Galaxy Surfactants Limited (NSE: GALAXYSURF) Q3 2025 Earnings Call dated Feb. 11, 2025
Corporate Participants:
K. Natarajan — Executive Director and Chief Operating Officer
Analysts:
Aditya Khetan — Analyst
Rohit Nagraj — Analyst
Sanjesh Jain — Analyst
Arun Prasad — Analyst
Archit Joshi — Analyst
Shalini Gupta — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Galaxy Surfactants Limited Q3 and Nine-Month FY ’25 Earnings Conference Call.
As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference, please signal an operator by pressing star and then zero on your touchstone phone. Please note that this conference is being recorded.
I now hand the conference over to Mr. K. Natrajan, Managing Director of Galaxy Surfactants Limited. Thank you, and over to you, sir.
K. Natarajan — Executive Director and Chief Operating Officer
Thank you and a very good morning, ladies and gentlemen. It gives me immense pleasure to welcome you all to our Q3 and YTD December FY 2025 conference call. At the outset, this has been a relatively weak quarter. But despite the weakness, we are clear there are several one-offs that caused this. I will now be taking you through the factors that adversely impacted this quarter. Most of these factors are short-term by nature and structurally, let me assure you, we do not see any change in our growth trajectory.
Let me start with the demand-side. India makes up for 40% of our business, weaker-than-expected festive season, the excess channel inventory, lower than projected government spending which spurs the rural economy and unusually weak urban spending adversely impacted our volumes, registering low-single-digit decline for this quarter.
And this also was exacerbated by the fact that it started deteriorating from close to middle of November, beginning of November. While this is not encouraging, a lot of these cyclical blips as against any structural risk. Various such as reduction in grammage, slower scale-up of new launches and slower than projected growth of the Beauty and segments also contributed towards this decline.
While we see this continuing for one more quarter, we are clear that from Q1 ’25, ’26 onwards, things should start picking-up as both rural and urban spending will drive the mass and masstige segment for the performance of actors. Improvement in systemic liquidity combined with the tax incentives provided by the government in the recent budget to incentivize consumption has laid the foundation for it. We’ve also seen lower funding for various D2C brands as contributed towards a broader slowdown of the Indian beauty and personal care market.
AMET, while continues to remain flat, the Q-on-Q improvement in volumes combined with the easing of supply chain-led volatility are major positives going into FY ’25-’26. Macro stability along with stability in-demand will ensure more launches and better pickup going ahead.
Rest of the world has been the highlight for this year, while pickup in premium specialty still continues to be below our expectations, we strongly believe the platform has been laid for a strong recovery for our premium specialties. While for this quarter, we registered a 9% volume growth, the YTD volume growth stands at 20%, driven by the masstige specialties.
On the supplier side, while easing freight costs, availability of containers and cold transition overall contributed towards reduced supply-side volatility. The 40% rise in fat prices during the quarter impacted sentiment and demand pick-up adversely. From our experience, we can share that such phenomena does happen once in two to three years given the inherent volatility in the palm and coconut oil value chain. The adverse impact on-demand is usually felt for two quarters before the normalcy in price returns. We believe that this time too, it shouldn’t be no different.
Apart from the one-offs, I will now share the groundwork that has been done by us to ensure the growth momentum sustains going ahead. While cyclical slowdowns and sudden rise in feedstock prices are part of the game and not in our control, enhancing our customers as well as product basket to ensure consistency in growth and profitability are some of the controllables that are well within our hand.
Our new product Galseer DermaGreen has been getting very good response across developed markets. We strongly believe this will be game-changer as far as oil’s end-use segment is concerned. And these posture effects will be felt in the coming years. Mine as a category though did face headwinds due to the inflationary pressures in developed markets and some reformulations. Traction acceptance are now making a strong comeback.
Given the range we persist, we are leaving no stern unturned to ensure faster approvals, enhanced presence across multiple applications and customers. Preservation remains a key focus area for us. Our upcoming launches in the field of sustainable and non-toxic preservation will lay the foundation for our next leg of growth in this category.
To conclude, rough weather has always been part of sailing, where no one can ever predict the roughness sailing despite these challenges continues to be our key imperative. The same is a story in Galaxy where cyclical slowdown has been part of our business. The extent always remains difficult to predict. Having said that, at Galaxy, we have always focused on the controllables as to ensure when the weather turns, we are ready to sail ahead. We remain confident of our growth and despite the challenges seen in this quarter, I assure you the structural remains intact.
