Good day, and welcome to the Rossari Biotech Limited Q1 FY 2024 earnings conference call. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions when the presentation concludes. Should you need assistance during the conference, please signal an operator by pressing Star and then 0 on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Anoop Poojari from CDR India. Thank you, and over to you, sir. Thank you. Good afternoon, everyone, and thank you for joining us on Rossari Biotech Limited's Q1 FY 2024 earnings conference call. We have with us, Sir Edward Menezes, Promoter and Executive Chairman, Mr. Sunil Chari, Promoter and Managing Director, and Mr. Ketan Sablok, Group Chief Financial Officer of the company. We will begin the call with opening remarks from the management, following which we'll have a photo moment for a question and answer session. Before we start, I would like to point out that some statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. I would now like to invite Mr. Edward Menezes to make his opening remarks. Thank you, Anoopji, good afternoon, everyone, and thank you for joining us on our earnings call. I hope all of you had the opportunity to go through our results presentation that provides details of our operational and financial performance for the first quarter ended June 30, 2023. We have recorded a steady performance during the quarter, demonstrating the resilience and adaptability of our business model amidst a challenging global economic landscape. Our commitment to sustainable and innovative solutions has kept us in a stable position despite the current subdued demand scenario witnessed in the chemical markets. We are delighted to share that we have acquired the remaining 16% stake in our subsidiary, Tristar Intermediates, during the quarter, and we are now nearing the completion of the acquisition of the remaining stake in Unitop, leading to 100% ownership. As we move forward, our strategic intent remains to seamlessly integrate both Unitop and Tristar into our operations. We believe this move will drive growth and enhance our overall competitiveness. While our recent organic performance has been tempered, our commitment to growth remains intact. Our approach to growth includes both seeding new businesses and strengthening our presence with existing segments. Central to this strategy is our focus on developing innovative, sustainable solutions across all our business verticals. In our HPC division, our R&D team has made remarkable strides in creating morpholine-based derivatives, serving as integral components for pharma API and a diverse range of other industries. In addition, we have made significant progress in devising innovative solutions tailored to the institutional chemical needs of the Indian Railways. In the Asian division, our R&D team is actively designing smart, sustainable aquaculture solutions that are tailored to meet the specific needs of farmers. These state-of-the-art solutions span a wide spectrum of areas, from probiotics, feed additives, to disinfection and comprehensive pond management. Overall, R&D continues to be a cornerstone of our growth strategy and plays an important role in the company's future roadmap. Our confidence in customized products as a differentiator is backed by our track record in developing unique and innovative solutions for our customers. As the market landscape continues to evolve, we see our emphasis on R&D and customized solutions as an important pillar in maintaining consistent growth in a volatile environment. To conclude, despite the macroeconomic challenges, we remain optimistic about the remainder of the year. We firmly believe that our strategic initiatives focused on broadening our customer base, prioritizing high-margin segments, along with our commitment to R&D, position us favorably for delivering healthy, operational, and financial performance in the coming years. With this, I would like to conclude my address, and I now hand it over to Mr. Ketan for his comments. Thank you, Edward, sir. Good afternoon, everyone. At the outset, I would just like to inform everyone on the call that Mr. Chari, due to some unplanned contingencies, is traveling. He's however there on the call with us today. He would interact based on his connectivity. My apologies for this. Let me update you about the two key developments during this quarter. One, of course, as Edward, sir said, we acquired a 16% stake in Tristar Intermediates Private Limited for an aggregate consideration of INR 16.9 crore from the existing shareholders. Post this, the entire 100% stake now has been acquired. Second, as part of our digitization initiative, we have successfully transitioned to SAP S/4HANA across the group. We went live across all six group companies and multiple locations. This digital transformation required a planned shutdown for a week in April, followed by we had about another week set aside for the system stabilization. I'm happy to inform you that the transition has been executed seamlessly and the new ERP system is operating smoothly. This planned migration led to a slight lower sales in the month of April due to the necessary downtime. Now let me provide you with a brief overview on the financial performance