Bodal Chemicals Limited (524370) Earnings Call Transcript
February 13, 2025
Earnings Call Speaker Segments
Ladies and gentlemen, good day, and welcome to the Bodal Chemicals Limited Q3 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference call is being recorded. I would now like to hand the conference over to Mr. Ankit Patel, Executive Director, Bodal Chemicals Limited. Thank you, and over to you, sir.
Thank you very much. Good evening, everybody. On behalf of Bodal Chemicals Limited, I extend a very warm welcome to everyone for joining us on the call today. On this call, we are joined by our CFO, Mr. Mayur Padhya. I hope everyone had an opportunity to go through the financial results and investor presentation, which has been uploaded on the stock exchange and our company's website. We will give you a quick overview of the company's performance, and then Mr. Mayur Padhya will talk you through the operational and financial performance for the quarter. We are India's largest integrated manufacturer of dyestuff, Dye Intermediates and hold a meaningful market share in the world. We also have basic chemicals, caustic soda and recently, new product group is added, benzene downstream products. In today's environment where Indian suppliers are emerging as preferred partners globally, we have been able to hold our leadership position. Coming straight to operational performance. During the Q3 FY '25, company achieved total revenue of INR 445 crores, growth by 30% year-on-year basis. This growth is led by improvement in volumes of all products but majorly by Dye Intermediates. The absolute EBITDA stood at INR 46 crores, a 53% growth on a year-on-year basis. During 9-month FY '25, total revenue stood at INR 1,304 crores, growth of 28% on a year-on-year basis. This growth mainly led by volume and better realization in our Dye Intermediates. Interest depreciation and other overheads has increased at the company level on capitalization of Saykha's benzene downstream project. On the other hand, there was not enough contribution by this project at the top line level. Hence, the increased overhead offset partially profitability of other divisions. During the quarter, our stand-alone profit after tax stood at INR 7.3 crores and consolidated profit after tax stood at INR 5.4 crores. For the 9-month FY '25, our stand-alone profit after tax stood at INR 9 crores and consolidated stood at INR 4 crores. Coming to Dye Intermediates. During the quarter, Dye Intermediates division has performed better in volume and value. For 9 months FY '25, total revenue from Dye Intermediates stood at INR 507 crores. Revenue from Dye Intermediates grew by 53% year-on-year basis during this 9-month period. In Q3 FY '25, revenue from Dye Intermediates stood at INR 179 crores, a growth of 4% on a quarter-on-quarter basis. In Q3 FY '25, average per kg realization of H acid and Vinyl sulfone were near INR 490 and INR 242 per kg. Being an integrated Dyestuff manufacturer, we produce major Dye Intermediates products and about 40% of these intermediates capacity is captively consumed, resulting in a cost advantage for our dyestuff products. The balanced capacity of Dye Intermediates is served in both domestic as well as global markets. Considering near to peak utilization and stable prices, we are hopeful this division will continue to perform better in coming days. Coming to our Dyestuff. The company has found some opportunities in manufacturing salt-free dyes generally used in the textiles. Salt-free dyes have good business and returns in future. So the Board of Directors have decided to set up and run a project for the manufacturing of salt-free dyes at our Unit 4 of the company located at Ahmedabad. The said plant has enough facilities and machinery, which can be used to start the production of salt-free dyes. Earlier, the Board has decided to stop some operations at this unit and dismantle the facility but now it will be restarted. Further, end application industries like textiles, leather, paper, other dyestuff consuming industries have not recovered yet as expected. Revenue from Dyestuff stood at INR 373 crores, 6% year-on-year basis during the 9 months. In Q3 '25, the revenue from Dyestuff stood at INR 114 crores, a degrowth by 8% on a quarter-on-quarter basis. We are expecting marginal improvement in operation of the division in coming days. Coming to Basic Chemicals, about 40% of our Basic Chemicals is captively used by Dye Intermediates. The revenue for 9 months was INR 73 crores and has reported a growth of 18%. In Q3 '25, the revenue from Basic Chemicals stood at INR 29 crores, a growth of 24% quarter-on-quarter basis. Coming to Chlor Alkali. During the 9-month period, Chlor Alkali business has reported a revenue of INR 243 crores, a growth of 21% year-on-year basis, led by the volume growth of 16% year-on-year basis. In Q3 '25, revenue from Chlor Alkali business stood at INR 88 crores, a growth of 15% on a quarter-on-quarter basis. The improved prices are stable and looking forward, a steady performance from this division, considering steady demand in the end-use industry. Coming to the benzene derivatives, our Saykha greenfield project, the benzene downstream products has achieved a required quality norms but due to nominal scale of production, this unit has not contributed much to the revenue in the quarter 3. We are now required to achieve -- obtain certain certifications to enable us to cater to the pharma industry, which is a major target industry for us. We expect this unit will start contributing to top and bottom line to some extent in Q4 FY '25 and major increase in volume will happen thereafter. Sener Boya, our subsidiary company in Turkey is experiencing hyperinflation. During the quarter -- Q3 '25 due to the AS 29 there is INR 1.65 crores loss, and the same is already a part of the declared result. Chinese and Indonesian subsidiaries have performed satisfactory. We have been moving up the value chain and working relentlessly towards diversifying the business from our core Dyestuff and Dye Intermediates business to other specialty chemical products like benzene derivatives. Long-term story of India remains intact and the chemical industry is poised to grow from here on. Thank you. And now I hand over the call to Mr. Mayur Padhya to walk you through the financial performance.
