Balkrishna Industries Ltd (NSE: BALKRISIND) Q4 FY22 Earnings Concall dated May. 14, 2022
Corporate Participants:
Rajiv Poddar — Joint Managing Director
Madhusudan Bajaj — President (Commercial) and Chief Financial Officer
Analysts:
Basudeb Banerjee — ICICI Securities — Analyst
Ashutosh Tiwari — Equirus Securities — Analyst
Siddhartha Bera — Nomura — Analyst
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Ronak Sarda — Systematix Group — Analyst
Ankit Kanodia — Smart Sync Services — Analyst
Amin Pirani — J.P. Morgan — Analyst
Abhishek Jain — Dolat Capital — Analyst
Vimal Gohil — Union AMC — Analyst
Arvind Sharma — Citibank — Analyst
Lokesh Manik — Vallum Capital — Analyst
Joseph George — IIFL — Analyst
Sonal Gupta — L&T Mutual Fund — Analyst
Trilok Agarwal — Dymon Asia — Analyst
Chirag Shah — Edelweiss — Analyst
Maitri Parikh — Pi Square Investments — Analyst
Ravi Naredi — Naredi Investments — Analyst
Suraj Fatehchandani — Compound Everyday Capital — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Balkrishna Industries Limited Q4 FY’22 Earnings Conference Call hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded.
This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company, as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.
I now hand the conference over to Mr. Basudeb Banerjee. Thank you, and over to you, sir.
Basudeb Banerjee — ICICI Securities — Analyst
Thanks, Mike. Very good morning to all the participants and thanks to Balkrishna Industries management for giving us the opportunity to host the call. We have with us Mr. Rajiv Poddar, Joint Managing Director of Balkrishna Industries and senior management of the company. Over to you, Mr. Poddar for your initial comments, sir.
Rajiv Poddar — Joint Managing Director
Thank you, Basudeb. So, good morning everyone and thank you for joining us today. Hope all of you along with your near and dear ones are safe and healthy. Along with me, I have Mr. Bajaj President, Commercial and CFO; and also SGA, our Investor Relation Advisors.
Let me begin with performance updates. The geopolitical situation has aggravated supply chain problems. This has increased both the prices and availability of raw materials. Similarly, logistics and freight costs have continued to remain at elevated levels. End user markets continue to remain strong in spite of inflationary trends. The off-highway tire industry continues to see higher offtake on account of healthy demand across mining and agricultural markets and the BKT brand continues to gain market share.
Let me now talk about our capex plan. During the quarter, we commissioned the 50,000 metric tonne per annum brownfield tire plant at Bhuj. We expect complete ramp up in production to be achieved in second half of financial year ’23. Carbon Black, the project is on track. We expect the commissioning of the 55,000 metric tonne per annum Carbon Black project along with the power plant in the next 2, 3 months. The advanced Carbon Black project of 30,000 metric tonne per annum will be commissioned in second half of financial year ’23. In November ’21, the Board had decided capex at the Waluj plant at a cost of INR350 crores. For simplicity, we will term the old plant as Waluj 1. However, the Board of Directors have now decided to keep this capex investment on hold and continue the operations of the plant in order to have unhindered production and cater to the strong demand and quicker production scheduled demanded by end customer. As you are aware, the new plant in Waluj is now termed as Waluj 2 was commissioned in September ’21, which has a capacity of 30,000 metric tonne per annum. The total achievable capacity profile is 360,000 metric tonne per annum which will be available by end of financial year ’23.
The Board of Directors has declared a final dividend of INR4 per share in addition to the 3 interim dividends of INR4 per share each and a special dividend of INR12 per share announced earlier in financial year ’22. Thus, the total dividend will be INR28 per share.
With this, I now move on to the operational highlights. Our sales volume for the quarter was 77,119 metric tonne, a growth of 13% year-on-year. For financial year ’22, sales volumes stood at 288,795 metric tonne registering a growth of 27% year-on-year. Our standalone revenue for the quarter stood at INR2,432 crores, which includes realized gain on foreign exchange pertaining to INR58 crores. For financial year ’22, revenues stood at INR8419 crore, which includes realized gain on foreign exchange pertaining to the sales of INR152 crores. For financial year ’22, 54% of sales came from Europe, 18% from India, 17% from Americas and the balance from rest of the world. in terms of channel contribution, 69% was contributed from the replacement segment in financial year ’22 while OEM contributed to 28% with the balance coming from offtake. In terms of category, agricultural segment contributed 66% in the financial year ’22 while [indecipherable] industrial and construction contributed to 31% and the balance came from other segments.
The standalone EBITDA for the quarter was at INR576 crores, with a margin of 23.7%. The EBITDA for the quarter was impacted by higher logistic costs which have moved up almost 400 basis points quarter-on-quarter basis. In addition to this, we also saw higher power costs. For financial year, EBITDA stood at INR2,182 crores, with a margin of 25.9%. Other income for the quarter stood at INR52 crores while unrealized loss stood at INR21 crores. For financial year ’22, other income stood at INR185 crore while unrealized gains stood at INR39 crores.
Coming to the net forex items, for the quarter, we had a net forex gain of INR56 crore, which includes realized gain of INR77 crore and unrealized loss of 21 crores. For the financial year ’22, we had a net forex gain of INR246 crore, which includes realized gain of INR207 crore and unrealized gain of INR39 crores. Profit after tax stood for the quarter was recorded at INR374 crores while for the financial year ’22 profit after tax stood at INR1,411 crores. For the financial year ’22, profit after tax was impacted by the crystallization of contingent liability to the tune of INR65.4 crores, post completion of certain tax assessment, which was charged in the Q1 and Q2 of the financial year.
