Ladies and gentlemen, good day, and welcome to Deepak Nitrite Limited Q2 FY24 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 this 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. Viral Shah from IIFL Securities. Thank you, and over to you, Mr. Shah. Good afternoon, everyone, and thank you for joining us on Deepak Nitrite's Q2 and H1 FY 2024 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 of Deepak Nitrite Limited. We will 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 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. The results documents have been shared with you earlier and have also been posted on the company's website. I now invite Mr. Mehta to share his opening comments. Thank you, and over to you, sir. Good afternoon, everybody, and a warm welcome to all of you on Deepak Nitrite's Q2 and H1 FY24 Earnings Conference Call. First of all, I want to wish everybody a very, very happy Diwali and a wonderful, prosperous New Year for not just you, but your family and friends as well. Our results documents were shared with you earlier, and I hope you've had an opportunity to glance through them. I'll initiate by briefly taking you through the key financial and operational highlights through the quarter and half year. Mr. Upadhyay will then present you with a more comprehensive financial overview during the period under review. Following that, we would love to hear your questions. In the first half of this financial year, the global chemical industry faced significant hurdles. Concerns have been about destocking by Chinese enterprises, uncharacteristic weakness in the Eurozone, and a transient reduction in discretionary income and expenditure, owing to a hike in interest rates to calm inflation in major economies. Despite these challenges, our business demonstrated resilience due to various factors like cost leadership initiatives, changes in product mix and geographies, and strategizing procurement of certain key raw materials where possible. In addition to skillfully overcoming challenges, we have progressed on key strategic initiatives, including growth CapExes, which will cater towards bringing in upstream as well as downstream products. These projects have the capability of being both top line and margin accretive. In the current scenario, DNL has experienced a decrease in revenue due to the transient reduction in realizations. In Q2 FY 2024, consolidated revenues were INR 1,795 crore, lower by 9% year-on-year and flat on a quarter-on-quarter basis. Sequentially, we witnessed consistent performance in the face of a challenging operating environment. This was primarily due to a strong growth overall in the phenolic segment and a steady demand for Advanced Intermediates products. We have also observed a quarter-on-quarter normalizing trend with regards to volumes, particularly in products geared towards specific end user sectors like glass, paper, home care, and more. We anticipate a normalized performance starting from Q4. While key export markets are grappling with demand pressures due to the global situation, the good news is that domestic consumption and demand remained largely intact. Our strategy remains focused on products and geographies that enjoy stable to positive demand. Nevertheless, our market presence has remained steady across all product lines and geographies, thanks to enduring relationships with customers and the perseverance of our teams to maintain operational excellence. Hence, in all cases we have retained, and in a few cases, grown our volume shares. However, in terms of profitability, EBITDA has been impacted by input costs and a migration to relatively non-native markets for some of our products, which earlier had a home in geographies such as the Eurozone. In Q2 FY 2024, EBITDA was INR 319 crore, up 52% quarter-on-quarter, translating into an EBITDA margin of 18%. Our EBITDA grew quarter-on-quarter, attributed to an uptick in phenol production, driven by an increased demand and optimized capacity utilization. Additionally, cost savings on raw materials, operational improvements have all enhanced profitability by their own little bits. All of this while maintaining healthy margins. Consequently, PBT and PAT for the quarter grew by 37%. Thus, our primary focus continues to remain on enhancing productivity through our dedicated efforts and maintaining and growing our relationships with key customers.... and as well as ensuring that our products find a good home, even if there is a migration in geographies in some cases. On the operational front, our domestic business generated revenues of INR 1,437 crores, while exports were at INR 341 crores during the quarter. Coming to our segmental performance, in the first half, the AI segment generated revenues of INR 1,379 crores, lower by 3% on a year-on-year basis, despite some these challenges. Further, during the quarter, we observed a positive uptick in our sales volume compared to the previous quarter. We are actively working on establishing new relationships in both the short and long term with key customers to ensure consistent off-take. Furthermore, we successfully maintained or increased our wallet share, our share in the markets, as I mentioned, in new geographies as well. Deepak Phenolics reported revenues of INR 2,188 crores in H1 FY 2024. In Q2 FY 2024, revenues stood at INR 1,120 crores, up 5% on a quarter-on-quarter basis, and EBITDA margins improved by seven, improved to 17% from 10% last quarter. This quarterly improvement in profitability can be attributed to increased volumes, margin improvement, and an improvement in VOC, owing to the establishment of the advanced process control systems that we've put in place. We also see that there is a gradual improvement in demand in the Phenolics segments. Our sustained high capacity utilization at 136%, so it continues to be a key factor. Notably, our efforts to introduce new downstream products are also now materializing, indicating promising growth prospects. Moving to some interesting updates about our projects. First of all, our asset project is steadily progressing and is planned to be commissioned as scheduled. Other projects such as photochlorination, fluorination, MIBK, MIBC, hydrogenation, the