DCM Shriram Ltd. (DCMSHRIRAM) Q2 FY23 Earnings Concall Transcript

DCM Shriram Ltd. (NSE:DCMSHRIRAM) Q2 FY23 Earnings Concall dated Oct. 21, 2022

Corporate Participants:

Ajay S. Shriram — Chairman & Senior Managing Director

Vikram S .Shriram — Vice Chairman & Managing Director

Analysts:

Neelam Saha — Ventura Securities Limited — Analyst

Ahmed Madha — Unifi Capital Pvt Ltd. — Analyst

Saket Kapoor — Kapoor & Company — Analyst

Pratiksha Daftari — Aequitas Investments — Analyst

Pratik Tholiya — Systematix Group — Analyst

Presentation:

Operator

Ladies and, gentlemen, good day and welcome to DCM Shriram Limited Q2 FY23 Earnings Conference Call. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Siddharth Rangnekar from CDR India. Thank you, and over to you Mr. Rangnekar.

Operator

Thank you, good afternoon and thank you for joining us on DCM Shriram Limited’s quarter two and H1 FY23 Earnings Conference Call. Today, we have with us Mr. Ajay Shriram, Chairman and Senior Managing Director; Mr. Vikram Shriram, Vice Chairman & Managing Director; Mr. K. K. Kaul, Whole Time Director and Mr. Amit Agarwal, CFO of the company.

We shall commence with opening remarks from Mr. Ajay Shriramand and Mr. Vikram Shriram. Members of the audience will get an opportunity to post their queries to the management, following these comments, during the interactive question-and-answer session.

Before we begin, please note that some of the statements made on today’s call could be forward-looking in nature, and a note to that effect has been included in the conference call invite circulated earlier. I would now like to invite Mr. Ajay Shriram to give us a brief overview. Over to you sir.

Ajay S. Shriram — Chairman & Senior Managing Director

Thank you for that. Good afternoon, ladies and gentlemen, and thank you for being part of our Q2 and H1 financial year 2023 earnings conference call. I wish to take this opportunity to convey our best of greetings to each one of you ahead of Diwali. I will commence with perspective on industry dynamics and the associated strategic imperatives for us.

I shall be followed by Vikram with the discussion on operating and financial performance. Today, the world is witnessing historically high inflation and fears of recession are around the corner. Interest rates are rising, U.S. dollar continues to strengthen, and is a cause of concern for net importing countries. Along with this, the geopolitical environment is very unfavorable and the climate continues to pose new challenges. Our businesses are operating in a tough and unpredictable economic environment. We have managed to evolve and manage the situation well with forward-looking approach, dynamic control on costs, and having strength in the business model and on the financial.

Our investment and capacity building, better integration, cost-efficiency, innovation and value creation are all aimed at driving business momentum, while limiting the negative impact of such a volatile operating environment. There will be INR2,500 crore capex is on schedule and will lead to substantial announcement in our reported results in the coming year. In line with the desire to be more sustainable, we are pursuing projects, which will enhance the resource conservation, increase use of green energy, lower energy usage, and further encourage the circular economy we are already having.

Some of these initiatives are underway, and will bear fruits in the coming years. Currently, we are 11 times water positive and 34% of the total energy consumer in our operations is green. With this, I would now like to walk you through the perspective on our various businesses.

First, I’ll cover chemicals. Global capacity utilization in chlor-alkali is at the low-level given higher energy costs and moderation in construction activity. Consequently, India has stepped up exports with H1 financial year 2023 net exports at 1.39 lakh metric tons versus 0.13 lakh metric tons in the same period last year.

As we import, prices are range-bound around $650 a metric ton during Q2 financial year 2023. The energy prices that form significant part of the cost of production continue to be [Indecipherable]. We expect the prices of caustic soda to support high input costs and decrease in chlorine prices, leading to reasonable margins. A lot will also depend upon expected inflationary pressure across the world in coming months.

Work on growth initiatives continues with additional 120 MW captive power plant getting online by December 2022 and the aluminum chloride expansion as the [Indecipherable] contracts getting operational within this financial year. We are building value-creating businesses in the form of epichlorohydrin, hydrogen peroxide. And, these will be fixed — we will see commissioning in the early part of the financial year 2024. The 50 MW green power supply will be fully operational from Q2 financial year 2024.

