Ladies and gentlemen, good day and welcome to the Q3 FY23 Earnings Conference Call of Oriental Carbon & Chemicals Limited. This conference call may contain forward-looking statements about the company which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference, 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. Akshat Goenka, Promoter and Joint Managing Director of Oriental Carbon & Chemicals Limited. Thank you, over to you, Mr. Goenka. Good afternoon and a very warm welcome to everyone. Along with me, I have Mr. Anurag Jain, CFO, and SGA, our investor relation advisors. We have uploaded our results and investor presentation for the quarter and nine months ended 31st December 2022 on the stock exchanges and company website. Hope each one of you had a chance to go through the same. During Q3 FY23, the company clocked revenues of INR 104 crores, a growth of 8% year-on-year. However, volumes were impacted due to disruption on account of the war and other issues, mainly in Europe. EBITDA has also grown by 19% to INR 23 crores and PAT stood at INR 10.4 crores. Margins were impacted due to higher input costs and freight costs. We also could not get expected allocations from North America this year, primarily due to high freight rates. We are approved with our customers there and expect to be more competitive for next year and win the business then. We don't expect to start the second phase of expansion of our project right now, and we will again review the situation in the next six months. In spite of this year being very challenging on sales and costs, we are comfortably generating surplus free cash flow. Debt reduction is going at a good pace. We are even paying some term loans early to save on interest cost. By the time our demerger's appointed date comes around, we expect to have less than INR 85 crores of term loans to remain in the books. This is a very low and very comfortable amount. This is extremely positive situation to be in. The demand sentiments for a majority of the automotive segments such as passenger vehicles, commercial vehicles and tractors have remained healthy, aiding in the improved offtake for the industry participants. The domestic automobile sector has experienced a robust resurgence in the current fiscal year, aided by a recovery in economic activity and greater mobility, and is expected to grow at high single-digit levels across segments in FY 2024. Commercial vehicle volumes could see a growth of approximately 9% and passenger vehicles to see a growth of approximately 10%. A favorable mix of factors is propelling demand for commercial vehicles to their pre-pandemic peak in the ongoing financial year, aided by a robust recovery in demand due to the increased government spends on infrastructure development, increased fleet utilization, better availability of financing and replacement demand, which will all support sales of commercial vehicles going forward. The Indian tyre industry will be able to scale a turnover of INR 1 lakh crore in the next three years on the back of new capacities. The industry has completed investment of INR 35,000 crores in the last three years in new capacity creation and debottlenecking, with the major beneficiary being truck and bus radials and passenger car radials. In the recent ATMA summit, they are projecting growing at a double-digit CAGR for the next 10 years, which augurs very well for us. They are talking of tripling in the next 10 years. The trend of shifting production out of China, along with the competitive and conducive environment, is making India a preferred global supplier of tires. Coming to our demerger. The demerger of the chemical business undertaking of the company to OCCL Limited is progressing very well. SEBI and stock exchanges have given their approval for the scheme and we have filed the application in NCLT, Ahmedabad. The scheme is pending before the tribunal for their sanction and approval. We expect all the shareholders to support the scheme very well, for the meeting which will be held under the NCLT's directions, and this will be a very important step in the growth of our company. Now I would like to hand over the line to Mr. Anurag Jain to update you on the financial performance of the company. Thank you, Akshat. I will take you all through the standalone financials of the company. Total income for Q3 FY 2023 stood at INR 103.6 crores as compared to INR 95.8 crores in Q3 FY 2022, a growth of 8% year-on-year. For nine months FY 2023, it was INR 363.5 crores, a year-on-year growth of 28%. EBITDA for Q3 FY 2023 stood at INR 23.4 crores as compared to INR 19.7 crores in Q3 FY 2022, a growth of 19%. EBITDA for nine-month FY 2023 stood at INR 71.1 crores as compared to INR 66.8 crores in nine-month FY 2022, a growth of 6%. EBITDA margins stood at 22.6% for Q3 FY 