for the quarter ended June 30, 2023. Despite the challenging global environment, the quarter's performance remains steady. The company achieved a revenue of INR 410.6 crore for the quarter, compared to INR 406.5 crore in Q4 FY2023, and INR 434.7 crore in Q1 FY2023. EBITDA stood at INR 57.7 crore, as against INR 54.6 crore in Q4 FY 2023, and INR 57.8 crore in Q1 FY 2023. Bad debt in the quarter stood at INR 29.2 crore as against INR 29 crore in Q4 FY 2023 and INR 28.7 crore in Q1 FY 2023. Despite the challenges and the difficult conditions, we were able to improve our EBITDA margins by 14.1%-14.1%, up about 70 with quarter-on-quarter and about 80 with year-on-year. Our focus on prioritizing products with higher margins and our tight control on costs have contributed to enhancing our margin performance during the quarter. In the SPPC segment, performance was stable, even amidst softer demand from key domestic industry. The introduction and contribution of new products supported the performance. Meanwhile, in textile chemical, division segment, the segment was steady, though growth was muted due to significant inventory destocking with business in the global market. In the Asian segment, we exhibited a decrease quarter on quarter, but Y-on-Y, there was a growth. Given that the first four to five months are typically softer for the poultry industry, we have seen this trend quarter on quarter. However, we are confident that revenues will pick up through the year, and we, we expect this segment to show a good growth during the current year. We are also happy to share that ICRA has assigned AA- (Stable) on the fund-based term loan and fund-based working capital facility and A1+ on the short-term non-fund-based limits. These ratings are a testament to our robust financial position and strategic growth initiatives. In closing, I would like to state that we remain dedicated to our strategic growth initiatives, consistently driving innovation and improving operational efficiency. We are confident that these initiatives, coupled with our disciplined financial management and investment in our people, will enable us to deliver sustainable growth in the coming years. On that note, I would like to end my opening remarks and would request the moderator to open the forum for any questions that you may have. Thank you. 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 the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use hand raise 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 Sanjesh Jain from ICICI Securities. Please go ahead. Good morning, sir. Thanks for taking my question. I got few of them. First, on this pharma API, which we mentioned in the opening remarks, that one of the chemical line we are entering will also allow us to get into pharma API. Can you elaborate slightly more just in terms of how do you want to look at the pharma API? What are the products we are looking at it? Where does it fit in the value chain for us? Yeah, thank you, Sanjesh. Actually, what we've done is we had an opportunity in the viscose manufacturing. You know that we are also dealing in thin finishes for viscose, and there's a product, modified cellulose, which is called lyocell, and the solvent that is used there, which is NMMO, N-methylmorpholine N-oxide. We had developed in the last year, we have started to develop this product, and since this morpholine chemistry had other opportunities, we also developed other chemicals like HEM, that is Hydroxyethylmorpholine or N-formylmorpholine or N-methylmorpholine. These are the three or four products that we have, we have been targeting, out of which, NMMO is a big product, which goes into lyocell worldwide. The potential for this product is pretty large, and there are not many very many players whose products are approved here. We have got approval for this product with some major multinational manufacturers, as well as from the local manufacturers of Lyocell in India. Therefore, as an extension to the NMMO, we also ventured into the same chemistry with HEM, NMM, as well as NSF. Out of which, HEM is a molecule which is used in the manufacture of drugs for kidney transplants and heart diseases. That's how this new chemistry was added to our portfolio. When we say API, this is just one molecule, right? We are, we are getting into an intermediate or we are getting into API? No, no, it will be an intermediate. Actually, it's not a misnomer there. It's, it's an intermediate for the drug, actually. Okay. Who else produces this product today in India? That is my actually pharma technical team will be able to tell you. I can, I can share that information with you on the side. Got it. Got it. Thanks for that. Second, on the HPPC consumer side of the business, which is anti-rheumatic API and other white label manufacturing we do. How has been the consumer trend? If you look at the FMCG company, volume growth has been steady, while for us, if you look at the performance, it's still not catching up a bit. What is the expectation for this year in the HPPC category? The HPPC category has actually done very well for us in the last year. Unfortunately, because of the softening of the raw material prices, the selling prices have come down. Therefore, you see a dip