Deepak Nitrite Limited (DEEPAKNTR) Q2 FY23 Earnings Concall Transcript

Deepak Nitrite Limited (NSE:DEEPAKNTR) Q2 FY23 Earnings Concall dated Nov. 10, 2022

Corporate participants:

Ranjit Cirumalla — Vice President

Maulik Mehta — Chief Executive Officer and Executive Director

Sanjay Upadhyay — Director – Finance and Group Chief Financial Officer

Analysts:

Nirav Jimudia — Anvil Research — Analyst

Isha — Mt Capital — Analyst

Sudarshan — Prosperity Wealth Management — Analyst

Vivek Rajamani — Morgan Stanley — Analyst

Distell — Kotak Securities — Analyst

Rohan Gupta — Obama — Analyst

Jo Michel — HDFC Mutual Fund — Analyst

Mitra — Anubhuti Advisors — Analyst

Rohit Magaro — Sentrum Broken — Analyst

Ashish Kandudraf — — Analyst

Karan — NIS — Analyst

Saba Makati — Centrum — Analyst

Presentation:

Operator

Good day, and welcome to the Q2 FY23 Earnings Conference Call of Deepak Nitrite, hosted by IIFL Securities Limited. At the outset, I would like to clarify that certain statements made or discussed on the conference call today may be forward-looking in the nature and a disclaimer to this effect has been included in the results presentation shared with you earlier, and have now also been posted on the company’s website. [Operator Instructions].

I now hand the conference over to Mr. Ranjit Cirumalla from IIFL Securities. Thank you, and over to you, sir.

Ranjit Cirumalla — Vice President

Thank you, Rituja. Good afternoon, everyone, and thank you for joining us on DeePak Nitrite Q2 and [Incipherable] Earnings Conference Call. We have with us today Mr. Maulik Mehta, Executive Director and CEO; Mr. Sanjay Upadhyay, Director, Finance and Group CFO; and Mr. Sam Saarland, CFO, D&L. To begin, Mr. Malik here will share views on the operating performance and the growth plans of the company, followed by Mr. Upadia, who will take us to the financial and segmental performance.

I now invite Mr. Maulik Mehta, opening comments. Thank you.

Maulik Mehta — Chief Executive Officer and Executive Director

Hi. Good afternoon, everybody, and a warm welcome to you on Pipas Nitride Q2 and H1 FY23 Earnings Conference Call. I trust you had the opportunity to go through our results documents that was shared with you all earlier. I will begin by briefly taking you through the key highlights for the second quarter and the major developments and strategic approach for the coming year. Mr. Bader will then present to you the financial overview during the period in progress. Following that, we’ll be open for question and answers. Before we begin a quick update on the development about the fire incident at Nadzari in Baroda on June 2, 2022. This incident led to the damage of certain property, plant and equipment inventory and have interacted business for which the company has completed all the necessary actions for restoration of the facility and to restart the operations at full capacity.

The company is adequately insured for reinstatement value of damaged assets and loss of profits due to business interruption. The company has launched a claim of this incident with the insurance company and the survey is currently ongoing. We are heartened of course, to keep in mind that there is no impact, no loss of life of any source. The Nadzari plant of the company lost 100% of production for one month. And upon receiving direction from direct authorities, operation has been resumed in a phased manner from the early July period and full production capacity has been achieved in October. Hence, the results of the current period are not comparable to the previous period to that extent. Also, I would like to highlight that for the month of July, operations at the Nadzari facility was made using the far more expensive natural gas rather than coal, which is historically the fuel of choice.

While we had a well-planned and functional firefighting system in place before the incident, which contributed to zero loss of life, we have further strengthened our protective systems with incremental upgrades, not just in Nadzari, but across all of our locations. In the second quarter, we worked through challenges pulled by loss of production caused by the fire incident as well as a very volatile global environment. D&L has exhibited certain agilities and initiatives and adhered to its delivery commitments despite the sustained inflationary challenges in inputs as well as the higher operating costs and logistics. As global supply chains continue to get realigned, we have demonstrated to our customers that they really can depend on Deepak. As a result, our wallet share across all end user industry has either remained stable or increased in the quarter.

On a consolidated basis, revenues were up 25% at 4,041 crores in H1. Despite the short-term concerns outlined, revenue growth was driven by strong volume growth in the phenolic segment. We have operated all of our plants with the exception of Mandatary at optimal utilization rates. As of conveyed, a phased restart of Nadzari during the period under question makes this quarter not equivalent to the previous quarter.

The phenolic plant operated at a continuously high utilization throughout the entire quarter despite the regular monsoon disruptions that take place on power, thanks to the newly commissioned power plants. — the phenolics business, we have witnessed declining pricing in the beginning of the quarter. As a global supply chains undergo realignment one thing that we have noticed is that in Q2, Europe was more concerned with burning crude for energy rather than consuming phenol.

So RM movement was not in line with finished product movement. Likewise, China saw a moderation in demand as the economy awaited the results of the CCP elections that take place once every five years. Overall, volume growth has been strong in the quarter, but cost of key raw materials and utilities have been challenging for the industry in general. Further, we witnessed cost pressures in utilities — and we also incurred costs for restarting and [Indecipherable] facility in a phased manner without the benefit of the corresponding revenues.

Of course, this will be addressed in time by an insurance loss of profit. In Q2 FY23 on a consolidated basis, revenues came in at 1,974 crores, up by 17% year-on-year. I would also like to add that last year’s base benefited from above average realizations in key products, especially in the phenolic segment. During the first half, revenues in Advanced Intermediates segment surged by 32% to 1,434 crores.

Alongside significant input price inflation, to the royal fluctuation in exchange rates. The company met its delivery commitment and achieved a good top line performance despite these difficulties. This was also aided by gains in key product categories as a result of increased demand. The company has been successful in passing on cost increases while maintaining and growing market share. Demand for key products in the Advanced Intermediates segment remains robust. Ipapinolix also delivered a strong top line performance during the first half, with revenues increasing by 22% to 2,625 crores. EBITDA performance tapered due to declining realizations. However, this was partially offset by better manufacturing efficiencies and active RM and utilities management, supported by cost control initiatives.

