Ladies and gentlemen, welcome to the earnings conference call. I'm Ashish Dandekar, Chairman and Managing Director, and with me are Nirmal Momaya, Managing Director, and Santosh Parab, our CFO.

Since I know all of you are very busy, we will not waste time and get right into it. I hand over to Santosh for a brief on the terms and the performance, following which we will take questions.

Thank you, Ashish. Good evening to all the participants, and thank you for joining us.

I'll quickly jump into the real business matter of today. Firstly, I'll just make a few announcements that you would have seen that we have changed our disclosures from the traditional lakhs and crores to million to match with the international standards.

From this year, we have also started the segmental information where internal restructuring will happen, and the management has started looking at the business in a more structured manner. I think the investor community will be happy because this was always a request that it'll be better understanding if we have segmental results.

Coming down to an overall revenues, our revenues were 5,199 million rupees. That's around 28% more as compared to the last year's quarter, and it's almost 1,000 million rupees more as compared to the last quarter.

Obviously, we have done extremely well on the revenues, but the margins are not in line with the expectations. There are certain reasons for that.

The main reasons have been the raw material price where, as we know, the entire situation of raw material and the prices, the availability as well as the freight costs and other things have increased a lot. You would have seen the details of our financial statements, and you would have seen that our margins, which were plus 45% last quarter, have come down to 40%, and that's what has percolated down to our EBITDA for the quarter.

Coming down to the segments, as you could see, we have now segregated our business into three main verticals. What we used to call straights and blends, which is now called as specialty ingredients.

This is, I'd say, a non-chemical business. It's more of a knowledge business which we sell blends to the end consumers.

We have aroma, the vanillin flavor fragrance business, manufacture of vanillin. Obviously there is the third segment, which is performance chemicals, predominantly downstreams of our diphenol, which go to the product basket of straights and aroma.

These are the other chemicals. Plants are in performance chemical division, which transfer certain materials to the other two divisions for forward integration.

You would have seen the segmental results. There's a intersegment knockout in performance.

These are nothing but the straights which are sold by performance chemicals as a chemical manufacturer to the specialty ingredients part of the company. The raw material for aroma, which is predominantly guaiacol, which is sold by performance to aroma at market prices, or the normal commercial terms based on arm's-length principle.

Specialty chemical ingredients business sells straights as well as blends, as we used to show it in the earlier period. Coming down to the verticals, you have seen that the straights business though has been always growing and has better margins.

That has been also reflected in the numbers which we have disclosed. Straight sales have been around 927 million, while specialty ingredients, that's the value-added blends, has been more than 3,000 million, which is if you see on an overall basis, the specialty ingredients business has done more than 4,000 million revenues.

The EBITDA is 6.35% here, predominantly because it has come down basically because of raw material prices being high. Coming down to aroma, we have sold around 560 metric tons of vanillin in this quarter, which is primarily ethyl vanillin, which we took a campaign for ethyl vanillin in the last quarter.

We have sold around 200 metric tons of ethyl vanillin, which was there in our channel stocks and internal channel stocks. We have sold around 350 metric tons of methyl vanillin in this.

Naturally, the capacity utilization was not optimal because we are taking such a large campaign of ethyl vanillin for first time. We were cautious, and the ramp-up was very cautiously done to get the qualities, to have the capacity utilization on right track, understand the dynamics of the new campaign.

We're happy to announce that we have almost got 95% of our customers have approved our ethyl vanillin. In this quarter, we have already sold 350.

If you remember, in last quarter we have said that we are taking a campaign of 750 odd metric tons of ethyl vanillin, half of that is done. We have produced almost more than 300 metric tons.

We will be taking a shutdown after the 750-ton ethyl vanillin campaign is over in mid of August, and then we'll switch to methyl vanillin. Naturally, we will be doing around 500 to 600 metric tons in the next quarter of methyl vanillin.

On the prices, US and the European prices are remaining same on the sale side as we had discussed in the earlier period, and it will remain in $13 to $14. As we ramp up our capacity and capacity utilizations are better, the sale happens at $13 and $14 million, we will be getting into a positive EBITDA zone on ethyl vanillin, aroma business also.

We feel that in this quarter, the second quarter itself, we will have a positive EBITDA in aroma. As far as performance is concerned, there has been, again, as diphenol plant has been shut down, and it remained shut down primarily for the economic reasons and the high prices.

See, the phenol prices are still very high. Other raw material prices are very high.

It's not very commercially economical, and not able to manufacture diphenol at this current stage. Hence, we took a shutdown.

We have been procuring the intermediates from Chinese markets because the prices are very comparable and competitive as compared to our prices, and we are relying on that. Though diphenol business is shutdown, we have ample catechol to service our aroma needs.