Thank you, ladies and gentlemen. And over now for the Q&A session.
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 touchtone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. These participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will now wait for a moment while the question queue assembles.
The first question is from the line of Aditya Khetan from SMIFS Institutional Equities. Please go-ahead.
Aditya Khetan
Yeah, thank you, sir, for the opportunity. Sir, my first question is, sir, can you share the volume growth for nine months? I believe, sir, you have mentioned that it is single-digit, but is into the mid-single digit or low-single digit?
K. Natarajan
It’s 4%.
Aditya Khetan
4%. Okay.
K. Natarajan
Correct.
Aditya Khetan
And sir, you have talked about the new product, so Galseer DermaGreen, sir, can you like share some data like what is the market size of this product? And is it more of a specialty product? And comparing with our current basket, so are the margins premium in this product or is it more or less in-line with other products?
K. Natarajan
So, this is a premium product where this goes into shower oils, which is a big product that consumers use in the developed markets of the US and the Europe. So this is a green all soluble shower oil ingredient, so which ensures that this will deliver significant superior performance of moisturization with ingredients that are green.
So this obviously will be a high-margin product and we are building up a very good pipeline because all the customer, because this was launched in the InCosmetics Exhibition in April 2024 and since then we have been having a very good response from a customer and a very healthy pipeline is being built. Many of the customers are sampling it and they are in making a formulation and testing it.
Some of them are also doing consumer testing. So we see based on these early signals that this has a potential to become a significantly big product in our portfolio.
Aditya Khetan
Okay, okay. Sir, on to the margin side, like so that is clearly visible like — so because of the higher raw-material prices, we are witnessing some pressure on EBITDA spreads per kilo. So as you have mentioned in your last quarter, like you were confident that second-half would be better as compared to first-half on the spread side and all, but it seems like the number is coming onto the lower side and next quarter also it — so the commentary is not that good. Any idea sir how things will shape up on EBITDA like guidance what you have given of 20.5% to 21.5, is there a downward revision? And what is the outlook on the icon pricing?
K. Natarajan
See, one thing that the thing that really caught us offboard was the volumes in — started to get significantly lower, say, from your number because I think many customers were looking at the Diwali season giving them a good demand comeback. But I think when that didn’t happen, they took actions in terms of reducing the pipeline inventory pretty swiftly because with the increasing feedstock prices, they also didn’t want to have more stock in the pipeline because everyone has started increasing prices of the end-products because they are no longer able to absorb it.
They wanted to do grammage reduction. Again, they wanted to reduce the schemes that had already introduced to incentivized consumption. So that was something that caught us off-guard. The reason why and obviously that also led to lower operating leverage, okay, impacting because India is a significant market and that really it’s your bottom-line.
The other thing that led to that was the slower-than-expected conversion with some of our customers in the specialty ingredients segment. Although they are progressing well, we had expected certain conversion to happen faster, but didn’t happen because I think there were a lot of — some of the of the customers do talk of some sort of uncertainties given the current tariff was and the geopolitical situation, some of them said they want to wait-and-watch.
So there were some mixed signals. But the good thing is the work-in terms of those projects in pipeline, they’re getting it ready to launch and all that is pretty good, but I think there has been some hesitation in terms of going into the next phase of using and launching it. So that’s where we are today.
Aditya Khetan
Okay. Sir, is this slow uptick also because of the higher prices or because of the higher inflationary environment, higher RM also is leading to the higher prices per kilo of the finished products. Is that also like impacting the overall volumes or is it only related to you can say what you are mentioning that from the — so from the customer side because of the lower grammage? So that is the only reason.
K. Natarajan
No. So one of the thing is that the demand environment, if you see even the commentary from all our customers, they have been finding that the herbal condoms has been impacted, rural also has not kept pace. And obviously, the high inflation of feedstocks makes all our customers not to take too much amount of positions in terms of maintaining very-high inventory, whereas when the demand is not being robust, they don’t want to build the inventory with the high-priced feedstock because they want to ensure that even the price correct, they don’t want to be saddled with high-priced inventory with them. So they’ve been cautious.
If you look at it, this has been more with our Tier-2 and Tier-3 customers because their ability to have any hit based on certain feedstock inventory corrections is just pretty low. So that did impact the demand sentiment from our customers as well, which we have seen. And the oil and coal prices have been continuously raising. In fact, November, December, it has gone up like we talked about 40% compared to last quarter and most of it has happened in November and December.
