it with all due precautions in mind. Let me also assure you that the throughput, even the increased throughput, is all spoken for several years to come as well, because these are all tied up in volume contracts. Our customers have shown that, there is a great degree of optimism with regards to the end application here. Very clear, sir. Thank you so much for the explanation. The second question was something you did also touch upon briefly in your answer. I just wanted to get a sense in the first month that you've seen whether there's been any change in the trends in terms of the end segment demand, or is it broadly similar? Again, like you said, you are cautiously optimistic. Just wanted to get a sense if any segments are starting to show some signs of pick up or not. Thank you so much. Yeah. Generally speaking, we are seeing, compared to the previous quarter, slightly, you know, greater sense of optimism. Just to be very clear, optimism doesn't straightaway translate into more orders. Optimism translates first into, you know, discussions with a longer outlook in mind rather than just a few weeks or a month. It talks more about how we see the situation and the resilience of the end application, whatever the end application is. It could be textiles, it could be paper, it could be detergent, it could be agrochemicals or pharmaceuticals. Our customers are having conversations which include how they see the world improving in its buying sentiments over the next few months. In some cases, this has resulted in our customers being more willing to, you know, buy larger volumes, you know, run their plants, at a higher capacity, holding on to more stocks of raw material because they see their order books filling up. As I mentioned, cautious optimism because this is still early days. A lot of new factors have to be considered. For example, China's reopening, Europe going through a milder winter than anticipated, you know, various countries, central banks also sounding not all dovish, but less hawkish. It's going to be end to end about whether every single part of the global recovery trends in the same direction or not. Therefore, you know, it's at least, you know, it's enough to start a conversation. Sure, sir. Thank you so much for the explanation and all the very best. Thank you. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants, kindly limit your questions to two per participant. The next question is from the line of Naushad Chaudhary from Aditya Birla. Please go ahead. Hi. Hi. Thanks for the opportunity. Firstly, on the power cost pressures, in last couple of quarters, it has almost doubled. Any outlook here? Any sort of relief we are witnessing here? How do you see next two to three quarters, how should it be? What has doubled? Power cost. See, when you're saying power cost, you mean power, coal, all utilities, correct? Yes. What we see in the PNL, sir. I don't know the split as- As volumes, for example, in phenolics, as the volume and the throughput of the plant increases, you can anticipate that's over the power and fuel cost. On a per kilo of the final output basis, it remains fairly consistent. I mean, we are still exposed to the volatilities of the movement of prices of products like coal and natural gas, for example. As these stabilize over a period of time, you will see the gross value of these costs also stabilize. One thing I can tell you is that because of our, you know, cogent power plant operating at Dahej, we were able to avoid any and every failure of the plant because of the grid being down. This allows us to maintain a consistently high level of production and allows us to avoid any, you know, negative impact with regards to the specifications and quality of our phenol or acetone because they're manufactured on a continuous basis. This gives us more confidence, more product, better quality. Now let's see how the coal prices and the gas prices moderate over a period of time. It seems like in the last couple of weeks, they have improved, but it's again, as I mentioned, very early. See, there is a one-time impact also. Because of fire, our coal fire boiler was down in Nandesari, and we had to run our plant. Because we wanted to get production, we had to run on gas, which you know it was very costly then. These things do happen, you know, and what you are saying is the total number, but the production volumes have also gone up in phenolics and this. This is also impacting. We can't just compare the absolute number. Yes, it is fairly under control. Understood. The one-off impact, can you quantify that? Would it be there in the coming quarters as well? No, no, that was because of fire. Now, why should it be there? Right. Right. Would you be able to quantify that? I know there's no need to quantify this particular figure, but this I'm just explaining to you that this is also there. One month we had to run the boiler on gas. We'll quantify it when speaking with the insurance company. Sure. Sure. Sir, just, I have calculated it, though, but just wanted to hear from you how you are seeing the phenol spreads moving. I see, the benzene, propylene, these prices are softening. If you compare it with the phenol prices, the phenol prices relatively, are, stable. How you see the phenol spread, currently, and, any outlook if you would like to share? What does your calculation say? Sir. Hear from you. No, no. Obviously, the secondary market DASDA and you have been sharing that your way of doing things is slightly different, so it won't match. Directionally, it's indicating that there is a positive improvement, at least on the spread side. Would you validate that, sir? Maybe in short term, not much. I don't know whether if you are saying, but yes, in phenol margin, I think by and large will remain in the same range as of Q3. Okay? Okay. Maybe 1 and a half% here and there. Okay. Okay. In terms of the last question, in terms of the end user slowdown, earlier you had indicated textile is having some problem. Apart from this, any other end user which is, you know, giving us problem in terms of growth? Well, I think it's I don't know, but that's the reality. It's only textile and dyes