Camlin Fine Sciences Limited (CAMLINFINE) Q1 FY23 Earnings Concall Transcript

Camlin Fine Sciences Limited (NSE: CAMLINFINE) Q1 FY23 Earnings Concall dated Aug. 12, 2022

Corporate Participants:

Ashish Subhash Dandekar — Chairman of the Board, Managing Director

Santosh Parab — Chief Financial Officer

Nirmal Momaya — Executive Director and Managing Director

Analysts:

Surya Narayan Patra — PhillipCapital — Analyst

Amit Shah — East Securities — Analyst

Nirali Gopani — Unique Asset Management LLP — Analyst

Aniket Inamdar — Individual Investor — Analyst

Anurag Patil — Roha Asset Managers — Analyst

Harsh Jhanwar — Centrum PMS — Analyst

Rohit Sinha — Sunidhi Securities — Analyst

Pankaj Prabhakar Bobade — Affluent Assets Private Limited — Analyst

Presentation:

Operator

Good day, ladies and gentlemen, and welcome to the Q1 FY’23 Earnings Conference Call of Camlin Fine Sciences Limited., hosted by Sunidhi Securities & Finance Limited. [Operator Instructions]

I now hand the conference over to Mr. Ashish Dandekar, Chairman and Managing Director. Thank you, and over to you, sir.

Ashish Subhash Dandekar — Chairman of the Board, Managing Director

Thank you. Ladies and gentlemen, welcome to the quarterly earnings con call of our company. As we have always done, our CFO, Mr. Santosh Parab, will first give you a brief of the quarter’s performance and details, after which we will be answering your questions with Mr. Nirmal Momaya, our Executive Director and Managing Director.

So without further ado, over to you, Santosh.

Santosh Parab — Chief Financial Officer

Thanks, Ashish. Once again, welcome, and thank you for joining us for the earnings call for our financial results for the quarter ended 30 June, ’23. We appreciate your presence, especially at the cusp of a long weekend.

Just as a reminder, today’s discussion might include certain forward-looking statements, which must be viewed in conjunction with the various risks involved in our businesses. As usual for ease of understanding at our outlook at consolidated financial results, despite the challenges in global markets amenity from the inflationary trends which further aggravated by significant volatility in the currency across the world. CFS has been able to start the fiscal with an encouraging note, which can be seen from the result.

This performance in the quarter is more than heartening, especially in the backdrop of shut down for maintenance and upgradation of more than 4 weeks of our diphenol plant at Dahej. The consolidated revenue remains quite stable at INR384 crore as compared to quarter 4, where it was at INR389 crore. The operating EBITDA for the quarter has improved to 13% and stood at INR48 crore, as against INR6 crore and INR24 crore in the last quarter.

The exemplary increase in power cost in Europe due to Russia-Ukraine crisis, is started last quarter remained at the similar levels. But with favorable currency movement and increase in selling prices did help us to recoup some of these higher costs.

Apart from the impact on the diphenol production due to shut down and upgradation during this quarter, all other product lines are fired on all cylinders. Since foreign exchange gain in standalone operations was negated by action losses in the subsidiaries, the other income on consolidated level stood at around INR1 crore. Consolidated profit before tax stood at around INR15 crore, as compared to last quarter of INR20 crore. The tax provision was high, as they in turn sovereign set up of tax losses are not large. In the last quarter, if you remember, we had informed you that the debottlenecking and upgradation of diphenol plant was completed in mid-May ’22, whereby the capacity was enhanced to 15,000 metric ton per annum from the existing 10,000 metric ton per annum.

We expect to gradually ramp this up to have the production and do an optimal capacity in the next two quarters. We are looking at this year for sustainable growth, based on emphasis on integration and innovation. As you know, we are forward integrating our diphenol catechol line by manufacturing vanillin. As a part of that effort, we are confident of commercializing vanillin production and this newly constructed plant at Dahej very soon. With aroma products back and with enhanced capacity of diphenols, this augurs well to achieve a sustainable growth.

