Aarti Industries Ltd (AARTIIND) Q3 FY23 Earnings Concall Transcript

Aarti Industries Ltd (NSE: AARTIIND) Q3 FY23 Earnings Concall dated Feb. 06, 2023

Corporate Participants:

Nishid Solanki — Investor Relations

Rajendra Gogri — Chairman and Managing Director

Analysts:

Rohit Nagraj — Centrum Broking — Analyst

Vivek Rajamani — Morgan Stanley — Analyst

Archit Joshi — B&K Securities — Analyst

Sagar Sanghavi — JP Morgan — Analyst

Surya Narayan Patra — PhillipCapital — Analyst

Abhijit Akella — Kotak Securities — Analyst

Keyur Pandya — ICICI Prudential — Analyst

Rohan Gupta — Nuvama — Analyst

Ankur Periwal — Axis Capital — Analyst

Ranjit Cirumalla — IIFL Securities — Analyst

Nitin Agarwal — DAM Capital — Analyst

Vishnu Kumar — Spark Capital — Analyst

Meet Vora — Axis Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Aarti Industries Limited Q3 FY23 Earnings Conference Call. 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. [Operator Instructions] I now hand the conference over to Mr. Nishid Solanki of CDR India. Thank you and over to you sir.

Nishid Solanki — Investor Relations

Thank you. Good afternoon, everyone, and thank you for joining us on Aarti Industries Q3 FY23 Earnings Conference call. Today we are joined by senior members of the management team, including Mr. Rajendra Gogri, Chairman and Managing Director; Mr. Rashesh Gogri, Vice Chairman and Managing Director; and Mr. Chetan Gandhi, Chief Financial Officer. We will commence the call with opening thoughts from Mr. Rajendra Gogri, who will take us through the performance, update on growth initiatives, and outlook on the business. Post this, we shall open the forum for question and answers where the management will be addressing queries of the participants. Just to share our standard disclaimer here some statements that maybe made in today’s call may be forward-looking in nature and a disclaimer to this effect has been included in the results presentation that has been shared earlier, and also available on the stock exchange website.

I would now invite Mr. Rajendra Gogri to share his perspectives. Thank you and over to you sir.

Rajendra Gogri — Chairman and Managing Director

Yes. Thank you. Good afternoon, everyone, and welcome to our Q3 FY ’23 earnings conference call. We have shared our results documents, and I hope that you have had an opportunity to go through them. We reported resilient performance during the quarter and nine-month period under review as reflected by our share from value-added products, driving better profitability. This was achieved despite a decrease in demand across some end-user categories, which we believe will give us back by next year.

Our teams responded promptly to the dynamically changing situation and utilized their expertise to maintain a strong performance by optimizing the product mix and market opportunity. The share of value-added products in Q3 FY ’23 was about 81%. Our expertise and competency in multiple product value chains related to benzene and it all will remain exceptional, and we are leveraging this strength to establish a solid foundation in newer chemical value chains, which will further boost the chem company’s profitability.

As you all know, during the quarter, we saw two key developments. The first significant event is that we signed a binding 20-year term sheet with Deepak Fertilisers for supply of nitric acid with more than INR8,000 crores. This is a historic partnership, which will greatly help us in the long term and ensure that we have a steady and adequate supply of these crucial raw material. This comes into effect from 1st April ’23, which I disclosed earlier and eliminates the need to invest into backward integration for concentrated nitric acid.

The second progress is the demerger of the Pharma entity of Aarti Industries into a separate company, Aarti Pharma Limited. The record date was 20th October 2022 and the new company was listed under stock exchange, both NSE and BSE on the 30th January 2023. Now coming to the financial performance for Q3 FY ’23. The financials for Q3 FY ’22 and nine months FY ’22 have been recasted to consider the effect of scheme of arrangement for the demerger of Pharma segment from the appointed date 1st July 2021. Further we had looked to exclude the short fall fee and the termination fee received in FY ’22, arising out of cancellation of the first long-term contract to draw an appropriate comparable[phonetic].

As per this during the quarter under review, revenue increased 12% Y-o-Y to INR1,854 crores with exports contributing over 48% of total revenue. EBITDA improved by 26% Y-o-Y to INR289 crores. Profit after tax stood at INR137 crores. Considering this performance, the Board has approved an interim dividend of INR1 per share. That is 20% of the face value of the INR5 each. Demand was steady for key products under the essential end usage, further aided by volume gains.

As mentioned, demand for products pertaining to textile end user industry remains impacted and to that extent, the performance appears tapered. We expect demand recovery to come in from the first half of next fiscal year. Having seen some decline in the raw material prices in the last quarter, and the impact of that might partly be seen in Q4 FY ’23. The price of few raw materials are seeing some upside in the last few days. Having said that, we have robust pricing mechanism in place to mitigate the impact of inflationary cost pressure whereby the same is passed on to customers, thereby protecting absolute profitability.

Our profitability was further bolstered by the contribution of products with high growth and better margins. We are happy to report that against the guided EBITDA of about INR1,100 crores for FY ’23, we have already achieved the EBITDA of about INR837 crores in the nine-month FY ’23. We are constantly monitoring the development with reference to the ongoing global recessionary trends and we’ll work to optimize our product mix to mitigate the same to be able to meet the guidance given earlier. As you would have noticed, depreciation for the quarter has increased and is in line with our expectation. This is on account of commissioning of our ongoing projects.

With continuing depreciation of Indian rupee against the U.S. dollar, the mark-to-market loss of about INR11 crores in respect of our unhedged ECBs were provided and has resulted in the increase in the borrowing cost. Now let me turn your attention to the production details for Q3 FY ’23. Production of nitrochlorobenzene stood at 18,199 metric tons, while the same for hydrogenation came in at 2,995 metric tons. For nitrotoluene, the production for Q3 FY ’23 stood at 7,528 metric tons. I’ll now take you through some of the expansion initiatives announced and updates around that.

We are pleased to announce that the plant associated with the third long-term contract has been commercialized by the end of Q3 FY ’23 at our Jhagadia facility. We expect that the ramp up as per contract terms will kick in from coming quarters. Other projects, including brownfield expansion of NCB facility at Vapi and few other specialty chemical blocks are progressing well. This will become operational in our next couple of quarters and start contributing from H2 FY ’24. We have started the initial work around expanding the Ethylation capacity at Dahej SEZ by 3x with an investment of INR200 crores.

