Deepak Nitrite Limited (NSE: DEEPAKNTR) Q3 2025 Earnings Call dated Feb. 17, 2025
Corporate Participants:
Maulik Mehta — Chief Executive Officer
Sanjay Upadhyay — Director of Finance, Group CFO & Whole-Time Director
Analysts:
Ranjit Cirumalla — Analyst
Nirav Jimudia — Analyst
Arun Prasath — Analyst
Vivek Rajamani — Analyst
Ankur Periwal — Analyst
Sanjesh Jain — Analyst
Unidentified Participant
Rohit Nagraj — Analyst
Chirag Shah — Analyst
Meet Vora — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Deepak Nitrate Q3 Nine Months FY ’25 Earnings Conference Call, hosted by IIFL Capital. At the outside, 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. [Operator Instructions] I now hand the conference over to Mr Sirumala from IIFO Capital. Thank you, and over to you, sir.
Ranjit Cirumalla — Analyst
Thank you,. Good afternoon, everyone, and thank you for joining us on Deepak Nitrite’s Q3 and nine months FY ’25 earnings conference call. Today, we have with us Mr Mehta, Executive Director and CEO; Mr Sanjay Upadhya, Director, Finance and Group CFO; and Mr Sekar Mandha, CFO of Deepak Limited. We will begin the call with opening remarks from the management team, followed by an interactive Q&A session. To begin, Mr will share his views on the operating performance and the growth plans of the company, followed by Mr Sanjay Upad, who shall take us through the financial and segmental performance. The result documents have already been shared with you and posted on the company’s website. I now invite Mr Mehta to share his opening comments. Thank you, and over to you, sir.
Maulik Mehta — Chief Executive Officer
Good afternoon, everybody, and a warm welcome to you on Deepak Nitride’s Q3 and Nine-Month FY ’25 earnings conference call. Our results documents were shared with you earlier, and I hope you’ve had the opportunity to glance through them. I’ll initiate by briefly taking you through the key financial and operational highlights for the quarter and nine months. MR. Will then present you with a more comprehensive financial overview during the period under review.
Following that, we will open the forum for your questions. As we reflect on the challenges and achievements of the quarter, it’s evident that the profitability of this period has been marked by a unique confluence of events. Agrochemical intermediates demand is generally lag-adjusted to 1/4 behind end segment, which led to a temporary idling of plant capacities in the quarter. Persistently stubborn raw-material costs have also impacted product margins as we prioritize our market-share strategy in Phenolics and dye intermediate.
Finally, projects which were targeted to be commissioned in Q3 and Q4 have faced delays in their final stretches and are now set to add value from Q1 onwards. Despite these transient set-up setbacks, we remain confident of being well-positioned for recovery and sustained growth in the upcoming quarters. In Q3, revenues were INR1924 crores, degrowing by 5% on a Y-o-Y basis and 6% on a Q-o-Q basis because of the earlier mentioned factors as well as a scheduled maintenance shutdown in Phenolics. Typically, advanced intermediates and phenolics have a countercyclical nature and balance each other out evenly.
However, for the first time, we witnessed challenges in both segments simultaneously. I’ll cover the segmental performance more specifically. On Advanced Intermediates, revenues were at INR552 crores, lower by 18% year-on-year. Agrochemical intermediates were affected by end of year destocking priorities by international customers. Volume dispatches have already begun at the tail-end of Q3 for EU and non-EU customers and we expect the domestic industry to resume demand towards the end-of-the quarter. We have taken efforts in the meantime to significantly improve on the product carbon footprint of these products.
And the results are clearly seen in the dramatic jumps we’ve seen to our sustainability scores in indexes such as the Dow Jones Sustainability Index. Dyes and pigment intermediates have seen stable demand with growing market-share. Margins have been impacted due to stubborn raw-material prices, which we believe will start normalizing in the quarter. Additionally, the Indian government has initiated investigations into dumping of some of these products, which when coupled with ForEx volatility is expected to see margin expansion to normalized levels.
On, revenues were INR1366 crore, 20% improved on a Y-o-Y basis and 5% lower on a sequential basis. Demand remained strong. However, performance was impacted by a plant shutdown, which resulted in-production volume loss. On a positive note, the plant resumed operations with a further improvement in throughput, which will allow India to become self-reliant on domestic supply looking ahead. We’ve taken several measures to ensure that profitability and productivity are meaningfully improved. We have entered into medium-term agreements for our mines which align well with our expanded capacities for hydrogenation.
We have also completed our expansions and cost-improvement initiatives for agrochemical and die intermediates. This will yield higher-volume at a lower-cost for segments where demand is resilient. We continue to make progress on strategic projects. Key highlights are as follows: the company introduced new products from existing assets, which will have revenue and margin improvement and the results will be seen partially in Q4. The nitric acid complex is in its commissioning stage and will feature well from Q1 onwards with additional nitration capacities coming in-line.
The new R&D center is commissioned — will be commissioned as scheduled towards the end of Q4. MIBK, MIBC, and other backward and forward integration are expected to be commissioned in H1 FY 2026. This will expand our footprint in the energy sector as well as establish our foray into advanced solvents for life science applications. In addition, our long-term plans for the polymer value chain are also taking shape. We entered into long-term contract for key building blocks at competitive rates and agreed to acquire assets for the polycarbonate resin production where India is entirely import dependent.
This strategy is further accretive by ensuring that existing capacities are localized without adding to global production. While we work with our collaborators to ensure that European demand for resins is also catered to buy this asset. All major polymer projects are expected to be commissioned by December 2027. I would now like to hand over the call to Mr Sanjay Upadyay, who will address this forum and take you through the financial performance and key updates during the period under review.
Sanjay Upadhyay — Director of Finance, Group CFO & Whole-Time Director
Thank you, Malik. Good afternoon, everyone, and thank you for joining us today on Deepak earning call. I’ll now take you through the highlights of the financial results for the quarter and nine months ended December 31, 2024. As we review our financial performance of Q3 and nine months FY ’25, we acknowledge the impact of several external challenges that have impacted our profitability, including deferred demand, continued inventory destocking by customers and increased raw-material costs. Despite these headwinds, our team has remained focused on maintaining operational efficiency and progressing with long-term growth plans. In this context, our EBITDA performance reflects temporary headwinds.
As we move forward, we are confident that the actions what we have taken will drive recovery and improve profitability in the coming quarters. Coming to our financial performance in Q3, consolidated revenue of INR1,924 declined by 5% as compared to INR2,023 crores in Q3 FY ’24. While revenue was impacted due to multiple factors already discussed, it’s important to state that we have retained or increased wallet shares with key customers. EBITDA came in at INR190 crores versus INR318 crores compared on a year-on-year basis.
