Deepak Nitrite Limited (NSE: DEEPAKNTR) Q1 2026 Earnings Call dated Aug. 14, 2025
Corporate Participants:
Unidentified Speaker
Somsekhar Nanda — Chief Financial Officer
Maulik Mehta — Executive Director and Chief Executive Officer
Sanjay Upadhyay — Director, Finance and Group Chief Financial Officer
Analysts:
Unidentified Participant
Ranjit Cirumalla — Analyst
Sanjesh Jain — Analyst
Nirav Jimudia — Analyst
Abhijit Akella — Analyst
Tushar Raghatate — Analyst
Aditi Loharuka — Analyst
Rohit Nagraj — Analyst
Tejas Sonawane — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to the Deepak Nitrate Q1FY26 earnings conference call hosted by IIFL Capital Services Ltd. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing Start and zero on your touch tone phone at the outset. I would like to clarify that certain statements made or discussed on the conference call today may be forward looking in nature and a disclaimer to this effect has been included in the investor communication shared with you earlier.
The results documents have been shared with you earlier and have been also posted on the company’s website. Please note that this conference has been recorded. I now hand the conference over to Mr. Ranjit Sirumala. Thank you. And over to you sir.
Ranjit Cirumalla — Analyst
Thank you. Good afternoon everyone and thank you for joining us on Deepak Nitrites Q1FY26 earnings conference call. Today we have with us Mr. Molik Mehta, Executive Director and CEO, Mr. Sanjay Upadhyay, Director Finance and Group CFO and Mr. Somsekarnanda, CFO of Deepak Nitride Limited. We will begin the call with opening remarks from the management team followed by an interactive Q and A session. To begin, Mr. Monik Mehta will share views on the opening performance, operating performance and the growth plans of the company followed by Mr. Sanjay Upadhya who shall take us through the financial and segmental performance.
I now invite Mr. Mehta to share his opening comments. Thank you. And over to you sir.
Maulik Mehta — Executive Director and Chief Executive Officer
Hello, good afternoon everybody and a warm welcome to you on Deepak Nitrite’s Q1 FY26 earnings conference call. Our results documents were shared with you earlier and I hope you’ve had the opportunity to glance through them. I will initiate by briefly taking you through the financial and operational highlights for the first quarter ended 30 June 2025. Mr. Upadhyay will then present you with the financial overview during the period under review. Following this, we’ll open the forum for Q and A as we begin FY26. Deepak Nitride remains steadfast in navigating a complex global business environment. The past several months have been marked by a confluence of challenges that have significantly affected the industry slower than expected.
Recovery in some agrochemical intermediates has stifled growth while continued oversupply from China has impacted the pricing. These headwinds, coupled with fairly fast evolving geopolitical complications have compounded the complexities a strong business fundamentals underpinned by an import substitution strategy. Expansion initiatives, both capacity augmentation as well as new projects, process optimization and commitment to innovation and sustainability have provided us some resilience in this backdrop. Despite these challenges, we foresee a pickup in demand trajectory driven by improving market dynamics, the commissioning of new projects and expanding product applications. Our focus on accelerated execution, enhanced product mix, digital transformation, expansion into newer markets and product variants positions us to capitalize on the evolving landscape.
We remain confident that Deepak Nitrite will continue to deliver value while contributing to India’s larger vision of self reliance and sustainable industrial growth. Deepak Nitride has solidified its position as one of India’s leading chemical intermediate producers, recognized globally for responsible manufacturing and a supplier of choice. Our diverse portfolio serves multiple industries underpinned by a philosophy of responsible chemistry emphasizing sustainability, transparency and ethical business practice. Guided by an experienced leadership and deep technical expertise, we continue to strive towards driving operational excellence and long term value creation. Our performance this quarter was sustained by volume growth across our diverse product portfolio supported by a notable recovery in demand from non agrochemical applications and also the initial success from certain cost optimization initiatives in the advanced intermediate segment.
Although agrochemical intermediates are experiencing subdued global demand, we project a recovery in the upcoming period. The phenolic segment witnessed steady demand with better realizations backed by debottlenecking and capacity augmentation initiatives. Our focus on cost management continues. We’re excited with our pipeline of new products and upcoming projects that are set to contribute to growth in a meaningful way. In addition, we’re actively expanding into newer applications to broaden our market presence and diversify our customer base. For the quarter ended June 30, 2025, Deepak Nitride reported a revenue of 1897 crores, mainly driven by steady volumes, improved product mix and realization gains in phenolics.
This came on the backdrop of a challenging external environment. Despite pricing pressures in the AI segment, consolidated EBITDA stood at 197 crores marking an 11% sequential rise with margins expanding by about 100 basis points to 10% quarter on quarter. This was a result of improved operating leverage from sustained volumes and enhanced operational efficiencies from our optimization and process recalibration efforts. PBT was at 138 crores up 17% sequentially demonstrating resilient operational momentum. These numbers are excluding government incentives that We’ve received of 17 crores in Q1 and 161 crores in Q4 which was a sum total of about 2 years respectively.
The standalone Deepak Nitride revenue was 620 crores, lower by 7%. Quarter on quarter EBIT declined to 41 crores primarily due to a delayed offtake of key products in the Ag Chem Intermediate space. However, we anticipate a recovery in the ensuing period. In addition, we’re driving targeted initiatives to enhance our competitiveness by adding new customers through a diversification effort and into new geographies. We’ve seen initial improvements in the margin trends in the non ICAM space. These trends, along with our strong customer relationship position us well for a sustained recovery. Also, the benefits from backward integration will enhance supply security and cost optimization even amidst global upheaval over capacity and pricing challenges.