in the HPPC revenues. If you actually see the HPPC volumes, we have almost 19% increase in volumes year-on-year. That is a very healthy trend for us overall. In the ARD also, we have a very healthy volume increase. It was only because of the price correction that happened, that you see a small decrease in the HPPC sales. Again, that volume growth is not showing in the gross profit growth as well, because if I look at the gross profit for the standalone business, it has grown by 11%, while there is a tailwind of lower raw material prices in the margin. Is that the new business what we are doing is a margin dilutive versus what we were doing last year? You will see a gross profit increase of only 11%. If you see the EBITDA margin, because of the volumes that we have incorporated and the fixed cost coming down, the EBITDA margins have grown dramatically in the standalone, say, from INR 27 crore to INR 35 crore. Got it. Got it. I was just looking at the prices and the volume. This EBITDA captures a lot of operating leverage. The other question is on the- The volumes have gone up, therefore, we are able to reduce the cost for the products. Got it. Next, on the Buzil side of it, I was just going through your annual report. It appears that Buzil Rossari Private Limited's revenue in FY 2023 has declined from INR 85 crore, INR 79 crore, while we were anticipating a very strong growth into Buzil Rossari Private Limited. What's transpired there? Why why there has been a revenue, EBITDA, and PAT decline last year in the Buzil Rossari? I will ask Ketan to explain, explain more. Oh, Sanjesh, on the BRPL front, last year, we started off with a new line of business, which was into tender, the government tender business, where we supply the cleaning products to the large government schools and huge government contracts. These tender, we, we realized that we were unable to do it through Buzil Rossari because of certain, you know, conditions in the tender documents with respect to the, you know, net worth and minimum sales and things like that. All that part of the sales and the business was routed through Rossari. That's why you will see that the growth which we were expecting or planned in BRPL, part of that could not happen. It's actually not visible in the BRPL numbers because they have come out, come in the Rossari numbers. Generally, for our internal MIS, we always, you know, show that as a BRPL sale because it is generated by the BRPL team. How much was it last year compared to INR 85 crore of 2022? Last year, this was about, I think about INR 20-25 crores of sales, which was done through, through Rossari. Okay. We have done almost INR 100 crore versus INR 85 crore in 2022. INR 100 crore is what we talk about, last year's sales of the... Fair enough. Fair enough. The last two questions, one on the Tristar, how has been the trend, have you seen any slowdown? Because I think Europe market generally is very weak, and Tristar had a larger presence there. That's number one. Number two is bookkeeping question. Depreciation quarter-on-quarter has declined from INR 16 crore to INR 14 crore. Anything there? Why has it changed? Yes, Tristar. Yes, you are right. We are seeing some pressures from the European market. I think this quarter should be a better quarter for us. In fact, June was also good for us in Tristar. We are not really much worried on the Tristar front because we expect quite of, you know, April, May being a little soft. We are seeing good traction in Tristar. Overall, on an annualized basis, we are quite good on the Tristar front. We should see good numbers coming in through the year. On your second was on depreciation. Last year, you know, Q4 being the last quarter, some of the asset, adjustments in terms of, accelerated depreciation, et cetera, we have taken on some of our older assets, at Silvassa. I think some also in, in, in the facil ity in Dahej. Those accelerated depreciation impact has come in the quarter four. That's what impacted resulted in a higher depreciation rate last year. I think now... Of course, since we follow the WDV method of depreciation, the rate should be lower quarter-on-quarter. I think now the current rate of about 14% is a more consistent rate that will be there on a quarterly basis. Fair enough. Just one last question: Any update on the 2024 guidance, anything which we think is doable in terms of top line impact? If the top line, I think we should be at, you know, low double digits, 12%-14% is what we still think we'll be able to achieve, at least for the Q1 performance. And EBITDA margin? It will be on the similar, similar lines. 