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00:00Hello and welcome to NDTV Prophet. I am Varsha and DCM Sriram is in focus today. Company
00:14has commissioned its hydrogen peroxide plant of around 50 to 500 tons per annum at its
00:20chemical complex in Gujarat. Now, this will add to their chemical business portfolio and
00:25is a downstream to hydrogen produced at their chemical complex. Now, hydrogen peroxide just
00:33to give you a view has a wide range applications from bleaching agent to water and waste water
00:38treatment and chemical synthesis and food processing as well. Well, to speak more on
00:43this, I am here joined by Mr. Amit Agarwal who is Executive Director and CFO at the company.
00:49Welcome Mr. Agarwal. Yeah, thank you. Well, just give us a sense about this hydrogen peroxide
00:58plant. How will this impact your chemical business in terms of revenue and market positioning?
01:04Yeah, so see the current market size of hydrogen peroxide is let's say the demand in the country
01:12is close to about 200 kilotons per annum and we are coming up with a capacity of close
01:20to about 52 kilotons per annum. Right, so we do expect to take up close to about 20-25%
01:29market share over a period of one and a half two years. Alright, and also when it comes
01:35to your capacity utilization for hydrogen peroxide, what are you expecting this to be
01:40at? So, see the current capacity utilization because we have commissioned only couple of
01:45days back. So, current capacity utilization is close to about 25-30% and over next one
01:52and a half year, we should be close to 19%-100%. Alright, got it. Now, this is a downstream
02:00product that you are going into. Now, how this will help in terms of margins? So, see
02:07the way you need to look at it is that currently what we produce in our chemicals complex at
02:13Bharuch as well as in Kota is primarily caustic soda and chlorine. The idea of the organization
02:20is to diversify into multiple products within the adjacencies of caustic soda. So, that's
02:27why we have got into hydrogen peroxide, we have gone into now we are commissioning epichlorohydrin
02:34and we also are getting or we already have commissioned aluminum chloride as well. So,
02:38the whole idea is to have multiple basket of products in terms of and which will increase
02:43overall profitability largely the margins on these products ranges between 50-20% depending
02:50on the market conditions. So, this addition in margins, this incremental uptake in margin,
02:56I mean, when are you expecting to see its impact in your financials? I am assuming not in one year,
03:05but yeah, I mean for a long. Yeah. So, I think the significant impact you will see from next
03:11year onwards. This year we would like to focus on increasing our market share in ramping up
03:17the capacity. So, I think you will see the impact on profit, significant impact from next year
03:22onwards. So, in FY25 as you said that you are adding many more downstream products. So,
03:30in FY25, I mean, the number of products or the number of downstream derivatives that you are
03:36adding in your portfolio will go to, I mean, what is the number of products? Yeah. So,
03:42let's say today in our chemical portfolio, we have caustic soda as one large product and then
03:51we have aluminum chloride and SBP as the other two products, but they are relatively small in
03:58terms of adding value. So, we will be, in this year we will be adding two large products which
04:03will be hydrogen peroxide and epichlorohydrin. Okay. There is this recent news when it comes
04:11to your epichlorohydrin product. How will the recommended imposition of anti-dumping duty on
04:20the said product will impact your company's pricing strategy and overall market competitiveness?
04:26So, as and when it is implemented, it will only help the prices. One has to see as and when it
04:32happens. Obviously, we are looking at ECH as a much larger game plan because from ECH, we would
04:41want to move to Epoxy. We have already announced that we would like to get into Epoxy. We have
04:46given our intent to invest about thousand crores over next two to three years into Epoxy. And then
04:51from Epoxy, then we would like to get into further derivatives of hardeners and things like that.
04:56So, our plan is to up the value chain in the ECH segment. I mean, ECH is epichlorohydrin.
05:04So, up the value chain there. Understood. Well, let's talk about your Q1 numbers.
05:10Good show when it comes to chemical front, but what led to this growth and
05:15what would be the overall outlook for the chemical business with the remaining part of the year?
05:21There were one major factor that led to improvement in chemicals was the cost side.