Naturally, the closure of diphenol plant is weighing down on performance chemicals, and that's why we have seen a 2.5% negative EBITDA there. With shutdown and switching it to better resource planning, I think this performance chemical EBITDA also will be positive in next quarter because we also are manufacturing the straights chemicals in performance chemical, which are sold at arm's length to the specialty ingredients business segment.

Hence, performance chemical will also move to a positive zone. As far as coming back to specialty ingredients, blends has been the hallmark of our business.

We have been saying that we should grow at least 20% as a minimum this year. In the budgets, we are talking about 20 25% to 30% of the growth this year.

Last year, we had done around 1,000 or 10,000 million of sale in blends. We have already done 3,000.

We have that run rate of 20% growth already in place, and this will be much more than that. All the companies in America are doing extremely well on this.

The only issue here is the prices. At this, the conflict has forced to increase the prices.

As we have that some one-quarter lag of transferring the increase in material prices and the other prices to the customer. That lag has played in this quarter.

There has been difficulty also here to pass on the entire increase in prices to our customer, and that's weighing down on the gross margins. Effectively, those gross margins are also impacting our downstreams.

Now the question is that what will happen for the whole year? We had been guiding that we'll be doing 2,000 to 2,400 of revenue this year with a EBITDA 250 to 280, that was what we are saying.

Looking at the prolonging nature of this conflict, and prices being high, logistical issues, and other things, we feel that we may end up with the same turnover. Because the sale side seems very, very secure.

Business lines are in place. All the things are ready.

We are very confident of delivering the top line. The whole issue is on the margins.

Looking at the scenario, I would just revisit these margins, and we feel that now the margin should be in the range of 10% to 12% this year. Obviously, the prolonging war situation can throw different things, but if the prices stabilized at what they are, we should be looking at an EBITDA in the range of 10% to 12% going forward.

As far as diphenol is concerned, as I said, it is shut down, but we are looking at alternatives. We had talked about some other products, phenolic compounds there, but we are holding on to it because the raw material prices of those compounds have also increased.

We are looking at various options. By third quarter, we will take a decision to either have an alternate use for that, or maybe if the situation is right, we may shift back to the diphenol production.

At present, the Chinese prices of the raw material intermediate is very, very competitive, and we have secured Chinese hydroquinone from China for next two quarters. Though we don't give the details of debt and other things, but it remains under control.

We have been almost in line with what we have disclosed on 31st of March. There is a slight increase because of the utilization of working capital.

Working capital remains a bit of a concern because of the elongated working capital cycles. As with the Hormuz Strait and the Red Sea issues, we have to now ship it across the South Africa, and that has increased the working capital needs.

Because of the global slowdown also, the recovery from the customers have also elongated by a few days, and that's weighing down on the working capital cycle. We are agile, and we will work through this issue.

You would have also seen a exceptional item in our financial statements on account of the fire which occurred in February in Brazil. We had taken some kind of a write-off there on the losses.

We have now tried to settle the insurance claim because cash is the main requirement. Now, it's around 40 crore 400 million insurance claim.

We said that, let's not haggle with the insurance people, take a 20% haircut and we'll settle. Obviously, that had an accounting impact, and we have shown it under the exceptional item.

As far as Europe is concerned, it has been already gone into liquidation. No more cash burn.

Of course, there's a small cash burn, because with the liquidation, we require legal help till the entire process is over. There is a small cash burn which has happened.

China is in the process of liquidation. We have been telling that this will happen this year, and we will have around 10 to 20 million of expenditure which will be incurring during this quarter.

With this, I think I'll open the forum for questions. Thank you.

Hi, am I audible?

Yes.

Hi. If you repeat your next three quarters' implied guidance, if you're looking at 250 crore EBITDA and you've done almost 9 this quarter, that number seems to be, I think, deliverable given that it implies significantly good margins levels.

Are you out of that problems you had on raw material, costing side, and everything, or you think there is some degree of uncertainty and we'll have a better color end of Q2?

Basically, what we're guiding is 2,200 to 2,300 crore top line, and EBITDA margin in the range of 10% to 11%. It will be in that range, between 220, 230 crore kind of EBITDA.

Given the cost structure as we have it today, it seems within reach for us.

No, if this number works out to be around 13% margin. I was trying to think through that the pressure you saw on gross margin in first quarter, is it now completely behind us?

Because 13% looks like a normal, decent margin levels. Or is it some degree of pressure is still continuing in Q2, maybe end of Q2 when we get a better visibility on that?

Just wanted to understand if that pressure point is over or is it continuing.

Q2, of course, also with the war situation continuing, there is pressure on raw materials prices. We're in a position to pass on some of it to the customers.