14%, 15%? Yeah. We would be happy if we can do around 14%, would be a good target. Got it. Got it. That's it from my side. Thank you for answering all the questions, and best of luck for the coming quarters. Thank you. Thank you so much. Thank you. Ladies and gentlemen, if you wish to ask a question, you may please press star and 1. The next question is from the line of Ankur Pariwal from Axis Capital. Please go ahead. Yeah, hi, sir. Thanks for the opportunity. First question on the, the segmenting group here, for the quarter. If you can help us into volumes and, realization, you just mentioned, you know, on a standing basis, we are seeing a double-digit growth. Is there a significant slowdown on the, the subsidy side? Because, you know, this is a EBITDA, our revenue is still, on a year-on-year basis. I think I'll talk more from the consolidated basis, because as we indicated that it's better to look at the numbers on a consolidated, because a lot of the sales, you know, happens on an intercompany basis, where all the new businesses that are coming in into Unitop Tristar are being done through Rossari. If you see on an overall consolidated basis, I think we've seen good volume collection, and that's quite happening for us, even though, you know, some of that growth has not come, the similar kind of growth is not being seen on the top line because of the RM price softening, resulting in, you know, some price corrections at our end. If you see year-on-year, I think we've done about 20% kind of volume growth, and I think that's what is important for us. Our, you know, top line has been more or less down about about six, 6% on a consolidated basis. I think that's more to do with with the pricing part. Okay. If I heard you right, 20% volume growth year-on-year, across all the segments? Yes. Okay, and, broadly, if you can give. Sorry, Ankur, not all the segments. I'm giving an overall number of. Yeah, yeah. If you can broadly highlight, which are the leading ones here, how is the business, HPPC, for example? Textile was almost stagnant in terms of volumes. Very small volumes. Textile maybe. Okay. Given the share, I believe HPPC would have grown much after this. Yes, yes. Look, also recently, you know, the earlier discussion which you want to operating level side. If you look at the consol. side, you know, the EBITDA or the gross profit are largely flatline, despite the volume increase. Is there some RM inflation which is yet to be passed on or, you know, how is the margin situation there? The RM prices in the last two weeks have started to have an uptick again. We are not really sure how we will be passing on the price or whether there will be an increase in price. Most commodities have started going upwards. If you look at styrene, if you look at butyl acrylate, if you look at formic acid, acetic acid, all of them have started an upward trend, are showing an upward trend in the last two weeks. I really will not be able to, we'll really not be able to give you a guidance on whether more price correction will come or there will be a price increase. More so because the HPPC, the price correction or increase comes quickly, you know, because it, it passed on immediately to the customer. Just presuming the same method, RM inflation is still at today prices, are we expecting our margins to be largely stable or probably, you know, some positive happenings as should things improve there since volume intervals have started coming back? Ankur, our strategy, our strategy is to actually fill our capacity, basically. Therefore, we're not looking to at a very high growth in, you know, margins. We would like to keep the margins stable, but fill capacity, and therefore, cost will come down and help us, help us boost our EBITDA margins. Okay. Just lastly, on the new product launches, which you highlighted and very happy to create in this quarter, how should one look at, you know, the product launches and the margin profile here? Will the focus will be on, you know, volume metrics, like capacity utilization and volume growth here, and probably the margin may take a beating in the near term? For, for the new products, there will always be a higher margin idea. There's not going to be volume growth. I mean, we are not going to run out of volumes over there. All, all the new products based on modeling or the new product introduced in Aqua, they will, they will have healthy margins for us, and then we will build, build the brand and the business there. Whereas the HPPC business is the biggest engine, I, I would say the fastest engine for us to fill in capacities, you know? There, where we will focus to fill capacities with the HPPC products, whereas, with the new products that come in, we are not using a strategy of low price. It will be always at a healthy margin. Okay. Thanks, sir. Absolutely. Thank you and all the best. Thank you. Thank you. Participant, you may press star and oneh to ask a question. The next question is from the line of Aditya Chheda from InCred Asset Management. Please go ahead. Hello- Sorry to interrupt, but the line for you is breaking up in between. Yeah, hello. This is much better, sir. Thank you very much. My question is again related to the raw materials v ersus the previous long-term trends, do you feel that those have normalized more or less? Or, if you could sort of guide us, from a more medium to long-term perspective as to how much realization, degrowth is possible if you compare some long-term trends. Also, if you could help us understand the quarterly run rate of the subsidiaries, and if the, if you can quantify the intercompany sales, which we are doing right now, if you can quantify them just so that we can understand the performance better, at least for now. I think RM prices, see currently are, you know, are more or less steady, but as [uncertain] said sometime back, you know, last