and dye intermediates, where also we are seeing the improvement now in the fourth quarter. That segment is really impacted. Otherwise, we don't see much of a problem in any other segment. I will add, however, that the European paper industry is currently in quite a depressed state. I mean, it's been low for the last three quarters. Any small improvement will also be a big improvement, and that's significant power cost and water cost and energy cost that it has to contend with. This is, as I mentioned earlier, this is a structural thing. Our customers certainly are looking at Deepak as a larger player rather than their other suppliers who are also based in Europe. This helps us because when we are manufacturing in India and supplying to European companies, suddenly they prefer Deepak rather than buying from other European companies which might be facing, you know, their own cost of power and energy and water. Right. Yeah, that's it. All the best for the future, sir. sir. Thank you. Thank you. Thank you. Thank you. The next question is from the line of Chintan Modi from Haitong Securities. Please go ahead. Yeah, hi, sir. Thank you very much for the opportunity. Firstly, you have mentioned about a new investment of about INR 1,000 odd crores, which will partly also go for polycarbonate compounding business. It's like kind of a furtherance to your polycarbonate business. If you could help us understand what exactly would this mean? No, exactly that, as you rightly mentioned. The compounding facility, which will be a world-scale facility, will be able to make, you know, small batch and large batch. Made to order and made to stock. It will largely service India's very fast-growing demand of these compounds. The compounds are manufactured, based on certain properties that they are imbued with. It could be, you know, the ability to withstand temperature or pressure or a particular shape. It could be on the base of precision. You know, a lot of different metrics depending on the end application. All of these therefore have polycarbonate as their main ingredient with other additives which are able to support that particular application. In this case, what we are going to do is with this facility, we will engage with, you know, key partners and start building those relationships, supplying and having our products approved at their end. As we are doing this, you know, we put up, you know, significant facilities that will manufacture polycarbonate and its upstream all the way to phenol over a period of time. Once that is done, it is essentially supplying to the, you know, compounding facility itself, which is then making the application compounds as the customers require. Some amount may also be sold into the market, and some amount will be moved via this, compounding facility. It is our effort to occupy a space way downstream, where we are talking more about application than more about, you know, long-term value creation with customers who are based on Indian requirements. Sure. Basically, currently you would be buying polycarbonate, compounding it and sell it into the market. Once you understand the market, you will be going more backward integration by setting up a polycarbonate plant. Yeah. Imagine building a bridge from both sides of the river. got it. Got it. Sure. Secondly, as you mentioned about all your backward integration projects which are currently under implementation, once you are done with that, what level of self-sufficiency you will achieve in advanced intermediate business? If you could give some kind of a number? I think we should see an EBITDA improvement of at least about 2% across the advanced intermediate revenue. Whatever is the EBITDA percentage that we get, we will consistently be able to add at least 2% to that, more as we add more production and debottleneck and add more capacities. That will be margin accretive. In the meanwhile, it will be at least 2% on the current business. Okay. Okay. If we were to just see it from a revenue perspective, like how much proportion of that will be backward integrated to a large extent? How much would that be? Uh. 70%-75% initially. Just to be clear, I don't think I have understood your question, to be honest. We will be internally consuming to start off with about 2/3 or a little bit more than 2/3 of the capacity, with plans over the next year, two years to expand that to about 90%, 95%. See, the idea here is we are setting up this facility with some extra capacity. We will expand parallelly in nitration business so that we consume entire production captively. It pays back very fast, maybe three and a half years. This is a step in right direction because not only the price advantage, but it was also causing interruptions in the operations which will stop now. It is helping us on both the fronts. Helping the EBITDA improvement as well as running the plant smoothly. To hammer on this. My question was a little different. Out of the INR 100 of revenue that you are deriving today in advanced intermediates, how much proportion of that revenues would you be fully backward integrated or to a large extent backward integrated? 40%. 40%. Look, advanced intermediate is a, it has a large product portfolio. We are talking of only nitric acid here, right? The chlorination. The combination would not be... I don't know how it matters to you in terms of percentage. That cannot be so large. There are only two products, what Maulik spoke about, and today's CapEx is. Yeah. Is it the right question or I-? Uh, I think there is a confusion about your question. Look, we manufacture a lot of products which will use these, uh, feedstocks. They have their own, uh, you know, revenue and margin profiles. And because they're long in particular streams, it's very difficult to quantify because if I'm making a product which has nitration as a key step, I'm selling that, but I am also internally consuming that to go downstream into other processes which may be, you know, uh, hydrogen reduction or sulfonation or, uh, you know, cyanuric chloride, uh, uh, reactions and things like that. So it becomes very, very challenging for us to answer this question because