Coming down to brief on the business of the subsidiaries, CFS Europe recorded a turnover of INR132 crore in the current quarter. CFS Europe, has incurred higher energy cost due to the increase in gas prices in Europe. It was able to recover some of these escalated energy costs by increasing the selling prices in this quarter. As I said earlier, there has been no respite on the increased energy costs, however, there was some relief as the prices have increased at much lower pace than in earlier quarters of the gas prices.

CFS Mexico has again broke its record of highest turnover in this quarter by posting a total revenue of around INR90 crore, the clocked turnover of INR77 crore in last quarter. CFS Mexico is expected to continue its stellar performance. CFS Brazil and CFS North America with turnover of INR27 crore and INR17 crore, respectively, in the current quarter, are expected to keep improving their performance in the subsequent quarter.

Our Chinese subsidiary, which used to manufacture vanillin remains closed awaiting the order from Chinese Supreme Court. With that time lines, yet cannot be determined, we are envisaging the receipt of order sometime in this financial year. The Chinese plant will remain close till then.

Coming to our CRAMS project, which is with Lockheed Martin. The discussions with them are still in progress of supplying a proprietary chemical, for battery storage system. We are generally looking at achieving commercial product supply to them in sometime February ’24. We’ll be sharing more information on it in the coming quarters.

With this, I’ll request to open the floor to Mr. Nirmal Momaya, our MD, Ashish Dandekar, CMD and myself are there to answer the questions. Thank you.

Questions and Answers:

Operator

[Operator Instructions] The first question is from the line of Surya Narayan Patra from PhillipCapital. Please go ahead.

Surya Narayan Patra — PhillipCapital — Analyst

Congrats with a great set of numbers in the difficult time, sir. The first question is on the impact of a plant shutdown. So since we have not been importing any hydroquinone from European operations. So during this one month kind of a shutdown of Dahej facility, whether the tariff would also got impacted? And could you please quantify what business that we would have lost in the standalone operation for the quarter?

Nirmal Momaya — Executive Director and Managing Director

So in the standalone, we did import some hydroquinone from Italy, which was consumed in this quarter. So it’s not that there was no import, but it was a very limited quantity. We do see that in terms of volumes for the downstream products, on a standalone basis, so there is an impact, of course, on the upstream on hydroquinone and catechol, where the production was half of what it should have been on capacity. And in the downstream products, I would say that they were impacted by about 20% or so in terms of volume. Though in value because prices have gone up, it kind of got a bit of a catch-up. But yes, if you were to look at it overall, diphenol was at 50% and the other downstream were about 20% lower than previous quarter.

Surya Narayan Patra — PhillipCapital — Analyst

For the standalone business, that is how we should look at it?

Nirmal Momaya — Executive Director and Managing Director

Yes

Surya Narayan Patra — PhillipCapital — Analyst

Okay. Sir, with regards to the European operation, so could you share what is the EBIT for this quarter and versus last quarter, what is the kind of change even Y-o-Y changes?

Nirmal Momaya — Executive Director and Managing Director

Yes. So this quarter, the EBITDA was INR17 crore, and last quarter was INR7 crore.

Surya Narayan Patra — PhillipCapital — Analyst

For Europe, sir?

Nirmal Momaya — Executive Director and Managing Director

For Europe, yes.

Surya Narayan Patra — PhillipCapital — Analyst

Okay. So sequentially, although there is a INR5 crore kind of an incremental energy costs that we have witnessed, still, there is a kind of improvement of INR10 crore?

Nirmal Momaya — Executive Director and Managing Director

Yes. Due to pass on the price increases on hydroquinone in the European market.

Surya Narayan Patra — PhillipCapital — Analyst

Okay. So is it fair to believe that the EBITDA swing also what we are witnessing for the consolidated operation? So it is reflecting that only. It means savings in the SG&A cost. So around INR10 crore kind of SG&A cost saving that we are witnessing despite of a INR5 crore kind of an incremental rise in the energy cost, it is just that reflects that. Is that correct, sir?