2023 and 19.6% for nine-month FY 20 23. Profit after tax for Q3 FY2023 stood at INR 10.4 crores as compared to INR 10.6 crores in Q3 FY2022, and stood at INR 32.2 crores in nine-month FY2023 as compared to INR 35.6 crores in nine-month FY2022. PAT margins stood at 10.1% for Q3 FY2023 and 8.8% for nine-month FY2023. With this, I would like to open the floor for questions and answers. Thank you very much. We will 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 will wait for a moment while the question queue assembles. The first question is from the line of Saravanan Balakrishnan, an individual investor. Please go ahead. Yeah. Sir, thanks for giving me this opportunity. Sir, my first question is primarily on the raw material and freight cost. Like, from January, like, the freight cost based on, like, Baltic Dry Index has significantly come down, and even the sulfur cost has come down. Will this benefit pass on in the coming quarters? That is question one. On the last conference call you mentioned, like, the pricing could only be passed to the customer with a timeline. Could you elaborate more on that? Yes, you are right. The reduction in the sulfur and the reduction in freight costs are all positives for the company and should help us in the future. Yes, you are right that there is a timeline in passing on the prices. That has now been corrected because the prices have stabilized or are coming down now. That has now been corrected. That was an issue till earlier quarters, but not now. Got it. you mentioned about, like, different OEM tire companies, like, have communicated about expanding, multiple times in the next, like five-seven years. is there any, like, interesting trend or, like, again, feedback coming from, like the OEM, like, partners? Sorry, coming from? Like, especially compared... like from a product standpoint. Like, even, like last time, like you spoke about, like different bloom characteristics and like dispersion. Are getting the research more on the insoluble sulphur product, right? Like from that standpoint, I'm asking, sir. No, these are the characteristics, you know, which continue. There is nothing new to add because this is not something which is developing on a daily basis. You know, the concerns of the customers remain the same, and these are the parameters on which we will continue to excel and sell our product. Got it. Also like the review of the expansion of the second phase, like I think that we'll again revisit next year, right? Like post, like how the demand is looking like. Yes. We'll evaluate it after six months. Got it. One last question, sir. Like, about the global insoluble sulphur downturn, like any signs of like existing capacity like, getting reduced or like new capacity coming in, like especially from, Flexsys? No, I mean, I have not heard of Flexsys talking about reducing or expanding their capacity. Got it. That's it from me, sir. All the best. Thank you so much. Thank you. Ladies and gentlemen, to ask a question, you may press star and one on your touchtone phones at this time. We have the next question from the line of Viraj Shah from Shah Investments. Please go ahead. Hi, sir. Good afternoon. sir, as in the results I can see, the top line has grew by 8% in quarter three, on YOY basis and 28% on nine-month basis. you mentioned that the volumes are impacted, so this would be on Reliance front or can you throw some colors on that, sir? Yes. The volumes were impacted. Therefore, for the quarter, the volumes were less than what they were on the earlier quarter. Okay. Thank you. Thank you. Participants who wish to ask a question may press star and one. The next question is from the line of Karan Mehra from Mehta Investments. Please go ahead. Hello, sir. Good afternoon, and thank you for the opportunity. Sir, can you give some commentary on how our business is going on in Europe since it's a 50% plus contributor? Also, in case you can elaborate something on the current demand scenario. From a market share perspective, our business is stable and growing in Europe. However, there was a sharp downturn last year in Europe, which resulted in lower offtake of overall capacities. This year, first things were looking quite bad, but now signs are more encouraging coming from Europe. We have to wait and watch and see how it unfolds. Sir, at EBITDA margin, it has reduced to 20%-22% levels, which earlier we used to maintain about 27%-30%. Why aren't we able to pass on these costs even when there are only a few players for this insoluble sulphur? It's not about few players or more players. The fact is that today the global capacity utilization is, I would say, 70% or below. Of course, that demand supply mismatch has been there for some time, and it will be there till demand of the product doesn't grow and the economy