Good evening, everyone. The overall performance of the company has been satisfactory for the quarter gone by. Our stand-alone performance for Q3 FY '25 is as below. Total revenue for Q3 FY '25 stood at INR 436 crores. EBITDA stood at INR 48 crores in Q3 FY '25 with a margin of 10.9%. Net profit for the quarter stood at INR 7 crores. Our stand-alone performance for 9-month FY '25 is as follows. Total revenue for 9-month FY '25 stood at INR 1,285 crores. EBITDA stood at INR 125 crores in 9-month FY '25. Net profit for the company stood at INR 9 crores. Our consolidated performance for Q3 FY '25 is as follows. Total revenue stood at INR 446 crores for Q3 FY '25. EBITDA stood at INR 46 crores for Q3 FY '25 with a margin of INR 10.4 crores (sic) [ 10.4%. ] Net profit for the quarter stood at INR 5 crores for Q3 FY '25. Our consolidated performance for 9-month FY '25 are as follows. Total revenue stood at INR 1,304 crores for 9-month FY '25 against INR 1,020 crores for 9-month FY '24, a growth of 28%. EBITDA stood at INR 121 crores in 9-month FY '25, a growth of 36%. Net profit for the 9-month FY '25 stood at INR 4 crores against net profit of INR 4.43 crores in 9-month FY '24. Division-wise performance on consolidated basis for 9-month FY '25 are as follows. Dyestuff revenue stood at INR 373 crores, Dye Intermediates revenue stood at INR 507 crores, Basic Chemicals at INR 73 crores and Chlor Alkali at INR 243 crores. Total production volume on stand-alone basis for 9-month FY '25 are as follows. Dyestuff reported 12,174 metric tons, Dye Intermediates reported 23,194 metric tons, Basic Chemicals stood at 1,68,269 metric tons. Chlor Alkali stood at 68,224 metric tons. With this, I conclude the presentation and open the floor for further question and answer.
[Operator Instructions] First question is from the line of [ Dipesh Sanchiti ] from [ Mania Finance ].
Yes. Sir, just wanted to know what is your outlook for growth in the coming 2 quarters and for the next year? Also, would you see that the entire chemical industry is now again coming up? How do you see the prices going forward? Have we left the -- whatever was there, have we left it behind? I mean, the prices, which were there, the price increases, high cost inventory we have left it behind. What is your outlook, sir?
To talk about the current phase, how chemical industry and especially for Bodal Chemicals where we are placed, I think chemical industry overall has definitely recovered. The volumes are definitely better. The overall demand has been better in the last few months. That is reflecting in our results in the last couple of quarters. We have reached the annual run rate of INR 1,700 crores top line. Also, there are no concerns about any high-value inventories in our systems. So I would say that we have reached -- we are going at a decent about 13% to 14% EBITDA levels at the moment. We are working -- for Bodal, we are working on our greenfield project of benzene downstream products, where due to not achieving high manufacturing volumes and sales, we are still investing in terms of that business where the return is not the maximum as of now. But we are almost at the verge of getting the needed approvals and the quality standards for our finished goods that now we soon will be increasing the utilization of the plant very soon. After that, at the optimum level of 80% to 90% utilization of that plant, which should happen in the next couple of quarters, our run rate in that business will add around INR 300 crores of annual business for us. So in a normal scenario, within 3 to 4 months, we should be on track to do an annual turnover of INR 2,000 crores plus. So that looks very much possible as of now. And overall, to comment about chemical industry, I think last 8 -- around 8 quarters where there were a lot of challenges in terms of volume, in terms of margin but that almost everything feels like it's all normalized and quite stable at the moment. So going ahead, we feel confident about doing anywhere between 12% to 15% of EBITDA levels in coming few quarters. And long-term plan, right now, we are consolidating our recent capital expenditure. We are waiting to be -- to successfully complete the benzene project and commercialize it completely within a couple of quarters. And post that, we will look at any new possibility of growth. But immediately, we do not have any plans to do any CapEx. So I would say in the next 4 to 6 quarters, we are not going to do any major CapEx. So it should place us at a run rate of around INR 2,000 crores plus top line and we should be able to do INR 250 crores plus EBITDA. So that is our immediate target and we should be on track to do that within a few months.
