EPIGRAL LTD (NSE: EPIGRAL) Q3 2025 Earnings Call dated Jan. 27, 2025
Corporate Participants:
Maulik Patel — Chairman and Managing Director
Sanjay Jain — Chief Financial Officer
Milind Kotecha — Investor Relations, Strategy and Corporate Communication
Analysts:
Meet Vora — Analyst
Parth Mehta — Analyst
Nirav Jimudia — Analyst
Rohit Nagraj — Analyst
Pujan Shah — Analyst
Aditya Sen — Analyst
Meet Bhatt — Analyst
Naitik Mohata — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Epigral Limited’s conference call hosted by Emkay Global Financial Services. [Operator Instructions] And there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] I now hand the conference over to Mr. Meet Vora, Emkay Global Financial Services. Thank you, and over to you, sir.
Meet Vora — Analyst
Thank you. Good evening everyone. Thank you for joining us on Epigral Limited’s Q3 and FY25 results conference call. We would like to thank the management for giving us this opportunity to host them. On this call we are joined with Epigral’s management represented by Mr. Maulik Patel, Chairman and Managing Director; Mr. Kaushal Soparkar, Executive Director; Mr. Sanjay Jain, Chief Financial Officer; and Mr. Milan Kotecha, Investor Relations.
I would like to invite Mr. Maulik Patel to initiate the proceedings with his opening remarks post which we will have an interactive Q&A session. Thank you, and over to you sir.
Maulik Patel — Chairman and Managing Director
Thank you, Meet. Good afternoon everyone and welcome to the call to discuss Epigrell’s Quarter 3 FY25 performance. I believe you had an opportunity to view the earnings presentation that was released earlier today. If we talk about the overall chemical industry, we have witnessed improvement in the scenario but pace of the growth in demand is slow. However, we expect that to improve on a continuous basis. We have witnessed domestic demand scenario to be better than the global market scenario. In this volatile environment we were able to deliver 37% revenue growth from for 9 months FY25 on account of volume growth of 15% which is majorly coming from derivatives business.
New projects we have commissioned in recent past and also our strategy to have diversified revenue model has helped us to have consistent growth. In line with our strategy, revenue contribution from derivatives business has reached to 54% for nine months of FY25 compared to 44% for the similar period in FY24. We have witnessed volume growth on account of various expansion projects we commissioned in previous years. These expansions will further contribute in FY26 as well. Along with our chlorotoluen value chain project which is the final stage and we expect to commission the same in this quarter. Further, the way India is growing, we see the domestic demand for various chemicals to increase over coming time. We see growth potential both in CPVC resin and epichlorohydrine demand and hence we have announced to expand and double both the capacities.
In CPVC resin, we will expand our capacity from existing 75,000 tons per annum to 150,000 tons per annum. And in epichloride ring we will expand current capacity to 50,000 tons per annum to 100,000 tons per annum. We expect both the project to commission in first half of FY27. Hence it will start contributing from FY27 onwards. We are growth oriented company and our strategy to diversify into value added import substitute products. Strengthening our integrated, complex and continuous capex for growth is playing well for us to grow more efficiently and creating value for all our stakeholders.
I now hand over to the call to Mr. Sanjay Jain, our CFO who will take us through the financials.
Sanjay Jain — Chief Financial Officer
Thank you, Maulik. Let me take you through the quarterly numbers first. The capacity utilization of the plants stood at 81% in Quarter 3 FY25 similar to what it was in Quarter 3 FY24. Revenue for Quarter 3 FY25 increased by 37% to Rs. 649 crore against 474 crore in Q3 FY24. This is backed by volume growth and better product mix on year. On year basis sales volume grew by 11%. This volume growth majorly coming from the derivative and specialty business.
EBITDA grew by 49% to rupees 183 crore against 123cr in quarter 3 FY24. Higher production volume which led to better absorption overhead, volume contribution from derivative especially business and improvement. Improvement in realization resulted to increase in S beta in quarter 3 FY25. EBITDA margin stood at 28% in quarter 3 FY25 against 26% in quarter 3 of last year. PAT jumped by 110% to 104 corrode in quarter 3 FY25 against R49 corrode in quarter 3 FY24. That margin stood at 16% against 10% in Q2 FY24.