Vinyl, globally PVC face demand pressure leading to prices reaching sub $1,000 per metric ton levels. China is pushing its production to India and we have made representation to the government and are awaiting decision on anti-dumping duty and customs duty on PVC. At this price level, our PVC operations are sub-optimal. Carbide prices have also witnessed a decline quarter-on-quarter, but continued to give reasonable margins and hence production is being optimized given the flexibility in the business model. It is important here that globally no PVC demand resulted in lower chlor-alkali capacity utilization. On an overall basis, we continue to earn reasonable margin.

Sugar, globally sugar output and consumption is expected to be balanced in the coming season and India will continue to play a major role in trades like in this year. India has exported a record approximately 11 million metric tons sugar this year, without any subsidies from the government and with closing sugar inventory being up approximately 6 million tonnes.

International sugar prices are expected to remain firm and Indian mills in West and South should benefit from exports. In the next sugar season. India sugar production can be expected at the 6 million metric tons, consumption at approximately 27.5 million metric tons, and we will have close to 8 million metric tons available for exports. UP sugar industry needs the balance government policy for sugar exports, as well as cane juice-blended ethanol to remove regional imbalances with Maharashtra. We expect to start our touching operations from first week of November. Our growth initiatives are on track to build capacities, further integration, and further value capture from the distillery ash. These projects will get commissioned in Q3 financial year 2023 and would to earnings in the coming season.

Our potassium sulfate project from distillery ash is coming up in a subsidiary and will be commission by Q1 financial year 2024. Now I’ll cover the IT businesses, which comprise of Shriram Farm Solutions, Bioseed and Fertilizer. The monsoon played a crucial — clinical role in performance of these businesses and also witnessing a shortfall in Q1, there has been above-average rainfall across regions, especially in South and Central India.

Shriram Farm Solutions has increasingly become — is increasingly becoming research-based across its verticals of seeds, specialty plant nutrition and crop care, with key focus on products that can sustain climate change, optimize nutrition along with supporting lifecycle of current products. It has this research center into Ludhiana, Punjab.

During the quarter, the business launched five new products, including two products from its own R&D. It is also setting up manufacturing facilities on bio-fertilizers and water-soluble fertilizers. All this augers well for growth of this business. Bioseed is repositioning its products sales with farmers and enhancing its portfolio. The product pipeline is strong. The performance of India business improved during the quarter. We believe that this business should turn around over the period of next two years.

Fertilizer consumption stabilized after the shutdown in Q1 financial year 2023. We are continuously improving our energy consumption that adds to better performance. Subsidy outstanding has increased significantly as a result of high gas prices and requires better support from the government.

[Indecipherable], I’m happy to share that we are now entering the glass facade business, which will be an added growth driver. The fabrication shop for the glass facade is being set up in Hyderabad. The existing business is witnessing good growth momentum. This is in line with enhanced footprint and the wider range of our portfolio, both with the new UPVC and with system aluminum products. The windows and doors business is seeing traction in our project segment too where we are seeing volume and pricing growth. Our new windows and doors habitation units has been commissioned at Bhubaneswar and Will argument our presence in that part of India. Investments and initiatives we have been making across businesses towards integration, scale, innovation, resource mobilization and sustainability are delivering intended positive outcomes.