And what about the debt situation right now? What is the debt on the company for the long-term as well as the working capital?
Present long-term debt is INR 540 crores and working capital is around INR 300 crores.
INR 300 crores. And how does the company plan to service this debt, I mean, and reduce it? I mean, is there any particular strategy, which we are adopting?
Yes. See, presently, our quarterly installment is about INR 22 crores, which will increase in next year to INR 30 crores. So as per schedule, we will pay about INR 120 crores debt. And further, we are liquidating some debt asset at our Vatva location. So whatever realization will be there, that will be used in repayment of debt only. So we are targeting by March '26, we should be able to pay off another about INR 60 crores of debt. So from today to March '26, about INR 200 crores of debt reduction we are targeting.
How much are we expecting from these liquidation of assets? And are we even looking at raising capital from the market as in, via preferential or QIP?
See, as Ankit had mentioned, we are not presently liquidating Unit #4. And for balance locations, we are expecting around INR 60 crores to INR 70 crores of realization that will be used for this repayment. And what was your another question? No, we are not presently considering any raising of equity. So this is our plan.
Okay. And what is the capacity utilization currently? How much is the capacity utilization of the existing plants? And also with the commercialization of benzene project, if you can give a timeline as well as how much will it add to our turnover? Because INR 2,000 crores is something, I mean, which you have guided. Is this something, which we had already achieved in March 2022 also, I mean, FY '22? Now going ahead, when we are looking at INR 2,000 crores, how much of the benzene project also will add from this? And how much EBITDA increase we look from this benzene project?
See, capacity utilization is almost at the peak level in dye intermediate, almost 90% utilization is there. For dye intermediate, it is almost at 56%. So over there, additional utilization is still possible but that's gradually, we are expecting it to increase. For Basic Chemical, we are once again at the optimum level for PC and sulfuric, it's almost 100% utilization. And caustic also, we have crossed almost 90% plus utilization. So for the present businesses only dye intermediate -- sorry, Dyestuff has underutilization. And as far as benzene downstream product is concerned, present utilization or rather last quarter's utilization was hardly 13%, 14%, which we are planning to gradually increase during current quarter. And from next quarter, it will have a significant jump. And once we reach the optimum utilization of benzene downstream product, we are expecting about 12% to 14% of EBITDA from that business that will contribute almost INR 300 crores of top line.
INR 300 crores annual top line, right?
Annual. Yes.
Yes. Annual top line, okay. And what you said is that the Dyestuff was 50% because I think that's a bit of Dyestuff, Dyestuff is 50% utilization. Dye Intermediates is almost 90%, right?
Yes. Dyestuff 56% and dye intermediate almost 90%, correct.
Almost 90%.
The next question is from the line of Shantanu B from SMIFS Limited.
Yes. This is Shantanu Basu. I have a couple of questions. So the first question would be with regard to your subsidy from the Punjab caustic soda plant. What is the status, sir? Have you received any amount from the state government? That is one. And then I'll ask the other question.
Yes. As far as the subsidy, we have yet not received. But yes, we have crossed one important stage that is a district level committee that has concluded and that has approved our case. So now matter has been referred to state level committee, and that is the main process, which we need to complete. And we are expecting next month, there has to be -- there should be some committee meeting, which will consider our case and then it will go further. So that's the final stage, then only operational things will remain. So we are expecting from next quarter, some cash flow should start coming to the company.
And will it be to the tune of INR 45 crores?
Yes, initially to the tune of INR 45 crores, and annually, it will be about INR 20 crores for total 7 years.
