Ladies and gentlemen, good day, and welcome to Oriental Carbon and Chemicals Limited Q1 FY 2024 earnings conference call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not 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, 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 touch-tone 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 OCCL Limited. Thank you, and over to you, sir. Good afternoon, a very warm welcome to everyone. Along with me, I have Mr. Anurag Jain, CFO, and SGA, our IR advisors. We have uploaded our results and investor presentation for the quarter ending June 30, 2023, on the stock exchanges and the company website. Hope each one of you have had a chance to go through the same. OCCL has started the year with revenues of INR 110.4 crore in Q1, a degrowth of 20% year-on-year due to less sales of insoluble sulfur and correction in sales price of both sulfur and acid, consequent to reduction in sulfur cost. We had seen a pent-up demand during the same period last year as things were coming back to normalcy post-COVID. Currently, we are seeing lower demand in Europe due to the prevailing economic conditions over there. However, EBITDA impact stood at INR 32.6 crore, a growth of 15% year-on-year, and INR 15.3 crore, a growth of 9% year-on-year, respectively. The CV industry is expected to grow mid-to-high single-digit during FY 2024. The positive impact of a promising monsoon and the government's ongoing efforts to boost infrastructure are favorable for the commercial vehicle industry, despite challenges posed by high interest rates, fuel prices, and inflation. Overall, sales momentum is expected to remain healthy, driven by improving fleet operators' profitability and gradual freight hikes and rising fleet utilization. In FY 2023-2024, Indian tyre manufacturers anticipate making an investment of INR 5,000 crore, driven by the growing demand from both the replacement and OE markets. The domestic market shows strong demand for radial tyres serving passenger and commercial vehicles owing to several factors. Our company is a research-oriented enterprise dedicated to producing top-quality products that result in superior offerings for our customers. Our ongoing investments in sustainability, efficiency improvement, and product quality exemplify our commitment to progress and environment. We have ambitious plans to expand in geographies like North America, aiming to increase our market share. Concurrently, we are striving to increase our share in the Indian market. The demerger that was proposed and approved by all shareholders is now awaiting approval from the NCLT. The next hearing date is scheduled for 11th October 2023. 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. Now I will take you all through the standalone financials of the company. Total income for Q1 FY 2024 stood at INR 110.4 crores as compared to INR 137.9 crores in Q1 FY 2023, a reduction of 15% due to less sale of insoluble sulfur and decrease in prices of acid, consequently reduction in sulfur cost. EBITDA for Q1 FY 2024 stood at INR 32.6 crores as compared to INR 28.4 crores in Q1 FY 2023, a growth of 15%. The EBITDA margins had improved to 29.5% for Q1 FY 2024. Profit after tax for Q1 FY 2024 stood at INR 15.3 crores as compared to INR 14 crores in Q1 FY 2023, a growth of 9% year-on-year. Tax margins have improved to 13.8% in Q1 FY 2024. With this, I would like to open the floor for questions and answers. 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 touch-tone 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 Aditya Khetan from SMIFS Limited. Please go ahead. Sir, thank you for the opportunity. Sir, my first question was on to the recently, we had expanded the capacity of 5,500 metric tons of insoluble sulfur. What is the utilization level that is operating currently? Secondly, what are the plans for the next phase of second phase? Are we planning to go ahead with that expansion or not? The, the expanded. The, our current capacity utilization is below the optimum level, so expanded capacity is not getting used as of now. W e are hoping that we will get additional orders in the next, beginning of the next quarter, next year. Once we see those orders coming in, then accordingly we will plan for the phase two expansion. These orders you have said will come by next year, FY 2025. Normally, internationally, you know, there is an annual cycle of addition of new plants, allocation of orders. These plants rectify by the end of this year, and then, then we will know by December that what is the fresh orders we, we have got. Currently, sir, we would not be operating that capacity or like what would happen for full fiscal effect 2024? Currently, we do operate that plant, but overall the capacity utilization is not enough to have all the lines operational at the same time. Okay. Okay. Sir, so this is largely because of the demand impact in U.S. and Europe. Is that one of the big reason or you expect like, say, this- That is a very significant reason, that there has been a degrowth in demand in Europe and elsewhere also. That's one of the significant reasons, apart from the fact that we are looking to get into additional markets. Okay. Sir, since we would not be planning to ramp up the volume so that our fixed cost would go up on quarter on quarter basis. You expect this 28%-29% margins which we have reported in this quarter, so how much like downside we can expect from this level? That is very difficult to comment on because, you know, these margins are dependent on many factors. There are material costs, the exchange