Century Enka Limited (CENTENKA) Q3 FY23 Earnings Concall Transcript

Century Enka Limited (NSE:CENTENKA) Q3 FY23 Earnings Concall dated Feb. 10, 2023.

Corporate Participants:

Suresh Sodani — Managing Director

Krishnagopal Ladsaria — Chief Financial Officer

Analysts:

Prashant Sharma — Analyst

Vipul Shah — Sumangal Investments — Analyst

Keshav Garg — Counter Cyclical PMS — Analyst

Vikram Kotak — Ace Lansdowne Investments — Analyst

V. Ramakrishnan — Equity Intelligence — Analyst

Unidentified Participant — — Analyst

Chandresh Malpani — — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to Century Enka Limited Earnings Conference Call hosted by Quantum Securities Private Limited. [Operator Instructions].

I now hand the conference over to Mr. Prashant Sharma from Quantum Securities. Thank you, and over to you, sir.

Prashant Sharma — Analyst

Yeah. Thank you, Aman. On behalf of Quantum Securities, we welcome you all to Quarter Three FY’23 Result Conference Call of Century Enka Limited. We thanks the management for giving us the opportunity to host this call. The management is represented by Mr. Suresh Sodani, Managing Director; and Mr. Krishnagopal Ladsaria, Chief Financial Officer.

I now hand over the call to Mr. Suresh Sodani, over to you, sir.

Suresh Sodani — Managing Director

Good afternoon, everyone, and welcome to Q3 FY’23 earnings conference call of Century Enka Limited. Firstly, let me thank our host, Quantum Securities for hosting this earnings call.

Now, let me first brief you on the key operational highlights for the third quarter of financial year ’22-’23, after which our CFO, Mr. Ladsaria will brief you on financials. Our revenues in the third quarter declined to around — by around 9% in — due to a 9% decline in volumes year-on-year basis. There was a moderation in replacement demand and lower tyre exports, as a result of global slowdown which impacted the NTCF demand. The sharp drop in Chinese NTCF prices combined with high levels of power and fuel prices have impacted NTCF margins.

OEM demand for tyres has improved, but demand for two-wheeler tyres remains below pre-pandemic levels, while the near-term outlook will be influenced by geopolitical developments and a recovery in Chinese demand, medium- to long-term prospects remain stable due to India’s infrastructure development plans and overall growth prospects.

In Nylon Filament Yarn segments, has also witnessed lower demand as weavers were in wait-and-watch mode due to falling prices scenario. NFY margins were impacted by sharp price corrections in line with Caprolactam price corrections. While our costs remained elevated due to higher stock in trade, power and fuel costs have also soared. China is dumping in India at lower slowdown in the country, which is impeding our ability to pass on cost increases. Imports from China have increased by 51% for the nine month period FY’23 compared to same period previous year. Caprolactam prices fell further in Q3 FY’24, the decline on combined for Q2 and Q3 is about 26%. We expect stability and recovery in Caprolactam prices as economic activities resumed in China post holidays.

On capex fronts, all capex approved by the Board are broadly on schedule. In nine months FY’23, there is a cash outflow of INR219 crores for the ongoing capex. The NTCF expansion is expected to be commissioned by Q4 FY’23, while the full capacity of polyester tyre cord fabric is expected to be commissioned by next year in fourth quarter. Lastly, the NFY capacity expansion will also be completed in Q4 FY’24.

Now I request our CFO Mr. Krishna Ladsaria, to brief you on financial performance.

Krishnagopal Ladsaria — Chief Financial Officer

Good afternoon, everyone, and welcome to this earnings call. Let me give you some of the key highlights of the financial results. The operating revenue for third quarter of financial year 2023 stood at INR468 crores, a decline of 17% year-on-year. EBITDA for the quarter stood at INR21 crores, a decline of 73% year-on-year, representing EBITDA margin of 4.42%. Net profit was reported at INR10 crores, which is a decline of 80% year-on-year, representing a PAT margin of 2.13%.