The enhancements underway that results in better performance and strength and will give further strength to the earnings profile. I will now request Vikram to take you through the operating and financial performance. Thank you good afternoon everyone. I will take you through the financial highlights for Q2 and H1 financial year 2023 results. The net revenue, net of excise duty, this quarter were up 28% year-on-year at INR2,740 crores. This was led by better prices and volume across all businesses segments excepting Vinyl where prices and volumes both came lower. Chlor-alkali business revenues were up 62% year-on-year at INR781 crores, led by ECU that was up 74% year-on year along with other product prices. Capacity utilization levels were reasonable at 87% versus 90%. Vinyl revenue were down 53% year-on-year at INR155 crores led by volumes, which were lower due to power availability and maintenance shutdown. PVC prices were down by 32% year-on-year and carbide prices were down 9%. The sugar business revenues net of excise duty were up 5% year-on-year at INR617 crores on account of better sugar realizations by approximately INR100 rupees per quintal. Sugar volumes were almost the same at 12.5 lakh quintal whereas ethanol volumes were lower at 205 lakh liters versus 260 lakh liters last year. Ethanol volumes on a half year basis were up — similar, almost similar. In the agri inputs, all businesses reported strong revenue. SFS increased 53% year-on year at INR238 crores, witnessing price and volume growth across most product categories. Bioseed increased 13% year-on year at rupees INR88 crores, with India business reporting revenues of INR60 crore, increasing by 8% year-on year, and international business reporting revenues of INR28 crores, increasing 26% year-on-year. Fertilizer saw a 99% year-on-year increase in revenues at INR585 crores. Price realization for the quarter increased by 88% year-on year on account of higher gas prices, which is a pass-through. Natural gas prices for Q2 financial year 2023 were at $24 per NBP versus $12 per million Btu last year. It is important to note — mention that increase in energy prices increases the topline and the subsidy burden without significantly changing bottom-line and therefore lower overall margins for the company because of the interest cost. Fenesta delivered revenues of INR178 crores that increased 37% year-on-year, led by volumes in project segment and higher prices. The order book also increased by 6% year-on-year. Coming to profitability, in Q2 financial year 2023, PBIT stood at INR302 crores, down by 3% year-on-year, despite cost pressures. The performance was primarily supported by chemical, agri inputs and Fenesta segment. Chemicals PBDIT at INR250 crores versus INR108 crores during Q2 financial year 2022, led by higher product prices in spite of higher energy costs and fuel costs. In Vinyl, the PBDIT was at negative INR10 crores versus rupees INR156 crores positive during the same period last year, led by lower volumes and lower prices of PVC. Energy and carbon prices continue to be much higher. At these prices of energy and carbon material, PVC is marginally positive at contribution level. Carbide continues to be reasonably profitable. The sugar business PBDIT at negative rupees of course primarily being an off-season and higher-cost of last year sugar inventory. Non-availability of C molasses also dragged down the earnings. Also there was an additional charge relating to previous period amounting to rupees INR15 crores on account of revision in wages with effect from October 2018 entries in molasses quota from 18% to 20% for sugar season 2021-2022, which also was a one time charge in that INR15 crores. Agri inputs businesses reported better numbers for the reasons stated earlier. Fenesta PBDIT was at INR36 crores registering a growth of 97% respectively, led by volumes and prices. For the half year FY23, net revenues, net of excise, were up 36% year-on-year at INR5,591 crores and PBDIT was up 25% year-on year at iNR766 crores. Growth was seen across all business segments. With robust cash flows across our businesses, our debt levels remain at comfortable levels with surplus net debt as on Thursday, September 2022 attributes 35% versus net debt of INR4 crores as on 31st March 2022. Return on capital employed for September 22 came in higher at 36% versus 26% for September 2021. This is despite higher subsidy outstanding in urea, as well as higher sugar inventory versus the same period last year. The Board has recommended an interim dividend of 230%, amounting to INR71.7 crores. Overall, we have delivered yet another good performance in the backdrop of an uncertain macroenvironment and despite challenges in certain businesses, particularly on the cost side — with the energy costs. With our investment on track and a strong balance sheet and cash flows, we look forward to a healthy and sustainable growth going-forward. While closing. I would like to convey to you my festive greetings for Diwali. We will now take the questions that you may have. Thank you.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions]. The first question is from the line of Neelam Saha from Ventura Securities Limited. Please go ahead.

Neelam Saha — Ventura Securities Limited — Analyst

Am I audible?

Ajay S. Shriram — Chairman & Senior Managing Director

Yes, we can hear you.

Neelam Saha — Ventura Securities Limited — Analyst

Yeah, hello sir. Congrats on a good set of numbers.

Ajay S. Shriram — Chairman & Senior Managing Director

Thank you.

Neelam Saha — Ventura Securities Limited — Analyst

So my question is some of your capacity data is in TPD format. As per you, what is the suggestable number of days I should multiply it with to get annual capacity data?

Ajay S. Shriram — Chairman & Senior Managing Director

Generally, we look at approximately 330 days — 330 to 335 days to give you an idea of what the annual expected production done.

Neelam Saha — Ventura Securities Limited — Analyst

Okay, and if I’m not wrong, and your PVC compound comes from your PVC resin business, right?

Ajay S. Shriram — Chairman & Senior Managing Director

Sorry.

Neelam Saha — Ventura Securities Limited — Analyst

Your PVC compound comes from your PVC resins, right?

