Deepak Nitrite Limited (NSE: DEEPAKNTR) Q4 2025 Earnings Call dated May. 29, 2025
Corporate Participants:
Unidentified Speaker
Maulik Mehta — Executive Director and Chief Executive Officer
Sanjay Upadhyay — Director Finance and Group CFO
Analysts:
Unidentified Participant
Sanjay Jain — Analyst
Neera — Analyst
Ankur — Analyst
Abhijit Akela — Analyst
Vivek Rajmani — Analyst
Arun Prasad — Analyst
Kumar Somia — Analyst
Aditi Loharuka — Analyst
Hussain Paruchawala — Analyst
Meet Vora — Analyst
Arun Prasad — Analyst
Presentation:
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operator
Ladies and gentlemen, welcome to the Deepak Nitrite Limited Q4 and FY25 earning call hosted by IIFL Capital 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 nature. And a disclaimer to this effect has been included in investor communication shared with you earlier. As a reminder, all participant line will be in listen only mode. And there will be an opportunity for you to ask questions at the end of today’s presentation. Should you need assistance during the conference call, please signal an operator by pressing Star then zero on your touchtone phone.
Please note that this conference is being recorded. I now like to hand the conference over to Ms. Disha Arora from IIFL Capital Limited. Thank you. And over to you ma’ am.
Unidentified Speaker
Thank you. Good afternoon everyone and thank you for. Joining us on Deepak Nitride’s fourth Q&FY25 earnings conference call. Today we have with us Mr. Malik Mehta, Executive Director and CEO. Mr. Sanjay Upadhyay, Director of Finance and Group, CFO and Mr. Somshikhar Nanda, CFO of Deepak Nitrate Limited. We will begin the call with opening remarks from the management team. Followed by an interactive Q and A session to begin. Mr. Malik will share his views on. The operating performance and the growth plans of the company. Followed by Mr. Sanjay Upadhya who shall take us through the financial and segmental performance. The result documents have been shared with you earlier and also have been 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 — Executive Director and Chief Executive Officer
. Good afternoon everybody and welcome to Deepak Nitrite’s Q4 and FY25 earnings conference call. Earnings documents were shared with you earlier and I trust you’ve had a chance to review them. FY25 was a challenging year for the entire chemical industry marked by significant external headwinds, A global slowdown in demand amplified by geopolitical tensions and macroeconomic uncertainty and a wait and watch mode in the face of tariff ambiguity has meant that supply couldn’t be fully absorbed, placing pressure on prices of chemical intermediate. Additionally, intense price competition, particularly from Chinese producers who have been aggressively placing supply, exerted further margin pressure for Indian manufacturers.
Amongst these headwinds, domestic demand served as a vital cushion, showing early signs of stabilization and recovery in almost the entire range of industry applications. This resilience was supported by our continuous focus on cost optimization, digital transformation and an endeavor to capture niche demand through product variants and new offerings. Given this operating framework, we reported a resilient performance in FY25 where we focused on further strengthening our business model through key initiatives aimed at improving both productivity as well as profitability. Record production volumes were achieved in several products through process optimization initiatives, debottlenecking efforts and capacity augmentation, all of which have served to enhance operational efficiency.
Cost optimization has been achieved by process recalibration. Simultaneously, we expanded our product portfolio and secured long term contracts, positioning ourselves for consistent and sustainable growth as we look ahead to FY26. With several projects commissioning on the horizon, we’re confident in our ability to deliver an improved growth and profitability scenario. We have also started gaining benefits from renewable hybrid power arrangements which will encompass almost 60% of our total consumption by the end of next year. For the fiscal year ended March 31, 2025, Deepak Nitrite reported a total income of 8,366 crores, growing 8% over the previous year.
The growth has been achieved in the face of significant headwinds and our teams have expended considerable effort to the bottleneck facilities, augment capacity and develop new products and variants as well as seeking out additional customers and non coal markets in order to achieve the growth. As you’re all aware, product pricing remains subdued for most of the fiscal year. In this context, we’ve delivered a consolidated EBITDA of 1,176 crore almost at last year’s level. Despite these challenging environments, here too I would like to commend our team for undertaking these optimization measures, process recalibration and delivering increased production volumes of key products.
We reported a profit before tax of 953 crores for the year and profit after tax of 697 crores. While top line growth was driven by volume which helped offset the impact of lower realization, profitability was affected by several factors. These included elevated input costs, overall slowdown in certain segments like the agrochemical industry and some customer specific challenges. We are confident that we will be able to transition towards a normalized level of profitability during the financial year. Following a subdued Q3 we indicated an expected improvement in Q4. Our Q4 performance highlights include a total income this is by the way for Deepak Nitride standalone AI business, a total income of Sorry, this is the entirety a total income of 2,202 crores marking a 14% sequential increase and a 3% rise on year on year basis.
EBITDA increased to 339 crores, a 79% increase on a sequential basis and a 6% increase on a year. On year basis. PBT more than doubled on a sequential quarter basis to 279 crores. An increase of 106% PAT of 202 crores is also 106% increase on a quarter on quarter basis. In Q4 we achieved record production and sales levels across several key products. This was driven by capacity augmentation, rebottlenecking of select facilities and process optimization initiatives. These contributed to strong volume growth for the quarter. Domestic sales accounted for 82% of revenue and exports contributed 18%. Now for the segmental performance, advanced intermediates in the quarter recorded revenues of 654 crores reflecting a 19% sequential increase for the full year.
The segment reported a revenue of 2,527 crore representing a 7% year on year decline. The quarter on quarter recovery was driven by strong performance across multiple product segments which effectively met customer evolving customer requirements. While demand for dyes and pigments has improved from Q3 end, pricing pressure persisted. We’re actively addressing these challenges through targeted initiatives aimed at improving competitiveness and margins. As previously indicated, agrochemical demand continues to be subdued, a trend that we expect to persist for the next couple of quarters. Nevertheless, we remain focused on prioritizing the production of high demand products and strategically expanding into non core markets that demonstrate consistent or growing demand.