Our gross debt stood at INR2,443 crores at the end of 31st March ’22, of which about INR1,942 crore is relating to working capital debt. Our cash and cash equivalent were at INR1,932 crores. For financial year ’22, we incurred a total capex of INR1,023 crores on new capex programs of the allocated INR1,900 crores project.
For Q4 financial year ’22, the euro hedge rate was at INR86.5. Forward hedge rate currently stands at around INR85 level. For financial year ’23, we expect to clock volumes of 320,000 metric tonne to 330,000 metric tonne, considering the capacity enhancements from ongoing capex will be available towards the end of first half of the financial year.
With this, I conclude my opening remarks and leave the floor open for Q&A. Thank you.
Questions and Answers:
Operator
Thank you. We will now begin the question-and-answer session. [Operator Instructions] We have the first question from the line of Ashutosh Tiwari from Equirus Securities. Please go ahead.
Ashutosh Tiwari — Equirus Securities — Analyst
Hi, sir. Congrats on good numbers. Firstly, you mentioned the hedge rate on how much for the quarter, realized rate?
Rajiv Poddar — Joint Managing Director
86.5.
Ashutosh Tiwari — Equirus Securities — Analyst
86.5, and 85 it will go to subsequently.
Rajiv Poddar — Joint Managing Director
Yes.
Ashutosh Tiwari — Equirus Securities — Analyst
Secondly, on this Waluj plant, we had mentioned earlier that this plant can’t be used. So is it like the plant and machinery is still usable or we will incur that capex later on?
Rajiv Poddar — Joint Managing Director
So at the moment, it is usable and since there is a strong demand, we are continuing to use it and we will decide once at a later date about how to go about the planned investment.
Ashutosh Tiwari — Equirus Securities — Analyst
So in that case, what is the capex number for ’23 and ’24 if you can provide?
Rajiv Poddar — Joint Managing Director
Roughly INR900 crores.
Ashutosh Tiwari — Equirus Securities — Analyst
Okay, INR900 crores capex.
Madhusudan Bajaj — President (Commercial) and Chief Financial Officer
[indecipherable] is the total project. I think we’ve done roughly just over 1,000. So the balance will come, it’s roughly INR900 crore for next year.
Ashutosh Tiwari — Equirus Securities — Analyst
And lastly, if I may ask, any color on — like demand is strong. Any color on the inventory, the distribution channels and all. Is that normal where it stands today?
Rajiv Poddar — Joint Managing Director
Yeah, it is normal as per what it was standing is normal.
Ashutosh Tiwari — Equirus Securities — Analyst
Around 3 months or so?
Rajiv Poddar — Joint Managing Director
Yes, yes.
Ashutosh Tiwari — Equirus Securities — Analyst
Okay, thank you, sir.
Operator
Thank you. We have the next question from the line of Siddhartha Bera from Nomura. Please go ahead.
Siddhartha Bera — Nomura — Analyst
Ye,s sir, thanks for the opportunity. Sir, my first question is on the freight cost. So even if I look at quarter-on-quarter on a per tonne basis, it has jumped sharply by about 50% and if you look at the freight indexes and all, it has not jumped back sharply. So I mean, is it also a factor of availability and why is it [indecipherable] so sharply and if you can just highlight about the outlook, should we expect these type of per tonne levels to continue or do you have said that there is some dip in the current quarter.
Rajiv Poddar — Joint Managing Director
So basically, we had some old contracts which were running in the earlier part of the year. That’s why you didn’t see the impact so sharply earlier, they came and we have to renegotiate the contracts, which were negotiated at the current list, which led to this kind of impact. So that is where the full cost is now. I mean it’s the full picture is now captured into the costing because the new contracts have come in place.
Madhusudan Bajaj — President (Commercial) and Chief Financial Officer
And same is likely to continue for some more period. Current rates are likely to stay. We don’t foresee any immediate relief in the freight.
Siddhartha Bera — Nomura — Analyst
Got it. And second is sir, on the demand side, now, I mean if you look at the capacity, we will already be touching close to the peak capacity in the second half on a quarterly run rate basis. So what is the plan for next year. I mean, given the current capacity, I think the next year growth will be at probably low-single digit at full capacity. So any plans on the capacity side, how to — how you are looking to expand from here on going ahead?
Rajiv Poddar — Joint Managing Director
So we are — we have put the team to — is on the drawing board, the whole team is working on the drawing board. As soon as we have something more specific, we will come to the Board, and once the Board approves, we will announce it, but we are on the drawing board phase for future expansion.
Siddhartha Bera — Nomura — Analyst
But generally, by the time you plan it, how long will it take for the capacity to come on site?
Rajiv Poddar — Joint Managing Director
Between 18 to 24 months.
Siddhartha Bera — Nomura — Analyst
18 to 24 months. Okay. Sir, last question is on the working capital side, we have seen a very sharp jump this year, specifically on the inventory and all. So next year, how do you expect this, should we expect a similar level of working capital or you believe that it may come down —
Rajiv Poddar — Joint Managing Director
No, basically working capital will remain at these levels. See, there are 3 reasons which have contributed to that. One is the overall turnover of the company has grown. Number 2, the lead times have grown because of the higher shipping periods and availability. So that realization of the money is going to take that period. And thirdly, the raw material cost has also gone up, which is leading to higher purchase price. So all the 3 combinations coming together has had an impact on the working capital which we do not see a major relief on that. So we expect it to be at these levels.
Siddhartha Bera — Nomura — Analyst
Okay, got it. I’ll sir come back in the queue for follow-up questions.
Rajiv Poddar — Joint Managing Director
Thank you.
Operator
Thank you. We have the next question from the line of Jinesh Gandhi from Motilal Oswal Financial Services. Please go ahead.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Hi, sir. Can you talk about the price increases taken fourth quarter and in 1Q so far?
