PCBL : Transcript of the Conference Call held on 28th November, 2023

PCBL Limited

November 28, 2023

Moderator:

Ladies and gentlemen, good day, and welcome to the PCBL Limited conference call. Present on

the call would be Dr. Sanjiv Goenka, Chairman; Mr. Kaushik Roy, Managing Director; Mr. Raj

Gupta, CFO; Mr. Saket Sah, Head, Investor Relations; Mr. Pankaj Kedia, Vice President,

Investor Relations.

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 star then zero on your touchtone

phone. Please note that this conference is being recorded.

Please note that this conference is being recorded. I now hand the conference over to Dr. Sanjiv

Goenka, Chairman, PCBL Limited. Thank you, and over to you, sir.

Sanjiv Goenka:

Thank you, and good afternoon, and welcome, and thank you so much for joining us at short

notice. It's always a pleasure to meet all of you. And many of you have been very strong

supporters of the group and off late the PCBL and I thought it's only fair that I share with you

some important developments at PCBL.

The last time I had interacted with you all, I had shared with you the very strong growth track

that we have for PCBL and the Carbon Black business, the addition of specialty chemicals and

specialty blacks. So, that was a shift from Commodity Blacks to Specialty Blacks. Growth in

volume -- and the target remains over the next few years to get to 1 million tons.

The growth in volumes, change in product mix to shift to specialty Carbon Blacks and value-

added products for specialty use with higher margins and to shift platforms, and this is something

that I've been talking about for the last several months. We have to shift platforms from Carbon

Black. And it is with that in mind that I thought I must share with you a very exciting

development today.

We signed a share purchase agreement with a company called Aquapharm, which is based out

of Pune, which is largely involved in chemicals. In phosphonates, in oil and gas chemicals, in

polymers and gives us access to a different platform, where we can shift from the carbon

molecule to phosphorous molecule to the amino acid molecules. So, this is a very significant

step in our company's journey towards getting away from pure commodity carbon black to

specialty chemicals.

current EBITDA levels and 8.5x 'FY25 EBITDA levels. Between PCBL and Aquapharm, over

the next 30 months, the cash flows would be adequate to take care of this entire acquisition cost.

Let me also remind you that PCBL sits on a certain amount of INR 450 crores of liquid cash at

this point in time. And Aquapharm has no borrowings whatsoever, it's a debt free; and PCBL

has only working capital borrowings. The exciting thing about this is that it accelerates our

growth. It helps in future-proofing our portfolio within products which are sustainable, so, A;

sustainability; and B; decarbonization.

Green chelates is something that's very, very exciting, extremely exciting. It's biodegradable.

It's sustainable. It's green. So green chelates are biodegradable chelating agents, which improve

detergency. The global market for this product is 1,30,000 tons as it stands. Aquapharm today is

at 3,300 tons. The growth rates are interesting. The headroom for growth is enormous. And the

plan is to increase it to 20x over the next 5 years; 20x of the current production of 3,300 tons.

Water-soluble polymers is something that also offers a very exciting opportunity, 35%

contributions. The global market is 4 lakh tons. Aquapharm's capacity is currently 4,000 tons.

So again, significant headroom for growth. Global leaders who are customers, plants, which are

diversified with global supply chain and in Chemicals, which are high in value, high in

contribution, high on growth rates.

So, you have Commodity Blacks, which are stable; then you have Specialty Blacks, which are

very high in terms of contribution and high in terms of growth; and you have expansion there,

and now you have another platform, which is the phosphorous molecule and the amino acid

molecule platform.

And this calls for even stronger growth. So, it's a huge opportunity. It's both margins accretive

and earnings accretive. So, I think overall, this is a unique opportunity for us. We decided to

sign the share purchase agreement and I thought I must take you into confidence. So immediately

after the Board met and approved the transaction, I'm having this call with you. These are the

broad outlines of the transaction, which, as I said, to my mind, is extremely bullish for the

company, puts us in a different area, but with synergies, synergies on the supply chain, synergies

on manufacturing processes, operational synergies.

And we do believe, we can add value to Aquapharm from where it is. And so combined, to

repeat, it will be both margins and earnings accretive. So that in a nutshell is what I wanted to

share with you. I'm now opening to answering questions that you might have. I'm there. The

PCBL team is there, my Investor Relations team is there, and we will all together try and answer

as many questions as you might have. So over to you.

Moderator:

Thank you very much. Our first question is from the line of Rohan Gupta from Nuvama. Please

go ahead.

Rohan Gupta:

Congratulations on such a big move in the company. Sir, many questions, but I will restrict

myself to two to three. Sir, first is that we are in a specialty black business while we have been

continuously focusing more towards specialty chemicals, but this move that it's a completely

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PCBL Limited

November 28, 2023

should be a better year. So hopefully, cash flow should actually be higher than INR 370. In fact,

the forecast is for higher and FY'26 is even higher.

Moderator:

Our next question is from the line of Krishan Parwani from JM Financial. Please go ahead.