Nirmal Momaya — Executive Director and Managing Director

Yeah, it is partly. I mean, it’s one of the things that has improved the margin. It’s not the only thing.

Surya Narayan Patra — PhillipCapital — Analyst

Then what is the saving that we are witnessing? Sir, sequentially the SG&A cost for the quarter, if you see from the INR125 crore to INR115 crore it has become, while there is an increase in the INR5 crore of energy cost. So that means almost like INR15 crore kind of saving is the other expenses.

Santosh Parab — Chief Financial Officer

Just to correct you on that. The last year’s cost, the incremental INR4 crore is on the base of quarter 4 costs. So one thing is that we have recovered some part of that INR27 crore and some part of this INR4 crore.

Surya Narayan Patra — PhillipCapital — Analyst

Okay. I was comparing exactly the sequential basis. In the previous quarter, consolidated EBIT other expenditure was INR124 crore. In this quarter it is INR115 crore. So kind of a INR10 crore saving despite a INR4 crore kind of incremental energy cost?

Santosh Parab — Chief Financial Officer

So yeah. So one saying is that, apart from that, what has happened in India, the operations were lesser, right, so that is operating cost includes power cost in India, other operating costs includes labor charges in India. So the throughput in India was lesser. Now, output, as Nirmal said, we were lesser by 50% on the diphenol line and 20% on other products. So the output in India was lesser. So comparatively because of those lower volumes, our operating costs in India is lesser. And that’s why there is a reduction in operating costs on an overall basis, even though INR4 crores of power cost increase outside India.

Surya Narayan Patra — PhillipCapital — Analyst

Okay. So then I think this is a strong margin scenario that we are witnessing for this quarter, sir. So given that as we are saying our vanillin plant is on track for commissioning in this quarter fully. So then from the base of this near about 13% kind of margin scenario in this quarter, we generally see is believed to be a lean quarter and that to impacted with the shutdown. So are you giving an indication of a very strong improvement in the margin profile with vanillin coming up in the second quarter?

Nirmal Momaya — Executive Director and Managing Director

Yes. I mean the margin profile should improve as compared to Q1. Also, the rest of the year, we don’t know what the pricing situation and raw material prices as well as selling price situation will be. So difficult to predict beyond Q2, Q3, Q4, looking strong, but I mean there’s so much volatility going on everywhere that it’s very difficult to give a clear-cut guidance.

Surya Narayan Patra — PhillipCapital — Analyst

Okay. Sure. Sir, if you can talk something more on the vanillin plant. When are you thinking that, okay, it is commissioning? And how staggered manner that your utilization be progressing pricing scenario, means the way that you’re trying to play out this opportunity?

Nirmal Momaya — Executive Director and Managing Director

Yeah. So we are expecting the commercial production to start by end of this quarter. So which means from Q3 we will start producing, initially, the production will be at about 40% to 50% of capacity, which will get ramped up after starting up in the next 3 to 4 months based on the market. The market scenario yet remains short yet over $20. So in that sense, the pricing scenario seems to be holding.

Surya Narayan Patra — PhillipCapital — Analyst

Okay. And even the elevated cost scenario, which is visible, possibly will be helping the prices to remain elevated only for vanillin, is that right, sir?

Nirmal Momaya — Executive Director and Managing Director

It seems to be. But of course, since demand-supply both also play a role. It’s not only cost. But I mean what indications you are getting is that it should in the short term, it will be short.

Surya Narayan Patra — PhillipCapital — Analyst

Okay. Just last question. On the blends side, sir, it seems that there is a kind of a strong recovery in that, I’d say, a strong performance based of a profit sense, right, on the blends side. So whether what we have been anticipating ramp-up in the blends and which could not happen during the COVID during the last 3 quarters. So are you seeing kind of a real ramp-up now starting from the first quarter itself? And this is a kind of a progressive run rate that we should see from here on?

Nirmal Momaya — Executive Director and Managing Director

Yes. So in the Q4 ’22, it was about INR110 crore. And in this Q1, it’s about INR125 crore. So yes, there has been an improvement in this quarter. And I think the trend is showing that there will be further improvement

Surya Narayan Patra — PhillipCapital — Analyst

Sure. Any specific thing that is driving this, sir?

