DCM Shriram Ltd. (NSE: DCMSHRIRAM) Q3 2025 Earnings Call dated Jan. 21, 2025
Corporate Participants:
Shruti Joshi — Investor Relations
Ajay S. Shriram — Chairman and Senior Managing Director
Ajit. S. Shriram — Joint Managing Director
Analysts:
Nirav Jimudia — Analyst
Riya Mehta — Analyst
Nisarg Vakharia — Analyst
Jainam Ghelani — Analyst
Rohit Nagraj — Analyst
Ahmed Madha — Analyst
Raj Vyas — Analyst
Pratik Tholiya — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to DCM Sriram Limited Q3 FY ’25 Earnings Conference Call. [Operator Instructions]
I now hand the conference over to Ms. Shruti Joshi from CDR India. Thank you, and over to you, Ms Joshi.
Shruti Joshi — Investor Relations
Thank you, Nirav. Good afternoon, and welcome to DCM Limited’s Q3 FY ’25 Earnings Conference Call. Today, we have with us Mr. Ajay Shriram, Chairman and Senior Managing Director; Mr. Ajit Sriram, Joint Managing Director; Mr Aditya Sriram, Deputy Managing Director; and Mr. Amit Agarwal, Group CFO of the company. We shall commence with remarks from Mr. Ajay Sriram and Mr. Ajit Sriram. Members of the audience will get an opportunity to post their queries to the management following these comments — 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 invitation that has been circulated earlier and is also available on the stock exchange website.
I would now like to invite Mr. Ajay Shriram to give us a brief overview. Over to you, sir.
Ajay S. Shriram — Chairman and Senior Managing Director
Thank you. Thank you, Shruti. Good afternoon, ladies and gentlemen, and a very warm welcome to all of you. We would like to wish all of you and your families a very happy and prosperous new year. To start with, I shall share my thoughts on the industry and business dynamics, following with Ajit will share the views on the financial performance. Post that, we’d like to hear your viewpoints as well. The geopolitical environment is leading to economic uncertainties on various fronts. This is impacting international trade, investment and consumption patterns. We expect global growth to moderate and monetary policies to become more accommodative. While we expect growth trends to be led by Asia with India playing a pivotal role, there may be challenges on account of trade policies and inflation. We as an organization must navigate this challenging landscape and our endeavor is to build an agile business to handle these evolving dynamics along with seeking opportunities for growth. Our business has seen a series of well-planned initiatives to strengthen capacities in core segments towards value-creation and integration, both downstream and upstream.
This remains the focal point for our growth strategy. Healthy balance sheet and cash flows continue to give us the confidence to pursue these growth initiatives. We are focused on strengthening on — strengthening sustainability across the organization with continuous reduction in carbon footprint and water conservation. Over next 15 months, we shall be adding about 74 megawatt installed capacity of renewable energy for captive use. Our efforts have led to recognition among top 7% of the 523 global Chemical companies for ESG performance in the S&P Global Corporate Sustainability Assessment 2024.
I will now turn to discussion on various industry dynamics across our various businesses. First, I’ll pick-up chemicals. At the beginning of the quarter, there were apprehensions of supply constraints due to a cyclone in the US and increased demand in China led by fiscal stimulus. This led to increase in international prices. However, now the prices have started correctly with demand-supply adequately balanced. Caustic soda capacities in India are currently operating at a rate of around 80% and this is resulting in oversupply of chlorine in the market and therefore suboptimal ECUs. However, they have improved during the quarter. India continues to be a net of caustic, which is a positive. Our newly commissioned projects are meeting performance norms and ranking and ramping-up further steadily. As on-date, hydrogen peroxide is operating at about 80% capacity utilization and caustic soda post expansion is operating at about 70%. There is oversupply of hydrogen peroxide in the market. However, the caustic soda players are at a distinct cost advantage.
ECH plant commissioning has taken more than anticipated time due to a technical issue. We are confident of starting the trial run-in Q4 financial year ’25. The project work on adding aluminum chloride capacity and the new calcium chloride plant at Bharut that we announced in the last quarter has taken off and our team is working to commission these as per the stated finals. Our efforts towards cost efficiencies continue and we are working towards further optimizing our power cost. We have tied-up another 6.6 megawatt green power and are expecting its inflow from end of this financial year. We are also working towards further optimizing energy costs in our in our existing power plants.
Global demand for PVC continues to be sluggish. US prices of PVC remain weak owing to slower demand in downstream usage, shorter working schedules in December and higher interest rates that continued to impact construction. PVC pricing in Asia stayed soft on the back of surplus production and higher inventories during the quarter. Domestic PVC demand has picked-up on account of increase in agriculture and construction activities. This demand is estimated to have grown at approximately 10% during the nine-month period.
Majority share of this demand was fulfilled by imports. China has continued dumping material into India. In this context, the notification from finance ministry on imposition of anti-dumping beauty on several countries, including China, Korea and US is awaited sugar and ethanol. Global sugar balance for sugar season 24/25 has shifted to a deficit of 0.7 million metric tons due to a downgrade revision in global production. The Indian sugar season, season is expected to-end with the stock of 7.3 million metric tons. The production estimate is 29.3 million metric tons after diversion of 4 million metric tons for ethanol production. Consumption is estimated at 29 million metric tons. Exports of 1 million metric tons have been permitted by the government, which is a positive step for the industry. Simultaneously, industry is also pushing to increase in the MSP of sugar. The current price are at INR4,000 per of refined sugar. However, this should increase by another INR2 per kg to enable reasonable margins in the business. On the ethanol front, for the current-season, OMCs have floated tenders for supply of 916 crore liters of ethanol, targeting a blending of 18%.