costs. As far as our fixed costs are concerned, obviously, as we had indicated earlier in our concalls, they are not expected to go up in any significant manner once for our next phase also. But the margins are, are, are dependent on so many things. It's very difficult to predict what they are going to be for the year, but we expect them to be better than last year. Okay, sir. Just one last question. What is the current supply position globally, which are the companies globally which are looking to expand? What would be the capacity or the supply figure in the next two years, if you can quantify in terms of data, sir? As far as installed capacity is concerned, it is in excess of demand as of now. As far as current expansions are concerned, the one that we know of is Shikoku in Japan, which is expanding by 10,000 metric ton per annum. They have announced the plan to expand by 10,000 metric ton per annum. China concern, they are also expanding? I think they are replacing rather than expanding. Once they, they expand, they are going to shut down their, older, older, less efficient capacities also. Okay. The net, net capacity addition wouldn't be that much, right? If you are talking only 10,000 is added by Shikoku. That is what, that is what we expect. Okay. Okay. Thank you, sir. That's it for me. Thank you. Participants, you may press star and one to ask a question. Next question is from the line of Akshara Deo from Vivo Commercial. Please go ahead. Thank you for taking my question. I just wanted to know. Sorry to interrupt you, but you are breaking. Hello? Yes. Yes, please, go ahead. Yes. I just wanted to understand how we would be looking forward in terms of growth guidance other than the install of the insoluble sulfur capacity for the rest of the year. Growth guidance for capacity? Growth guidance for the company, top line revenue. Actually, currently we do not give anticipated annual numbers. Okay because of competitive reasons. As I have said earlier, we do expect additional orders to come in by the end of the year, which should augur well for Q4. In that manner, we should expect a growth in quantities over last year. Okay, sir. Okay. Thank you so much. Thank you. This question is from the line of Dhruv Muchhal from HDFC Mutual Fund. Please go ahead. Yeah, thank you so much. Just one question is just if you can throw some light on the demand situation right now, and is the weakness in demand also to do with the inventory issue that we are seeing in some of the other sectors, or it's probably the underlying demand is a bit weak? Also I was just trying to understand, I believe last few years have been difficult for us because of the higher sulfur and the fleet cost, and exports to Europe probably were impacted. Sorry, I missed your, I missed your next question. After weakness in demand, I couldn't hear that clearly. Yeah, the weakness in demand. If you can probably speak something about that, what's causing this? Is it because of the inventory issue in the system like we see in some of the other chemical sectors, or, what's, what's causing this? Is the underlying demand actually also weak that way? Weakness in demand obviously is a mixture of few things. As we, we did see that, we did see a correction in inventories in Europe, for example, where there was a certain reduction in, certain reduction in consumption of tyres because of slowdown. In domestic as well, there was some impact on account of inventory correction, though, in domestic it could be a little more temporary. Because once the, once the inventory is corrected, then it should pick up, but in Europe it will be difficult to say that. Mm-hmm. Got it. Last few years, there was some impact on us because of the higher sulfur prices, or probably globally that was, and also because of the freight rates increase. Our exports to Europe had got a bit impacted because of the higher freight rates. A lot of this thing has normalized to a large extent, I believe, more than normalized, I think, now. How is our competitiveness to Europe now, assuming the demand there recovers back, I mean, are we back to the earlier stage that we were in, in terms of our competitiveness to Europe, or still there is some, you know, issues still pending in terms of resolution? You will notice that even in spite of reduction in top line, we have registered a increase in EBITDA. One of the major reasons for that is the correction of international freight, which does make us more competitive as far as the international market is concerned, whether it be Europe or other countries. That has been one major upside, where we were losing on margins in the international market. As far as sulfur is concerned, there, there too, we have seen a correction in prices. They have come down now to the normal levels, and that has also benefited us by restoring some of the margins, which we had, which had come to very precariously low levels in the same quarter last year. Mm-hmm. Got it. Okay, so what you, what you are trying to say is that the EBITDA improvement is despite the lower volumes? Yes. Which, which in a way reflects that, got it. Can you give any sense on how low the volumes will be on a year-on-year basis, some ballpark benchmark, range? We normally, normally we do not share, volumetric figures because of competitive reasons. It will be, what? More than 5%, 10% decline or in that range? No, we are not, we are not expecting a decline in a year-on-year situation, because we are very much in the running to get, a bunch of new businesses. If we, if we manage to secure those orders, then, then there