By implementing strategic initiatives we have successfully expanded our product portfolio which is expected to generate incremental annualized revenue. This growth will be driven by the commercialization of a new value stream integrated product for the dyes and cosmetics segment and the launch of a new product through a long term co manufacturing agreement. Overall, these targeted efforts will enhance our market presence including untapped geographies opportunities, thereby creating new avenues for sustainable growth. This is by the way done with existing assets and negligible investment and while we may have launched these products in the middle of the year, they are going to be tested by customers for stability and then we will be available to be able to supply commercial volumes when the next contractual cycle begins.
This is expected to be in the beginning of CY 2026 meaning January. The phenolic segment delivered a revenue of 1287 crores marking a sequential degrowth of 6%. Profitability was higher due to various cost optimization, stable sales volume and improving sprints. This was further bolstered by operational efficiencies at the plant. The segment’s resilience reinforces the strength of our integrated approach. We’re progressing well on key projects that will enhance our backward and forward integration, strengthening our competitive advantage. Our concentrated nitric acid plant is in trial production phase while for the weak nitric acid commissioning activities are ongoing with the technology partner at site and are expected to be commissioned within this quarter.
Commissioning of both of these plants will significantly strengthen Deepak Group’s manufacturing capabilities for all nitration based products. By scaling up production and enhancing backward integration, we will secure a more reliable and predictable supply chain for our key raw materials. This will not only boost operational efficiency and reduce reliance on external suppliers, but will also solidify our market leadership as an ammonia to a mine supplier and reinforce our commitment to import substitution, ensuring a more resilient foundation for long term growth. Now building on our extensive expertise in hydrogenated aromatics and non aromatics, we have started trial production at our new hydrogenation facility, significantly expanding our group’s production capacity.
This strategic move directly supports the expansion of our product portfolio and better positions us to meet with growing global demand for high value specialty chemicals. This new facility will not only enhance our operational scale but also our position as a key player in this critical segment while integrating well with our already commissioned fluorination assets. Our advanced solvent, mibk, MIBC and others and nitration plants are expected to be commissioned in the next quarter. This move will significantly strengthen our downstream integration allowing us to capture more value from our existing product lines and reduce our reliance on external suppliers.
We are prioritizing resilience by effectively managing resources and adapting our processes to meet with these demands. In the face of market challenges for our core agrochemical products, we have demonstrated operational agility by proactively repurposing our assets. This capital efficient approach allows us to co develop and produce alternatives higher value products in close collaboration with our other customers. The strategy not only diversifies our portfolio but drives new growth without requiring meaningful capex. Our transition to renewable energy is already delivering results during Q1 we have seen short term benefits through strategic tie ups and in order to attain our long term goal of sourcing 60 to 70% of energy from renewables by FY27 we have signed a PPA which will lead to significant cost savings starting from May 2026.
Overall, this initiative is projected to reduce our CO2 emissions by an estimated 60 to 65%. India’s first integrated polycarbonate project aims to produce 165,000 metric tons of polycarbonate annually. A key part of this strategy is backward and forward integration from propylene which will be supplied from a feedstock of lpg. The chain of products will include from propylene to phenol and acetone, bisphenol and polycarbonate resins. In line with this, the company is also expanding its phenol and acetone capacity to to serve as raw materials for bisphenol A, which will also in turn be an intermediate for polycarbonates and we have already entered into the polycarbonate compounding business with an invested asset in Baroda.
This holistic approach which leverages existing expertise and the technology license from Trinseal positions Deepak Nitride to be a highly integrated producer, reduce India’s reliance on imports and secure a predictable supply chain for its downstream products. Polycarbonates are a highly versatile product range that are used widely in various applications and industries due to very unique properties including high impact resistance, transparency, heat resistance and weight. They are used in sectors such as electrical, automobile, medical devices and now increasingly also in defense and drone manufacturing. This integrated complex is expected to start commercial operations by December 27. Deepak Nitrite is committed to expanding its integrated product portfolio and deepening market penetration.
With investments of around 10,000 crores over the next three years in operations spanning seven manufacturing plants across India serving more than 50 countries, we’re well positioned to deliver long term value and contribute also to India’s self reliance. To summarize, Q1 has demonstrated challenges and opportunities which have tested our strategic ability amid global uncertainties. Our focus on import substitution, integration, innovation and sustainability continue to drive operational performance. We profusely thank our employees, partners and stakeholders for the continued trust and support as we work towards realizing a vision of creating a stronger, self reliant and prosperous India.
Potential US Tariffs are expected to have a moderate impact on our business. Given that our exposure to the US is limited to 2.5 to 3%. At a consolidated level, we are taking proactive steps to negate this by expanding into new markets. Additionally, we are maintaining close communication with our customers and closely monitoring this unpredictable environment. More importantly, this will help increase our exposure to Bharat in line with the Vixit Bharat Initiative. Overall, we remain committed to delivering a long term value and to our stakeholders through responsible growth, operational excellence and a sustainable future. Thank you.
We look forward to building on the strong foundation in the coming years. With this. I would now like to hand the call over to Mr. Sanjay Upadhyay who will address this forum and take you through the financial performance and key updates during the period under review.