As of December 15, 2024, ethanol blending in petrol reached 15.4%. Margins for producers are suboptimal given higher feedstock prices. Recently, government has HTI for-sale of sugar to produce ethanol. This is positive for this segment. The sugar expansion at Lone unit got operationalized in this quarter and the compressed biogas project will be commissioned by Q4 financial year ’25. Building Systems. The business continues to make efforts towards increasing penetration of current range of products and enhancing the product portfolio by setting up newer revenue platforms. By strategically aligning our efforts with market demands, we aim to optimize the customer experience along with business growth. In-line with this thought, the Board has given approval to invest up to INR65 crores in the fast-growing hardware business, which will enable backward integration, better customer experience as well as develop into a new revenue platform.
Our project to establish a new aluminum exclusion facility is progressing as per schedule. As a result of these initiatives, the business will be better-positioned towards becoming a more holistic player in the building material space and drive sustained growth. Moving on, the agri-inputs business portfolio comprises of Shriram Farm Solutions, fertilizers and the businesses. First, Shriram Farm Solutions. The business has once again achieved double-digit growth and continues to contribute significantly to the top-line and bottom-line of the company. The growth is driven by volumes across the business verticals in general and research wheat in particular, where SFS continues to consolidate its leadership position.
Looking ahead, we remain optimistic about continued growth in coming quarters, buoyed by robust demand for Crops increasing pharma adoption of our innovative solutions and ongoing advances in our product pipeline based on the principle of better science. Fertilizer, the urea industry continues to be stable with gas prices inching lower. By focusing on the areas of energy efficiency, maximizing production capacity and controlling fixed expenses, the company aims to enhance operational and financial performance., the business is on a promising turnaround journey, bolstered by new and better hybrid seeds across product categories and a robust pipeline of products for future growth. There was increased acreage of corn across key states due to higher crop price-driven by maized ethanol push. This along with has driven the growth for the first-nine months of this year.
I’ll now request Ajit to provide the financial performance. Ajit, over to you.
Ajit. S. Shriram — Joint Managing Director
Thank you. Good evening, everyone, and wishing you all a very Happy New Year. I will now take you through the financial highlights of Q3 FY ’25. The net revenues, net of excise duty for Q3 FY ’25 were at INR367 crores versus INR3035 crores in Q3 FY ’24, an increase of 11% year-on-year, driven by growth across, SFS and business — and businesses. PBDIT for Q3 FY ’25 was at INR537 crores versus INR480 crores last year, an increase of 12% year-on-year. Coming to the businesses, chemicals, the business saw an increase in revenue of 35% year-on-year, led by caustic soda volumes that were up 21% on account of the new 850 tonnes per day facility and ECUs that were up by 12%. Increased by 90% owing to lower input prices, particularly energy prices and efficiencies from the new 120 megawatt power plant.
Despite steady growth in downstream consuming industries like alumina, textile, pulp and paper, soaps and detergent, excess capacity in India is creating a pressure on product prices, especially chlorine. We have our plans in-place to enhance our chlorine downstream in terms of ECH, aluminum chloride, chloride and a few more ideas.. The business reported a growth in revenue by 26% year-on-year on account of higher volumes of PVC as well as carbide, which has grown by 27% and 38% respectively. Last year, there was a maintenance shutdown in the same-period. PVDIT for the segment improved to INR29 crores as against the negative INR3 crores last year, led by lower-power and carbon material costs.
Commissioning of the 68 megawatt green energy by end of next year will reduce the carbon footprint along with better cost structure going-forward. Sugar and ethanol. Sugar and ethanol businesses revenue net of exercise duty was flat at INR889 crores and the domestic volumes were lower by 6% due to lower releases in the quarter and prices of sugar were also low by 3%. Ethanol volumes as well as prices were higher by 6% and 12% respectively. EBITDIT for the segment was lower at INR113 crores as against INR188 crores last year due to higher-cost of production led by a higher state advice price, SAP and lower recovery.
Finessa Building Systems. Finessa Building Systems revenue increased 4% year-on-year, led by increase in volumes across segments. PBDIT for the quarter at INR43 crores was similar to last year due to higher fixed expenses. These expenses are expected to remain elevated given the need to grow the existing businesses and invest in new verticals. The order book continues to be healthy. We are also excited to announce our foray into the hardware business, which will be through an acquisition to give us a head-start into this segment. Shriram Pharp Solutions. Shriram Solutions revenues increased by 19% year-on-year, supported by volume growth across all verticals. SS has further strengthened its leadership position in research wheat segment. For the quarter was higher by 18% at rupees INR212 crores.
Fertilizer revenue was low by 8% year-on-year which is — which is mainly attributed to the lower gas prices in the current quarter. EBDIT was at INR29 crores as against INR26 crores last year. Outstanding fertilizer subsidy was at INR11 crores as against negative INR21 crores last year.. The Bioseed segment saw a revenue increase of 22% year-on-year and a PBDIT increase of 36%. The improvement is led by better volumes and prices in corn, wheat, patty and vegetable seeds. Both domestic as well as international operations contributed to the growth. The company’s net-debt stood at INR867 crores as of December 31, 2024 as against INR314 crores last year and INR14 crores as on 31st March 2024. The year-on-year increase because of — was because of capital expenditure over the last one year and a higher sugar inventory. Over March ’24, the decline is primarily because of reduction in sugar inventory. Return on capital employed for December ’24 came in slightly lower at 14% as compared to 16% for December ’23 since capex incurred on projects will start yielding the returns in the forthcoming quarters. The Board has announced an dividend of 180%, amounting to INR56.14 crores recently. This took — this takes the total dividend announced for the year at 280% amounting to INR87.33 crores. As this round of capex is completion, we are in advanced stages of finalizing our foray in advanced materials as well as in value chain around our core businesses.