I think going forward, to get to that 10% EBITDA in the next nine months seems to be on target.

Once we are behind this raw material challenge, what is the normalized level of margin you think you can have given that your businesses are now coming back up on top line? Based upon whatever visibility you have, what kind of margin levels we can look at maybe in second half or fiscal '28?

In fiscal '28, I think it's in the region of 12% to 14% is what we can look at.

Okay. Last question I have is on the debt side.

What is the level of debt you have, and is there any other plan other than organic way of reduction through internal cash flow that you can take to strengthen your balance sheet?

On debt side, at present we are almost on the same level which we had. We were around 670 crores of debt on 31st of March, the gross debt, which is now 640.

This is mainly the reduction is on account of prepayments which happened for my long-term loans on IFC and EXIM for the vanillin plant. The debt, no increase in debt during this last three months.

We may, because we are talking about 2,400 crores of revenue, 1,700 increasing to 2,400, which will certainly entail a working capital support. We'll try to use the internal cash, but it looks like as the year progresses, we may have to go and take credit lines from the market in the range of 100 to 200 crores.

How did you manage this good achievement of flat net debt given that pressure you had on several fronts and a very low EBITDA levels? Anything other than any specific thing that you could extract cash from?

One thing is there that I had revenue and the cycle is moving, the working capital cycle is moving. It was not a case that I have no no revenue.

Revenue has been high. I have also have a 40% cash, 40% margin.

There is a generation of cash which is happening. Obviously, the question is right that from where this increase in working requirement of the working capital for increased sale has come from.

Naturally, there is one more stakeholder is that we have been using supplier finances, dealer finances to tide over this situation. There the we are using some dealer financing for on the sale side as well as using dealer for buying raw materials.

Now, that also, as I said, that that has also played on the margins because if you try to get dealer finance for the on the sales side, then obviously the cost increases and the raw the margins get impacted, the gross margins. In other words, the interest which I would have paid by borrowing, I have I am paying it to the cost of raw materials.

That's

that 1, 1.5% has impacted me because of this bit of a working capital needs has impacted my gross margin.

Right. Any plans to infuse capital or ways to get some cash, balance sheet deleveraging other than internal accrual?

See, as you see, cash is required. We will be working on it.

It's not the time now that I'm standing on the edge of the hill and I have to jump. There is time still.

As it goes, we are looking at avenues. You may have heard it from the market also.

At the appropriate time, what is better, there will be a lot of consideration, the market price and all those things, what is the rate of interest, my rating, and other things. We have been closely working on it.

As soon as a final decision is taken, we'll come and we have to anyway inform the thing.

Okay. Great.

Thank you. Wish you very best.

Hi, am I audible?

Yes. Hi.

Thank you for taking my turn. I just had couple of questions primarily on vanillin and the outlook going forward.

We were always under the impression that vanillin, the EBITDA realizations per kg or per ton were to be profitable because the fixed cost of the business was very minimal. Considering that, we always were under the impression that the cost to make per kg was about $9 to $10 depending on the crude volatility.

The realizations post tariff had improved to about 13, 14 between Europe and US. The fixed cost primarily were, I think, only your sales team.

Can you just explain this loss at an EBITDA level for the aroma business? Because this is 3, 4 crore loss for this quarter at EBITDA is new to some shareholding.

Good question. See, as you rightly said, or indirectly said that the whole game is about the capacity utilization.

As I've said, we were cautiously increasing the ramp-up of ethyl vanillin, and you would have seen that you would have produced how many, 400 tons in this quarter with a capacity of 1,500. Naturally, there was fixed cost of the plant, which cannot be absorbed entirely on the 400 tons.

On an yearly basis, if you see, as I increase my capacities, these will get absorbed. On a quarterly basis, we are in a fix because we cannot increase the cost more than the price.

That's why this 4 crores, 4 to 5, 4 and 1/2 crores of negative burn has come and hit us. As the capacity utilization cross 70, 80 in the subsequent quarters, we will absorb almost all the fixed cost.

On an yearly basis, it'll come down to that. This is a cutoff in a quarter where the expenditures are for the whole capacity, but the utilization is hardly 25% or so.

That's how this is planning out. As we go ahead, we'll get that EBITDA.

Sir,

Santoshji, basically, at 70% means you're talking about at a quarterly run rate of production at about 1,000 tons?

No, it's capacity is 6,000 tons, achievable 5,000, 4,500.

If you divide it by 4, that's about 1,200, right?

On an yearly basis, we are saying 3,000 tons is what we are estimating this year. That's around 60%, 70% of my capacity utilization.

At that, how much are you expecting to make at an EBITDA level?

We will be making around 7% of EBITDA on the total, if the prices are at $13.

So 7% EBITDA on that. Okay.