Sanjay Upadhyay — Director, Finance and Group Chief Financial Officer
Thank you Molik Good afternoon everyone and thank you for joining this call today. I will now walk you through the key highlights of financial Results for the first quarter ended June 30th. In the first quarter of FY26 we achieved stable operational performance on quarter on quarter basis. This was predominantly driven by sustained volumes, better pricing in phenolics as well as cost optimization initiatives. Despite persistent pricing pressure and softer demand in agrochemical intermediates, our legacy portfolio as well as phenolic stayed resilient and maintained volumes. As hinted by Maulik, we anticipate demand revival in agro intermediates in the upcoming quarters.
Meanwhile, demand in other end applications like dyes, pigments, detergents, glass and home personal care etcetera remains steady. Our EBITDA showed marked improvement, benefiting from greater operating leverage due to steady volumes along with ongoing cost control and efficiency measures. As we advance, we believe that strategic steps we have undertaken will accelerate our recovery and enhance profitability in the coming period. Financial Overview on the revenue front, our domestic sales totaled at 1623 crores in Q1 complemented by export revenue of 267 crores. This resulted in consolidated domestic to export revenue ratio of 86. 14 for the quarter in alignment or import subsidiation strategy, our keen focus on the domestic market provides a stable buffer against geopolitical shocks.
This not only insulates us from the external volatility but also ensures a more consistent demand trajectory and revenue stream forming a predictable and resilient foundation of our long term business stability. Consolidated Revenue declined by 7% quarter on quarter to 1897 crores. EBITDA grew by 11% to 197 crores compared to 178 crores in Q4FY25 with margin expansion at 10%. Profit before tax improved by 17% reaching at 138 crores. With a positive outlook ahead, we expect performance to improve as damage stabilizes, as demand stabilizes, key projects come online and cost efficiency initiatives then for further momentum positioning us for consistent profitability in the period ahead.
Total income every time PBT exclude excluding government incentive Amount yield is 17 crores in Q1 161 crores in Q4FY25 respectively. Segmental Performance Highlights the advanced intermediate segment delivered revenue of 605 crores in Q1FY26 lower by 7% from 654 crores in Q4FY25. EBIT stood at 35 crores yielding margin of 6% in addition to ongoing macro insurance, this was impacted due to certain pre operative expenses of projects nearing commissioning. At DCTL, our Fenolix business showed Resilience posted a operational revenue 1287 crores from 1371 crores in the prior quarter. Q4 in Q4 and decline of EBIT was 6% in the turnover and EBIT was 101 crores reflecting an operational margin of 8%.
Favorable demand situation ensured volume stability as well as better pricing. Simultaneously, we achieved cost optimization by effectively managing our variable expense. EBIT grew by 29% during the period. Strategic Growth and Innovation on that front, we continue to advance our long term growth strategy which includes launching our new specialty chemical manufacturing facility each year. Leveraging our strong R and D capabilities, we are focused on developing differentiated products that will expand our specialty chemical portfolio. The new capacities will enhance our self reliance on critical raw materials contribute to margin improvements as they scale up. Our state of art R and D center near Vadodra which is expected to commission soon will play a pivotal role driving innovation led growth.
Although the quarter presented external headwinds, we remain optimistic about our future prospects. With a healthy project pipeline, a steadfast commitment to operational excellence and improving market conditions, Deepak Nitride is well positioned to achieve sustained sustainable growth and deliver lasting value to our SOCA shareholders. With that I would now request moderator to open for a more question answer session please.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the Touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use answers while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. First question is from the line of Sanjay Jain from ICICI Securities. Please go ahead.
Sanjesh Jain
Yeah, good afternoon sir. Thanks for taking my questions first. On agrochemical side can help us understand what really think it is lower demand because destocking appears to be largely behind for the coming of the innovator or it is China oversupply because China still continues to add a lot of capacity. So that issue doesn’t look like going away very soon. So what gives us confidence that we should see a much better recovery going forward.
Maulik Mehta
Okay. Did you have another question also? I can answer them together.
Sanjesh Jain
Okay. But then I will ask all my questions. Thanks. Thanks for that. You said that volume was steady. That means we did. We had on a standalone basis particularly in AI was the volumes lavish agrochemical has declined. What should be the growth rate or looking at the non agrochemical segment particularly some of our key products like sodium nitride OBA eha. How is that portfolio? That’s number three. Number three on the value solution from the agrochemical value chain which you spoke about last quarter that we intend to move up in the value chain. Where are we in that effort and when should we see a benefit of that going in? On the lastly on the new product commission we were looking at.
Thank you.
Maulik Mehta
Okay. Thank you for the question. I’ll answer the first one first. Yes, China has had, you know, it has ramped up its capacity significantly but most of that capacity that has been ramped up is for the final product which goes into formulation. We are an intermediate manufacturer. So what’s Important is that we focused on seeing what we can do to optimize our cost structure as well as our effluent footprint. And on both of these, along with our quality, I think we stand out as the best in the world. And this has also been given as feedback by customers.
Now, the Chinese market is also open to us to supply, albeit at perhaps lower realization if we we choose to take it. Now, that choice remains ours and we will engage with all potential customers, both in India, in Europe as well as in China, to optimize our customer mix. That way, we will ensure that we are de risk from a geographical perspective. These products continue to remain extremely desired in terms of their effectiveness and efficacy at the farm level. Now, that said, we have also worked to see how we can engage with partners and see where we can go downstream to further optimize our value offering.
In a couple of the plants, we have made sure that we are able to run multiple products in discrete chains. Now in these discrete streams. Now these products, because we’re literally in the middle of the year at the moment, what we have worked with strategic customers for is plant pilot batches, which are roughly about 20 or 30 tons in terms of volume, in order to be able to qualify for contractual agreements which would start with meaningful volumes from January onwards. So these are certain steps that we have taken to not only de risk from X particular product, but also from X particular customer.