Our EBITDA performance in Q3 FY ’20 was impacted by short-term challenges, including higher overall cost, which comprised the margins. PBT and PAT stood at INR135 crores and INR98 crores, respectively. Looking ahead, we are optimistic about margin recovery as demand stabilizes, new projects ramp-up and cost optimization initiatives to take effect, positioning us an improved profitability in the upcoming quarters. And on the operating front, our domestic business revenue stood at INR1,645 crores in Q3, while exports revenue at INR279 crores.
On a consoled basis, domestic export mix of 85 to 15. Moving to the segmental performance in the Advanced Intermediate segment revenue stood at INR552 crores in Q3 FY ’25 versus INR674 crores last year, while EBIT stood at INR17 crores, translating to 3% margins during the quarter under review. Nine months FY ’25 revenue came in at INR1,873 crores and EBIT came in at INR131 crores, translating into a margin of 7% on the back of challenging macro-environment the segment delivered performance with revenue stood at INR1,366 crores in Q3 FY ’25 versus INR1,349 crores in Q3 FY ’24, while EBIT stood at INR121 crores, EBIT margin came in at 9% in the quarter — in nine-quarter.
In nine months FY ’25, revenue grew by 21% to INR4,273 crores and EBIT came in at INR544 crores, translating into a margin of 13%. Lastly, on the balance sheet front, the company’s financial position remains solid with a net-worth of INR500 crores 222 crores on a consoled basis and INR3,073 crores on a standalone basis. We are well aware under — we are well under-leveraged on thresholds, ensuring adequate headroom for increased debt in order to fund our future expansion, which we have already announced. We are making continued progress on our ongoing projects with several nearing completion, the results of which will be seen in the coming quarters.
This new plant will not only enhance the self-reliance on critical raw materials, but also optimize profitability to enhance value-add once they are fully operational. Our R&D center near is advancing well with 85% of work completed. This facility will strengthen our industry position and support long-term growth through innovative innovation.
Our R&D team remains focused on developing new products that will expand our capabilities in the specialty chemical sector, further reinforcing our commitment to technological advancement. In conclusion, while the past quarter present challenges, present care challenges rather, we are optimistic about the future with a solid pipeline of projects, a focus on the cost optimization and improving market conditions. DNL is well-positioned for sustained growth and long-term value-creation for our shareholders. With that, I would now request the moderator to open the floor for Q&A session.
Questions and Answers:
Operator
Thank you very much. [Operator Instructions] The first question is from the line of Neerav Jamouria from Envil Wealth. Please go-ahead.
Nirav Jimudia
Yes, sir. Thanks for the opportunity, sir. I have two questions. So first, when we compare our standalone business, I think our top-line between the second-quarter to 3rd-quarter fell by close to around INR53 crores, but the EBITDA impact was like close to INR33 crores. So one of the reasons you have mentioned in your opening remarks was that there were some deferment of sales predominantly from the agro intermediates. So just wanted to understand from you that are the — are these products were having the higher contribution margins and possibly because of which the impact on the EBITDA was higher, A, or the sales impact of these products were higher than INR53 crores and the RMC cost had impact more on the performance because of which our performance was impacted.
Maulik Mehta
Okay. Hi, Neerav. So I’ll try to answer this question. So what ended-up happening is that while agrochemical intermediates certainly have played a role in the kind of margin dip that you see in Q3, those — the volumes with regards to exports both to Europe to China as well as to the US, those have by and large commenced in December and you will see the results of that in the quarter. However, other than that also in a couple of our assets where we had plant capacities available, those assets were idled until the customer demand pickup resumed and that we are seeing now slowly in Q4 itself.
So again, I will highlight that in both of these cases, when it is agrochemical related, demand on a global, including India scale is expected to normalize between Q1 — sorry, Q4 and Q2, but we are seeing a recovery in export as well as in domestic demand from the end of December onwards. Now there are other products also which are relatively higher-value. And in those places, when we buy our raw materials, those raw materials also come with an N minus one or N minus 2 in terms of the prices. So as those raw-material prices slowly start to moderate, we will start seeing the effect of that in months, which are one or two months down the line. So this is by and large a general situation, but it has shown exacerbated impact in Q3.
Nirav Jimudia
So sir, in terms of this loss performance what we have suffer in Q3, how confident are we that this could be recouped in Q4 where this sales, which we have deferred could come back to us in Q4 or most of this could be spread between Q4 and Q1.
Maulik Mehta
So we are seeing a larger part of it being recovered in Q4. We are also seeing an improvement in domestic demand, which was not there in Q3, which will start to add value from the end of Q4 onwards.
Nirav Jimudia
Second question is on the nitric acid plant. So now we are in the advanced process of commissioning it by end of Q4 of FY ’25. If you can share how much of the capex we have incurred on the same? And if you can just give some rough understanding in terms of the savings which could accrue to us on an annual basis based on our current requirement of nitric acid.
Maulik Mehta
So on the first question with regards to the capex, I would say that the capex by itself has been largely under control as what we had announced earlier. However, because of the delay of a couple of quarters, there is an added impact with regards to the overhead, which will all be capitalized. So the capex amount I’ve already shared earlier and that still plus the cost of dealing. But by and large in terms of the improvement to the bottom-line, again, it is more or less in-line with what we had said. So I would have loved to have that value coming in earlier in Q3, but you can anticipate that somewhere between 70 crores to INR80 crores on an annualized basis is the margin expansion that you would see from the single project. Maybe more, I’m going to be conservative.
Nirav Jimudia
The last bit on from my side, like we would require an additional ammonia for this nitric acid plant and even we are already using ammonia as one of our raw materials for some of our products, how our additional ammonia requirement would be to so will be sourced domestically or could we have to import this ammonia through long-term contracts, if you can share your view here?
Maulik Mehta
Yeah. So we are well aware of our increased ammonia consumption as a potential risk vector and we have diversified our ammonia sourcing, which includes imports as well as domestic availability. We’ve also invested in expanding our ability to store, not just consume, and that investment will allow for further derisking of the supply-chain. By and large, we are confident of being able to source ammonia at rates which are relatively at parity with international indexes, especially, Middle Eastern Index and other local indexes and South Asian index. So we would not be — let me put it another way, we would not be disadvantaged because we have derisked our supply chain.
Nirav Jimudia
Expanding capability is meaning thereby we our own storage tanks to derisk the requirement of ammonia.
Operator
You’re sounding a little bit distant. Sorry, is audible.