Further, I shared last time with our NT capacity reaching over 90% utilization, we have commenced the work related to debottlenecking of our Nitro Toulene Capacities. We target the capacity increase by about 50% with an objective to cater to certain high-growth application in agrochemicals. We expect both these units to commercialize in H1 FY ’25. During the nine-month period, we necessiated[phonetic] capex of about INR840 crores towards various expansion opportunities we shared previously. Our target annual capex will be in the range of INR1,100 crores to INR1,200 crores for FY ’23.

Our volume growth from new capacity will occur in the coming two years, but the fixed cost will generally tail the micro inflation, thereby yielding a robust gross profit to EBITDA conversion starting FY ’24 based on solid business visibility, our EBITDA growth guidance for FY ’24 and ’25 stands at CAGR of 25%. The collective capital expenditure target for FY ’24 and ’25 remains unchanged at about INR3,000 crores and will drive strong momentum going forward. This will be aimed towards developing new chemical value chains and introducing high potential products that will broaden the addressable market size and respond to increased demand from customers.

As a company, we have set our sights high for growth and have taken decisional action to ensure that we remain at the forefront of our chosen chemical skillset[phonetic]. Additionally, we see great potential to new chemical value chains and are poised to leverage our expertise to capitalize on these opportunities. These results of our past initiatives will become evident in the next two years, and we are confident in our ability to deliver on expectations. This confidence stems from our commitment of best-in-class manufacturing processes, continuous process enhancements, strong R&D focus, robust customer relationship management, and unwavering commitment to sustainability and innovation.

Our objective is to create value for our shareholders by taking advantage of favorable industry trends. That concludes my initial thoughts, and we’ll now request the moderator to open the floor for the Q&A session. Thank you.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Rohit Nagraj from Centrum Broking. Please go ahead.

Rohit Nagraj — Centrum Broking — Analyst

Thanks for the opportunity and good afternoon sir. Sir, first question is on a Q-o-Q basis, our gross profit has been more or less flattish, rather marginally declined. However, we have said that the value-added products contribution has been higher during the quarter. So does it mean that the discretionary part of portfolio actually had more impact during the quarter and because of which the gross profit — absolute gross profit has been flattish on a Q-on-Q basis? Thank you.

Rajendra Gogri — Chairman and Managing Director

Yes. I think discretionary is a little bit pressured on the life[phonetic] site, but other sites didn’t see much impact in Q3 overall.

Rohit Nagraj — Centrum Broking — Analyst

Sure. Sir, second question is, now earlier we were targeting that part of our capex will also go for the nitric acid part of the business, either on a weak nitric acid or concentrated nitric acid. But now, since we have got this deal with deeper fertilizers still, our capex remains unchanged for FY ’24, ’25. So this allocation — capital allocation, which was probably earlier done for nitric acid which part of the business will it be allocated now? Thank you.

Rajendra Gogri — Chairman and Managing Director

Our current product, more or less all the capex is ongoing, except the two nitrotoluene and Ethylation block, which will be commissioned in FY ’25. Everything else should get commissioned in Q4 FY ’23 and FY ’24. And the new product line for chlorotoluene and multipurpose plants, which is where the capex will go.

Rohit Nagraj — Centrum Broking — Analyst

Sure. Thank you so much. I will come back in the queue [indecipherable].

Operator

Thank you. The next question is from Ramita from Morgan Stanley. Please go ahead. Ramita may I request you to unmute your line from your side and go ahead with your question please.

Vivek Rajamani — Morgan Stanley — Analyst

Hi, sir. This is Vivek from Morgan Stanley. Sorry about that. Sir, two questions from my end. Could you provide a bit more color on the kind of demand trends that you’re seeing in your key end segments, particularly, if you could just clarify on what is specifically driving the weakness you’re seeing on the textile side? That’s the first question.

Rajendra Gogri — Chairman and Managing Director

Textile slowdown has been going on for a couple of quarters. And I think that is because of the global demand slow down because of, I think, the high inflation and all even countries, like Bangladesh, Turkey, everybody was facing problems. But now currently, some global recessionary trends are also visible in other segments also on auto, et cetera.

Vivek Rajamani — Morgan Stanley — Analyst

Sure, sir. And sir, for a second question, could you also maybe touch upon once all of your ongoing projects are progressively commissioned over F ’24 and possibly F ’25. Could you maybe talk upon — touch upon how your revenue exposure could change in terms of your end segment exposure? Thank you.

Rajendra Gogri — Chairman and Managing Director

Yes. End segment exposure more or less, it will be around 50-50 with the current ongoing expansion. So our FY ’25 number maybe more towards the singular 50-50. But chlorotoluene and multipurpose plants, I think, will be more on Pharma and agro. Going forward, I think there will be some increase on Pharma and agro during FY ’25.

Vivek Rajamani — Morgan Stanley — Analyst

Sure sir. Thank you. I will rejoin the queue.

Operator

Thank you. Next question is from the line of Nitin from Aurum Capital. Please go ahead.

Unidentified Participant — — Analyst

Yes, thank you for the opportunity. My question is that how much tune of capex is spending now, including the maintenance capex? And what is the revenue there that we’ll have from this capex?

Rajendra Gogri — Chairman and Managing Director

Yes. No, this year, we spent around INR840 crores. And this year, around INR1,100 crores to INR1,200 crores. And next two years, what we have guided is INR3,000 crores. So current ongoing expansion, I think except that nitrotoluene and Ethylation more or less, everything will get commissioned by first half of FY ’24.

Unidentified Participant — — Analyst

Okay. And what is the revenue gear that we are expecting considering the current crisis?

Rajendra Gogri — Chairman and Managing Director

Yes, we are targeting about INR1,700 crores EBITDA by FY ’25. So generally, revenue guidance depends on the raw material, but should be up for — if you take five times INR8,500 crores plus.

Unidentified Participant — — Analyst

Got it. Thank you sir.

Operator

Thank you. The next question is from the line of Archit Joshi from B&K Securities. Please go ahead.

Archit Joshi — B&K Securities — Analyst

Hi, sir. Thanks for the opportunity. Sir, in this quarter, I think some revenues must have also flown from the second contract. If we were to adjust for that, has our base business seeing some volume growth given that you are still seeing some challenges from the dyes and pigments portfolio? Have you been able to mitigate the effect of those pain points by addition of some other products? If you can guide something on that front.

Rajendra Gogri — Chairman and Managing Director

Yes. If you remove the shortfall fee and the termination fee overall EBITDA growth has been about 26%. So there is a growth because of the second contract as well as increase in the volume of our regular product also in Q3 compared to the Y-o-Y number.