Our strategic roadmap also includes a downstream move in certain applications with marginal investments along with industry leading ESG targets. Looking ahead, we’re expanding our portfolio with new product offerings and variants supported by new customer acquisitions which we believe will drive a revival and growth for the segment. The new products will also serve customers in the pharma and personal care segments as well as high impact industrial solvents and energy applications. Phenolics In Q4 FY25 the phenolic segment reported revenues of 1,532 crores reflecting a 12% quarter on quarter and 5% year on year growth. For the full year, revenues increased by 16% reaching 5805 crores.
This growth was underpinned by the debottle making and capacity augmentation initiatives which enabled us to set new benchmarks in the production and sale of key products. While the market absorbed the increased production volumes, a temporary rise in imports which started in Q3 impacted product pricing while we had taken an annual shutdown. Looking ahead, we anticipate an improvement in market conditions coupled with softening input costs and supported by enhanced operational efficiency. As far as project updates and the future outlook is concerned. While some of our projects experience delays, These spillovers from FY25 have created a robust and exciting project pipeline for FY26.
By the second quarter we anticipate a commissioning of our state of the art R and D center at Saudli Verdota. This involves over 100 crores of capex. This facility will give a better structure and embedded to our R and D program while significantly enhancing our innovation capabilities. We have already commissioned facility which is focused on compounding which will go into applications which are multiple in nature from electric switches and EVs all the way to medical devices and this compounding facility will dovetail very nicely once we have our polycarbonate resin manufacturing setup. The nitric acid unit will be commissioned towards the end of Q1 early Q2 and this is a critical upstream integration which will help improve reliability, reduce costs, significantly improve sustainability scores and allow us to capture a greater share of the value chain.
Expansion projects across key chemistries including nitration and hydrogenation are set to be commissioned to Building on successful commissioning of chlorination block in Q4, FY24 and a recently commissioned chlorination block. By the second half of FY26 we expect to commission the MIBK and MIBC project which are downstream derivatives of acetone. These will help enhance an integration and value support value added growth. We’re also executing a major transformation in our energy consumption with the goal of transitioning 60 to 70% of energy consumption to renewable sources in Gujarat and Maharashtra. This shift is projected to result in a 60% reduction in carbon emissions, aligning with our broader sustainability goal.
To address challenges relating to intermittency, reliability and infrastructure integration, we’re targeting an optimal blend of renewable energy sources. This helps bring in sustainability in operations apart from yielding significant reduction in total cost. As a legacy, the company has been rewarding shareholders by way of handsome dividends. So has it this year. Mr. Upadhyay will take you through the details of the dividend process by the Board of Directors. As far as strategic outlook is concerned, this is probably the first time and maybe the last time. I hope that we’re not going to give a sharp guidance about the next quarter, this quarter and the next quarter owing to geopolitical uncertainties.
But we continue to remain confident about an optimistic growth in our full year projections now what started out as an investment thesis and an aspiration has now become a well accepted industry by word make in India make for the World as most companies embrace the concept of near shoring, Deepak is entering a transformative phase marked by the commissioning of fully integrated facilities that will significantly enhance operational resilience and profitability in an increasingly volatile global environment. Our strategy of backward and forward integration ensures that we can better serve consumers while enabling our commodity and specialty businesses to support each other.
This year represents a renewed commitment to building a new Deepak, with project execution gaining momentum, technologies being finalized and promising partnerships emerging in the field of material sciences. Our growth roadmap includes the development of upstream products like nitric acid as well as downstream derivatives like mibk, mibc which are set to become operational in the coming quarters. A major highlight is that the Deepak Chemtech board approved an investment of 3,500 crores for new capacities in phenol, acetone and IPA which will be integrated into the production of polycarbonate resins. Combined with the earlier 5,000 crore approval, the total investment in the PC Resins project, starting from phenol and acetone now stands at approximately 8,500 crores.
Once commissioned, Deepak will become one of the world’s largest single location producers of phenol and acetone, with over half of this capacity set to be converted into higher value derivatives like bisphenols and polycarbonate resin. In conclusion, FY25, and particularly the strong recovery in Q4 exemplifies Deepak’s operational resilience and the strength of its strategic initiatives. Despite ongoing global volatility and pricing pressures, we achieved volume growth, strengthened our market footprint and advanced critical integration projects. Thank you for your continued support and trust. We look forward on building on this strong foundation in the coming years. I’d now like to hand over the call to Mr.
Sanjay Bhajan.
Sanjay Upadhyay — Director Finance and Group CFO
Thank you Molik Good afternoon everyone and thank you for joining us today on Epoch Nitride’s Earning call. I will now take you through the key highlights of the financial results for the fourth quarter and full year ended March 25. In FY25 we recorded a considered revenue of 8366 crores reflecting an 8% growth over 7758 crores. In FI24 EBITDA stood at 1176 crores, marginally lower than 1199 crores in previous year with EBITDA margin at 14%. PBT was 953 crores and PAT came at 697 crores. You all are aware that we have a strong history of proposing and distributing dividends in order to carry that vision out of out of our management.
This year also the board has maintained unit of 375 crores amounting to 7.5 per share. We hope this offers an opportunity to be rejoiced by the shareholders who have placed immense trust in us. We are thankful to the shareholders and believe their unwavering trust in us and shall take us to this will shall take us to the greater heights. After relatively beautiful Q3 we closed the year well delivering 14% quarter on quarter revenue growth led by recovery in advance. In the media segment. As Molik highlighted, we witnessed encouraging demand revival across several key products in the portfolio.
