Meghmani Organics Limited (MOL) Q2 FY23 Earnings Concall Transcript

Meghmani Organics Limited (NSE:MOL) Q2 FY23 Earnings Concall dated Oct. 21, 2022

Corporate Participants:

Ankit Patel — Chief Executive Officer

Gurjant Singh Chahal — Chief Financial Officer

Analysts:

Rahul Veera — Abakkus — Analyst

Ayush Agarwal — Mittal Analytics — Analyst

Pushkar Jain — Sequent Investment — Analyst

Bhavya Gandhi — Dalal & Broacha — Analyst

AM Lodha — Sanmati Consultants — Analyst

Hrishikesh Kale — — Analyst

Ashish Gandotra — — Analyst

Hemant — Navigdata — Analyst

Deepesh Sancheti — Manya Finance — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q2 and H1 FY ’23 Meghmani Organics Limited earnings conference call.

[Operator Instructions]

I now hand the conference over to Mr. Ankit Patel, CEO of Meghmani Organics. Thank you and over to you sir.

Ankit Patel — Chief Executive Officer

Thank you, Ranju. Good afternoon everyone and a warm welcome to Meghmani Organics Limited quarter two and half Yearly FY ’23 earnings call. I hope you and your family members are keeping on healthy, safe and sound. Commenting on the quarter two FY ’23 financial performance, Meghmani Organics revenue grew by 20% year-on year to INR655 crore successfully navigating global macroeconomic challenges. The company’s gross profit grew by 10% to INR257 crores during quarter two. Meghmani Organics EBITDA grew by 9% to INR85 crores during this quarter. The company’s profit-after-tax grew by 13% Y-o-Y to INR73 crore in the quarter two. Meghmani Organics Limited profit-after-tax stood at 11.2% during this quarter. Highlighting our H1 FY ’23 financial performance, the company’s revenue surged by 38% year-on year to INR1,438 crore. Meghmani Organics gross profit increased by 33% to INR601 crores in the first-half of FY ’23. The company’s EBITDA grew by 33% to INR219 crores during the first-half. And the profit-after-tax grew by 41% to INR187 crores during the first-half. The company’s resilient performance amid an uncertain global macro environment demonstrates the management’s acumen towards risk management and financial prudence. On the balance sheet front, the company’s cash-and-cash equivalents stood at INR59 crore as on 30th September 2022. And debt to equity ratio stood at 0.39. And the return issues like ROCE and ROE stand at 18% and 24.7% respectively. As mentioned earlier in our previous calls, the Company’s capex plan are progressing as planned. The commercial production of the agrochemicals new multipurpose plant is likely to commence from third quarter FY ’23. We are planning to commission the plant in the month of November after Diwali. On the pigment side, the three Phase one commercial production of the titanium dioxide plant with a 16,500 tons capacity is expected to be comment in the third quarter as well of this financial year. We hope to commission the plant in somewhere in the month of December. The notification for the same will be uploaded on the exchanges as we start the commercial production. We intend to double the titanium dioxide capacity to 33,000 tons by third quarter FY ’24. We are confident about the long-term goals for both the business verticals. And our come competent human capital is swiftly moving towards to materialize the company’s long-term goals. The company continues to delight its esteemed plant with a diversified product portfolio and quality products. Meghmani Organics has a notable financial track-record. During the last five financial years starting from FY ’18 to FY ’22, the company’s revenue, EBITDA and PAT have registered a CAGR of 19%, 22% and 41% respectively, outperforming the industry growth rate. The government’s Atmanirbhar Bharat initiative is pushing the Indian Chemical industry towards import substitution and strengthening its R&D capabilities. Additionally the growing China plus one strategy amongst global nations has put the Indian Chemical industry in a sweet-spot. Meghmani Organics is well-placed to benefit from favorable government policies as well as with the kind of the infrastructure what the company has created. The company continues to generate free-cash flow, which not only would augment the working capital to some extent, but also would contribute to the internal accrual for funding for the ongoing capex. It will further strengthen our balance sheet. The management is confident to sustain the company’s historical growth rate for the coming years and create long-term value for its esteemed stakeholders. With this, we would be happy to address the question of the investor and analyst fraternity. Thank you.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session.

[Operator Instrcutions]

The first question comes from the line of Rahul Veera from Abakkus. Please go-ahead.

Rahul Veera — Abakkus — Analyst

Hello, hi, Ankit, hope all well on year end.

Ankit Patel — Chief Executive Officer

Yeah, we can hear you.