Rajiv Poddar — Joint Managing Director
So fourth quarter we had taken price increase towards the end of February, beginning of March and that was to the tune of 2% to 3% and we are planning to take another price increase in June to the extent of 3% to 4%.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Okay. Okay. So in that context, what has led to the 7% Q-o-Q increase in blended realization in fourth quarter?
Rajiv Poddar — Joint Managing Director
So basically whatever price increase we have taken in Q3, the full impact of that has come in Q4.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Okay. Okay. And what was the Carbon Black sales for fourth quarter and ’22, the external sale?
Madhusudan Bajaj — President (Commercial) and Chief Financial Officer
So less than 3%.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
For both fourth quarter and period?
Rajiv Poddar — Joint Managing Director
Yes.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Okay. And lastly, with respect to the underlying demand environment, in case, this tightening of interest rates and money supply plays out and the commodity prices cool off, do you expect the demand also to moderate from where we are — or our product or in the past, we haven’t seen much correlation?
Rajiv Poddar — Joint Managing Director
At this stage, we see a good demand and what we are getting to. I mean what we are hearing is that it should remain strong for the near future. So we would like to maintain that.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Okay, thanks. I’ll fall back in queue.
Rajiv Poddar — Joint Managing Director
Thank you.
Operator
Thank you. We have the next question from the line of Ronak Sarda from Systematix. Please go ahead.
Ronak Sarda — Systematix Group — Analyst
Yeah, hi, thanks for the opportunity. Sir. First — firstly on the some of the financial numbers so we can highlight. What was the quarter 4 cost of key raw materials, natural rubber, synthetic rubber and others?
Madhusudan Bajaj — President (Commercial) and Chief Financial Officer
Natural rubber was around INR150 rupees per kg, [Indecipherable] was around INR98 to INR100 and fabric approximately INR375 a kg.
Ronak Sarda — Systematix Group — Analyst
Okay. And now our carbon black consumption is largely from the captive, you said you’re still buying from outside?
Rajiv Poddar — Joint Managing Director
No, 100% from captive usage.
Ronak Sarda — Systematix Group — Analyst
Now 100% captive. Okay, great. Okay. So just a follow-up here. I think the — the domestic tire manufacturers, other than yourselves, the raw material for a national [Indecipherable] already increased up to 180 and beyond. So, can you explain what’s helping us in this scenario.
Madhusudan Bajaj — President (Commercial) and Chief Financial Officer
Currently, natural rubber prices are around INR165, INR170-72 levels. Earlier it was INR180 also as you are telling. So now in last 10-15 days it has [Speech Overlap] and we are hopeful that now it should continue in the current levels for next couple of months.
Ronak Sarda — Systematix Group — Analyst
Yeah. No. Right. That’s understandable. But for us, you think INR150 was the average natural rubber prices. That price is including — that price is including custom duty, etc. Our price because majority is export. So our price will be in tonnage — per kg will be always lesser.
Rajiv Poddar — Joint Managing Director
Got you, second more your thoughts on the treasury management. For the last three years we have seen cash balances increasing and even short-term borrowings being at a very elevated level and this year we have seen now long-term borrowings also coming through, so we are overall in a net debt position. So I mean how do you see this both gross debt and a high amount of cash, what’s the thought process there? So ultimately we will use the money for capex. So that is what the plan is.
Ronak Sarda — Systematix Group — Analyst
Right. But, I mean we are already on almost INR1,900 crores of cash. I don’t think that the large capex plan coming through.
Rajiv Poddar — Joint Managing Director
So if you see the debt cost is about 0.5%. So it’s within the thing, so having the treasury and having the debt is not, there is a sort of arbitrage. That’s the difference between…
Ronak Sarda — Systematix Group — Analyst
But debt cost continues to remain at such a low level, right.
Rajiv Poddar — Joint Managing Director
Yes, yes, yes.
Ronak Sarda — Systematix Group — Analyst
Okay, sure. And finally, a follow-up on the inventory side. We understand the increase in the cost. But if we calculate on the per — on a number of days. I mean, it has gone beyond 75 days in the current year, which has largely been below in that 50 days range. So what would explain that given we are short on capacity or is this — there some one-off item here in the…
Rajiv Poddar — Joint Managing Director
No, no, basically if you see, the availability of raw materials has an impact, so you have to procure and keep. Secondly, availability on outward shipment is also an issue. So that is also adding. So it’s a combination of both these things, which have added to these things. So as it cools off, as availability of containers eases out and all, you will see this drop back again to those levels. But till then it will sustain at these levels.
Ronak Sarda — Systematix Group — Analyst
Okay. Got it, got it. Okay, thank you.
Operator
Thank you. We have the next question from the line of Ankit Kanodia from Smart Sync Services. Please go ahead.
Ankit Kanodia — Smart Sync Services — Analyst
Thank you for taking my question. My first question is regarding the difference in now that we compare the FY ’21 numbers in FY ’22 numbers. So in volume terms, what we see that earlier our share from India market was around 22%, 23%, which has come down to 17%, and correspondingly we have seen a rise in the share of Europe. So, is it a mix of Europe doing well and in India you are seeing demand or what is the scenario, can you just throw some light.
Rajiv Poddar — Joint Managing Director
There were two issues which have impacted this. One, there was a very strong demand from Europe, so we have — in the export market. And secondly, in the first — in the first half of this there was also COVID impact in India with certain shutdowns and other issues which have impacted. So there is no other, nothing else which has impacted this.
Ankit Kanodia — Smart Sync Services — Analyst
So the demand remains strong even in India. And what is about — and how are we placed in terms of our distribution reach [Speech Overlap]
Rajiv Poddar — Joint Managing Director
We have a pan-India distribution network.