In the phenolics segment we achieved higher volumes across all product lines. However, the pricing environment and crack remained soft due to increased imports as well as the higher raw material prices. In Q4 conflated EBITDA rose sharply by 79% quarter on quarter to fee 39 crores supported partially by the government incentive. So government incentive is a part of the business. I mean there is there will be some questions on that. It’s a part of our regular income, you know, because incentives are there for 10 years which we get. Of course this figure is high because of the cumulative accumulated 161 crores, but normally we get around 60 to 70 crores every year and if you we are booking on a cash basis but it has to be actually we can on accurate basis we get around 60 to 70 crores every year.
So hope I have answered that query from the investors. Q4 has been a chilling quarter persistent business in pricing. We believe our initiative towards capacity augmentation, debottlenecking and cost optimization are aimed in the right direction. While the outcome of these initiatives has been latent in Q4, we are confident that as we move forward, strategic actions we have undertaken will further strengthen our recovery trajectory and drive improved profitability in the upcoming years. On the operating fund, domestic business revenue stood at 1,796 crores in Q4 and 6,849 crores for the FY25 export KFC 84 crores in Q4 and 1432 crores the full year.
The domestic to export mix of FY23 to 17 on a consolidated basis moving to now segmental performance in the advanced Internet segment, revenue increased by 19% quarter on quarter to 654 crore in Q4FY25 from 552 crores in Q3 IT EBIT at 45 crores and margin at 12% for the full revenue stood at 2527 crores with EBITDA 136 crores reflecting 7% margin. Deepak Finalix posted a stable performance with Q4FY25 revenue rising 12% sequentially to 1,532 crores from 1366 crores. EBIT came in at 239 crores with a margin of 16%. For FY95, revenue grew at 16% to 5805 crores and ABI through the 783 crores translating to a margin of 13%.
On the balance sheet front, the company continues to demonstrate financial strength with considered net worth of 5425 crores and standalone network of 3126 crores. We enjoy a well formatted fortified position to undertake a planned upstream and downstream expansion which has been covered by Molly Ginny’s remarks. We are making notable progress with our growth initiatives led by a strong R and D foundation. We are developing different products to enhance our specialty chemicals portfolio. This new capacity will improve self reliance in critical raw materials and support margin expansion as they become fully operational. Our new R and D center near Vairodhara with an investment of little more than 100 crores is set to be commissioned shortly and this will reinforce our innovation led growth strategy.
In conclusion, when the past presented external challenges and we continue to face external challenges currently in current year also our outlook remains strong and positive with a solid pipeline of projects set to be commissioned during the year though the numbers will be for the it will not be annualized number because most of the projects are getting commissioned Q1, Q2, Q3, Q4. But we are looking at a very bright next year. With this whole project getting commissioned next year, Deepak Group is well positioned to deliver sustainable growth and long term value for all stockholders. With that I would now request moderator to open the forum for question answers.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch tone telephone. If you wish to remove yourself from the question queue you may press star and 2. Participants are requested to use handset while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. First question is from the line of Sanjay Jain from ICICI Securities. Please go ahead.
Sanjay Jain
Yeah, good afternoon sir. Thanks for taking my question. First I want a clarification. Molig Bhai, you said in opening remark that we are looking at few downstream products in agrochemical moving up in the value chain. Second, you spoke about the new product which will have application in agro and pharma and probably another for industrial solvent and energy. Can you give us a little bit more color on this product? And what is the capex? We are looking at expansion of these products.
Maulik Mehta
Okay, so first of all thank you for the question. These products will not really have any meaningful capex maybe other than some balance balancing equipment or something. And most of these will be utilizing assets that we already have in campaigns. So while we have a baseload and a foundation of some intermediates that we make, we’ve partnered with certain downstream customers where we would run these products as a value add in certain campaigns. I think every month there will be a campaign that will swing between the baseload of products and the higher value accretive products. Now when we go downstream in agrochemical intermediates here also the focus is to do it in a very strategic manner because traditionally we have always focused on making intermediates and not really technicals.
So when we’re doing that we’re doing that along with strategic partners. And as far as what I mentioned about the personal care, this again is going to be A it is going to be an asset valorization but B it is also going to fundamentally add a brand new chemistry to our product portfolio. Just for the record, this chemistry is one that’s called Friedelcraft.
Sanjay Jain
Can you come again? What chemistry is it?
Maulik Mehta
It’s called Fiddle Craft. Sorry, these are German names. I Think that’s two scientists who created this chemistry many, many years ago. But it has a broad range of applications and over a period of time it will actually also feed into the polycarbonate resin as a major application. But right now the priority focus will be into personal care and fun.
Sanjay Jain
Very clear. That means because we were running very efficiently plant, this means we will have more value from the same plant rather than more volume. Is that will be a fixed treatment.
Maulik Mehta
So while that answer is yes, I mean we have a mixture of high efficiency continuous operations plants, for example the phenol plant, for example the sodium nitrite or the nitrotolean plant. But we also have very broad range of batch plants which are very well instrumented and able to have a very large number of chemistries that we’re able to use in those assets. So these are assets which will be used to make these higher value relatively smaller volume products. And some of them will include assets such as our chlorination block, some of them will include assets which we would otherwise have used for some other chemistries.
So the high efficiency single product plant will continue to run in that manner in order to gain the base load of efficiency. And the other assets which are batch will be used to generate higher value smaller volume margin corrective products.
Sanjay Jain
Very clear, Very clear. If we go to the standalone business this quarter, I think we had a good run on the agrochemicals sequentially. But if I look at incremental gross profit to an incremental revenue that’s only 37% that says that we are still facing some margin pressure in the underlying CO product. Even in the Q4 when we say the margins have stabilized, are they stabilizing at a Q4 level or at the Q3 level?
Maulik Mehta
No, neither. Even Q4 is softer than it should be. But I’m not going to give any opinion about what Q1 and Q2 will be because I mean literally on daily basis there are news that come out that completely shatter your perception of what would be a normalized situation. So I would rather say that we’re confident about coming back to a normalized number which is neither, I mean which is higher than the Q3, obviously higher than the Q4. But I would say that this will be achieved on on the annual number rather than on a base of Q3 or Q4.