Despite external headwinds during this period, DNL continued to achieve high average plant utilization. Nonetheless, profitability has been impacted due to a reduction in price of phenol and an unpatented and volatility in the rate of key raw materials like benzene. We are expecting the margins to be better in upcoming quarters as these situations return to normal and the relationship between the raw materials and the finished product is re-maintained where both of these are used for the same purpose.

In key developments, all projects are progressing well and are being commissioned in phases. The first one was commissioned in the month of October. The entire volume for the next five years is tied up. All other projects that we have also clarified to the investor community are on track and will be commissioned in phases over the next 12 to 15 months. In the current month of November, another project is expected to be commissioned. This one is margin accretive and environment related. We have further also commissioned and as of yet, unannounced medium volume, medium-value product targeted to the EU market, which replaces a recently planned chemical. Deep is only the second manufacturer of this product worldwide, and we expect to see robust growth over a period of time.

Right now, we are bullish based on feedback received from feed marketing activities. Our teams have successfully overcome significant challenges to achieve results while maintaining a level of agility and responsiveness with our customer base. We continue to progress towards our goal of becoming a diversified chemical company while maintaining our strong leadership position in key existing products and processes even as we innovate to generate new value.

In order to deliver scalability and volumes, we also aim to develop stronger and longer-lasting relationships with strategic customers. As we do so, we will continue to prioritize process improvement and operational excellence. We have announced an investment into chemical manufacturing for products that use energy both as a raw material as well as utilities in the Sultanate of Oman.

Since the cost of fuel based inputs are generally lower and cleaner in the Middle East, we believe that this project will have a good future given a sustained growth in demand for the relevant products, both in Asia as well as globally. Deepak proposes to invest 51% in equity in this business which will manufacture products where we already have a very deep customer connect and market insight. To conclude, we are confident that DNL with its innovative product mix and pipeline of new projects coming in and decades of manufacturing experience is an excellent candidate to lead the Indian chemicals manufacturing trend. Our continued focus is on preserving a level of agility, which allows us to capture opportunities presented by a sudden shift in the industry landscape.

The contributions from upcoming brownfield and greenfield expansions with value-added forward and backward integration, we will strengthen our competitiveness and position ourselves to expand our market share to not only be globally competitive, but be leaders in our respective fields. Thank you. I would now like to hand over the call to our group CFO, Mr. Sanjay Upaja to address the [Indecipherable] to the financial performance.

Sanjay Upadhyay — Director – Finance and Group Chief Financial Officer

Thank you, Malik.

Operator

[Indecipherable]. We are unable to hear the management.

Sanjay Upadhyay — Director – Finance and Group Chief Financial Officer

Yep, Thank you, Malik. Good afternoon, everyone, and thank you for joining us today on Deepak earnings conference call. I’ll walk you through the highlights of the financial results for the quarter and half year ended September 30, 2022. During the quarter under review, decorated has delivered a steady performance amid challenging operating environment that it a number of days of products.

And while Landstar came into operation in sales on the top of prices of case hotels and the input obviously remain high. One China has been extremely challenging interested in ForEx market and it’s also challenges, it is hardening that company posted robust top line across business increase for its share and market share, especially phenolic, which has been constantly increasing its market share in the country.

Our business [Indecipherable] something we are looking working diligently to strengthen. We had a strategic decision to use cash flows to reduce debt and reduce business risk — as a result, our operations continue to be exceptionally capital efficient with enhanced ROC. Despite this is an increase in the working capital cost with a higher input cost — we achieved 48% ROC in Q2 FY23 and more than 30% in PS one reporting quarters.

Now on the financials. On the operating front, our domestic business revenue stood at INR408 crores at 800 turning Q2 and H1. Higher by 28% and 32% year-on-year, respectively. Export revenues were 277 crores in Q2 and 589 crores in H1. On a consolidated level, domestic to exports stood at 18 and 17 in H1 FY23 on a consolidated basis, revenues were 25% at 4,041 crores compared to 3,224 crores in H1 FY22 driven by incremental gains in both advance intermediates as well as generic segment.

EBITDA stood at INR648 crores in H1 FY20 compared to 865 crores in H1 FY22 Margins came at 16% in FY H1 FY23. PVP came at 550 and 409 crores, respectively. In Q2 FY23 on a consolidated basis, revenue grew by 17% at 1,934 crores as compared to INR1,690 crores in Q2 FY22. On a year-on-year basis, EBITDA changing at 283 crores from 395 crores in Q2 FY22.

Margins moderated at 14%, higher raw material costs and other use further with lower recovery for a few quarters. But stood at 235 crores and 175 crores respectively. Profitability was aligned with the operational performance of the company, which was impacted due to review paved by the inflationary deflation in RM and other equities. In the ensuing quarters, we circumstantial to [Indecipherable] as mentioned earlier, our strategic business is merged in accordance to [Indecipherable] eight.

Due to this merger, the group’s operations are now reported in two segments, Advanced Intermediates and Panoli — in the advanced individual segment revenue has increased by 26% to 635 crores in Q2 FY23 versus 544 crores in Q2 FY20. — while EBITDA marginally grew by 1%, 49 crores during the quarter under review. In H1 FY20, revenue grew by 32% to INR1,415 crores and EBITDA came in at INR98 crores, translating to a margin of 21% despite the current environment and challenging circumstances.

Decarlis delivered an encore performance revenue growth of 13% to 1,284 crores in Q2 versus 1,139 crores in Q2 FY20. While EBITDA stood at 134 crores and income margin came in at 10% in the quarter. In H1 FY23, Rene grew by 22% to INR2,619 crores and EBITDA amino translating to margin of 13%. EBITDA has been considerably dimes a result of high inventory carrying costs and drop in sales price and however, things are weakened to normal in the ensuing quarter. Last year, on the balance sheet front coming financial regimes significantly enhanced, and the company continues to maintain zero debt position in the network of 3,661 crores per sided basis. and 2,415 stand-alone hereby training balance sheet for future expansion.

With that, I would like to return to operator to open the question and answer session. Thank you.

Questions and Answers:

Operator

Thank you very much. will now begin the question and answer session. [Operator Instructions] The first question is from the line of Nirav Jimudia from Anvil Research. Please go ahead.