Ankit Kanodia — Smart Sync Services — Analyst
Okay. One last question regarding your — one of your focus area as you mentioned in your presentation is penetrate America, but when we see the volume share, it remains almost at the same level what it was in the last year. So what are we actually doing and what our franchisee coming here in the future to increase that share.
Rajiv Poddar — Joint Managing Director
No, no, I mean, if you see the actual numbers of dispatches in percentage terms, percentage terms it remains same, but you’re talking a higher percentage of a higher number. So if you see the growth in America, has been substantial in the last two years, but percentage while it remains same because our base has also grown no. So what base you’re comparing 250 versus 280, 290 so that base 17% is there. So if you see the actual number it has grown. In tonnage terms, there is a substantial increase.
Ankit Kanodia — Smart Sync Services — Analyst
Right, and anything else — as in any particular strategy which we are following there in America. If you’d like to throw some light on that what we are doing.
Rajiv Poddar — Joint Managing Director
Following this old, I mean what strategy we had put in place a couple of years back, we are seeing the benefit of that and we’d like to continue with the same strategy.
Ankit Kanodia — Smart Sync Services — Analyst
Thank you, thank you, so much. Thank you. We have the next question from the line of Amin Pirani from J.P. Morgan. Please go ahead.
Amin Pirani — J.P. Morgan — Analyst
Yes, hi, sir. Thanks for the opportunity. Sir, I just wanted to get some more understanding on the non-commodity cost inflation. You talked about freight costs and also power cost. So power cost has gone up for you because of the increase in power tariffs or is it because there have been power shutdowns and you having to use more backup and diesel gensets?
Rajiv Poddar — Joint Managing Director
So it’s a combination of all the things. So the power tariffs have also gone up and where we have our own power plants and all, there the cost of coal has also, coal and gas has also gone up. And in certain cases there were power cut outs as well from the government. So we had to run our DG sets, which led to higher cost.
Amin Pirani — J.P. Morgan — Analyst
And sir, going forward, given that in this quarter that coal situation has become tougher, at least that’s what we hear, are you facing more unplanned shutdowns, like does it impact production is what I’m trying to understand.
Rajiv Poddar — Joint Managing Director
No, we have a full backup. In fact, as I said in my opening speech that the new power plant at Bhuj should also be operational in the next 2 to 3 months, which will have an additional benefit of availability to us for our Bhuj production, so that should ease off some of the cost of the power for us over there.
Amin Pirani — J.P. Morgan — Analyst
Okay. So availability should improve, but the coal price and coal availability will continue to be a problem as it is for everyone, right? Is that a fair thing to say?
Rajiv Poddar — Joint Managing Director
Absolutely, you are fair.
Amin Pirani — J.P. Morgan — Analyst
Okay, okay. Thank you, sir. Thanks a lot.
Rajiv Poddar — Joint Managing Director
Thank you.
Operator
Thank you. We have the next question from the line of Abhishek Jain from Dolat Capital. Please go ahead.
Abhishek Jain — Dolat Capital — Analyst
Thanks for the opportunity, sir. Sir, manufacturing costs expected to increase in entirely because of the high energy and RM cost. How do you see the opportunity of increasing realization of your products?
Rajiv Poddar — Joint Managing Director
So we are working on that and that’s why we are being able to pass on this kind of price increase and also we are continuing to pass on the price increase because it is a increase for everybody and more so for the players in the western part of the world.
Abhishek Jain — Dolat Capital — Analyst
And sir, because this ongoing war in Ukraine, many peers have shutdown their plant in the Ukraine and Russia. So how do you see the benefit of it in your business?
Rajiv Poddar — Joint Managing Director
So I think that benefit was, I mean, the demand for BKT branded product was anyway strong, so, and continuing to grow. So that would continuing without a thing also. So I don’t think there is any impact in that on the demand per se, because of war. But overall, the demand has been strong anyway, so it’s not because of the war that this has created. So even post the war, we see the demand to remain strong.
Abhishek Jain — Dolat Capital — Analyst
I’m talking about is the benefit in the realization because we have seen a sharp increase in the realization, so most probably it is because of the passing freight, but also we have taken the price hike in this quarter.
Rajiv Poddar — Joint Managing Director
Yes, because we have been able to pass it on to the end user. We have been passing it…
Operator
Ladies and gentlemen, we have the line for the management dropped in the conference. Please stay connected. We will have the management reconnect. Ladies and gentlemen, we have the management connected. Sir, you may go ahead.
Rajiv Poddar — Joint Managing Director
Yeah, sorry, the line got disconnected, apologies for that. So, yeah, as I was saying that the cost which has been passed on is — the realization has increased because we are passing on the impact of the cost and that is always been the case. It’s not a matter of demand or supply.
Abhishek Jain — Dolat Capital — Analyst
Okay, sir. So what is the gap between your size and the competitor size right now?
Rajiv Poddar — Joint Managing Director
12% to 15% from Tier 1.
Abhishek Jain — Dolat Capital — Analyst
So there is a room for the increase — increase the prices in the coming months.
Rajiv Poddar — Joint Managing Director
Sorry?
Abhishek Jain — Dolat Capital — Analyst
So there is room for the increase in the prices in the coming months for you?
Rajiv Poddar — Joint Managing Director
So, I mean, gap should remain at these levels. So that is — that will continue.
Abhishek Jain — Dolat Capital — Analyst
Tank you, sir. That’s all from my side.
Operator
Thank you. We have the next question from the line of Vimal Gohil from Union AMC. Please go ahead.
Vimal Gohil — Union AMC — Analyst
Yes, sir. Thank you for the opportunity. Sir, just a long-term industry question, and what the [Indecipherable] BKT is. We’ve seen a strong demand environment for quite some time now. I think the last downtrend that we saw was in that harsh climatic conditions that we saw in Europe. Post that, the industry has been has held well — has held up well for past. So do you think there are some structural changes that have happened in the industry? So that’s a growth has happened or is it that Balkrishna has continued to take market share and going forward, the inherent cyclicality of this industry will continue, but Balkrishna will continue to gain share.