would probably even be an increase from last year. On a full-year basis? Yes, yes, yes. Got it. Even if the orders don't come, and we don't want to look at that kind of situation, then it's very difficult to predict, you know, where, where it will land up, because it all by and large depends on the demand situation. Got it. You mentioned about additional order flows. The additional order flows will help you in terms of recently expanded capacities. This is not for the next stage of expansion, right? Well, in a way, it's both, because it will help in the first stage of orders that will come will help in utilizing the existing capacity, and at the same time, it will be a trigger point for completing the expansion. Got it. Got it. Sure. Just to summarize, I mean, this demand weakness that we are seeing is, in your view, is not because of some significant increase in competitive intensity by somebody else, or it's broadly just normal market conditions, how the underlying demand is moving, right? The, the significant increase in competitive intensity has already happened. Yeah over the last, two, three years. That is, I think, now been, baked into the system. There is no fresh, new competitive intensity that is coming up. Mm, got it. Sure. Great, it helps. Thanks a lot. Thanks, and all the best. Thank you. Participants, you may press star and one to ask a question. Next question is from the line of Keshav Garg from Counter Cyclical Investments. Please go ahead. Sir, I'm trying to understand what is the net debt of the company as on today? Excuse me, sir? Net debt. Net debt of the company as on 30th. As on 30th June, we are net debt free. We don't have debt as on 30th June. Sir, net cash? That we'll have to calculate, but, but, but, but, but, but on a... You have to say, I have. On 30th June, our long-term debt was INR 89 crore. Okay. Sir, versus this, how much cash we had, including mutual funds, et cetera? No, if you're talking about cash and net debt, we are positive. We are net debt positive. We don't have any debt. Okay, okay, okay. Sir. I'd like to also clarify that our short-term and long-term debt combined is less than the surplus, cash and investments that are there in the company. Sure. sir, what percentage of our, roughly of our insoluble sulfur sales are to non-tyre sector? It is very insignificant. Mainly, it is tyre, tyre company. More than 90% is tyres. ... Sir, is there no other application of insoluble sulfur or any intermediate product that we are manufacturing, or any possibility of some kind of a forward integration? Insoluble sulfur is majorly used in tyre or tyre-related industries only. Though it is used in other applications as well, but the convertible is very less, so it's not significant enough to talk about. Sir, now that the freight cost has come down, sir, how is our cost of production, how does it compare with our competitors in, let's say, Japan or China and other geographies? Freight cost is basically what makes us competitive while we export. As far as the cost of production is concerned, that's nothing to do with freight cost per se. However, while we talk about competitiveness vis-a-vis China and Japan, we, though we do not have any idea of their production cost because this is all very confidentially kept by them, but we do feel that we are competitive as far as costs are concerned. We are competitive enough to, you know, to compete with them. Sir, how is the demand looking broadly in terms of, we already second quarter is going by as we speak. Sir, are you seeing any improvement in demand vis-a-vis the first quarter, or is it the same, or, or actually the things have gone down? In export, we are yet to see any improvement in demand, per se, as far as the total market is concerned. In domestic also, we do not see any significant upside as of now. Sir, basically thing, things remain as they are. Yes. Or have, have they further gone down, as compared to Q1? No, I cannot say that they have further gone down, we do not see any very encouraging signs of improvement either as far as demand is concerned. Sir, if we look at, at least the domestic tyre industry, if you look at their first quarter results, they have given all-time high numbers, both for the top line as well as for EBITDA. Sir, why is it not percolating down to our company? No, see, our when we look at our company, we are looking at a mixture of exports as well as domestic market. Though, we have not lost much quantity vis-a-vis last year in domestic market, but there has been an impact in the exports. That is what has affected our top line. Okay. Thank you. That's all from my side. Sir, just one request, sir, since the company is net debt-free, sir, kindly consider a share buyback because maybe this is the best opportunity to acquire the, and extinguish our outstanding shares so that the earnings per share can increase permanently going forward. Thank you very much. Thank you. Thank you. Participants, you may press star and 1 to ask a question. Next question is from the line of Samar Cha from AlphaWealth Advisors. Please go ahead. Yeah. Hi, am I audible? Yes, go ahead. Yeah. Basically, my first question would be that, we have, we had previously planned to increase our penetration in the North America markets. Currently, what our penetration would be, and what are our plans for the next few years? What kind of penetration should we see? Lastly, have you added any new customers on the North America front? In terms of approvals, our penetration is very good. As I said, last year also, we got good approvals, we have only added to those