Nirav Jimudia — Anvil Research — Analyst

Yeah, good afternoon. So I have two questions. Sir, based on, I was just trying to understand the stand-alone business you mentioned in detail. So when we look from 2011 to 2018, we almost doubled our sales, so from 700 crores to 1,500 crores. So it took us almost seven years to double. Then from 2018 to, let’s say, the first half of this financial year, if we take on an annualized basis, we again doubled our turnover, so let’s say, from 1,500 crores to 3,000 crores.

And — these sales have been steadily going up, even if we account for those one time increases in the Asda prices. So all those have been accounted for and still we have doubled our turnover from FY18 to FY23. So I have two questions here. So one is based on the greenfield and the brownfield expansions that we have announced, what could be the reasonable number of years where, again, we could see our sales doubling from INR2,000 crores to INR6,000 crores.

And how much money we have to put in order to achieve this sort of increased turnover. So this is one. And second is, based on the opening remarks, what Mr. Morita mentioned, we have been undertaking some of the backward integration projects, adding some intermediates also for our finished products, adding some customized products where we’ve got some five-year long-term contracts with the customers outside India.

So how much margin reset could happen from the current levels, considering the current global macro situation? Because if we see from FY11 to FY23, for first half of FY23. Our EBITDA margins have been from 8% to 20% before correcting from 32% to 33%. So — it has come down from 32% to 20% and likely so the reasons what you mentioned like some of the raw material prices have gone up or the freight costs have gone up. So if you can answer these questions, that would be helpful.

Sanjay Upadhyay — Director – Finance and Group Chief Financial Officer

Okay. A lot of stuff to unpack there. But first of all, I would just add that perhaps the same trajectory of revenue growth may not be there and that would only be because a lot of the new investments will not be coming into us nitrite as stand-alone, but into a new subsidiary called Get — and there are different reasons for that, but the company continues to invest in high-quality growth as a group.

You will see that. Secondly, while you have seen a moderation with regards to the margins on a percentage basis, I would like to highlight that in deepenitrite a stand-alone entity — we have not seen any general trend of a reduction in gross margins. Now unfortunately, in there was a lower percentage as well, and that was because of significant cost increase when in the month of July, we used natural gas, for example, as a raw material — as a utility.

And along with that, we had a substantially lower volume that we were able to produce and sell into the market. a lot of people, because they look at deeper phenolics and a large capacity that manufactures final and acetone underestimate the size of the throughput of various different chemicals from the Nader side. So in Q2, we have seen a volume drop of about 15% compared to previous quarters. And this was because we were restarting our plant and throughput in a phase in a safe manner. So in Q3 onwards, from October onwards, where all the plants are up and running in full swing, you will see, again, a volume pickup. So between the cost increases, unfortunately, due to the fire incident and the volume drop, we are seeing a severely contracted Q2.

We do believe that the volatility both in RM and in FG, will continue to be a factor for the ensuing quarters, but we remain bullish about our ability to have our customers understand this and maintain a growing wallet share. So even though in Q3, there is a softening of demand in certain key industries. There are customers worldwide and especially in Southeast Asia, which continue to buy a lot of deeper products, so mitigating pockets of moderating demand. We remain bullish about all of our products.

Nirav Jimudia — Anvil Research — Analyst

Got it. So sir, this is about Q3 and probably the second half of FY20. But let’s say, if we take slightly longer or four, five years where my apologies that I didn’t include our new subsidiary, where we are also investing a lot of money apart from the phenolic. — let’s consider that subsidiary also is a part of the related capex for the advanced internal gate business. How do we see this business shaping up over the next three, four years? Because — we are doing a lot of backward integration stuff. We are doing some customized products also. So possibly, from current levels, there could be some margin reset also could happen over the next three, four years. So could could you share your thought process over the next three, four years, how our business would look like, how our normalized EBITDA would look like based on your current assessment of the situation.

Sanjay Upadhyay — Director – Finance and Group Chief Financial Officer

I would say that over the next three to four years, we should target to double our top line — and for us, the growth in our bottom line may be a little bit faster because there’s also a lot of backward integration that is taking place. So between both of these, I think the next three to four years, there’s a strategic balance between the board. But the company remains in a good leading position in all of its products. So it will continue to benefit from the downstream integration and run field expansion.

Maulik Mehta — Chief Executive Officer and Executive Director

In the order of this thing, the margin improvement will be surpassing because, as you rightly mentioned about the integration. So that will improve EBITDA certainly and top line, of course, will grow when we are setting a new facilities. And in the existing business also, we are see all the products and all the businesses, we are doing some debottling, as Molly mentioned in sphere is some sale marketing them for a simple sense, which is a very good protected — and we have commissioned one more project this month, in fact.

So things are moving and things are happening. See, one thing is that we are doing whatever right to do for the business fundamentally outside world, things are very volatile, we all know in Europe and China. And that certainly — like for example, the textile business is certainly impacted. And so telematics infected and serially then one of our team of business. Fortunately, resumes in a business where we have end applications in several industries. So fortunately, we are able to sell our product, we are able to capture our market — but in terms of it, there will be negative some pockets will be positive. So this is how a resilient model is created, and we’ll continue to do that.

Nirav Jimudia — Anvil Research — Analyst

And sir, my second question is on qualitative side. So — how much are R&D team currently comprising of and because now we are also setting up a new R&D center at Saudi. So how the team would look like once this new R&D center would be up and running?

Maulik Mehta — Chief Executive Officer and Executive Director

Currently, we are in on the 13 staff tend total. Although the PCs will be in those 20, 25 PhDs it’s a significant number — and they are working on a new site. Of course, it is going to take time, but they are like whatever products and we are more person that is maintaining, is all coming out of our R&D only, they are constantly on it. let’s say now, so we do not have a segment, but otherwise on those final specialty and find intregation further.

Nirav Jimudia — Anvil Research — Analyst

Thank you so much, sir, and all [Indecipherable].

Maulik Mehta — Chief Executive Officer and Executive Director

Thank you.

Operator

Thank you. The next question is from the line of Isha [Phonetic] from Mt Capital. Please go ahead.

Isha — Mt Capital — Analyst

Sir, just wanted to know like for this particular quarter, what was the volume growth? What was the growth because of the price hike that taken?