Sanjay Jain
That’s very helpful. But can you throw some light on what’s really happening? It’s a demand side issue in China or it’s over supply situation in China. What really is driving sudden spurt in Competition in our product, which till now has been doing quite well even in the worst of the situation in FY23.
Maulik Mehta
Generally what has happened over the last several years is that there has been a significant over capacity that has been built in China. Along with that, a lot of the agrochemical intermediates that Deepak manufactures has a very large application base across the world but has been largely dependent on only a small handful of customers. Now as these molecules go through a process where there is a patent expiry, the number of customers increases and for a short period of time so does the number of potential competitors. So Deepak has been focusing on ensuring that it is building cost leadership as well as ESG leadership.
There is always going to be a period of time in the middle when you are essentially competing with someone’s finished good inventory. It’s easy for Deepak to compete with anybody at a global level when you’re talking about manufactured products. When you’re competing with somebody clothing stock which is depleting at a price pretty rapid clip but you still have the tail end of it there in the market, that competition becomes uneven. To be honest, we are actually quite well aligned with a lot of other players who say that the down cycle of hydrochemicals is petering over to the end.
You have certain players who are forward integrated into the formulation who are able to tell you that the future is much brighter because they are there with it. We follow suit maybe with a lag of 1/4 or 2/4 but we are well aligned that moving forward the situation is not as grim as it was in FY24 25 with regards to volume recovery as well as over a period of time prices. Great.
Sanjay Jain
I have one last question. I’ll get back on the queue for others. How is the market scenario?
operator
Can you please rejoin the question queue for follow up question?
Sanjay Jain
That’s fine. Thanks Malik Bhai for answering all those questions and Dashak for coming quarters.
Maulik Mehta
Thank you.
operator
Thank you. Ladies and gentlemen. In order to ensure that the management is able to address questions from all participants in conference, please limit your question to only two questions per participant should have a follow up question. We request you to rejoin the queue. Next question is from the line of Neera from Unwill Wealth. Please go ahead.
Neera
Yeah, so thanks for the opportunity. I have two questions. So the first is on the commissioning of our nitric acid plant. So when we see the other players in the industry having the the capacities of nitric acid they are integrated in terms of their upstream ammonia. Whereas probably we have to purchase ammonia from the outside to support our nitric acid production. So just wanted to have your thoughts here. That because we need to purchase it from the outside market, how we would be competitive visa with those players having their captive ammonia. And also if you can talk about in terms of the OPEX difference between us and them over a period of time.
Maulik Mehta
Okay. Hi Neerab and thanks for your question. Just to clarify, Look Deepak, nitride has been in the business of consuming ammonia now for 54 years. We started off with sodium nitrite which is a consumer of ammonia. So our ammonia purchasing pipeline, both from domestic as well as international sources is relatively robust and it can be made more robust with some marginal investments here and there. So we don’t compete with manufacturers of nitric acid. Our asset is in place for us to consume internally. So our products that we make while nitric acid will be made, our products will be downstreams of nitric acid.
And those are much higher value in a sense of multiple end applications, domestic and international demand. In fact, in a couple of places we have tied up a large portion of our production for multiple years with formula linked pricing which includes movement of feedstock as like for example ammonia. So moving forward, I don’t see us as trying to benchmark against nitric acid producers who have their own ammonia. I look at benchmarking us against nitric acid consumers who purchase their own nitric acid. Whereas we will continue to purchase and expand our purchasing policy for ammonia.
Sanjay Upadhyay
So nearest leverage is this is a make or buy decision. Okay. It’s not. It has nothing to do with the market. So if you are and then secondly the certainty of supply and through pipeline, these are the major components one has to look at. It is company anybody we know they will be far superior denied but assured supply pipeline supply cost as compared to market will be much lower. Paybacks are better. Quite good in fact. So this is what about for make or buy decision? Not as compared to how they are doing and what they are doing, how efficiently they are doing is more important.
So hope you have answered your question.
Neera
So just one thing here. Last quarter you mentioned that probably we would have our own structure storage tanks also for ammonia. So how that is progressing and when that could be commissioned? Because now nitrogen facilities are getting commissioned in Q2. So if you can share something on that storage tanks that would be helpful.
Maulik Mehta
What we have done is we have. We’ve already made investments and commissioned investments about storage of nitric acid as well as unloading of nitric acid to have a much higher rate of consumption on a steady basis. We have also invested into expanding our storage to allow us a greater degree of flexibility and then take that ammonia via pipeline into our consumption sites. So that is. I won’t say that that is a significant investment but that should also be operationalized during the year. The second question is to ensure that we have a strategically de risked ammonia sourcing strategy.
Neera
Got it. The second question is in terms of the input prices like some of our major raw materials like toluene octanol have seen a price corrections from March onwards. So just wanted to have your thoughts here. Like have the product prices being existed commensurate with the fall in these raw material prices or we would have some extra delta left with us to work with. Given the kind of commentary what we have seen in your investor presentation like we have been you have mentioned that we are seeing a kind of demand revival in dyes and pigment segment.
So if you can relate all this with reference to these raw materials as well as your outlook for for dasda Oba for FY26. Thank you so much.
Maulik Mehta
Sure. So Neerab, as you mentioned there is a price softening of key petrochemicals like benzene and toluene and such. Now because we are intermediate manufacturers, we are also present in multiple parts of value chain. For example my OBA prices do not move in line with toluene prices. So in some parts of the business when we have contractual agreement with customer for an intermediate we have a formula with a pass through clause which may have in some cases one month, in another in other case it is a quarter where there is an adjustment to the price of the product based on quarterly average movements.
In other places it is linked to the market price. So when I am selling optical bright mills nobody really asks me about the price of toluene and how its downward revision would improve my oba. So there it is about being able to secure long term customer contracts. And as you’ve mentioned OBA we have debottlenecked our optical brightener manufacturing capacity. We’ve also launched a few new SKUs including into certain segments where we were originally expecting an extinction threat in that segment. So now our optical brighteners are able to service those applications as well and we’re working very tightly with our key account our customers to increase our wallet share.
