Business Update
- There was an impact of a corona virus outbreak on the results of the company in March as all customer plants were shutdown
- Did lose turnover of Rs 10 crores due to the plant shutdown
Participants
- Ultra Capital
- Candyfloss Advisors
- Bamboo Capital
- Sunidhi Securities
- Vriddhi Capital
- Atom Investments
- Alphaaccurate Advisors
- GIRIK Capital
- Sapphire Capital
- Astute Investments
QnA
- Most of the contracts with customers are linked to raw material prices. The average price for key raw material sulphur was 45% less in FY20
- The Q3FY20 was one of the lowest offtake quarter in terms of exports as there was uncertainty in the global market
- The overseas market is reasonably strong but the domestic market is subdued
- The entire chemical industry across the globe was never shut down because it was classified as essential but in India, there were different distinctions made
- The sulphuric acid plant expansion is expected to complete in H2 2021
- Not planning to be aggressive on debt expansion because of current uncertain environment
- Chinese government if offering very good sops to the export industry as a subsidy to get back their industry and for India, this is a big threat
- AlsoIndia is the only country where the chemical industry is shut down and there has been no incentive from the government to the industries
- In the sulfone market, China is a big competitive threat
- The gross margins in Q4 were higher because raw material prices had gone down but finished goods prices will adjust in April
- The boron business hasn’t been doing well because of multiple problems coming one after the other and it is not operating at optimum capacity utilization
- No single sector contributes more than 10%to the overall revenues
- Most of the specialty chemical products are exported and some products are mature while others are newer products with higher growth potential
- The sourcing of sulphur is mostly done locally but if there is a price differential then could import as well
- The availability of sulphur is high and there isn’t a negative impact as of now but if there is a continuous slowdown in consumption of fuel in domestic markets then there could be an impact on prices
- There hasn’t been a substantial increase in costs due to sanitizing and other requirements of working in the corona era
- The maintenance expenditure will vary in a range of Rs 8-10 crore on an annual basis
- The Chinese government has been far ahead in terms of tackling coronavirus than other countries globally. They are providing 13% export subsidy along with power and interest costs already being very low
- The new sulphuric acid plant that is coming up will be the only expansion in commodity chemicals from the company over the next 10 years
- Post this expansion other expansions will be in downstream products
- The investment in the sulphuric acid plant will be to the tune of Rs 50 crores and another Rs 20 crores for the downstream plant
- The debt for the expansion has already been tied up and 2/3rdof the expansion will be financed by debt
- The market size in sulphur chemistry is very large and even if the company grows its revenues by 10 times there would still be growth opportunities available
- The asset turnover in a sulphuric acid plant varies between 1-1.5 while in downstream products it is 2-3 times
- The company supplies directly to pharma companies and makes the chemical that goes into making the API
- The philosophy of the company is to enter into smaller value molecules rather than higher value molecules
- Have not lost any market share in export markets but revenues are down due to overall demand being low
- The sulphuric acid market is a pure commodity and it is very difficult to forecast the future pricing trends
- Power costs in China are half (Rs 4.5 vs Rs 9/unit) of India’s cost and interest costs in China are 25% (2.5% vs 10%) of what are the costs in India and along with this there are export subsidies provided
- The other income is higher due to regrouping done on adjustments of some line items which were previously being classified in a different way
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