Nirmal Momaya — Executive Director and Managing Director

No, I think it’s just that customers have opened up, the interactions, which were restricted during COVID. I think all of that has now kind of, in the last 3, 4 months, has eased up. So I think it’s just the interaction and approaches are now much easier.

Surya Narayan Patra — PhillipCapital — Analyst

Sure, sure. Okay. I have couple of more questions. I’ll be there in the queue, sir. Yeah, thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Amit Shah from East Securities. Please go ahead.

Amit Shah — East Securities — Analyst

Sir, I have a couple of questions. Sir, firstly, I would like to understand a bit more on our businesses in Brazil and Mexico. Which are the key products which we manufacture in Brazil and Mexico? And how is this region performing for us? What kind of opportunities are we seeing in Latin America?

Nirmal Momaya — Executive Director and Managing Director

Basically, our focus area is on Shelf Life Solutions. And the products that we make there are essentially for, I would say, 60% of the businesses for extending Shelf Life of food, animal feed, biodiesel, pet food and some of the other nutritional products for the animal feed market, some bactericides, some mold inhibitors. So it’s a whole basket of products that we have there. The market opportunity is significant. And our performance in Mexico has been very strong. Brazil is picking up, post-COVID. Now, we are again back to believing customers and starting to make approaches in the market.

Amit Shah — East Securities — Analyst

Okay. Sir, how is the competition over there?

Nirmal Momaya — Executive Director and Managing Director

Competition is very strong.

Amit Shah — East Securities — Analyst

Okay. Sir, and a follow-up question. Sir, how do we source our raw materials for Latin America facility? Are we facing any challenges in sourcing them?

Nirmal Momaya — Executive Director and Managing Director

Yeah. I mean, there are challenges. But I think we’ve kind of mitigated the risk by making interventions to see to it that we don’t get stocked out. So I mean, I would say, generally, we are okay on the sourcing.

Amit Shah — East Securities — Analyst

Okay, understood, sir. Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Nirali Gopani from Unique Asset Management LLP. Please go ahead.

Nirali Gopani — Unique Asset Management LLP — Analyst

Sir, on just seeing a significant improvement in our gross margin, it’s a higher than we have seen in the last 5 quarters. So is it largely because of your passed on the fuel price hike through the pricing inventory, are you seeing this hike and to the short-term number that we are seeing?

Nirmal Momaya — Executive Director and Managing Director

Yes. We’ve been able to pass on the cost increases. Of course, there’s a lag between the time we can pass on the price increases. Generally it’s a quarter’s lag. And I think, in the last quarter, raw material prices were quite stable. So therefore, we did the catch-up and, the margins have come back to where they were.

Nirali Gopani — Unique Asset Management LLP — Analyst

Okay. So sir, normally, the guidance on a gross margin of roughly about 47% to 50%. So is this number sustainable or we go back to 50%?

Nirmal Momaya — Executive Director and Managing Director

No, doesn’t seem to be. I mean, I think we should be able to sustain it at least for one quarter. The next quarter, again, will depend on what the raw material prices are like.

Nirali Gopani — Unique Asset Management LLP — Analyst

Okay. And sir now the vanillin plant it was supposed to commence in June, right? So is there a reason for this delay?

Nirmal Momaya — Executive Director and Managing Director

No, no real reason for the delay. The mechanical completion is done. Now we are doing the trial production, and we should be hopefully now coming to commercialization soon.

Nirali Gopani — Unique Asset Management LLP — Analyst

Okay. Can you just mention that currently, the vanillin price is about roughly $20? And in Q4, you mentioned it was roughly about $30 and even after we come in the prices estimate at about $20. So any change in that view?

Nirmal Momaya — Executive Director and Managing Director

No. No change in the view, it’s the same.

Nirali Gopani — Unique Asset Management LLP — Analyst

Okay. So do you see that even after we come into the market, the prices should sustain at about $20?