But we do depottleneck in anticipation of and then over the next year work to see how we can increase our wallet share with them. So this is an ongoing activity. Even this year we will be able to debottleneck the asset with marginal investment and our goal is to ensure that we are increasing our wallet share because we have upstream integration and because we have strong value chain thesis that we are able to give to customers.
operator
Thank you. Next question is from the line of Ankur from Axis Mutual Fund. Please go ahead.
Ankur
Yeah, hi Sir Ankur from Excess Capital. Thanks for the opportunity. First question on the AI part. Your commentary suggests volume led uptake across some of the segments wherein we are seeing some green shoots. My question is more on our thoughts and strategy. Given that the pricing led scenario is the way it is, probably it will take some time for it to recover. Is there any enhancement in product specifications that we are doing to address the margin pressure? Or there could be a reset in terms of AI margins over the medium.
Maulik Mehta
Term.
Ankur
As we scale up this business.
Maulik Mehta
In the AI business, the part which goes into dyes, pigments and their associated industries. I think I had mentioned also in February that from the closing end of Q3 onwards there has been an improvement and that improvement was volume led and eventually it would turn into pricing improvement as well as margin improvement. So I think the volume improvement has persisted. There is now we’re starting to see some level of margin improvement again. All of this is significantly influenced by geopolitics, so I am cautiously optimistic. But we are seeing along the lines of what we had mentioned in February when it comes to other segments such as agrochemicals.
For us, in a certain group of products which go into agrochemicals we are seeing price as well as a sorry margin as well as a volume improvement, but not in others. The other ones will come maybe towards the end of Q1 or Q2. I’m not sure and hence I am not going to give any clarification with regards to the other chemical which goes into agrochemicals. What we have done in the meanwhile is we have seen how to ensure that we are optimizing on the cost front, how we are ensuring that we are able to even go downstream in partnership with certain customers as well as ensure that there is a level of asset fungibility where we are able to use the same asset to drive production for intermediates which will go into other applications.
Applications such as pharma and person careful is fully realized. We will have more options than we did one or two years ago because we will have more products commissioned across a broader range as well as we will have gone downstream to be able to have, you know, greater security about the future of these assets.
Ankur
Sure. And just a follow up on that, you know, within AI Is there any specific segment within the pricing or the competitive pressure is significantly higher. Maybe fine specialty or basic chemicals or even delta.
Maulik Mehta
So pricing pressure of course is significant on products such as darpa. And there is a pricing pressure on a couple of agrochemicals and another couple of agrochemicals. The situation has been on an improving track. I wouldn’t say that it is where I would like it to be or where it has been in the last few years, but it is on an improving track.
Ankur
Okay, great. And just a second question on our medium term expansion into phenol acetone downstream. So there was a tech tie up which I think was pending on the BTL side. So what’s the status there? And you know, from a tech perspective, are we more or less done across the product range that we are looking at or there is still more to go?
Maulik Mehta
Sorry, what is bts?
Ankur
Bta?
Maulik Mehta
Oh, bisphenol epa.
Ankur
Yeah.
Maulik Mehta
Yeah. So we are on the. I think we’re at the final leg of concluding on that the other licenses have already been tied up. Polycarbonates. As we mentioned earlier, we are in a unique position where the equipment, the license, the final product trademark as well as our anchor customer all happen to be the same name. Which gives us a great degree of confidence not only in servicing the Indian requirement because of our polycarbonate, because of our compounding facility that we’ve already put up. We’ve already started servicing the domestic market as well as the anchor customer which will be located in Europe and will continue to continue product that comes out of this plant.
So I think we’re well placed with India’s growing demand as well as our anchor customers. Expected demand.
Ankur
Okay, that’s great. Qualified. Thank you. And all the best.
Maulik Mehta
Thank you.
operator
Thank you. Next question is from the line of Abhijit Akela from Kotak Securities. Please go ahead.
Abhijit Akela
Yeah, good afternoon. Thank you so much. Abhijit Akhila here. Just a clarification on the government incentives. So number one, I mean this was for 10 years. You know, how long, how many more years does it continue for? And if I heard you correctly, you mentioned that there was some accumulation of the incentives this year. So for what period exactly has this 161crore number been received?
Sanjay Upadhyay
I mentioned that no accrual basis. 60 to 70 crores is the accrual every year. This is still December 28th. Okay. But then you make further investment, you further qualify for this incentive. So when we are considering the larger projects, we fall into a mega project scheme that the schemes are again better and such Incentives and these things will continue there also. But on current results, if you are this 161 is what government does is that they release 80% and 20% is withhold till they do the final verification and certifies that. So that was completed last year.
So we got current year as well as the accumulation of past year of 30%. But henceforth it will be 60 to 70 crores on an accural basis for the existing investment.
Abhijit Akela
Right. So is it. Yeah, sorry, just to clarify. So is it fair to assume that out of this 160 crores maybe 60 or 70 would have pertained to FY25 and the rest would have pertained to the previous years? Okay, got it. So thank you so much.
Maulik Mehta
They will have, obviously they, they will have their own period of time. So that will be accrued separately because they will be separate investments.
Abhijit Akela
Yes, sure. And I guess the, you know, commissioning for that would be basically from fiscal 28 onwards or thereabouts. Yeah, okay, got it. Yeah. Thank you so much. The other question I had was just on the normalized margin outlook. While I understand that for the next couple of quarters it’s very difficult to hazard adjust, but when you’re alluding to a more normalized level from a full year basis, is there some rough range you could point us to for the two segments regarding where margins could end up normalizing each of them?
Maulik Mehta
I think it is probably not the right time to be able to answer that. We believe that the normalized margins should be higher than what they are right now. Whether that happens in 1/4 or 2/4 or 3/4, I don’t know. But we’re confident about an annualized margin which is higher for perhaps we see how the situation plays itself out and there will be pockets of opportunity even in the short term and it might look disproportionately higher than it should be. So I’ll just hasten to say that it doesn’t mean that Q1 and Q2 will be low and Q3 and Q4 will be high.
