India Glycols : Transcript of Earnings Conference Call for Q3FY22

"India Glycols Limited

Q3 FY2022 Earnings Conference Call"

February 15, 2022

ANALYST: MR. ROHIT SINHA - SUNIDHI SECURITIES

MANAGEMENT: MR. RUPARK SARSWAT - CHIEF EXECUTIVE OFFICER MR. ANAND SINGHAL - CHIEF FINANCIAL OFFICER MR. SANJEEV GURWARA - PRESIDENT MARKETING MR. SK SHUKLA - HEAD - LIQUOR BUSINESS

PROF DR. R K KHANDAL - PRESIDENT, R&D AND BUSINESS DEVELOPMENT

MR. ANKUR JAIN - HEAD (LEGAL) AND COMPANY SECRETARY

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India Glycols Limited

February 15, 2022

Moderator:Good day, ladies and gentlemen, and a very warm welcome to the India Glycols Limited Q3 FY2022 Earnings Conference Call hosted by Sunidhi Security and Finance Limited. Please note that this conference call may contain certain 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 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. Rohit Sinha from Sunidhi Securities. Thank you, and over to you Rohit!

Rohit Sinha:Thank you, good evening, everyone. Thank you for joining us on Q3 FY2022 earnings call of India Glycols Limited. I would like to thank the management of India Glycols Limited for giving us this opportunity to host the call.

From the management side we have with us Mr. Rupark Sarswat - Chief Executive Officer of the company along with him, we have, Mr. Anand Singhal - Chief Financial Officer, Mr. Sanjeev Gurwara - President of Marketing, Mr. SK Shukla - Head of Liquor Business, Prof. Dr. R.K. Khandal - President, R&D and Business Development, and Mr. Ankur Jain - Head (Legal) and Company Secretary. Without any further delay, I would like to handover the call to Rupark Sir for his opening remark, post which we will open the floor for Q&A. Over to you Sir!

Rupark Sarswat: Thank you Rohit. Thank you for welcoming us and also for the introduction for myself and the team and I hope all is well and everybody who is attending this call and it was good that you reminded that there is uncertainty and you can never predict the future, never better than this time to remind up for very, very uncertain times and in summary I believe IGL has navigated based on certain times reasonably well and I will try and present to you or talk to you about summary of how our performance has been so far.

Very briefly, I will talk a little bit about the performance highlights and then very important factor which is feedstock trend, and of course my colleague will also throw some light on financials and other things.

If you look at the performance for the quarter and I have introduced two slides here and the reason for that is we have also formed a joint venture in between, so a session of the business has moved to the joint venture and when we talk about reported results obviously

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India Glycols Limited

February 15, 2022

the joint venture sales and profit numbers are there for the entire quarter of last year but not there for this quarter of the current year.

In overall terms, you have seen a gross turnover of 1760 Crores up 4%, a net turnover of 794 Crores down 11%, EBITDA of 62 Crores, reported results down 36%, EBITDA margins of 7.7% and PAT of 24 Crores. So, you know very well that in our case the gross turnover is significantly higher because we have portable spirits as one of our segments where the excise is very high, I think of the order of 600% to 700% and that is what results in a significantly higher gross turnover number compared to the net turnover.

So, if you look at this the key things to point out here is that we had the EOD business which went into the joint venture with Clariant last year for the same quarter, but it is not there in this quarter. In addition, we had a long shutdown which was about 16 days in December including catalyst changeover so that had some impact and as I will talk about a little bit more, we have had unprecedented escalations in feedstock and energy costs which we think will eventually not remain that high but all in all given these factors, I would say that we have continued to maintain the growth momentum despite the factors that I talked about.

Let me also talk about the same performance in terms of continued businesses. When, I say continued businesses you understand, we have taken away the EOD numbers from both sides of the equation and this means gross turnover of 7% not going into reading out the numbers, net turnover of 12%, EBITDA down somewhat by 11%, EBITDA margin obviously the same and PAT up by 34% on a competitive basis.

So, when we talk about continued businesses obviously the joint venture businesses have been excluded from the comparison but the EO sales to the joint venture obviously feature now as ideal sale though it does not feature much in terms of the profit and the same factors we have had the shutdown in December and we have had unprecedented increases in feedstock and energy costs and given that I may say that it is an excellent performance for the continued business given the circumstances that we have operated in and some of the headwinds that we had.

If you look at the nine-month overview, I have given it there in terms of reported results you will see a turnover which is up by 21% nine months. EBITDA which is down 11%, EBITDA margins of 8.77% and PAT which is up also because of the slump sales up quite significantly at 273 Crores. So for the nine months again you will see that we believe that this is a resilient performance for the first nine months on the back of a good bounce back and I will talk about it a little more in the BSPC or the Bio-based Specialities and Performance Chemicals business and also good growth in portable spirits, despite the

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India Glycols Limited

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shutdown and the escalation in feedstock and energy prices, margins have been under significant pressure but I think with these factors you would agree with me that this has been a resilient performance.

If I look at the same numbers on the basis that I spoke to you about earlier which is continued businesses, it is gross turnover of 34%, net turnover of 42% which is contributed by a few factors, one of them of course is very good performance in bio-based specialties and performance chemicals and portable spirits but also some EO sale to the joint venture which is included in the net turnover. EBITDA has not risen by numbers as good as the net turnover and I think the main reason for that as I mentioned is headwinds which have put substantial pressure on margin. Nevertheless, we have had an overall margin of 8.63% which is kind of in line with the margins that the businesses had and a profit of 263 Crores up quite significantly. So, that is the overall summary for the business. I can also give you a few quick highlights of the business which are also there in the presentation.

I talked about the shutdown, so I will not repeat but this bring some pressure on the business for the big plant being down for about 16 days, I will talk in a bit about feedstock and energy prices. To update you that we are making good progress on the two bio ethanol projects which are in progress in Kashipur and Gorakhpur and we expect them to be commissioned by April and June in the coming years respectively.

We have also made a small beginning as we talked about earlier in expanding our portfolio of BSPC which is Bio Based Specialties and Performance Chemicals with some stem that we are doing in modifying some of our plants to make specialty a main, so that is the kind of a beginning which we can talk to you about and we are also investing more in upgrading one of our existing R&D buildings and putting in more equipment and infrastructure and are also in the process of getting a few more people in R&D, so the thing to highlight about is the bounce back in Bio-based Specialities and Performance Chemicals in particular and good growth in portable spirits.

I thought I will spend a little bit of time on talking about something which has been very, very important in terms of how we look at the business which is based on bio-based ethanol or bio-based ingredients, some of which I talked about last time, so, I will not delve into great detail because I spoke about it last time, there are a number of factors which have been affecting these businesses and to some extent have caused some headwind and I think it is important for you to understand, for you to draw your own conclusions in terms of how the business looks going forward and when I talk about margin compression and hopefully looking at the improvement in margins in the coming years, so you all know about the global energy crisis which was triggered by several factors, the coal shortage in India, the significant issues that we have been having globally in terms of sustainability and green

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