Nirav Jimudia
It’s better. So by saying that we would be building or expanding the capabilities to source our requirement of ammonia is to safe to assume that we may be constructing our own ammonia tank so that we could be derisked from this volatility in the ammonia prices?
Maulik Mehta
Absolutely correct.
Nirav Jimudia
Thank you so much and wish you all the best.
Maulik Mehta
Thank you.
Operator
Thank you. The next question is from the line of Arun Prasad from Aventus Spark Institutional Equities. Please go-ahead.
Arun Prasath
Good afternoon, everyone. Thanks for the opportunity. Sir, my first question is on the Phenolics segment. Sequentially, we have seen this roughly around 40 percentage reduction in the EBIT for the Phenolics segment. Can you just break-down into volume, how much of this is in the — because of the volume and spreads and say increase in depreciation?
Maulik Mehta
So I would hesitate from going into a great deal of detail on this simply because Q3 also had an annualized maintenance shutdown, which resulted in some loss of productive uptime. Now this is a normal thing and by and large, most good companies engage in an annualized shutdown. In our case, it has given an advantage of seeing how to further improve the efficiencies and hence the throughput. So I think Q3 is unfortunately for this conversation exactly the wrong time to be able to break this up because in the meanwhile, what has ended-up happening also is that while we had our production outage for maintenance, we’ve also established some advanced process controls and we’ve done some debottlenecking.
And in the meanwhile, anticipating relatively stable and growing demand, a lot of consumers may have taken a position with regards to short-term import of phenol, which is again uncharacteristic. So today, I’m happy to say that India is pretty much self-reliant when it comes to phenol and also the other co-products like acetone and IPA. And between this and ForEx volatility and things like that, I do genuinely believe that moving forward, I think this will create less and less of a need for importers to be dependent on material that comes from overseas.
Nonetheless, Q4, Q1, all of these will have a high degree of dependence with regards to the prices of key raw materials, benzene and propylene as well as the presence of the imported parcels, which may have happened in Q3. By and large, again, I would want to add that Deepak and India remain the only places by — all over the world where there is not only a continued improvement in-demand, but a continued improvement in-production as well. So I am bullish about the medium-term.
Arun Prasath
And I think we will see that over a period of time, this demand continues to accelerate and our ability to support this depend continues to accelerate? Yeah. Right, Malik. So I understand that obviously, we’ll be drawing back our market-share from the imports, but specifically for this quarter, do you think that if not for the shutdown, you would have delivered the same EBIT as it of the Q2 quarter or the spreads would have also impacted our performance?
Maulik Mehta
There is an impact from spreads. There’s no doubt about the fact that there is an impact from spreads and that impact from spreads may continue also into Q4, as will some overhang with regards to the volumes already committed for imports. But when you look at the ForEx volatility right now and you also look at enhanced capability, I think there is a strong case to be made to discourage importers from continuing to import.
Sanjay Upadhyay
So I believe from March onwards this our situation will normalize. So though Jan-Feb, because of the import is, yes, there is an impact, but March onward we’ll see a normalized situation.
Arun Prasath
All right, right. Understood. Sir, just one again on that — coming back to spreads. Globally, if you have to think of in all spreads, obviously, our volume is more localized and you will be replacing imports. But if our margins have improved, global spreads also has to improve. So what — what do you think should happen first, a recovery in-demand or some curtailment of the supply, especially in key supply centers like Southeast Asia, China or Japan, Korea and Europe?
Maulik Mehta
There’s no question about a recovery in-demand. Demand is quite strong across segments in the Phenolics value chain. So whether you’re looking at auto or looking at pharma, you’re looking at construction and furniture, the demand is robust. One individual sub-segment may have a dip or an increase, but by and large, demand is not a challenge and that is unique to India. However, with regards to spread, these are on the basis of global volatility in the indexes. So I would be hesitant to make a strong claim about spreads significantly improving or going down. I genuinely do believe that right now with the way that key raw materials like benzene and propylene are acting. There is a case to be made-for over a period of time seeing how to improve the price of phenol. Once customers are also confident that they don’t need to rely on imports.
Arun Prasath
Okay. Any comment on the utilization rates in some of these geographies? Do you think it is sustainable, low, high or how do you see that — so those utilization rates in these geographies outside India?
Maulik Mehta
It’s very low. And in some cases, it may be bordering on the question of profitability or not. But I would hesitate again to comment about their strategies. In many places, what we have found is that you may have an average utilization rate, which should be achieved to make the asset profitable and some of these assets are being operated at well below that utilization rate. I cannot comment about the strategies or how long they would continue to manufacture in these circumstances, very often it depends on what they look at as a short and medium-term future.
Arun Prasath
Okay, any kind of ballpark figures of what percentage of the overall phenol global capacity is currently under probably — in the bottom-line profitability, which may shut-down or may not shut-down. But any say percentage of total capacity would be very helpful.
Maulik Mehta
No, I won’t comment about whether they may shut-down or not, but I will comment that majority of the capacity right now worldwide, especially almost all the capacity which is non-integrated, is probably at or below the threshold that one should look at for continued and sustained plant operations for meaningful margin.
Arun Prasath
Okay. And what percentage of the capacity is not integrated according to you?
Maulik Mehta
Come back to you on that question. But I’m not prepared with the answer right. No.
Arun Prasath
Okay. Okay. All right. My second question is on the comment mentioned in the investor presentation that you are planning to complete all the projects by FY ’28. So does it mean that we will be — the last phase will be starting the FY ’28 or the first phase of projects will start the FY ’28 and which one will be the last one and which one will be the first to start? Can some color on this.
Sanjay Upadhyay
The idea is to complete all the projects because these all are integrated projects. We cannot have a situation that we are starting one and not starting the other one. So everything will be done by — if whatever you read is right, it will be completed by FY ’28 because we have tied-up the problem supply also if you are aware. So it has to go in sync. It cannot be one versus other. Otherwise the whole benefit of integration will be lost. So the whole plan is to have a fully-integrated facility up and ready.
Maulik Mehta
There will be periods of time where one part of the asset, especially, for example, the polycarbonate resin asset may get commissioned earlier. And we will ensure that throughput is maximized by securing the intermediate feedstock at competitive rates. Luckily for us right now, those rates are looking quite competitive. And as Mr mentioned, between now and FY ’28, we will ensure that all of the individual components are also commissioned so that we integrated complex all the way from propylene until polycarbonate, along with the other assets, which will go into the same polymer industry will all be commissioned.
Arun Prasath
Understood. Just any update on the BPA project? Have you firmed up the technology or a licenser or where-is that in the interest — in which stage the DPA plant is right now?