Ajay S. Shriram — Chairman & Senior Managing Director

From the PVC, we make PVC compound with a joint-venture business, which we had with Westlake for the last five years and we bought out the shares of Westlake and now this is a 100% subsidiary of DCM Shriram Limited.

Neelam Saha — Ventura Securities Limited — Analyst

And if raw material comes from the PVC resin business, right?

Ajay S. Shriram — Chairman & Senior Managing Director

It comes from our PVC business, as well as comes from outside. We buy some resins from outside also. We will require different grades of PVC for making particular types of PVC compounds.

Neelam Saha — Ventura Securities Limited — Analyst

Okay is there any certain parentage of your PVC resins that you send to PVC compound, certain percentage that you send outside, how that [Technical Issues].

Ajay S. Shriram — Chairman & Senior Managing Director

I’m sorry, could you kindly repeat that.

Neelam Saha — Ventura Securities Limited — Analyst

Okay, is there a certain percentage of your PVC resin that you send to PVC compound and certain percentage that you send outside. I just wanted to know how much of it gets transferred PVC compound.

Ajay S. Shriram — Chairman & Senior Managing Director

Let me put it this way. I think the amount we send to our PVC compounding client would be maybe 10% or 15% of our monthly production.

Vikram S .Shriram — Vice Chairman & Managing Director

Less than — sometimes.

Ajay S. Shriram — Chairman & Senior Managing Director

Even less than 10% because we buy material from outside also. So and we sell approximately 90% plus minus in the open-market, PVC. Our total PVC production around 90%, we will sell in the market and around 10% we use in our PVC compounding because we buy from Formosa Plastics also and another people for our PVC compounding plant. It requires different grades of PVC.

Neelam Saha — Ventura Securities Limited — Analyst

Okay understood. Thank you and have a Happy Diwali.

Ajay S. Shriram — Chairman & Senior Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Ahmed Madha from Unifi Capital. Please go ahead. Thank you for the opportunity. Am I audible?

Ajay S. Shriram — Chairman & Senior Managing Director

Yes, please, yeah.

Ahmed Madha — Unifi Capital Pvt Ltd. — Analyst

Yeah, so my first question was regarding the caustic export volume. So, if I look at the sequential numbers, they have more than doubled, right. So how should we interpret this number? Is his because of lower domestic demand or we see better realization in exports or we are setting up the export markets now so that when next year, the new capacity comes up, we can export significant quantities. How should we look at those numbers?

Ajay S. Shriram — Chairman & Senior Managing Director

See, it’s a good question. See, I think there are multiple reasons. One of the reasons is that in Europe. Because of energy prices being high, their production has come down. So demand has risen. Because of that, we are able to export caustic into — export caustic as, I said, we’ve gone into 1.39 lakh ton compared to 0.13 lakh tons in the corresponding period last — first six months of the last financial year and this financial year. So, this has opened up as an opportunity and of course, the price is also satisfactory compared to the Indian situation. And you’re right, the new plants are also coming up. So if we get the opportunity to expand, it sort of puts less pressure on the domestic market. So, we are looking at exports and wanting to grow that.

Ahmed Madha — Unifi Capital Pvt Ltd. — Analyst

Okay. So, should we assume that going-forward, our export volumes will be close to 20% of total sales?

Ajay S. Shriram — Chairman & Senior Managing Director

I’m not sure it will be close to 20% of total sales. I think that is a little high. All these things depend so much on what is the market position in the export market and the domestic market. I think it’s a swing which happened. Yes what India is trying to do, a couple of the large aluminum manufacturers, whether it’s Vedanta or couple of others on the East side who used to import caustic soda. We as industry is trying to get into contracts with them. And rather than the importing caustic soda, Indian manufacturers, we will supply caustic soda. So that will then put less pressure on the domestic market. So, we are working on that direction. Exports at the moment has gone at 1.39 lakh tons in the first six months and we are attempting to increase it, but depends a lot on the market.

Hello.

Operator

Does that answer you question Mr. Ahmed?

Ahmed Madha — Unifi Capital Pvt Ltd. — Analyst

So, I am repeating again. So we look at new caustic capacity, which is coming up in Q1 or Q2 of next year, how will the ramp-up of this capacity will be?