Rahul Veera — Abakkus — Analyst

Yeah. Just wanted to understand in the specifically agrochemical segment, is prices of 2,4-D and Bifenthrin stabilizing now or is it still in doubtful?

Ankit Patel — Chief Executive Officer

Your voice is not clear Rahul. Can you repeat your question?

Rahul Veera — Abakkus — Analyst

Sure, am I audible now?

Ankit Patel — Chief Executive Officer

Yeah.

Rahul Veera — Abakkus — Analyst

Yeah, so just wanted to understand the agrochemical segment the prices of 2,4-D and Bifenthrin now stabilizing or is this still in a downward spiral?

Ankit Patel — Chief Executive Officer

As always the prices have corrected as of now and we feel now it has got — become stable relatively. It is not going down further. At the same time, the raw-material prices have also gone down. So that is not creating any pressure on the margins as of now.

Rahul Veera — Abakkus — Analyst

Okay, and how is the inventory level in the system and how is the demand shaping up and specifically from the European exposure perspective?

Ankit Patel — Chief Executive Officer

Yes, so inventory is the only thing because what happens, there is always a pipeline inventory of the raw-material as well as the finished goods. So that is getting cleared slowly. So it will be a matter of probably two months or so where we will be able to clear the old inventory and the new low-price raw-material and the new selling price will be stabilized after that. As far as the demand is concerned, the demand is little bit sluggish as of now because a lot of negativity globally as far as the recession is concerned. But one positive thing about the agrochemical division is we are in the process — we are in the business of crop protecting chemicals which are agro chemicals. And when the whole world is talking about the food security, so the demand for the crop protection chemicals will remain stable. There will be good demand in the coming days. So it is maybe, this situation will be there for maybe one or two quarters, but in the long-run it will always be positive.

Rahul Veera — Abakkus — Analyst

Okay, fair point. Just one question for Chahal sir. Wanted to understand the gap between consol and standalone. I believe consol largely has a cost of Kilburn. Is that correct?

Gurjant Singh Chahal — Chief Financial Officer

Yes. It contains depreciation of the existing plant in Kilburn. So that is only component.

Rahul Veera — Abakkus — Analyst

Okay, perfect, perfect. This was helpful, thank you.

Operator

Thank you. Next question comes from the line of Ayush Agarwal from Mittal Analytics. Please go ahead.

Ayush Agarwal — Mittal Analytics — Analyst

Good afternoon sir and thank you for the opportunity. I hope I’m audible. Sir, last-time, in last quarter you had mentioned that you had taken a shutdown in 2,4-D capacity for maintenance purposes. Have you resumed production there?

Ankit Patel — Chief Executive Officer

Yes it has very much commenced, the production has started and it is running as per the normal capacity now.

Ayush Agarwal — Mittal Analytics — Analyst

Perfect. So in this quarter then, what would be the revenues from non-2,4-D chemicals in our agrochemical segment as a percentage if you can mention?

Ankit Patel — Chief Executive Officer

For the second-quarter?

Ayush Agarwal — Mittal Analytics — Analyst

Yeah, for the second-quarter.

Ankit Patel — Chief Executive Officer

So it was never like — 2,4-D was not completely shut-down for the — all the three months. It was running. So, there was only partly shut-down. So we have not segregated the separate revenue apart from 2,4-D.

Ayush Agarwal — Mittal Analytics — Analyst

Okay. Understood. Second question is on our new products. So there was news article that came out that we have come out with two new products, Cyfluthrin and Spiromesifen with capacity of 500 metric ton per annum for both these products. So if you can help us understand you know the market size of these products, when we will sell in export markets, do we have registrations, what competition do we have in these products?

Ankit Patel — Chief Executive Officer

Sure. So Ayush, I’ll just brief you about the first Cyfluthrin. There are two products, one is the Cyfluthrin and second is the Beta Cyfluthrin, both are connected each other. The key intermediate for these two products we are already been making it. So we are backward integrated first that is, first thing. Second thing is that is this product is only being manufactured by one company which is the Bayer Crop Science. That’s the only company which is making this product in India. And so that is why we are backward integrated and we have targeted this product. From the registration point-of-view, we are already doing the registration in various markets, in North-America, Latin-America, some of the markets as well. And with the new product, these are relatively high-value products. It will help to grow further. So that is about Cyfluthrin. Second thing is — the second product is Spiromesifen. So that is, also a new product in our basket which we have started the production and it is not being manufactured by a company on a regular basis in a big way. I would say, only one or two companies would be making it on campaign basis. So this product is also we are registering into various market like North-America, Latin-America, Asian markets, India also is a big market for this product. It’s not a big market, I would say the niche market for this product. So and again a relatively very-high value product. So it will help to grow in a better way in the coming days.