Sanjay Upadhyay — Director – Finance and Group Chief Financial Officer

In deeper nitrate, unfortunately, there was no real volume growth on an average, simply because of the pier Infigen in Pepino. I think it would be close to about 10% in the phenolic segment. So if it was a normalized quarter, then in Deepak Nitrite stand-alone, we would also have seen a volume of about 10%. So in quarter three, you should see this coming, yes. Actually, a good representative quarter would be quarter four the Jan to March quarter of 2022 as an indicative volume because that’s when we had the plant up running, including the debottleneck capacities.

Isha — Mt Capital — Analyst

Okay. And sir, like from past three quarters, you were talking about the price hike taken. So has all the price has been realized after the headroom is less?

Sanjay Upadhyay — Director – Finance and Group Chief Financial Officer

See, the price hikes as and when they come, they are always on a rolling quarterly basis. The raw material price is high, then with a quarter lag, in some cases, less in some cases about a quarter we are able to pass the prices on in order for us to maintain a healthy margin. Now of course, this is not going to factor in when you look at it on a percentage basis because I cannot tell the customer that my costs have increased by [Indecipherable] additional, so I can maintain my percentage. Nonetheless, if the situation moderate in terms of the raw material prices, if they reduce then, of course, we pass that benefit over to our customers with a line. And when the prices increase, the customers support us with that price increase.

Isha — Mt Capital — Analyst

And sir, just another thing I wanted to understand what led us to you more of natural gas apart from the other — like the major crude-related derivatives that we usually use for our raw material.

Sanjay Upadhyay — Director – Finance and Group Chief Financial Officer

See, every good plant in the country is by law, needing to have what is called a stand-by boiler. Essentially, it is one which can be used as and when the primary generator of steel is under maintenance or whatever you do. So you take the vision and you run it at that point. Now while we were going through the plant restoration, we also identified areas of improvement in the boiler which were affected because of the significant pressure that arose from the higher incident.

And therefore, we address the safety aspects and the repairs of the boiler also. And in that period of time, the natural gas boilers that is always available as a standby was this was due to. So this is not something which is a normal case. But in order to maintain our delivery commitments and to start operating our plants in a safe manner for that period of time, it was a natural gas boiler that was used rather than generally use cold oil.

Maulik Mehta — Chief Executive Officer and Executive Director

But this is covered under our LOP. So as and when LOP claim is settled, we will get the date.

Sanjay Upadhyay — Director – Finance and Group Chief Financial Officer

Absolutely.

Isha — Mt Capital — Analyst

Thank you for that, thanks so much.

Sanjay Upadhyay — Director – Finance and Group Chief Financial Officer

Thank you.

Operator

Thank you. The next question is from the line of Sudarshan [Phonetic] from Prosperity Wealth Management. Please go ahead.

Sudarshan — Prosperity Wealth Management — Analyst

So my question is a follow-up question on the previous gentleman. So you guided for doubling the drop in growth and within three to four years. Is this on a stand-alone basis? Or is this on a consolidated?

Sanjay Upadhyay — Director – Finance and Group Chief Financial Officer

The flows on a stand-alone basis, consolidated cannot happen because the — in federal new capacity and that it still takes three to four years to set up. So.

Sudarshan — Prosperity Wealth Management — Analyst

Okay, sir. And another question is on the final segment. So what is the price change in finance as it done in the last quarter and the last 40 days and the same period, Benzene and propylene price corrections.

Sanjay Upadhyay — Director – Finance and Group Chief Financial Officer

I don’t want to give you prices, but the pension prices have gone up. In fact, if you are taking the material prices, you must have seen the engine prices have gone up significantly in the quarter. In fact, generally, this quarter was a little subdued because of demand also though we are able to maintain our volumes. In fact, we have expanded, but then — overall demand was down because of global situation because of electric monsoon also and fly industry not doing well, which they continue not to do well even today.

So there was an impact of this — on top of it, Benzene probably prices were higher — there was a shutdown from BPCL, which also led to — led us to buy some timing from the market — and all in all, there were several issues for the quarter. And in fact, there is a shutdown in October also for BPCL is continuing. So there will be some impact. So no business, what you are seeing is lower demand, but we are selling our volumes on top of it, this kind of, I would say, disruptions in the market.

Sudarshan — Prosperity Wealth Management — Analyst

Okay, sir. And another.

Maulik Mehta — Chief Executive Officer and Executive Director

I’ll just add one point here that there are significant global disruptions. India, however, the disruption of a much smaller scale, right? There is — India has a very different kind of consumption of the oil compared to what you have in Europe, in the U.S., in Asia. And therefore, whatever disruption you are seeing, especially places like China in places like Europe where there is disruption rather than disruption. In India, it is a disruption, it is transient in nature.

And it remains a target market where deeper win continue to grow its solid share. And even if in the short term, there is a slowdown, it is a slowdown to a very brisk CAGR. India demand of Fino is quite linked to GDP growth also because it has infrastructure spending associated with the pharma associated with the agrochemicals associated with it. So when we speak about slowdown in India, we have to keep in perspective that it has slowed down in a very high CAGR, which is still high and will improve as the global situation also improves.

Sudarshan — Prosperity Wealth Management — Analyst

Okay. And my question is on the capex front. So recently in October, there has been a commissioning in number you expect to come in on time. plant actually. So can you just to the details on it, like in terms of capacity and margins, which we can expect from these commissions?

Maulik Mehta — Chief Executive Officer and Executive Director

So there are three products which have been — I mean, there are three initiatives which have been commissioned in the last month and this month. One of them is for an agrochemical, which I mentioned has already got all of its volumes booked under formula contractual agreements for the next five to seven years. This is product where Deepak has a leadership position, we’ll continue to have a leadership position with a challenging chemistry.

And it is, I think, maybe second largest player, maybe the second or the third largest player in the world. The second one, which is being commissioned, as I have mentioned in my opening remarks is a margin-accretive and environment-related project. And the third one, which got commissioned is a product which is targeted globally. But right now, we’re prioritizing Europe Simply because in Europe, it replaces another chemical, which has been planned by the agencies for its customer generic property.

So our product replaces that has a very interesting CAGR, which is developing simply because the previous one is banned. And this was something that we had not announced earlier — and we have seen very encouraging feedback from all of the target consumers. So it is something where I would not like to give guidance. It’s very early.