new research and development center, and brownfield expansions are all progressing well and expected to be commissioned over the next few months. In conclusion, Deepak Nitrite continues to be strategically positioned for comprehensive expansion, continues to increase its integration within its value chain and new value chains. Our investment plans underscore our readiness to capture these opportunities as they come to our home market, and we persistently aim to diversify our project portfolio, broaden the customer base, and enhance our overall value propositions. We have a firm and robust financial standing, very strong client relationships, and a well-planned growth prospect. We're trying to enhance our business proposition, market share, and shareholder value. We've taken substantial steps to mitigate risks in our business model, ensuring a stable input supply, established captive power, increase the amount of generation of power and steam using sustainable means, and valorization of waste. Our ongoing and upcoming investments reflect our commitment to seizing opportunities in a responsible manner, with an unwavering focus on innovation, customer expansion, and value creation. I'd like to hand this now over to Mr. Sanjay Upadhyay, who will address this forum and take you through the financial performance. Thank you, Maulik. Good afternoon, everyone. Thank you for joining us on this call today. First of all, let me wish all of you a very happy and healthy festive season. I'll now take you through the highlights of the financial results for the quarter and half year ended September 30th. During the period, Deepak Nitrite maintained a solid performance despite a challenging operating environment marked by volatile raw material prices and utility costs. Despite these obstacles, the company managed to increase its market share, especially in phenolics, and strengthen its top line across various business segments. Consequently, the operations remain highly capital efficient, resulting in enhanced return on capital employed. Its overall ROCE is 27% in Q2. Coming to our financial performance on the operating front, domestic business revenue stood at INR 1,437 crores and INR 2,869 crores in Q2 and H1 respectively. Export revenue were INR 341 crores in Q2 and INR 677 crores in H1. On a consolidated level, domestic to export mix stood at 81%-19%. And in Deepak Nitrite standalone, it is remaining at the more or less same level, say around 60/40 or maybe 55/45. In H1 FY 2024, on a consolidated basis, revenues are lower at 11.11% at INR 3,595 crore compared to INR 4,031 crores in H1 FY 2023. EBITDA stood at INR 561 crores in H1 FY 2024 compared to INR 648 crores in H1 FY 2023. Margins came at 16% in H1 FY 2024 against 16%, with almost at par with FY 2023. PBT at INR 884.79 crores and INR 355 crores respectively. In Q2 FY 2024, on a consolidated basis, revenues came at INR 1,795 crores, again, almost at par with INR 1,800 crores in Q1 FY 2024. On Q-on-Q basis, EBITDA came in at INR 319 crores from INR 242 crores in Q1 FY 2024. Margins were at 19%, the higher raw material costs and other utilities, along with the lower recovery on fuel, fuel products, EBITDA stood at INR 277 crores and INR 205 crores respectively. Profitability was aligned with the operational performance of the company, which was impacted due to review cleared by the inflationary pressure, in our area and other utilities. In the interim quarter, the circumstances is going to expected to improve in the second half of the year. Moving to the Advanced Intermediates segment, the revenue stood at INR 670 crore in Q2 FY 2024, while EBIT stood at INR 103 crore during the quarter under review. In H1 FY 2024, revenue came into INR 1,379 crore and EBIT came in at INR 218 crore, translating into a margin of 16% despite the current economic challenging circumstances. Finally, segment delivery performance, revenue growth of 5% at INR 1,120 crore in Q2 versus INR 1,068 crore in Q1 FY 2024, while EBIT INR 170 crore and EBIT margin came at 15% in the quarter. In H1 FY 2024, revenue decreased by 16% to INR 1,080 crores and EBIT came at INR 258 crores, translating into a margin of 12%. Last year, balance sheet and company's financial position is significantly enhanced, and the company continues to maintain zero risk position with a net worth of INR 4,342 crores on a consolidated basis, and INR 2,765 crores on standalone basis, thereby strengthening the balance sheet for all future expansions. In the quarter, our cumulative investment in wholly owned subsidiary DCTL was around INR 599 crores. Of these, 100 crores are invested in Q2 FY 2024. Several projects are progressing well on schedule. Our R&D team is actively developing new products to establish additional specialty chemical stability. Once they're operational, this plant will enhance our presence in the critical raw materials and boost our profitability. Additionally, we are constructing a state-of-the-art R&D center near Vadodara. It will come up maybe towards the end of next year. This will certainly, certainly help in boosting our growth prospects in future, particularly in the fine and specialty segment. With that, I would now request moderator to open the forum for question and answer session. Thank you very much. We'll now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question. The first question is from the line of Nirav Jimudia from Anvil Research. Please go ahead. Yeah, good afternoon, sir. I have two questions. So first on, our standalone business and with respect to three or four- Nirav, sorry to interrupt you. Can you speak a little louder, please? Yeah. Is it okay now? Yes. Yeah. So if you can share your thoughts on three of our traditional products like Sodium Nitrate, DASDA, and PNT part, in terms of the demand situation in H1 of FY 2024, in terms of the capacity utilizations which we have clocked. And if you can just walk us through in terms of the situation for H2 of FY 2024, and the next year in terms of where we can see the first line of improvement coming. So would it be DASDA? Because what we have seen is last three years after FY 2020, DASDA had been a muted growth. So where can we see the meaningful jumps coming