Coming to blends, we had held that blends being the holy grail of the business at 40% gross, trickles down to, depending on each geography where some geographies are more saturated, we see higher EBITDA because the fixed cost again is only sales. Again, this is hit us further.

Could you explain the outlook going forward, and how do we see that come back to about where we were sometime back before even the ADD kicked in? If you remember, we were at 14%, 15% kind of EBITDA margins about six odd quarters back.

I'm just trying to understand where is it not coming up. If you look at the March '25 quarter, we were at 14% EBITDA, and that is without the ADD and without vanillin even coming in.

Just trying to understand where were we there and where are we today, because we have the ADD, we have the utilization. Can you help us understand the same?

In

blends, there is no ADD. It's only on vanillin.

If you see the segmental results, there we have shown what was the EBITDA last quarter also. Right?

Last quarter, we have done around 264 crores, or 400 in the March quarter. On a 3,400 crore million revenue, we had done 263 crores, 263 million of EBITDA.

Today we are at 255. On a year-on-year basis, we are at 255 versus 300.

Let's talk first about quarter

to quarter. We told you that

the gross margins have come down. That 4% to 5% percolation is hitting me down on the EBITDA.

Okay. I think then this year also we may not end up with So for Q2, sorry, in the opening remarks, I missed your expected tonnage for Q2.

Your voice wasn't very clear. Could you repeat the same if you don't mind?

On blends, we don't give tonnage.

No, no, vanillin, sorry.

500 to 600 metric tons.

Similar as this current quarter run rate.

Yeah. As I said, ethyl vanillin we had a 700 metric ton campaign, which we are completing in August.

That will be 350 tons of ethyl vanillin. We'll start the campaign.

We'll lose around two weeks there. We'll produce and sell.

We will be ramping up entirely ethyl vanillin. Looking at the period and the September being in 15 days of the start of the campaign, we have seen that we'll sell 500 metric tons.

It'd be similar this quarter run rate, about 700, 800 odd crore revenue. Sorry, 70, 70 million, 77, 70, 80 crore in revenue.

See,

it will be around 800 million.

To answer your question on the blend first, in Q2, the blends margin will be better than they were in Q1. Specifically, we got hit in Brazil because of the fire.

We had no stock, and we had to bring in stock by airfreighting it at high prices, which now in the Q2, we are already, as we speak, shipped material on sea, which of course has now landed. Now that's the one that is being consumed this quarter.

There's a negative of about 8 crores in Brazil, which will get corrected in Q2. Then there are certain businesses where the raw material prices have gone up and we've been able to pass on some of the price increases.

Your Q2 numbers will look different from what they were in Q1 for the blends business. For vanillin, it'll be slightly better than Q1, where Q3 is our main where we will have 1,000 tons plus of production and sales in Q3.

As far as the performance chemicals goes, we were negative EBITDA in Q1. In Q2, it'll be positive.

All in all, versus Q1, all three of the verticals will be significantly better than they were in Q1.

Thank you for that, Ashish. Thank you for that.

Actually, my concern was that over the last two, three quarters, it's because of geopolitical reasons, etc. Beyond a point, a lot of companies tend to have inventory gains, tend to have renegotiated prices.

In our case, over time, even though we've had a couple of tailwinds for us, like the anti-dumping duty coming in our favor, it's been almost 14 odd months, and we're still seeing softened prices. As of now, a lot of people thought that even on your Q4 concall, when shareholders and investors and analysts came to ask you on certain things segmentally, we were expecting a simple math that was about at $13, even if you did 500 tons, we were under the impression that your EBITDA per kg is directly trickling to your EBITDA.

There was no other fixed cost other than the sales team. Your

No, it was very clear that what we are saying is our raw material cost for vanillin is between $7 to $8 for methyl vanillin, and conversion cost, which is a fixed cost, is 7 crores per month. The math is, if I produce 200 tons, my cost goes to $11.

If I produce 400 tons, my cost goes to $9, $9, $9.5, which gives me a straight margin of $4. That's the math.

Nirmal sir, you're already producing 4, 500 for the last three, four quarters, including this

Quarter. I'm talking about a month.

I'm talking about a month, and this is a quarter.

Even at $11, okay, let's assume $11, at $11 you're still selling at 13, 14, 13 and 1/2 or let's say 13. Even in this quarter it was 13, right?

Because the tariff came off Q4, tariff came off half the quarter.

Like I

told you,

we have trade financing, our net realization is lower because we are using trade finance. That's what Santosh mentioned, that what has impacted our margin is on the raw material side we are using financing, and on the selling side we are using trade channels for financing.