Okay. So that is one. And now sir, I would like to understand on a more granular basis, your margin trajectory. So this year, on a combined basis, you did around 10.4%, the EBITDA margin. So if you can talk us through the margin considering the prevailing situation and now that you're saying that volumes are improving. And sorry, there was a disturbance from the operator. I missed the point that you made on margin as to how margins and realizations are looking. So if you can add to that, that would be very helpful product-wise. And also, if you can give me the product-wise margins that you sort of expect in FY '26 and FY '27 priced on Dye Intermediates, Basic Chemicals, Chlor -- CA and benzene? So is that possible, sir?
Yes. Margin, as Ankit Bhai mentioned, we are -- from the current businesses, we are doing about 13% margin. But our benzene downstream project, which has not been stabilized, so that overheads are contributing some losses. So because of that underutilization and overhead losses, our margin has reduced to 10.5% or so. And going forward, it is difficult to give specifically division-wise margin because it's -- we have an integrated plant, but you can consider blended margin of about 13% at the line of INR 2,000 crores, that is what we are targeting for the company level.
Okay. Okay, sir. And sir, you mentioned in your opening statement or rather Ankit Bhai mentioned in his opening statement that salt-free dyes are being introduced. So there were no CapEx of this plant, right? It's being made from an existing facility, right?
Correct.
And this INR 2,000 crores of revenue that you expect to achieve would consider revenues from salt-free dyes as well, right? That is included in that?
No. Presently, from salt-free dyes, we have not considered turnover in this projection. That will be something additional.
So what would be that, sir, in FY '26?
See, this is a new kind of project we are starting. So we are expecting within 4 to 6 months, things would get stabilized. And after that, we will be able to comment what turnover it can give to the company.
And sir, like benzene, should this also pull down your margins to some extent?
No. This will add to the overall margin. So presently, whatever study we are doing since that, it has a very good margin. So it is...
What is the margin like, sir?
It is difficult to comment at present. But yes, it should be better than our total level.
So we are going to -- it is something that we already do, something very similar, and we are not going to spend any CapEx for this as well as our existing teams are going to do it. So it doesn't add a lot of burden as far as a lot of the expenses or investment goes. So that is why we are not -- this should not impact our bottom line while we are in a trial phase. We are targeting that within a couple of quarters, we want to reach a certain decent level of volumes, and then we can grow that business. But it won't add any losses or any burden to the overall numbers.
The next question is from the line of Shaurya Punyani from Arjav Partners.
Sir, this new greenfield facility, so what -- can you quantify the capacity we have added like in metric tons?
Greenfield facility, caustic has done 2,031 metric tons during last quarter.
Okay. No, so what total capacity was added to our overall capacity?
Are you asking about the benzene greenfield or...
Yes. Yes. Benzene, benzene.
Yes, benzene greenfield has done production of 2,031 metric tons. Its capacity is 63,000 metric tons per annum. So present utilization, as I mentioned earlier, is about 13%, rather last quarter's utilization was 13%.
And this should reach optimum next year, you are saying, right, like 80%?
Yes. So within a couple of quarters, we should reach to the optimum utilization, which is about 80-plus percent.
The next question is from the line of Harshil Patel, an Individual Investor.
Thank you for very good results this quarter. I just -- I would like to understand that our main cost is basically power and fuel and the material, right, which constitute 60% of our total cost or total sales value?
You're correct.
So basically, are we doing anything to monetize or optimize the power cost because that would be a significant value. So are we using any renewable energy sources? Or are we using any cost optimization towards this power and the raw material?
So we are not doing it at the moment. Yes, it is attractive spending investment for the company where if we go for some renewable options, especially in the Gujarat state where we have a lot of consumption. We are talking to a few companies with whom we can partner and set up some kind of a solar power plant, et cetera. And -- but at the moment, again, these activities also need a lot of investment, a lot of CapEx. So -- but we are evaluating it. And in near future, we can consider with investing in that area where we can save some money annually on our power expense.
Okay. So with that, how much saving that we can bring on the table if we are moving towards renewable energy? Because why I'm saying this because our competitor might be moving towards this renewable energy. Like in cement company, a lot of companies are -- because in cement, the major cost is towards power and fuel. And a lot of companies are taking various initiatives to reduce the power cost. So just wanted to understand how much optimization is possible in power cost if we are moving towards the renewable energy source.