We are positioned in a place where we are able to take opportunities. And those opportunities may be short or medium term in nature, they may be long term in nature. So we will remain agile and we will always ensure that we are giving a high degree of transparency to investors.
Abhijit Akela
Okay, understood. Thank you so much sir and wish you all the best.
Maulik Mehta
Thank you.
operator
Thank you. Next question is from the line of Vivek Rajmani from Morgul Sangi. Please go ahead.
Vivek Rajmani
Hi sir. Thank you so much for the presentation. Just a couple of Clarifications on phenols. I know last quarter was a difficult one because you’d mentioned the perfect storm given that you’ve been able to run the plants a lot better in this quarter. Just wanted to get a sense of if we’ve been able to recoup the market share that we lost last quarter to imports and possibly increased it because we obviously expanded our capacities. And as an extension, I think you mentioned that you will see some relief from the import pressures after March. Just wanted to get back to see if that has been happening as you were guiding in the previous quarter.
Thank you.
Sanjay Upadhyay
Yeah, I mean you’re right in this Vivek, of course we are not losing a market share remains intact. In fact it’s growing. We have the. We go on the bottlenecking capacities and those are. I mean the market absorbs whatever we are selling. So I know we don’t see any pressure on market share as such as well as Q3 had some pressure on raw motor pricing but sorry, Q4 Q1 we are seeing though Molly has told me regarding is Q4 Q1 is much better for phenol as compared to Q4 because 0 motor the cracks are going back to the level.
So I mean I can say things are in place. We are able to sell in the market whatever volumes we are supplying to the market and cracks are also getting improved cracks. So whenever we talk about something we like to see the dip of Nitride’s product portfolio. Frankly we are into domestic. 83% domestic market is growing. You know, domestic market is stable and though there will be some pressure here and there in one of the quarters but overall domestic markets are doing reasonably well. Export we are facing pressure maybe somewhere because of the. The export dynamics.
What we are facing outside geopolitical situation. This, I mean so phenol and this so far as domestically we don’t see much of a pressure on that which is a larger part section of our business. When we talk about AI and all these things that also if you see we are doing it’s not that there is a pressure on product volumes are ending. It’s only because of some concerns on the this but that that is also now getting more or less getting in a stable situation now it will further improve from here. I mean whatever we have seen up till now, I think we have seen the bottom.
All I can say future looks very bright, not that and all with all the commissioning in a phase manner where we are very confident we’ll go on because it’s already done. I mean I think everybody has already started the CNA part of it. So with all these things we see a very, very good next year from this onwards. So and various steps are taken. You know this RND is a small, small thing with Molly Fever was highlighting. But we must realize how are we differentiating our product, how the efficiencies are getting improved, how the like nitric acid creation, the supply starts and pipeline.
Many things are done internally because if the external environment remains external. But we are doing so many things here. So I see as a good year and next year will be further better because of step what we are taking. I am not talking about the global uncertainty, what is happening. But by and large things are in control from our side. We don’t see much of an issue on running our plant operations. And this then becomes commissioning of the plant. So I am very optimistic about this though cautiously optimistic that the right word molecules used. But yes, and this year it should be better than last year because we have seen the bottom which I feel.
Maulik Mehta
I totally agree. One thing that we have learned last year is that maybe we need to have a much sharper messaging about when we do our regular shutdowns for cleaning and maintenance. Because when we announced it, we announced also the period of time that we will have a shutdown as well as the fact that we would have inventory. But I think a lot of traders because of their. Because of the country’s large dependence on Deepak which has served them well, they anticipated for whatever reason that we may extend our shutdown or they wanted to de risk themselves.
So we had much more of an import coming in in the end of October, early November to compensate for a perceived extended shutdown which never actually took place. We were in fact able to start back up at a shorter notice along with larger asset available capacity debottlenecking also. So our increased capacity came head to head with an increase in imports. I think maybe we can learn from this, improve our communication strategy that we put out to ensure that this kind of situation gets avoided. Because at the end of the day our customers just want to feel secure about the availability given the face of uncertainty in geopolitics.
Vivek Rajmani
This is very clear. Thank you so much and all the very best.
Maulik Mehta
Thank you.
operator
Thank you. Next question is from the line of Arun Prasad from Avindus Park. Please go ahead.
Arun Prasad
Thanks for the opportunity and good afternoon everyone. So first Molik first just coming back to the technology part on the. On our phenol polycarbonate integrated project. You said this phenol is in the final stages but have you finalized for the new phenol acetone complex? Is it the technology licenses finally or you are just continuing with the existing one that we have?
Maulik Mehta
I won’t answer that question. I’ll just say that it has been finalized.
Arun Prasad
Okay. All right. And also you said that for the from the polycarbonate project, the anchor customers expected demand is, is, Is very healthy. So can you indicate what percentage of our overall polycarbonate capacity this expected demand would be? The anchor demand would be.
Maulik Mehta
I’m so sorry, I know I’m saying this a second time. Same gentleman. I won’t answer that question as well. Frankly, that is part of the discussion that we are having. And if I answer that question, I’m giving away any leverage. So we are in conversations and what we are telling strategic partners is that what we have commissioned, their interest in working with us is well noted and we are happy to be their partner of choice because we’re able to service them with technologically trademarked products. If they can help us debottleneck fast and further expand capacity quickly, then we will be able to service them faster.
So leave us with that little bit of leverage for negotiation. But rest assured that our first priority is to ensure that anchor customers as well as the domestic market are both well served.
Arun Prasad
Okay. All right. So that’s fine. On the compounding facility you spoke about, when do we get to see some kind of a revenue traction from this facility? Is it this year, next year? What stage we are in in terms of. I know you mentioned that you have 10 customers, but are we in a stage where we can confidently go and sell and book revenue on this? And what is our aspiration in the next 2, 3/4 or the medium term?