This quarter is not methyl vanillin, it is ethyl vanillin, where the cost of ethyl vanillin is higher than cost of methyl vanillin. Even the selling price is higher, but these costs of ethyl vanillin, we have reached a breakeven point.

Now when the methyl vanillin starts, you will see that the margins will be significantly better, the gross margins. Similarly, EBITDA margin will be.

In ethyl vanillin in the next run, the margins will be significantly better because of the scale-up effect that ethyl vanillin will have.

Primarily, basically, you're stuck on fixed cost on one side, and margin on the other thanks to the war, and third being your financing, which is impacting your margins overall. Is that correct?

Correct. The so the

The solution is only capital, or the solution is capital plus a normalized geopolitical time?

No, I think the first is capacity utilization. Okay?

That's the first thing, which is in our hands. That we can start increasing the capacity utilization.

Of course, there is the question of financing for that, which we are using trade finance now, it may impact the margins slightly, but at least the capacity utilization goes up and the cost comes down. That's the first thing.

Second is geopolitical situation improving, and improvement in costs, which in the methyl vanillin run, we already have raw materials that we've acquired at very competitive prices, our margins will be significantly better. The third is, of course, capital, which we are looking at various options to be able to raise that capital.

When would be a fair estimate to gauge that you'd swing back to double-digit kind of EBITDA margins at a company level, like Q3, Q4?

Q3.

Q3

would be there. Q3.

Q3, you'd swing back to double digit.

Yes.

Okay. Thank you so much.

Thanks.

Thanks for the opportunity, sir. My first question is on the growth number.

Hello, am I audible, sir?

Yes.

Okay. If I see the quarterly growth trend for the segment, the growth number looks really strong, which is higher than the kind of a blended performance on the overall revenue growth for the company.

Why so, sir? Is it because of the restatement of the numbers or it is something else?

If I see the slide number 7, wherein the segmental revenue growth is more or less on an average, it is beyond 30%. This growth number look higher compared to the kind of a overall growth number.

Surya, unfortunately, I have not got your question. I am on seventh slide.

Huh.

The segmental growth for all the segments, sir, it is on an average more than 30% on a blended basis if we look it, then kind of a near 30% kind of a growth that we are seeing here. Whereas, I think, the blended growth for the company as a whole for the quarter looks like 22%, 23% kind of growth.

Whether any difference that I'm finding here? What is that?

Now I think I've got a hang of what you're asking. You're saying that we are comparing the corresponding last year's quarter.

Yes.

It gives this. Okay.

Now, last year's quarter, specialty, you see at straights. We would have been almost same on the volumes on quarter on quarter.

We have been saying that straights, for example, straights business is not it will saturate. The biggest thing of difference is of the price side, right?

We are selling a bit more straights, and the average realization is giving this growth from last quarter to this quarter. Blends has been increasing.

No question of blends. Blends has been at a 20 CAGR, it is growing at 20 CAGR.

Performance is a different scenario because if I have catechol, I will sell catechol. If I don't have catechol, I'll not sell catechol.

No enough hydroquinone, no enough derivative. That's a different set.

It's like a residuary business. If straights do well, there will be lesser hydroquinone to sell.

Vanillin does well, there will be lesser catechol to sell. Performance will always be based on straights and aroma.

Aroma has been increasing. We have got better price realization because that was a tariff era, anti-dumping duty has come down.

Our quantity was also less. That's the reason when you compare quarter on quarter, you have to see the price side also, the volume side also, and our capacity utilization.

Okay. Okay.

Sir, my second question is on the margin profile of the, let's say, specialty ingredient business, where see the both the blends as well as the straights, those are the kind of a branded product area for us. It is this quarter, let's say, 6% because of quarter-specific challenges, if I believe.

What should be the kind of a like-to-like margin that we should have seen for this specialty ingredient business in the previous year, sir?

Let us talk about this quarter first. What we have lost on a normalized gross margin is around 4%

to

5%, 3% to 4% because of the geopolitical, and 1, 1% to 2% because of our liquidity situations. If I had done this 4%, my normalized EBITDA at this moment of time and with all the pressures of putting the material to American markets and other things, I would have done 4% at least more on gross margin, which would have straight flown down to my EBITDA.

In other words, EBITDA would have been more than 10%. As boss was telling, you have to also see what is this straights business is not one company.

There is across the geographies. There are certain like Brazil had its own thing because of lower margin.

It was hardly 20, 22% margin there because of difficult situation where we had to push material by airfreight or buy it from competitor at higher rate, raw material, and make the blends. Then there is other geography like Vincross, which is just growing now, which has started now.

EBITDA is because of negative, as it grows, we provide working capital to it, it grows, it will come down to 10%. While the businesses which are already settled like Mexico and US, they're already doing a very they should have done 17%, they have done 14% because they're lost gross margins.