Return on capital employed for the trailing twelve months improved to 25% compared to 18% as on 31 December 2023 24. On account of better volume growth from optimum revenue mix resulting in growth in absolute ebit. This ROC is including capital work in progress. If the exclude capital work in progress then roc stand at 31%. Our net debt to EBITDA has significantly improved to 0.8 times at the end of December 2024 against 2 times at the end of December 23rd. The ratios improved in line increase in EBITDA backed by volume growth and reduction of debt as company has paid rupees 380 crore in period of nine months ended 31st December 2024.
Let me take you the nine month numbers for FY25 capacity utilization of the plant for nine months stood at 82% against 76% of last year. Revenue grew by 37% to rupees 1934 crore. This is majorly driven on account Top 15% sales volume growth majorly coming from derivative and specialty business and improvement in issue realizations. The company has achieved revenue of FY24 i.e. 12 month revenue of FY24 in the period of nine months ended 31st December 2024. Derivative and Specialty business contributed for 54% of the revenue in nine month period time compared to 44% in nine months of last year. As a result of volume growth and better realization, the EBITDA grew by 55% to 537 crore. The EBITDA margin increased to 28% compared to 23% of last nine months. PAT jumped by 127% to rupees 270 crore compared to rupees 119 crore as on nine months FY24. With this we can now open the floor for QA.
Questions and Answers:
Operator
Thank you very much. We will now begin the question and answer session. [Operator Instructions] The first question is from the line of Parth Mehta from Vallum Capital. Please go ahead.
Parth Mehta
Yeah. Hi. Am I audible?
Maulik Patel
Yes.
Parth Mehta
So, just wanted to know our caustic revenue has increased by about 25% Q-on-Q whereas which is mainly driven by the pricing growth. So has this led to an increase of the gross margins by around 50 bps?
Maulik Patel
Yeah. Parth, if we see that way. Yeah, to an extent. The gross margin has improved and one of the factor for that is the improve in the realizations of the caustic soda.
Parth Mehta
Right. And. Okay. Great. And what has. What is the reason for an increase in the other expenses which is leading to a flat EBITDA margin?
Sanjay Jain
The other expenses increased substantially from 56 crore to 70 crore in quarter three. This is certain direct expenses which is attributed to production like water. Labor which has increased with the overall operation has also gone up. And the production volume which is up by 8%. Along with this, the higher logistic cost has also led this increase in the other expenses.
Parth Mehta
Okay, so what I understand is that the prices of caustics have increased whereas ECU has not increased much. So this negative chlorine carry, how do we record it? We record it in the derivative. It is revenue or do we record it in other expenses or in cost?
Sanjay Jain
The negative price of story is a part of the issue relation which has improved on Q and Q as well as on Y O Y basis.
Parth Mehta
Sorry, actually your voice is not clear.
Sanjay Jain
The negative price of chlorine is not a part of the other expenses. It is part of the issue license which has increased both on quarter to quarter and year on year basis.
Parth Mehta
So basically just to add what Sanjay sir is saying. The chlorine negative is already factored in the ECU of the caustic soda. So that is not part of any other thing. But it’s a part of the ECU that we have already said, right? That is. That is recorded in part of the caustics revenue, right?
Maulik Patel
Yes, that’s true.
Parth Mehta
Okay. And the last is we have paid around 250 crores of debt this quarter. So our total debt would be standing at around 600 crores. But our interest cost reported for this quarter is zero. If you could just help me understand that.
Sanjay Jain
As such the interest expenses have gone down with the decrease of the debt which we have paid over a period of nine months. Further the interest expenses which is reduced to zero or negligible amount. This is on account of the positive impact of forests on derivative instrument.
Parth Mehta
Okay. Thanks.
Operator
Thank you. The next question is from the line of Nirav Jimudia from Anvil Research. Please go ahead.