from DASDA? And then you can share your thoughts on nitrate as well as the PNT chain. Nirav, Maulik will answer this question, but I just want to know, why are you calling these products only as a traditional product? Yeah, because, these are the products which generally we come to know in terms of, the market understanding, because sodium nitrate, we have the leadership position, PNT also and DASDA, also had contributed, good amount of profitability in FY 2020. So probably I'm aware of these three major products. There could be others also, but if you can walk us through other products also, that would be also helpful, sir. There are many, but yeah, let Maulik answer. Okay. So first of all, Nirav, thanks for the question. Happy New Year. But, I'll take them one at a time. See, DASDA, the largest end application for this is optical brighteners, and they go into detergents, textiles and paper. Now, you're right in saying that the last, couple of years have been muted if you compare it to, high point. That high point also, I would consider as noise because it was a one-off. But, what I can see today is that while, you know, Q1, Q2, and even before that has been muted, we are seeing, if you look at a lot of the announcements that are made from paper companies and from detergents companies, about increasing their investments in India, increasing their capacities in India, you will see that the optical brighteners industry certainly has bottomed out over the last couple of quarters, and sequentially we'll start to see an uptick. Now, as the only Zero Liquid Discharge manufacturer and with a market leadership position when it comes to both DASDA and optical brighteners... We are trying to be able to take the largest share of this growth as it comes. What has happened over the last, year, two years in fact, is that there has been a malaise in the traditional, geographies for these products which were in the Eurozone, partially because of water cost, power cost, these things. And you have also noticed that over the last two years there has been a steady stream of announcements about shutdowns in these, but also correlated to that, increases in investments and the, the bottlenecking in Indian and Asian capacities outside of China. So as these start to get commissioned, we will start to see an increase in volumes, and as we start to see an increase in volumes, that will be followed by an increase in our margins. Now, PNT, the largest home for PNT is Dahej, so they're not directly correlated, but there is a significant correlation. The other segments are, more into the dyes and the pigment segments. Now, those have had, you know, a depressed couple of years, but there also we believe that the situation by and large, has bottomed out. So it is not going to get worse, so to speak. It is going to get better. How fast it gets better is also a very good question. Now, when it comes to sodium nitrite, because it is a so-called intermediate/commodity product, it has many, many end applications. And certain end applications are doing very well, when certain traditional end applications, like dyes and pigments, have been suffering, especially in places like India. But we, there also, we are seeing that there is an expectation of improvement. We continue to remain the market leaders. We will continue to remain the market leader with the new capacities that we add in Oman as time moves forward. We are very confident in these industries as well, but also in certain export markets where we have pivoted to in the last quarter or two, where earlier they were relatively unexplored. We have increased our focus on that. We have started off while, you know, it factors in our overall export markets. Because we are new into these markets, the margins may not have been as interesting, but as we develop our understanding better and work with the consumers there better, we are strongly under the impression that this will also improve. In all these cases, I can tell you that the demand will certainly sequentially improve, the rate of which we will see. But you are seeing also that there are lots of announcements made by other companies, which will be our customers. Correct. So that should give you confidence. Got it. it. Got it. The second question is, if you see, in terms of standalone Deepak Nitrite, most of the products, which we have developed, we have a substantial market share in most of them. And over a period of time, we have either backwardly integrated or forwardly integrated in terms of the product profile. So, and this has also helped us in achieving close to INR 3,000 crore of sales in the standalone side. I just wanted to understand your thoughts that, in the standalone business, and I'm not- I'm excluding the downstream portion of phenol acetone, part, when can we see, such similar blocks coming in terms of, let's say, three, four products or a block of three, four products putting together or contributing to close to INR 500 crores-INR 1,000 crores of incremental sales? And, if you can correlate it, it with the acid plant which we are currently putting on. Could the acid plant also give us an opportunity to develop some of the newer downstream products which can help us to, get a meaningful improvement in our standalone sales going forward? So I'll answer this question now. While we are in process of commissioning our upstream, naturally it is sensible for us to expand our consumption as well, and that is also taking shape in line with our commissioning of the upstream. So you will see that value accretion there. Now, with regards to, you know, the absolute number that you talked about, INR 500 crore, INR 1,000 crore, our priority is always on ensuring that we are growing our market share and growing our bottom line. The top line is a factor of the market prices, so it is difficult to comment on that. I believe that, you know, as the demand situation improves, so will the prices. When that happens, you know, it is your guess as well as mine. But we have not only increased the capacity utilization in brownfields, we are also going to be introducing new products which will take advantage of Deepak's existing core capabilities. Now, they may be new value chains, but