NTCF sale for Q3 FY’23 declined by 1% and it was at INR253 crores for the quarter, while NFI sales for the quarter was 30% lower at INR189 crores. The operating revenue for nine-months ended financial year 2023 stood at INR1.99 crores, which increased by 5% year-on year and stood at — sorry, increased by 5% year-on year, EBITDA stood at INR120 crores, which declined by about 39% year-on-year, representing an EBITDA margin of 7.48%. Net profit was reported at INR76 crores which was a decline of 44% and PAT margin for the nine months was 4.74%. NTCF sales for nine months FY’23 increased by 5%, to INR813 crores and enterprise sales increased by 4% to INR692 crores.

With this, we can now open the floor for questions and answers.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Vipul Shah from Sumangal Investments. Please go ahead.

Vipul Shah — Sumangal Investments — Analyst

Hi sir, thanks for the opportunity. So my question is, all high-priced Caprolactam inventory has been utilized or we will see inventory losses in this quarter also? So what was the caprolactam prices at the end of the third quarter and what are the Caprolactam prices right now, sir?

Suresh Sodani — Managing Director

At end of quarter three — I mean, end of quarter two, the prices were in the range of $1,700 which had reduced to end of quarter three by December between $1,600 to $1,630. The prices had slightly improved from mid of January between $1,650 to $1,700, they’re currently stable at about $1,700. Post the holiday season in China, the prices have slightly improved. These will continue to depend on the geopolitical issues as well as the Chinese demand for the products, the downstream products or the actual final products from Caprolactam in the domestic markets. But we do expect prices to be more stable compared to the previous two quarters. And our inventory gets replaced on regular basis. So most of the old inventories get consumed on regular basis, so the new replacements would be more at the current prices.

Vipul Shah — Sumangal Investments — Analyst

So, in this quarter we may not see any inventory loss, right?

Suresh Sodani — Managing Director

If the prices do not fall further, yes, we can say that. But as I said, these are very uncertain times. We — one of the two important parameters, factors which will determine the price levels is: the crude prices and the underlying benzene prices which impact Caprolactam; and second would be the demand for Caprolactam and products in domestic Chinese market.

Vipul Shah — Sumangal Investments — Analyst

Okay, so at any given point of time we — how many months of consumption as inventory, sir?

Suresh Sodani — Managing Director

Our inventory cycle from — right from raw materials to the finished goods, normally in the range of 45 to 60 days.

Vipul Shah — Sumangal Investments — Analyst

45 to 60 days. And sir you have given the sales for NTF and NFY for the three months and nine months. But can you give the quantity as well?

Suresh Sodani — Managing Director

No, we report our results in single segments. So, we just give the value terms breakup of our sales, otherwise, all the reports are in — right up to the EBITDA is on single segment basis.

Vipul Shah — Sumangal Investments — Analyst

Okay, so you would not like to give NTF and NFY quantity separately, right sir? Yeah.

Suresh Sodani — Managing Director

Yeah, as we are reporting in single segments.

Vipul Shah — Sumangal Investments — Analyst

Okay. Okay, sir. And sir, what is our current capacity for NTF and NFY and post expansion what they will be?

Suresh Sodani — Managing Director

So the current capacity is 78,000 tons per annum. We expect the capacity to increase to 86,000 post commissioning of our NTCF expansion and further increase to 94,000 post our expansion of PTCF and the nylon filament yarn.

Vipul Shah — Sumangal Investments — Analyst

So this 78,000, 86,000, 94,000 is inclusive of all three segments, NTF, NFY and this polyester tyre cord?

Suresh Sodani — Managing Director

Yes. Yes.

Vipul Shah — Sumangal Investments — Analyst

Okay, so that also you would not like to break the capacity separately?

Suresh Sodani — Managing Director

Yeah, for competitive reasons and since we’ll continue to report these are all polymer based single line products, we will continue to report on a single segment basis.

Vipul Shah — Sumangal Investments — Analyst

Okay, so what will be the cumulative capex till 2024 when PTCF expansion will be completed?

Suresh Sodani — Managing Director

It will be in the range of between INR375 to INR400 crores. [Speech Overlap] Of which this does not include any further capex that the Board may consider for the next financial year.