Rajiv Poddar — Joint Managing Director
So there is, it’s a mix of both. There has been a strong demand as well and also the growth for BKT brand — the marketing the brand building equity exercise that we are doing is now paying off. And that’s why we are able to create a stronger demand for the BKT branded product, which has resulted in the Balkrishna growing at a quicker pace than the market. That means, we are taking market share.
Vimal Gohil — Union AMC — Analyst
But you do believe that this industry will continue to remain tight because of its nature.
Rajiv Poddar — Joint Managing Director
Yes.
Vimal Gohil — Union AMC — Analyst
Got it. Sir, secondly on your margin outlook, the demand — given the fact that the costs have been volatile, do you have any — do you want to comment on the margin outlook going forward in the context of current cost environment?
Rajiv Poddar — Joint Managing Director
So as we have always maintained and I always said that our endeavor will be to maintain an EBITDA of 28% to 30% on long-term sustainable basis. Do not look at it quarter-on-quarter or each quarter by quarter, because that can fluctuate based on variable costs. However, our endeavor is to maintain an EBITDA margin of 28% to 30%, which will be on a long term sustainable basis. That is we have always said and held that — hold that statement too even today on a long-term basis.
Vimal Gohil — Union AMC — Analyst
Right. Sir, last question would be on — the increase in inventory that we’re seeing, some of the contribution would also have come from your carbon black plant ramping up, would that be correct?
Rajiv Poddar — Joint Managing Director
This is basically for other raw materials and shipping cost because of availability of containers we have to plan keep. So it’s not a matter of carbon black alone, there is overall for the tariff business.
Vimal Gohil — Union AMC — Analyst
Right, right. So you don’t have any inventory that has been kept in the carbon black plant.
Rajiv Poddar — Joint Managing Director
No, there is a nominal inventory because that is all mainly equal. So there is no problem of shipping availability over there, both from a raw material perspective of the carbon black as well supply to the customers, so that is not an issue.
Vimal Gohil — Union AMC — Analyst
Got it, Sir. Got it. Fair enough, Sir. Thank you so much and all the very best for FY ’23.
Rajiv Poddar — Joint Managing Director
Thank you.
Operator
Thank you. We have the next question from the line of Arvind Sharma from Citibank. Please go ahead.
Arvind Sharma — Citibank — Analyst
Yeah. Hello, good morning, sir. First question on the capacity buildup. If you could just enumerate how it could build from the current capacity. I think 285 was the last year. Since the Waluj, are expected to add around 25,000 metric that is not coming, I believe. So how — can you please explain the capacity buildup from here on?
Rajiv Poddar — Joint Managing Director
So basically Waluj what we were trying to build up is yet continuing. We are not stopping to refurbish it, so the old plant will continue and that is already being produced — producing tire. So that will continue to produce. And our endeavor is with all the projects that we’ve taken, this year we will see it between 320 and 330 metric ton, and eventually by the end of it we will be at 360,000 tons for the following financial year.
Arvind Sharma — Citibank — Analyst
That 360 includes the 25,000 metric that we were planning to add?
Rajiv Poddar — Joint Managing Director
Yes, but that is already running. So we are not stopping the plant which is running. That’s why that production capacity will continue already in the system.
Arvind Sharma — Citibank — Analyst
I was under the impression that, that was an incremental 25,000 tons. So, sir right now your capacity is 285 plus 55, right? That’s about it right now?
Rajiv Poddar — Joint Managing Director
So, yes, it is 285 plus 50, which will be there — the 50 is being ramped up, which will come in towards the full production will be coming towards the end of the second half of this year. I mean, end of the year. So in the second half you will see the benefit of that 50,000. And the 25 which is from Waluj will continue. So we have not stopping there. So, because there is a strong demand, we are not stopping that. So that system is all — that is already in the system, which will continue. So, earlier we had plan to stop that, refurbish it and then restart it. But now we are not stopping it. So that 25 will always — it’s already in the system and will continue.
Arvind Sharma — Citibank — Analyst
Okay, fine. Thanks for that, Sir. Sir, second question, sorry I missed it. The gross and net debt position for FY ’22 end and the balance sheet has now turned out to be net debt — market seems to be a net cash company. Any target that you have going forward in terms of balance sheet health, specifically in terms of debt and cash?
Rajiv Poddar — Joint Managing Director
So our, basically I’ll repeat my opening statement. Our gross debt stood at INR2,443 crores at the end of 31st March ’22, of which INR1,942 crores is relating to the working capital debt, and INR500 crores is the long-term towards the project and our cash and cash equivalent is INR1932 crores.
Arvind Sharma — Citibank — Analyst
Okay, so that INR1,942 crores is likely to drawdown, hopefully by this year.
Rajiv Poddar — Joint Managing Director
Yes, yes, yes.
Arvind Sharma — Citibank — Analyst
Fine, sir. Thank you. That’s all from my end, Sir. Thank you so much.
Operator
Thank you. We have the next question from the line of Lokesh Manik from Vallum Capital. Please go ahead.
Lokesh Manik — Vallum Capital — Analyst
Yes, good morning, Rajiv [Indecipherable My question was on the increase in the freight costs. So you mentioned that these are coming on the lag effects and renegotiation of new contracts. So just a question on that. Do we have volume visibility in these contracts, where you know we don’t be exposed to risk of lower volumes and higher freight cost going forward if the customer reduces the volume offtake.