Nirav Jimudia
Yes. Good afternoon team. There are few questions to ask. So first one is on the utilization of caustic soda plant for Q3FY25 in last quarter you mentioned that it was close to around 75%. So if you can check the numbers for this quarter?
Maulik Patel
So for this quarter the caustic soda capacity has been utilized around 80% utilization we have achieved in Q3 FY25.
Nirav Jimudia
And last time you mentioned that our ECO was close to around or ECU was close to around 26 rupees with chlorine being negative at around 6 7. So if you can share the similar numbers for QT of FY25 and how we are seeing because most recently we have seen some spending in the prices of caustic soda in the Chinese market to plus some shipment issues and the freight cost also going up. So if you can share the numbers for Q3 of FY25 both in terms of ECU and the chlorine negative and how are the trends currently looking?
Maulik Patel
So on the caustic soda side the realizations for the caustic soda had been in the range of around 43,000 per ton kind of thing. And the chlorine is negative, around 9,000 kind of thing. And that’s where the ECU has revolved, around 31, 32 kind of thing. And considering the current situation, it has been in the same range in as of now also in between it has, it has bit to a level, but again it has control the levels where the issue is again around 31,000. So I guess we believe that it should be in the same range in the coming months.
Nirav Jimudia
Got it. So just one question here. So let’s say if we have a 4 lakh tons of capacity and 80,000, 80% utilization, so close to. We have produced around 80,000 tons of volumes of coastal. What you said is that ECO has improved by cost close to around 5 rupees. So if we just multiply 80,000 tons and 5 rupees of improved realization, the number comes close to around 40 crore. 17 crores is what you explained that there were the increase in the other expenditures due to their freight trips going up and because probably on the export side. So was the difference of that 40 -17, 23 crores is because of the lower realizations on the other products or where the margins on the other products were slightly suppressed this quarter or if you can share those differential, that would be very helpful, sir.
Maulik Patel
So if we put it, I mean in terms of the chloralkali and the derivative segment, in both the cases the margins has been around to the similar levels of what we generally guide, that is around 25%. But if you see the issue has gone out gone up to around 32,000. So that definitely helps us to sustain the margin. So in terms of, if I put in terms of the derivative side, then there is the marginal prices up and down in each product. It’s not drastic up and down. It’s. Some might be maybe low by 3,4% and some maybe increased by 3,4%. But overall the capacity over there, I mean in terms of the capacity utilization has been almost a stagnant or bit lower compared to the Q2. So that’s where the chloralkali percentage in terms of focal contribution has reached around 50%.
Nirav Jimudia
So just to add it slightly here is just to reconfirm by that.
Milind Kotecha
And one more thing, you know the coal and salt price is also not constant for quarter on quarter basis.
Nirav Jimudia
Okay, okay. So there was not. There were no increases on the coal side also for us or the salt cost also for us in this quarter, right?
Milind Kotecha
Yeah, yeah, yeah.
Nirav Jimudia
Correct. The second question is on the peroxide side. So I think we have a 60,000 ton peroxide plant and we utilize our own hydrogen here. So are we working on some special grades of hydrogen peroxide which are like generally the wet chemicals which are generally used for all those circuit cleanings and everything. So because now we have been producing this peroxide for a quite a longer period of time. So are we trying to do some value addition here or through our own RnD? If you can share your thought process here, it would be very helpful.
Milind Kotecha
So hydrogen peroxide. Right now we are selling almost most of the application, some of the high quality, which is like a food grade and which is used and which is required. That market is very small. So still we are evaluating whether we will make such kind of grade because market of that particular grades are very small. So definitely it is going to improve in the future. But that is not. We are looking right now. But in the future once market will be enough then definitely we are going to set up and we will make that particular grade also. Currently we are not making that those grades right now and how to make those grades. We can make those grades but currently we are not interested because of the volume.
Nirav Jimudia
Our total requirement of power put together for all the integrated complex is close to 140 megawatts or it is slightly higher than this?