I think we will see a meaningful improvement because orders delayed are not orders declined. And meanwhile, we will see what we have to do in order to make our assets multipurpose in campaigns to be able to run along with customer requirements. With your second question, which I’m answering last, regarding the volumes now, frankly, on the other products which are going more into the dyes and intermediate space, I think there our volumes are largely intact with marginal growth. It’s only that. And also, by the way, in our pp, our optical brightness and intermediates there also we have seen a growth in line with our debottlenecking efforts.
The agrochemical products have had a temporary blip, as I mentioned. Some of them, which would be higher margin, have had a deferment of supply from our customers, which we are working to see how to address. So all in all, I would say that the net impact on volume is not substantial, but there has been of course, a net impact in terms of profitability and we’re seeing what we can do to cover that for the rest of the year.
Sanjesh Jain
Thanks. Thanks very much for the coming.
Maulik Mehta
Thank you.
operator
Thank you. The next question is from the line of Neera Harish Chimodia from Anvil Wealth. Please go ahead.
Nirav Jimudia
Yes, thanks for the opportunity and thanks for the detailed presentation. I have two questions. So first is on an investment of close to around 220crores which were mentioned in the annual report to manufacture a key agrochemical intermediate for our foray into specialty fluorochemicals. So if you can share your views here, like is this for a novel agrochemical or. Or this is for the off patent product, some estimates on the market potential and when can we see the full benefit of this investment accruing to us?
Maulik Mehta
Okay, so first of all Nirav, thanks for the question. Just to clarify, the investment of 220 crores is in its construction phase and expected to be commissioned at some point between the end of January and the middle of March. We’re engaging with customers. Just also to highlight that while the primary customer for this would be an agrochemical major for a product which is under patent and our process also would be under the intellectual property control, the plant is designed in such a way that it doesn’t necessarily only have to make that it will also be able to supply to the cosmetics industry as well as the polymer industry, both of which appreciate the higher quality as well as the considerably reduced carbon footprint that this process will allow us to put on the table.
So this technology as well as this plant is probably the first and only of its kind and it leverages two key strengths of the company. So the moat is significant.
Nirav Jimudia
Got it sir. Any timelines of the launch of this product by the Innovator? Because probably or possibly in the earlier phase we’ll be supplying some of the samples to them and then once that is launched, the sales could have been ramped up from them. So any tentative schedule have been given by the Innovator to you in terms of the launch by them.
Maulik Mehta
So this product will be supplied as quote, unquote, plant relevant batch in quarter three and in time for us to be able to engage with them meaningfully for long term contracts moving forward. But as I also mentioned, the asset will be fungible for us to use in other applications there also we are engaging with customers there also we are ensuring that we are using this opportunity to supply small plant relevant batches for them to test. In some of these applications there is also things like stability testing, all of those things. But in all of the cases, whether it is for cosmetics, whether it is for advanced polymers, that is for agrochemical intermediates, in all the three spaces the customers have definitely reverted back very, very positively with regards to our industry leading specifications and purity.
So on that front our product is a benchmark. Now we have to make sure that we are able to supply the products and run them in campaigns as efficiently as possible.
Nirav Jimudia
Correct. So just a last clarification on the answers given by you. This product which we are going to supply, is it safe to assume that it would be backwardly integrated in the sense that it would use most of the bouquet of products which we are currently manufacturing and this is a kind of forward integration going to the customer through the bouquet of products what we are already having.
Maulik Mehta
So you are partially correct. But also I’ll highlight that this plant, the protected IP is the process, not the product. So the same plant will be able to make multiple products using a process which will be intellectually protected by Deepak using a common set of strengths. So you change the raw materials from A to B, you’re able to make a product which goes into a different application. And in most of these cases there is significant synergy with our core competencies and in two cases a significant synergy also with Deepak manufacturing the upstream product. I hope this helps.
Nirav Jimudia
Got it sir. The second question is on the AGM, like the chairman sir mentioned about projects worth 14,000 crores under pipeline. If I’m not wrong, some turnover figure of 7,000 crore was also mentioned on these investments. If I recall it correctly, we are undergoing 8,500 crores of capex plus 2,000 crores of capex which is under various stages of commissioning. So for the rest of the projects are the products finalized and what sort of integration it would help with the existing line of products. What we already have. Thank you so much.
Maulik Mehta
Okay, so a couple of points just to highlight. Many of the products that are being which are in the process of commissioning, whether it is products like mibk, mibc, whether it is nitric acid, those are already part of this and they are in various stages of commissioning. Was something that was commissioned a year and a half ago, which was the first chlorination asset. There is something which is in the process of being commissioned in this particular quarter that we are referring to and some more which is being commissioned in Q3, which is in the mechanical completion and pre commissioning stage.
So all of these put together then over and above this. What we’re talking about with regards to 8,000 crores of revenue is to keep in mind that when we make phenol acetone, bisphenol A, these will be largely fed into the manufacturing of polycarbonate so they will be able to accrue a higher ROCE and an EBITDA percentage. So it should be looked at in line with that, that all the investment, when you look at a backward integration, does not result in top line as high as if it was just a downstream investment, but it builds a significant amount of resilience and we are able to leverage that to create long term agreements with our customers.
One of those customers incidentally also being the company that we are acquiring the license as well as the plant and assets from.
Nirav Jimudia
Thank you so much sir and wish you all the best.
Maulik Mehta
Thank you so much.
operator
Thank you. The next question is from the line of Abhijit Akela from Kotak Institutional Equities. Please go ahead.