Those are doing well, and that's why the growth part will be there. The laggards like Vincross and Brazil, they do well, the margins will increase.

There is a great growth part we are looking. We have done here on a quarter-on-quarter basis also, we have sold almost 300 million more sales this year.

There is a growth part. We know where which products to push and everything, and it will happen.

On sale side, it's not a problem at all. The whole issue is on the purchase side.

If this is settled, and more things, the EBITDAs will grow, because the fixed cost is not going to move. Even if you see our other expenses overall, they are not increasing with this.

The capacities are there. The fixed cost is in place.

People are in place. It's only now I think number has to come in from the top line and the margins, gross margin.

Okay. Then, sir, if we believe that, let's say, hypothetically, second half of the current financial year will look normalized environment, business environment, then which business out of the three segment is likely to deliver better margin profile, or if you can give some sense that, okay, in a normalized business environment, what should be the likely margin profile of specialty ingredient and aroma?

Basically, Surya, right now, aroma is negative. In Q2, it'll be positive.

In Q3, which is where we see much more normalized because we'll have a run of methyl vanillin with all the raw materials in place, so that will be significantly better than Q2. Q3 is where you'll probably see closest to normalized margins, and that's in aroma.

In blends, of course, 4%, 5% is the raw material hit that we've taken, which some of them already in Q2 have been corrected. Again, Q3 would be the right quarter for more normalized margin, but Q2 also there is an improvement over Q1.

Performance chemicals is the residue business, which, of course, it was negative because of the diphenol closure and some costs which were being incurred. We were selling catechol at a loss, which we've now stopped selling catechol, which is we're using all of it for our internal consumption.

That also will be positive. All the three verticals or segments will be positive.

Okay. The better or the best margin vertical would be specialty ingredient.

Is that understanding right, sir?

Yes, specialty ingredient and aroma

depending upon the scalability, aroma also

will be could probably be as good as specialty. Okay.

Okay. Just last one point about the diphenol plant shutdown scenario, sir.

You mentioned that, okay, you are also exploring about having that used for some other products. That is one.

If you can talk something more on that. The second point here is that if this plant shutdown situation continues for, let's say, for whatever reason, either for the competition reason or the new during that period would be required for manufacturing the new product, in during that period, what surely can happen for our other operation, whether the performance chemical revenue, what we are seeing for this quarter like 175 crore, what impact it can see, and what overall margin impact it can put for other segment because this is like integrated?

First of all, 175 crores is the total, but it's netted off. A large part of the 175, almost 100 odd crores goes into straights business, straights and blends.

Okay? It is sold to straights and blends.

Okay? Then

aroma was almost 30 crores. Net-net, in performance chemicals, I think that was your first question that the total was not adding up.

So 130 crores is internal transfer, and the net sale of performance chemicals is only 40 crores.

Oh, okay.

You got that? Basically, when you look at that, that number is not going to significantly change, the net sales to outsiders, because it will reduce a bit because catechol sales will come down.

Then there is an increase in sales of some other products like HQEE, we have some HQ sales also, and TBHQ, which is increased. That number will be in that region.

The numbers to check and follow are more slide 5 and

Specialty ingredient and aroma. and aroma.

In the performance, you just look at the margin because a lot of the straights margin will be captured there. As the diphenol expenses go away and the negative goes away, you will see that the margin will improve considerably because a lot of the straights margin is captured under performance chemicals.

Sure. Okay.

The margin is captured there, transfer price is the sales is captured in straights.

Okay. Okay.

The potential for introducing new product in that plant, that scenario, how do you

We are working on alternatives which we should be finalizing in the next few months on which way to go. We have options on how to utilize it.

We are seeing which is the best possible way to sweat that asset, where will we get the best margins with the best returns, and we'll follow that.

We'll

of course intimate the investors once we're ready.

Of course, sir. Theek hai.

Sure. Thank you, sir.

Wish you all the best.

Yeah. Hi.

Thanks for the opportunity. Sir, a few questions.

Firstly, a clarification. Our last call, fourth-quarter, would have happened in May end.

At that moment, did we guide for weakness in first quarter?

Yes, we had said that the margins will get impacted because of the geopolitical situation. We were always confident about the top line.

The whole issue was on the raw material, and that's why we had even closed our diphenol plant. Revenue side was never an issue.

This was entirely because of the margin, the raw material prices. Okay.

Now that we are in mid-August and like half the quarter is gone, the commentary which you're providing that 2Q will be much better than 1Q, that you are pretty confident about, right?

Yes. Okay.

Sir, now asking on mathematically, if I was to do numbers, to a previous question, you mentioned that you will hit double-digit margin in third quarter. You're guiding for full-year margin of 10% to 11%.