Our power cost is not that comparable to cement companies, et cetera. There the part of the cost -- power is very, very high. Our major cost is raw materials, not the power, the chemical raw materials, et cetera, that we buy. So I think there is not that big of a margin. Plus we also believe in investing in the integration of the business or expanding of the business because our expertise is to manufacture and sell the chemicals. So we are still focusing on that. But yes, again, some chemical competitors have been doing this. They have been setting up with some partnerships, smaller capacities like 3 megawatt, 5 megawatt, and they are getting good benefits out of it. So that is why we are evaluating that. But overall, they are not very, very big numbers. I mean the annual spending could be around INR 20 crores, INR 30 crores and where even a 5% saving will only be a couple of crores. So we have to really evaluate whether that investment that is where we want to employ our capital or whether we want to grow in business plans and where we can add more capacities or maybe save some other costs.
Okay. Okay. Another question is that since our chemical, as you know, the dyes and dyes intermediates is significantly hazardous to the environment, right? It creates a lot of water and air pollution. So just wanted to understand, do we -- historically, do we have any precedence where environmental -- this Pollution Control Board has issued a notice or has forced us to close down our plant because of certain noncompliance with the environmental law?
No, we do not have any issues or any notices or any risk as far our -- as our manufacturing plants go. Our Saykha latest unit is a 0 discharge. So we do not discharge anything. Our Khambhat unit is also 0 discharge. Also our Baroda unit, which has a good facility of discharging our treated effluent into the sea. So all our units are complied absolutely, and we do not have any risk or any issues regarding any manufacturing activity or any plants, any closing down or anything -- any risk like that we do not have. Everything is very complied and our daily practices are very, very perfect in terms of the regulation, et cetera.
Okay. And one question further is that the 13% margin guidance that we are giving or 13% number that we are anticipating from our existing business, right, so is this considering the volatility in the prices of raw material and finished goods?
It is considering all of that. We have traditionally done even up to 20%, even 17%, 18% consistently for a few years also. At the same time, we've also done about 8% in our challenging years recently. So that is -- this is something we feel that in a normalized scenario, we should be able to do around INR 2,000 crores of top line. And again, like I mentioned, around 12% to 13% of EBITDA. That is in a normalized scenario.
Okay. That EBITDA is including other income, that is including subsidy -- Punjab government subsidy or excluding Punjab government subsidy?
Including the incoming subsidies also.
Including. Okay. So in that case, don't you think that our margin will be significantly lower than 12%, 13% because at INR 20 crores straightaway we are getting -- taking a hit in credit into P&L, which does not have a direct cost coming into P&L. So don't you think that it would -- our margin would be significantly lower than what we are saying 12%, 13%?
See, at the INR 2,000 crores turnover, when we receive INR 20 crores, that is 1%. So if we are achieving 13%, then operational EBITDA is 12% and 1% from this subsidy. So this is something conservative what we can guide.
Okay. Because when we say 12%, 13% on turnover of INR 2,000 crores, so it becomes to INR 240 crores, INR 240 crores out of that INR 20 crores, which would be 8% to 10% of the total EBITDA, it would be a significant number. Hence I just thought to get this clarification from you?
Yes, it's only 1%...
Of the total turnover, of the total turnover but 10% -- 8% to 10% of our total EBITDA.
Yes. In that way, that is correct.
And do we have any policy to hedge our raw material because it keeps on changing. So I don't know whether to gather any products where we can hedge our raw material prices or finished goods prices.
It is more of a spot business, sales and purchase. Most of the -- we do have some contracts but the majority of the sales and purchases that we do are more of a 1 month or 2 monthly cycles.
Okay. And what are the major raw material cost that comes into our P&L? So for the finished product that we are selling, so what are the major raw material costs, if you can tell us? So...
Major raw materials are sulfur, aniline oil, naphthalene, soda ash, caustic soda, coal. These are some of the main raw materials.
Okay. Okay. And just last question that how much is the replacement -- considering that we are having this much capacity, how much is the replacement cost of our total capacity along with the land, if you wanted to set up a plant like this much facility and this many integration which we are having. So how much the cost is required to be incurred to develop this kind of plant that we have?
It is easily more than INR 2,000 crores in today's world. And I would say around, yes, INR 2,500 crores, including all the spare land also we have available at our 3 big sites and all these capacities that we have done so far.
Okay. So INR 2,000 crores -- be somewhere between INR 2,000 crores to INR 2,500 crores, correct?
Yes.
Okay. And do we have any surplus land and do we have any plan to monetize those land?