Ajay S. Shriram — Chairman & Senior Managing Director

See, the ramping up is happening. There are new plants coming up. So that is going to add to the total capacity — I mean India capacity will reach almost 70 lakh tonnes if we take the next three months or four months coming in. But, I think everyone at the moment, because of the demand especially for chlorine –chlorine demand is fairly low and that is sort of taking the manufacturing level of the chlor-alkali plant. So it depends a lot on the chlorine? How that moves and that will determine what will be the capacity utilization of the plant. Everyone is a little apprehensive because of chlorine price. And chlorines prices as you may be knowing is going to negative. It’s almost minus INR10,000 rupees per ton of chlorine. So, that is having an impact on the total caustic soda chlorine products.

Ahmed Madha — Unifi Capital Pvt Ltd. — Analyst

Okay, got it, got it, got it. Coming back to the chlorine part and the PVC part, so this year — this quarter than, we had minus INR15 crore EBIT loss. Now if we assume that your volumes will ramp up because the breakdown in [Technical Issues] will restore. So, does that mean that we will breakeven or there’ll be a negative contribution margin?

Ajay S. Shriram — Chairman & Senior Managing Director

The PVC is difficult to say because as we are seeing internationally, PVC prices also have become soft over the last couple of months. That’s having an impact as I mentioned has come to sub $1000 per metric ton. It was about $970. And going-forward, we have to see how it moves because China demand has also come down. Europe demand has come down. In America, because of the high inflation and interest cost,the economy is pulling back. The housing sector is not doing as well. So, all that has reduced the demand for PVC.

Ahmed Madha — Unifi Capital Pvt Ltd. — Analyst

Got it, got it. Finally on the sugar business. So, we have.

Ajay S. Shriram — Chairman & Senior Managing Director

Could you kindly repeat that — which business?

Ahmed Madha — Unifi Capital Pvt Ltd. — Analyst

Yeah, I’m talking about sugar business.

Ajay S. Shriram — Chairman & Senior Managing Director

Sugar?

Ahmed Madha — Unifi Capital Pvt Ltd. — Analyst

Yeah, so my question was that we had…

Ajay S. Shriram — Chairman & Senior Managing Director

May I request you to kindly come closer to your mike. We can’t hear you properly.

Ahmed Madha — Unifi Capital Pvt Ltd. — Analyst

Am I audible?

Ajay S. Shriram — Chairman & Senior Managing Director

Yeah that’s better. Thanks.

Ahmed Madha — Unifi Capital Pvt Ltd. — Analyst

So my question is in the sugar business, we have some high-cost inventory from last quarter, right. So grain prices further revising upward and domestic sugar is not going up, how do you look at the sugar business margin. That’s first part. And the second part is with the increase in the sugar capacity by 2,000 TCD,. does this mean that we have sufficient molasses for our 350 kL per day ethanol production [Technical Issues].

Ajay S. Shriram — Chairman & Senior Managing Director

Yeah, so just to answer your first question, in terms of carrying the inventory, we currently have about 14.6 lakh quintal of sugar inventory, which is at about INR3,300 is the cost. So the prices have been reasonably good, however, they have not been able to cover the increased costs, the claim cost cost and the consumables costs, which happened in the last season. So you know the only good part in sugar is that because exports are happening, the inventories at reasonable levels. The sugar prices are expected to remain stable or depending on how the export prices are, it might inch up a little bit. But, we don’t see the prices coming off from current levels. That is point one. Also, just to add to that, whatever my investment we are doing in the sugar, where we are increasing our refining capacity, that is going to add straight away about INR80 rupees to INR90 rupees per quintal to our margins along with the ethanol capacity — grain-based ethanol capacity we’re putting in. All in all the way you need to look at our sugar businesses, we are looking to grow volumes not just in sugar but we are complementing the volumes with ethanol with value-add on sugar through refinery with getting into the products like sulfate of potash, which is from this. And continue to look at it.

So, that’s our process. Near term plus-minus, we will continue, pricing and the strategy we will grow well in this business.

Ahmed Madha — Unifi Capital Pvt Ltd. — Analyst

Got it and on the molasses part if can answer.

Ajay S. Shriram — Chairman & Senior Managing Director

Pardon me.

Ahmed Madha — Unifi Capital Pvt Ltd. — Analyst

Molasses.

Ajay S. Shriram — Chairman & Senior Managing Director

What was your question, if you can repeat?

Ahmed Madha — Unifi Capital Pvt Ltd. — Analyst

Yeah, so my question was that with a 4,000 incremental TCD capacity coming up this season, do we have sufficient molasses for our 350 k per day ethanol production capacity.