Archit Joshi — B&K Securities — Analyst

Got it, sir. Sir, in this volume growth that you’re talking about in the base business, is that seem to be sustainable maybe in the next few quarters even until — as we have mentioned in the presentation for two to three more quarters, we are seeing some challenges for then in the dyes and pigment portfolio. So even without that, would we be able to maintain this volume growth?

Rajendra Gogri — Chairman and Managing Director

Yes. Overall, we see that the volume growth will happen, but sometimes some of the products we may have to put into nonregular markets. So then we will try to keep the volumes but nonregular market may attend to a lesser margins.

Archit Joshi — B&K Securities — Analyst

Understood, sir. Sir, and another thing that I noticed in the presentation was a couple of new technologies that you’ve spoken about the wafer phase and the continuous flow. I think this is the first time we have mentioned of such a thing in the presentation on the con call. Sir, any color that you can give on this? Is this going to be embedded in our existing facilities? Or there’s going to be a change in some process? Or is this going to be targeting a completely new product set, anything on that end?

Rajendra Gogri — Chairman and Managing Director

No. This will be part of our new product line. Basically exiting products we are not going to change any processes.

Archit Joshi — B&K Securities — Analyst

Right, sir. Some more elaboration sir, if possible? What kind of [technical issue] this technology?

Rajendra Gogri — Chairman and Managing Director

Yes. This chlorotoluene we will be doing a lot of downstream production also. And a lot of new chemistries will come and also in our multipurpose plant also, we have identified some products which will be — have this kind of chemistries.

Archit Joshi — B&K Securities — Analyst

Understood sir. Thank you. Thanks. That is it from my end.

Operator

Thank you. Next question is from the line of Sagar Sanghavi from JP Morgan. Please go ahead.

Sagar Sanghavi — JP Morgan — Analyst

Hi, sir. Thank you for the opportunity. Am I audible?

Rajendra Gogri — Chairman and Managing Director

Yes.

Sagar Sanghavi — JP Morgan — Analyst

Okay. I have two questions. One is on the very long term. We had earlier given guidance for FY ’24 and FY ’27 where our bottle line kind of increases up to 2x or 3 to 4x. Does that still remain same and what will drive drive it? And the second is you had mentioned about a turnaround in discretionary demand in the next two, three quarters. So again, what will drive this turnaround given that there’s a recessionary environment moving[phonetic] over? Thank you.

Rajendra Gogri — Chairman and Managing Director

Yes. Overall guidance, both FY ’24 and FY ’27, I think we should be able to achieve. General slowdown, what we see from the customer end and everything that can last about next two to three quarters. I think that is a broader feedback, what we are getting from the customer side.

Sagar Sanghavi — JP Morgan — Analyst

Okay. If I can just slip in one more question. On the tax rate, how do you look at tax rate going ahead because you’ve been getting some tax breaks? Does that continue with these new [indecipherable]?

Rajendra Gogri — Chairman and Managing Director

So basically, the new plants have a bit of a higher depreciation for [multiple speakers].

Operator

Sagar may I request you to mute your line from your side please. Lot of background noise coming from your end. Thank you. Sir you may continue.

Rajendra Gogri — Chairman and Managing Director

Yes. So the new facilities have — for the initial period, there is higher depreciation and this is whether there will be certain tax benefits available. Plus we have a few units operating there and a couple of other tax. So it will be there for a few years. So the tax rates will continue to repay the [technical issue].

Sagar Sanghavi — JP Morgan — Analyst

Okay. So it should be in the ballpark 20% range?

Rajendra Gogri — Chairman and Managing Director

[Technical issue]

Sagar Sanghavi — JP Morgan — Analyst

Okay. Alright, thank you.

Operator

Thank you. Next question is from the line of Surya Narayan Patra from PhillipCapital. Please go ahead.

Surya Narayan Patra — PhillipCapital — Analyst

Yeah, thanks for this opportunity sir. Sir, a couple of questions. First question is about the crude price correction and the significant correction in the freight cost. What we have seen in the recent past, whether the full impact of this has been seen already in the revenues and the product prices? Or that is yet to be seen in the subsequent quarter sir?

Rajendra Gogri — Chairman and Managing Director

Generally for domestic, it gets passed on, on a month-to-month basis as far as the benzene toluene price are concerned. And export it has to come where we have contractual, it gets passed on to — with a quarterly lag basis. But benzene again has started showing some upward trend in month of January, so February pricing again gone up. And freight has further softened in Q4 overall yes.

Surya Narayan Patra — PhillipCapital — Analyst

So in fact, sir, see, that was a kind of a concern that possibly the growth from — revenue growth number will be impacted because of the correction in the freight as well as crude. And what we have seen this quarter is that the growth is largely contributed by the stronger almost, like 34%, 38% kind of growth in exports, whereas the domestic prices, possibly we have seen the impact of this correction already since the growth has got softened. Now considering the kind of slowdown concern, what you are indicating and this quarter’s performance and also the likely repricing of the products are driven by the crude and freight so should we build any kind of concern for the export growth in the subsequent quarter?

Rajendra Gogri — Chairman and Managing Director

Yes. As far as the trade is concerned, generally trade has been also more or less pass-through with the customer, sometimes with a lag because of kind of plate which has increased in the last couple of years, so there is no option but to pass it on to the customers in that sense. And yes, there is some decline in regular export market is there. So we will have to reshape the products there’ll be some impact on export demand in the coming quarters.

Surya Narayan Patra — PhillipCapital — Analyst

Okay. Sir, while the export demand could be a kind of a concern, but considering the ramp-up in the multiyear supply contracts, what we have just initiated or the third contract, which is getting effective[phonetic] now. So considering that the demand concern will be overcome by this new product introductions. Is it fair to believe so?

Rajendra Gogri — Chairman and Managing Director

This will be — will be first quarter. So it would take — ramp-up will let take time because of the this.

Surya Narayan Patra — PhillipCapital — Analyst

Okay. Sir, just an extension to this one. So like what is the cumulative capex that we would have done for all these three multiyear contracts? So whether — because the third contract is also now commissioned. So hence, if you can say that what is the cumulative capex that we would have done for all the three? And also, we know that these multiyear contracts are the downstream products of our existing line of products. So what is the complementing capex that we would have done in our existing products along with the multiyear contract capex? So if you can share these two things [technical issue].