We do have surplus land in Bharuch, Saykha, GIDC. In fact, we have a lot of it. And we also have -- we've also been acquiring some adjoining land parcels, which we can use in future. We do not have any plans to monetize the land because that is for our absolute business purpose where we see a next -- we have a plan of next 10 years where we want to keep adding integrated chemical manufacturing setups. Also, we have around 50 acres of spare land in Punjab unit, Chlor Alkali unit, where again, we have no plans to monetize, and we can consider expanding the plant or set up integrated Chlor Alkali projects also. So -- and we do have some spare land in our Baroda unit as well, but no plans to monetize any of that.
Okay. And then the last question that what was the reason that last time when we raised the preference, we have gone through the preferential issue and we somehow canceled those preferential issue at a later point of time. So can I get a specific answer that -- because I have not attended any previous call, so I apologize for that. Just wanted to understand what was the reason for cancellation of the last preferential issue?
See at the time of finalizing last preferential issue, we had an understanding with the investor that they will give the full contribution within 3, 4 months. So initially, we were expecting them to do preferential share only but then they insisted for warrant, wherein we have said, okay, 25%, you will pay upfront and balance 75% you will pay within 3, 4 months. Now after finalizing that, prices of shares has gone down to some extent. And then the investors come up with saying that as per SEBI guideline, we are getting 18 months of timeline. And we were not ready for that because we were ready to dilute our capital at this low level only if we get it done within 3, 4 months. So that's why it didn't work out, and we had to drop that issue.
And in terms of competitors, competition, right, so like we have caustic soda. So we have certain competition with the other players. So specifically, I just wanted to understand if I wanted to say dye, Dyestuff and Dye Intermediates. So who are the bigger competitors in India who are competing with us?
In Dye Intermediates, we are the largest player because we are into more number of products. There are companies that make similar Dye Intermediates, but with less number of products. Kiri Industries is one of them. AksharChem is one of them. Shree Pushkar is another player. These players are there into dyes and Dye Intermediates or only Dye Intermediates. In Dyestuff, the largest player is Colourtex based out of Surat. And another large player is Jay Chemicals based out of Ahmedabad. So these are some of the leaders in both bits.
But sir, in Dyestuff, we don't have any listed players? Colourtex, I understand is unlisted and Jay Chemicals is also unlisted.
There are no large players, I would say. Kiri Industries does some volumes. But other than that, I don't think there is any company which has a very big volume and sales of only dyes. The 2 I mentioned, they are the largest and they are private.
Okay. And who are the competitors in benzene product, downstream production and the stream that we are doing?
Benzene derivatives, the largest player is Aarti Industries Limited. And the second largest in India is Kutch Chemicals. These 2 are the leading companies. And there is a third player, which is comparatively smaller. The name is Hemani Chemicals.
Hemani Chemicals?
Yes.
Okay. And there's a salt production that we are starting. So do we have any competitors or we are the only player to a large extent?
No, there are competitors, but there are no any large, listed entities that is making this. Salt-free dyes basically goes into manufacturing ink and that ink goes into textile printing. So it is comparatively a new segment, and it is growing very fast, where the traditional textile printing is shifting to digital printing. So this is part of that raw material chain where because of our existence in Dyestuff already domestically and internationally, now we want to get into the kind of dyes that goes into digital. So that is why we have got into that. But yes, Colourtex is already active in that space. Jay Chemicals is also active in that space. So in the larger players, I would say, we'll be the third one who will get.
Okay. And since our return on capital employed is consistently going down. So do you think that this return on capital employed and return on equity would improve going forward? Because towards equity, we are left with a very small amount after repaying our interest and depreciation, right? Because we might be attaining 12% to 13% towards EBITDA. But our finance cost and depreciation put together would be around INR 140 crores to INR 160 crores on a year-on-year basis. So around INR 240 crores, we reduce this INR 160 crores towards depreciation and finance cost. So that ends up with INR 80 crores towards profit before tax. And from that, we are saving 25%, 26% towards taxes. So we are left with INR 60 crores or INR 50 crores of profit with a substantial risk on the volatility into the prices because our prices keep on fluctuating. So do you think that we have any -- what is the ideal return on capital that we should look for?