Milind Kotecha
Close to entire campus. Yeah, we have a 134megawatt captive power plant and we are also using government power also. So close combined you can say around. Yeah, it’s around close to 140megawatt is our requirement here.
Nirav Jimudia
Perfect, perfect. Thank you so much sir and wishing the team — entire team, all the best.
Milind Kotecha
Thank you.
Operator
Thank you. The next question is from the line of Rohit Nagraj from BNK Securities.. Please go ahead.
Rohit Nagraj
Thanks for the opportunity. So the first question is regarding the floral that we have now. The first segment or first phase has been commissioned and we’ll be commissioning the next two phases in this quarter. What is the strategy in terms of seeding the market? Have we already seeded the market and given that part of the project has been commissioned, how has been the plant behaving in terms of initial operations? If you can just comment on that. And the strategy to seed and expand the market in FY ’26. Thank you.
Maulik Patel
Yeah. So yes, the Chlorotolin project is almost, you know, the last phase of capex I think we have done in this last couple of months. Almost done and then I think we are going to do the commissioning in end of. It’s already going on in phases manner. The entire CAPEX will be over probably in this month and probably next or probably maximum in March we will commission the project and this project is having 10 to 11 products differently. So every product we are taking a trial right now and once it is given to the customers after sampling we will get a trial order and then we will start doing so. Already we started doing it, but right now that activity will speed up in next in this quarter as well as in the beginning of the first quarter of next year also.
And we are expecting we will reach revenue generation will come maximum from the second half of next year. Because this entire cycle of sample approval and the trial orders to the export market as well as the domestic market will take little bit time. It is not going to generate like other products. It will start operating at the optimum level from the beginning because it is 10 to 12 products, it is not one particular product. And each campaign will take little time and to establish with the customer as well as to give a confidence to the customers that we can supply their quality as well as the quantity also. So we are expecting the revenue generation will start from the second half of the FY26. But Commission of the project will be done by in next one month or next 45 days time.
Rohit Nagraj
That’s helpful. Just one clarification here. So second half would be the revenue generating phase. After that can we take say two, two and a half years to reach the optimal utilization level?
Maulik Patel
Yes, not two and two and a half year. I would say to optimum level. I think we will reach by end of FY ’26 only.
Rohit Nagraj
Okay, fair enough. So the full impact should start coming in from FY ’27.
Maulik Patel
Full impact, yes.
Rohit Nagraj
Second, a similar question on ECH. Now, given that we will be again expanding the capacity and we’ve already tapped partially the exports market, what is the strategy going forward in terms of utilizing this particular project given that domestically another player will also be coming in for competition. So we’ll have to look out for exports market. So what is the strategy that we are looking when we will probably commission the project sometimes in first half of FY ’27? Thank you.
Maulik Patel
So you know, currently our plant is running at the full capacity. But going forward we have expanded this capacity. And the reason behind, you know, once we focus on the first project, when we commission the first project, when we establish and when we decide the first project. That time India’s capacity was 80,000 tons of ECH. But that capacity has increased in today’s time and probably by next first half, you know, another big player is also coming into the epoxy resin market and it will reach to almost 150,000 tonnes Indian market. So Indian market is also growing along with we are also expanding. So yeah, there may be a timing difference, plus or minus, but eventually I think the Indian market will absorb the quantity which we are going to produce in the long term. And meanwhile we are also exporting to European countries. And that will also continue going forward also.
Rohit Nagraj
This is helpful. Thanks a lot and all the best.
Maulik Patel
Thank you.
Operator
Thank you. The next question is from the line of Pujan Shah from Molecule Ventures. Please go ahead.
Pujan Shah
Hello. Am I audible?
Maulik Patel
Yes, yeah.
Pujan Shah
My first question would be on the cpuc. So what could be the current realizations and what are the expectation and the sustainable margins in the CPVC going forward?
Sanjay Jain
So current realizations for the cpvc is around 1 lakh 31 like 35,000. And we, I mean considering the current situation, we tend to the margins that we have in this also is around the same thing 25% that the company as a whole. So we tend to believe that we will be able to continue that sort of margins as well in the coming times.