approvals in the past year, and that is a very important step in getting the allocations. The time is coming up in the next few months for those approvals to be converted into actual allocations. We will be certainly putting our best foot forward. Okay, sir. Any, any customer you can comment on that if you will? No, I can't comment on specific customers. Okay. One last question would be, sir, on the realization expectation, like directionally, directionally, can you tell me for the next few years, what could be like? Look, all I can say is that, till the global demand-supply situation does not improve further, with the underlying demand going up, the situation is not gonna be so easy. Things will be there under pressure. Okay. Thank you, sir. All the best. Thank you. Thank you. Next question is from the line of Samar Singh from TBS Capital Group. Please go ahead. Good afternoon, thanks for the opportunity. I missed the first part of your opening commentary, but I think it was, you mentioned something about demand weakness from Europe. Sorry, can you repeat, Samar? I didn't get you. Yeah, just I think in the first part of your commentary, you mentioned, that we are still seeing demand weakness in Europe. That's correct. I want clarification on that because, you know, as per the EU new car registration data, registrations for the first half of calendar year are up by 18%. I would have thought that we would at least, if not, you know, positive commentary, we would at least start seeing some sort of stable commentary coming out of our exports, to Europe. ... Yeah, but actually it's, it's not happening. I, if you delve deeper into the news, you will see that a lot of the European tyre companies are actually facing various kinds of strife. I don't want to, you know, take specific names of our customers and, and their results and, and the various issues at their, at their factories, but you will see that, that, that is happening. I don't know what the exact reason is, that maybe the, the replacement demand is, is what drives their sales more than the OEM. Maybe things will improve. There is also a little bit of destocking going on from a, from an inventory point of view. It's, you know, it's, it's difficult to say. Okay, got you. That's helpful. A last question, plans for cash flow for this year is just continued debt paydown? That's correct, that's correct. Our, our cash flow plans remain as, as we've announced, debt payoff, expansion, CapEx, and dividend. There is no other plan. The decision on whether we are starting our expansion or not, will be taken by the end of this year. We will be in this, first few months of this financial year, we have continued to prepay debt, which is coming due over the next 12 odd months. Yeah, that's what we'll, we'll, we'll keep on doing. Got you. Thanks very much. Thank you. Next question is from the line of Aditya Khetan from SMIFS. Please go ahead. Sir, thank you for the follow. Sir, regarding to your opening remarks onto the new orders which you are not getting for the new expanded capacity, is there any new geography which we are targeting or, or any new customer like, which we might have been added, so there is likely chance of getting order from that particular geography or particular customer? Is something on the cards or we would see this utilization ramp up to take around two to three years from today? We are in advanced stages with pretty much all customers across all regions. If you ask me about the pipeline, it's, it's strong. From pipeline, it has to be converted also, that is the stage we are at, with, with a number of customers and a number of geographies. Okay. This expansion, so before, like, expanding the capacity, so generally a company follows an approach, so to, so to fill the odd, odd books pre-hand only, so when, so whenever the capacity to commercialize. Here, sir, it, it seems like so we had expanded the capacity, but we are not having order with hand. How is the approach like, which we, which we keep generally, so while doing business? We must remember that between the decision to expand capacity and today, the two to three years of COVID happened, global auto slowdown also happened in 2019. The external. Sure. the external environment changed a lot. Now, I don't think it would have been prudent to suddenly stop expansion midway. Sir, we had, a year of 2020 and 2022 also. That two years also, sir, we were not able to fill this capacity of 5,500 tons, so that I wanted to understand better. No, we were not. That's it. I can't shed any more light on it. We were not. It's a fact. Okay. Sir, onto the cost side, when we look in FY 2023, more or less, the power and fuel cost, the freight cost, each and every cost has been rationalized, and they are operating at the normalized levels. Now with the crude prices again going up and things have started to pick up on the inflation front, is there any chance that our costs can again go up, freight costs and all, all these things? As far as, in the future is concerned, it's very difficult to say, because most of the inputs are dynamic and are not very, very much long-term forecasted. For example, sulfur, it has corrected, but in the current month, it has gone up again, though not significantly. Same for oil and freights. What we can say is that they have rationalized, and we hope that they stay there or they move with inflation. That is our hope. Any guidance around to the margins, if you would like to share for full fiscal FY 2024 and FY 2025? It will be very difficult to say, because the margins would depend on two, three