That concludes my opening remarks and I request the moderator to please open the for the Q&A session. Thank you.
Questions and Answers:
Operator
Thank you very much. [Operator Instructions] The first question is from the line of Nirav Jimudia from Anvil Wealth. Please go ahead.
Nirav Jimudia
Good afternoon, sir, and thanks for the opportunity. Sir, I have a few questions to ask on the chemical side. So sir, when we analyze our ECU numbers for Q3 FY ’25 vis-a-vis of 2Q of FY ’25, our ECU was up around INR3 50%. And if I just multiply it with our volumes of 180,000 what we have reported in Q3, it gives us a positive impact of close to INR62 crores. But however, when we see our PBIT numbers on a Q-on-Q basis, the net impact is only INR27 crores. So if you can just help us explain why the difference between the — both the numbers is varying? And is there any specific one-time loss or increase in the depreciation because of which this number is not telling.
Ajay S. Shriram
Yeah. So see there, as you rightly said, one is depreciation because the projects were capitalized. So there’s an increase in the chemical. Also, sorry to interrupt you, your audio is not clear, sir. Is it better now? Yes, sir. Yeah. So what I was saying was that one of the reasons or two reasons for difference. One is because the went up because of the capitalization which happened in the first-half of the year. And second is also strip expenses went up. One, because they’ve early been capitalized and now they are being charged to P&L. And second reason is that as we move into operations, the overall expenses do go up with the higher manpower cost, repayment and things like that. So I think that also eased up, but that should even out over the period as the volumes increase, then probably you see the higher impact coming in.
Nirav Jimudia
Got it. So if you can just share what was the impact of depreciation in Q3 FY ’25 because of which the numbers are?
Ajay S. Shriram
So I won’t have it right away. Maybe you can connect with our Investor Relations team after the call, we provide that to you.
Nirav Jimudia
Fine. And sir, secondly, when we interrupted last during Q2 FY ’25 con-call, you mentioned that chlorine was like negative INR650 per in-quarter two FY ’25 and which in Q3 FY ’25, the trend was around INR9 negative. So if you can just help us explain what was the chlorine negative in Q3 FY ’25 and what’s the current trend in terms of the chlorine negative in Q4 of FY ’25.
Ajay S. Shriram
So Q3, the trend was close to again the range around INR9,000 to INR10,000 rupees and the similar trend continues as we speak.
Nirav Jimudia
So sir, you mentioned in your opening remarks that the prices have started correcting for caustic soda in January. But of late, what we have seen also is that in China, the prices of caustic soda is also again started strengthening. So is it? Yeah. So is it like — and also when we see November and December ECU trend for ours, I think it is close to around INR30 INR50 pesa for DCM. So is it fair to assume that even for Q4, our ECU trend looks positive in terms of the higher numbers or it would be on the similar lines what we have reported in Q3 of FY ’25.
Ajay S. Shriram
So as you know, the caustic issue is a combination of caustic and chlorine price that we do. We have seen that the caustic price has been stable and has gone up, but of course, the pressure on chlorine continues due to the capacity and the demand-supply balance in the country. So the current ECUs are in the range of INR29,000, INR30,000 per ton and we do expect it to remain at these levels or improve over-time.
Nirav Jimudia
Okay. Sir, also if you can share the production breakup of 1997 TPD in Q3 of FY ’25 between the quota and plant.
Ajay S. Shriram
Yeah, I think that’s too much of a detail, but so broadly — broadly, of course, the details, the Investor Relations team can share with you later as well. But broadly, our Kota plant runs steadily at close to 550 tonnes per day caustic and the Bharush plant therefore is the remaining, which we are ramping-up now with the new additional capacity.
Nirav Jimudia
Just from my side, like when we see our revenue of INR721 crores in Q3 FY ’25, what number I could arrive based on the ECU realization multiplied by the volumes, our contribution from the value-added products was close to 27% in Q3 of FY ’25, correct me if I’m wrong. So if you can share what would be the contribution of the value-added products in the PBIT of INR66 crores what we have reported in Q3 of FY ’25?
Ajay S. Shriram
Okay. I would suggest within the tailing and the arithmetics we can do it offline, right? I think broadly we are giving the trend. The details, you can check with our Investor Relations team and we will respond to all your queries in terms of aligning these numbers, right?
Operator
Thank you, sir. Nirav, I’ll request to join the queue again for a follow-up question. Thank you. The next question is from the line of Riya Mehta from Aequitas Investment Consultancy. Please go ahead.
Riya Mehta
Thank you for giving me the opportunity. My first question is in regards to the caustic plant. So the new plant, what would be the capacity utilizations like?
Ajay S. Shriram
As I mentioned in my opening remarks, the capacity utilization in the complex at is in the range of about 70%.
Riya Mehta
Got it. This will be the overall, right?
Ajay S. Shriram
Yeah. Yeah, yeah.
Riya Mehta
And just particularly for the newer plant, what would be the utilizations level like?