Rajendra Gogri — Chairman and Managing Director

Actually, second and third is not of a downstream kind. It is more of an independent, second and third contract. And the first contract, which got canceled was more of an integrated. Direct expense of all the three contracts will be maybe around INR1,000 crores. And if you take indirect, maybe another INR300 crores, INR400 crores extra [indecipherable] that.

Surya Narayan Patra — PhillipCapital — Analyst

Okay. So that means the INR1,400 crores kind of capex, which has not kind of contributed anything likely to be the growth driver for ’24?

Rajendra Gogri — Chairman and Managing Director

No, the second contract is already contributing.

Surya Narayan Patra — PhillipCapital — Analyst

Yes. Yes. But that is in the initial stage of ramp-up, right, sir?

Rajendra Gogri — Chairman and Managing Director

No, second contract is fully ramped up. The third contract, which we have commissioned now in Q3 of FY ’23, which will be going on a ramp-up phase next year.

Surya Narayan Patra — PhillipCapital — Analyst

Okay. Sir, just another one thing regards the margin outlook. So how should we think sur you had indicated that the newer project, which will be starting from FY ’24 are likely to have margin profile in the range of 25% to 30%. So since we are almost now approaching FY ’24 and currently, our blended margin, what we are witnessing is in the range of around 15%, 16% level, and the newer projects are likely to have the margin profile of 25% plus. So the blended kind of scenario, what should it be? Could you give some sense on that? Because it is quite clear that the growth on the EBITDA side, it is — you have already indicated and that is likely to flow in. But on the margin front, how qualitatively that it is going to be changed?

Rajendra Gogri — Chairman and Managing Director

Actually, the value-added product sales will be starting mainly from FY ’25. So the impact of high margin will be coming post FY ’25. So slowly that — as a percentage share of this high more value-added product goes up then overall gross margin at the constant raw material will increase beyond FY ’25.

Surya Narayan Patra — PhillipCapital — Analyst

Okay. Okay. Just lastly a small question, sir. Is it possible to say what is the cumulative R&D spend, although it is not a line item for us, but what is the R&D spend that we should be doing for a year as a percentage to sales?

Rajendra Gogri — Chairman and Managing Director

It will be about 1%.

Surya Narayan Patra — PhillipCapital — Analyst

Okay. Okay. Thank you sir. We wish you all the best.

Operator

Thank you. Next question is from the line of Abhijit Akella from Kotak Securities. Please go ahead.

Abhijit Akella — Kotak Securities — Analyst

Good evening sir. Thanks for taking my question. Just first of all, on the EBITDA for the quarter on a sequential basis, it is up about 7% or 8%. It seems to be driven primarily by lower other expenses, which seems to have fallen quarter-on-quarter. So is this margin expansion largely due to the fall in freight costs and maybe power and fuel costs as well? Or would we have passed this on to customers and instead grow volumes on a sequential basis? What exactly is the reason for this? And in case it is related to a decline in expenses, do we need to pass this on to customers in the subsequent quarter?

Rajendra Gogri — Chairman and Managing Director

The expenses are generally not passed on. If you see the Q2, we had the maintenance shutdown, which has resulted in higher expenses that partly gets corrected in Q3. So it is a raw material in the fleet, which gets passed on to the customers in general. But there are some volume growth and some savings in expenses, which is part of the contribution on the EBITDA side.

Abhijit Akella — Kotak Securities — Analyst

Okay. Understood. So this can be retained. And on the second long-term project that has been commissioned, is it possible to just share what revenue run rate it is operating at right now?

Rajendra Gogri — Chairman and Managing Director

That is not an immediate number from that I think.

Abhijit Akella — Kotak Securities — Analyst

Or even the first one, has it ramped up compared to the 15%, 20% utilization rate that was earlier.

Rajendra Gogri — Chairman and Managing Director

First one is still slower we had a shutdown in this Q3 for that. But the demand of that downstream product is slow overall.

Abhijit Akella — Kotak Securities — Analyst

Okay. Okay. On a Y-o-Y basis, is it possible to share some volume growth number?

Rajendra Gogri — Chairman and Managing Director

Because these are too many different products. So generally, the volume growth numbers, we are not in — sharing or taking out. Overall value-added percentage was about 81% in this quarter.

Abhijit Akella — Kotak Securities — Analyst

Right. And so, one other thing was just that you’ve spoken about the softness in textiles, which will probably hopefully fade in two, three quarters. And we also spoke about auto showing some signs of softness. There’s also a lot of talk in the industry about agrochemicals sort of seeing some demand weakness because of high inventories worldwide. So are we seeing some signs of softness there as well? And how do you expect these softer and these industries to shape up in coming quarters?

Rajendra Gogri — Chairman and Managing Director

Yes. Agro is more molecule specific. So some molecules, we are seeing that. Other molecules, they are quite strong. So it becomes very molecule-specific inventory impact. And we don’t see that impacting not more than a quarter on inventory correction. On agro for some of the products, but not all of them.

Abhijit Akella — Kotak Securities — Analyst

Okay. One last thing. Just on the capex that’s being incurred on chlorotoluene’s and then on the asset upgradation initiatives, is it possible to share some figures with us regarding how much is being spent there? And what sort of economics we are expecting from that in terms of maybe revenues and profits? Thank you so much.

Rajendra Gogri — Chairman and Managing Director

This growth in all spending will start from the next year, actually FY ’24. So up until now, the major expenses has been on our existing product line, all these contracts and expansion asset restoration on the existing product line and some few specialty chemical blocks.

Abhijit Akella — Kotak Securities — Analyst

Is it possible to just break that up sir for us, the asset upgradation and the specialty chemical lines, how much have you spent exactly?

Rajendra Gogri — Chairman and Managing Director

That bifurcation will not have handy on that.

Abhijit Akella — Kotak Securities — Analyst

Okay. Fine. Maybe I will connect separately [indecipherable] thank you so much.

Operator

Thank you. Next question is from the line of Keyur Pandya from ICICI Prudential.

Keyur Pandya — ICICI Prudential — Analyst

I think it is not partially answered, just wanted to understand, probably if you can give some idea on contract 1 and 2, what we had earlier guided versus what trended right now we are running it as far as contracts 1 and 2 are concerned?

Rajendra Gogri — Chairman and Managing Director

Yes, contract 2 asset is more of a — we are as per our original guidance whereas contract 1 the demand is slow. So in general, what we had guided was about maybe 30%, 40% this year may not materialize as far as contract 1 is concerned.

Keyur Pandya — ICICI Prudential — Analyst

Contract 2 would be INR200 crores when stabilizes, is it INR200 crore per annum?