Abhijit Akella
Good afternoon. Thank you so much for taking my questions. Just a few updates on some of the key projects, if it’s possible to share. So just on nitric acid, should we expect the benefits to start from the second quarter of this financial year or will it really start from the third quarter? And could it add something like 200, 300 bps to the advanced intermediate segment margin? Is that a fair estimate to have?
Maulik Mehta
Yes, I think in terms of the margin expectation, you’re right. And just to clarify, since we are in the middle of the second quarter, we’ve already begun trial production and we’ve already started the commissioning activities for the WNA asset integrated. Both of these will be commissioned and online on stream for their desired capacity by the end of Q2. If we’re able to take advantage of some volumes as the trial production commences, of course there will be that benefit which is accrued. But meaningful and consistent benefit will be accrued from the beginning of Q3 onwards at infinitum.
Sanjay Upadhyay
Yes, it will add to ebitda maybe about 2 to 3% what you mentioned. That’s right.
Maulik Mehta
Also, I’ll just highlight that while we have been constructing this, we have also invested in expansion of our nitration capabilities across multiple locations. So we will be able to consume more of what we make as compared to what we had originally anticipated. So fortunately, unfortunately, whatever you want to call it, our nitration and reduction capacities have been able to come on stream with trial production in one place and commissioned in other places a little bit earlier than the nitric acid plan. But the good thing is that a market presence is already established and we should be able to hit the ground running once these assets are fully commissioned.
Abhijit Akella
Thank you, that is helpful. And then on the MIBK MIBC project, we’ve mentioned 2H of fiscal 26 as the commissioning timeline. So realistically, what sort of capacity utilization percentages could we work with for this financial year and then maybe next financial year?
Maulik Mehta
I think there will be a ramp up. It’s going to be an accelerated ramp up to a sense because not only will we be making mibk, but we’ll be making the downstream of that mibc and a couple of other solvents and mining chemicals as well. So the capacity ramp up will be for I think three or four products altogether in line with mibk. So the answer to that is a little bit challenging. It is going to be an accelerated ramp up. It is not going to be something that takes like a year to do, it’s going to be months.
But we will do it in line with customer approvals because two out of these products also have significant consumption in the cosmetic space where there is a higher price and higher margin expectation. But for that you have a longer lead time for validation. So we’ve already started production of some of these or we’re starting production within the month to see marketed from another location. And we are ensuring that we are able to move forward with this validation before the much larger plant comes into production. Hopefully this will allow us to accelerate our meaningful supplies to these segments as well.
If not, then there will be a couple of months of lag where their validation cycles and stability studies are in the terminal stages of approval.
Abhijit Akella
Understood, thank you so much. On the polycarbonate compounding facility which is up and running at present, are there meaningful contributions expected for this year in terms of revenues or maybe profits as well?
Maulik Mehta
I think frankly what you should look at is not so much for this year, it’s more about what we’re able to accelerate on over the next year, two years. I mentioned much earlier, this asset, while it will have contribution and revenue, is not expected to be. I mean, it’s a strategic investment to fast track our approval cycle. So it is to be looked at as if it is a very large scale pilot project and it allows us to move forward the validation cycles. Many of these end applications have validation cycles which are more than 18 months long.
So we’ve just started that a few months ago. And if you look at 18 months, then you should not look at a meaningful contribution. If and when that happens during the year, certainly it will be, we will appreciate it. But it will allow us to run the polycarbonate resin plant when it is commissioned all the way to 100 without at that time waiting for 18 months of qualification.
Abhijit Akella
Got it, Got it. So just to Round up on the advanced intermediate segment. Obviously profitability has been weak for the last couple of quarters, but with all these, with the battery integration now coming up, nitric acid, plus the new products under contract manufacturing initiatives, is there a. Can we expect to sort of get back into double digit, you know, EBIT margins maybe sometime next year or so? Is that sort of how we are envisaging it?
Maulik Mehta
Yeah, in fact, you know, if the orders from our strategic customers had not been delayed, deferred, we would have been able to see that even in Q1. But the unfortunate truth is that this is a situation that prevailed despite our best efforts. So. Yes, but of course I will just highlight that many of these products that we’re talking about, like nitric acid, happen to be in Deepak Chemtech. So you know, the profits as they are will be booked in the company where they’re manufactured. And as a group we will be of course able to take advantage of that.
Deepak Nitride standalone EBIT percentage should be able to improve steadily over a period of time. But from that perspective, I would rather focus on the EBITDA of the group rather than the standalone.
Sanjay Upadhyay
But Abhijit, to answer your question, isn’t it part of AI segment only? So AI segment will certainly, certainly show the improved EBITDA at a console level.
Abhijit Akella
Sure, I understood that, thank you. Just last two quick things from me and I’ll get back in the queue. One is on the CAPEX budget for this year. Last time we had mentioned 1500 crores for fiscal 26. So is that still on track? And then I guess we need to, you know, incur pretty much the entire 10,000 crores by fiscal 28th. So you know, the next two years, should we expect remaining amounts to be spent.
Sanjay Upadhyay
This year it would be in the range of 800 to 1000 crores roughly and spent. So next year will be a significant amount out of the whatever new capacities what we have announced. So around 3,800, you know. Yeah, around thousand, we already spent. This will be around 3,000 and around 5,000 and the balance. That’s how it will be.
Abhijit Akella
So sorry, thousand crores this year and then 3,000 odd in 27 and the balance in 28. Is that correct?