factors. First of all, how the raw material and the exchange behaves, and on the and on the quantity of material that we get, for new orders. That will determine the margins for FY 2023, 2024. Okay, sir. Got it. Thank you. Thank you. Participants, you may press star and one to ask a question. Next question is from the line of Mani Shah, Individual Investor. Please go ahead. Sir, thanks for the opportunity. Sir, what is the global size of the insoluble sulfur and the domestic size, and what it is growing at a CAGR? What it could be growing at a CAGR for the next at least three to four years, approximately, if you can answer? The domestic size should be around 27,000-28,000 tons, uh, per, per annum. So that should be the, uh, uh, the bulk of domestic demand. The global demand is very difficult to, to ascertain, uh, because, uh, the numbers are not published anywhere, and even if different tyre companies have d- uh, different, uh, convention ratios, uh, but, uh, just give me one moment, let me make a guess. Which is somewhere around between 200,000-275,000 and 300,000, I think. Around 275,000. 275,000, you told India at 27,000, that means India is 10% of the global market? Yes. Indian market, our, our estimate is very, very, is, is very accurate as far as Indian market is concerned. As far as global market is concerned, it's an estimate that we have. No, the estimate says that you said that 275,000, right? It could be between, yeah, it could be between 260,000 or 300,000. I, I would put the estimate at around 275,000. Sir, at what pace it is growing approximately, both, both the markets? Historically, what, you know, the analysts say is that the market should be growing between 3%-4%. Current situation is not the same because of slowdown in Europe and other factors. If you look at it on a long-term basis, this is what the analysis is, that the insoluble sulfur consumption should grow between 3%-4%. Sir, sir, what should be the excess capacity in the market right now, approximately? That number will be difficult to say again, because we don't have the excess capacities of many people. There, there is quite a gap. That much we know. It should be more than 10%? Yes, more than 15%. More than 15%. Okay, sir. Thanks a lot. Thank you. Thank you so much. Thank you. Next question is from the line of Dhruv Muchhal from HDFC Mutual Fund. Please go ahead. Yeah, thank you. Can you probably give what was the share of exports this quarter and the same number last year quarter, YoY? In revenue, both, probably in value terms or volume terms, whatever is comfortable. Just a minute. I, I will get back to you with that number. Sure. Okay. So the decline in other expenses, although it was only similar QoQ, but the decline YoY is primarily driven by so what? Decline in prime, and YoY is primarily driven by, decline in freight costs. That is the biggest number there, and then decline power and fuel costs. Okay. The freight cost, what we are seeing in 1Q is almost a normalized number now, or there's still some scope left? They have come to more or less p re-COVID levels, more or less there. It's reflected in 1Q numbers? The lower cost is reflected in 1Q numbers. Yeah, that's broadly it, if you can share the export numbers, export share. Sorry, please. Sorry, come again. That was the only thing, sir. If you can probably share the export sales. Yeah, yeah. That's on my, it was just calculated. I'll just give you the number. Sure, sir. Thank you so much. Thanks. It was around 50% last year, and it's around 50% this year. Around 50% both years. 50%, 50% both years. The current year, our sales turnover versus, sorry, our export turnover upon total turnover is 50%, and last year was 50%. Last year was 50%, five zero, and this time it is 52%. Yeah, last quarter that is. Yeah. YoY, 1Q 2023 and 1Q 2024. Got it, sir. Thank you so much. Thank you. Thank you. Next question is from the line of Keshav Garg from Counter Cyclical Investments. Please go ahead. Sir, I'm trying to understand that, what is the import duty on insoluble sulfur imports in India? Are we making any representation to the government to impose any kind of anti-dumping duty on the same? Import duty is. Sorry. Import duty there is. The next question is from the line of Rajvi Shah from Moneywise Financial Service. Please go ahead. Thank you for the opportunity. Sir, my first question is, do we see our- Rajvi, sorry to interrupt you. Can you please speak a little louder? Yeah, sure. My first question is, do we see our market share increasing going ahead? What are your plans to increase the market share in domestic markets? Well, when we say that, you know, from next year we are looking at additional quantities, definitely our market share will increase. Yes, we do see our market share increasing. Okay. My next question is, what is the outlook on the tyre industry? With respect to the evolving trends on EV radialization, can you share your views on the growth path ahead? Well, as far as EV is concerned, we believe that the tyres, should evolve further, for use with EV. That's good news for us, because that means that insoluble sulfur utilization should go up as a percentage of the weight of tyre. Okay. Thank you, sir. Thank you. Ladies and gentlemen, we'll take that as our last question. I now hand the conference over to the management for closing comments. 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 SGA, our Investor Relation advisor. Thank you once again. Thank you. Thank you very much. On behalf of Oriental Carbon and Chemicals Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.