two, three weeks, we are again seeing some hardening in the prices. We'll have to take this, you know, as, as it comes, because it's a little difficult for us to currently understand how the prices are going to, going to pan out. We are generally not taking very long-term position on the, on the raw materials, so I think we will be in a much better position to handle the pricing, whichever side it moves out. Again, on y our second question again, on the intercompany sales, I think as I said, you know, it's better to look at the numbers on a complete consolidated basis, because now a lot of these sales are actually happening across companies, depending on the want of the customers and the development of products and certain parts of the products which are happening, you know, in different plant locations of various group companies. The ideal way would be to look at the numbers only on a holistic holistic basis. Yeah, you had anything else also, Aditya? No, thank you. Sorry? I got your voice is cutting. Thank you, sir. Yeah. Thank you. Thank you. The next question is from the line of Rohit Nagaraj from Centrum Broking. Please go ahead. Yeah, thanks for the opportunity. My first question is on the Unitop side. We, from Unitop, we serve predominantly the agrochemicals and oil and gas. From the agrochemical companies, we have seen a very similar commentary. Was there any impact during Q1 on the agrochemical side, and how has been it looking like in the foreseeable future, given the demand or the POs that we are receiving? Thank you. In the Unitop side, see this quarter, I think we've, we've seen a good demand. The only thing that impacted slightly on the Unitop sales was we had about 2 weeks of complete shutdown on the patches early in April because of the SAP implementation. That actually impacted more on the Unitop side, because it took us some time for us to consolidate, and, you know, go live on the system there. Both side, I think we've seen a good demand. I think even July has been a good, good month for us in Unitop. The capacity utilization at Unitop, I could say in the last three months, including July, has been significantly good. It's, it's been at about 85, 90% plus utilization of, of the capacity. For us, at least, in terms of the orders and, and the POs, it, it has been good for the, for the last three months at least. Rohit, to add to that, actually, in Unitop, because of the synergies between, Rossari, VRP, and Romakk and Unitop, as well as Five Star. A lot of non-agro surfactants have also been paid for. Demand for non-agro surfactants have been generated by the group, and we are looking at pending orders this month, you know, pending order, orders in excess of 2,000 tons. We are seeing that Unitop is doing pretty well for us. I'm sure this quarter also will be strong for Unitop. All right, sir, got it. The second question is from the export side. How has been the performance during Q1, and what are we hearing? Because generally for the chemical companies, exports have been not answering over the last few quarters. What is our feedback on this? Thank you. Exports, you know, this quarter, we've done about INR 80 crore of exports. Roughly about 20% of our turnover is, is on the export side. Partly, you are right, we have seen the growth coming. Last quarter also, we were at 80. Last year we were at about 85- ish, so we've not seen the traction there. It's, it's more, I think, impacted from the textiles slowdown. Even on the export side, a lot of, you know, the countries where we used to export, we've become a rather more cautious. There are many of the countries like, you know, Bangladesh, etcetera. There, there are issues on the payment side in terms of forex, and we, we, you know, we are, you know, quite cautious of the customers that we are dealing with. We don't want any of our funds to get, you know, kind of stuck there. There have been in Europe and U.S. also in the textile space. I, we, we expect at least the next two quarters also to be slightly sluggish. You may not see growth coming in. We, we should be happy if we can maintain, you know, the current one. Maybe post that, we see some, you know, inventory use up in, in, in the textile space, and then we can see the, the export turnover in textiles also going up, and then the overall turnover on the export side should also grow. Sure. Thank you so much, and better luck, sir. Thank you. Thank you. Ladies and gentlemen, if you wish to ask a question, you may please press star and one. Participants, to ask a question, you may press star and one at this time. To ask a question, ladies and gentlemen, please press star one. As there are no further questions, I would now like to hand the conference over to the management for closing comments. Over to you, sir. Thank you, everyone. We have been able to answer all your questions satisfactorily. Should you need any further clarifications or would like to know more about the company, please feel free to contact our team or CDR India. Thank you. Thank you once again for taking the time to join us, and have a very good evening. Bye. Thank you. On behalf of Rossari Biotech Limited, that concludes this conference. Thank you for joining us. You may now disconnect your line.