Nirmal Momaya — Executive Director and Managing Director

$20, that’s what our expectation is at least for the initial phase.

Nirali Gopani — Unique Asset Management LLP — Analyst

Okay. And so the Dahej plant, the shutdown is complete and everything also. Can you see a Q-on-Q improvement in our top line because vanillin is also coming onstream from Q3? So what kind of top line can you see in this full year of FY’23?

Nirmal Momaya — Executive Director and Managing Director

So top line on the consolidated basis, yes, what we are projecting is around between INR1,800 crore to INR2,000 crore. So we continue to look at that kind of number.

Nirali Gopani — Unique Asset Management LLP — Analyst

Okay. And can we achieve an EBITDA margin of roughly about 15% on a consolidated basis for the full year?

Nirmal Momaya — Executive Director and Managing Director

Difficult to say. This margin, based on this raw material prices, the way they are fluctuating and also sales price realization, you don’t know. But I mean it should improve from where we are because of our capacity enhancement and vanillin plant coming in, it should improve from where we are.

Nirali Gopani — Unique Asset Management LLP — Analyst

And Mr. Santosh, just set up on the tax rate, so can you just elaborate a bit on that part?

Santosh Parab — Chief Financial Officer

So as we have been said in the past, also because of some subsidiaries have losses, we cannot set up the internal country losses, a couple of subsidies because of the partnership volatility at certain losses. So those kind of losses cannot be adjusted with the profits of the other country tax profit. So like Europe, Mexico and to some extent India has done taxable profit, but subsidiaries like Brazil and US as well as Wanglong where we have some maintenance costs are making losses. So the losses there cannot be set up with the profits of the other countries. So that’s why this taxes rates are higher. But as the year goes, we are looking at an overall tax rate after adjusting all the losses in the range of 30%, 31%.

Nirali Gopani — Unique Asset Management LLP — Analyst

For FY’23?

Santosh Parab — Chief Financial Officer

For FY ’23.

Nirali Gopani — Unique Asset Management LLP — Analyst

Okay. That’s it from my side. Thanks a lot.

Operator

Thank you. [Operator Instructions]The next question is from the line of Aniket Inamdar, an individual investor. Please go ahead.

Aniket Inamdar — Individual Investor — Analyst

Yeah, good evening. My question is on the $20 price of ethyl vanillin you mentioned. Considering that we are using our own low-cost materialize that in the presentation, wouldn’t the gross margins for what have been produced during this year is much higher than our current gross margins overall?

Nirmal Momaya — Executive Director and Managing Director

It will be slightly higher, of course, because catechol, when we sell catechol, we sell it at a loss, and vanillin is at there will be an improvement in the gross margin for that piece of the business in the sense for that much amount of catechol that is consumed in vanillin.

Aniket Inamdar — Individual Investor — Analyst

Okay. And basically considering this starting from the second half, we will be looking at what, 2,000 tons this year?

Nirmal Momaya — Executive Director and Managing Director

Yeah. I mean, yes, that’s right in that region.

Aniket Inamdar — Individual Investor — Analyst

Okay, thanks a lot.

Nirmal Momaya — Executive Director and Managing Director

Yeah.

Operator

Thanks you. [Operator Instructions] The next question is from the line of Anurag Patil from Roha Asset Managers. Please go ahead.

Anurag Patil — Roha Asset Managers — Analyst

Thank you for the opportunity. Sir, in Europe, how are you seeing the demand environment currently?

Nirmal Momaya — Executive Director and Managing Director

So from Europe into Europe, we sell hydroquinone, which is the demand is yet strong. From India, we do sell some products into Europe, which continue to remain on the same levels as they were last year.

Anurag Patil — Roha Asset Managers — Analyst

Okay. But going in the next couple of quarters, do we see that sales from India to sustain or there is a possibility that it can be impacted?

Nirmal Momaya — Executive Director and Managing Director

The European market?

Anurag Patil — Roha Asset Managers — Analyst

Yeah.