doesn't grow. Secondly, you know, as we've always said, that apart from margin, what we try to focus on is a fixed margin per ton. As the sales price goes up and the turnover goes up, even though the margins may be the same or thereabout, even if they go up or down a little, the percentage term will reduce. The vice versa will happen in case the selling price comes down and the costs go down. Suddenly for the same profit, the margin will look higher. Sure. Sir, that answers my question. I will join back the queue for further questions. Thank you. Thank you. Thank you. Anyone who wishes to ask a question may press star one at this time. The next question is from the line of Samarth Singh from TPF Capital. Please go ahead. Hi, good afternoon. Thanks for the opportunity. Yeah, with China Sunsine having expanded their capacity, I think China now has finally become sort of has gone from being a importer of insoluble sulphur to being neutral or maybe even a net exporter. Have you seen them get more aggressive in trying to get, you know, validations from the MNC clients and trying to gain market share there? I would say that China is now competing in Asia along with China, but their movement still has not happened towards the West. Okay. We are not seeing any more aggression from them, so far. Aggression in Asia. I mean, aggression in Asia. I mean, aggression in Asia, no, but not in the West. Got you. If you actually saw their recent remarks that they let out, it appears that this capacity expansion that they are going to do or have done or something of that sort, they may shut down the old capacities. Right. Right. That is what they have alluded to, in their remarks. At least that's what I could call out of it. Got you. Also, I think Shikoku is planning an expansion, right, a 20% increase in their capacity. Yeah, yeah. We've read the news that they are planning on increasing by 10,000 tons approximately, you know, adding another line. You know, let's see how that unfolds. Okay. Difficult for me to comment on their strategy at this stage. Right. Right. In general, you know, you would think that given the undercapacity is your competitors would not be going ahead, but it does not seem like they are, maybe they have lower return expectations where they're going ahead and putting capacity, here. We also don't know whether the likes of Shikoku will put this capacity. Maybe, I mean, their plant's also quite old. Maybe they'll shut down an old plant. Maybe it's very difficult to speculate on their on their mindset for it because we do know the prices they are selling at. We know their return profiles that are happening. So it's difficult for me to comment on their, you know, strategy behind this. Fair enough. Just a question on Europe. I think, you know, if you could just give some color. I think you said that our volumes are lower quarter-over-quarter in Europe. On a YOY basis, at least I think, at least passenger vehicle sales have been pretty strong in Europe for the months of October, November and December. Have we seen an increase there or, you know, are we more towards commercial vehicles in Europe? No, I'll let Anurag answer that, but just one small thing that we noticed in quarter three, we noticed a lot of companies across the globe did inventory correction. They had built up inventories and then they started reducing it. Now, that's, we saw some order reductions coming because of that. Now we are seeing things normalize back and the orders coming in. Anurag, anything to? No, you're absolutely right, Akshay. I just want to add two points, that we sell to tire companies and whether it is more passenger vehicle or the commercial vehicle is not something that we can make out as of now. Yes, the export sales to Europe were lesser in Q3 versus the last year Q3. There were two factors, demand and inventory correction. I think that is going to be corrected in the coming quarters. Great. Last question from my side. If you could please provide me just with the the cash, debt and investments on the balance sheet as of the end of the quarter. Yeah, sure. I think- The cash, debt and investments. Yes. On debt, I gave my expected projection for long-term term loans as of 30th September to be sub INR 85 crores because we are in process of repaying quite a lot. What is the exact position as of now? The long-term debt today, as of 31st December, was INR 114 crores. Okay. 114 as of 31st December. We expect that to reach, sub 8- The term loans. sub 85 by 30th September. Yeah. Okay. Cash and investments? Investment and cash put together was INR 170 crores. Did you get that, Samrat? Investments and cash put together was INR 170 crores. 