Ajay S. Shriram — Chairman & Senior Managing Director

Yeah, so our existing capacity is 350 KLD on C molasses business, our B molasses, it is about 450 KLD. And so, we are short of molasses for the entire season. We are short by about 15%. Now. If you remember when we were putting up — when we announced the project of 120 KLD grain-based Distillery, there the tandem that are putting is 260 KLD grain. This strategy is that we will be able to process grain to meet up the shortfall to some extent, not fully although, but to some extent, we will fill up the shortfall in the availability of molasses to the extent of 15% of the existing capacity. I hope I made myself clear.

Ahmed Madha — Unifi Capital Pvt Ltd. — Analyst

Yeah, got it, got it. Thank you so much. That’s it from my side. I’ll get back in the queue.

Ajay S. Shriram — Chairman & Senior Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Saket Kapoor from Kapoor & Company. Please go-ahead.

Saket Kapoor — Kapoor & Company — Analyst

Yeah, thank you for this opportunity.

Ajay S. Shriram — Chairman & Senior Managing Director

Hello.

Saket Kapoor — Kapoor & Company — Analyst

Yes, sir. Am I audible?

Ajay S. Shriram — Chairman & Senior Managing Director

Yes, yes, we can hear you.

Saket Kapoor — Kapoor & Company — Analyst

Yeah, yeah, thank you sir for this opportunity firstly. Sir as in your opening comments, you did mention about correlation between PVC and the caustic prices. So, if you could address slightly more into it, how historically had been the correlation with now PVC prices on a continuous slide over the last one quarter. How — what should now be the impact on the caustic, either dynamic aligned or the geographies, you see difference this time, sir.

Ajay S. Shriram — Chairman & Senior Managing Director

See the way it works and the correlation that the CMD was talking about is essentially that when the construction activity is low and we all know globally construction activity has come down given the high-interest rates. And therefore, the PVC consumption goes down. And the key ingredient or one of the key raw material for PVC manufacturing is chlorine, and therefore the chlorine. Once the chlorine goes down, which means the operating levels of global chlorine [Indecipherable] plants are coming down, which again as a consequence, the caustic available is little less globally. And therefore, the prices have gone up. So if you see global prices which have gone down to close to about $500, $550, I would say at the beginning of, let’s say in the month of July, now they are about $750 level. So that’s some –exact position is difficult to give you but than give some of the factors which helped supporting the prices of caustic.

Saket Kapoor — Kapoor & Company — Analyst

But if we take that into accept or if the negative chlorine which currently the glut I think because of more chlorine there in the market, that will not be allowing the caustic players to run at optimum levels going ahead. So that would directly put pressure on the utilization levels and hence the profitability for the domestic players would also be going down. However, export may support the volume uptake. But what the glut in chlorine needs no management rather than lower utilization level. So, that understanding is correct, sir.

Ajay S. Shriram — Chairman & Senior Managing Director

What you are saying is right. There is glut in chlorine and going forward, at least for the new plants, I’m sure it will affect the operating rates. With the existing plants, it’s okay. And therefore with the new plans to ramp up, my sense it will be a little slower than what would have been the expectation. But for the existing plants, that should be okay. Currently,we are operating at almost 95% capacity utilization for our existing plants.

Saket Kapoor — Kapoor & Company — Analyst

Right.

Vikram S .Shriram — Vice Chairman & Managing Director

I’d like to just add that ultimately, chlorine demand is also growing because a lot of our customers are also expanding. With this China plus one story plus the whole chemical export story from India. A lot of our customers are also under expansion mode. So, there may be temporary — for some quarters or some period, there may be a mismatch, but the expansion and demand is also expected to be strong.

Saket Kapoor — Kapoor & Company — Analyst

Right, sir, Correct on that part. So, it would transitory in nature going ahead or this period has been maintained. Correct. Sir, as in the graph, sir, the ECU realization for us was also flat for this process. So the trend — the upward trend in the caustic soda prices have been post the end of the September quarter or it was mentioned as the [Indecipherable] prices started moving up, then why our realizations lower. Was this negative [Indecipherable] impact the reason for the same.

Ajay S. Shriram — Chairman & Senior Managing Director

So see if you see the graph, there is already in the international prices, there is an uptick from $593 in August to $675 in September and as I mentioned, has already reached about $740, $750. Then, our prices also on [Indecipherable] basis have gone up.