Maulik Mehta
So this is just think of this as an R and D center now. It is able to make in terms of the total throughput much larger than what you would expect very often in R and D center, sometimes even larger than standalone plant, but it is still to be considered as an R and D center. We have generated revenues already in the last year. We will extend that this year. But these are all to be considered as in a chemical. What you would expect is PO for piloted products. So when you’re talking to customers and you’re scaling up your production in order to give them confidence that these are plant representative samples and that’s what they pay for when you send them a lab sample.
They don’t pay for that when you send them a pilot sample, a larger volume multiple SKUs that they do pay for. But still these will be considered. I would consider them as R and D projects to build customer confidence forward as we’re able to have them do their extended testing in multiple environment, temperature, heat, sorry, temperature, conductivity, those other things. Then they will expand into full fledged business skus. So we’ve already started seeing value, we’ve already started engaging with customers long term contracts but these are still pilot project.
Sanjay Upadhyay
The response what we have got from our customers is very encouraging. Product is getting acceptance frankly this is field marketing what we are doing to see ensure that when we come up with several plans and this we are ready with this facility also on a larger scale so that we again I mean back to back we are new integrated facilities of compounding also. And the idea is that next several plant will be consumed captively as a product in the market.
Maulik Mehta
This is a change for our strategy because the traditional thing that Deepak would do would just be to manufacture the resin and sell the resin. Now while we will do that we will also ensure that we are selling compounds which are made using that resin and other smaller raw materials which have significantly higher price as well as margin but have a significant approval cycle. So we are starting that approval cycle earlier before the PC plant comes up so that we can then reduce the amount of resin that we sell in the market and it increase the amount of compound that we sell.
Arun Prasad
Typically what is the approval cycle in months? Is it 24 months? 36 months?
Maulik Mehta
For some products it can go from 6 months to other products, things like medical devices and all that can go to even 36 months. There are obviously much, much higher value and because of that there is a very strict regulation and control. So I mean we’ve been working with potential customers in multiple segments including EVs, including switches, including furniture as well as medical devices.
Arun Prasad
So some of this, so what I understand is some of these approvals needs to also come from the customer’s customer. Is it the right way to think? 36 months is too long?
Maulik Mehta
No, it is not. As long as we look at it from a different perspective, 36 months for something which is going to be around helping people in difficult situations where things cannot be repaired easily and these will last with the customer, the consumer for decades. 36 months is a fair thing and government India as well as they’ve been very supportive. I would not put too much money into the fact that something takes 36 months. It takes it because it will be there as you know, consistent business for decades.
Arun Prasad
Finally, one question on our capital working.
operator
Sorry to interrupt sir, can you please move to the question for follow up.
Arun Prasad
Sure.
Maulik Mehta
Thank you.
operator
Thank you. Next question is from the line of Kumar Somia from Ambed Capital. Please go ahead.
Kumar Somia
Hi sir, good afternoon. So just couple of questions on the compounding facility. Is it the same capacity that we had indicated earlier or has there been any change of plan?
Maulik Mehta
It will be that capacity in a phased manner. Right now it is smaller but not significantly smaller.
Kumar Somia
Okay. And sir, any indication on what is the revenue that this fiscal from the compounding facility?
Maulik Mehta
No, I won’t answer that question right now because it depends on what you know, what products get accepted when the same customer expects maybe different SKUs for separate registration or approvals, those things. So we’re working together with multiple customers and multiple sectors. So yeah, it’s too early.
Kumar Somia
If you could just give us an indication what is the cash capex for this system.
Sanjay Upadhyay
This fiscal? It won’t be that high because we are almost at the verge of completion of all our earlier capexes. This should be in the range of 1200 to 1500 crores out of whatever we have announced at 8500 plus the residual of the earlier. So out of around say 9000, 9500 crores our cash outflow this year should be around 1500 crores.
Kumar Somia
Thank you sir, that will be all. Thank you.
Maulik Mehta
Thank you.
operator
Thank you. Next question is from the lineup Aditi Loharuka from ED Equisearch. Please go ahead. Sir,
Aditi Loharuka
I would like to know that how much is not so modest capex justified in the light of uncertainties in global trade in general and chemical industry in particular.
Maulik Mehta
Sorry, I didn’t understand the question. Could you repeat it please?
Sanjay Upadhyay
A little louder please.
Aditi Loharuka
Yeah. How much is not so modest capex justified in light of uncertainties in global trade in general and chemical industry in particular.
Sanjay Upadhyay
Justification? Are you asking. Yes sir, what I mentioned just now.
Maulik Mehta
No, in general.
Sanjay Upadhyay
The point is I don’t know if you’re asking about the capex, what we are the approvals, what we have got from the board, about 8,500 capex. These are all well thought of strategy and well integrated business strategies, you know, going backward, going forward like compounding, like nitric acid, like polycarbonate. So I mean market remains the market, what it is. But how resilient business you are creating is very relevant in this situation. You know if you answer the question, you can answer it. Consider if we have that backward integration, forward integration and all kind of efficiency in the place.
So capex justification. In any case this capex is going to take time. It’s by December 27th will be ready. So and I don’t see much of a problem in taking these capex decisions. Whatever we have taken, I can understand if you are entering into some other. These are all very well known sort of strategies what we are following.
Maulik Mehta
I’ll just add one point to that and I say this with unequivocally. I think that Deepak Nitrite has the best investment thesis in the chemical industry in India across the segments, across the company sizes. The investment thesis that Deepak has is attracting interest across the globe. So there’s no question about the fact that we have made the right decisions. Now sometimes you do have project delays and those are regrettable and we have to work hard to see how we can always keep on improving on those fronts. But if you’re asking about why we’re investing, what we’re investing in, I think that you will have a remarkable resilience moving forward.