Maulik Mehta
No, that is — so right now, I cannot comment about that. We are in close talks with a couple of parties, all of who are willing to give up the technology, but we are not finalized with any one about this.
Arun Prasath
Understood. Understood. Finally, if I can squeeze in one more on our compounding plant, polycarbonate compounding plant, have we touched base with all the domestic customers? And what is their current feedback and how we will be scaling up this part of the business? Can you just explain it will be helpful.
Maulik Mehta
So we have started manufacturing some small compounds and we have been engaging with key customers to start-off with more in the electronics segment. But there has been a little bit of a pivot here because earlier we were looking at a establishing a polycarbonate resin plant. And now it is more of a migration of the assets along with the relevant trademark of the asset. So the party that we are acquiring the assets from is also the party that we are collaborating with to see how to fast-track and prioritize more value-accretive compounds, which will be given sold to companies which are looking at migrating their consumption assets into India to be able to take advantage of various initiatives by the government as well as the growing consumption expectation in India. So the kinds of compounds that we would look at making in this facility will now be a — I would say that they would be on a better baseline moving forward because of this collaborative partnership.
Sanjay Upadhyay
And the response, to answer your question, the response from the customers is very, very positive. We are getting into EV batteries and those segments also. We hit the polycarbonate compounding thing. So I think we are moving in the right direction. With the, these things, this also will — it’s certainly giving us an advantage because is a very well-accepted brand in the international world. So that also helps. So to answer your question, yes, things are looking positive at this stage compounding and we are getting into medical devices segment also for compounding business. So those are all very, I would say a growing segments where we are entering and advanced segment, which gives a better margin profile also.
Operator
Thank you. The next question is from the line of Vivek Rajmani from Morgan Stanley. Please go-ahead, Mr Vivek.
Vivek Rajamani
Hi, sir. Yeah. Hi, sir. Thank you so much for the presentation. Sir, in your presentation that you’ve uploaded, you’ve mentioned a couple of comments. Firstly, you’ve started to see a pickup in the international customer offtake. And I think you’ve also mentioned that you will see a more normalized level of profitability from Q4. So just with respect to these two points, if you could just give some more color, from a volume perspective, if you had a base of 100, what kind of normalization would you expect going into Q4 or potentially Q1? And when you’re saying normalized profitability, which quarter do you think we can take us a normalized level, would that be the first-half of this fiscal or maybe even before that? So just some color in terms of that would be super helpful.
Maulik Mehta
Yeah, Vivek, this is a question that internally also we have debated on a lot because certainly, we will be seeing an improvement in Q4 and that improvement trajectory will continue into Q1 as well. One question that we’ve been debating internally also is what do we call normalize because we’ve had a much better margin profile two years ago and then that has slipped partially because of slowdown in-demand and partially also because of an overhang from the kinds of capacity that have been put in China, which also affect India’s profitability.
So if I’m being genuinely confident here, what I can say is that Q3 was absolutely abnormal for us. I’m talking about on a standalone basis. And I would certainly say that Q4 will be meaningfully better than Q3. Q1, we’ll continue to maintain that trend. And if I have to say, look at my last two years, I would consider a return to normalization somewhere between the — I would say between Q1 and Q2, maybe in Q1 and Q2 would be a markedly normal quarter.
But Q4 will be meaningfully, meaningfully better than Q3, largely because of the internal efforts that we are taking for cost optimization. As demand returns as it has in some segments in Q4, we expect that trend to continue in other segments as well. And hence Q4 demand will be completely realized in, say, Q1 with price improvement — sorry, with margin improvement, you will therefore see between the end of Q1 and Q2 a normalization.
Sanjay Upadhyay
And on side, since Malik mentioned about the standalone side, as we mentioned earlier, Jan 5, yes, there is an import, which has already come in. March onwards things are improving. So you will see a normalized Q1 for also. So I personally believe Q1 onwards, again, now what is called normal is a debate, but Q1 onwards, things will certainly change. Q4 DNL, yes, doing better than Q3 because Q3 was no comparison and will have some impact, but will also do relatively good. It won’t be that bad. But yes, there is an impact of import.
Vivek Rajamani
I’m sure, sir. Super helpful. Thank you so much for that. And secondly, just to clarify, you did mention that some of the projects that you wanted to commission over the course of Q3, Q4, you have seen some delays. I just wanted to clarify if this is a function of the ongoing industry dynamic where obviously demand can obviously be significantly better or is it just you taking the time to operationalize the plant properly and make sure all the chinks are completely sorted? So just wanted to clarify if this is more about ramping the plant up properly and not in response to the industry weakness?
Sanjay Upadhyay
Yeah, it is not industry weakness.
Maulik Mehta
No, it’s more of the second, right. I mean, we want to make sure that when it is commissioned, it is able to run straight as quickly as possible to capacity and beyond. And this is where we have seen the maximum value coming in. So even though it has meant that there has been a delay from Q3 to-end of Q4 in terms of commissioning, we want to be ready to be able to quickly ramp-up because demand is there.
Vivek Rajamani
Sure, sir. And just the last bit as an extension to this, when you say 2027 or fiscal ’28 is when you want all of your capacities to be up and running, assuming you’ll keep the same argument where you want the capacities out there irrespective of however the industry situation may evolve over the next three years, wouldn’t that be a fair comment?
Maulik Mehta
For the polymer chain, we would be — we would be ensuring that the assets are commissioned at these times because we’ve locked up the downstream as well as the upstream. So we are confident about the market profitability. But regardless of the market’s profitability, we will ensure that those projects are tight with regards to the execution plan.
Vivek Rajamani
Sure, sir. That’s super helpful. Thank you so much and all the very best. Thank you.
Operator
Thank you. The next question is from the line of Ankur Periwal from Axis Capital. Please go-ahead.
Ankur Periwal
Yeah, hi, sir. Thanks for the opportunity. First one, you know, on the Advanced intermediate side, given the extended pressure on margins as well as the pricing led pressure because of China’s overcapacity. Just wondering your thoughts if there is a structural change in the margins that this business will be making over a period of time even if demand comes back and let’s say, over the next maybe 1 or 1.5 years, there is uptick in them, et cetera. So your thoughts on that side, please?
Maulik Mehta
So there — let me put it this way, structural and unstructural, there was an element of COVID related unstructured this thing effect on margins. And if I have to keep that on the side for the time-being for the argument. I would say that by and large, with its upstream and downstream integrations, Deepak should be confident of being able to return to its course. And that course was relatively range-bound between say 18% to 20%. Now there is an upside also available in the future as new capacities and as medium and long-term contracts are established. But without that, if I’m only looking at-cost optimization, projects under commissioning as well as maintaining a market-share, around 17%, 18% is the target that we should look at in deeper nitrate on a standalone basis. Okay.