Rajiv Poddar — Joint Managing Director
No, there is no volume linked bonus or anything linked to the costing contracts, it very simple contract that this is valid for this duration. It’s not related that you will get some extra bonus or extra discount if you reach a certain milestone number of containers.
Lokesh Manik — Vallum Capital — Analyst
No, if they reduce the volume offtake, would that then impact us? Or would the cost then go down proportionately?
Rajiv Poddar — Joint Managing Director
No that is on per container basis, so whatever I record on a per container basis, that is what will be charged.
Lokesh Manik — Vallum Capital — Analyst
Understood, understood. Second was on the energy crisis in Europe. So, are you seeing your competition face issues with production planning and maybe some volume would have been diverted to us through market share gains, are you seeing that benefit coming in?
Rajiv Poddar — Joint Managing Director
So no, we are not able to comment on our competitors status.
Lokesh Manik — Vallum Capital — Analyst
Fair enough, That’s it from my side. Thank you so much.
Operator
Thank you. We have the next question from the line of Joseph George from IIFL. Please go ahead.
Joseph George — IIFL — Analyst
All right, thank you. I have 2 questions, one is on the hedges that you have for the Euro for FY ’23. Could you tell us what percent — what percent of your FY ’23 expected Euro revenues are hedged and at what rate?
Madhusudan Bajaj — President (Commercial) and Chief Financial Officer
For full year, we expect average realized is 85.
Joseph George — IIFL — Analyst
85, and all of it is hedged at this point for FY ’23.
Madhusudan Bajaj — President (Commercial) and Chief Financial Officer
Almost, t we are gradually — almost 85 we expect for the full year.
Joseph George — IIFL — Analyst
All right. And what was the similar realization for the full year FY ’22.
Madhusudan Bajaj — President (Commercial) and Chief Financial Officer
FY ’22 towards 87.3%.
Joseph George — IIFL — Analyst
Understood. And sir, the second question that I had was in relation to your margin outlook. You mentioned that your long-term [Technical Issues]
Operator
This is the operator here. If you could come closer to the mic, your voice is breaking up on the line.
Joseph George — IIFL — Analyst
Is it better now.
Operator
Yes, a bit better now.
Joseph George — IIFL — Analyst
All right, let me go ahead. So the question was in relation to the margin guidance, you mentioned that your medium to long-term margin guidance is 28% to 30%. But when you look at FY ’23 given inflation — given higher operating expenses etc., do you feel you’ll be able to bucket yourself in that range, or will it be tough.
Rajiv Poddar — Joint Managing Director
So that is our endeavor to be in that range. We are working towards that. But because of the volatile conditions outside of the cost, variable cost movement is so volatile at the moment, It is difficult to comment for short-term, but long term definitely our endeavor is to be there in that bracket.
Joseph George — IIFL — Analyst
Okay. So in other words compared to say what we have — compared to the margins what we have seen in 3Q and 4Q, which is around 24%, 25%, pressures or do you think the worst in terms of margins is captured in what we have seen in the last couple of quarters?
Rajiv Poddar — Joint Managing Director
It’s difficult to say now because there is so much of volatility on the variable cost. But as you can see we have already — always been trying to pass on as much as we can and we are working towards the next price increase already planned for June. So that is what is under our control and we are trying to do that. So quite hopeful that we work towards our goal of 20% to 30%.
Joseph George — IIFL — Analyst
Got it, Sir. Thank you.
Operator
Thank you. We have the next question from the line of Sonal Gupta from L&T Mutual Fund. Please go ahead.
Sonal Gupta — L&T Mutual Fund — Analyst
Yeah, hi, good morning, and thanks for taking my question. Sir, coming back to the logistics cost, right. So if I look at your Q3 commentary, you’d said that costs were higher than what we passed on, but it’s coming down and therefore we have not taken any further increases in Q4 and now you’re saying that the freight cost has jumped by almost like 400 basis points Q-o-Q. So just trying to understand, I mean what changed really speaking right.
Rajiv Poddar — Joint Managing Director
So that was the visibility we had to during the call, and after that the contracts which were getting over, we were negotiating and those didn’t come in place. So that explained — the cost went up after the call. Well, that’s why we had to take a call price increase. Just after the call also we took our price increase in February, March, and now we’re taking another one. So it was a reaction from the cost that went up.
Sonal Gupta — L&T Mutual Fund — Analyst
Right. And so could you, what was the price increase in Feb, March or in Q4 that you’ve taken?
Rajiv Poddar — Joint Managing Director
2% to 3%.
Sonal Gupta — L&T Mutual Fund — Analyst
2% to 3%, and this is largely like freight surcharge sort of a thing or this is like overall price increase.
Rajiv Poddar — Joint Managing Director
Overall, overall, overall price increase.
Sonal Gupta — L&T Mutual Fund — Analyst
Okay. And sir, also on the power cost, like you mentioned, you have a new power plant coming Bhuj in in 2 to 3 months, so could you just talk about, I mean how much of that capacity will become, I mean, how much would be captive now been sourced and what sort of savings you will get?
Rajiv Poddar — Joint Managing Director
So goods will be fully captive through our power plant. We’ll be feeding it on our own. The other plants will be yet dependent on the grid. So that is how it will be working.
Sonal Gupta — L&T Mutual Fund — Analyst
And what is the size of this? How many megawatts is this?
Rajiv Poddar — Joint Managing Director
20 megawatt [Speech Overlap] So 20 megawatt is already there and the new one will be additional 20 megawatt.
Sonal Gupta — L&T Mutual Fund — Analyst
Okay, and this is a coal based or what is it?
Rajiv Poddar — Joint Managing Director
Yes, coal based.
Sonal Gupta — L&T Mutual Fund — Analyst
Okay, and just last question was on Russia. I mean, would you have a sense of what percentage of, like the European agri market production of tires comes from Russia?