Ayush Agarwal — Mittal Analytics — Analyst

Great. So if you can help us with the realization for these products individually like in the broad range, not specifically like any numbers within the broad range that you mentioned high-value products, so $30, $40 products/

Ankit Patel — Chief Executive Officer

Even higher than that. You can see $30 plus both the products.

Ayush Agarwal — Mittal Analytics — Analyst

Understood understood. And on the update, so last-time you had mentioned so I mean given that we are very close to commercializing our capex now, can you spill out more beans on kind of products we will have in the first phase of our new capex and anything on those lines?

Ankit Patel — Chief Executive Officer

Definitely. So as I mentioned, we are going to comments, our plant in the third quarter after Diwali. So we plan to commission the plant somewhere in the month of November. And so slowly, gradually we have started announcing the products in the market not just from the investors point-of-view but also from the customers and the global market point-of-view so that people come to know that we have come up with this kind of product. So we are going to now gradually about all the products. From the investor point-of-view as I mentioned we are in this plant it will be Cyfluthrin, Beta Cyfluthrin, Spiromesifen, these three products are going to be there. At the same time, we are going to expand the capacity for the Lambda-cyhalothrin which is a key insecticide, key pyrethroid insecticide. Will be one of the largest player in India. And we have got registration in various markets like North-America, Brazil and some of the other markets. So it will generate very good revenue in the coming days time.

Ayush Agarwal — Mittal Analytics — Analyst

Well, thanks. Just one final question from my end is that you know we have been following a lot of agrochemical companies and there is overall sense of bullishness in the market for the long-term given China plus one and other growing demand but what we also see is that a lot of companies in the pyrethroid range even in other range are expanding capacities by a lot. I mean, some are expanding by 2x, some are expanding even further and we are also expanding a lot and we see other companies also, smaller companies announcing very large expansions. So, how do you own navigate in these times where one side demand is also growing but supply is also growing at a much faster rate?

Ankit Patel — Chief Executive Officer

Yes I’ll say there are some small companies entering into this segment as well as some of the existing companies are also expanding into pyrethroid but pyrethroid is a very vast range of products. So the companies are coming into the old range of pyrethroids or rather they are expand capacity in the same product. As a make money, we are not expanding the capacity of Cypermethrin, Permethrin, Alpha Cypermethrin. These are old products. So we are not doing any expansion in old range of pyrethroid. We are coming with the new range of products.

Ayush Agarwal — Mittal Analytics — Analyst

[Indecipherable] Is that safe to assume?

Ankit Patel — Chief Executive Officer

I’m sorry, can you repeat your question?

Ayush Agarwal — Mittal Analytics — Analyst

Coming into new products with relatively lesser competition in these products currently?

Ankit Patel — Chief Executive Officer

That’s correct. So if I talk about Cyfluthrin and Beta Cyfluthrin, these are also pyrethroid. And as I mentioned, it is only being manufactured by Bayer Crop Science in India.

Ayush Agarwal — Mittal Analytics — Analyst

Bayer Crop?

Ankit Patel — Chief Executive Officer

Bayer Crop Science, multinational.

Ayush Agarwal — Mittal Analytics — Analyst

Oh Bayer okay, understood, okay. Perfect thank you for answering my question and a very Happy Diwali to you on your team.

Operator

Thank you.

[Operator Instructions]

Next question comes from the line of Pushkar Jain from Sequent Investment [Phonetic]. Please go ahead.

Pushkar Jain — Sequent Investment — Analyst

Hi sir thanks for the opportunity. Just a clarification question that there is certain media article stating that there are steep correction TiO2 prices. So is this the grid that we are planning to manufacture or how is the situation on-the-ground level?

Ankit Patel — Chief Executive Officer

Pushkar, there are two things. What has happened that yes the price has corrected because it was very-very high but at the same time the input cost has also gone down. So both the things our going hand-in-hand. At the, same time, what positive think we are listening which it is little early to mention but because there were few plants in the European continent. And because of very-high input costs — utility costs like natural gas and everything, European companies are not running at full capacity or they may shut-down for a few days. So that will again support the demand for the titanium dioxide. So that is a positive thing. And we are targeting typically Indian market. And as we know, the Indian market is growing in double-digit for the paint segment and similarly for the titanium dioxide. So under import substitute and Atmanirbhar Bharat, it’s going to be good opportunity for us.

Pushkar Jain — Sequent Investment — Analyst

Okay so basically the input cost is also as I understand there will be supply pressures but the input prices also have corrected similarly.