Rajendra Gogri — Chairman and Managing Director

No, that was more about INR500 crores, but it is not purely directly related to topline we restructured the EBITDA.

Keyur Pandya — ICICI Prudential — Analyst

Sorry, I couldn’t understand.

Rajendra Gogri — Chairman and Managing Director

It is more of not directly to the top line as far as when we consider the EBITDA coming out of a second contract.

Keyur Pandya — ICICI Prudential — Analyst

Okay. And sir, on contract 1 you mentioned probably the end product is also facing some slowdown. So in absolute terms, what kind of revenue should we expect either say, FY ’23 or say FY ’24? Are you considering that slowdown?

Rajendra Gogri — Chairman and Managing Director

FY ’24 number that maybe around INR200 crores. But the margins and all are still under pressure on those lines.

Keyur Pandya — ICICI Prudential — Analyst

Okay. Sir, thanks a lot. I will contact you separately for further details and all the best. Thank you.

Operator

Thank you. Next question is from the line of Rohan Gupta from Nuvama. Please go ahead.

Rohan Gupta — Nuvama — Analyst

Hi, sir. Good evening and thanks for the opportunity. Sir, first question is on our start of Q1 before Pharma demerger — I mean after Pharma demerger in Q2. You mentioned that INR1,100 crores these kind of guidance for EBITDA for FY ’23. Looking at the current number and you’ve mentioned that there’s some pickup in demand environment. What kind of numbers one can expect now? Or is there any upward reason for that given the nine-month number?

Rajendra Gogri — Chairman and Managing Director

No, overall, I think as we mentioned, there’s some global slowdown. So we are not revising guidelines. Overall now, we’ll try to reshuffle the products and everything to meet the guidelines of about INR1,100 crores.

Rohan Gupta — Nuvama — Analyst

Okay. Sir, second question is in terms of our Aarthi Pharma. What kind of sales we do from there? I mean, we are supplying to intermediates to them, because earlier there were some intersegmental sales was there. So what kind of business is coming right now from Aarti Pharma? Do we have anything on that?

Rajendra Gogri — Chairman and Managing Director

No, we don’t have any significant sales to Aarti Pharma.

Rohan Gupta — Nuvama — Analyst

So there is not any significant revenues coming from outgoing to Aarti Pharma.

Rajendra Gogri — Chairman and Managing Director

No, no.

Rohan Gupta — Nuvama — Analyst

Just an observation on the current quarter numbers and trend like the purchase of the stock intake. So that has gone up significantly with roughly INR126 crore, while we always had adjusted kind of trading business. So what is this? Why all of a sudden sharp increase in purchases of stocking trade any particular product commissioning? Or lack of any existing intermediate which we are manufacturing and have to buy from outside?

Rajendra Gogri — Chairman and Managing Director

No, no. I guess. One of the reason for this increase in that was the transitionary period because the demerger was effective on 20th of October, and there were certain orders which would have been issued by us in the name of Aarti Industries for the Pharma business. So those orders, we still have to continue servicing from Aarti Industries. So it’s more of a transitionary period activity, nothing beyond that.

Rohan Gupta — Nuvama — Analyst

Okay. So just last on my side, on the contract 1. You mentioned that contract 1 that after the termination, we are still running on 40% kind of — 30% to 40% kind of utilization. You mentioned that there’s a global weakness in the demand environment for the Dicamba intermediate. Do you see that this environment or the sluggishness in the Dicamba intermediate will continue? Or you see that there is some pickup happening. Or are we evaluating any further possibility of further forward integration in complete Dicamba which we had once planned for that? Or can you break it partially — partially these capacities also facility also for making some other chemicals as well?

Rajendra Gogri — Chairman and Managing Director

Yes. Currently, basically, we are looking at a slowdown in that. So even in FY ’24, we don’t expect that — what we had guided 70% may not happen. So what are we are evaluating and our strategy on that, whether we can go downstream or we can try to convert the other line into some other products. Because we have two different lines in that. So that detailing we are trying to work out how to optimize those assets.

Rohan Gupta — Nuvama — Analyst

So if I understand rightly, sir, I think that including the peripheral investment in excess — along with this contract, we had some INR850 crores[phonetic] investment made in this and that at the current level, 30%, 40% utilization or maybe even not looking at 70% utilization next level next year. So it means that it will not contribute anything to the bottom line with this run rate and INR800 to INR900 crore investment will not fetch anything. Is that understanding correct, sir?

Rajendra Gogri — Chairman and Managing Director

No, no, this is the downstream component, which will not be utilized. But the upstream, we’ll be starting to give in to the other products. This particular molecule doesn’t have much use. But the precursors that we are now going into the other markets.

Rohan Gupta — Nuvama — Analyst

Okay. So the ancillary investment, which we have made around with this project that is being utilized now? [multiple speakers]

Rajendra Gogri — Chairman and Managing Director

Correct, correct. That will get ramped up in the next two years to almost fully utilized levels.

Rohan Gupta — Nuvama — Analyst

This is only related to this plant, which was I think the investment was INR600 crores, if I am not wrong?

Rajendra Gogri — Chairman and Managing Director

It is around INR500 crores was coming from this plant.

Rohan Gupta — Nuvama — Analyst

Okay. So that investment will still fetch lower utilization of just only 70% and where we are evaluating further possibility of getting into other products?

Rajendra Gogri — Chairman and Managing Director

Yes, yes.

Rohan Gupta — Nuvama — Analyst

Yes. And just one more thing on this. As regards to that investment, just to refresh that is largely — I mean, there’s a significant component of termination and shortfall compensation. So the investment is substantially funded out of cash downflow[phonetic]. So typically, there’s no cash flow, which has gone into that.

Rajendra Gogri — Chairman and Managing Director

Yes, that we understand because we already got the termination fees along with the two years EBITDA number.

Rohan Gupta — Nuvama — Analyst

That we understand. That is already money sitting in the balance sheet, right?

Rajendra Gogri — Chairman and Managing Director

Yes, yes, yes.

Rohan Gupta — Nuvama — Analyst

Just last from my side, sir. Sir, last time, you guided for the further reduction in debt, and you mentioned that roughly last quarter, debt was at peak level. So do we see that — and the working capital, which has gone up in between what kind of debt level we are looking at year-end?

Rajendra Gogri — Chairman and Managing Director

So I guess, the debt level should be virtually be a bit lower than what we have seen on the peak but maybe around INR2,600 crores, INR2,700 crores debt level could be seen. So some part of it is because of reduction in the commodity prices or the freight cost and other things which is resulting in the reduction in working capital.