Sanjay Upadhyay
Yeah, yeah. But some portion goes to the next year also because you don’t pay. If you are talking of cash out, I’m mentioning our cash out or not the actual CapEx in the balance sheet, I think there’s some risk the cash outflow happens to subsequently also post project completion.
Abhijit Akella
Okay, okay, got it appreciate that projects.
Sanjay Upadhyay
Will be completed by dates what we have given by the 28th. But cash outflows can happen in the next year also. Can it will happen because there are some guarantees and warranties and whatever, you know, the creditors and LCs.
Abhijit Akella
Right. Okay. Just one last thing from me on the topic of tariffs. So you know, I guess we do have significant exposure to some industries like say textiles for example, or I don’t know, maybe even you know, autos or auto ancillaries or something else which are export oriented and which are believed to possibly face some headwinds from the tariffs from the US So Malik would appreciate your assessment of, you know, how you’re seeing the scenario and what possibly the repercussions could be and how we could mitigate these challenges.
Maulik Mehta
I think honestly anything that I say right now I would look back at it within the next month, month and a half and probably wish I hadn’t said it. One thing is for sure that as a company, as an intermediate manufacturer, we must not only look at first order impact, but second order impact as well. Because our customers and their demand pickup is also dependent on what is going to happen with this. And more than that, it is also dependent on how other companies, other countries are dealing with the same geopolitical uncertainty. But generally what happens during times of uncertainty is one, most companies will try to see how to de risk their supply base.
Two, they will try to see how to mitigate their costs by conversing with their suppliers to see if some of these can be shared. But three, there is also an impact which we don’t consider of the rupee dollar devaluation. And along with that also is the fact that supply chains are not built overnight. They take a lot of investment and time and hence any impact, both positive as well as negative, would be bleeding out over multiple quarters. Just because there is a position and a threat of tariff and an increased tariff at one time does not mean that the sum total of the impact is felt within the next month or two months.
So I will definitely say it’s a wait and watch approach. I will also say that we’re not without options and I will also add that our greatest investment is into the country of India itself. As I mentioned in the AGM also India is the world’s largest economy that has a fair balance of supply led as well as demand led growth. And that is something that we should harvest and cultivate because that is our true strength and potential. Meanwhile, we are working with our customers also in the US to see how we can ensure that they are de risked and we will do it without allowing for any significant bleed from our margins as well as volumes.
But I’m sorry I’m not able to give you a much clearer answer. Frankly you deserve a better answer. But this is not a time when anyone would be able to give you.
Abhijit Akella
No, sure, completely understand that. Thank you so much. I appreciate the responses and wish you all the best.
Maulik Mehta
Thank you so much.
operator
Thank you. The next question is from the line of Tushar from Omega Portfolio Advisors. Please go ahead.
Tushar Raghatate
Good afternoon sir. Thank you for the opportunity. My question more on the DCTL and DTL. Considering the 9000cr of your capex in the polycarbonate and phenol. Considering the imports of near to 5000 crores and the adjoining importance like epoxy resins and other products what is the size of market you are looking at to fill the gap? And also the end user application are so diverse. So just as a from the defects management in terms of market size, what sort of market size you are seeing to cater?
Sanjay Upadhyay
Sorry, your voice was not clear, you couldn’t hear clearly.
Tushar Raghatate
Hello.
Sanjay Upadhyay
Hello.
operator
Yes Mr. Tushar, please go ahead.
Tushar Raghatate
I just wanted to know like you’re. Doing 9000 crore capex in DCTL. So considering the polycarbonate resin import and the end user market markets in the polycarbonate what sort of market size you are seeing? You know in order to cater from this PC compounding facilities going forward.
Sanjay Upadhyay
You. Are asking polygon market size India.
Tushar Raghatate
Yes sir. The Indian market size which you are trying to better going forward.
Sanjay Upadhyay
4 lakh metric tons.
Tushar Raghatate
Okay sir. And so considering the the size of the KP what sort of IRR and in how many you are seeing that you know the the cash flows contributing positively going forward like recurring the amount.
Sanjay Upadhyay
The payback is around five years. Five and a half years. Between five and five years when you take the entire integrated value chain you know you cannot be doing it in bits and pieces. So it’s from phenol 2 to this phenol a2 phenol the entire capex will be five five and a half years payback 16 to 18% IRR.
Tushar Raghatate
Fair enough sir. And sir in the phenol business like one of the major I know of capacity in Germany which is near about 30% of their capacity is getting shut due to European carbon carbon policy. Any any benefit you are seeing from that in the panel business.
Sanjay Upadhyay
Are our chairman today morning we have extended capacity. Even this month also we have reached another peak. So and we are able to sell the entire volume. And that because of these reasons only because India is. We are one of the integrated players. That’s one thing. And secondly India is consuming this intermediate in a significant way. Our demands are increasing so we are able to sell the whole. That’s why we are increasing the capacity when we are putting a polycarbonate also because we can’t let go the market, you know, so you can see the numbers and results that is demonstrating our ability to produce and sell both.
Tushar Raghatate
Got it sir, I’m sure like one. Of the player in, you know, is putting up the canol and acetone capacity in India and also having a plan to enter into bpa. Do you have, do you feel any. Any competition going forward due to that? And second sir, would be considering your capacity of pinol acetone to cater the polycarbonate. Do you have plans to, you know, for the merchant sale in the phenol acetone BPA going forward?
Sanjay Upadhyay
See, by and large this will be captive. There is a room for one more player also because the way demand is growing. Yes, but our additional capacity comes for a captive consumption largely.
Maulik Mehta
Of phenol BPA which is also sold in the market. But it’ll be a much smaller share of the total capacity.