Rajiv Poddar — Joint Managing Director
No, we don’t have that number.
Sonal Gupta — L&T Mutual Fund — Analyst
Okay, sure. Thank you so much.
Operator
Thank you. We have the next question from the line of Trilok from Dymon Asia. Please go ahead.
Trilok Agarwal — Dymon Asia — Analyst
Yeah, hi, good afternoon, sir. I just wanted to, obviously, your thoughts, particularly with regards to the demand because we know that acceleration is there across the countries, but the cycle has been a pretty longer comparative last cycle. So have you sort of seen any impact on demand across segments or do you think there is enough, the pricing is despite somewhat higher prices the demand continues to grow and stable, that’s point one. And probably you can answer the second.
Rajiv Poddar — Joint Managing Director
So at the moment we see the demand to contribute to remain strong. We hope it continues and we are quite confident that it will continue to remain strong.
Trilok Agarwal — Dymon Asia — Analyst
So, so far what you’re trying to say is all the price that you are trying to pass on is completely absorbed and there is no visibility of any volume kind of moderating or stagnating.
Rajiv Poddar — Joint Managing Director
No, no.
Trilok Agarwal — Dymon Asia — Analyst
And when you alluded to the differential of sort of March, the pricing between you and competitors between 12% to 15% even now, did you see that gap narrowing or do you think it can only go — it can go because you guys are operating at margins which is still much better than what the others are doing.
Rajiv Poddar — Joint Managing Director
So we continue to — we’ll continue to keep the gap of 22%, that will be 12% to 15%. We’ll continue to keep that gap.
Trilok Agarwal — Dymon Asia — Analyst
Okay, and then this — just to reconfirm — the capacity that you have kind expanded will start from October, is that fair assumption to make?
Rajiv Poddar — Joint Managing Director
Towards the end of first half of ’22 of this financial year, and it will slowly ramp up and you will see the impact of it — full impact coming towards the second half of the financial year.
Trilok Agarwal — Dymon Asia — Analyst
And how long typically it takes for the full ramp-up of the new capacity?
Rajiv Poddar — Joint Managing Director
3 to 6 months.
Trilok Agarwal — Dymon Asia — Analyst
Understood. Okay, thank you very much.
Operator
Thank you. We have the next question from the line of Chirag Shah from Edelweiss. Please go ahead.
Chirag Shah — Edelweiss — Analyst
Yes, thanks for the opportunity. Sir. My first question is on Europe side. Given the recent crisis that the — that part of the world is going through, are there any production disruptions that you have come across from ground level, which can create an opportunity either in terms of pricing or higher volumes for you? Is there anything of that sir coming across?
Rajiv Poddar — Joint Managing Director
No, no, not at this moment. We have not come across anything.
Chirag Shah — Edelweiss — Analyst
Okay. Second question is just a follow-up on the earlier one, on this capacity ramp up. So you are saying that the new plant capacity will start flowing from H2 onwards right?. Or it will start flowing from current quarter itself and full ramp up in H2?
Rajiv Poddar — Joint Managing Director
Correct. You are absolutely correct. It will come from this quarter and full ramp-up will be towards the end of next quarter — towards the middle of next quarter.
Chirag Shah — Edelweiss — Analyst
Okay. And sir, just a clarification, the price hike that you indicated, is it possible to indicate over last 12 months what is the kind of price hikes that you would have taken and also your peers set. So have you maintained that 10% to 15% in your pricing.
Rajiv Poddar — Joint Managing Director
No, I don’t have the whole year’s data in front of me at this stage.
Chirag Shah — Edelweiss — Analyst
But broadly, would it be around 10%, 12% or more or would be low, on the lower end.
Rajiv Poddar — Joint Managing Director
Roughly, we would have done about 15, 16% for the whole year.
Chirag Shah — Edelweiss — Analyst
And I presume your peers had would have been slightly higher to maintain the price gap.
Rajiv Poddar — Joint Managing Director
Price gap is the same and is continuing to remain same, I am assuming they have done similar pricing increases.
Chirag Shah — Edelweiss — Analyst
Similar price increase. Okay, thank you very much.
Operator
Thank you. We have the next question from the line of Maitri Parikh from Pi Square Investments. Please go ahead.
Maitri Parikh — Pi Square Investments — Analyst
I wanted to ask about the carbon black prices that, what’s the difference between our captive cost that we have. And if we also to come market. So how much is the additional profit that we are making on?
Madhusudan Bajaj — President (Commercial) and Chief Financial Officer
It is approximately 10% — 8% to 10%.
Maitri Parikh — Pi Square Investments — Analyst
Okay. So that is the benefit that we are having right now of the carbon black. And one more question. Then what will be our market share currently?
Madhusudan Bajaj — President (Commercial) and Chief Financial Officer
Less than 3% of our total turnover, so we hardly have any markets.
Rajiv Poddar — Joint Managing Director
No, no carbon you are asking?
Maitri Parikh — Pi Square Investments — Analyst
No, no, for our overall product.
Rajiv Poddar — Joint Managing Director
Tires. Sorry, can you repeat your question.
Maitri Parikh — Pi Square Investments — Analyst
Of our market share in India domestic, not for the Carbon Black but for our product.
Rajiv Poddar — Joint Managing Director
For the tire product, our market share would be about 4% to 5% in India. For replacement market.
Maitri Parikh — Pi Square Investments — Analyst
For replacement, okay.
Rajiv Poddar — Joint Managing Director
In our tire business for the products that we make.
Maitri Parikh — Pi Square Investments — Analyst
Yeah. Okay, thank you.
Operator
Thank you. We have the next question from the line of Ravi Naredi from Naredi Investments. Please go ahead.