But all I can tell you is that at the moment, — the feedback has been extremely positive. And De has developed the product internally. It is also the — it’s only the second company worldwide at manufacturers. At what scale, what we will do over a period of time will come out as we see the product and its use case improvement.

Sudarshan — Prosperity Wealth Management — Analyst

Okay. Sir, I’m seeing the benzene and final demand, can you just tell me that if the coming quarters will have pressures on no segment margin pressures?

Maulik Mehta — Chief Executive Officer and Executive Director

So let’s put it this way, that normally Final, Benten, all of these, whether they go up or they go down, they go down more or less together with some gas in the last quarter because Europe was actually burning oil rather than tracking it into petrochemicals like benzene and toluene, who is using it for its calorific value. This was also not a time where it was going to use in all for its solvent application.

So there was a drop in the demand for final and an escalation in the price of Benin, this is completely out of lockstep, which it normally is. Now what has happened is owing again to more macroeconomic trends the prices of benzene has corrected significantly. In fact, between the higher than the lows of the same quarter, quarter two, there has been a gap of about to 60% between the high and the low in the same quarter for benzene.

Now Final has not seen that much of a rise in a fall. And therefore, we expect to be able to benefit from a price correction in dentin, which is more than any price correction that we may see in in — so the margins we expect to have at least some level of an improvement compared to Q2, simply because the macroeconomic trends moderating in terms of the intensity.

Sudarshan — Prosperity Wealth Management — Analyst

Okay, sir. So another thing is you have said like 50% increase has been in the in pace. So at the end of the quarter and the end of the mid of quarter three, is it still this high or is it connected

Maulik Mehta — Chief Executive Officer and Executive Director

No, I’m saying within the quarter, there has been such a volatility.

Ranjit Cirumalla — Vice President

Okay. Okay.

Maulik Mehta — Chief Executive Officer and Executive Director

But the prices for benzene are sliding. As we see right now, again, this is one of those things where it’s difficult to predict what will happen one month from now. which new superpower is going to decide what. But at the moment, at least the general trend has been that the prices of a lot of these petrochemicals has seen some level of correction since mid-September onwards. This will get affected regionally based on certain startup for shutdowns as that may be.

Sudarshan — Prosperity Wealth Management — Analyst

Okay, sir. If I can squeeze in another question.

Maulik Mehta — Chief Executive Officer and Executive Director

Yes, Sure.

Sudarshan — Prosperity Wealth Management — Analyst

Yes, sir. Regarding the INR1,500 crores capex punish you have mentioned like MBand or the two of the products which you will be coming in. So apart from this, is there any other updates on what are all the products that be coming in in terms of capacity? You have given guidance for 40,000 metric in MBand 800 in capacity.

Maulik Mehta — Chief Executive Officer and Executive Director

So we have deliberately not announced names of products other than these simply because the other investments that are there other than the upstream integration, the ones which have downstream integration are actually multiproduct platforms, fluorination, for example, coronation and photochlorination have multi products. but these are assets that we are investing in and they are engineered assets.

So while they can do one thing, they can also do a lot more things because they the assets allow us to use significantly more pressure, significantly higher temperatures in some cases, introducing a liquid, we can use a gas vice-versa — so it gives us a level of flexibility, which is not common to what we have done in the past where we put our plants with single product in mind. And therefore, it may have a range of different products that we will run in campaigns.

I would not truly call the multi-purpose class, but they are certainly in that line. And the investments would be, as I mentioned, into fluorination, et photochlorination, — we will also, of course, be adding significant investments into expanding our titration capacity, hydrogenation capacity and some other unit processes that we will announce over a period of time, that they have already been in.

They’ve already asked the R&D phase I have mentioned earlier that some of these investments will be — which we have not announced the value yet. We’ll be using the gas liquid reactions, which will be in that sense, downstream of what we already manufacture and targeting the pharma segment in an application.

Sudarshan — Prosperity Wealth Management — Analyst

Okay, thank you very much.

Operator

Thank you. The next question is from the line of Vivek Rajamani from Morgan Stanley. Please go ahead.

Vivek Rajamani — Morgan Stanley — Analyst

Hi sir, thank you so much. So two questions on my end. Would it be possible to quantify the impact of using the natural gas in of coal for that one month?

Maulik Mehta — Chief Executive Officer and Executive Director

It would — I mean, we’ve already done it as part of the work that is required when we file it for the insurance claim. — give me a couple of minutes, and I will give you a specific number. But if you have a follow-up question to that, you can ask it while this number comes up.

Vivek Rajamani — Morgan Stanley — Analyst

Sure, sir. The recent question was barring the usage of natural gas. And obviously, the 15% reduction in volume you saw because of the fire and the phase ramp-up. Would it be say that these two were the only externalities, which were affecting the quarter. Or do you see any other market-related conditions, which may have also played a part in the performance for that segment?

Maulik Mehta — Chief Executive Officer and Executive Director

Okay. So when you’re talking about the segment, you are specifically talking about advanced and unit stand-alone, correct?

Vivek Rajamani — Morgan Stanley — Analyst

That is correct.

Maulik Mehta — Chief Executive Officer and Executive Director

So there has been moderation, as Mr. Pare also mentioned in the application of the textile industry in India. However, we have taken this opportunity based on geopolitical situation, to target customers in Asia and in the U.S. who would otherwise have bought competing products from Europe. So because this opportunity has been available to us, I can say that the impact of the lower demand in this particular segment in India has been mitigated by the park’s marketing team.

We remain also bullish about this segment recovering. But at least for the next couple of quarters, these international markets will remain extremely supportive to Deepak products and good pricing, which allows us to maintain the same level of netback as if we had sold to the Indian textile industry. With regard to your other question, which — the first question about the effect of natural gas versus coal for a month.

Vivek Rajamani — Morgan Stanley — Analyst

Coal and the impact.

Maulik Mehta — Chief Executive Officer and Executive Director

The step-up impact in one month was four crores. This is the delta, which we would have been able to gain if we had used coal into natural gas.

Vivek Rajamani — Morgan Stanley — Analyst

Got it, sir. This is really helpful. And if I may just squeeze in one more clarification. I think you mentioned Barringer running all your plans utilization levels. Would it be possible to give some color on what that optimal utilization rate is — because obviously, on the phenol side, you’ve been able to run it north of 100% in the past. So just some color on that would also be really helpful. Thank you so much.