Vipul Shah — Sumangal Investments — Analyst

Okay. Okay. But PTCF has a higher profitability, right sir?

Suresh Sodani — Managing Director

PTCF is a growing demand, because PTCF is used in passenger cars as reinforcement. And as you would have seen that the passenger car growth and obviously the tyres for passenger cars requirement is growing, so PTCF we expect that it will continue to grow with increased GDP and ability of a large number of people to purchase their own vehicles. So hence that’s the reason that we have entered into PTCF, and yes the PTCF would be growing on a continuous basis in line with the way other industry — other countries have experienced the growth of passenger vehicles. We also expect that our passenger vehicle, personal vehicle segment should continue to grow.

Vipul Shah — Sumangal Investments — Analyst

So, from 78,000 to 94,000, all capacity addition will be in PTCF segment only?

Suresh Sodani — Managing Director

No, as I said part of it is NTCF [Speech Overlap] commissioned by end of this financial year and the balance would be in PTCF and some capacity in NFY as well.

Vipul Shah — Sumangal Investments — Analyst

Okay sir. Thank you very much. And if I have further questions, I’ll come and join back the queue. Thank you.

Suresh Sodani — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Keshav Garg from Counter Cyclical PMS. Please go ahead.

Keshav Garg — Counter Cyclical PMS — Analyst

Sir, thank you very much for this opportunity. Sir, I’m trying to understand that the our market capitalization is roughly INR800 crore, our average operating cash flow is around INR150 crores and we have around INR250 crore of net cash on the books. So — and promoter shareholding is less than 25%. So considering all these factors, isn’t it — doesn’t it make sense for the Company to do an open market share buyback, so that the cash on the books can be utilized in the best possible manner, in the most tax efficient manner and the promoter shareholding can also rise which will increase the confidence of the investor community, so what are your thoughts on the same?

Suresh Sodani — Managing Director

I think this has come up in previous earnings call as well. These are issues which are deliberated at the Board level and the Board would take appropriate decision on this regard. As management, we are not able to commit on what kind of decision would be taken. But just to assure you that these are discussed at Board level and as and when any decision is taken on this regard, because that’s beyond management to comment on or to commit upon what will be the action taken on this regard.

Keshav Garg — Counter Cyclical PMS — Analyst

Sure sir, we understand. It’s just that the network is 1,300 crores and market cap is 800 crores and we have huge historical real estate at negligible value on our books. So, if you could just take this proposal to the Board on behalf of the shareholders just as feedback from the shareholders, sir that would be great.

And sir, now secondly, also wanted to understand that we had our plants in Bharuch in Raigarh and Bhosari. So sir, but in the investor presentation it mentions that we have only two plants, so to which of these three locations have we stopped operating in?

Suresh Sodani — Managing Director

Our Mahad plant has been non-operational since 2013. We only have two operating plants. One is in Bharuch, Gujarat and second in Pune — in Bhosari Pune.

Keshav Garg — Counter Cyclical PMS — Analyst

What are the plans for the Raigarh real estate? Are there any plans to dispose off the same?

Suresh Sodani — Managing Director

No, there is no plan to dispose it off, because it’s in the industrial area. Projects will be valuated if possible if anything suitable project can come at that site, that would be the first choice. However, there is no decision taken on what has to be done in the near term on that plot.

Keshav Garg — Counter Cyclical PMS — Analyst

Right sir. Also sir, our volumes have fallen during these nine months. So now that we are increasing capacity, so with the increased capacity, are you confident that we will be able to ramp up our production?

Suresh Sodani — Managing Director

See this lower demand is — lower production is a result of lot of geopolitical issues during the current financial year, particularly the war which has impacted the export of tyres to Europe as well as U.S. and U.S. due to other reasons. Export of tyres forms a major portion of the total tyre production in India and which ultimately impacts all the raw materials which go into the tyres. Secondly, because of the high prices of underlying raw materials, the tyre prices per se had gone up during the current financial year, so which has impacted the replacement market of the medium and heavy vehicles.