Mathematically, given 1Q was weak, 2Q will be slightly better, is it fair that the second-half margins can be to the tune of 13% to 15%?

Yes, looking at the fixed cost, fixed costs are stable, are not going to increase a lot. The whole thing is the revenue is going to come, the growth in blends and also in aroma.

The margins thereon gives us a higher rate of EBITDA in the second half.

Understood. Thank you.

That's it from my side.

Hi, thank you for the opportunity. Sir, actually, I was just hearing your commentary.

You mentioned that our volumes in aroma business will be similar to what we have done in Q1, whereas we are guiding for EBITDA to be positive in Q2. I just wanted to understand what will be the drivers that will help us to get this positive EBITDA given that volumes will still be similar to Q1 level?

As because we are going to go for methyl vanillin now, which is a lower cost product, but a higher margin as compared to ethyl vanillin. We are switching over.

We are ending the campaign of 700 and 700 odd tons because we have the orders in hand and that forced us to manufacture ethyl vanillin. We're moving back to methyl vanillin where we also have orders on that hand, and that will give us a higher margin.

The swing is the difference between the EBITDA is only 4 crores. We get that methyl vanillin, we are confident that we'll come into positive EBITDA even aroma.

Understood. Sir, I think if I remember correctly, in our last call, we had guided for almost 4,000 tons of vanillin in FY '27, whereas this time we are saying that we'll do 3,000 tons in FY '27.

What has changed in the last three months, which is resulting in this lower guidance? Basically,

we had guided for 3,600 to 4,000, and now we are saying 3,000, around 3,000. The change is basically in our ethyl vanillin run, the ramp-up we took was slower than what we had anticipated, purely because we wanted to get the quality standards to be absolutely undoubtable.

That's what we've done. We've got 95% customer approval in the first shot, which is excellent for a product like ethyl vanillin.

Which meant that now we will be doing another campaign. Every time we switch a campaign, we lose about a month of production.

In this year, we're going to do four campaigns, we'll be losing four months of production. That's how we're looking at around 3,000 tons of production.

Understood. Sir, any particular reason why we shift campaigns given that you are saying that methyl vanillin is a lower cost and better margin?

Why aren't we sticking to methyl for the full year?

The customers require both, and ethyl vanillin in the next run, our margins will be similar to methyl vanillin. It was in this run we had high-cost material that we had to buy, and production also of some of the intermediates was high cost, which in the next run those costs will be rationalized, and the margin profile will be similar to methyl vanillin.

Understood. Sir, I think you also mentioned that raw material costs were higher, which we were not able to pass on in this quarter.

Quarter two, we are confident that we'll be able to pass on, and how much of that would be passed on? Will we be fully able to pass on those costs?

No, not fully, but in the blends, some of it, of course, we will be able to pass on. I'm not saying that we'll be able to pass on entirely the cost, but maybe half of the cost we'll be able to pass on.

Got it. Understood.

Thank you. All the best for the future.

Thanks.

Thank you so much for the opportunity. I had a couple of questions here.

Wanted to understand the current demand scenario for vanillin and what is the situation on channel inventory with your customers, and what sort of interactions you are having with your customers for pickup in volumes and for the utilizations to improve sequentially? That would be my first question.

Vanillin, right now, as we understand, the channel stocks are getting cleared out, so that issue which was there is now out of the way. We are absolutely on track with all the customers that we discussed in the past, the F&F companies and the others, for their quarterly and half-yearly and yearly contracts, we are in negotiations, and that's progressing well.

In terms of demand pickup, 3 to 4,000 tons is what we are estimating for this year, but we may not be able to produce that much because of the campaigns that we're doing. It's fair to say that the demand is picking up.

Got it, sir. Sir, is it normal to have four campaigns in a year, or so what kind of vanillin volumes do we expect for FY '28, let's say?

For FY '28, see, I'll tell you again. This ethyl vanillin campaign was a campaign, like I mentioned, to scale up, we took a lot of time.

Normally, even if I take one month break, I can produce 400 500 tons of, whether it's methyl vanillin or ethyl vanillin, per month. That's my capacity.

In eight months, even if I run it for eight months, I ideally should be producing 4,000. This time it is 3,000 because we took four months for ethyl vanillin to scale up.

Understood. It is fair to assume that 4,000 tons should be your peak utilization for vanillin plant?

No, no, no. It's not so because we'll not be doing four campaigns.

Ideally, we don't want to do more than three campaigns. At that, we should be able to scale it up to 5,000 tons, yeah.

Okay. My last question was, what kind of working capital requirement is there for the business currently, and what kind of number of days you are expecting?

When do you expect the credit funding of 100, 200 odd crores to cross?