Pujan Shah
Okay. So assuming the incremental capacity coming in FY27 and we are also, we also commissioned the new capacity of 75,000 in H1FY27. So at that point of time, assuming the global scenario remains the same as of now. So do you think there would be any dumping impact on CPVC and there could be impact on our realizations which could ultimately lead to margin deterioratement in FY27. 8. What are your views on this?
Maulik Patel
See currently also if you see the cpvc, the market itself is growing in a double digit percentage, barring few quarters. It can be that it might, it is subdued. But otherwise on a longer horizon or a five year period, we expect the CPVC demand to reach around 5 lakh ton 5 lakh tons by FY 2029 or FY 2030. So considering that the India demand is there, even the new capacities that are supposed come that will absorb the capacity that we are putting. So even today, like as of today also considering the India demand still more than 50, 60% is something which is metro imports. So even once we come with our capacity of additional 75,000 and the domestic other capacity, India will be still importing the CPVC resin. So there is a good demand for India and CPVC resin. Considering there is a good focus and the demand is majorly in India, it is a not a global market driven. It’s majorly the Indian market driven. And that’s where we are positive for this segment to grow. And along with that even we will grow in our CPVC business.
Pujan Shah
Okay. And sir, what could be the difference between. Let’s suppose assuming if a person has been setting up a brownfield project versus a greenfield project. So on our total cost of per TP it’s around 60, 70,000. So do you feel it remains the same for the expanding capacity which has been coming in by 75,000? So will it be in the same range or it would be impacting because of any other reason?
Maulik Patel
See, currently what we have announced so far, the CPVC expansion, what we are doing is almost in the same range what we have done in the past. I would not know about the others, but it would have been. It is. It has been remaining the same range of what we have done in the capex in the past.
Pujan Shah
Okay, so. So we have a sufficient land over there and we have been able to expand in the same plant.
Maulik Patel
Yes, yes. So currently what we have 75,000 in the complex, we are expanding another 75,000. So the additional 75 expansion is happening in the current complex itself. So the land that we have we. There is a space for the expansion of additional of CPVC as well as the epichlorohydrin.
Pujan Shah
Right. And last question would be on the CPUC manufacturing why it has been difficult. I understand the technology few are competitor are also been building and have been associated with a technological partner. So why it becomes a very difficult thing to manufacture and what could be and why it takes two years to ramp up understanding the approvals of the customer. But is there any technological advantage or is there any other reason out there?
Milind Kotecha
No, it is not because of the technology, but majorly it is because of the customer approval and it is a little longer process compared to other products in the cpvc. And that’s why it is taking little more time.
Pujan Shah
Okay, okay. So potentially our approval would be on the line Whenever we started and we commissioned the new capacity we can reach capacity utilization to 80 to 100 in the same time frame due to we all that we. We hold all the techno approvals as well as the technology, right?
Maulik Patel
Yes, again we need to take approval of the customers definitely. But we have experience already of so of last couple of years. I think now we can speed up the and to reach the optimization of the new facility which we are setting up compared to the past.
Pujan Shah
So optimal utilization of that new capacity will be will be recognizing FY27 or it would be reflecting in FY28 the whole capacity of the new the 75000?
Milind Kotecha
The optimum level probably we might reach by end of ’27 or beginning of ’28. Yeah. Because it’s a large capacity. Yeah. But the full benefit of like full year benefit will be visible in FY ’28.
Pujan Shah
Yes, yes, yes. Got it.
Maulik Patel
Yes, that’s right.
Milind Kotecha
Thank you Maulik sir. We’ll get back in.
Maulik Patel
Thank you.
Operator
Thank you. The next question is from the line of Aditya Sen from RoboCapital. Please go ahead.
Aditya Sen
Thank you for the opportunity. So can you please share how much revenue are we expecting from our capex of 780 crores in CPVC plus ECH.
Sanjay Jain
So the capex of…
Milind Kotecha
Yeah. We are expecting close to. Close to 1002200 crore once it reach to optimum level. Yeah.