Tushar Raghatate
So considering the thumb rule of polypropylene and other things like the 165 KDPA I think the capacity can be much higher, you know, going forward. Considering the applications you’re working on.
Maulik Mehta
I’m not sure what thumb rules this is.
Sanjay Upadhyay
Today. Whatever plan we have, this is the capacity we are setting up. So I mean beyond that today we can’t say anything further.
Tushar Raghatate
So my question is basically the, the quantity of polypropylene and the BPA is used and the phenol is used to make polycarbonate. On that front the, the. There is a huge room of expansion in the polycarbonate. So on that front I’m asking a post calendar year 27. So what sort of markets you are seeing?
Sanjay Upadhyay
I understand your question but the point is let us cross 27, 28 first then we can discuss, you know, I mean there is a time, you know, first you can’t jump to this kind of discussions now because we are in the process of setting up such a large capex and projects beyond that today we will not be able to answer further expansion on future beyond 27.
Maulik Mehta
That will be one thing that I can mention is that when there is an established plant which is integrated with room to grow further expansion does not take time as a fresh greenfield plant. And also the investment required to expand is very, very small compared to again a greenfield asset.
Tushar Raghatate
Bayer has a subsidiary in India to cater the polycarbonate, the import resin. So after you post your capex getting commercialized, do you see yourself as the lowest cost producer in India for polycarbonate?
Maulik Mehta
Bayer is not into polycarbonate. You may be referring to Covestro, yes, emerged from Bayer several years ago. You know we’re going to be working with a lot of different partners in the downstream and you can look at us as co producers because we will also be getting into compounding. We will also be partnering on compounding with various players including with ex mayor. Covestro does not have manufacturing for polycarbonates in India will be the first.
Tushar Raghatate
Got it. So and you also mentioned in your advanced intermediate advanced product subsidiaries that you’re working up with the ABS plus polycarbonate blend. So just wanted to understand you’re having plan to manufacture ABS or you have some collaboration with other who are already manufacturing ABS in India.
Maulik Mehta
The second, not in India. We’re talking to everybody right now. ABS is massively oversupplied globally. So there’s plenty of options of getting into ABS manufacturing.
Tushar Raghatate
But certainly are you planning to manufacture epoxy resins because it’s the 20003000 crore market of imports in India.
Maulik Mehta
I won’t, I won’t respond to that. This is something that is being internally evaluated but at the moment I have no comment for that.
Tushar Raghatate
That was really helpful. Thank you. Get back in the queue.
Maulik Mehta
Thank you.
operator
Thank you. The next question is from the line of Aditi Laurika from CD Equire Research Ltd. Please go ahead.
Aditi Loharuka
Sir. I would like to know that how are you adapting to rising risk of trade war?
Maulik Mehta
Whatever adaptation we do then the trade war looks different in the next week. So the. I think honestly the best thing that we are able to do to adapt for a trade war is look within, look at our partners, our business partner, suppliers and customers all over the world. Because as I mentioned earlier, we are not without options and we’re not without relationships. Frankly speaking, as I mentioned, the direct impact that it has on Deepak’s consolidated business is not substantial. But the second order impact is something that is to be asserted. So no clear answer to give you right now, which is worth your time.
But we are evaluating options and we’re engaging with everybody, including us companies. Let’s be clear. Companies, our customers, our suppliers. Nobody benefits from a trade war. If someone benefits, it may be a government or someone else. But customers which are companies prefer stability of supply and strategic partnerships. So we’re navigating into this together. Not alone.
Aditi Loharuka
Yeah, the situation is unpredictable. I agree. But given the current scenario, what are the options that you have to deal with this?
Maulik Mehta
The options that we are working on our investments for. Because these options allow us to cater to investments which are already being planned by the consuming industry within India. So when we are investing in something which is going to be made in India using feedstock that is made in India and consumed by customers in India, this is one way that we are working to see how to protect the future of Deepak Nitrites growth trajectory.
Aditi Loharuka
And how will this impact your CAPEX plan?
Maulik Mehta
Yes, there is no direct impact to the CAPEX plans. The CAPEX plans are as we have already delineated them.
Aditi Loharuka
Okay.
Maulik Mehta
With regards to cost of material of construction and some such, I don’t know. But when we are relocating a polycarbonate plant, let’s keep in mind that significant assets are already constructed and being packed and brought to India. So you don’t have to invest in, you know, brand new assets. These are very high quality assets, extraordinarily well maintained. Frankly, their assets that were put up at an expense which today would have been prohibitive in the kind of metallurgy that they have. So let’s say that we have assets which we are able to put up which would have cost considerably more if we were to invest everything all over again in a brand new plant.
Aditi Loharuka
No, what I want to understand is like when we make any CAPEX plans, we have in mind that this plan will generate a certain sum of revenue and the major exports are in us also. So I want to know that how will like this impact your capex? As in will you. Do you have any plans of slowing down capex if the tariffs are high or anything as such?
Maulik Mehta
We do not have plans to slow down our CAPEX because of the tariff war that is ensuing all over the world. Because our CAPEX plans are very clearly targeted towards supplying our product to Indian customers with some amount being supplied to our technology partner who will compound it into their applications in Europe.
Aditi Loharuka
Okay, so thank you.
Maulik Mehta
Thank you.
operator
Thank you. The next question is from the line of Rohit Nagaraj from BNK Securities. Please go ahead.
Rohit Nagraj
Sir. On mibk, mibc, we said that the ramp up will be relatively faster in terms of current pricing. What is the optimal level of revenues that we are expecting and what are the EBITDA margins that expecting on the downstream products? Thank you.