everything that we are doing in the, uh, advanced intermediates, uh, business is part of a chain, one chain or another. So how do we go about answering this question? Most of them begin from the, you know, the basic intermediates building blocks, and a large part of basic intermediates as the building blocks require these, few intermediates that we spoke about, which we are, which we are backward integrating into. They're not the only ones, but they're key raw materials. So as it supports the upstream, cost and availability, so will it benefit all the way downstream as well. But, the safer answer to tell you is that it will certainly help something in top line because we have not had the opportunity to manufacture consistently because of, you know, unavailability of some raw materials, as I mentioned. So now when we do it, on a regular basis, it will add to the top line, but the significant impact will be, an improvement to the EBITDA percentage. Just as what Mr. Upadhyay has also emphasized. Sure. Sure. No, I think it is very helpful. Thank you very much. Right. Thank you. Thank you so much. Thank you. The next question is from the line of Meet Vora from Axis Capital. Please go ahead. Yeah, hi sir. Thanks for the opportunity. I just wanted to understand on phenol acetone derivatives. While you have said that we will be doing MIBK and MIBC and including IPA, the total acetone consumption capture rate will be around 80%. Currently I mean, we'll be selling the current acetone in open market. Will we let that market go off or how we are planning on that once MIBK and MIBC come on stream? This is my first question. I think that's kind of left to us, right? We will see that we participate in the market depending on the value that we get, but it gives us that sense of flexibility because, you know, when we make, isopropyl alcohol, IPA, it comes, you know, in a margin accretive manner compared to sale of just pure acetone. MIBK comes, in a margin accretive manner. MIBC is margin accretive to MIBK itself, right? All of these, and in fact, MIBK and MIBC will have margin profiles which will be similar to what you would expect from, say, the AI business. It is an effort to go downstream. If you're asking about, you know, vacating the, pure play acetone market, we'll need to figure out a strategy about how we can address that. As, Mr. Upadhyay also mentioned, we are debottlenecking our phenol and acetone capacities anyways. Sure. When I refer to 80% of phenol production, acetone production, I was referring to the current production. We will be able to add some, you know, through debottlenecking exercises which are extremely short-term. You should see the result of that coming in maybe a couple of months from now, to be honest, maybe in Q1 of the next year. That will add capacities of both phenol and acetone. I think we will be well-placed to, you know, have a significant market share of all the products, including acetone, even though we plan to internally consume higher and higher quantities. As required, when required in the future, we do anticipate that we will need to, you know, significantly expand our phenol capacity far beyond what the current plant is capable of doing. We will have to put up new plants. Some of those capacities will be consumed downstream as we move towards polycarbonates. Some of those will be available to the market as we intend to maintain a particular wallet share in India's growing story. Sure, sir. Thanks. That's helpful. Secondly, as you rightly said that, you know, in the polycarbonate we are, doing like we are building a bridge from both sides of the river. I just wanted to understand whether we have cracked the phenol downstream products till we go up to polycarbonate, like this phenol, I mean, entire route have we cracked or till the time we market for polycarbonate through just processing it, and once we find the end consumers then we'll start cracking or how is it going to go about? Also, if you can quantify that? Sorry, what do you mean by cracking? The technology is widely available and well established. Okay. I mean, there are various different technologies, different routes. All of them are well established. All of them have advantages, different advantages as it pertains to the Indian ecosystem. It is up to us to decide, you know, which, you know, road we want to take. The destination is clear. We have started to invest in that destination as well. Okay. sir, if you could quantify, the debottlenecking exercise that we are doing on phenol acetone plant, that would be helpful. I mean, we will add on 50,000 tons. We will touch on 3 lakh 20, 3 lakh tons, above 3 lakhs. Okay. Okay. Thank you so much. That's all from my side. Thank you. Thank you. The next question is from the line of Manish Jain from Moneylife Advisory Services. Please go ahead. Thank you for the opportunity. Wanted to understand the trend in raw material prices. You know, last three quarters the prices had increased drastically due to various factors. Are you witnessing moderation in the prices especially for nitric acid, ammonia and caustic soda? These prices are volatile now. They are at an elevated level if I'm comparing to last year at the same time. There has been I won't call it a moderation certainly, but I would call it a plateau compared to the previous quarter. As and when we do find small pockets of opportunity, we take them. We are large consumers and hence we are able to use that and leverage better product pricing. Beyond the point, this is also challenging. In the short term, we do anticipate that even if prices moderate, they may not reach the prices that were prevalent last year. One of the reasons of course being that last year we were engaged in contractual agreements with formula prices, and this time we are, you know, addressing the situation on our own. Okay. Got it. Secondly. I'll just highlight that what you see, you know, as a performance of this quarter, the last quarter and the quarters before that is despite having this as a challenge. This is not a challenge that began last week. It's not just going to be in quarter four. It has been the challenge for the