Aditya Sen
Yeah. Optimal level. And what is the present realization of ECH if you can share that?
Sanjay Jain
So ECH relation is currently around 1 lakh. 105000 to 110000 in that range.
Aditya Sen
Okay. And going forward is it going to stay within this range or is it also volatile?
Sanjay Jain
So the price of the raw materials are increasing globally. The logistic costs are increasing. So definitely it is. It will. The. The epic chlorohydrated price also will increase going forward.
Aditya Sen
Okay, noted. And how much revenue are you expecting this chlorotoluen to contribute once it runs at optimum capacity?
Maulik Patel
The turnover which is at the optimal capacity. When the plant runs at optimal capacity we expect that 350 crore of top line from the closed volume project.
Aditya Sen
All right, thank you. Those are my questions.
Operator
Thank you. The next question is from the line of Meet Bhatt from Alembic Pharmaceuticals. Please go ahead.
Meet Bhatt
So I wanted to understand the anti dumping scenario. Like you know how anti dumping on PVC so how it is going to impact us. And you know whether we will shift our purchase of PVC from importing from other countries to Indian manufacturers. And if yes how will it impact our margin?
Maulik Patel
So you know India is having a capacity of 1.5 million only PVC and rest 2.5 million. PVC is coming from import already right now in India. So irrespective anti dumping duty international price will increase. Domestic price will increase. I think we need to pass on to the customers eventually the cpvc. So eventually the CPVC resin price will go up. And that is the impact is going to be for the PVC antidam duty going forward as well as bis. Also bookings are coming in pvc, BIS as well as NDP in next year.
Meet Bhatt
Okay. Okay, understood. And this is second question was regarding the competitive scenario like how many big players like DCW are coming up with CBVC capacities and some of them might have also in house PVC capacity. So will it, will they have better gross margin than us and will the demand in future is enough to absorb the whole supply?
Maulik Patel
So as Milind has mentioned, you know the India’s capacity of CPVC demand is going up to up to 5 lakh ton by 20, 29 and 30. So definitely everybody is ramping up like we are ramping up the capacity so others will also come up the capacity of this. And definitely we are, we are going to buy PVC from the import as import right now. So yeah it is going to definitely there is a change in the. But I think people are operating even though we are manufacturing caustic soda and other derivatives also. But we have an independent profit center in the products and derivatives. So the CPVC is going to be the independent profit center whoever is coming in the in the future. Yeah.
Meet Bhatt
Okay. And last is just the book coming question. What is the volume growth for Q3 overall volume growth?
Sanjay Jain
Volume growth for Q3 is around 11%. Sorry, 11%.
Meet Bhatt
Okay, so it’s QoQ, right? Not YOY.
Sanjay Jain
It’s Y-o-Y.
Meet Bhatt
I’m asking Q-o-Q.
Sanjay Jain
Q-o-Q, it’s around 1%.
Meet Bhatt
Okay. And what is, what are the capacity utilization for CPVC and ech?
Sanjay Jain
So capacity utilization as we said earlier it is around 80, 85% capacity relation and for CPUC it 50, 55% relation.
Meet Bhatt
Okay. Okay, that’s it. Thank you.
Operator
Thank you. The next question is from the line of Naitik Mohata from Sequent Investments. Please go ahead.
Naitik Mohata
Good afternoon sir. Thank you for the opportunity. Most of my questions have been answered. I just wanted to clarify again like why how has our interest costs reduced to almost negligible in this quarter?
Sanjay Jain
The interest cost which was there in the quarter two has become a negligible quarter three. The major reason is that the company has made a substantial payment of debt in this quarter. And along with that there has also been a positive impact on the positive effect of derivative contract on the mark to market provision. So that is the reason the interest cost effect negligible in the quarter three.
Naitik Mohata
Okay, so this is because our debt was in foreign currency?
Sanjay Jain
No, there’s not a foreign currency but we have a one structure as a reverse web. So we have a positive impact on… [Technical Issues]