Ankur Periwal
Sure. Thank you for that. And from a — apart from chem, there were other areas as well wherein we were focusing to ramp-up our products, the new launches as well. Any thoughts over there in the non-Echem side?
Maulik Mehta
Yeah. So in the non-AgChem side, the products that we were looking at ramping-up as well as the projects which we completed in Q3. Those are now established in terms of their capacities and we are in ongoing conversations with customers, some places where the volumes have been frozen for Q4. And in other places where we’re talking about how those volumes will expand over the period of the year as we discuss medium-term contracts.
So ensuring that our products, which internally matches all of the qualifications and specs also get a similar tick mark from the consumer then that is the activity that is transpiring in Q4. Once we have that, then we will have more confidence when we next discuss about how those margins and those revenues are targeting to be expanded over the year. Right now, we are in a process where our products are being qualified at customers end and we are ongoing — we’re having ongoing conversations about medium and long-term contracts with them.
Ankur Periwal
Sure. And just last bit on this. The revenue mix right now among the, part over the next, let’s say, two to three years, how do you see that bit changing given that presumably will see a bounce-back in-demand and the newer side also will see a pickup?
Maulik Mehta
So what we have done is that we have expanded capacities where we believe we have right to win. And those products and the quality of those products is well-established. Those places where there is a segmental focus on AgChem. As it recovers, it will have a — okay. So as it recovers, we see that there is a possibility for about 15% to 20% improvement in the volumes and the total realizations coming from that. But as a company, we have also looked at increasing our focus on non-Ag chem as a segment, whether that is into personal cares or solvents or same polymer intermediates. So because of our increased attention to also investing in these, while will recover as and when it recovers, we will also have a ratio which is skewed away from because of the investments in the other intermediates.
Ankur Periwal
Okay, great. And just last bit on the phenolics side, you did mention an expected uptick in terms of demand or spreads on the phenol side, let’s say, Q1 onwards. Just curious whether we are referring to the — our thoughts on improvement in-demand is led by the global factors here or there is some bit of excess Chinese phenol supply which are shifting from even the backward integrated facilities which are coming here now and we are seeing hopefully some seeing some uptick there. What is driving that thought?
Maulik Mehta
So imports from China is not a problem because if China is consuming and it’s all captive largely. See what happens is certain motors are getting diverted and because of our shutdown, the imports are little higher. India is becoming a sales I would say with our capacity, which what we have added, we have the sort of supply available which can meet the demand, but market will have to adjust itself. So — and non-integrated players will find it difficult in a — in the near-future because they cannot meet the local suppliers price. And particularly with this dollar index and dollar-rupee and this, they will definitely find it difficult.
So considering all these factors, we certainly believe in which we are seeing that that’s why I mentioned that March onwards, you will see things getting normalized. We are selling in the market and with a healthy margin. I don’t know what is normalized or not because then that is everybody is receiving, but it will be a healthy margin considering the volumes and what we are seeing. So that is the situation today. And this is the situation.
This will continue in the longer run also because in India, demand is growing and growing in a significant way. Somewhere it was around 10%, 12%, but even if you feel that it is really high, so it is growing at 7% to 8% and which gives enough room for all the players to run the capacity full and earn healthy margins. Great, sir. Thanks for your detailed answers and all the best. Thank you. And one more thing which I want to answer, these AI margins and this there is some component of — because we are in the project phase and there are certain expenses which cannot be capitalized.
So those things are also charged to revenue in the AI. So this impact is also to be considered because what we see is the EBIT, what we have seen the balance sheet, but it has impact like, for example, 93 which we are supposed to start in by month — quarter-end or beginning of the earlier quarter. Now there is an impact where admin cost — I am giving example, the accountants will understand that those things cannot be capitalized. So those things are also charged to that brings down the margin in that percentage, you know, and that will get normal once the plants are commissioned. So those things are also to be kept in mind when we calculate the margins and percentages.
Operator
Thank you. The next question is from the line of Sanjesh Jain from ICICI Securities. Please go-ahead.
Sanjesh Jain
Good afternoon. Thanks for taking my question. Sorry to interrupt, sir. Can you hear me? Please use your handset. Yeah, I want to ask that. Is it good now? Yes, sir. Yes. Thank you. Yeah, hi. Good afternoon. First question on the Phenolics. In the opening statement,, you mentioned that there is a 10% expansion in the capacity. We earlier were doing annualized 3 lakh 50,000 metric ton of phenol. Is it 10% on the 2 lakh metric ton of the base capacity we are talking or on the expanded capacity of 350,000 metric ton?
Maulik Mehta
No, I would say that it is right now at about 350 plus-minus.
Sanjesh Jain
Okay. So the expanded capacity is 3 lakh 50 plus-minus.
Maulik Mehta
See, let’s keep in mind that as any large-scale operation is concerned, winter months will always have a number which is slightly higher than summer months because of the added benefit that you get from cool weather. I’m talking about it on an annualized basis. You may have a higher number in-school ones and may have a normalized number in the hot month. I’m talking about on average.
Sanjesh Jain
So on a yearly basis, we should be able to do 350 plus-minus.
Maulik Mehta
Yeah.
Sanjesh Jain
Got it. Got it. That’s very clear. Second on the agrochemical side, you said that we have seen the demand picking-up at the fag end of December. When we say, is it that how does entire CY ’25 looks like because if you look at the commentary globally, on the crop protection side, the innovators are looking at volume growth in mid-single digit, that means this year should be a more normalized year from the crop protection side. Are we getting that kind of a visibility from the customer and how does — one should look at the new product pipeline in the active intermediate side?
Maulik Mehta
So when our consumers say single-digit or high or mid-single digits. I look at that as a positive because so-far the commentary was more linked to inventory destocking at their channels or at their consumer end, right? So when they’re talking about a growth, that growth is without taking into account inventory destocking, which anyways is towards its tail-end in most of the AgChem intermediates — or most of the. The intermediates stand to benefit from this demand improvement with roughly between 1/4 lag to a four, five-month lag. So on a CY basis, if the consumption pattern is normalized with a 5%, 6% improvement or whatever you said, then adjust it for about a quarter and you would get a sense of what one might look at in the intermediate space.
Sanjesh Jain
That’s very clear. And the product pipeline, we are looking for segment in coming financial year.