We expect, we are seeing as also witnessed in the underlying Caprolactam prices similarly on the other raw materials which go into manufacture of tyres, there is a general feeling that the pricing should correct to more normalized levels. And the demand, which was kind of deferred or reduced due to multiple factors, should come to normal levels in the next financial year, especially starting from maybe Q1 or Q2 of next financial year. So we hope that the demand would again bounce back and that would reflect in more production of all materials in the value chain of tyre production. Hence, we are optimistic that post expansion we should be able to utilize large capacity of the expansion — expanded capacity as well.

Keshav Garg — Counter Cyclical PMS — Analyst

Right sir. And lastly, wanted to understand the status of anti-dumping duty on both our segments NTCF and NFY?

Suresh Sodani — Managing Director

No, while there was positive recommendation from DGTR for imposing anti-dumping duty, the Finance Ministry, and not only in our case, in most of the cases has not been recommending anti-dumping duties on particularly on what they consider as raw materials for the finished goods. So, no anti-dumping duty is currently applicable on either segment.

Keshav Garg — Counter Cyclical PMS — Analyst

Okay sir. Thank you very much sir and best of luck. And sir kindly take that suggestion about buyback to the Board. Thank you.

Suresh Sodani — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Vikram Kotak from Ace Lansdowne Investments. Please go ahead.

Vikram Kotak — Ace Lansdowne Investments — Analyst

Yeah. Sureshji, I have one question for you that, what are the total capex plan when you plan and how much is spent and how much is to be spent from now on?

Suresh Sodani — Managing Director

So, in the current financial year, in the nine months we have spent, already spent about INR219 crores and that balance we expect another INR25 crores to be spent in Q4.

Vikram Kotak — Ace Lansdowne Investments — Analyst

Okay.

Suresh Sodani — Managing Director

So the balance about — between almost close to INR100 crores would be spent in FY’24 and that would conclude our current approved capex from the Board.

Vikram Kotak — Ace Lansdowne Investments — Analyst

Right. So, INR350 crore is a [Indecipherable] INR340 crore, INR350 crore is a correct number, right?

Suresh Sodani — Managing Director

No, we’re also spent, [Speech Overlap] so as I said in the earlier question, our total spend will be just around between — because this also includes some maintenance capex and replacement capex. The total capex will be slightly under INR400 crores, out of which we have already spent part of it in the previous financial year, this year would be close to INR250 crore and the balance in the next year.

Vikram Kotak — Ace Lansdowne Investments — Analyst

Right. So, current approved capex will finish by FY’24 which is INR100 crores in FY’24, right, roughly?

Suresh Sodani — Managing Director

Yes. Yes. Since we have cash on balance sheet and we intend to grow, so if anything is approved by the Board on the proposals that we evaluate and take it before the Board, that would be announced in the subsequent [Indecipherable] it is approved.

Vikram Kotak — Ace Lansdowne Investments — Analyst

But what are the project under execution which is NFY and PTCF and NTCF, that will take care of the — within the next INR100 crores next year, right?

Suresh Sodani — Managing Director

Yeah. Yes.

Vikram Kotak — Ace Lansdowne Investments — Analyst

Right. Thank you. Thank you so much.

Suresh Sodani — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of V. Ramakrishnan from Equity Intelligence. Please go ahead.

V. Ramakrishnan — Equity Intelligence — Analyst

Good afternoon sir. Thanks for taking my question. Sir, recently we have rebranded, I think earlier it was a B.K. Birla Group company, now Aditya Birla Group. So, is anything to — what has changed? Is there any change in the way the Company is looked at it? Can you elaborate on that?

And the second question is, Surat is a big market for the nylon yarn. So, Surat has been doing very badly for the last I think five, six years. So, can you throw some lights on what do you expect and what drives the demand from Surat market?

Suresh Sodani — Managing Director

Okay, so I think we — as you would have seen now from this quarter we have changed our logo. It is just showing that we are now more integrated with the Aditya Birla Group. It was already our Chairperson was Mrs. Rajashree Birla since many years. What it means is that… [Technical Issues].

Operator

Ladies and gentlemen, it seems that we have lost the line for the management. We will request all participants to please stay connected while we reconnect them. Thank you. [Technical Issues].