Ajay S. Shriram
So see, we don’t look at it that way because the newer plant has its own set of efficiency. So it must so happen, you might operate newer plant at 8%, 9% and the older plant at lower capacity. So I think one should look at it as overall thing.
Riya Mehta
Got it. And over the next one year, what kind of utilization leverage do we look at here given we are in an oversupply situation?
Ajay S. Shriram
So we are looking to see how we can ramp-up our capacity utilization. And in-line with that, you know, as you are aware, we are close to commissioning our epic plant that will help us. We’ve also — the Board has approved aluminum chloride further expansion and entry into calcium chloride. So again, both these will help us in improving our utilization. So we do expect it to take a little time, but we are — we expect that in the next 12 to 18 months, we will reach full capacity utilization.
Riya Mehta
So it is fair to say that maybe by FY ’27, we would reach by around 80% or 90% capacity realization, which is our peak capacity realization.
Ajay S. Shriram
Right.
Riya Mehta
Okay. And in terms of power, basically we have commissioned our power plant and it’s been running for a while. What kind of savings in cost have we seen in the last, say, this 1/4 with the new power plant?
Ajay S. Shriram
So I think we are — we are getting good savings. So we’ve invested close to about INR500 crores in the power plant and we are getting ballpark — we are running the returns of about 20%, 25% on the power plant.
Riya Mehta
20% to 25% on the incremental 6 megawatts which we are buying, that will be also yielding similar returns.
Ajay S. Shriram
Yeah, that might be a little lower, but yes, that’s more from our endeavor to reduce the carbon footprint. So wherever we have opportunity, we add that.
Riya Mehta
Okay. So that would not reduce our cost in a significant way, which earlier 120 megawatt?
Ajay S. Shriram
Yes, that is.
Riya Mehta
All right. So now coming, where would we see cost-saving coming in the chemical division as such?
Ajay S. Shriram
That’s what we have done over whatever investment we have done over last three years, whether it is the capacity expansion, the 850 TBD, which are more efficient localizers. Second is the P120 power plant or the green energy that we took 15 megawatt, like 44 megawatt, the first tranche we did will definitely add to lot of savings. And then we also — if you remember, I think in the last Board meeting, we had approved a project for analyst action turbine that will further improve the cost structure. So that’s the constant endeavor to keep working on costs. And in addition to that, we can also add that the other major raw-material for us is salt. So we are seeing what steps can we take to further optimize our cost on that side. And also there is a huge focus on digitalization and leveraging data and analytics to further enhance our efficiency and competitiveness. So with this holistic focuses — focus areas we expect to remain cost-competitive.
Riya Mehta
Got it. In terms of ECH, when do we see this commissioning? Because I think we have seen a lot of delays. Is this because of late approvals or after you commission, there will be an entire one year which will take for approvals not?
Ajay S. Shriram
So I think as mentioned earlier in the opening remarks, we have faced a technical issue with the commissioning of the ECH plant. The teams are working very actively on it. And as we shared, we expect to start the trial runs and commission the plant towards the end of this quarter, which is QY — Q4 FY ’25.
Riya Mehta
Okay. And post that we will see approval processes in — across our clients, right?
Ajay S. Shriram
Yes, approvals with the customers, that’s part of the process. So we expect that to happen and then we expect to ramp-up the capacity.
Riya Mehta
Got it. And aluminum chloride would come by when for us.
Ajay S. Shriram
I think that has been approved by the Board. The timeline for commissioning for that is Q1 FY ’27.
Riya Mehta
Okay. In terms of PVC, we’ve seen that anti-dumping duty was recommended. So where in this stage of regulatory approvals are we there? And how much time is we can foresee if everything goes smoothly.
Ajit. S. Shriram
Well, this is actually with the ministry right now, the commerce Ministry is also aware of it. We’ve made our application. There are a couple of court cases which are delaying this. This hearings are going on the results so-far in the court cases are positive. So there is an expectation that after the budget we hope it’s not too late after that, but we expect that after the budget you should come fairly so fairly soon.
Operator
Thank you very much. Ria, sorry to interrupt you. May I request to come back for a follow-up question, please? Thank you. I request to all the participants kindly restrict to two questions per participant and join the queue again for a follow-up question. The next question is from the line of Nisarg Vakharia from Nv Alpha. Please go ahead.
Nisarg Vakharia
Yeah, good evening, everyone. My first question is for Finesta. Sir, we have an order book growth of 33%. Last quarter also we had an order book growth, but it’s not translating into revenue growth. And secondly, our capital employed is only INR45 crores for about INR120 crore of PBT per annum that we do. If you could just explain both these points.
Ajay S. Shriram
Yeah. So one on the capital employed first, that is also because we get customer advances, right, and whether it is project customers or retail customers. So we work largely on advances that leads to lower capital employed. And in any case, this is a business which has, you know, the capital output ratio is high in any case. So I think one of the reasons why the total capital employed is low. Coming to the bookings, you’re right, the bookings are good. However, the execution is slow in the market. Now we are seeing and that’s something which we are seeing across the building materials space that the growth levels are slow, implementation is slow and the various reasons, I mean liquidity issues and things like that. But we’re seeing execution being slow.
Nisarg Vakharia
Sir, can you explain this INR65 crores that we are deciding to invest for hardware manufacturing? I think I’d also read a few quarters or one, two quarters back where you said you want to invest INR150 crores in aluminum. Both of these are separate projects, if you can explain in detail on how you see this business ramping-up over the next two to five years in India.