Maulik Mehta
So largely the product segment that we’re looking at is relatively stable. There are a couple of molecules where we have started engaging with customers, which would be a more margin-accretive, but they will be made from assets which are already in-place. So capacities have been debottlenecked. There will be some margin accretion, but it all depends on the rate at which the customers are able to pick-up. Those products also have to be tested at the customer there.
Sanjesh Jain
Got it. Got it. Last two, largely bookkeeping kind of a question. Can you help us understand in the standalone, how are we spread in terms of end applications say our dice and pigments, FMCG risk consumer, can you help us with that? And number two we are expecting to start the fluorination capacity next year. Can you help us understand the purchase we intend to make for hydrofluoric acid? Will it be domestic? Will it be imported? How do we want to meet that requirement? Thank you.
Maulik Mehta
So for the first question, again, it’s difficult to answer because we are intermediate manufacturers. I can give you examples of, for example, where the same product does go into also and it also goes into dyes, it also goes into rubber chemicals, for example. So the same product that we make, it becomes difficult for us to be able to you know, say that this is an product or this is — our customers maybe ICAM customers, but the product that we make is the same. And when there is a movement of migration of demand from one to the other, our product remains the same.
So it’s difficult for me to establish that there is this much of a ratio of to dyes and pigments to other chemicals or to cetane improving or fuel improving. Those become difficult. And so you will have to excuse me on that. With regards to the fluorination, we already commissioned the fluorination asset about 12 months — 13 months ago. Yeah. So we right now are manufacturing with again diversified supply base with regards to the hydrochluoric acid.
So there are domestic manufacturers also which are physically located very close to us. And we’ve also invested in a fleet of tankers which are able to move it from international locations to — from the port to us and we have those agreements also in-place. So it will largely be imported, it’s also balanced. So the asset on-ground that we have put up is capable of taking the hydrofluoric acid in multiple different ways. Tanks, ISO tanks, et-cetera, are purpose-built only for this and we have our own fleet there. But domestically also, there are smaller tankers available which are the supply of which is done by the manufacturers.
Sanjesh Jain
Very clear. Very clear,. Thanks for answering all those questions and best of luck for the coming quarters. Thank you.
Operator
Thank you. The next question is from the line of Adity from CD Research Private Limited. Please go-ahead. Hello. Thank you. MS. Adity, I would request you to please use your handset.
Unidentified Participant
Sir, my first question is, have you been making any adjustments to the quantum of your plant capex in light of ongoing stress in the chemical industry.
Maulik Mehta
No, no, planned CapEx. Have you made any changes to our strategic plant? No, I would not say that we’ve made any changes to the kind of assets that we’re looking at putting on-the-ground. However, in a couple of cases, there has been a slight delay in the commissioning of the assets so that we are able to ramp it up quickly. But this delay has of course it does have a cost implication with regards to overheads but beyond that in terms of what we put up and the business case for that by and large it is unchanged.
Unidentified Participant
Okay, but major consuming regions have been going through destocking in agrochemicals business. So don’t you think that there’s any requirement to change the capex plan.
Sanjay Upadhyay
See, what is happening here? One cannot have current situation in mind and then take a call or what to do and how to do. Our one major advantage of in whatever projects we announced these are fully-integrated facilities we are in a company where it is chemistry driven company where integration is the key here. So you cannot have one situation because of the market you pull-down the capacity of some product and ultimately, in a — maybe in a couple of months or we feel now that period is already over in agrochem or whatever we are talking. So ultimately, the people who are having those kind of integrated facilities are certainly, certainly bound to do well because fundamentally that is a very, very strong business.
Why if you see phenol also, we are doing such things so that it becomes — so that these kind of issues do not bother us, you know. So the whole idea is to integrate facility and make your fundamentals strong. There could be a temporary ups and downs, which we are in — I feel market has overreacted in Q3, but that’s how people read, but that’s okay. So — but things are — will get normalized and things remains a very, very well, very, very strong footing and strong fundamental. So these certain small, I mean, temporary things should not affect our long-term strategy and plan
Maulik Mehta
And most of the investments that we’re making, which are relating to agrochemicals, I would say that they are more of upstream integration. So our wallet share remaining the same, these will become margin-accretive.
Unidentified Participant
Okay. So you mentioned that there has been delay in some projects. Could you please specify those projects?
Maulik Mehta
Yeah. So for example, there has been a delay, for example, in our nitric acid commissioning, which I have already highlighted.
Unidentified Participant
Okay. So only this one project.
Maulik Mehta
By and large, there is a minor delay in some smaller projects, which move from one part of half year to another part of a half year. Thank you. The other place that there has been a delay is in MIBK, MIBC and that would have been completed by the end of Q4, which is now slipping into H1. We may commission one part of the asset before another part. But this has also been because of very unique engineering that we put in — into the asset, which will give us good benefit when it comes to the project being commissioned and cost advantages as well as carbon footprint advantages.
Operator
Thank you. The next question is from the line of Rohit Nagraj from B&K Securities. Please go-ahead.
Rohit Nagraj
Thanks for the opportunity. Sir, first question is on the Phenolics front. So two-parts. One, during Q3, did we have any inventory losses? And second part, in terms of planned shutdown, after the one which has been happened in 3Q, will the next frequency will be after 1.5 years? Thank you.
Maulik Mehta
Okay. So for your first part, we had inventory, yeah, during the shutdown. However, at the same time, in order to mitigate any loss at the customers and they did also import maybe a little bit more than they needed to. And by and large, this is something that when the end segment is growing, a lot of consumers end-up doing this just because they — they don’t want to be so dependent on a single supplier, recommissioning their asset after a plant shutdown exactly on-time. This is something that we have developed a skill for doing. Nonetheless, the customers buying behavior is more linked to their need to have product available with them regardless. So that did transpire during the quarter. And what was the second?
Sanjay Upadhyay
Yeah, the lake shutdown will be around after one and a half years.
Maulik Mehta
Very helpful you can assume about 18 months.
Rohit Nagraj
Sure. Sir, second question on the advanced intermediates. You also alluded that the — there was a stubborn RM price environment. Was it particularly for some of the imported products, given that generally over the last few quarters, the chemical prices have been stable or is it impacted by a certain few set of intermediates or few set of raw materials that we purchase. Thank you.
Maulik Mehta
Yeah, a few set of raw materials. And by and large these are — they are domestically available. See, pet-chems like Tolvin and Xylene are always in play because simply of the fact that the refinery throughputs are extremely margin sensitive. And if they’re not able to make that kind of margin, they just run the asset at a lower throughput. So prices of products like and xylene have been relatively stubborn simply because of a manufacturer’s inability to produce. But on the other hand, certain local raw-material for example caustic light have been priced much higher than corresponding periods in the past. And as a large consumer, this does affect us, especially for price-sensitive products like sodium hydride.