they have similar process profiles where we have a high degree of competency in. So these are investments that you will see coming into announcement and then into play over the next two years. We've already made certain announcements. We haven't made certain announcements, even though we are at a pretty advanced stage, because we're waiting just to tie up some of the last bits. But if you're looking at you know, what Deepak Nitrite standalone's business profile looks like over the next couple of years, then I don't see any challenge in you know, achieving and crossing the numbers that you were earlier referring to. ...... Got it, sir. And sir, just a last bit of thoughts on the commissioning of the various brownfield expansions which we have been talking about. So where can we see those CapExs coming online over the next three to six months? So what portion of the CapExs from the brownfield side would get commissioned over the next six months? I think all of them. All the brownfields. Huh? All the Brownfields will get commissioned over the next six months. Okay. Okay. Thank you so much, sir, and festival wishes to the entire team. Thank you. Oh, sorry. Hydrogenation brownfield will get commissioned over the next eight months. Okay. Okay. Thank you so much, sir, for the opportunity, and festival wishes to the entire team. Thank you, and same to you. Thank you. Next question is from Bharat Gupta from India Inside Value Fund. Please go ahead. Thanks for taking my question. First of all, a happy Diwali to the entire team. Happy Diwali. Sir, a couple of questions- Bharat, may I request you to talk louder, please? A couple of questions. First, on the growth CapEx front, we signed a MOU with Gujarat government regarding the INR 5,000 crore investment plan. So where... what's the progress on it? And if possible, can you throw some light with respect to the participation of the CapEx across the specialties and all, if you're doing this or not, and probable timelines for the same? So, I won't want to break it down into specialty or non-specialty, because all of these, at the end of the day, all depend on how you define specialty. So, you know, this whole notion of assuming that specialty margins should be higher, I think now we may all accept that this is not always accurate. What I can share is that the MoU that we signed is for very specific product sets. Those we are progressing along well on, finalizing with regards to the technology suppliers. We are also, you know, clear about where we will be putting what up, and we should see these being invested in and commissioned over the next four years. Right. So this, technology, as Mani was mentioning, it's very, it's an advanced stage. We are acquiring land in a very, very soon rather, in a couple of months, because that is also the prerequisite of going ahead with the INR 5,000 crore expansion. So things are in place and moving, as per the schedule. There were some delays in land at least, but yes, now we are progressing fast, so should not be an issue at all. Right, sir. So, sir, if I look like going forward for the next four-five years, it will be a complete transformation journey from being to a extent of competitively to going venture into a specialty kind of a status. So, like, just wanted to get a sense, like what whatever investments which we are making in, so where does China compete in? And particularly, it can be a big threat because a lot of investments will be going in, in this particular domain. So if this particular de-stocking and Chinese dumping continues for some more time, so can it have a delay on the timelines which we are setting in? No, no. I think you are mixing up the two. De-stocking of China cannot continue for two-three years, no? And then this is actually, frankly, we ask, is this the right time to set up the projects? Because the world is seeing a very volatile situation today. And let's understand and appreciate one thing, that things are very, I mean, it's very difficult for anybody to comment what will happen in next... Suppose now, if you ask me 25, like, how about this? I can give you a guess only, because nobody knows how Israel war will take place or what is happening on interest. And so, I mean, some guesswork can be done by anybody, but nobody can tell you with... So the point here is, if we are going into the projects now, we expect and hope things will settle down in next couple of years, and the world will again start. Though other countries, some countries are doing well, many countries are not doing well. So if things happen as per the next two, three years, if you see there is a revival in the world economy, is the right time to enter the market also. You know, these... So I think what we are doing is the right thing to do today, and go ahead with the expansion plans, and you are entering the market when there is a upcycle. Right. So just one, the question was to rely on the fact that the segments which we will be investing in, particularly, so is China a big play in that particular segment as well? Because I- So let me tell you, see- Specialty, sorry. Please understand how we are, what projects we are setting up and this, because it is making our company much more stronger, you know, going backward, going forward. And China may come, or Europe may come, or anybody can come. I mean, we can't stop anybody coming. But the resilience which, the model what we are creating, if you see that way, I mean, that is something which will, we can sail through any such crisis or any such additional capacity. Yes, there can be ups and downs in the business, but business remains on a very, very strong foundation and fundamentals. Let's appreciate this. You see, Deepak Nitrite standalone, you see Phenolics also, whatever announcements we have made, and the way the demand is of Phenolics is growing and the way we are entering the market and capturing, I think that is where; let's appreciate that, the steps are taken in the right direction. If somebody comes, if they don't come, that's a different question altogether. And we are; if our base is strong, I think we can face any challenge as such. ... I just want to clarify, this whole concept about destocking, I think that the