Nirmal Momaya — Executive Director and Managing Director

I think most of our business is in the food and food chain, which doesn’t really get very badly impacted. There are no big swings in that. So in terms of volume, we don’t expect to be impacted in the next few months.

Anurag Patil — Roha Asset Managers — Analyst

Okay. And sir, from a medium term perspective, 2, 3 years down the line, which of our segments like Shelf Life, Performance Chemicals, which segment do you see growing at a fastest rate?

Nirmal Momaya — Executive Director and Managing Director

So aroma would be the fastest rate right now in the first couple of years because it’s a brand new facility and the capacity is 6,000 tons, so which will add in terms of percentage, it’ll add the highest number.

Anurag Patil — Roha Asset Managers — Analyst

Nd sir, for Shelf Life and Performance Chemicals, what kind of a growth rate we can expect any ballpark idea will be fine?

Nirmal Momaya — Executive Director and Managing Director

Shelf Life Solutions, our blends business is growing at about 30% a year. Our TBHQ, BHA business will grow at about 15% to 20% a year. So about 20%, 25% a year. And in Performance Chemicals, with the added capacity, I think in the next few years, we should be able to grow by about 20% a year on a volume basis. I’m talking everything on volume basis.

Anurag Patil — Roha Asset Managers — Analyst

Okay, sir, that’s it from my side. Thank you very much.

Operator

Thank you. The next question is from the line of Harsh Jhanwar from Centrum PMS. Please go ahead.

Harsh Jhanwar — Centrum PMS — Analyst

Yeah, hi, sir. Thank you for the opportunity.Sir, my question was regarding vanillin prices. So vanillin prices have come off from $30 to $20. Sir, as I understand, currently, there is a demand-supply gap and supply is lesser than demand. So if you could help us understand why, any reason for this significant decline in prices, even though we are not commissioned our plant yet? And how do you see this pricing going ahead?

Nirmal Momaya — Executive Director and Managing Director

The pricing is even today in excess of $25. What we are saying is once we come into the market, we expect the price to come down to about $20.

Harsh Jhanwar — Centrum PMS — Analyst

Okay, thank you. That’s it for me.

Operator

Thank you. The next question is from the line of Rohit Sinha from Sunidhi Securities. Please go ahead.

Rohit Sinha — Sunidhi Securities — Analyst

Yeah, thank you for taking my question, sir. Just one question on this capacity expansion at Dahej facility. So post this commissioning and surplus capacity of hydroquinone, just wanted to know our further expansion or scope in the TBHQ, BHA and MEHQ segment and near-term outlook in the MEHQ segment?

Nirmal Momaya — Executive Director and Managing Director

So TBHQ, BHA, I think we’ve done some debottlenecking in those capacities, and we expect to push volumes on both those products in the next few quarters. As far as MEHQ is concerned, we are in the process of finalizing our plan on what kind of volumes of hydroquinone do we want to divert to MEHQ. So that plan has yet been built.

Rohit Sinha — Sunidhi Securities — Analyst

Okay. I mean what kind of just overall market that is there for us in the MEHQ?

Nirmal Momaya — Executive Director and Managing Director

MEHQ overall market size is about 5,000 metric tons. So maybe 5,000 and 5,500. So yes, we have an opportunity to play in that market. But we’ve not yet decided as to how much of the hydroquinone will be used for MEHQ. Based on what we do for TBHQ, BHA, we will take a decision on how much will go into MEHQ.

Rohit Sinha — Sunidhi Securities — Analyst

And the pricing difference between TBHQ and MEHQ would be significant?

Nirmal Momaya — Executive Director and Managing Director

Yeah, yeah. Significant. TBHQ is much higher than MEHQ.

Rohit Sinha — Sunidhi Securities — Analyst

Okay. That’s it from my side. Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Pankaj from Affluent Assets. Please go ahead.

Pankaj Prabhakar Bobade — Affluent Assets Private Limited — Analyst

Hello. Am I audible?

Operator

Please proceed with your question.

Nirmal Momaya — Executive Director and Managing Director

Yeah.