Rohan Gupta — Nuvama — Analyst

So still it will be INR2,700 crores, you’re talking about gross debt. What is kind of the net debt number?

Rajendra Gogri — Chairman and Managing Director

No, I’m looking at more or less gross and net will be similar.

Rohan Gupta — Nuvama — Analyst

Okay. This, I’m asking because we looked at when in Q2 con call, you mentioned that will be — this is a peak date, and we’ll see some reduction in that level — in net debt level and it can come down by year-end.

Rajendra Gogri — Chairman and Managing Director

[multiple speakers] reduction.

Rohan Gupta — Nuvama — Analyst

Okay. Thanks sir. Thank you so much. I will come back for any follow up questions. Thank you.

Operator

Thank you. Next question is from the line of Ankur Periwal from Axis Capital. Please go ahead. Ankur, your line is unmuted. May I request you to unmute please.

Ankur Periwal — Axis Capital — Analyst

Sorry. Am I audible now?

Operator

Yes. You are thank you.

Ankur Periwal — Axis Capital — Analyst

Yes. Okay. Thanks for the opportunity. First question on Slide #9, wherein we are saying that 50-plus products are in the pipeline from R&D perspective. Are these products largely for the existing value chain? Or these are the new value chain that we have talked about?

Rajendra Gogri — Chairman and Managing Director

Yes. These are mainly from the new value chain but some from the existing value chain also. But more than 3/4 will be of new.

Ankur Periwal — Axis Capital — Analyst

Okay. Sure. And so from a time line perspective, these will be FY ’24 onwards getting commissioned, right?

Rajendra Gogri — Chairman and Managing Director

Yes, FY ’25 onwards.

Ankur Periwal — Axis Capital — Analyst

’25 onwards. Okay. And sir, second question on the volumes front. While I understand near-term slowness in terms of macro, et cetera. But from a medium term let’s say, from a three or five-year perspective, what should be our volume growth on a like-to-like basis?

Rajendra Gogri — Chairman and Managing Director

Yes, basically, what we are seeing that in around 40%, 50% volume growth, that’s what we are guiding in EBITDA, more or less that volume growth will transfer on our existing product line, about 40%, 50% growth and then the new products will come in.

Ankur Periwal — Axis Capital — Analyst

If I got you right, 25% CAGR, which is 50% almost growth is largely volume driven largely from the existing product segments.

Rajendra Gogri — Chairman and Managing Director

Yes.

Ankur Periwal — Axis Capital — Analyst

So any top-up there from Chloro Toluene or the other initiatives will be inching up the growth further?

Rajendra Gogri — Chairman and Managing Director

Correct. Correct. So that will be more of FY ’25 onwards. So it will be commissioned in FY ’25. So we don’t see much coming in from both in FY ’25. We are commissioning here. The new product real contribution towards EBITDA will come from FY ’26.

Ankur Periwal — Axis Capital — Analyst

Fair enough. And here, we are largely gaining market share because the reason I checked on this was historically, looking at the chemical business EBIT, the growth has not been as sharp versus what we are guiding now. So is it any specific area wherein we are gaining market share globally? If you can help us understand that.

Rajendra Gogri — Chairman and Managing Director

Yes. Some of the product is, the first contact downstream, upstream capacity, which we’ll try to fulfill that [indecipherable] new capacity, which are coming — and at [indecipherable] plant, we are ready that totally additional volumes, which we are tripling. And nitrotoluene also we are expanding. So — across the board, somewhere the new will get started in FY ’24 and ’25. And the rest, which is already commissioned. So there’ll be some ramp-up on this first contract-related upstream capacities.

Ankur Periwal — Axis Capital — Analyst

Okay. That’s helpful. And sir, lastly, if I may, on a nine-month basis, if you can define how could be the — how should one look at the volume growth here? I understand it’s a mix of multiple products, but broadly, directionally, what should be the range?

Rajendra Gogri — Chairman and Managing Director

That it has become difficult. And again, contractual — new contract is a different kind of volumes and all. Overall, on the value-added percentage has increased to 81%. The specific number will not have a volume growth.

Ankur Periwal — Axis Capital — Analyst

Okay. No worries sir. That is it from my side. Thank you.

Operator

Thank you. Next question is from the line of Ranjit from IIFL Securities. Please go ahead.

Ranjit Cirumalla — IIFL Securities — Analyst

Hi, sir. Thanks for giving this opportunity. Firstly, on the second long-term contract. If I understand it right, there was an advance that we have got for setting at this particular contract. So to that extent, this should be a largely noncash flow, at least for this particular year. Is that understanding right?

Rajendra Gogri — Chairman and Managing Director

Correct. Correct.

Ranjit Cirumalla — IIFL Securities — Analyst

Okay. So how long would that be, whether we will be exhausting that this year or this.

Rajendra Gogri — Chairman and Managing Director

Sorry, sorry to correct that it won’t be a noncash flow thing — there will be cash flow coming in from the contract. So the advance doesn’t get interested against the supply gets partly adjusted, and it will be there over a period of fairly a longer period of time.

Ranjit Cirumalla — IIFL Securities — Analyst

Okay. So how long would that continue over the next two to three years?

Rajendra Gogri — Chairman and Managing Director

It will be more than that, but we can’t give the exact details on kind of confidential but it will be there for more than three years, for sure. We will gradually phase out over time.

Ranjit Cirumalla — IIFL Securities — Analyst

[indecipherable] 20%, 25% each year or even less than that?

Rajendra Gogri — Chairman and Managing Director

A little bit lower than that.

Ranjit Cirumalla — IIFL Securities — Analyst

Okay. And the rest will be kind of a cash flow?

Rajendra Gogri — Chairman and Managing Director

Yes.

Ranjit Cirumalla — IIFL Securities — Analyst

Okay. Second, we have said that most of our projects would be kind of a commission in the first half of FY ’24, and it will continue to have the guided impact of 25% CAGR. Would it safe to assume that probably the bulk of this crop would largely accrue in FY ’25, even that we will have this overheads [phonetic] in FY ’24?

Rajendra Gogri — Chairman and Managing Director

Yes. Can you repeat the question?

Ranjit Cirumalla — IIFL Securities — Analyst

Yes. So our EBITDA CAGR for the next two years is 25%. And we have also said that most of our capex is likely to come on stream in the first half of FY ’24. So I assume that there would also be a higher overheads on account of capitalization. So to that extent, the EBITDA growth should be a bit lower. So would it safe to assume that the 25% CAGR that we are guiding would be skewed towards FY ’25?