Saket Kapoor — Kapoor & Company — Analyst

And currently, the prices are in the vicinity of $750, this is what we are

Ajay S. Shriram — Chairman & Senior Managing Director

International prices, yes.

Saket Kapoor — Kapoor & Company — Analyst

Right, sir, I’ll come back in the queue for the follow-up and best of luck. Thanks.

Ajay S. Shriram — Chairman & Senior Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Pratiksha Daftari from Aequitas Investments. Please go ahead.

Pratiksha Daftari — Aequitas Investments — Analyst

So if you could just may quantify the impact of break-down in the captive power plant and how much — like how much of the losses that we have reported. How much of that could be attributed, higher cost will be attributed to the power plant?

Ajay S. Shriram — Chairman & Senior Managing Director

This is actually in terms of the breakdown to put up our plant?

Pratiksha Daftari — Aequitas Investments — Analyst

Yes, yes, yes.

Vikram S .Shriram — Vice Chairman & Managing Director

How much can we attribute for that loss.

Ajay S. Shriram — Chairman & Senior Managing Director

So because of the — breakdown in Kota power plant, which was therefore almost three, three and half months, the total loss would be in the range of around INr25 crores to INR30 crores for this period.

Pratiksha Daftari — Aequitas Investments — Analyst

Okay, okay. understood. and so if you could register — like in the presentation we have seen that the international prices have gone up, but the domestic prices for caustic even adjusting for the chlorine hasn’t really moved up. So, is there anything particular in the domestic market that is impacting the positive dynamics. Demand slowdown.

Ajay S. Shriram — Chairman & Senior Managing Director

I put it this way. I think one, there is always a time lag because we have contracts already which are there. Okay that’s one. And secondly also, I think it depends a lot on supply demand, but maybe international deals, which are done at a higher price, but ultimately the average price in India we are actually happy that it’s at least stable. It is looking that way for this quarter. And, the price impact also happens after little time lag. So it can’t happen overnight.

Pratiksha Daftari — Aequitas Investments — Analyst

So is it fair to assume that the caustic prices have gone up in October vis-a-vis September for domestic process for us.

Ajay S. Shriram — Chairman & Senior Managing Director

Marginally, they have gone up but unfortunately chlorine prices have gone down further.

Pratiksha Daftari — Aequitas Investments — Analyst

Okay, and chlorine you said negative 10,000 ton a ton vis-a-vis about 4,000 to 5,000..

Ajay S. Shriram — Chairman & Senior Managing Director

Approximately, yeah it moves approximately, but depends deal-to-deal. But approximately around that much plus-minus.

Pratiksha Daftari — Aequitas Investments — Analyst

Okay okay. Any particular change in the demand outlook in the domestic industry, especially from alumina, textile and paper.

Ajay S. Shriram — Chairman & Senior Managing Director

I think touchwood the domestic demand is quite stable and moving well.

Pratiksha Daftari — Aequitas Investments — Analyst

This is basically the capacity utilization has been right — like the constraint is only chlorine utilization, not demand?

Ajay S. Shriram — Chairman & Senior Managing Director

Chlorine is a major factor,which is impacting definitely. There is no doubt on that. That is having an impact. But. I think world economy we are seeing the geopolitics of the world and that is affecting each industry in an efficient way. So what’s happening today is something maybe more positive tomorrow or a little positive tomorrow, we can’t commit — comment or commit anything going-forward. But at least it looks like in India, the caustic soda, chlorine, balance and demand as they’re moving today will continue for the quarter.

Pratiksha Daftari — Aequitas Investments — Analyst

Okay. On the sugar segment front, there rains off late — the recent rains — has that impacted the crop in UP?

Ajay S. Shriram — Chairman & Senior Managing Director

So it’s a little early to say. See, sugarcane is a hardy crop. So however, the real impact will have to be seen.

Pratiksha Daftari — Aequitas Investments — Analyst

Okay, okay. And if you could just share the cost of. Inventory valuation as on 30th September for the 14.7 lakh quintals

Ajay S. Shriram — Chairman & Senior Managing Director

About 3,308 per quintal.

Pratiksha Daftari — Aequitas Investments — Analyst

Okay. all right, yeah, that’s it from my side. Thank you.

Ajay S. Shriram — Chairman & Senior Managing Director

Thank you.