Ajay S. Shriram
Sure. So see the aluminum extrusion project, the purpose of that and that’s where that was for about INR150 crores. So that project was to bolster our aluminum in those business. So currently we are importing the aluminum extrusions and the profiles and then they go for coating separately. So there is a lot of inefficiency involved in terms of transportation, logistics and delays in execution, which is not a very good consumer experience, right? So our idea was that we should have our own consumer excluded facility where we can control the performance the quality as well as customer service. So that was one objective. And aluminum windows are actually doing very well. They are growing faster than you think it’s today as an industry as well as for us. So we see good scope there. And obviously, once we can do aluminum exclusion, it will open a door for other products within the aluminum space, which we can diversify into. So that’s a little long-ish plan, maybe two, three years after — after — two years after commissioning.
Coming to hardware, again, here we procure hardware as we speak, we procure hardware of almost INR90 crores in Finesta. Almost 50% is imported, rest is indigenous. Now the idea is once we are able to get into the hardware business, it will help us again on the logistics front because the suppliers are unreliable given the logistics constraints at times what we have seen and that again delays our service to the customer. So one, I think we can do that with our own — we can more once we have our own facility. That is one.
Second, upgrading or innovative products is something what we’re looking at. So our research and development can be at a much faster pace. So these two things are more from the customer experience perspective. And the last is again, once we get more hands-on experience, we will be able to build that as a revenue platform as well.
Nisarg Vakharia
Thank you. Sir, now my second question is regarding Sri Lam Farm Solutions. Can you tell me what sort of volumes we have done in research wheat in this year? And do you think that we have captured enough market-share or we still have potential to grow these volumes for next year also.
Ajay S. Shriram
Yeah. So see, last year, we had done about 76,000 tonnes of research we see. This season, we will — we have done close to about 96,000. These are ballpark numbers are may be off by about 1,000 here and there. So about 96,000 tonnes of research is what we have done this year. Our market-share is close to about 65% 70%, but the market itself is growing by about 15%, the search wheat market in the overall market. So I think there is scope for growth.
Ajit. S. Shriram
Okay. I’ll just add to that, that ultimately in any of these research products, agriculture products of seeds, one has to have a strong research setup to come out with new products which are better than the past one and continuously going through the trials and development, etc because everyone is in the business. So how do we stay competitively ahead. So we have a strong R&D setup also. So they’re also coming up with new products. So we are fairly well-positioned on the research feed front.
Nisarg Vakharia
Sir, one thing is that in India, we haven’t seen a company get such dominant market-share in research feed. We have seen companies come and go in cotton and the market shares change every three, four years. Can you please explain the research wheat segment slightly better for us as to how sustainable is this? And what is the reason that DCM has sort of got this dominant market-share in this segment.
Ajay S. Shriram
So I would say, as JMD mentioned it is primarily because of our research and search — strong research on the search wheat. We’ve been introducing products almost every year, except this year. Last year also, we launched about two to three varieties and the year before that also there was one variety which was launched, which ensures that we are doing the right lifecycle management. It’s not that other companies are not there in this segment. There are companies in this segment, but I would say it is — they are not able to grow the way — and we also had the early more advantage. So one is early more advantage, feeding the market with newer products and there are — there is competition as well. So that risk continues. And that’s why we need to continue to feed products into the market.
Operator
Thank you. Next question is from the line of from Jainam Ghelani from Svan Investments. Please go ahead.
Jainam Ghelani
Hi, sir. Thank you for this opportunity. So sir, my first question is that what would be our current captain — captive chlorine consumption? And post our expansion of all the derivatives, where do we see it going-forward?
Ajay S. Shriram
Yeah. So see, post expansion, our overall as a chemical both Kota and put together our captive flooring consumption will be close to about 32%, captive. And on-top of that, we have pipeline supplies, which again will be in the range of around 35% 40%. So if you add these, we are almost 70% captive. So one is what own — what is consumed captively, other is virtually captive with what we supply is pipeline?
Jainam Ghelani
Okay. And sir, since we’ve announced a fundraise, are there any other derivatives that we wish to expand into as of now.
Ajay S. Shriram
So we are continuously evaluating new opportunities and adjacencies for the chemicals business and all our businesses. So at a suitable time, if we do decide and the Board has approved, then we will announce — announce those as well.
Jainam Ghelani
Okay, sir. That’s it from my side. Thank you.
Ajay S. Shriram
Thank you.
Operator
Thank you. Next question is from the line of Rohit Nagraj from B&K Securities. Please go-ahead.
Rohit Nagraj
Thanks for the opportunity. Sir, first question is on ECH. We’ve seen that the project has got delayed. Any material challenges from the sort of initial on the delay front? And secondly, even during operations, do we expect that there will be teething problems because the technical issue has got elongated? And another adjacent question to this, given that domestic market is now completely supplied, what is the strategy from the management in terms of placing the product maybe partially in the domestic market or how to tap the exports market? Thank you.
Ajay S. Shriram
Yes. So you’re right. I think this was shared partly in our opening remarks as well. There has been a technical issue in the ECH project. But as we discussed earlier, the team is working very actively and there has been a solution that has been found. So we expect the commissioning of the plant to happen and trial runs to begin in this quarter itself, Q4 FY ’25 and once that is done, any plant might have some small issues to begin with, but we don’t — we don’t foresee any material issues going-forward after that.
In terms of the market, you know, there are some capacity which is already there in the market, but we feel that this additional capacity will be absorbed in the market. There is a growing market domestically with a number of epoxy players expanding their capacities. So domestically itself, there will be a significant demand. And also we are already in touch with customers globally as well. So we do expect that we’ll be able to commission and then ramp-up the capacity as planned now.