Ladies and gentlemen, thank you for patiently waiting. Please remain connected, we are trying to reach the management line. We request all participants to please stay connected. Thank you. [Technical Issues].

Ladies and gentlemen, thank you for patiently waiting, we have the management line reconnected. Sir, over to you, please go ahead.

Suresh Sodani — Managing Director

Sorry, we got disconnected. I’ll start with first part of the question regarding integration with Aditya Birla Group. So I’ll just repeat it even if it is already heard, because I’m not sure at what point we got disconnected. So, we were already integrated, as I said, Chairperson was Mrs.Rajashree Birla since a very long time. And lot of people had already come from Aditya Birla Group. So, the management part was already integrated, nothing changes in that term. What the integration brings is that, now we have a common logo with Aditya Birla Group as well as the processes part gets more integrated, the opportunities for an employee to move within and out coming from Aditya Birla Group becomes more easy. All processes which the Group is very proud of, while most of it is rolled out, whatever balances remain will also get rolled out and it becomes much more integrated than what it has been, in terms of the people processes and some other processes.

The second part regarding the Surat market, yes, the market is — especially in the current last few quarters has been quite challenging, both — and it has been challenging for the entire value chain, more from — impacted by imports, China at every stage as well as rising input costs for the entire value chain, including ourselves. Surat while has its challenges, is also the most promising market because a lot of investments are also being made, particularly in the downstream weaving and processing sides, which allow the producers to compete with imported fabrics and other products which are getting imported. So, many new machines, many houses have put up the latest machines to be able to compete with products which were coming from — particularly from China and other countries. And that it’s a good positive sign in the overall context of the textile value chain. However, challenges would remain because this is an industry which has very low duty protection up to the yarn and processed yarn stage. So these challenges with respect to high energy prices and others, as soon as there is a improvement or correction in the underlying fuel costs, I think that will be good for the entire industry, but still remains Surat in our view would continue to remain one of the largest market for synthetic yarns and fabrics.

V. Ramakrishnan — Equity Intelligence — Analyst

Sir, my other question is, it the capacity is fungible? Suppose if you see a retail demand for NFY, can you shift from nylon yarn to nylon, filament yarn to nylon tyre cord, NTC? So is it fungible, your production capacity?

Suresh Sodani — Managing Director

Our current configuration is more fungible between NTCF and PTCF, particularly on the downstream the conversion part, the dipping part. In NFY it is not readily fungible because we have to make some modifications in the equipment. So it is only when we see a clear trend of changes that we have to do and we have to make some small investments as well, that we can make it fungible. But per se to say that from within a month to month it can be switched between NTCF to NFY, that is not possible on the current configuration.

V. Ramakrishnan — Equity Intelligence — Analyst

Sir, if you look at your last I think several quarters there is lot of variations, I think sometimes the EBITDA margin goes to 12%, 14%, 15% then comes to 4%. So from the management point of view, what are the steps you are taking to have — this volatility to bring down the volatility? And on a year-on-year basis what kind of EBITDA margin you will be comfortable with?

Suresh Sodani — Managing Director

See, the most of the volatility is external driven and to a large extent outside our control. For example, changes in power and fuel prices are something that we have very little control on. But what we are trying to do and which is already been announced earlier is that, we’re — will be sourcing some power from our hybrid JV which should start in quarter one of FY’24. So that will bring more stability in our power prices because that prices don’t fluctuate with the changes in other fuel prices either from coal or other sources for generation of power. As regards the demand side, that has been volatile mainly because of the geopolitical issues as I explained earlier. And once these things are reduced we will not be out of it completely, but we do expect that, that will bring more stability in demand which has an impact on margins.

Thirdly, volatility is also impacted by how the external — other countries are operating, particularly China. And China has witnessed this COVID-related lockdowns which has impacted the value chain significantly across the world, because their domestic demand has fluctuated their — some regions were operating, some were closed. Now since China has opened up and it is expected that the kind of COVID restriction that imposed may not remain in future. So this gives us some confidence that the volatility going forward should be less than what we have seen in the current financial year. We do our normal expectation on — EBITDA margin is around 10% and we hope that should happen in next few quarters.

