Bodal Chemicals : Transcript of Analysts/Institutional Investor Meet/Con. Call

MANAGEMENT:

MR. ANKIT PATEL - EXECUTIVE DIRECTOR,

BODAL CHEMICALS LIMITED

MR. MAYUR PADHYA - CFO, BODAL CHEMICALS

LIMITED

Moderator:

Ladies and gentlemen, welcome to the Q1 FY'23 Earnings Call for Bodal Chemicals

Limited. This conference call may contain forward-looking statements about the

company, which are based on the beliefs, opinions and expectations of the company

as on date of this call. These statements are not the guarantees of future performance

and involve risks and uncertainties that are difficult to predict.

As a reminder, all participant lines will be in the listen-only mode, and there will be

an opportunity for you to ask questions after the presentation concludes. Should you

need any assistance during the conference call, please signal an operator by pressing

'*' then '0' on your touchtone phone. Please note that this conference is being

recorded.

I now hand the conference over to Mr. Ankit Patel, Executive Director of Bodal

Chemicals Limited. Thank you, and over to you, sir.

Ankit Patel:

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 our call today.

On this call, we are joined by our CFO, Mr. Mayur Padhya; and SGA, our Investor

Relations Advisors. I hope everyone had an opportunity to go through the financial

results and investor presentations, which have been uploaded on the stock exchanges

and our company's website.

Let me give you a quick snapshot of the recent developments of our company, and

then I will hand over the call to Mr. Mayur Padhya to talk about the financial

performance. Our company, Bodal Chemicals, is India's largest integrated Dyestuffs

and the Dye Intermediates manufacturer. In an environment where Indian suppliers

are preferred as reliable partners globally, we have been able to leverage our

leadership position.

In domestic market our Dyestuff and Dye Intermediate market shares are around

13% and 20%, respectively. Globally, our Dyestuff and Dye Intermediate market

share are around 3% and 6%, respectively. I'm excited to share that over the last 1

year, we have successfully implanted the Chlor Alkali products in our product

portfolio. We are expanding our product basketand entering benzene chemistry

products, and we are confident that we will be able to replicate a similar success in

this new product as well.

Coming to the performance overview during Q1 FY'23. Total revenue for the Q1

FY'23 stood at INR 463 crore, a growth of 8% on a year-on-year basis. Consumption

of end-user industries has been on edge headed by many uncertain global events,

although the rising raw material price has been positively reflected in our Basic

Chemicals and Chlor Alkali business, which has partly negated the adverse

performance of the Dye Intermediates business. We will now touch upon each

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INR 131 crore in Q1 FY'22, a growth of 15% on year-on-year basis.

Coming to Dye Intermediates. This segment has seen some pressure due to

unprecedented volatility in key products like H-acid and vinyl sulphone prices. This

quarter, revenue contribution from Dye Intermediate chemicals stood at INR 122

crore. The lukewarm demand from textile manufacturers due to the steep price hike

in cotton has impacted the overall demand for dye intermediates to a certain extent.

Average prices of key products, H-acid and vinyl sulphone have been moderated in

Q1 FY'23 to INR 473 per kg for H-acid and INR 290 per kg for vinyl sulphone.

More than 40%, 45% of these intermediate capacity is captively consumed resulting

in a significant cost advantage for our Dyestuff products. Given the healthy

prospects for Dyestuff, we strategically intend to move up the value chain and

increase our captive consumption of Dye Intermediates.

Moving to Basic Chemicals. Although our Basic Chemical division also reported

healthy performance led by higher raw material prices, close to half of the basic

chemical capacity is purely consumed for Dye Intermediates production. Our overall

Basic Chemical segment contributed around 15% of our total revenue, Q1 FY'23

with a revenue contribution of INR 64 crore. Chlor Alkali business, this segment has

come up well for us and has contributed meaningfully to our overall business. Since

March, there has been a disparity in the price reported in India and China.

The overall cost of production and the demand supply gap has been uncertain on the

back of various geopolitical events. In India, the demand for key products like

caustic soda has been healthy in FMCG, textile and paper industries. The Chlor

Alkali business delivered a strong performance with revenue of INR 86 crore in Q1

FY'23. The upgradation of the Rajpura caustic unit is on track and is expected to be

completed by October '22. Post completion, our Chlor Alkali business will contribute

a significant pie of total revenue.