170. Great. Okay. You said, sub 85, around the time of the demerge are expecting to be around 30th of September. I mean, we expect the appointed date to be sometime in quarter three. We don't expect it to be earlier than thirtieth September, but thirtieth September or in sometime in that quarter. Got it. Excellent. Thanks a lot, guys. Good luck. Thanks. Thank you. The next question is from the line of Nehal Jain from SK Securities. Please go ahead. What is the outlook on the Indian tire industry? The outlook on the Indian tire industry in the recent ATMA summit, they said that they will grow three times in the next 10 years, which is a double-digit CAGR. Right. you know, we've heard that like what's the international outlook? We've heard that in Europe there is a slowdown in the tire manufacturing sector because of, you know, manpower issues and higher energy costs. What is your views on that? Our view on that is that, I would expect Europe to be stagnant in the coming years, maybe grow in a very minor way. I think the U.S., and Latin America would do well. India, of course, is gonna grow at double digits. Asia is also expected to grow. Right. Do you think that, you know, what impact will have on India? Will India's manufacturing, tire manufacturing segment will boost or what impact will that have on us? I'm just going by the estimates that they themselves put out for themselves of double-digit CAGR growth for the next 10 years. That's their own estimates. Yes. Got it, sir. With respect to radialization, how will that lead to growth? Like our growth. Sorry. Radialization. With respect to radialization, how will that lead to our growth? What happens is that, you know, this is something which is now attaining maturity, but however is still a little bit away from perfection. Whenever radialization grows, insoluble sulphur consumption grows. The effect is that, you know, if the tire company grows, say by 10%, the insoluble sulphur consumption would grow by, say, 12%. The growth of insoluble sulphur consumption should be about 1%-2% more than the tire industry growth. Okay. Understood, sir. Thank you. That was helpful. Thank you. Participants who wish to ask a question may press star and one on their touchtone phones now. The next question is from the line of Aditi Sawant from ADM Advisors. Please go ahead. Yeah, hello. Thank you so much for the opportunity. I have couple of questions. First is, how is our penetration levels in U.S. and China currently? Where do you see that growing in next one or two years? Second is, Sorry, go ahead. Yeah. Secondly, if you can help me with your volumes and utilization for this quarter and nine months? China, our penetration is next to nothing today. We have no predictions of for where it is going to reach in the next two years. It is anybody's guess. We would assume it to remain what it is today. North America, we have been selling a decent amount over the last two years because we have certain plants allocated to us. It is an extremely important focus market. We have over the years been trying to get approvals and then allocations to significantly ramp up our sales in North America. We finally have all the approvals in place and continue to work towards more approvals. I am very confident that in the next year or two years, or as things progress, we will start getting significant allocations as well from that market. This year we had some issues because obviously the freight cost was very high, so we were not as competitive as they wanted us to be. Now freight costs have come down a lot, and I'm sure that we are gonna be very competitive going forward. Yeah. Thanks. That was helpful. Can you just comment on volume and utilization for this quarter and nine months? No. Sorry, we don't give this kind of figures, please. Okay. Just last question, if I can ask, is, have we added any new tire customer? Yes, we have. We have added new tire customers. Okay. Okay, sir. Thank you. That's it from my side. Thank you. The next question is from the line of Saravanan Balakrishnan, an individual investor. Please go ahead. Yes. Thanks for giving me this opportunity again once again, sir. One quick question about Duncan Engineering. Last time, you know, it was mentioned you have significantly reduced the debt and also like had a good spike in the sales. Just want to understand the endgame with Duncan Engineering. Are there anything that we are doing to improve the repeat order rates from the customers? Last time, my understanding is like, 30% of Duncan Engineering's revenue is coming from top five customers. Are we also trying to diversify that number to a wider group? I'll try to answer all those questions. I'll do my best to do that. Look, as far as Duncan Engineering is concerned, we are at a growth we're rapidly growing in that company. We have been growing for the last couple of years. This year also, we are on track to grow 30% from the previous year. We are