Rohit Nagraj
Yeah, that’s helpful. Sir, second question is on the PVC front. So in terms of current market trends, how are we expecting that the utilization levels will move up on the PVC front and particularly the margins, what are we expecting that the last couple of years a significant decline in margin because of the China overcapacity and supplies. Will that continue in foreseeable future?
And another allied question that we have carbide capacity and we heard probably during pre-COVID that China’s carbide capacities are also likely to get toned down. So any view from that side are — is this happening in China from your connects or your contacts in China? Are we seeing any kind of such move? Thank you.
Ajay S. Shriram
So to answer your question on the margins, this quarter, our margins were around 19%, right? So I would say these are reasonable margins at a price realization for — for PVC at about INR76,000, INR77,000 and carbide also was in the range of around INR64,000, INR65,000. So I would say prices have been suboptimal. However, on cost front, there has been significant improvement both because the prices for the raw-material prices went down as well as our efficiencies improved. So I would say that one, I don’t see prices coming below 7,000 6,000 unless something happens on cost front, the margin of 19% are quite reasonable. So that was one. What was the next question you had?
Rohit Nagraj
So on the carbide capacity, any queues from China that the capacities have been contained or there is a move from the government to contain those capacities because I think earlier pre-COVID, there was an expectation that due to pollution issues from coal, the government was taking steps to curb those capacities, which are already in place.
Ajay S. Shriram
So that was there was a phase of 1, 2 quarters where they did curb capacities, but after that all the capacities have come back and most of the capacities are carbide based and they are dumping the product globally. So at least I’m not aware of any further action that you want to take.
Rohit Nagraj
So that’s all from my side. Thank you so much and all the best. I’ll come back-in the queue.
Ajay S. Shriram
Thank you.
Operator
Thank you. Next question is from the line of Ahmed Madha from Unifi Capital. Please go ahead.
Ahmed Madha
Yeah. Thank you for the opportunity. I have a few questions on the sugar business. So there has been consistent commentary from your side and from the industry that the sugar prices has not gone up, but the SAP cane prices have gone up, the yields are low. So do you see the profitability weakness, which was in Q3 to continue for the next season entirely or do you have any levers which can help us offset the margin loss from the sugar business in the sugar-ethanol segment overall?
Ajay S. Shriram
Yeah. Can you repeat the question? It was not very clear.
Ahmed Madha
Yeah. So my question is, we have seen the profitability margins being low in the sugar business in Q3, right? So now this weakness because of the lower sugar prices will continue for the entire season or you have any levers which can help you offset the margin loss.
Ajay S. Shriram
I think essentially there are two reasons. One is there was an increase of the state advised price of sugarcane last year-by the UP government number-one. Number two, there was a very good variety of sugar cane called 238 which was roughly 80% of the cane being crushed by most sugar mills and that has got infested by a disease called red rot and that has now decreased and that was a very high healing and a high recovery variety, which had come up in the last three or four years, four, five years. And that has now decreased dramatically. And that’s one of the primary reasons why your cost of manufacturing has gone up because of lower yield, lower recovery and also because of the higher SAP.
Ahmed Madha
Okay. Okay. And what was the ethanol mix this year or rather this content?
Ajay S. Shriram
Pardon me, ethanol
Ahmed Madha
Ethanol mix between B-heavy,, grain-based.
Ajay S. Shriram
So we are the Q3 just primarily CME.
Ahmed Madha
Okay. And the decline in the rice cost from FCI, will that help us meaningfully?
Ajay S. Shriram
Right. Yeah, that will be — I mean probably in the next financial year, not in the current financial year.
Ajit. S. Shriram
Yeah, because we already covered as far as feedstock is concerned, besides the molasses or sea heavy, we’ve already covered till mid April as far as other feedstocks are concerned.
Ahmed Madha
Okay. So for the financial year FY ’25, what will be our molasses-based ethanol and what will be grain-based ethanol? Percentage roughly?
Ajay S. Shriram
Yeah, roughly — I think see, we’ll manufacture close to about 16.5 crore liters. Out of that about 45% should be grain-based.
Ahmed Madha
Okay. Okay, fine. Got it. And last question on the hydrogen peroxide and aluminum fluid, in the presentation, you have written that your utilization currently is 80%. What was the utilization for the full-quarter Q3 for these two products?
Ajay S. Shriram
Yeah, average for Q3 was 40%. Average was 40%.
Ahmed Madha
Okay, got it. And just one more thing. On the caustic side, this quarter the volumes have further gone up sequentially. So do you see the utilizations further moving up in Q4 as well for caustic soda?
Ajay S. Shriram
Yeah, that is a continuous focus area for us to utilize the capacity and we do see it ramping-up quarter-on-quarter.
Ahmed Madha
Okay, got it. Thank you.
Operator
Thank you very much. Next question is from the line of Raj Vyas from TM Investment Technologies. Please go-ahead.
Raj Vyas
Yeah, hi. Thanks for the opportunity. I just wanted to know like with a 12% Y-o-Y increase in EBIT and a 9% increase in net profit, so like any ballpark number that we are looking for like going ahead, like what will be the run-rate going ahead?