Operator
Thank you. The next question is from the line of Chirag Shah from White Pine Investment Management Private Limited. Please go-ahead.
Chirag Shah
Yeah, thanks for the opportunity. I have a slightly broader question first and then some follow-ups. First on the return on capital of the business that you have now. If I go back into the history, the deepulk nitride had certain inefficiencies. I’m talking way back, say, 2010, 11 or even earlier. After that, you worked very well, you brought in lot of efficiencies and executions, et-cetera. And now again, we are seeing there are delays coming in and I’m adding into the WIP projects which are commissioning from ’20 — now commissioning from ’28 or end of ’27.
So for a business like Deepak, which is semi-commodity in nature. The chemistry capabilities are required along with that agility and cost capabilities are also required. Can you throw some light on why the delays, the internal factors of delays? Is it — is it bandwidth issues? Is it size and scale issues? And how are you tackling it? The reason is after this phase, you have another set of bigger capex is lined-up based on the MOUs that you have indicated earlier with Gujarat government and such stuff. Ultimately, return on capital matters in a business — in any business, right? And from a 10%, 12% ROCE business, we have transitioned to a 25% ROC business very well for your execution capabilities. So first you can elaborate what led to these delays which are — what are the internal factors and how you are tackling them on a sustainable basis?
Maulik Mehta
So one of the reasons that we were able to go up was a draconian focus on ensuring that the execution is done very well and the projects that we are taking up have technology which is very mature. So when the technology is matures, you have that high degree of confidence that once you have started the project execution, you can timeline it, you can ensure that there is that headroom available for expansion as and when. When you’re making the — when you’re building the technology in-house, that maturity that would be there from bought-out technology is a little bit less.
Now what we have done with some of our projects, for example, MIBK MIBC, there is some level of it being an outsourced technology that we have licensed. But the significant improvement that we were looking at was by putting in industry-first. I mean, literally in the whole country, we would be the only company to have this particular kind of technology, which is even in the utilities and the product carbon footprint. Now worldwide, while things like sustainability and things like that may have become less important.
We do genuinely believe that there is a value to this and that value will come. In the meanwhile, what has ended-up happening is that some of these chinks, which would otherwise have been easier with mature technology has caused some level of delay in the commissioning. Now that is not to say that right now is the right number or 10 years ago Rosi is the right number. It’s just a general industry assumption that mature technologies will lead to a higher ROCE if there is clear operational focus and purpose-built in-house technologies will have a ROCE number, which may be slightly worse, but given certain experience and expertise will improve.
Again, Chirag, I’ll also highlight one more thing. The assets that we are looking at commissioning are not assets where we have had decades of experience, for example nitration and reduction. Assets for example like photochlorination or fluorination or even unique types of purification and distillation, these are technologies which are relatively new to the bug. And there is a learning cost which comes. Once the asset is fully running and then we are able to see how to be eking out more-and-more utilization from the same assets, you see a dramatic improvement in ROCE. But for the learning period, there is an implication from new technologies.
Sanjay Upadhyay
And I will add to this point, see, for example, nitric acid, I mean, yes, there is a delay. I will not say no. But the reason for delay because we wanted to — we could have easily done in a new site away at Dahej. Why we — but what we did is true because the consumption is in unnecessary Borroda, we wanted to have again integrated facility where the supplies are from pipeline because it is a very, very enduring benefit. So we have — the whole plant is set-up within our nitrides existing facility of nitric acid. Now if anybody goes and visits that, they will realize that how — what we have done there, it’s — we just delayed — today you are seeing the delay, but if you tomorrow, if somebody goes and sees the plant, so somebody mentioned about the ammonia, the ammonia supply is through pipeline.
You have nitric acid supplying to deepulk nitrate through pipeline, the tankers move, it’s wonderfully done and a very good engineering work done by the team. It took time for us, no doubt on that. But the end results and I’m sure end results are certainly, certainly good, which you will see from the Q1. So yes, I mean there are delays, but then there are reasons and which are valid reasons, but once the facilities are up and running, you will see the results yourself. I would rather ask somebody to go and see the acid facility what we have set-up in the first nitrate plant and then they will realize how it is done.
Chirag Shah
No fair, sir, I do accept your point, but.
Sanjay Upadhyay
Finance what you are saying. I’m not saying no. There is an impact on ROCE because of these delays. But yes, we have — that is there in our mind. But certain times it takes time to take a step-back and then move forward because it happens. Businesses are not straight-line. Yes, there can be some impact. As Molly was mentioning of technology, there are — there may be some cases where we may have to change the technology supplier. It can happen. So those things are part of our project facilities. So it can happen. But end result, you will certainly, certainly find that once all the projects are running, things have changed dramatically.
Chirag Shah
So my question was more forward-looking rather than pass-through because these are all smaller projects, MIDC, MIBK, nitric acid plant, the bigger projects are going to be commissioned now from 2020 — end of 2027.
Sanjay Upadhyay
See, because I heard you say the bigger projects will certainly will be like hello what we have done because it is not going to be in-house technology. It is going to be world’s best technology when you talk of polycarbonate, when you talk of, when you talk of whatever products we are talking, you know. So there and then you have — see this one more thing one must appreciate that we have to have a site also ready. So that is also done in the past. So those things are — I mean, that will be handled in a way and not the way we have handled the INR00 crores, INR500 crores car project. So rest assured that this — there will not be such issues in the larger projects. I understand your concern, but it’s well — the point is well taken, but it is not going to happen that way. It will be happening in a way?
Chirag Shah
Yeah. And second question is on the import of that Malik touch-based on. So what gives you a kind of — first of all, the import was not at aggressive pricing or detrimental pricing, which happened, right, during the quarter? That’s the first question. It was because there was a shortage of supply in domestic market or it was also because the pricing was very aggressive from that perspective. That is the first question I have on that point.
Sanjay Upadhyay
No, because we had announced a shutdown and people got worried that when we will start the plant. So there were some additional imports. So pricing is one part, but imports were done because we in fact, our production was down by what 15,000 tons. So they came around 12,000 to 15,000 tonnes. So that was a concern in the market and people imported.
Chirag Shah
So what gives you confidence that this aggressive pricing because ultimately you will also have to benchmark your pricing to a large extent to the international prices.