Rajendra Gogri — Chairman and Managing Director

Yes, it will be more towards FY ’25, yes.

Ranjit Cirumalla — IIFL Securities — Analyst

Yes. And lastly, the way I understand the business is we are — we generate a lot of [indecipherable] we carry our one reaction and there are multiple products that we generate, the fluorination hydrogenation or nitrogen process. And when we say that we were exposed to the discretionaries around 50%. So the question is that would that 50% event also impact the other 50% of the business, where there is a demand, but there could be a situation that we might not be able to cater that because we are contained by our ability because beyond the point we might not be able to produce because [indecipherable] or in a larger part of the portfolio?

Rajendra Gogri — Chairman and Managing Director

Generally, we are able to place it on a nonregular market. So generally, we are able to manage if a particular segment has a lower demand. In a regular market, we try to place it in a nonregular market.

Ranjit Cirumalla — IIFL Securities — Analyst

That’s what we did during the COVID as well, in the initial part of COVID.

Rajendra Gogri — Chairman and Managing Director

Correct. Correct. Cool sir. That answers my questions. Thank you.

Operator

Thank you. Next question is from the line of Nitin Agarwal from DAM Capital. Please go ahead.

Nitin Agarwal — DAM Capital — Analyst

Thanks for taking the question. Sir, two things. One is, A, you talked about this 25% EBITDA CAGR over the next two years. Now you also talked about certain softness being there in some of the segments, like textiles and autos. So what is the risk in your assessment on this guidance? What should be mindful of?

Rajendra Gogri — Chairman and Managing Director

So we expect there is a normal demand situation in [technical issue]. At least FY ’25 should see a totally normal demand. It is mainly based on that.

Nitin Agarwal — DAM Capital — Analyst

And sir, what could drive upside to this? I mean what could be the primary — is there any source of upside to this guidance, which elements can surprise us on the positive side to this guidance?

Rajendra Gogri — Chairman and Managing Director

Yes. I mean, overall, if the [technical issues] higher profits can come up because of that.

Nitin Agarwal — DAM Capital — Analyst

Have you been seeing any instances of these in recent times where in certain products where because of various reasons, the issues in China or Europe, there have been shortages and price improvements or the supplies have been largely normal across most of your products?

Rajendra Gogri — Chairman and Managing Director

Yes, most of the products are in a normal situation.

Nitin Agarwal — DAM Capital — Analyst

And sir, lastly, this whole talk which has been there about China plus one. Later, Europe plus one also. In your assessment, how much of that has played out and in which shape and form are you seeing it playing out?

Rajendra Gogri — Chairman and Managing Director

China plus one is a very long-term structural thing, which is going on for last maybe five, seven years, and I think we will continue to happen for the next five, 10 years. So there is a Europe plus one is long term. Some of the energy intensive products, you see that the investment in Europe might become less because the energy will become costlier. So that may open up opportunity for India. So then that Europe plus one also may take two, three years that you have to identify the products where they will open other long-term opportunities.

Nitin Agarwal — DAM Capital — Analyst

Sir, have you had any conversations with your clients around this, the potential fallout from this Europe plus 1? Or this is right now largely a concept, and it’s not much really translating into numbers of industry — Indian industry just yet?

Rajendra Gogri — Chairman and Managing Director

No, it’s just discussions are going on of these possibilities in that but that impact will come only up for two, three — after two, three years. So except some people have surplus capacity and you temporarily put up. But in general, I think for the newer capacity, it will take two, three years.

Nitin Agarwal — DAM Capital — Analyst

And sir, just last one on FY ’24, you said bulk of the growth will be driven by our current products. And FY ’25 is where some of the newer products will start to contribute in a more meaningful way. That understanding is correct, sir?

Rajendra Gogri — Chairman and Managing Director

No, even up to FY ’25 will be more of the current product line because FY ’25 by the new product line, it will be the first year. So we don’t see any significant EBITDA coming from new products in FY ’25, but some volumes will start coming in FY ’25 from the new products.

Nitin Agarwal — DAM Capital — Analyst

And sir, on that, the fact is we have the same product lines if you’re saying which you’ve been driving growth for ’24, ’25. I mean, what has been the reason that our growth has been relatively little contribution for some of these existing products have been little on the muted side over the last few quarters. I mean what is going to change in your assessment over the next two years on this current portfolio, which can drive up such a reasonably strong growth versus what we’ve done in the recent past?

Rajendra Gogri — Chairman and Managing Director

Yes, basically, this entire the first contract backward change, which we had expanded that we expect that to get [indecipherable]. And this new Ethylation and nitrotoluene that is a new capacity, which we are adding is based on more visibility. And nitrochlorobenzene expansion will happen. So those are the things which we will lead to this volume growth and some other specialty chemical also we have added. So that will also drive the growth.

Nitin Agarwal — DAM Capital — Analyst

And sir, last one, sir, on Pharma business, so how are you planning to share more details on the business? Anything which is planned sir, if you can share it on this call?

Rajendra Gogri — Chairman and Managing Director

Basically, nine-month results are already in public domain in Pharma. So EPS for nine months was about 16.6. So annualized EPS about 22 for Pharma. On an absolute number, PAT is about INR751 crore and EBITDA is INR264 crores for nine months in Pharma. And then after Q4, obviously, there will be a regular interaction for Pharma.

Nitin Agarwal — DAM Capital — Analyst

Okay, sir. Thank you very much sir.

Operator

Thank you. Next question is from the line of Ritesh from Morgan Stanley. Please go ahead.

Unidentified Participant — — Analyst

Sir, just one quick escalation. Did you say that your FY ’23 to ’25 growth, 25% CAGR is more FY ’25 rather than FY ’24? I got confused when you answered to a particular participant.

Rajendra Gogri — Chairman and Managing Director

Yes, yes. Because FY ’24, even some slowdown might go on in maybe one or two quarters. And so, FY ’24, is I think will be more of a turbulent year in that sense. So that clarity we will be able to view in Q4. Yes.

Unidentified Participant — — Analyst

Yeah, I understood. Thank you. That is it from my side.

Operator

Thank you. Next question is from the line of Vishnu Kumar from Spark Capital. Please go ahead.