Our benzene derivatives and sulfuric acid, the Saykha greenfield project is

progressing well and is expected to start a trial run in Q1 FY'24. Indian

manufacturers import a lot of benzene derivatives. Our main goal is to replace

imports and capture business in the pharma and agrochemical markets where such

benzene derivatives are used.

Subsidiary performances. Our subsidiary, Sener Boya, has reported a notable

performance, whereas the other subsidiaries have reported weak performance,

especially the SPS unit due to the lower demand of Dye Intermediate products. In a

medium to long-term view, we foresee these subsidiaries will improve in their

respective region and will bring meaningful business to our company.

In the last few weeks, we are seeing some green shoot events, and we anticipated a

steady performance in the upcoming quarters. We aim to create a sustainable

business model without losing the leadership position in our legacy business. In the

coming years, we expect our business will be less volatile and more diversified as we

will be serving a wide spectrum of end user industries.

Thank you. And now I hand over the call to Mr. Mayur Padhya to walk you through

the financial performance.

Mayur Padhya:

Good evening, everyone. Overall performance of the company has been steady for

Q1 FY'23. Our consolidated performance for Q1 FY'23 is as follows, total revenue

stood at INR 463 crore for Q1 FY'23, a growth of 8% year-on-year basis. EBITDA

stood at INR 54 crore for Q1 FY'23, a degrowth of 3% on year-on-year basis.

INR 23 crore for Q1 FY'23, a degrowth of 18% on a year-on-year basis.

As highlighted earlier by Mr. Ankit, the sluggish response from end users has

affected our primary business of Dyestuff and Dye Intermediates. Performance of the

key subsidiary was healthy. Subsidiary, particularly SPS, posted revenue of INR 23

crore. Sener Boya has reported a total income of INR 26 crore. Total income from

the China subsidiary was nearly INR 3 crore.

Segment-wise performance on a consolidated basis for the Q1 FY'23 are as follows,

Dyestuff revenue stood at INR 150 crore. Dye Intermediate revenue stood at INR

122 crore. Basic Chemical revenue stood at INR 64 crore. Chlor Alkali division

revenue stood at INR 86 crore. TCCA revenue stood at INR 10 crore for the quarter.

Total production volume on a standalone basis for the Q1 FY'23 are as follows,

Dyestuff stood at 3,993 metric ton. Dye Intermediate stood at 3,442 metric ton. Basic

Chemical stood at 51,594 metric ton. Chlor Alkali stood at 21,299 metric ton, of

which caustic soda stood at 15,134 metric ton. TCCA stood at 299 metric ton.

With this, I conclude the presentation and open the floor for question and answer.

Anybody who has a question can now start asking questions.

Moderator:

The first question is from the line of Yogesh Tiwari from Arihant Capital. Please go

ahead.

Yogesh Tiwari:

My first question is regarding the Rajpura unit. So like Chlor Alkali, it's about INR

85 crore. So once this gets commissioned in Q2, what would be the revenue

contribution of this unit in FY'23?

Ankit Patel:

See, currently, the rates of, especially caustic rate is much higher than the average 5

or 10-year price. So if you take it at the current rate, then it will be more than INR

400 crore. But if I calculate it with a 5 or 10-year average prices of finished goods

caustic soda, then it will be in the range of INR 300 crore to INR 350 crore.

Yogesh Tiwari:

Annually?

Ankit Patel:

Annually.

Yogesh Tiwari:

For example, if like INR 300 crore additional revenue will come from only this

Rajpura unit for FY'23?

Ankit Patel:

It is not additional. It is going at that same rate. At a normal price, at an average

price, it will be around INR 325 crore. So around INR 80 crore a quarter, which is

going on right now also because of the extra higher price.

Mayur Padhya:

For your clarification, last year, this division has contributed INR 254 crore. So if we

achieve INR 400 crore from this unit, then INR 150 crore is additional revenue from

this division.

Yogesh Tiwari:

That is helpful. And if you can share what was the realization of caustic soda average

realization for Q1 FY'23? And what is the current price of caustic soda in the market,

the range?

Ankit Patel:

The current price is around INR 55 delivered. So on an average, I think the

manufacturers get around INR 53. That is today's market. For most of the August,

we expect the price to be around that much for the month of August because there

are a lot of exports happening from Gujarat. So August is going to be strong.

September also, they are trying to take more export orders, so we can maintain the

higher prices. And for this quarter, the average price was around INR 50, ex-plant.