05:26The costs have come down both in terms of whole prices, which is the power and power is the key
05:32ingredient in cost of production. And we also did some other measures like getting into renewables
05:39that also led to reduction in cost. And there was another raw materials where also the cost
05:43came down. So, I think that is one key component. And the prices were also marginally better,
05:48but then I would depend more on the cost side, which looks more sustainable for the rest of
05:54the year as well. And therefore, we do expect numbers to be better. To give you the exact
05:58sense, I think it will be difficult, but we do expect it to be better than last year,
06:01the chemical segment. Understood. Also, the reason for the sharp decline in profitability
06:08when it comes to your sugar business, despite a rise in sugar prices, but there was some,
06:16was there any some problem in sugar business? Because we did not see good numbers there.
06:22See, one, Q1, you know, the season ends somewhere, let us say in April or May. One,
06:28this year's season ended early. That was all across for all the industries. So,
06:33that is one reason. The other major reason is that the cost of production this year
06:38is higher than what it was in the same period last year. And the increasing selling price is
06:43not commensurate with the increasing cost of production. This is essentially an industry-wide
06:49scenario. It is not something which is specific to DCM Sriram. I think that is the key reason
06:55for sugar profitability. I just wanted to understand,
06:58there is no problem in ethanol production per se, right? That business is going well.
07:03Yeah. So, we actually produce more ethanol than we did last year, given that we had commissioned
07:08our grain-based distillery as well. So, ethanol fund is going very strong. It is primarily led
07:14by sugar. All right. Also, there was this
07:18recent news wherein government, I mean, government moves ethanol price hike for 24-25 season to
07:25intensify production, meeting the blending goals that we have. I just wanted to have your view on
07:31that. You see, government plays a very balancing
07:38act there, right? Yes, it did incentivize, but it does not mean any significant profitability
07:44to the ethanol producers. It is largely because government in, let us say, for example, in UP
07:50mandated that we could produce, actually, all India mandated that only sea-heavy ethanol would
07:55be used, right? And to make sea-heavy ethanol at par with BAV ethanol in terms of profitability,
08:01the prices of sea-heavy ethanol had gone up and same was for the grain-based. So, I think it is
08:07all to ensure that there is reasonable profitability to ensure that the mills are,
08:13you know, continue to viably produce ethanol. All right. Also, on the epoxy side, at what stage
08:20you are in where you can, you know, give some kind of guidance, how are you thinking about
08:25this business? So, we have completed the land acquisition for the new epoxy plant and we are
08:32in discussion with the technical consultants for technical tie-ups and yes, I think we are making
08:39progress. So, we should go to the board soon for final approval. We have the in-principle approval
08:45from the board. All right. Well, Mr. Agarwal, now on the overall numbers, so if you see, we saw around
08:5310,900 crores of revenue in FY24 while it was around 11,523. Now, where are you seeing this
09:02number in FY25, a guided range if you can give us? We should be around this level. I do not think
09:12it will change very significantly. Primarily, the reason being that most of our expansions are
09:17coming now and they will take time to ramp up. So, I think you will see a better number in terms
09:21of top line from FY26. FY25 should be in line with last year, maybe a little better.
09:28Okay. So, we can assume a single-digit growth in FY25 and maybe double-digit growth in FY26.
09:37Yeah, I do not have the numbers right away, but yes, it should be like that.
09:40With similar kind of margins or you are seeing uptick in margins as well?
09:44See, margins will all depend on how the prices are and these are bulk chemicals or bulk products,
09:50so it is very difficult to say how the margins will play out. What we do is we play on the cost
09:54side. So, we continue to invest and we make significant investment to ensure that we
09:59remain cost competitive and ensure reasonable margins at all times. Second thing what we do is
10:05in terms of how we look at our balance sheet. So, we ensure our balance sheet is strong,
10:09we are adequately leveraged so that we continue to grow. I think those are more guiding principles
10:15to ensure that the business grows. These one-year, two-year profits ups and downs can continue
10:21depending on how the market is. All right. Well, thank you so much,
10:24Mr. Agarwal for answering our questions and all the best.