definition in the market is wrong. Like, destocking, just to be clear, means that somebody will try to sell a product regardless of whether they are making a negative margin or not. Now, it doesn't matter what country you are from, whether it is India or China, nobody wants to sell at a loss. The reason that they believe that they are okay with selling at a loss right now, is so that they can empty their inventories in order to make new product, which will be sold at margins which are better than the products which they currently are holding in inventory. That essentially is what destocking means. And it also assumes that for whatever reason, the market demand right now is slower than it will be in the future, so they want to ensure that they are able to get a better part of the better market environment with their higher margin product, which they will make freshly and put it in their inventories. So destocking is not desirable for anyone, regardless of the capacities that are being put up. Let's be clear about that. Second point is that the investments that we are making, call it specialty, call it semi-specialty, are with what we call our right to win. And when we look at our right to win, we compare ourselves against companies that may have actually established plants with fully depreciated business models. So we don't make an investment hoping that the market will improve and hoping that destocking will end. We look at the situation where we are up against someone who has all of the wherewithal, and we are investing fresh money. So believe in Deepak and believe in the study that we have put in place. And I will not really want to get into whether it is a specialty, because what does specialty mean? Is it about margins? Is it about, you know, SKUs? What is it? Is it Is it about the length of the relationship with the customers? Because most of the products that we make, even in these segments, even if we're talking about polycarbonates, they are not going to be done, you know, with the sense of just putting them all in our department store and hoping someone buys them. They will be done with established long-term commitments with key customers, who will also be putting up investments on their own side to consume Deepak's products. So I think, we should realign with the idea of destocking and specialty chemicals, as, you know, we see it, not as per the market hype. Right. Thanks for the brief and more the overview on the team. Just the last bit from my side, in terms of the guidance. So I think in one of the calls you mentioned that the company will probably look to double the turnover over the next three-four years time frame. So currently, are we holding upon the same, given all the headwinds which the industry is facing? And- Yeah, yeah. So I think you mentioned the right word, transformation. We are at a stage where it's going to be a significantly different Deepak Nitrite in the next five years' time, four, five years, and you can say we are still confident of this. And whatever you have said, yes, it's doable. Thanks. That's it from my side. Thank you so much. Thank you. Thank you. Next question is from the line of Anika Mittal from Nvest Analytics. Please go ahead. Hello, am I audible, sir? Yes, yes. So, my question is, there is an update on the ongoing projects, specifically the Photo halogenation and Helix plant anticipated for completion in December 2023. I am interested in understanding the strategic implications of this initiative in light of the evolving situation in China. With China gradually reopening, could you elaborate how the completion of this project aligns with our objective to mitigate the input supply dependency on China? And additionally, considering the changing dynamics, how do we anticipate the manufacturing cost in comparison to import cost? And what is the impact, or what is the impact on our profitability? If you could also quantify the CapEx allocated to this project, sir. Okay. So first of all, for those particular sets of products, it will completely eliminate our dependency on China, on every aspect, even the raw materials. So we will be completely de-risked. We will also be the only company in the world with that kind of end-to-end integration. Now, our commissioning is by and large on track, maybe a couple of weeks here or there, but by and large, it remains on track. Now, with regards to what we will do there, it will allow us to manufacture both our, you know, consumed products as well as new products, because the assets have been up-engineered to be able to manufacture a much wider variety, which is currently in advanced stages in R&D. You know, once we establish ourselves with the base, you know, intermediate that we will be consuming, we will also be making these same assets more fungible in campaign manners. I wouldn't want to get into a number specifically about the CapEx element here. To a certain extent, they have already been clarified earlier, and I think that clarification continues to hold. No new coloring on that point. But that is again on track, and it dovetails very nicely with some of the other commissioning that is going to come online over the next three-six months as well. Thank you, sir. That's it from my side. Thank you. ... Thank you. Participants, you may press star and one to ask a question. Next question is from the line of Rohit Nagraj from Centrum Broking. Please, go ahead. Yeah, and congrats on a very strong comeback on the Phenol segment. So first question, in terms of the Phenolics margin, so on a sequential basis, how things have improved? Sorry? Hello? Rohit, your voice is breaking. Can you come in a better reception area, please? Just a minute. Yeah. Is this better? Yeah. Yeah. So first question is on the Phenolics front. So we have seen a very strong comeback in terms of margin sequentially. And so what is your assessment in terms of the domestic demand, the demand and the global inventory situation? Have things come back to more or less normalcy, and incrementally we will see that the performance will be remaining similar for the next foreseeable future? Thank you. So first of all, last quarter, the performance was subdued, but we've also given clarity that we ourselves, you