Ankit Patel — Chief Executive Officer

That’s correct.

Operator

Thank you. Next question comes from the line of Bhavya Gandhi from Dalal & Broacha. Please go ahead.

Bhavya Gandhi — Dalal & Broacha — Analyst

I just wanted to understand what is the market potential of tying of all these three molecules that we mentioned and given that we are taking registrations in LATAM, North-AM and what kind of opportunity do we have in terms of revenue for these molecules?

Ankit Patel — Chief Executive Officer

Yes so the new products are having good opportunity into not only into Indian market but also into Latin-American markets like Brazil, Argentina, Mexico and US and some of the Asian markets as well. So we have been doing the registration of this product. In fact we started registration well in advance. So by the time our plants start, we have few registration on-hand. So in coming days time when we will start the plant, it will help us to sell the product as fast as possible in this market. So that is one thing and this product to-market, may not be very-very big but these are the products where the market size is growing. So it will help us.

Bhavya Gandhi — Dalal & Broacha — Analyst

Roughly if you could just quantify market size of these three molecules, Cyfluthrin, Spiromesifen and Beta Cyfluthrin.

Ankit Patel — Chief Executive Officer

See these products are never individually defined as the market size product. It is always announced in the market as, a group of pyrethroid range products, something like that. So it is difficult to get the information from the market from one particular product point-of-view.

Bhavya Gandhi — Dalal & Broacha — Analyst

Okay. Fair enough. [Indecipherable] what is the market size that we are looking out maybe pyrethroid as a whole group.

Ankit Patel — Chief Executive Officer

So we, want to be the good player in the pyrethroid range with all the product, that is what our strategy is. So as of now also we are one of the leading player among top three you can say and we will maintain our extent and rather will be growing in that segment.

Bhavya Gandhi — Dalal & Broacha — Analyst

Globally, total pyrethroid market will be around INR26,000 odd crores?

Ankit Patel — Chief Executive Officer

I’m sorry.

Bhavya Gandhi — Dalal & Broacha — Analyst

If we consider the entire pyrethroid market globally, would it be in the range of INR25,000, INR26,000 odd crores?

Ankit Patel — Chief Executive Officer

Yes you can say that.

Bhavya Gandhi — Dalal & Broacha — Analyst

Okay and we are present across almost maybe 80% of those molecules.

Ankit Patel — Chief Executive Officer

Yes, now with the, new products coming in, yes we will be catering majority of it.

Operator

[Operator Instructions]

Next question comes from the line of AM Lodha from Sanmati Consultants. Please go ahead.

AM Lodha — Sanmati Consultants — Analyst

Ankit I had three-four questions, two questions relating to Mr. GS Chahal. First, regarding accounts. Again, Mr. Chahal can you tell me the what is the other income components, breakup of other income, what [Indecipherable] income.

Gurjant Singh Chahal — Chief Financial Officer

Other income during the quarter a major is the foreign currency gain because rupee has depreciated. So that has contributed around INR21 crores. And another is dividend income which is we are accruing INR4 crore per quarter.

AM Lodha — Sanmati Consultants — Analyst

And then another question, why your interest income is positive, and in spite of loans have increased INR500 crore to INR700 crores, interest income in the PACCAR is not debit, [Indecipherable]

Gurjant Singh Chahal — Chief Financial Officer

Yeah it is credit actually for both the quarters because we have got INR6 crores of foreign currency gain. So we had borrowing in euro which is old at the rate of INR89 at that time so no it has gone below INR80. So that is a gain which is coming in foreign currency MTM.

Ankit Patel — Chief Executive Officer

So we when we took a disbursement at that time it was INR89 rupee and now we are repaying in the range of INR80 INR81.

AM Lodha — Sanmati Consultants — Analyst

So therefore there is interest income become positive?

Ankit Patel — Chief Executive Officer

That is, correct.

AM Lodha — Sanmati Consultants — Analyst

Okay the next two questions related to Ankit. I think margins coming down segment is usually margins are 12% to 13% has come down to 9% the margins. In Agrochemical also I noted they were are we selling this quarter ends in volume from the previous quarter. Can you clarify when we can regain the old margins?

Ankit Patel — Chief Executive Officer

Correct. Sir as I mentioned that there were certain correction in the sales price and the prices for, some of our products were coming down, at the same time, the raw-material prices are also coming down. Now this is a matter of one quarter or few months where the channel inventory of the raw-material or finished goods getting clearance. So we hope that in coming quarters, margins in the agrochemical division should improve. At the same time for the pigment division also though global recession is playing important role for particular in the case of pigment division, so it’s going to be challenging but we are taking all the actions where we can cut-down the cost and, maintain or improve our margin into pigment division as well.