Maulik Mehta — Chief Executive Officer and Executive Director

Okay. So on most of the other products, we have run them at I guess it’s something between 90% to 100% capacity. In a couple of products, we have challenged that 100% and gone beyond that to about 100 million to 110 million. One thing I have to say is that it is somewhat easier — not easy it is more challenging to do in depeer nitride because the product output might be a solid problem.

So it is not as easy to go beyond 10% we have managed in a couple of cases, but it is something where there’s a good amount of work required. Nonetheless, as I mentioned, we generally have targeted between 90 to 15%, 108% utilization in deeper nitride stand-alone assets.

Sanjay Upadhyay — Director – Finance and Group Chief Financial Officer

Yes. But to answer this, we are conceding the bottlenecking in the current sales, you won’t do that. But with some, the bottlenecking little capex, you can expand and which you have been doing continuously. It doesn’t require if investment. So with the margin investment, you can have a higher capacity. So the way the Deepak Nitrite products and plants are multi-product, multi facility expiring one or two.

Vivek Rajamani — Morgan Stanley — Analyst

Got it, sir. And final would be north of 100% as per usual, right?

Maulik Mehta — Chief Executive Officer and Executive Director

Above 100.

Vivek Rajamani — Morgan Stanley — Analyst

Got it, very helpful. Thank you so much.

Maulik Mehta — Chief Executive Officer and Executive Director

Thank you.

Operator

Thank you. The next question is from the line of Distell [Phonetic] from Kotak Securities. Please go ahead.

Distell — Kotak Securities — Analyst

Good afternoon, thanks for taking my question. Most of my questions have been answered. Just A couple of clarifications I wanted to see. One was with regard to the Advanced Intermediates segment, — would it be fair to conclude that perhaps you are back to normal margins starting the March quarter after a period of consolidation in the December quarter going on?

Maulik Mehta — Chief Executive Officer and Executive Director

No, we will expect an improvement compared to Q2 because we had a lot of tailwinds because of the better situation now.

Sanjay Upadhyay — Director – Finance and Group Chief Financial Officer

Actually, it I would answer is I don’t know what is the normal margin because in current situation, these are so volatile, like Moly was just mentioning about the earlier safe in these which affects a particular chain of products. So normal, it’s very difficult to say. But we are doing better. In fact, the second quarter also had this impact of fire where we lost production and the — so all in all, — this is not a normal quarter as such. But then Q3 will have its own challenges. So frankly, nobody knows what is normal, but we are doing — I mean, we have done — like we started on Ligand 26 for 22nd of October with full capacity. So you will see that in the third quarter, the results and when it comes.

Distell — Kotak Securities — Analyst

Okay. No, I understand. Also, just to clarify the comment that was made earlier, the deeper nitride stand-alone business is what we are targeting to double in terms of top line in the next three to four years? Is it just to make sure I understood that correctly. And if so, if you could just elaborate on just highlight the major drivers that you would have to do that in terms of the major growth

Maulik Mehta — Chief Executive Officer and Executive Director

I clarified that a lot of the investments, even for downstream at upstream will come in the new subsidiary et which will house not only deeper nitride related products, but also deepenolic-related products. For example, MIBK, and IBC. So let’s put it this way that the business of Deepak Nitrite we’ll certainly see significant revenue growth over a period of time as the projects get commissioned, whether that is housed in one company or another company as analysts and investors, you will see the value coming People Phenolic as an entity, it is not easy to double the revenue of a commodity chemical like epoxies overnight.

And that normally will happen when there is either a significant new investment that is coming in with a new plant or with a significant downstream investment that is coming in. So that will be a different story. We as Nish and its associated product will certainly see revenue accretive to its current business over the next three to four years, in line with what you mentioned. — in and other subsidiaries.

Distell — Kotak Securities — Analyst

Yes. So IBK and IBC will come in this subsidiary, we patented, but possibly any other derivatives of notice might come within the canal itself. — to understand.

Sanjay Upadhyay — Director – Finance and Group Chief Financial Officer

As and when it comes, we’ll let you know about how it comes and where we are housing that.

Distell — Kotak Securities — Analyst

Okay. Sure. One last thing. Just with regard to the phenolic segment, — just from the market perspective in terms of demand that you’re seeing for India, have seen a significant slowdown in the country’s volume growth rate compared to the 10% kind of volume growth numbers we used to see earlier. — have things slowed down? And also, how are things looking at the global front, whether it be maybe in China or in other important reasons

Maulik Mehta — Chief Executive Officer and Executive Director

So if you’re talking — I think Abhijit, you should not focus so much on only the last couple of months as a sample size — so if you look over the last year, last three years, last five years, you will see that there is a remarkable consistency in the growth in consumption of final in India. Now the last couple of months have been very volatile, also very uncertain because of geopolitical issues.

And in all, as a product is something — it’s like water that it flows from the place where it is made to the place where it is consumed. — internationally, domestically, whatever. But in India, because it is very closely tied to the growth in barring some unforeseen circumstances, which would relatively remain in the short term, like how you’ve seen in the last couple of months or quarters. the growth story is intact.

So is the growth story for the downstream applications of Final where these have remained very bullish investor — so I don’t foresee a long-term slowdown from what we have seen in the last few years. You see the last couple of months, but don’t base your your perception about the future based on the last couple of months. Such things may happen. They may happen again. But this is India. There is always more optimism here than there is in most parts of the world, even at the worst of times.

Operator

Thank you. The next question is from the line of Rohan Gupta from Obama. Please go ahead.

Rohan Gupta — Obama — Analyst

[Indecipherable]. Good evening, for the question is on advanced into media business, you mentioned definitely that the tower impact was still strong in the current quarter. And we are expecting that from next quarter onwards, we can enter 10%, which was not achieved in the current quarter. So this volume growth we are expecting in the second half, it was primarily in the business a business or all you all see that we be the growth in the broad set fontal the advancing in the.

Maulik Mehta — Chief Executive Officer and Executive Director

In the broad spectrum of advanced intermediate. — which will, of course, include the basic intermediates, but which will also be seen in growth in volumes in other segments. So you will see having a broader improvement in terms of volume across all the segments.