know, went into destocking because we anticipated a change in the raw material prices. Also, we had about three weeks of no production in Q1, which affected our EBITDA percentage as well as our absolute. So if you're looking at Q1 as a source of comparison, we had clarified them as well, that it was an unusual performance. But, by and large, we believe that the downstream segments for phenol, acetone, and IPA remain relatively healthy as we had in Q2. That's what we should be seeing in the next couple of quarters as well. We have, as I mentioned earlier, also completed our Advanced Process Control commissioning, which allows us to operate more efficiently and operate at a higher capacity. Sure, sir. That helps. So same question again on the phenol segment. So one of the petrochemical players in domestic market, they have announced 300,000 tons of capacity. And in our MOU signed with Gujarat government, we also plan to go in for maybe a phenol, acetone, bisphenol A and downstream products. So how do we assess this particular development given that currently obviously we have more than 200,000+ tons of imports in the country, and the new capacity probably will be able to absorb a significant part of it. So your assessment of the same. Thank you. We assess it by feeling so very confident about the growing consumption of Phenol and Acetone in India. Right, sir. Fair enough. Got it. Thank you so much, and best of luck, sir. Thank you. Thank you. Next question is from the line of Ankur Periwal from Axis Capital Limited. Please go ahead. Yeah. Hi, sir. Thanks for the opportunity, and wishing everyone a very happy Deepavali. First question on the R&D side. You know, the new center is coming up in the next financial year, and we already have around 100+ manpower there. In terms of your thought and let's say focus areas, given we have been doing R&D in the fine specialty as well as the phenol derivatives, how do you, you know, allocate the resources there incrementally? So first of all, you know, whenever we're looking at very, very large volume, for example, if we were looking at something like polycarbonates, now there we, in our R&D, we work on formulations, but on the main facility, we would prefer to license it with an established, and proven player. When we're talking about specialty chemical value additions, where we're looking at things like, waste valorization, that's where our R&D comes in. So internally, our R&D is focused on two things. One is new product development, and one is, operational excellence. So both of these are given equal, and due importance. Internally, in our labs, we don't really discriminate between a specialty and a non-specialty chemical. That said, when we are directly interfacing with a customer to develop or co-develop a molecule for a long-term contract with them, we do assign a special team which works in lockstep with the customer's R&D and technology team. So they collaborate at every stage here, so that at the end of the day, there is a great deal of clarity and confidence built even in the development process. Sure, sir. Just a clarification, if I got you correct, you mentioned that the polycarbonate compounding, the formulation part, will be outsourced to a specialized third party, not done in-house? No, no. The compounding can be done internally using our own skills and talent. The facility, for example, something which would convert a key raw material, for example, bisphenol into a polycarbonate, that is where we will go with established mature players, where there is the option. I mean, there are multiple different technologies, but we will go with someone who has a proven track record. ... Sure. That, that, that's helpful. Secondly, on the, the standalone side, especially fine and specialty, you know, there have been, you know, excess inventory, China-led issues, et cetera. So your thoughts in terms of demand outlook there, and, how are we seeing the product basket there in terms of new launches? The product basket with regards to new launches, the pipeline is clear. Now, some of them, for example, may be what we're considering a specialty, but they may have something like Phenol as a raw material, right? And the end application, because it goes through multiple stages, will be, quote, unquote, "specialty chemical" with the characteristics of that, meaning long-term contracts, particular quality and spec, you know, high value add, all of those things, even if the feedstock is Phenol. In the meanwhile, when we're looking at new products that are being added, they will be added over the next two years. Would you say with regards to demand? With regards to demand, there is selective soft demand in certain parts of the agrochemical space. Whereas in other parts, the demand is relatively robust. When it comes to home and personal care, the demand is strong. When it comes to niche applications like thermal paper, the demand is weak. Fair enough. Will it be fair to say that most of this fine and specialty business will be largely contracted? I mean, with client commitments, maybe short term or long term. Yeah. Generally, that is the characteristic. It's not always like that, but more often than not, this is the case. They may be annual contracts, they may be multi-year contracts, or in a couple of cases, they may be half-yearly contracts. Sure, sir. And just last question, if I may. From our China dependence right now, in terms of RM sourcing, where are we right now? And post the expansion, where do we expect us to be? We source from China. We will continue to source from China wherever we need, but for every single raw material, we have sources which exclude China as well. So our critical dependency on China is not there, I think, in any business. However, it doesn't mean that we will not take the opportunity to buy from them. Obviously, if we are going to be manufacturing the raw material ourselves, there's no question about it. Sure. That's helpful. Thank you, and all the best. Thanks. Thank you. Thank you. Next question is from the line of Vivek Rajamani from Morgan Stanley. Please go ahead. Hi, sir. Thank you so much for the presentation, and happy Diwali to you and the team. If I may, just on the demand