Vishnu Kumar — Spark Capital — Analyst

Good evening and thanks for the time sir. If you see the nine-month sales number versus ’22 and ’23, roughly about INR860 crores is the increase, which is completely driven by exports, which means domestic seems to be flat for nine months. Now considering that commodity prices have generally gone up and also some new plants have kicked in for you, it appears that your volume growth overall seems to be negative. Is this only — I mean is the number quite large in textile, so we are not seeing any growth in domestic? Or other segments are also not doing great? Any thoughts or color on this?

Rajendra Gogri — Chairman and Managing Director

No, textile is generally domestic. Textile has very less export component. But overall, I don’t think it will be negative. We have not looked at that way actually [technical issue] export and local.

Vishnu Kumar — Spark Capital — Analyst

If you just look at the nine-month number, ’22 to ’23 it is practically flat. So I mean, obviously, the commodities prices have gone up. So it appears that at least the volume could have been negative.

Rajendra Gogri — Chairman and Managing Director

Yes. That is, in general, we always tried to reshuffle depending on the market, the remote potential in export market will push it there. So it hasn’t been analyzed that there will be a decrease.

Vishnu Kumar — Spark Capital — Analyst

But how much would be textile out of our overall domestic sales? Any rough idea you could give us?

Rajendra Gogri — Chairman and Managing Director

So we are more around 15%, 20% range. So textile market and domestic may be around 20%, 25%.

Vishnu Kumar — Spark Capital — Analyst

Okay, sir. Thank you.

Operator

Thank you. Next question is from the line of Meet Vora from Axis Capital. Please go ahead.

Meet Vora — Axis Capital — Analyst

Just trying to [technical issue]

Operator

Meet, sorry to interrupt. Your voice is breaking terribly. May I request you to come in a better reception area please?

Meet Vora — Axis Capital — Analyst

Hello. Am I audible now?

Operator

Yes.

Meet Vora — Axis Capital — Analyst

Sir, just wanted to understand our thought process behind tying up volumes of nitric acid with [technical issue]. So earlier, we were contemplating a INR200 crores of capex for setting up a concentration plant. And in last call, you mentioned that this plant has been ordered. Now given that as we grow our business, nitric acid is our key RM and even deeper fertilizer is not expanding their capacities. So how do we see this? I mean, will we be able to suffice our volumes from this agreement?

Rajendra Gogri — Chairman and Managing Director

Yes. Basically, they’ll be expanding capacity because fertilizer also plan to expand that capacity. And overall, because Deepak fertilizer is multi-location, multi-plant for both weak nitric acid and concentrated nitric acids. So it’s kind of [indecipherable] rather than having one single stream plant for us. So that is an advantage of sourcing from Deepak fertilizers compared to our own single plant [indecipherable]. And second piece of the cash flow for more on a value-added specialized chemistries. So they’re the two main reasons, which are driving this.

Meet Vora — Axis Capital — Analyst

Sure, sir. And secondly, we have highlighted that this quarter performance has been aided by newer capacity additions. So is there any other capacity addition except for first long-term contract and the second and third long-term contract?

Rajendra Gogri — Chairman and Managing Director

Other than that, none of any significant capacity addition in this quarter now.

Meet Vora — Axis Capital — Analyst

Sure. So this nine-month performance has been aided by second and third long-term contract addition?

Rajendra Gogri — Chairman and Managing Director

Yes.

Meet Vora — Axis Capital — Analyst

Okay. Thanks sir. That is all from my side.

Operator

Thank you. Next question is from the line of Rohit Nagraj from Centrum Broking. Please go ahead.

Rohit Nagraj — Centrum Broking — Analyst

Yes. Sir, in our presentation, we have mentioned that in FY ’22, 5% revenues came in from China. And given that recently, the restrictions have been over, have you seen any demand pickup, particularly for the exports in China?

Rajendra Gogri — Chairman and Managing Director

Yes, I think demand from China is now normalized overall, I think.

Rohit Nagraj — Centrum Broking — Analyst

Right. Okay. Thank you. That was the only question.

Operator

Thank you. Next question is from the line of Surya Narayan Patra from PhillipCapital. Please go ahead.

Surya Narayan Patra — PhillipCapital — Analyst

Thanks for the opportunity again sir. Sir, just wanted to check about the cost component relating to the energy and the date. So in fact, FY ’24 put together — just two components put together was about 8%. So for FY ’23, the cost share would be, what should be the percentage to sales, sir?

Rajendra Gogri — Chairman and Managing Director

I think that detail may have to be taken out [multiple speakers].

Surya Narayan Patra — PhillipCapital — Analyst

Yes. Yes, yes. Okay [indecipherable]. So that is the one. Secondly, some clarifications — what we are trying to say is that this third contract what we have commissioned. So this year, we may not find any meaningful contribution in the — even in the fourth quarter. Practically, that will be contributing from the first quarter. Is that right, sir?

Rajendra Gogri — Chairman and Managing Director

Yes, yes. Yes.

Surya Narayan Patra — PhillipCapital — Analyst

Okay. And even the other new projects, so you have said in the — for FY ’24, the — you’re at [indecipherable] these are the three key kind of commissioning that we should be seeing along with the specialty chemical project. Is that the kind of right understanding, sir?

Rajendra Gogri — Chairman and Managing Director

No, no. Multipurpose plant will get commissioned in FY ’25. And chlorotoluene will be FY ’25 and FY ’26. There will be multiple blocks for chlorotoluene. Over that two-year period, we’ll have a commission of various chlorotoluene blocks.

Surya Narayan Patra — PhillipCapital — Analyst

So then what are the projects that you are indicating for FY ’24, sir?

Rajendra Gogri — Chairman and Managing Director

So nitrochlorobenzene and some other specialty chemical blocks, which are currently under the construction.

Surya Narayan Patra — PhillipCapital — Analyst

Okay. Okay. Okay. So — and just last one question. So this year, the first agrochemicals dicamba project, utilization should be in the range of around 20% or so, that is the kind of right number we should consider?

Rajendra Gogri — Chairman and Managing Director

Yes.

Surya Narayan Patra — PhillipCapital — Analyst

Okay. Sure sir. Thank you sir. Thanks a lot.

Operator

Thank you very much. I now hand the conference over to the management for closing comments.

Rajendra Gogri — Chairman and Managing Director

Thank you, everyone, for taking out time to join us on our Q3 FY ’23 earnings conference call. I hope we have addressed all your questions. If you have any further questions, please feel free to contact our Investor Relations team and we’ll address them. Stay safe and we look forward to connecting with you all of you again in the next quarter. Thank you once again.

Operator

[Operator Closing Remarks]