Ajay S. Shriram
We can — given that our volumes are increasing and the capital expenditure plans are coming to an end, the first round or let’s say, whatever we had announced last three, four years, we do expect volumes to increase. Our cost structures are better than what they were in the past. So we do feel our numbers should continue to get better. However, it is all a function of costs as well on the raw-material cost as well as the product prices, which are not in our control. So difficult to say, but we do — we are taking our steps to improve our profitability.
Raj Vyas
Okay. And any reason for the fall in ROCE like it went from 16.1% to directly 13.7%.
Ajay S. Shriram
So I explained on the call — during the message by our JMD, that’s because the new capital expenditure which got commissioned in this financial year in H1, that is part of capital employed, the returns are yet to because the capacity utilization is low right now. So they will come up over next one year and that’s when we will see the optimum capital to the return on capital employed.
Raj Vyas
So vis the peak capacity that we are looking for? Pardon me, what is — what is the peak capacity that we are looking for?
Ajay S. Shriram
We will — as was mentioned by Mr Shiram that we will look to ramp-up over next 12 to 18 months-to about 90% to 100%.
Raj Vyas
Okay. Yeah. That’s it from my side. Thank you.
Operator
Thank you. Participants, you may press star and one to ask a question. Next follow-up question is from the line of Nirav Jimudia from Anvil Wealth. Please go-ahead.
Nirav Jimudia
Yes, sir. Thanks for the opportunity. Sir, you mentioned that our hydrogen peroxide plant operated around 40% in Q2. So even at 40% utilization, had it a positive contribution at the in Q2 or the breakeven point for hydrogen peroxide plant is slightly higher than 40%, if you can just share your views here.
Ajay S. Shriram
Yeah. So it has been positive on the contribution. Definitely.
Nirav Jimudia
Okay, okay. And that should further improve in Q4 given the kind of utilization rates pickup we have seen in the current quarter, right?
Ajay S. Shriram
Yes. Yes.
Nirav Jimudia
Sir, just a follow-up to this is like our hydrogen production is out to go with the increase in the caustic production, right? So some of the increased caustic soda production helps us for the excess hydrogen which could be utilized here. But I think we also had commissioned a flaker plant. So there also probably we would require some amount of hydrogen for conversion into — from light to flat. So at any point of time, our sales of hydrogen to the outside customers won’t be curtailed on. Is this right assumption to make here, sir?
Ajit. S. Shriram
So we’ve actually done the mapping and the planning for our hydrogen production and demands, whether it is captive demand or it is catering to our customers’ requirements. So we very consciously evaluate where to prioritize. Obviously, we really value our customer relationships. So that always gets the highest priority, while we are ramping-up our own capacity and internal utilization as well. So as it is ramping-up, we are continuously optimizing. And at full loads, we expect to have adequate hydrogen to cater to all the requirements.
Ajay S. Shriram
And just to add, I think the gas that we have started with natural gas as well in our fleker plant.
Ajit. S. Shriram
Yes, yes, sir. So our fleker plant has a dual feed fuel capability, which is one is natural gas and the other is hydrogen. So that gives us flexibility as well to balance out the hydrogen requirement.
Nirav Jimudia
Got it. And entirely 600 TPD is now commissioned or only 300 TPD is currently running on bigger.
Ajay S. Shriram
So in the flicking, so-far 300 TPD has been commissioned and the remaining 300 TPD also is being worked on and we expect that to be commissioned soon as well.
Nirav Jimudia
Got it. Sir, last bit from my side. In the hydrogen peroxide side, are our either hydrogen peroxide catering to some specialized applications or it is safe to assume that it is similar to what it is available in the market. So is there any differentiation sector in our hydrogen peroxide which is getting sold-in the market?
Ajay S. Shriram
So we are working on the special grades of hydrogen peroxide as well. We have an innovation center, which is also exploring how to create differentiated hydrogen peroxide. So over-time, we do expect a healthy percentage of our H202 to be specialty grade hydrogen peroxide.
Nirav Jimudia
Got it, got it, sir. But. But that would take some time before it is getting operationalized, right?
Ajay S. Shriram
Yes, it will take some time, but the teams are working very actively on this. So we are very optimistic.
Nirav Jimudia
Got it, sir. Thank you so much and wish you all the best.
Ajay S. Shriram
Thank you.
Ajit. S. Shriram
Thank you.
Operator
Thank you. Next question is from the line of Pratik Tholiya from Systematix Group. Please go-ahead.
Pratik Tholiya
Yeah, hi, sir. Thanks for the opportunity and congratulations a good set of numbers, especially in Chemical and. Sir, can you just help me understand your capex by FY ’26?
Ajit. S. Shriram
Sorry, capex, could you kindly repeat that please?
Pratik Tholiya
So what is your capex guidance for FY ’26
Ajay S. Shriram
So capex should be in the range of around — as of now, whatever we announced, it should be in the range of around INR700 crores.
Pratik Tholiya
Okay. And sir, this could be projects, this includes your aluminum chloride aluminum extrusion right and what else is there?
Ajay S. Shriram
So there’s alum chloride chloride extrusion and then like this INR65 crores, which has been announced very recently this year, then we have this 74 megawatt of green energy that will also happen in FY ’26. Yeah, and there will be some capex happening on the infrastructure front at, like water reservoir and things like that. And there is a turbine investment as well of about INR50 crores, which is a cost-improvement which I was talking about, yeah.
Pratik Tholiya
Okay, understood. And sir, what is your guidance on this epoxy reasons, where are we on that? Because we had announces quite some time back, this INR1,000 crores project, but any further development over there?