point, I think in your opening remarks, you mentioned that you saw a sequential increase in volumes across the board in this quarter. If I just look at the revenue line on the Advanced Intermediates, the revenues have obviously come down on a sequential basis, which implies that your ASPs would have obviously been lower. My question is, do you get a sense that, you know, the decline in ASPs is now maybe stabilizing and maybe, you know, going into the second half of this year, you start to see some pickup there in line with the demand trends that you are seeing? That was the first question. Just as an extension to that, obviously, we're in November, for the first month and, you know, 10 days of this new quarter. Do you get a sense that you're seeing an increased pace of green shoots coming through in some of these segments already? Thank you so much. Just to, just to be clear, I didn't, I didn't say that, demand in terms of volume is, you know, normalized in quarter two. I said that there is a sequential improvement in the volume demand trajectory in, you know, that we are seeing as we move towards Q3 and Q4. So just, you know, to be clear about that, and Q2 did have some weak spots of demand, and hence we chose strategically to migrate towards other geographies, other end applications for some of our products, which previously used to be sold in the more mature economies. Now, when it comes to how we are seeing Q3, this is... I think what we should look at is, you know, over a period of time, Q3 so far from October until now, has largely been occupied by the festival season. So October and November, every single year, not just this one, but even in past years, should never be reflective of what you would see in the rest of the year. Just like in China, you would never look at a January and February as an indicator of the rest of the year, because it is largely shut down because of, you know, its own New Year festivals. But we are continuing to see, you know, slight green shoots with regards to stabilization, normalization worldwide. Nonetheless, it is premature to assume anything right now. Sure, sir. Thank you so much for the clarification. Just a second question. Obviously, on the phenolic side, spreads have been very strong this quarter, and I think they've continued to hold up pretty well. If you could just give a sense of, you know, the regional demand-supply situation. I think the last quarter there were some shutdowns or so. If you could just give a sense of, you know, how the regional demand-supply balance is shaping up into the second half of this year, that will also be very helpful. Thank you so much. ... See, we are running Phenol plant at 136, 135%. You know, that answers your question, that there is a demand and we are able to supply. People will import because we are not able to meet the full demand. That's a different thing. But I mean, you have seen how it is, second quarter has performed, and we are very confident that in second half of the year also will continue the same momentum in Phenol as well as Deepak Nitrite also. So yes, there is a demand, in the sense of discretionary spending and this, yes, there is a-- I mean, that is going on for quite some time. It's not very recent, you know. When Maulik told about the textiles and these are all last one and half years, we are seeing this. There is a subdued demand. And overall, if you see the world economy also, there is people are maybe deliberately or maybe because of the external situation, the demand is gradually slowing. So we expect this to improve, but it may not improve so soon. But our product, we are selling full volumes, not an issue at all. Yes, there could be pressure on the realizations because in this market, we are able to sell full volume. But we are not worried about these things. I think we are reaching the bottom of the cycle, and things will go, can go up only from here. Sure, sir. That answers my question. Thank you so much, and all the very best. Thank you. Thank you. Next question is from Rohan Gupta from Nuvama. Please go ahead. Hi, sir. Good afternoon, and thanks for the opportunity. Sir, the first question is on our Phenol business. We are seeing a sharp improvement in margin. Though I don't think that the spreads have improved so sharply, so it is definitely driven by the better cost management and then maybe higher utilization or higher sales. So, can you give some sense that how the spreads have improved in, on a Q-on-Q basis, and how much growth in the margin, or profitability has come from the better volumes? Also because of the low base of Q1, because we had three weeks of no production. So the base of Q1 was, I would say, unusually low, hence it looks like a significant improvement. But by and large, you know, we have seen that there is a reasonable, you know, what we entered Q2 with and what we are exiting Q2 with, and in Q3 with, it has been by and large, you know, along a similar track. See, Rohan, this, we have been mentioning again and again that, Phenol normal margin would be in the range of, say, 15%-18%. And with what you are seeing now, and this volume, these are all here to stay. If it is going below that, around 10%-11%, then there is something abnormal in that quarter. Maybe because of over shutdown, maybe because of the inventory. Suddenly, there, there's a volatility in the raw material pricing in this. But otherwise, this is the margin one should expect. So I don't -- we don't see any, abnormality in Q2, and then going forward, this will may not continue either with. Okay. Hello? Yes, sir, I can hear. Sir, our capacity utilization for the Phenol plant is still stood at roughly 136% at, you know, H1. So, with the commissioning of the advanced process coming- It is not H1, it is Q2, because it's quarter one, we had a shutdown. We also had a brief shutdown in quarter two when we did the hookup. So 136, as you see, is the capacity utilization. It is not the capacity, the updated capacity. So we will be in a position to be able to cater even more to the demand in India and wherever it is. So I don't think, you know, you look at 136 as the absolute ceiling. We have the capability to ensure that we are able to supply to the growing