Ravi Naredi — Naredi Investments — Analyst
Thank you very much. Sir, my point is when we have so much the date and capex plan ahead, why you are paying so much handsome dividend and why not preserve money for further expansion?
Rajiv Poddar — Joint Managing Director
So that is think the prerogative of the Board and I think they had taken a call to give this. So we’ll put up your point to them, but they are comfortable. But even after this our reserves and everything are comfortable. So I think they have decided, the Board has taken a call to give the dividend. Also this year and 60th, we had a special dividend to celebrate our 60 years. So that may not continue over the years to come.
Ravi Naredi — Naredi Investments — Analyst
Okay, thank you.
Operator
Thank you. We have the next question from the line of Ashutosh Tiwari from Equirus Securities, please go ahead.
Ashutosh Tiwari — Equirus Securities — Analyst
Sir, employee cost has declined on a quarter-on-quarter basis, any reason because we are in inflationary scenario, hardly employee cost should increase. So this decline is any reason?
Rajiv Poddar — Joint Managing Director
Sorry, we couldn’t hear you Ashutosh. What is on the decline.
Ashutosh Tiwari — Equirus Securities — Analyst
Yeah, employee cost declined quarter-on-quarter of INR97 crores to INR90 crores, so any reason behind that?
Rajiv Poddar — Joint Managing Director
Yeah, so basically during — in the preceding years we were giving some additional incentives during COVID periods, which have now lapsed. So that is where the impact of that has come down.
Ravi Naredi — Naredi Investments — Analyst
So now it is sustained or maybe they will increase next year. But this is normalized employee cost.
Rajiv Poddar — Joint Managing Director
Yeah, yeah. Absolutely correct.
Ravi Naredi — Naredi Investments — Analyst
And sir, obviously our short-term debt cost has been lower because of denominated in euro and all, but with the rising yields will there be increase over there in terms of debt cost percentage.
Rajiv Poddar — Joint Managing Director
Very marginal, very marginal.
Ravi Naredi — Naredi Investments — Analyst
Okay. And lastly on this on this hedge you mentioned 85 is the hedge rate, the forward hedge rate right now. But I assume that that will be covering only 50% of our sales, like what we mentioned earlier. Or is it a full cover, 85 is the full cover right now.
Madhusudan Bajaj — President (Commercial) and Chief Financial Officer
85, we are expecting for the full year because we have already covered it.
Rajiv Poddar — Joint Managing Director
So we have covered essential amount at these levels. So the overall average would be at this level only. Okay, got it, okay. Thank you, sir.
Operator
Thank you. We have the next question from the line of Siddhartha Bera from Nomura. Please go ahead.
Siddhartha Bera — Nomura — Analyst
Yeah, thanks for the follow-up. Sir, just a quick clarification on the capex side. When said 900 crores is the project capex for this year, what will be the maintenance capex.
Rajiv Poddar — Joint Managing Director
Which is its in line, which we normally maintain about INR200 crores, so that will continue.
Siddhartha Bera — Nomura — Analyst
So total will be about INR1100 crores for the year, right.
Rajiv Poddar — Joint Managing Director
Absolutely correct broadly, 900 is what we have for our project cost and 200 is maintenance cost.
Siddhartha Bera — Nomura — Analyst
Got it. And sir, second question is on the commodity cost per tonne site for the current quarter. What would be the increase you are looking at on a per ton basis?
Rajiv Poddar — Joint Managing Director
What was your question.
Siddhartha Bera — Nomura — Analyst
On the commodity basket overall per ton basis, what would be the cost inflation you are looking at for the current quarter?
Rajiv Poddar — Joint Managing Director
Nearly around 3% we are expecting, 3% to 4% cost increase to use.
Siddhartha Bera — Nomura — Analyst
Got it [Indecipherable] and we have taken about similar number [Indecipherable]
Operator
Thank you. We have the next question from the line of Suraj Fatehchandani from Compound Everyday Capital Please go ahead.
Ravi Naredi — Naredi Investments — Analyst
Hi, sir, I had 2 questions. So the first one is what is our total carbon black capacity?
Rajiv Poddar — Joint Managing Director
So our carbon black capacity is 140,000 metric ton.
Suraj Fatehchandani — Compound Everyday Capital — Analyst
And how much of that are we usually right now.
Rajiv Poddar — Joint Managing Director
That is, the nameplate, that is, the nameplate. We will be able to — achievable will be 115,000.
Suraj Fatehchandani — Compound Everyday Capital — Analyst
115,000 and how much of that are we using right now as in percentage terms?
Rajiv Poddar — Joint Managing Director
How much of that are we manufacturing, the full capacity.
Suraj Fatehchandani — Compound Everyday Capital — Analyst
How much of that is required as per current phase.
Madhusudan Bajaj — President (Commercial) and Chief Financial Officer
95%, more than 95%.
Rajiv Poddar — Joint Managing Director
So practically we are selling about 20% of our production to 3rd party, rest we are using in-house, then 100% of our requirement is coming in-house, which equates to 80% of this capacity.
Suraj Fatehchandani — Compound Everyday Capital — Analyst
Got it, got it. And sir, secondly, sir. So a broad number on how has our revenues, our CAGR growth being better than industry, so any number on that, Industry CAGR growth versus our CAGR growth.
Rajiv Poddar — Joint Managing Director
Its by and large in line. We are a couple of points over.
Suraj Fatehchandani — Compound Everyday Capital — Analyst
Got it. Okay, thank you.
Operator
Thank you. That was the last question. I now hand it over to the management for their closing comments.
Rajiv Poddar — Joint Managing Director
Thank you. Thank you to everybody for coming on this call. We look forward to seeing you in the next quarter. Thank you.
Madhusudan Bajaj — President (Commercial) and Chief Financial Officer
Thank you.
Operator
[Operator Closing Remarks]