Pankaj Prabhakar Bobade — Affluent Assets Private Limited — Analyst

Well, sir, just wanted to understand, you mentioned that the vanillin prices are currently trading at $25. And after commissioning of our plant, you expect it to come down to $20. So would our supply this so high that it will disrupt the whole demand-supply mismatch?

Nirmal Momaya — Executive Director and Managing Director

No, I mean this is just an estimation, we don’t know what prices it will settle at, it may remain at $25, it maybe at $23. But I’m just saying that our capacity is almost 20% of the global capacity. So once that’s comes in, it will have some impact.

Santosh Parab — Chief Financial Officer

The $25 is because of there is a demand-supply mismatch at present.

Pankaj Prabhakar Bobade — Affluent Assets Private Limited — Analyst

So how much that would be corrected by our supply?

Nirmal Momaya — Executive Director and Managing Director

As I said, 20% of the capacity is what we will be producing. So there are no numbers available in the market to give you exactly what it is.

Pankaj Prabhakar Bobade — Affluent Assets Private Limited — Analyst

And are any other competitors of ours also coming up with the new capacity in this near future?

Nirmal Momaya — Executive Director and Managing Director

In vanillin?

Pankaj Prabhakar Bobade — Affluent Assets Private Limited — Analyst

Yeah.

Santosh Parab — Chief Financial Officer

In vanillin? Hello?

Pankaj Prabhakar Bobade — Affluent Assets Private Limited — Analyst

In vanillin, yeah.

Nirmal Momaya — Executive Director and Managing Director

No. in vanillin nothing in the pipeline, not that we’ve heard of anything.

Pankaj Prabhakar Bobade — Affluent Assets Private Limited — Analyst

Okay. Sir, second thing, you mentioned about our top line to be around INR1,400 crore to INR1,500 crore for this year.

Nirmal Momaya — Executive Director and Managing Director

INR1,800 crore to INR2,000 crore.

Pankaj Prabhakar Bobade — Affluent Assets Private Limited — Analyst

INR1,800 crore to INR2,000 crore. My mistake. And how would be the margin scenario? How do we expect the margin scenario?

Nirmal Momaya — Executive Director and Managing Director

Sorry?

Pankaj Prabhakar Bobade — Affluent Assets Private Limited — Analyst

How do we expect the margin scenario?

Nirmal Momaya — Executive Director and Managing Director

We already answered that question.

Pankaj Prabhakar Bobade — Affluent Assets Private Limited — Analyst

Sir, I think I would have joined late, I missed it.

Nirmal Momaya — Executive Director and Managing Director

It’s difficult to give an estimate of the margin because of the volatility in raw material prices, economic situations across the world. So it’s difficult to give a margin projection.

Pankaj Prabhakar Bobade — Affluent Assets Private Limited — Analyst

Sir, at least, would it be better than what it was last year?

Nirmal Momaya — Executive Director and Managing Director

It should be, yes.

Pankaj Prabhakar Bobade — Affluent Assets Private Limited — Analyst

Okay. Sure, sir. Thank you.

Operator

The next question is from the line of Surya Narayan Patra from PhillipCapital. Please go ahead.

Surya Narayan Patra — PhillipCapital — Analyst

Yes. And sir, can you just give some sense since we have passed on the price or passed on the elevated cost in the prices of hydroquinone in Europe. And we have seen the energy cost has really gone up 5 times kind of a much significantly when compared to the previous quarter. So current pricing would be how different from the price that you will be realizing here in India for hydroquinone?

Nirmal Momaya — Executive Director and Managing Director

Price is basically across the world are generally more or less the same.

Surya Narayan Patra — PhillipCapital — Analyst

Okay. It is not a different relation for Europe.

Nirmal Momaya — Executive Director and Managing Director

No, I mean, there will be a little bit of a difference. I would say about 10% or so.

Surya Narayan Patra — PhillipCapital — Analyst

Okay. So if that is the case, then even the downstream also accordingly proportionately would have gone up for TBHQ, BHA, let’s say?