Maulik Mehta
Give me a minute, Let me just open up that. But when you say current pricing, you know MIBC and at least MIBK more than mibc. The pricing is highly dynamic and volatile. If I look at the last six months and now it’s been extremely, extremely volatile volatile. So if I’m just to look at MIBK as a standalone product, I’m looking at a merchant revenue of close to about 550 crores. And let’s see, because like I mentioned, this is very, very dynamic.
Rohit Nagraj
Right? And in terms of EBITDA margins, any number you want to put to difficult.
Maulik Mehta
To say right now because it is integrated with the upstream. So you know, just putting it on a standalone basis would not be the right answer. It has to be balanced with, you know, cracks from all the way from propylene to acetone to mibk, MIBC and the other solvents.
Rohit Nagraj
Got it, got it. On the phenolics front. So this quarter again we have been able to increase the volumes. However the margins have been declined materially both on sequential as well as yor basis. So was there any element of inventory losses on our raw materials and second part?
Maulik Mehta
Yeah, sorry, just to correct you there, I would actually say that it is quite the reverse of that. The margins have improved from what was actually a multi year low in quarter.
Sanjay Upadhyay
Four, 8 to 11%.
Maulik Mehta
Yeah. So it’s been a substantial drop. However, in quarter one I would also highlight that two things have happened. One is we’ve had our highest ever production but also our production has been constrained in the same quarter because of the heat wave. Our last highest production was in the coldest month of the year. So it is heartening to know that we are capable of making a new high in the hottest month of the year. But the kind of heat wave that took place in Gujarat, especially in Dahit, was unprecedented for the last I think 50 or 70 years.
And hopefully with this learning and this experience, as we move through the rest of the year now, hopefully into colder months, we will be able to maintain this high production. So just to course correct here, in quarter one volumes were lower than they could have been despite having touched a high peak. But the cracks were higher than they were in Q4. As I mentioned, multi year lows in Q4 and there has been at least some level of an improvement in Q1.
Sanjay Upadhyay
Q1 is better than Q4. Rohit, I don’t know how you are saying it is lower because the incentive of 161 crores which we had mentioned that you need to remove from the last quarter, then you will know the real EBITDA between Q4 and Q1 as.
Maulik Mehta
Well as 17 and 17.
Rohit Nagraj
Got it. Thanks a lot. Thank you so much.
Sanjay Upadhyay
Okay, thank you.
operator
The next question is from the line of Tejas and Avane from Asian Market Securities. Please go ahead.
Tejas Sonawane
Hi, good afternoon. Thank you for the opportunity. Three questions from my side. Firstly, on the CapEx plan, the second MoU which we had announced of 9,000 crores. We also had mentioned about plans of expanding into mma, PMMA and Annaline. So if you can provide some update about these products. Secondly, I just wanted to know if you can give us some color on the peak debt levels which we could see by SY28. And thirdly on the quarterly numbers adjusting for the government incentive scheme from the segment and revenue of phenolics, removing the government income from the quarter four numbers as well as quarter one, we see there is a sequential decline of 6%.
While in the initial remarks you did allude to the fact that on the realization front we have seen some improvement as well as the volumes were steady during Q1. So what could have led to this 6% decline sequentially adjusting for the government incentive income? That’s it from my side. Thank you.
Sanjay Upadhyay
So the MoU of MM is whatever we have announced 8,500 crores. That is what the announcement is. We are very soon we’ll be coming up with BPA announcement also provided our board approves that. Of course, if they will approve, but everyone is pending today. MMA will come back to you when we decide on that. Today we have not yet decided. So today the capex plan is around 11,000 crores if you include BPA also into that. Plus whatever we have spent earlier. Okay, so that is the plan that. On CapEx second question, peak level and all these things.
We will not cross the threshold peak level of 1.5 around peak when we reach the top. But that will be late once with the project runs and this the project will come back to the normal level of deck. So we can be in the range of say 7,500 crores we have worked out but it depends on the capacities, how we are phasing out, what kind of credit cards and LC’s and everything. So but roughly it can be in the range of 7,000, 7,500 crores considering 11,000 capex. And what was your third question?
Tejas Sonawane
It was on the quarterly segmental performance. So if you remove the government incentive income from the Q4 segmental phenolics revenues and the Q1 revenues, there is no sequential decline of 6%. While in the initial remarks you did highlight that realizations have improved sequentially while their volumes also have been steady. So what led to the 6% decline which we have seen sequentially excluding the government incentive income?
Maulik Mehta
Yeah, talking about revenue, I’ll answer that. I think you may have misunderstood the when we said realization, what we were referring to was the bottom line, the ebitda. However, when we spoke about revenue, you’re correct that There is a 6% sequential degrowth after adjusting for the SGST benefit. The improvement in the realizations, AKA the ebitda, is because of somewhat of an improvement in the spread as compared to Q4. I hope this clarifies. Yeah.
Tejas Sonawane
Okay. Thank you so much. That was very helpful.
Maulik Mehta
Sure.
operator
Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Sanjay Upadhyay
Thank you.
Maulik Mehta
Thank you. Have a good day. And thank you for attending the Con call.
operator
Thank you.
Maulik Mehta
Happy Independence Day. And please, whatever worries there are about global geopolitics, I think this is a good time to remember that this is a young democracy. We’ve come far, we have a long way to go and the future is actually within us. Thank you.
operator
Thank you. On behalf of IIFL Capital Services limited that concludes this conference. Thank you for joining us. And you may now disconnect your lines.