Krishan Parwani:

Firstly, congratulations on the acquisition. Just one question from my side. Since I think you

mentioned that the promoters want to cash out. So just wanted to understand who would be

running the show once we complete this acquisition in the next 2, 3 months, would the current

promoters render any know-hows for some time? Or would we be running the show from day

one?

Sanjiv Goenka:

Well, the current promoters would be involved for a couple of years, at least the operating

promoters. But it's not just one individual who runs the company, it's a whole team. So, the

whole team exists. And that team will be there. And - so I'm not at all concerned about the

change in ownership. I do believe that the change in ownership can actually help in terms of

some value addition in terms of manufacturing process, some value addition in terms of supply

chain.

And hopefully, RPSG might bring some other practices, which might improve. So, I think as a

group, the one thing we've done very well is we managed acquisitions very well. So, I think this

is something that is our core competence. It's something that we've done well over generation,

frankly. And certainly, we've done well with our last few acquisitions, including sports. So,

we're looking forward to it. And we do believe this provides an area of huge opportunity for

PCBL and its entire family of stakeholders and shareholders.

Krishan Parwani:

Thank you for patiently answering my questions, and all the best and congrats once again.

Moderator:

Our next question is from the line of Aditya Khetan from SMIFS Institutional. Please go ahead.

Aditya Khetan:

Thank you for the opportunity. Sir, as I mentioned in earlier participant that the reason for selling

that because the families are becoming much larger. Sir, but I believe this Aquapharm was

looking to sell the stake since April 2023. Sir, is there any other specific reason why this

Mangwani family, which is the promoter of Aquapharm, want to like divest at a time when the

global -- when the Indian chemical sector is diversifying in terms of like value chains and growth

opportunities. Any other reason which you can like highlight apart from these families and all...

Sanjiv Goenka:

They've been looking at selling. Of course, any transaction takes time and they ran a process.

So, you're right about your time on April, and it's taken 7, 8 months to come to a conclusion.

And we had three competitors, and they've had a very strong process. And the reason ascribed

to us was that they really want to cash out and it's quite normal. I think -- it's actually a huge

opportunity because the Indian chemical sector is poised for very big growth as indeed the global

chemical sector.

And you will have consolidation. We are seeing this across industry, across portfolios. And I

think we are fortunate that we have bagged this one. We do believe it's a phenomenal company

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Aditya Khetan:

Got it, sir. No worries. Sir, just one last question, sir, if you can highlight the H1 revenue

EBITDA impact, half yearly, sir, H1?

Sanjiv Goenka:

Raj, you're on the call, would you like to share this number?

Raj Gupta:

Sir, there was some voice disturbance, so...

Sanjiv Goenka:

So, Raj, what the question was, what was Aquapharm's half one financial numbers? Would you

just like to share that with all the people on this call, please?

Raj Gupta:

Yes, the first half was around INR1,000 odd crores revenue number.

Sanjiv Goenka:

And bottom line?

PCBL Limited

November 28, 2023

Aditya Khetan:

And sir, EBITDA?

Raj Gupta:

Bottom line would be roughly around INR160 crores/ INR170 crores.

Aditya Khetan:

EBITDA, sir?

Raj Gupta:

EBITDA would be roughly around -- so this INR160 crores I'm talking about is PBT number.

And EBITDA would be around INR190 odd crores, roughly.

Aditya Khetan:

Okay, sir. Thank you, sir. Thank you.

Moderator:

Thank you. Our next question is from the line of Sanjeev Mohta from B&K. Please go ahead.

Sanjeev Mohta:

Congratulations on the acquisition.

Sanjiv Goenka:

Thank you.

Sanjeev Mohta:

Yes. So just a couple of things. One, who are you competing with in this acquisition, regard

whether the large players or...

Sanjiv Goenka:

One was very large. I don't know whether we're at liberty to talk about who were other

competitors.

Sanjeev Mohta:

Sure. Yes, that's fine. I'm just trying to understand the type of players. Yes.

Sanjiv Goenka:

One was very large. And one was a company which has done a couple of chemical acquisitions.

They have a strong chemical portfolio. I don't know whether they'll be a target to take over at

some stage.

Sanjeev Mohta:

Right. And like what was the reason we won the deal?

Sanjiv Goenka:

I think at one stage, it looked that we were out of the transaction and then it came back on the

table. We were very clear that we are not going above this value, and we had strong conditions

and conditions precedent to closure. And the price was -- I'm told exactly the same.

Sanjeev Mohta:

Right.

Sanjiv Goenka:

There is no difference in the price. But I think maybe there were doubts on the other parties

ability to conclude. I don't know, not for me to comment.

Sanjeev Mohta:

Right.

Sanjiv Goenka:

But when the deal came back on the table, we're working on the transaction because we are

convinced about the prospects of this company. And as we are about something else that we are

pursuing in the electrical vehicle space but hopefully soon, hopefully soon.

Sanjeev Mohta:

Okay. Thanks a lot.