Last couple of years have been a little different than our normalized years or recent years. The reason being post the COVID relaxations, FY '23 was a little challenging where the demand suddenly dropped for a lot of the products worldwide. And also due to Ukraine-Russia war, there was a lot of disturbance, again, followed by Israel war and the overall demand scenario in chemicals and textile space. So a few quarters were not -- did not perform great. I think that is one of the reasons when the earnings and when the profits are down, ROCEs are definitely going down, return on equity are definitely going down. The another reason is that last few quarters, we have invested heavily in our Saykha Greenfield Project, benzene project, where the returns in terms of top and bottom line are not there. Hopefully, they will happen soon. And once they also peak -- they also reach the peak utilization and when they start contributing to the top and bottom line, I think it will definitely change all our ratios in a very big way, just the way we have seen in our latest quarter because of the overall business scenario is better, we are now into some decent margins of 10% plus EBITDA. So going ahead with a couple of things that is not going the best for us, I think we are about to turn them around. And when that happens, I think it's going to help improve everything from top to bottom line to all the ratios.
Okay. So how -- without this capital expenditure towards benzene derivatives, how much is the return on capital employed from these 3 businesses, which is Dyes, Dyestuff, Dye Intermediates and this caustic soda plus Basic Chemicals?
It is a greenfield project. So there are a lot of expenses that we have to do when we started a new site. So those expenses are not related directly to the benzene business. So we did spend a lot of money but if it was a brownfield project in our existing complex somewhere, then it would have been much less. So we have to see it differently. We cannot independently just set up all our plants and businesses with the best return on capital percentage. So this is kind of an investment where we have to spend extra, which goes towards the benzene project, but then it is going to help us when we set up more factories, more capacities in the same unit. So in the upcoming time, it will reduce our investments, our CapEx towards the growth that we do at that site. So the ROCE originally was -- if it's just a stand-alone project, there's any extra expenses, any greenfield expense, then it is very attractive, about 15%, 18%, 20%. But again, because of that being a greenfield unit, we have to spend so much on water, electricity, civil, other infrastructure, et cetera. So if you include that, then obviously, ROCE is not that great. But I -- we cannot maintain that with every single project or every year.
Okay. And how much is the benzene derivative total project cost, greenfield project cost? And how much it was funded through debt and how much is through internal accruals?
The total cost, including the land comes to almost INR 600 crores. But when we remove this onetime or infrastructure cost, that is almost about INR 150 crores. So for net-net project, we have spent INR 450 crores kind of thing. And in that also, we have spent almost INR 65 crores to INR 70 crores for sulfuric acid, which we have put hold presently. So when we consider the CapEx, what we did for only benzene kind of thing, that comes to below INR 400 crores kind of thing.
Okay. Below INR 400 crores. How much is through debt out of project?
30% is debt and 70% is from -- sorry, 70% is debt and 30% is from in-house.
Okay. So roughly around INR 260 crores to INR 280 crores is through debt. So out of this, our total debt of INR 800 crores, we are saying that INR 250 crores -- INR 260 crores is towards benzene derivatives and the remaining is for the other -- our working capital and...
Yes. For infrastructure, working capital as well as our caustic project at Punjab.
Yes. Okay. So what -- so just wanted to touch upon this Punjab's government subsidy. So I understand that we are having certain proceedings going on to recover or the hearings or the assessments is going on. So as you mentioned in your timeline that you expect to receive major chunk in this year, then we keep on every year INR 20 crores year-on-year. So do you have any historical evidence that in the Punjab state government, the Punjab state government has released the subsidy for those certain projects which players like us or any other companies which did the project, they have started to receive this subsidy from Punjab government.
Yes. I have been regularly visiting Punjab and visiting this government body that is called Punjab Invest. At the same time, we are consulting our consultant. And in last visit, what they guided me is almost 120 companies have already got sanctioned and their disbursement has already started. So it's a regular feature over there and nothing like suspicious or some question mark over there.
And this is happened that why I'm asking you this because we are incurring a finance cost on these numbers because the government stuck up with INR 45 crores numbers, they are not releasing it. And just INR 45 crores, which is traded to the P&L around 8% or 10% towards finance cost. So...
Correct.
So basically, it deteriorates the overall equity dividend, right?
Correct. In fact, here it seems everything is going positive and it should materialize within a quarter or so.
Okay. And when do we intend to become debt free or we keep on doing certain projects here and there, so we basically will be carrying on certain load or debt every year or every 2 years. So can you please give us some guidance on debt?
We don't have any specific timeline or any intention to become total debt free. But yes, we definitely want to keep our debt EBITDA within 3. So once we are within 3 and there is a clear visibility about future project, then only we will consider whether to invest further in new project or further to wait.
Okay. And we have a recognized goodwill in consolidated financial statement. So which segment for this goodwill is we are recognizing in our books?
It is towards acquisition of our Turkish subsidiary that running business was going on that we acquired. So at that time, that goodwill was there in picture.