AM Lodha — Sanmati Consultants — Analyst

Okay on consolidated accounts, I note capital work-in progress INR429 cores, INR425 corn or something, how much capex we are yet to incur on the both project agrochemical and pigment for the year, 31st of March 2023?

Ankit Patel — Chief Executive Officer

So for the Agrochemical division the capex will be completed in this financial year, the first phase of capex. So when we announce the project, when we announce the commencement of the first phase we plan to announce one more capex. So. I think in the next one quarter, we’ll be announcing further capex in the agrochemical division at the time of commissioning of this project. At the same time for the titanium dioxide, by the March, I think we will, be able to, for the first phase the capex will be over. So INR275 crore worth of capex will be over by the March.

AM Lodha — Sanmati Consultants — Analyst

Okay. Just I wanted to know over and above the INR425 crore on consolidate budget, this is showing as work-in progress, how much the amount is to be spent by 31st of March ’23? In both division.

Gurjant Singh Chahal — Chief Financial Officer

In pigment, we expect another INR100 crores, we’ll be spending in addition in KCL and another around INR50 crores will be MREL we will be spending by large in agro division.

AM Lodha — Sanmati Consultants — Analyst

In the overall in the more diligent, you meant to say that, we will be adding INR150 crores, in addition to INR425 crores?

Gurjant Singh Chahal — Chief Financial Officer

Yes.

AM Lodha — Sanmati Consultants — Analyst

That comes to INR575 cores capex after 31st March ’23?

Gurjant Singh Chahal — Chief Financial Officer

Yes, this will get capitalized actually.

AM Lodha — Sanmati Consultants — Analyst

Entire thing will be capitalized, further announcement will be different thing, but whatever the CapEx is going on, will be capitalized in the current running year?

Gurjant Singh Chahal — Chief Financial Officer

Yes.

AM Lodha — Sanmati Consultants — Analyst

The last question against this borrowing, borrowing is how much total borrowings, short term and long-term borrowing the company do you have on this debt.

Gurjant Singh Chahal — Chief Financial Officer

Sir, as on September we have around INR385 crore of long-term debt. And INR240 crore is short-term and while we have INR60 crore cash-in at 31st March that you’re getting.

AM Lodha — Sanmati Consultants — Analyst

It means [Indecipherable]

Gurjant Singh Chahal — Chief Financial Officer

Fully integrated level, we have INR600 crore.

AM Lodha — Sanmati Consultants — Analyst

My point-of-view to Ankit we have got CCP, [Indecipherable]

Ankit Patel — Chief Executive Officer

That’s correct.

AM Lodha — Sanmati Consultants — Analyst

Including your balance sheet also showing this INR199 crore outstanding against INR211 crore. So my point is that one-time we are borrowing the money from [Indecipherable] in the other side, we are keeping our, this CCB depending for redemption for longer period duration. The INR12 crore amount is at least when the companies that company earning INR250 crores, happier lead [Indecipherable] That is my point-of-view. I requiest the CEO and another company to consider it and to recall that money as possible.

Ankit Patel — Chief Executive Officer

Sure Lodha, I think you have mentioned this is our last quarter earnings call as well. Is on that we had an internal discussion and we got the approval from the Board as well and as you rightly mentioned, out of INR211 crore of RPS, INR12 crore has been paid from MFL Meghmani Fine Chem to make Meghmani Organics Limited. So it has reduced now to INR199 crores and so there is a plan — earlier as you know there was a plan of 20 years but it has reduced to five years now. So within five years, everything will be cleared. Five years so, we’ll try to do it in advance but from 20 years it has been reduced to five years now.

AM Lodha — Sanmati Consultants — Analyst

What I also, the capex of Meghmani Fine Chem is almost over. We have got net capex which is last there up to till 2024 project which is in hand. Otherwise remaining capex is over for Meghmani Fine Chemical. So there is no point in keeping their money in Meghmani Fine Chemical and Board should reconsider it and make yearly payments to Meghmani Organic enable us to either reduce the terms loan by Meghmani Organic or deploy in the next phase of the biotech doubling of capacity. Their money should be deployed there instead of keeping the 8%. This is our request and this is our wish to the management.

Ankit Patel — Chief Executive Officer

Thank you very much Lodha and we understand your viewpoint and based on your discussion we have already started taking the action and, we’ll be working upon.

Operator

Next question comes from the line of Hrishikesh Kale, an Individual Investor. Please go-ahead.