Sanjay Upadhyay
Okay. So since the day we started their own facility, but I’m not saying that again I repeat my thing that I’m not saying we will be reaching a great margin of — because yes, but we will have on 350,000 tons, we will have a healthy margin because our major plus point is India demand is growing. This is a localized phener supply gives a definite advantage, we’ll be able to deliver to the market and we’ll be able to run our plant at full capacity and on a healthy margin. So that there is no question because it’s not easy to import and store and traders have also suffered and traders offer, there is definitely, definitely a problem with them on import side also. So — and we have been doing this for so many years and there so many quarters. So we know the market dynamics.
Chirag Shah
Okay. So you are saying normalization will happen sooner than later, irrespective of import dynamics how they play-out?
Sanjay Upadhyay
Yes,Normalization will happen in the medium-term. In the short-term because there has been import parcels that took place between the middle to the tail-end of Q3, that will play a factor-in the first couple of months of Q4. This has also been clarified.
Chirag Shah
Yeah, fair point. That’s understandable.
Maulik Mehta
But on medium and long-term basis, if you look at the kind of margins that are there, the forex volatility that is there as well as the domestic capacity, really you would have to be a very, very steely minded dealer distributor to target imports in this current environment?
Chirag Shah
And the last thing on the advanced intermediates, the kind of margins that we have reported are like historic lows in. So is the normalization what it was say five, six quarters back is the normalization that we are looking at or the new normal would be lower.
Maulik Mehta
I feel hesitant about being overly bullish. Let me just put it this way, that in Q4, we expect to see a meaningful improvement from Q3, but that’s not saying much, right? So I would assume that somewhere between Q1 and Q2 is when you will start seeing a margin profile, which is similar to what you saw maybe three, four, five quarters back.
Chirag Shah
And just if you can help us with this, I know it if we have to quantify this, the impact of perfect term, how should we go about? Because — so if you can help us understand from Q3 — from Q2 perspective, whatever margins we report in and advanced intermediates, okay, how should we look at those numbers? It would be helpful if you can give us insight how to go about if you can’t quantify it. So the swing that we have seen from Q2 to Q3, the normalization will be somewhere between, right, if — but for the perfect term. So if you can help us understand how to — so we can do our own derivation, it would be helpful.
Maulik Mehta
Are you talking about in Q4 or are you talking about it in general?
Chirag Shah
No, in Q3, but if this profit would not have happened the way it played out, everything against you, for example, 15 — Spinolex PBIT margin that you made 15%, would it be closer to or it would have been significantly lower even if the storm would not have played out the way it has all — everything going against you?
Maulik Mehta
I don’t know, honestly, yeah. When I say perfect storm, I didn’t mean it in the sense of, you know, everything that should not have happened at the same time. These are market dynamics. Some of these were partially linked to things that we did, for example, our plant maintenance in Nori. And in other places, it was, as I mentioned earlier, an inventory destocking, which was at its, but quarter adjusted for ourselves intermediate suppliers. It’s difficult for me to say what-if that had not happened, but that has by and large been something that we have seen happening as well as something that we have seen getting addressed in heart and parcel over Q4 and Q1.
So as I mentioned earlier on Deepak Phenolics, one would expect something which is a mix of what happened in Q3 and let’s see how the exit of Q4 is. On nitride from something which is entirely substandard in terms of performance, a meaningful improvement headed well in the direction of normalization. Yes. Thank you and all the best. Thank you. I understand you all are all looking for much more specific because the situation calls for it. But it is still something which is in-process. We’re confident of the initiatives we’ve taken internally with regards to cost optimization and asset debottlenecking. So that is the kind of confidence that I’m able to relay out.
Operator
Thank you. The next question is from the line of Meet Vora from Emkay Global. Please go-ahead.
Meet Vora
Yeah, hi, sir. Thanks for taking my question. So firstly, on the business, if we have lost around say 12,000 to 15,000 tons kind of volumes. How have you been able to maintain the kind of top-line that we have reported because the top-line is hardly down by around 5% and based on these volumes, my understanding is that it should have been down by around 20%. Or am I missing something here?
Sanjay Upadhyay
12,000 to 15,000. We were having inventory from where we have sold, but inventory is now depleted. But what happened, the market got this thing that yes, deep up nitride is having a shutdown, so it may impact the further supplies in future. So there were imports which took place.
Meet Vora
So this 15,000 tonnes is sales volume impact or production volume impact?
Sanjay Upadhyay
Production volume.
Meet Vora
So sales we have been able to maintain.
Sanjay Upadhyay
Yeah. Sales we have been able to maintain maybe plus or minus something, but sales we were able to maintain.
Meet Vora
Because our EBIT has gone down by around 40%, 45% kind of number. So if that’s the case, then impact would entirely be based on spreads only that are contracted largely. So that understanding is correct, right?
Sanjay Upadhyay
So there is an impact of shutdown cost also, you know, when you have — when you run-out of inventory, there is inventory cost, there is a shutdown cost. So those are costs which are also there in the quarter sitting there. Okay. And say that if you see from Q4, I mean Q4 we have — will have some impact, but March onwards things will again will be back to pre-normal.
Meet Vora
Understood, understood. So you are saying that there has been an operate element of operating deleverage as well?
Sanjay Upadhyay
Yeah, over here.
Meet Vora
Okay. And sir, secondly, on the Advanced intermediate side, in 3Q we have mentioned in our presentation that there has been dumping of at lower prices. So the impact can be essentiated higher on this side or is it because the plants have remained idle in the agro business?
Sanjay Upadhyay
Agro and DASA are different. DASA is a intermediate, agro is other chemical.
Meet Vora
So the higher impact would be because of impact in DASDA or in the agro business? So in the overall segment.
Maulik Mehta
Overall it would be agro intermediates but there is an element of DASA as well and this is why the government has initiated an investigation.
Meet Vora
Understood. And sir, just lastly on this project, just wanted to understand your thought behind this project. Is it more of a backward integration or is it for some of a new product we are trying to identify this product?
Maulik Mehta
No, no, it is not a backward integration, it’s a forward integration. It’s — we generate while we manufacture phenol and acetone. This is a valorization effort and we will also not only be able to sell it, but we will also be able to consume it for further value-added activities from Deepak nitride and sell that separately to another segment. In this case, for example, the pharma segment.
Meet Vora
Understood, sir. Yeah, thanks. That’s all from my side. Thank you.
Operator
Thank you. As there are no further questions from the participants, I would now like to hand the conference over to the management for closing comments. Thank you.
Sanjay Upadhyay
Thank you all for joining this call. In case any further clarifications are required, you can get-in touch with our Investor Relations team under Mr Som. Thanks again.
Operator
[Operator Closing Remarks]