Yes. So do you think that is it appropriate we should make an impairment or we should test it for impairment and get rid of it, because Turkey is, I understand is not doing good, right, because of the certain political issues and hyperinflationary issues. So just wanted to understand that do you think that we could look into it and if required and most -- I definitely understand that Board must -- Board and your auditor must have considered this thing. But just wanted to put or get some idea about it. Do you think that we should make any provision if required towards this impairment of goodwill?
So as you know, unfortunately, there has been certain incident or certain issues after we acquired this subsidiary, the earthquake, then currency depreciation, then hyperinflation, et cetera, were the issues. So our auditor is constantly reviewing the things. And as per their present comment, there is no -- not required to amortize this goodwill. But it's a continuous process. So every year, they review the things. And whenever they feel, they will consult with us. And as you mentioned correctly, the Board and auditor will decide whether to amortize this or to continue this on balance sheet.
Okay. Okay. I do not have any further questions and I must thank you for patiently answering my questions. Thank you.
Yes. Thank you.
The next question is from the line of [ Surya Saraogi ] from [ Capitalist Wealth ].
Yes. My question is regarding what is the reason behind such a good offtake in Dye Intermediaries (sic) [ Intermediates ]? So are you seeing less dumping from China? Or which are the geographies where you are seeing such high demand?
So the change that happened in Dye Intermediates business recently was -- this is one space post COVID relaxation and Russia-Ukraine war, I think this was one area which was affected very, very heavily. Agrochemicals was another space due to the lower demand across the globe, textiles was in a bad shape. And that is the reason why intermediates was hurt and intermediates in last 8 quarters, excluding the latest quarter, was -- our volumes were much lower. There was not too much of a problem of Chinese imports, et cetera but the problem was the demand. And with the December's performance, we finally -- there was a problem with the international pipeline, where usual pipelines are usually 2 to 3 months, similarly in agrochemicals. The intermediates and dyestuff pipelines reached to about 12 months or more. So when the slowdown came because of global reasons and Russia-Ukraine war, these pipeline -- there was a lot of pending orders in the entire pipeline. And it took almost 1.5, 2 years to actually normalize the scenario and then the normalized demand came, I would say, more than 6 months back. And that is why the volumes are better, the demands are normal. That's why our numbers, our utilization in that division is very good. So if things remain normal, demand remain normal, then we can continue this kind of performance.
And are you seeing that in the first half of this quarter till date, like how is the situation even in this quarter till date?
Even in the ongoing quarter, the performance is similar only compared to the Q3.
Okay. Okay. And sir, regarding benzene derivatives, so how much of this will be captively consumed in our Dye division?
The captive is anywhere around 10% to 15%.
Okay.
Yes. Not too much.
And the rest will be across industries, so your pharmaceuticals and agrochem and these industries, right?
Correct.
And are those -- sir, last con call, you had said that you expect approvals to come in by December. So have those approvals been delayed to this quarter? Or did you get them in December and as the plant is commissioned, you will start dispatching?
Out of the major pharma customers, we've already got approvals from 2 players. We've already taken orders and supply to them as well. The remaining 2 customers, we are working on that. And third, again, customer is also approved, and we are in the process of start working with them, getting orders from them. And the remaining fourth is the largest player and that, in fact, today, there's an audit going on. And so that also we should be able to come through within a month. So we have started supplying to almost, I would say, 70%, 80% of the customers. Meanwhile, because of the international technologies, there were some teething troubles in the plants as well in the last 2, 3 months. So put together, there was some approval -- pending approvals and as well as some teething problems. So that is why the December targets were not met completely. We did have some sales, some production. But now I think with all the approvals, almost all the approvals and as well as plant getting done with all the teething problems, I think going ahead within next 1 or 2 months, I think we should definitely be able to reach 60%, 70% plus. And for the next financial year, we should have the 100% contribution, which is about 80% plus utilization and the top line of around INR 250 crores to INR 300 crores. So that should definitely happen in the FY '26.
Okay. And sir, what is the cost of debt for the company today?
Cost of debt is around 9%.
Okay. Right, sir.
[Operator Instructions] Sir, there are no questions in the queue. Shall we close it?
Sure.
As there are no further questions from the participants, I now hand the conference over to the management for closing comments. Over to you, sir.
With this, we conclude the call and would like to thank everyone for joining us today on this earnings call. If you have any further queries, you can connect with us. Thank you so much.
Thank you. On behalf of Bodal Chemicals Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.
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