Ajay S. Shriram
Yes. So that is something which is very much on the agenda for us as a group. As you rightly said, we’ve taken a Board approval and the Board has approved INR1,000 crore investment in the advanced materials, largely epoxy space. And so there are active discussions going on internally. And as we get final approval to go-ahead from the Board, we will announce.
Ajit. S. Shriram
And just to add here, we’ve already acquired land for that and we are in discussion with technical suppliers and all that. So the movement is happening. Hopefully, we should close things soon and start implementing.
Pratik Tholiya
And so ballspark, what sort of capacity are we looking at?
Ajay S. Shriram
It will depend on the technical discussions but overall for 1,000 crores when you talking about, we were looking at about 80,000, 80,000 tonnes per day.
Pratik Tholiya
Yeah, right, right. And this mood so how much of our ECH then goes into this —
Ajay S. Shriram
Pardon me.
Pratik Tholiya
So how much of our ECH will be absorbed captively for epoxy?
Ajay S. Shriram
So it will actually depend as we ramp-up the capacities. But as Amit has shared, at 80,000 tonnes per annum that would translate to roughly 50,000 tonnes per annum of ESECH consumption. But over-time, we will look to ramp-up this entire vertical. So therefore, there will be contiguous capacity additions in this space.
Pratik Tholiya
Sure. So that’s helpful. And sir, just lastly on Penista, because we have seen margins coming off from 18 odd percent to 15% 15.5% of course, you did mention that there are additional fixed costs due to maybe some marketing activities and growing the business. So when can we then expect the margins to crawl back to that 18% or you think that couple of years since you are in this expansion phase, it will remain in this 15% 16% range.
Ajay S. Shriram
Yeah. So see one, my current last year same-period, I’m looking at the EBITDA margin, right? EBITDA margin was about 19% and the same-period last year were about 21%, so there is a 2% dip. And I’ve always said that this is a business which is a, 16% 17% EBITDA margin business, right? Given that as we increase our portfolio of products that each product will have a different set of margins. Currently, the major reason why the down is fixed-cost. And as was mentioned in the opening remarks that fixed costs are expected to be elevated because we will have to invest more on marketing, brand-building and things like that, as well as more on people as we are growing the platforms and even otherwise on existing people. I mean competition also adds to the cost pressure.
Pratik Tholiya
Okay. Understood. So yeah, that’s it from my side, sir. Thank you so much and wish you all the very best.
Ajay S. Shriram
Thank you.
Operator
Thank you. Next follow-up question is from the line of Rohit Nagraj from B&K Securities. Please go-ahead.
Rohit Nagraj
Yeah. Sir, just a couple of questions. One is on the ECU, given that the market is, you know, well supplied from the domestic point-of-view, do you see that the ECH should — the ECU should be in the similar range for the time-being till again the demand-supply mismatch comes in or probably from the demand-side, there is certain uptick from the domestic side? Thank you.
Ajay S. Shriram
So as you know, caustic ECU was made-up of caustic and of chlorine. Caustic, of course, is highly dependent on the global demand-supply situation and chlorine is more dependent on the local demand-supply situation. So the ECU is currently in the range of about INR30,000 per ton. And we do expect it to remain balanced in the times to come and hopefully over-time, it will inch up further as well.
Rohit Nagraj
Fair enough. Sir, second question, on the CBG project front, given that it will be commissioned sometimes during this quarter, what is the arrangement in terms of offtake in terms of supplies to customers, pricing for the same — and pardon me, if I have not, you know, done my homework earlier, just to get more clarity on the same. Thank you.
Ajay S. Shriram
So this will be two OMCs, the oil market — oil marketing companies. We’ll be supplying to them.
Rohit Nagraj
And in terms of the infrastructure network to transport the gas as well as from the pricing perspective, how will it be price?
Ajay S. Shriram
So see, there is a pricing formula which is based on the natural gas prices, right, but — and that’s — that makes it pretty viable as a business. Transportation infrastructure is there, further pipeline is being looked at. And also to add that we will definitely look at doing maybe some bit of supply to retail as well as we grow the business.
Rohit Nagraj
And just last bit on this. When we have worked out the project, what is the threshold of IRR or ROC that we had looked? I mean, is it in-line with other businesses or probably slightly higher for those businesses.
Ajay S. Shriram
If I remember correctly, this was about 18% a return on capital employed business.
Rohit Nagraj
Perfect. That’s it from my side. Thanks for that and all the best.
Ajay S. Shriram
Thank you.
Operator
Thank you very much. Ladies and gentlemen, that will be the last question. I now hand the conference over to the management for closing comments.
Ajay S. Shriram
Ladies and gentlemen, thank you very much for your participation in our earnings conference call. We are dedicated to achieving long-term success by implementing strategic initiatives aimed at investing in scale, value-creation and boosting operational efficiencies. To ensure that our values of integrity, agility, customer-centricity, teamwork, openness and newness are reflected in our ways of working. Our approved priorities are for creating a more engaged workforce that is equipped to trial in an ever-evolving business landscape. To this effect, we ensured effective team building and collaboration by encouraging open communication, investing in people development through conducting skill gap analysis, upgrading skills and encouraging continuous learning is another focus area that is vital for organization growth and employee satisfaction. The integration of digital technology into management practices is transforming how organizations operate and basing digital transformation and addressing cybersecurity concerns have become imperative to improve customer experiences and maintain competitiveness. Central to our strategy is a focus on sustainability, which underpins our unwavering commitment to environmental stewardship and social impact. Thank you very much once again. Goodbye.
Operator
[Operator Closing Remarks]