market as well. Sir, yeah, you see, that was my exact question, that with the Advanced Process Control and with that, which has helped us in debottlenecking. Should we expect in H2, the utilization level, I mean, on an increased capacity, can go up by another 15% from here in terms of volume, additional volume? Let's not put this in terms of percentage, but yes, it can go up. Because there is a demand in the market, and we are, our team is quite capable of delivering more, so there is no issue as such on that. The APC did not factor in Q2 at all, other than unfortunately necessitating, you know, a very short shutdown for hookup. It actually affected negatively in Q2. The benefits of that in terms of plant availability will be seen, you know, now onwards. Recently we have seen that the crude has gone up, and which is likely to have some impact on it. See, by and large, market absorbs. The crude volatility has remained, you know, so market absorbs these ups and downs. So, Rohan, I think between when you started that question and now, crude has probably gone in a different direction. So I think we are more concerned with our ability to, you know, maintain our appetite pass it over, and the demand in the market. ... Thank you. So the line for the partner has been dropped. We move to the next question. Next question is from Abhijit Akella from Kotak Securities. Please go ahead. Yeah. Good afternoon. Thank you so much for taking my questions. Just a couple of clarifications I wanted to seek. So one is, with regard to the CapEx in the first half, it's about INR 310 crore or so. You know, what number should we work with for the full year, please, this year, and maybe if there's a number for next year also, if it's possible to share? See, Abhijit, by and large, now the things are moving to the second first quarter of next year and first quarter onwards, I would say rather, because every quarter you will see new CapEx is coming up. So whatever CapEx we have spent, let's say, around INR 1,500 crore-INR 1,700 crore, this all is getting now not the any entire year, but Q1, Q2, Q3, that way it's progressing in next year. And it will commission from Q1 onwards. Yeah, except for the fluorination. Except what you are saying, that will be commissioned in Q4. This Q4. Okay. But in terms of the fresh CapEx on the newer projects, you know, when should we expect a major pickup in spending on that? Will it be this year or next year onwards? Abhijit, are you mentioning to the larger CapEx of INR 5,000 crore or the, what we already said, around INR 2,200 crore? Yeah, I guess, well, more of the INR 2,200 crore. So I mean projects such as... Yeah, sorry. That, that's what I was mentioning, that you will find this every quarter commissioning of one project from next year onwards. Okay. Okay. Fine, sir. Got it. Then, there is no government incentive income this quarter in Deepak Phenolics. So just wondering what reason for that might be, and whether we should expect some, you know, incentive income going forward. Yeah, of course. It's not going anywhere. Now, it depends, the government, you know, we, if they have funds, then they will start distributing it. These are all, I mean, our file is already there, and it can come any day. The process and everything is all... It may take time, but yes, you can expect this incentive in the, in some quarter it will be there, some quarter it may not be there, but it is there, and here to stay. Fine, sir. I got it. And one last thing is just on Advanced Intermediates. So last quarter we had pointed to, you know, normalized margin expectation of about 20%-22% EBITDA margin for Advanced Intermediates. We are running a little bit below that, but so how should we think about that for, say, the second half, and then beyond next year? This year, AbhijIt, I think Q2 and Q3 will also have this kind of whatever we are achieving today. Most likely from Q4 or next year onwards, things will change and things will improve. I mean, there is nothing wrong with the demand and thing, but only there is a pressure on pricing, because, though we are able to sell, but yes, overall things have slowed down, so there is an impact there. So from next year onwards, we will definitely see. Of course, we are not doing bad in AI. We is reasonably good, but if you are expecting still better performance, then you can expect from next quarter, first, sorry, April onwards. Yeah, yeah. Got it. I know that I also put myself out there, saying that the normalized EBITDA should be in the range of 20%-22%. It should. And it will be. It will be. We are starting to see anyways. It's just that the rate of improvement, sometimes you end up overestimating or underestimating. This case, maybe I overestimated, but nonetheless, the factors that would go in that direction are all in place, and we are seeing those conversations with our customers. Let's see. In this year, certainly towards the end of the financial year, we should be coming back to those numbers which we were used to. Got it. Got it. So, you know, improving trajectory in Advanced Intermediates and Phenolics to remain around these levels or maybe slightly improve in, you know, 3Q and second half. Is that? Yeah, yeah, you are right. You are right. No, no, no. Phenol, you can expect by and large around this. So, I would not look at a quarter-on-quarter improvement on phenol. Volume will increase, percentage will remain around this, +1%, -1% kind of thing. Abhijit, we'll take one last question from you. No, that's that clarifies all my questions. Thank you so much, Maulik and- Thank you. Thank you. All the best. Thank you very much. I now hand the conference over to the management for closing comments. Thank you all for joining this conference call of Deepak Nitrite. In case any further clarifications are required, our investment relation team, Anand Nanda, will be glad to reply to you all. Wishing all of you a very happy Diwali, a very happy festive season. Stay fine, stay healthy. Stay safe, and please enjoy this time with your loved ones. Thank you. Thank you. Have a great year. Thank you very much. On behalf of IIFL Securities Limited, that concludes this conference. 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