Hrishikesh Kale — — Analyst

So it’s about the upcoming distribution. Typically is predicted that next year would hit the hardest in terms of recessionary pressures in the group and USA. So, how would this impact our company.

Ankit Patel — Chief Executive Officer

Yes Hrishikesh, as you know we have got two division, one is the Agrochemical division, other is the Pigment division. So as I mentioned in the case of agrochemical division it is directly linked to the agriculture and the whole world today is focusing on the food security and for the food security point, every country needs to have the better yield of the crop and for that the consumption pattern for the Agrochemical will not be impacted no matter whether there is a recession or not. There may be impact of weather which is not in our hand but as far as the recession is concerned for the Agrochemical business there will not be much impact. Regarding the pigment business, yes there is a big impact on the pigments business as far as the consumption is concerned from the recession point-of-view. But the other application if we talk of the printing ink segment is not growing much but the packaging ink segment where also there is a good demand it is growing significantly at the same time in plastic master bag demand is improving for the Pigment. So overall as pigment market there may be for, a few quarters, one or two quarters, demand may be sluggish but in the long-run we are very positive. At the same time from the growth point-of-view in the Pigment division, our titanium dioxide plant will start in the month of December, which is mainly from the domestic market point-of-view and the application is into the paints which is growing into double-digit. The companies like JSW and Grasim is also entering into the paint business. So you can understand the kind of the demand and the growth in the Indian market. So taking outside division which is, a part of the pigment division will drive bery good growth in the coming days time for the Pigment sales.

Hrishikesh Kale — — Analyst

Okay so just, a follow-up question. So for the remainder of the year could [Technical Issues] or would this be a big hard with the session low.

Ankit Patel — Chief Executive Officer

Hrishikesh there was a disruption in-between, so can you repeat your question?

Hrishikesh Kale — — Analyst

Yeah so I was just asking could we have a short of achieving 3,000 crore turnover this year.

Ankit Patel — Chief Executive Officer

So we have already given the guideline to the investor, the kind of the growth and for this year we have predicted to the tune of about INR2,800 crore-plus. We’ll try to achieve it.

Operator

[Operator Instructions]

Next question comes from the line of Ashish Gandotra, an Individual Investor. Please go-ahead.

Ashish Gandotra — — Analyst

Hi sir congratulation on a good set of numbers. I had just one question [Technical Issues].

Ankit Patel — Chief Executive Officer

Ashish sorry we are not able to get your voice properly. Can you repeat your question.

Ashish Gandotra — — Analyst

Yes sir so what I was saying is in the last con-call if I remember we had discussed [Technical Issues]

Ankit Patel — Chief Executive Officer

So I think Ashish we have already announced that for the FY ’25 we’ll will be reaching INR4,500 crores top-line that we have already announced in the Investors Forum with a clear guideline the kind of the growth what we are assuming.

Ashish Gandotra — — Analyst

Okay INR500 crore top-line which we are seeing and the margins would be again in the similar kind of margins which we currently have.

Ankit Patel — Chief Executive Officer

Yeah so there will be a slight improvement in the margins as well in the coming as we are coming up with the new projects of titanium dioxide and the new products in the Agrochemical division. So overall, margins are also going to be good.

Ashish Gandotra — — Analyst

Got it got it. Just one last small question on the titanium dioxide which is expected to come commercialization by quarter three. So approximately, how much time will it take to reach 60%, 70% of capacity utilization level.

Ankit Patel — Chief Executive Officer

Yeah so we plan to commission the first phase of 16,500 ton in the month of December. So this is a new product in our basket as well so there will be few challenges to stabilize the plant as well as our customer which are going to be mainly into the paint segment they will also be taking from trials for approval of our titanium dioxide. So normally this process it will take to achieve 50% to 60% I think it will take two to three quarters.

Ashish Gandotra — — Analyst

So. I think it will take two to three months.

Ankit Patel — Chief Executive Officer

Two to three quarters.

Operator

[Operator Instructions]

Next question comes from the line of Hemant from Navigdata. Please go-ahead.

Hemant — Navigdata — Analyst

Congratulations on good set of numbers. My question is regarding that a presentation which you have sent in for Agrochemical division it seems like our utilization and production has come down compared to the last Q2 FY ’22. Our revenue has gone up come are gone up but the margins are gone down. I just wanted to understand this piece like how these two things base together despite our utilization production coming down, our revenue increase in margin is coming down. We had a lot of inventory beginning of this quarter. Can you just sort of explain like why the production utilization has come down though revenue is up?