V. Ramakrishnan — Equity Intelligence — Analyst

Okay. Thanks. All the very best sir.

Suresh Sodani — Managing Director

Thank you.

Operator

[Operator Instructions] The next question is from the line of Durgadas Bothra [Phonetic] as an Individual Investor. Please go ahead.

Unidentified Participant — — Analyst

[Foreign Speech]

Suresh Sodani — Managing Director

[Foreign Speech] question?

Krishnagopal Ladsaria — Chief Financial Officer

Net profit margin and operating profit margin.

Suresh Sodani — Managing Director

[Foreign Speech]

Unidentified Participant — — Analyst

Down the line three years.

Suresh Sodani — Managing Director

[Foreign Speech]

Unidentified Participant — — Analyst

Down the line three years, [Foreign Speech].

Suresh Sodani — Managing Director

[Foreign Speech] predicted value [Foreign Speech] around 10% normalized operating margin [Foreign Speech]

Unidentified Participant — — Analyst

NPM?

Suresh Sodani — Managing Director

Net profit margin [Foreign Speech].

Krishnagopal Ladsaria — Chief Financial Officer

See NPM will depend on operating profit margin, what the operating profit margin is generally our depreciation is in the range of INR40 crores today and going forward when all the expansions are on stream, it will be somewhere around INR55 crores. So, INR15 crores will be the increase and there are not many loans which we have taken, so interest costs would continue to be negligible. So depending on what is the operating margin, net profit margin will be derived, so you can take INR55 crores as estimate for depreciation and a negligible amount for interest cost. So that will give you an operating — sorry, net profit margin.

Unidentified Participant — — Analyst

Okay. Okay. [Foreign Speech]

Operator

Thank you. The next question is from the line of Mehul Parekh [Phonetic] as a shareholder. Please go ahead.

Unidentified Participant — — Analyst

Good afternoon, sir. I have four questions. One is that, our raw material prices, in terms of Caprolactam a lot dependent on China imports. What about the PET chips that we use for PTCF? Is it more locally available and competitive globally? Or is it again import dependent essentially from China?

Second is that, we are doing a lot of machinery replacement. So I would like to know that, with this machinery replacement, will our margins expand, the EBITDA margins will they expand by a percentage or two or more, because of the efficiencies of the machinery?

Third is, we have paid INR7.5 crores under — and there is a case going on. So in case we end up losing the case, what would the bloated amount with interest and penalty come [Indecipherable]?

And fourth is, the PTF industry, what is the annual demand from India for PTF in terms of tons?

Suresh Sodani — Managing Director

Okay. So the raw material for PTCF is both domestically and available and also from imported sources. These are more multiple players are there and availability is quite easy. So we would be having a mix of — depending on prices, but which are also linked with international prices. So we will have a mix of sourcing both from domestic as well as international and which can change based on, if there is economics of one over the other.

As far as machine expansions as well as replacements are concerned, that’s a regular exercise and our endeavor is to keep on improving our operating costs — reduce the operating costs. The new equipments would be definitely more efficient than some of our old equipments whose life is sometimes in range of 15 or excess of 20 years. So that will definitely help. And these are all part of the reasons that we take capex replacement for expansion. For the excise duty the status remains the same as mentioned in our notes to accounts, we’ve already the department itself has given recalculated the liability at INR7.3 crores which has already been deposited. And since we feel that we have a strong case that even that liability should not be there, we are in appeal at Supreme Court, which has still not been heard. While the department itself has gone against its order in the CSAT to challenge the recalculation, we feel that it is more administrative because their commissioner itself has calculated. So we feel that we have a strong chance that the liability should not — at the basic level should not go beyond INR7.3 crores. And we have also filed a case in the Mumbai High Court — Bombay High Court for non-levy of interest since our case is strong on terms of listing. So we feel that there is no finality on the exact liability. But in the current scenario we would feel that it should not exceed at the basic level at INR7.3 crores. But then these are subject to rulings by statutory or at various levels, and we’ll keep the shareholders and investor community updated on any development on this front.