Rohan Gupta — Obama — Analyst

Okay. And sir, if you see the view of the — you also mentioned that some of the industries are witnessing the slowdown less textile and all, which are also the key industry pain med. So this is a volume with private use of some industries in the domestically?

Maulik Mehta — Chief Executive Officer and Executive Director

So we don’t believe the slowdown is an endemic situation. It is here and now, and that is because of certain recessionary fears that are there worldwide. — because the textile industry also supports the global textile consumption industry. Nonetheless, as I mentioned earlier, while this transient effect is there, which is leading to some consumers of our products in India being relatively cautious about the visibility that we give in the long term. owing to certain geopolitical situations that we all know about that are taking place both in China and in Europe.

Coincidently, this has also opened up significant avenues for supply of power products to other countries where normally we have had only a moderate exposure. — countries like Southeast Asia, like the U.S., etc, where we are currently able to move a lot of material compared to what we were earlier and at margins where our netback, it remains similar to what it would be if we were selling to the Indian industry without dealing with the freight and the duty impact — so today, we are able to do it. This opportunity remains available to us over the next couple of quarters. But we also do anticipate that the domestic industry, at least the textile segment, will recover in a quarter or two. So for us, we — one channel or another channel, we remain confident about the demand — the volume demand and margin for deeper stand-alone business.

Operator

Thank you. The next question is from the line of Jo Michel from HDFC Mutual Fund. Please go ahead.

Jo Michel — HDFC Mutual Fund — Analyst

Thank you so much. Against the earlier guidance of about 1,500-odd crores of capex over, I think believe if I’m not wrong 18-odd months. So if I look at the one number, it’s about 140-odd crores of capex in the cash flow. It seems a bit low versus the run rate that we have probably guided. So is it — are there some delays in the capex? Or just the cash flow that is likely to accrue and probably bulk up in the.

Sanjay Upadhyay — Director – Finance and Group Chief Financial Officer

As not delaying the project.

Jo Michel — HDFC Mutual Fund — Analyst

Okay. So.

Maulik Mehta — Chief Executive Officer and Executive Director

A lot of these are engineering items. And in any chemical company, there’s a lot of investment that takes place when you’re talking about the civil structure and things like that. So those all happen at the right time. We don’t front-load any of the costs, unless we have to.

Jo Michel — HDFC Mutual Fund — Analyst

Sure. That’s a good one. Thank you so much.

Operator

Thank you. The next question is from the line of Mitra [Phonetic] from Anubhuti Advisors. Please go ahead.

Mitra — Anubhuti Advisors — Analyst

Thank you for the opportunity. Sir, just on the Nandesari plant, if you can give the — what were the blended utilization levels for the second quarter because the plant was shut down for some part and then we were running at lower capacity.

Maulik Mehta — Chief Executive Officer and Executive Director

So exactly that one part of the plant, I would say 30% of the volume — 35% of the volume was — I would say, close to 50% of the volume was operated at 50% run rate for the duration of the quarter. And the remaining 50% of the plant was operated at close to about 80%, 90% run rate. Also, I would just highlight one thing that one part of the plant was underutilized for a short period of time because it was going through or work in order for us to expand project that we already had announced for the ecochemical intermediates.

Operator

Thank you. The next question is from the line of Rohit Magaro from Sentrum Broken. Please go ahead.

Rohit Magaro — Sentrum Broken — Analyst

Thanks for the opportunity. Sir, my question is on the phenolic. So last quarter, we had indicated a utilization of about 19%. So just wanted to have what was in this quarter. And if you can quantify the high-cost inventory onetime impact for this particular quarter? Thank you.

Maulik Mehta — Chief Executive Officer and Executive Director

The run rate was similar to what it was. It would have been less because of the multiple power tracks that occurred in the hedge normally during the monsoon, which we were able to afford, thanks to the CP Yes, this is — while this is also an advantage, we have to keep in mind that, unfortunately, right now, the price of coal is also so high that we were able to run it — but — and we were able to save the costs that would be accrued in terms of the top page and the start-up and that start-up of the plant. But coal being as expensive as it did not yield the material benefit to the extent where we would have wished it purposes for us to protect the quality of our assets as well as to maintain supply chain.

Sanjay Upadhyay — Director – Finance and Group Chief Financial Officer

So as regards to your inventory, you think we have to I mean we imported is the impact in the same month. It’s not carryforward from the earlier quarters, but in the same point when you are importing the containment comes late. And because of the volatility in prices, the prices can change. in defeats all beyond that nothing. So once BPCL is normal and then we have our own stream running, then this won’t be that much.

Rohit Magaro — Sentrum Broken — Analyst

Right. And the expanded capacity to 300,000 tonnes debottling in capacity, that will be available from Q1 FY24 onwards. Is that right?

Sanjay Upadhyay — Director – Finance and Group Chief Financial Officer

Yes, that’s right.

Rohit Magaro — Sentrum Broken — Analyst

Thank you so much, and best [Indecipherable].

Maulik Mehta — Chief Executive Officer and Executive Director

Thank you.

Operator

Thank you. The next question is from the line of Ashish Kandudraf, an individual investor. Please go ahead.

Ashish Kandudraf — — Analyst

[Indecipherable]

Operator

Can you please repeat the question. We can not hear you, your voice is [Indecipherable].

Ashish Kandudraf — — Analyst

[Indecipherable]

Operator

We cannot hear you so we will move to the next question, which is from the line of Karan from NIS. Please go ahead.

Karan — NIS — Analyst

Yeah, Hello sir. I want to ask one thing like you said that the tax etc is not doing well in the new text. So by when do you see it’s coming to the rate was on track?

Sanjay Upadhyay — Director – Finance and Group Chief Financial Officer

It’s difficult to say because we were expecting during Diwali as when things will normalize, it has not yet normalized. So I mean very difficult to say.

Karan — NIS — Analyst

Okay. So like at present also, you have not seen any traction again, like the one coming up?

Sanjay Upadhyay — Director – Finance and Group Chief Financial Officer

No.

Karan — NIS — Analyst

Okay. That’s all. Thank you.