Operator

Thank you. [Operator Instructions]. The next question is from the line of Pratik Tholiya from Systematix. Please go ahead. Yeah, hi sir. I just wanted to — just check what was the chlorine prices during the quarter. If you’ve answered that, I actually missed that.

Ajay S. Shriram — Chairman & Senior Managing Director

The average prices Pratik were around minus $6,600 for the quarter minus. Currently, as we mentioned, it’s about minus $9000 to minus $10,000 minus.

Pratik Tholiya — Systematix Group — Analyst

Okay, I just, wanted to clarify that, That’s it from me

Ajay S. Shriram — Chairman & Senior Managing Director

It feels now good, reasonable, the prices are good.

Pratik Tholiya — Systematix Group — Analyst

Okay, and sir, are you seeing any benefit from this Europe plus one, lot of talks happening on that front. Of course, our exports are slightly going up but do you see any long-term benefits of this Europe plus one theme. The way China Plus One has played out in some of the other chemicals, can that happen in our caustic soda as well?

Ajay S. Shriram — Chairman & Senior Managing Director

I think it’s, difficult to say because of geopolitics. You see energy prices in Europe are going so high that factories are closing down. They’re not able to operate, so alkali plants are closed down because for chlor-alkali plant, the basic raw-material is power. Almost 65% to 70% of the cost of production is power. So that’s why, it is fluctuating. One cannot — it’s very difficult to give any commitment of how it will move forward. China is having its own problem because of COVID and because of the various other factors. So frankly speaking, these sort of products where the geopolitics is unstable, energy prices are moving in a manner, which has been unprecedented. We’ve never seen this level of energy costs. It is having an impact on the economy worldwide across-the-board.

Pratik Tholiya — Systematix Group — Analyst

Sure. And sir lastly on Fenesta, in your opening remarks you mentioned about the glass facade. If you could just elaborate more in terms of when will start and what sort of numbers you can expect in the initial quarters.

Ajay S. Shriram — Chairman & Senior Managing Director

So, the commissioning will start in the early part of next year. For the machines and [Indecipherable] arrive, it will take about a year so — less than a year. So, we should be starting early next year.

Pratik Tholiya — Systematix Group — Analyst

You mean calendar year?

Ajay S. Shriram — Chairman & Senior Managing Director

No, the financial year.

Pratik Tholiya — Systematix Group — Analyst

Financial okay, okay. And sir, what sort of numbers can we expect from there?

Ajay S. Shriram — Chairman & Senior Managing Director

See, it will take time to set in the market. It will be a slow start. But we should pickup Index [Technical Issues].

Pratik Tholiya — Systematix Group — Analyst

And the margins should be comparable with our existing Fenesta margins upwards of 18%, 15% to 18%?

Ajay S. Shriram — Chairman & Senior Managing Director

The EBITDA margins?

Pratik Tholiya — Systematix Group — Analyst

Yeah.

Ajay S. Shriram — Chairman & Senior Managing Director

Yeah, so EBITDA margins are in the range 14% to 15%.

Pratik Tholiya — Systematix Group — Analyst

Okay. Understood. Yeah, that’s it from my side and wishing the team a very happy Diwali. Thanks so much.

Ajay S. Shriram — Chairman & Senior Managing Director

Thank you very much and same to you and your family. Thank you.

Pratik Tholiya — Systematix Group — Analyst

Thank you so much sir.

Vikram S .Shriram — Vice Chairman & Managing Director

Thank you, Pratik.

Operator

[Operator Instructions]. So. ladies and gentlemen as this was the last question for today, I now hand the conference over to the management for closing comments.

Ajay S. Shriram — Chairman & Senior Managing Director

Thank you. Ladies and gentlemen thank you very much for participation in Q2 financial year 2023 earning conference call. We will continue to work on our strategic direction of growing our businesses, leading scale, multiple revenue streams, enhancing efficiencies. furthering innovation, and moving further on a circular economy and sustainability. We will also ensure that our balance sheet and cash flows remain strong. We are conscious of our responsibility towards the environment, towards community welfare and our employees who are the true assets of the company. We believe in working towards planet, people, and profits together. We thank you for taking out time during the onset of the festive season and I take this opportunity to wish you and your families very safe and Happy Diwali and the healthy and prosperous year ahead. Thank you, very much.

Operator

[Operator Closing Remarks]