Unidentified Participant — — Analyst

Yeah. But since this is a very old liability, the INR7.5 crores could exceed INR100 crore also, with interest and penalty. So that’s why I was just asking you this question.

Suresh Sodani — Managing Director

So we have already paid principal amounts, so INR7.3 crore has already been deposited.

Unidentified Participant — — Analyst

Okay. This was deposited recently, right?

Suresh Sodani — Managing Director

So this was deposited long back, when — so maximum interest liability, which could be there can be around similar amount, INR7 crores only, [Speech Overlap] INR8 crore. And there is an equal amount of penalty. So if we lose the matter, then there is an equal amount of penalty, which is again INR7 crore. So…

Unidentified Participant — — Analyst

So the maximum — if you lose the maximum…

Suresh Sodani — Managing Director

[Speech Overlap] so INR21 to INR22 crores could be the maximum liability.

Unidentified Participant — — Analyst

Okay. Okay. Correct. Correct. And this machinery replacement, what I was asking was that, can it enhance our EBITDA margin by 2% or more? Is it possible?

Krishnagopal Ladsaria — Chief Financial Officer

No. If you see our capacity expansions, we are not expanding or replacing the entire capacity. So it will have an impact, but not to that extent that for the entire operations it will increase by 2%. It will impact, yes, there will be some improvements.

Unidentified Participant — — Analyst

Yeah. And in PET chips, why I ask you about the India availability of raw materials — that are we globally competitive at PET chip level to be able to supply — to withstand Chinese competition on PTCF?

Suresh Sodani — Managing Director

We think so, because since it’s a domestically produced product as well as imported and these are all international prices, so prices are similar at most of the — in China as well as — because even the Chinese producers would buy that, there are very — I’m am not aware of anybody who makes their own PET chips and then converts into PTCF. So they would have similar cost structures compared to the PET chips that are available in India. So we should be competitive on that front.

Unidentified Participant — — Analyst

Right. And PTCF annual demand from India, any figure on that in terms of quantity?

Suresh Sodani — Managing Director

Yes. Our estimate, there are no reported numbers, but in our estimate the current demand should be in the range of between 30,000 to 35,000 tons per annum and with a projected — expected growth of between 8% to 10% year-on-year.

Unidentified Participant — — Analyst

Okay. That’s it. Thank you very much sir. Thank you very much.

Operator

Thank you. The next question is from the line of Vipul Shah from Sumangal Investments. Please go ahead.

Vipul Shah — Sumangal Investments — Analyst

Sir, the investment which we have made is in renewable power, so what percentage of our power will be renewable from next year onwards?

Suresh Sodani — Managing Director

For the Bharuch operations, almost 25% power will be from renewable on an annualized basis. The renewable power varies with season, but our expectation is that, 25% of the annual power should be and — on a company basis it will be around 15% on combined — 13% to 15% on a combined basis.

Vipul Shah — Sumangal Investments — Analyst

So what will be the tariff for that power?

Suresh Sodani — Managing Director

So we had said, we will save compared to the grid rates between INR15 crores to INR16 crores per annum based on the tariff that we’ve levied.

Vipul Shah — Sumangal Investments — Analyst

INR15 to INR16?

Suresh Sodani — Managing Director

Crores per annum.

Vipul Shah — Sumangal Investments — Analyst

INR15 crore to INR16 crore. So that will start from first quarter of next year, right?

Suresh Sodani — Managing Director

Yes.

Vipul Shah — Sumangal Investments — Analyst

And regarding your answer to the fungibility between nylon tyre cord and polyester tyre cord, so hypothetically 100% of the nylon tyre cord capacity can be switched to polyester tyre cord, sir?

Suresh Sodani — Managing Director

No, the spinning machines are different, but post spinning there are processes which require it to be converted into cords and into fabric and then it is to be dipped. These three processes are common between NTCF and PTCF. So we just have to add spinning capacity, new machines for spinning of PTCF, the balance downstream equipment and facilities are common and fungible.

Vipul Shah — Sumangal Investments — Analyst

Okay. Okay. So you have that flexibility to maneuver your production as for the market demand, right sir?