Maulik Mehta — Chief Executive Officer and Executive Director

Just to clarify, it is not like there is no demand. It is that most of the consumers for our products that happen to be in the textile space. are not able to provide a medium-term lability because they are waiting to get this from their end consumers, which may be in Europe or the U.S. or whatever. So the problem is not that they are not running the plant. They just simply that are not confident about whether two months from now, the capacity ramp-up will be as or why or the demand will change from A to B is there they are consuming subdued levels and they are also seeing how the situation develops.

Karan — NIS — Analyst

Absolutely, absolutely. Thanks for that. Thank you and wish you all the best.

Maulik Mehta — Chief Executive Officer and Executive Director

Thank you.

Operator

Thank you. The next question is from the line of Sudarshan [Phonetic] from Prosperity Wealth Management. Please go ahead.

Sudarshan — Prosperity Wealth Management — Analyst

Sir. Any update on the QIP front? And any update on your polycarbonate product.

Sanjay Upadhyay — Director – Finance and Group Chief Financial Officer

So QIP, nothing is on that. We’ll just wait for the right approach time and moment. So no update as such on polycarbonate, we are working on Polycarbonate. It is at a pre-feasibility stage. Once we are ready with that, then we are going for the license application and ceremony, we will have to come into other things before we go for the extra launch. So first and foremost is like.

Sudarshan — Prosperity Wealth Management — Analyst

Okay. So the QIP won’t be used for this polycarbonate.

Sanjay Upadhyay — Director – Finance and Group Chief Financial Officer

I think it depends. Of course, it is for voice, but it is defense and there are other capexes also in pipeline.

Sudarshan — Prosperity Wealth Management — Analyst

Okay. Then the QAP will be — the timing from QAP is one year from the date of announcement. So how long is the [Indecipherable].

Sanjay Upadhyay — Director – Finance and Group Chief Financial Officer

So to February, I believe.

Sudarshan — Prosperity Wealth Management — Analyst

Okay. So it is safe to say that polycarbonate will be finalized between that date.

Sanjay Upadhyay — Director – Finance and Group Chief Financial Officer

Yes, I think we are able to complete the pre-feasibility studies and everything.

Sudarshan — Prosperity Wealth Management — Analyst

Okay, thank you.

Operator

Thank you. The next question is from the line of Saba Makati from Centrum.

Saba Makati — Centrum — Analyst

Hi, thanks for the opportunity. My question is, [Indecipherable] Yes, yes, sure. And the last question then my second. So my question is on Deepak. So what is the stable margins, so you can expect growth on the gross and the EBITDA margin.

Sanjay Upadhyay — Director – Finance and Group Chief Financial Officer

See, again, I answered a few minutes which there is no stable margin in the current volatile business atmosphere, right? And this finally is a commodity product. So it will — you know how the commodity product codes are actually now moving in the market. So you can’t say that. But normally, you could can expect around 16% to 22% that range in the phenolic business, normal line. Anything about 25, 27 is may not be sustainable. Anything below 15% may not be the right margin.

Saba Makati — Centrum — Analyst

This is on EBITDA margin here, sir.

Sanjay Upadhyay — Director – Finance and Group Chief Financial Officer

Yes, EBITDA margin.

Saba Makati — Centrum — Analyst

Thanks. And a related question is, when we are done with the backward integration — so will there be stability in the margins as we go into more value-added products?

Sanjay Upadhyay — Director – Finance and Group Chief Financial Officer

More and more, you get into product, more and more your stable margin [Indecipherable].

Maulik Mehta — Chief Executive Officer and Executive Director

Just to clarify, the backward integration right now is in before nitrite stand-alone.

Sanjay Upadhyay — Director – Finance and Group Chief Financial Officer

When we go for general, of course. [Indecipherable].

Saba Makati — Centrum — Analyst

Thank you. Thank you.

Operator

Thank you. The next question is from the line of Mitra from Anubhuti Advisors. Please go ahead.

Mitra — Anubhuti Advisors — Analyst

Sir, just a follow-up question on, I think, for phenolic post commissioning of MIBK and MIBC. Will we still sell final or I think are the whole quantity will be continued for production now these two products only. And how are margins in these products?

Maulik Mehta — Chief Executive Officer and Executive Director

No, no, we will continue to sell in the market. We will also be consuming a good amount. In that sense, you must look at what has happened with ISO profile alcohol IPA, where there’s a good amount of consumption of acetone as well as market presence for acetone. So similarly, when it comes to IBC we will retain our market presence in the upstream product as well as the downstream products. And the margin will be — I mean, right now, the margins look very good. let’s see how they develop once the commission, but they will certainly be in addition to what margins we would get in the final acetone business.

Mitra — Anubhuti Advisors — Analyst

Okay. So basically, we’ll be ramping our phenol capacity over time also.

Maulik Mehta — Chief Executive Officer and Executive Director

Yes, we will be.

Sanjay Upadhyay — Director – Finance and Group Chief Financial Officer

We just say no, we are expanding to three lets — and these are all done with some mine, how are we going to consume our carton, how much market is required. And accordingly, these are taken.

Maulik Mehta — Chief Executive Officer and Executive Director

IBM should add about 20%, 22% EBITDA. This is on the base of a normal final which will have its own like 16% to 18% EBIT.

Mitra — Anubhuti Advisors — Analyst

Okay. Okay. And what capacities are we building on MIBC and MIB Care?

Maulik Mehta — Chief Executive Officer and Executive Director

Also, we have on the [Indecipherable]. I think my details about 40 [Indecipherable] and IPC is about 80.

Mitra — Anubhuti Advisors — Analyst

Sorry, 40? 80? and?

Maulik Mehta — Chief Executive Officer and Executive Director

80.

Mitra — Anubhuti Advisors — Analyst

Okay. Thank you so much.

Maulik Mehta — Chief Executive Officer and Executive Director

Thank you.

Operator

Thank you. Ladies and gentlemen, as this was the last question for today. I would now like to hand the conference over to the management for closing comments.

Sanjay Upadhyay — Director – Finance and Group Chief Financial Officer

Thank you so much for joining this call of MetaMako further clarification — you can get in touch with our Investor Relations team. They will second. Thank you once again.

Maulik Mehta — Chief Executive Officer and Executive Director

Thank you all.

Operator

[Operator Closing Remarks]