Ankit Patel — Chief Executive Officer

So Hemant, particularly in the case of agrochemical division, the utilization has gone down. So basically it’s the change of the product mix as we have mentioned that we took some shut-down for the maintenance for our 2,4-D plant. So in this quarter there was a, little bit less utilization of the 2,4-D which is relatively low-value product and high-volume products. So the utilization has come down but we’ve tried to cover it up with some of the high-value, low-volume products so you can see that the utilization has gone down but overall revenue because of the different product mix it has gone up.

Hemant — Navigdata — Analyst

Okay so you say that right now the, new products, which are coming up probably they had better margins and maybe better realization?

Ankit Patel — Chief Executive Officer

So the new product. It’s starting phase. So normally it takes them to stabilize the product quality and everything. So we are slowly, gradually stabilizing all these new products and definitely this products will have a better margin yes.

Hemant — Navigdata — Analyst

Sir, one more question. Our margin has gone down. What could be the major reason is it likely imported raw-material or locally the raw-material is sort of the prices have gone up, maybe it’s like across-the-board the raw-material prices have gone up?

Ankit Patel — Chief Executive Officer

There are two factors. The sales price was under pressure as market was getting corrected so the price sales prices were coming down very fast at the same time the raw-material prices were also coming down. Now when this kind of the market situation is there then for about three-four months there is always some channel inventory of raw-material, finished goods or work-in progress materials. So it takes about three, four months time to get it clear. So we hope to get it, coming back to the normal margin in the Agrochemical division in next couple of months, so it will improve further and so normally when the market is good when the prices are going up so you get the advantage very fast. Same time when the market is going down you need to absorb that kind of cost. So we are passing-through this phase right now.

Hemant — Navigdata — Analyst

I got it. Thank and last question. Definitely the last question. Regarding the new products which we have do we have raised registrations for exports as of now like are we saw client for registration for exports for the new products which we have now.

Ankit Patel — Chief Executive Officer

Sure so Hemant we started doing registration of this product well in advance before a few years before two years or so. So by the time we start our plant we have few registrations on-hand. So we have already started getting the decision for some of these products into different, different markets. So in next two years’ time we will be getting much — many more registration for the same product. So slowly, gradually over utilization will improve for the new products.

Operator

[Operator Instructions]

Next question comes from the line of Deepesh Sancheti from Manya Finance. Please go-ahead.

Deepesh Sancheti — Manya Finance — Analyst

The first question was what was the inventory loss in this quarter since the prices went down.

Ankit Patel — Chief Executive Officer

So inventory has gone up, there is no inventory loss. What we are talking about because you have inventory which is a high-cost inventory which is getting consumed. So that is an impact which is coming up. Otherwise there is no loss on account of inventory.

Deepesh Sancheti — Manya Finance — Analyst

Since there was — I mean the inventory which is there the finished products or the goods which are in manufacturing they were also a higher price right and then they were sold at a lower-price. I think because of that what is the effect on this quarter’s numbers?

Ankit Patel — Chief Executive Officer

No MTM loss because you always had gross margin which is a positive so you have to value at-cost our NRV which is lower. So NRV is not lower than the cost. You need to compromise sometimes a little bit of a margin to keep footprints alive in the market but then there is no loss that we are referring. There is a loss on goods inventory at all. I think there is some misunderstanding about this.

Deepesh Sancheti — Manya Finance — Analyst

Thanks so just because since earlier there was some — there were some comments made on the inventory that’s the reason I asked. Sir what was so going ahead what do we — what guidance should we look for the margins for Agrochemicals as well as for pigments?

Ankit Patel — Chief Executive Officer

So Dipesh we have always been telling industry as an average for the Agrochemical it generates EBITDA margin of somewhere in the range of 16% to 18% and our past record we have always been above the industry average. And that is what our aspiration is, particularly in the case of pigment also on an average the EBITDA margin range is from 12% to 14%. Where we have little bit down as far as the industry average is concerned but it is a tough time the pigment industry is passing-through but with the new project coming in, titanium dioxide, we hope to improve it very fast.

Deepesh Sancheti — Manya Finance — Analyst

Okay so in this year do we expect that in this financial year do we expect that whatever margins we have received we have been able to get in the first-half, we’ll be able to maintain it in the second-half.

Ankit Patel — Chief Executive Officer

And so first half for the Agrochemical division we have got the EBITDA of nearly, yes we should be able to maintain it.

Deepesh Sancheti — Manya Finance — Analyst

We should be able to maintain it. Okay and what about titanium dioxide? I mean titanium dioxide, when do we — when will we achieve full capacity and the kind of production, which, I mean which is planned.