Nirmal Momaya — Executive Director and Managing Director

Yeah, of course, yeah.

Surya Narayan Patra — PhillipCapital — Analyst

Okay. My second question is on, let’s say, any progress on that heliotropin kind of project, sir?

Nirmal Momaya — Executive Director and Managing Director

Yeah, we made those applications in China. So we are waiting for the progress to happen there.

Surya Narayan Patra — PhillipCapital — Analyst

Okay. I mean so there is no investment as such as we would have started it, right?

Nirmal Momaya — Executive Director and Managing Director

No, no, no.

Surya Narayan Patra — PhillipCapital — Analyst

Okay. And so I think we are kind of closing our heavy CapEx with the vanillin plant. So hereon, is there any kind of a project in mind? Or what is the kind of CapEx plans that we can be thinking about, either it could be relating to AlgalR or whichever? So if you can give some sense on the CapEx?

Nirmal Momaya — Executive Director and Managing Director

We do not yet actually finalized anything. So right now we are yet saying that the maintenance CapEx of between INR60 crore to INR80 crore is what is envisaged.

Surya Narayan Patra — PhillipCapital — Analyst

Okay. For this year and the similar that is the kind of a number for the current year. And if not anything on the Lockheed Martin front, I think similar kind of trend that one should think even for next year?

Nirmal Momaya — Executive Director and Managing Director

Yes, that’s right.

Surya Narayan Patra — PhillipCapital — Analyst

Okay. In fact, because of the elevated prices, did you face any kind of a rise in the working capital funding requirement sequentially? And whether any change in the debt level leverage because of this pricing scenario and hence, more working capital conditions? Anything on that side, sir?

Santosh Parab — Chief Financial Officer

Surya, we had shared at the last meeting also, since we are looking at sequential increase mainly because of the aroma business and in the range of around INR150 crore to INR200 crore. Looking at the costing and the shorter operating cycle, manufacturing margin in India, see we are looking at a range of around INR30 crore to INR40 crore, which will be required by the end of the year on our working capital. And we achieved INR200 crore-odd turnover or actually optimal capacity. So we will try to use our internal accruals of that. So push comes to shove, there will be an INR30 crore to INR40 crore of working capital increase by the year. And on an average basis, we have also been repaying loans of around INR30 crore, INR35 crore. And as you know, HCCB of INR100 crore is a convertible instrument. If they convert, I can reduce my loan portfolio of INR100 crore overnight.

Surya Narayan Patra — PhillipCapital — Analyst

Okay. And one just last clarification. This minority interest gain, so what is that? And how to think about it?

Santosh Parab — Chief Financial Officer

Yes, good question. So as you know, if you see the group profile now, there are only two companies which have a minority interest. One is Mexico, but that minority is miniscule around 1.5%. And as for the contract, we don’t have to share any profits from that minority interest. The other bigger minority interest is a 49% what we have in China. In China, we have no revenue, but we have to maintain the plant, there are some legal costs which are incurred because as there’s a case going on, and we are also co-defendant than in that case. So these are these costs for maintaining minimal employees, maintaining the plant and some legal cost, costs some things cost. The share of that, naturally, we shared 51% and 49%. So the gain in owners profit from the PAT is mainly on account to minority interest loss, which has been shared by the Chinese partner.

Surya Narayan Patra — PhillipCapital — Analyst

Okay. So that means till the time we are seeing any progress on the any drop in front, at least, that is a kind of a cushion to our overall number?

Santosh Parab — Chief Financial Officer

I don’t know, it is a cushion or not, but yes, my operating profit, my PAT, my owners profit will be more than my PAT.

Surya Narayan Patra — PhillipCapital — Analyst

Yeah, sure, sir. Thank you.

Operator

Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to the management for closing comments.

Ashish Subhash Dandekar — Chairman of the Board, Managing Director

Ladies and gentlemen, thank you very much for participating in this con call. We look forward to interacting with you again for the next one. Until then, have a good day. Thank you.

Operator

[Operator Closing Remarks]