working on adding more people, more products and as well as adding more customers. Yeah. We are certainly in a growth phase in that company. There is no, I don't know how to define the endgame, but the strategy at Duncan is to continue to grow by adding new products and new customers. Got it. regarding the margins, like, I think, like this is the, like, the current ones or the baseline metric that we are looking at, right? No, I've never said that current is. Yeah. baseline we are looking at. Got it. Our target is to maintain 15% EBITDA margin in that business, which is very good for that industry. Got it From an investor's perspective, actually, one should also look at the ROC and ROE of Duncan. I think, So far we managed to do all this with very low CapEx. The free cash flow generation is quite good. Right. Makes sense. I think that's it from me. I think, yeah, I wish you all the best, sir. Thank you so much. Thank you. Thank you. Ladies and gentlemen, to ask a question, please press star and one. The next question is from the line of Riya Verma from NRI Securities. Please go ahead. Hi. So thank you for this opportunity. Most of my questions have been answered. I just had two questions. Firstly, how do you see the demand supply dynamics for the insoluble sulphurs in the next two, three years? We would like to always say that we see it improving because we don't see significant capacity coming online and demand should keep improving. Last few years demand has been stagnant. U nless you have some external, new external issues, I mean, demand should be improving going forward. Right. Secondly, do we see our market share increasing going ahead? I mean, view on that? Yes, that is what we are co-consistently working towards every year. Right. Thank you. That answers my question. Thank you. Ladies and gentlemen, if you wish to ask a question, please press star and one. The next question is from the line of Yogansh Jeswani from Mittal Analytics. Please go ahead. Hi, sir. Thanks for the opportunity. Just one question on your U.S. side of the business. In this current turnover, do we have some contribution from U.S. coming in, and can you help us quantify that? With the approvals that you mentioned that are now lined up, going forward, what kind of turnover are we expecting from U.S.A. next two, three years? As Akshat has already explained, America is a major focus market for us. Yes, currently also we are getting contributions from America. We do see a majority of our growth in the next two, three years coming from America. There was one more question you asked. I missed that. Can you repeat that? Sir, if you could quantify that,% that we are getting from US out of the total turnover? No, unfortunately, that is something I cannot specify as of now because of competition issues. Understood. Next is, sir, on your margins. We do understand that the industry is facing difficult times, but, going forward, do you think that the margins that you used to do, 30% plus kind of, those will come back once the industry normalizes? Or do you think that those margins can't be maintained? There are two aspects to it. One is, as pointed out earlier to a similar question. We look at margins in rupees per ton basis, and when raw material prices are high, and even if the margins are maintained, as an overall percentage, EBITDA comes down because the turnover goes higher. For example, if the margin is 40% at 100 INR, it is 40% at 200 INR. Is again 40 INR at 200 INR, then as a percentage, it will come down. Assuming that, you know, the raw material prices come down to the levels that they were two, three years ago, then yes, it will recover. Our margins, EBITDA margins would recover even at the same rupees per metric ton margin. The second is of course, as the sales ramp up, there will not be any significant increase in fixed costs, again, it will help in our margins, EBITDA margins going up. Freight cost is a very critical element of this because, you know, freight cost is not something that we can ever recover from our customers because our competition is not exposed to that. If freight costs are high, then our margins will be lower. If freight costs come down, then that helps our margins. Got it. That's helpful, sir. Thank you. Thank you. Participants who wish to ask a question may press Star and One. There are no further questions, I would now like to hand the conference over to the management for closing comments. Over to you, sir. I take this opportunity to thank everyone for joining on the call. I hope we have been able to address all your queries. For any further information, kindly reach out to us or Strategic Growth Advisors at IR, advisors. Thank you once again. Thank you. On behalf of Oriental Carbon & Chemicals Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.