Ankit Patel — Chief Executive Officer

So we hope to commission the first phase of titanium dioxide in the month of December. And as I mentioned —

Deepesh Sancheti — Manya Finance — Analyst

That is how many MTPL?

Ankit Patel — Chief Executive Officer

16,500 tons capacity will be commissioned in the month of December and the second phase of expansion of another 16,500 ton making it total 33,000 ton will be commissioned again in the third quarter of next financial year.

Deepesh Sancheti — Manya Finance — Analyst

Next financial year okay. And this this 16,000 which we are planning in the next quarter, do we have enough orders for that as in, we’ve already spoken to companies?

Ankit Patel — Chief Executive Officer

We have already started discussion with the customers marketing about the product and everywhere in the market is very excited that we are coming up with this product but there will be certain approvals needed. Based on our titanium dioxide, the customers will be taking trial in their final product. So for, maybe few months, this approval will take time. Once the approvals will be there, then there will be a rapid growth in terms of the capacity utilization

Deepesh Sancheti — Manya Finance — Analyst

Okay but we must have already sent batches for the — I mean for approval, right.

Ankit Patel — Chief Executive Officer

So far the commercial production has not started. So without this, customers doesn’t approve the lab samples. They always go for the commercial production factories.

Deepesh Sancheti — Manya Finance — Analyst

Okay and in this — I mean the reference there are two types of titanium dioxide we will be producing, which one will have a better margin?

Ankit Patel — Chief Executive Officer

The first is we are going to start with the anatase. And the second is going to be the rutile will be starting with the rutile. Margin point-of-view, there is not much gap but the main thing is the market size for the rutile is much bigger than the anatase. So ultimately we will be targeting everything into rutile grade only. Because it has got the major applications compared to anatase.

Deepesh Sancheti — Manya Finance — Analyst

VYou mean to say in the paints industry?

Ankit Patel — Chief Executive Officer

Yeah so anatase also goes into the paint, rutile also goes into the paint but the rutile grade base paint is much bigger than the anatase base.

Deepesh Sancheti — Manya Finance — Analyst

Okay that’s great. And in the next five years, how do we see this titanium dioxide, I mean project. I mean do we see it growing to maybe a lack MTPL as. How is it?

Ankit Patel — Chief Executive Officer

As a company we are very bullish on this product and project and as you know that the major application is into the paint segment and we are already seeing the numbers of Asian Paints and the kind of the growth Indian paint industry is growing at. And big companies like JSW, JK, Grasim, they are all entering into the pain segment. So it’s going to be fantastic growth story for the paint as well as titanium dioxide point of view. So we are very bullish on it and definitely we hope to expand in the coming years as well further.

Deepesh Sancheti — Manya Finance — Analyst

Just, one last question, Meghmani Fine Chem recently bought the land for about INR160 crores. We also — do we have enough land or are we also looking at buying any land which is nearby? Any kind of — that kind of investment are we looking for?

Ankit Patel — Chief Executive Officer

So as far as the pigment division is concerned, we have got a huge land-bank available at the same time we have acquired the Kilburn Chemicals which was already having about 3,14,000 square meter land which is a huge land parcel. So from the pigment point-of-view, we have already got the good amount of land parcel. From the agrochemical point-of-view again the kind of the expansion what we are doing now, the similar kind of the land or similar kind of the capex we can do in the same campus, we have got land available in the same campus. So for the next three-four years we may not need the land but from the preview, any be keep on buying the industrial land from the future growth journey so any good land available definitely will be buying it.

Deepesh Sancheti — Manya Finance — Analyst

Okay and lastly 2025, what is the sales target because company has always given sales target and we’ve achieved it quite on-time. So by 2025 what sales target are we looking at for Meghmani Organics?

Ankit Patel — Chief Executive Officer

We have already announced from the investors point-of-view that we target to achieve 4,500 crore topline by FY ’25.

Deepesh Sancheti — Manya Finance — Analyst

Okay I’m talking about for pigments and for agrochemicals.

Ankit Patel — Chief Executive Officer

Talking about the same. So Pigment and Agrochemical put together be as of last year we were at INR2,500 crores and so we’ll be adding INR2000 crore revenue in next three years’ time by FY ’25.

Operator

As there are no further questions we have reached the end of question-and-answer session. I would now like to hand the conference over to Mr. Ankit Patel for closing comments.

Ankit Patel — Chief Executive Officer

Thank you very much for participating in the earnings call of Meghmani Organics Limited. We wish you on behalf of Meghmani Organics Limited Happy Diwali and a prosperous New Year to everyone. Thank you very much.

Operator

[Operator Closing Remarks]