And we are exactly where we need to be in order to take the best advantage of the geopolitical global situation. Yes, we have a large neighbor in China, but that does not change the fact that India has significant headroom to grow and Deepak has made the right choices for investment at the right time also.
Sanjay Upadhyay
Yeah, that’s very important. You know at what time point of time you are taking decisions. Delayed decisions do not help. If you have strategy, then I think we are at the right time we are going to and the right execution philosophy we are following.
Aditi Loharuka
Okay. So sir, what is your strategy to handle trade uncertainties in near term?
Maulik Mehta
That’s a whole separate question and it cannot be answered over an investor. Strategy is it involves working with our internal operations, it works with external customers and it works to see how to make certain assets fungible to be able to apply to multiple applications. Beyond this point, trade uncertainty is a fact of life which we should be poised to take advantage of as well.
Aditi Loharuka
Okay, sir.
Maulik Mehta
Thank you.
operator
Thank you. Next question is from the line of Sanjay Kushavaha from an individual investor. Please go ahead.
Unidentified Participant
Thanks for the opportunity. My question is polycarbonate and BPA products comes from petrochemicals and may face more regulation in future as the world move to more greener and stable material. How are you planning to this transition?
Maulik Mehta
To be honest, the world is moving towards greener solutions and that is a wonderful thing that companies around the world are doing. But the interesting thing is that the products that will come out of these systems will be required to house these cleaner and greener processes. When you have an electric vehicle, the polycarbonate that is used to Manufacture the electric vehicle and to house the battery of the electric vehicle is also as required as the source of the fuel. So let me just give you this kind of assurance that moving forward products such as polycarbonates will have different end users but will be just as much of interest to the downstream customers who are also engaging in improving their sustainability.
So it will be a slightly different sku, but the core product will remain the same and impart a different physical property based on the requirement. So we may not manufacture more internal combustion cars. And the polycarbonate resin that would be used for that compound will be the same polycarbonate resin which is used for a compound which makes an ev.
Unidentified Participant
Thank you sir.
Maulik Mehta
Thank you.
operator
Thank you. Next question is from the line of Hussain Paruchawala from Carnelian Capital. Please go ahead.
Hussain Paruchawala
Thanks for taking my question. Just one point. So for the debottle meeting, what is our capacity? We would say on the phenomenon.
Maulik Mehta
We’Ve stopped. I think we should have stopped much earlier answering questions about capacity because one thing that has happened is because of that then you have licensers saying oh you know what, now if you’re running it at that capacity, please pay us license fees for that. So we are, yeah, we’re consistently ensuring that we have the asset management the bottlenecked. Our focus is to ensure that we maintain and grow the domestic market share. So with the current capacity we will continue to find ways to optimize further. And with the. We’ve also signed up for greenfield plant because we are seeing that we will soon, not, not right now, but soon, maybe over the next year, six, eight months reach the kind of ceiling that we can expect from this asset.
So we need to work quickly to see that we have corresponding greenfield asset which will service the polycarbonate asset as well as the market.
Hussain Paruchawala
Got it. That’s what we go into my segment. Thank you so much.
Maulik Mehta
Thank you.
operator
Thank you. Next question is from the line of Meet Vora from MK Global. Please go ahead.
Meet Vora
Thanks for taking my questions. I had just two bookkeeping questions. First one is that what would be the accounting treatment for this government incentive income? Will we be doing this consistently on a cash basis or on an accrual basis? You know this 60, 70 crores of income is more or less certain that we are planning to accrue every year going forward.
Sanjay Upadhyay
Something for me and auditors. Also my original question, if I answer you something here, we will take a call. I understand you are what’s the dilemma? But we’ll take a call but let me talk to auditors also.
Meet Vora
Sure sir. And just secondly on the interest cost every quarter or year that we can work with. And I see that there’s been a debt increase to around thousand crores by the end of March this year. So if you can give some indication over there.
Maulik Mehta
Friendly.
Sanjay Upadhyay
We have got 900 crores cash also lying with us. The net debt is hardly anything. So and frankly this was borrowed to make sure that cash flows. And secondly we put impression on our team also that we have. Our habit of borrowing has gone over. Had completely gone. So negotiating skill. Are we getting the best rate? Are we getting the best opportunity? The 14 years payback. Sorry the thumb loan and those things are tested here. You know in a smaller way I can pay back this loan today also. And there’s hardly anything on the debt front.
But this was more. I mean we borrowed in a company where there was a new company working started in gctl. So this is what we have done. But frankly I know that to pressure in the debt at all.
Meet Vora
Correct. Because gross interest cost ideally should be in sync with that thousand. That’s what. That’s why I was asking. But under your point. Okay, thanks. That’s all from my side also there.
Sanjay Upadhyay
It will be another income. Right. So that interest also will be hardly anything. And when it gets capitalized also. I mean there are several factors here. I think it’s a bookkeeping question.
operator
Thank you. Next question is from the line of Arun Prasad from Evan dspark. Please go ahead.
Arun Prasad
Thanks for the follow up. I was asking about the capital work in progress. 1600 crores we have in our books as of March. So apart from the long term projects can you just help us understand what portion of this is getting commercialized in Q2 and Q3?
Sanjay Upadhyay
So all the projects what we had earlier announced for 2000 2,200 crores are getting commissioned in the current year. This whatever balance will be whatever we are spending say phenol technology or the polycarbon technology and this get over to the next years. You know that other all earlier announcements are getting completed by this year.
Arun Prasad
So. So majority of the CV will be capitalized this year.
Sanjay Upadhyay
Yeah.
Arun Prasad
All right. Thank you very much.
operator
As there are no further questions from the participants I now hand the conference over to management for closing comments.
Sanjay Upadhyay
Thank you all for joining this call. In case you have any further clarification to our team can answer that. Thanks once again for joining this call.
Maulik Mehta
Thank you.
Unidentified Speaker
Thank you on behalf of IIFL Capital limited that concludes this conference. Thank you for joining us. And you may now disconnect your lines.