Our general working capital cycle on a consolidated basis is 100 days. At present, even in March, you would have seen that it was bit better than that.

That was because we have extended line due dates with our creditors. It's 100 cross is what we generally require.

For each 1 crore, I will require 1/3 of that as a working capital support. Since 100, 150 crores we are working, I think we should be able to have the line in place in next 1, 1 and 1/2 months.

Or at least we'll know how we are going to fund it.

Got it, sir. Thank you.

That's it from my side.

Hi, sir. Sir, just one question.

If suppose everything were normal, then what would have been our EBITDA this quarter?

At least 6% more. See,

we have lost only on the margins. What 5% was gross margin, 5% will directly travel to the top line.

That is one, and the second what is impacted, that 6% would have given, and the second is of course the vanillin, where the gross margin was even more impacted because of ethyl vanillin.

So

All in all, 4% to 5% margin would have increased.

Right, sir. We can say that if everything were normal, the EBITDA would have been in the range of 37 to 40 crores.

Right, sir?

Yes, correct. Correct.

Sir, for the coming quarters, we are guiding for an average run rate of around 70 crores. Right, sir?

EBITDA. Obviously, Q2 will be less, and Q3, Q4 will be higher,

but

average we are guiding for is 70 crores.

Correct.

Sir, the other thing is that do you think that our raw material cost pressures has been behind us, or it will remain so in this quarter as well?

In Q2, it will remain with us because I don't see so much of a difference in raw material prices because with the war situation and the conflict, it keeps moving in directions which we don't understand sometimes. Till this is resolved, you will always see elevated raw material prices.

Sir, our guidance actually factors in that elevated raw material prices.

Yes. At least elevated for three months, and it's not factoring six months and nine months, yeah.

Okay. Sir, as you said in the beginning that some of the costs has been passed through, particularly in blends, right?

Yes.

Okay. Sir.

That's all from my side. Thank you.

Yeah. Yeah.

Yes, sir. Sir, can you elaborate on the inventory situation in the US and the global situation of vanillin, how you think will evolve in demand-supply equation?

See,

Niraj, you're asking for inventory situation internally of vanillin?

I'm asking can you comment on the inventory of the pre-anti-dumping duty which had collected? How is that inventory of vanillin in the US, and yeah.

I think you're asking for the channel stocks which were there in the start of

ADD.

Those have dried out. There is no overhang of any channel stock, either Chinese or pre-anti-dumping duty now.

There is no channel stocks in any of the countries now.

Okay. What is your estimate of the US demand, and what is your estimate of the residual demand that will come from India to supply to the US?

Basically, the demand is US and Europe, where the anti-dumping duties are. Our focus are on these two markets.

There seems to be a gap of about 5 to 6,000 tons of material which will have to be imported because the local production capacities are fully occupied at that level. We see that opportunity for us to participate in that supply.

Okay. Sir, but the question here arises that if you are not producing and China is having import duty on its head, why are the prices not rising in the US and Europe?

Good question. We are asking this to the market leader, which is Solvay, who are producing in US and Europe, why are they not increasing prices.

If Solvay increases prices, the Chinese price also increases. Chinese will again come back.

It will come with anti-dumping duty.

At present, if they sale at 18, the Chinese price is 15.

Remember that the customer, they are selling to the same customer. They are multinational, selling to customers across the world.

A fragrance and flavor company, if it's buying material at $8 in India, and you charge them $25 in the US, the same company doing it, it doesn't go down well with the customer. They have to protect their global business also.

They will always keep it reasonable. They will not take it to levels to equate it to the anti-dumping duty because some of these customers they are servicing on a global level.

Understood, sir. If I just do the anti-dumping duty math, they will not be able to supply below a particular price.

By that math, the price needs to go up, actually. I was asking you that, sir.

It's not a reverse working from my sale price plus 20% duty, 250% duty. See, the anti-dumping is to protect Solvay.

Solvay is indirectly deciding the price, right? If they sell at 18, the Chinese has to bear 200 250% duty, which comes to $7, $8.

That is how they have kept Chinese out. If they make the sale price to $21, the Chinese price becomes 8, 8 and 1/2, $5.

Despite 250%, they will start competing. That's one thing.

Secondly, as boss was saying, Solvay is not only selling in US. They have contracts like IFF and Givaudan for entire world as a whole.

They are balancing. They cannot take exorbitantly high.

If they increase prices in US, then Chinese do enter. They will sell at $8.

They're happy with that. $8, 250% duty, if they get $20, Solvay is saying $20, Chinese will enter.

Okay. Okay.

That's all. Thank you.

Thank you. Thank you for your time, ladies and gentlemen.

We look forward to interacting with you again at the next quarterly earnings conference call. Until then, good evening.

Thank you.

Hello.