Suresh Sodani — Managing Director

We’ll have to add spinning capacity and then our fungibility will improve. That would be the long-term vision to add that process stability and [Speech Overlap]

Vipul Shah — Sumangal Investments — Analyst

So, if you want to add spinning units, so what will be the capex if you want to become fungible?

Suresh Sodani — Managing Director

It’s not large. It will be under [Technical Issues] for a decent capacity expansion. It won’t be a large capex [Indecipherable].

Vipul Shah — Sumangal Investments — Analyst

So that is part of your current capex or it is not part of your current capex?

Suresh Sodani — Managing Director

No, current capex is only the first what we’ve approved from the Board. As I said, in future, looking at the demand growth of PTCF, we’ll take the decision on expanding our spinning capacity.

Vipul Shah — Sumangal Investments — Analyst

Okay. Okay. Okay, sir. Thank you.

Suresh Sodani — Managing Director

Thank you.

Operator

[Operator Instructions] The next question is from the line of Anik Mitra from [Indecipherable]. Please go ahead.

Unidentified Participant — — Analyst

Good afternoon, sir. Thank you for taking my question. Sir, after the expansion, what would be your market share in this particular segment?

Suresh Sodani — Managing Director

There are no — reported volumes, it’s not easily available in terms of — because many players, other players have integrated other products. So it’s again given on combined basis. But our estimate is that, we should retain our market share post expansion because other players also are expanding. There could be a one or two percentage point improvement, but we are not sure what kind of volumes are coming. We just have estimates and that’s why we will not like to give a number. But we — on a realistic basis, we should be able to maintain our market share post expansion.

Unidentified Participant — — Analyst

Okay. Sir, can you throw some light on the anti-dumping duty on radial tyre? Is it still continued?

Suresh Sodani — Managing Director

No, the anti-dumping duty was first extended up to December ’22, but while there was again a DGTR recommendation for continuing the duty, the Finance Ministry has not accepted it and that duty on radial tyres has been removed since January ’23.

Unidentified Participant — — Analyst

Okay. Okay, sir. Thank you. This was from my side.

Suresh Sodani — Managing Director

Yeah. Thank you.

Operator

Thank you. The next question is from the line of Chandresh Malpani from Niveshaay [Phonetic] Investment Advisors. Please go ahead.

Chandresh Malpani — — Analyst

Hello?

Suresh Sodani — Managing Director

Yeah. Can you please go ahead.

Chandresh Malpani — — Analyst

Yeah. Thanks for the opportunity. Sir, only one question. Sir, what players are coming up with PTCF capacities? I believe, SRF is already there. So any other player?

Suresh Sodani — Managing Director

We are not aware of anybody else entering into the segment.

Chandresh Malpani — — Analyst

Okay. So sir, and next question was — there is steel tyre cord fabric as well. So, where is it used basically?

Suresh Sodani — Managing Director

Sorry, steel tyre cord?

Chandresh Malpani — — Analyst

Yeah.

Suresh Sodani — Managing Director

Yeah. Steel tyre cord is used in radial tyres of medium and heavy trucks, so that’s the radial tyres. While PTCF is used in passenger radial cars — radial tyres, steel tyre cord is used in the truck tyres for radial tyres.

Chandresh Malpani — — Analyst

Okay. So we’re not…

Krishnagopal Ladsaria — Chief Financial Officer

[Speech Overlap] from our side for steel tyre cord.

Chandresh Malpani — — Analyst

Sorry sir, I missed it.

Krishnagopal Ladsaria — Chief Financial Officer

We are not having any plan to enter into steel tyre cord.

Chandresh Malpani — — Analyst

Okay. Okay. Thank you sir. Thank you.

Operator

Thank you. [Operator Instructions] Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference over to Mr. Prashant Sharma for closing comments. Thank you and over to you.

Prashant Sharma — Analyst

Yeah. On behalf of Quantum Securities, we thank everyone for joining us today. We look forward for staying in touch in future quarter. Have a nice day.

Suresh Sodani — Managing Director

Thank you.

Krishnagopal Ladsaria — Chief Financial Officer

Thank you.

Operator

[Operator Closing Remarks]