entirety of this financial year. As you can see, while it is a challenge, we take it in stride. We are up to the task, and we work hard to maintain our margin profiles. While we are doing all of this, we do not lose wallet share. Okay. Secondly, wanted to understand, are you looking to strengthen your employee base in the medium term for the upcoming projects and expansion? Also, can you give a sense on the number of employees you will be looking to add in the R&D department as you pour into more downstream products? No, I won't go into numbers, but there will be significant additions. Nonetheless, we also have internal programs where we, you know, we target, you know, to prefer internal mobility. Now of course, in R&D this is difficult because our teams are generally occupied and normally for things like compounding and all, it requires a specialized skill set. So we have been looking out, and, you know, taking talent and we have some, you know, good people who have joined us with this, you know, very clear vision in mind, and they're already working on that. It is in that sense quite similar to what we did about two years ago when we decided to enter the fluorination space. We announced it, you know, about eight months to a year after we started recruiting. We started building R&D facilities. We started piloting. We ensured that we tied up our raw materials. We, you know, we started hiring people who would be operating at the plants. Those people were also deeply involved when we were doing the piloting so that they would be confident that what they were getting when the plant is operational is something that they were confident running. Their input and guidance has been invaluable to us while we have done this. We recruit at the right time, not too early, but not only at a time where we need to operationalize. Whether it is at R&D level or it is at plant level, we start incorporating people and ensuring that the transition is smooth. Okay. Thank you and all the best. Thank you. Thank you. The next question is from the line of Rohit Nagraj from Centrum Broking. Please go ahead. Yeah. Thanks for the opportunity and congrats on sequential growth in both segments. My first question pertains to the CapEx. INR 1,500 crores CapEx is what we have planned for FY 2023 and 2024. As I understand in previous calls we had indicated about INR 700 crores of this will go to Phenolics. We have already invested close to about INR 400 in Chem Tech. Just wanted a broader bifurcation, in terms of standalone Deepak Nitrite, how much of this CapEx will go phenolics and Cleantech? Don't look at it from that perspective. Right. No, of course. This is actually Cleantech is a vehicle, is a 100% owned subsidiary. All these expansions are through Cleantech. Don't read too much into how much is going to Cleantech and how much going here. It's all through Cleantech only. I just wanted to have an understanding. Okay, let me rephrase the question. Out of INR 1,500 crores of total CapEx, how much of CapEx will go for backward integration? How much of it will go for capacity creation or growth? 50/50 you can take. Yeah. Okay. This of course does not incorporate the additional announcements that you would have seen. Yeah. in the investor presentation, which is approximately about INR 1,000 crores, which would be over and above this, and most of that would go into revenue generation. Correct? Right. Out of this INR 1,500 crores, how much are we expect to capitalize in FY 2023 and the rest will be certainly in FY 2024? In FY 2023. FY 2023 is hardly anything. I think around, I'd say INR 70 crores, INR 80 crores. Around INR 80 crores. Rest all will be next year. Exactly. Okay. probably some INR 100 crores this year and, the rest of INR 1,400 crores will be capitalized in FY 2024. Right. Right. and other. Maybe, beyond that also in Q1. Not everything is coming in 2024, first, March. Right. I mean, there could be one spill over by a quarter or so in that. Oh, yeah. That's it. Yeah. In terms of the PC, compounding, facility, could you just give us a broader understanding in terms of capacities that we want to create here in the initial stage? As I mentioned earlier, it is world-scale. To start off with in phase 1 it'll be about 35,000 tons. Okay. This will be broken up into, you know, you know, small batch volumes and large batch volumes and all of those. Okay. There will be tremendous amount of flexibility that is from day one. You know, as we need to grow, we do it in a phased manner. Right. Initially the PC will be imported. Yes, yes. Yeah. Okay. That's all from my side, sir. Thank you and best of luck. Thank you. Thank you. The next question is from the line of Tarun, an individual investor. Please go ahead. Hello. Yeah. Regarding the recent fire, although minor, which happened three days back, so the second fire in the past year, we wanted to understand what actions have been taken now to ensure that the chances of this happening are reduced in the future. Believe me, I appreciate your concern. We are significantly concerned as well. Investigations are definitely on the way, and we are working on this. Unfortunately, at this very moment, on this call, I cannot give you an answer, but we are working with, you know, internal team. We have, you know, got an external team which is, you know, specialized in investigations, and we're working with statutory bodies on this. One thing is for certain. Let's not get into about, you know, whether it is minor or major. We take everything equally seriously. What I can assure you is that the actions that are around the corner will be decisive in nature, and that will be the end of any such, situation happening. That is the intention with which we are pursuing this. Okay. Okay. Thank you. Thank you. Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to the management for closing comments. Thank you all for joining this call. In case you need any further clarifications, please do get in touch with our investor relationship team. We'll be happy to provide all the clarifications. Thank you once again. Thank you. On behalf of IIFL Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.