Aditya Khetan
Got it. Got it. Sir, this — so the rise in raw-material prices, complete pain has been taken in our numbers or like there will be spillover in the next quarter also?
K. Natarajan
See the only thing is this when the price increase has to be done, they are done with a lag. So this is a typical risk thing. So we manage the risk pretty well, but then you’re not able to pass-on the price increases immediately, because your prices run for a quarter, your prices run for a month. So whenever the next cycle comes and you end-up taking in the new price and getting. But as you’re doing it, you have one more increase coming in.
So we are ensuring that we are managing it judiciously. So we don’t see a challenge in terms of prices being passed on. But the collateral issue based on that is that the demand scenario gets more problematic because customers also increasing prices of their formulations in the market. So that is the issue that we need to be really concerned about. Our ability to pass-on prices obviously is pretty much there, but it happens with the lag, which always is the case, nothing new now.
Aditya Khetan
Got it. Sir, sir, one last question on to the guidance on EBITDA, if you can just possibly share. And what is the volume guidance, are we maintaining 6% to 8% band for the next two years or there is a downward revision there? And what would be the outlook for the exports market? That would be my last question.
K. Natarajan
See my or this thing is we see this as a temporary issue. Structurally, everything is in-place. So I have no reason to change anything with regard to my volume of 6% to 8% for the next two years or the EBITDA guidance. We don’t see that this is something the structure that has changed. So it doesn’t warrant any change in the guidance, okay, for the next two years.
Although for this year full-year, we will not — we’ll probably end at 4% volume growth and EBITDA per metric ton in the region of between INR19,500,000 to 20,000 per metric ton. Okay. But in the event that we do see there are some reasons for us to revise, we’ll do at the appropriate time. But as of now, I see no reason as to why the guidance needs to be changed.
Aditya Khetan
Got it. Thank you, sir.
K. Natarajan
Yeah. Thank you.
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, you had mentioned about the Nine-Month volume growth. Can you let us know about the 3rd-quarter volume growth on a Y-o-Y basis for all the three regions?
K. Natarajan
So, like it was third quarter, I think we were about minus 7% in India. We were about minus 1.5% in Amit. Rest of the world was about 9.5%.
Rohit Nagraj
Right. And overall volumes were about a percentage lower?
K. Natarajan
Yes. Minus 1%, correct in the quarter three.
Rohit Nagraj
Sir, second question is in terms of the ex-India market, what are the levers in terms of incremental growth. So any which is ROW, I think since last January, we’ve been seeing there has been a continuous growth., it grew earlier, then it had its own sort of challenges and now again, it is back on-track. So what would be the stable levers for individual geographies from growth perspective? And probably if you can also elaborate on the two segments that we are catering to Performance of and Specialty Care across these two geographies. Thank you.
K. Natarajan
Yes. So if we look at India, India essentially the government also seized of the issue and that’s how they have realized that the consumption needs to be now incentivized and that’s why the budget focused on that. And this is something that will be very critical because this now has to start reflecting in the consumers loosening their strengths. So the government also is doing things that will suddenly make this possible. So that is one thing. Otherwise, there is — India has been growing pretty well for us. This probably is the first financial year where we have seen it after probably growing pretty well for almost close to last four years. So this we see that this consumption story has to kick-in again and things will come back. So that is the key stuff.
With regard to all the other levers on our customer intimacy, on our capacity, everything is well on-track. With regards to the other geographies like World, the levers are essentially to ensure that we hold-on to all the new customer developments that we have done and the new business that we have created and that we are very much in control of. With Amit, things have — the entire thing was supply led, things have improved. We do not see any headwinds on-demand side and we would expect this momentum to continue.
The only thing you should not have the geopolitical situation getting worse sir and this is more from Africa, Middle-East Turkey perspective. As of now, we don’t see any indications of that. We only see things getting better based on what we read in the media. And yeah, the — we would like the steady-state as it is now to continue in India the consumption to get back to its original robust state.
Rohit Nagraj
Right. Thank you. Just one last question on the US. So the recent tariffs that have been imposed, any positives or negatives for us as far as US geography is concerned or any other geographies are concerned? Thank you.
K. Natarajan
No, the tariffs in US as of now see what has been imposed on China because only thing that is effective is the additional 10% that has been imposed on all imports from China. So that is something we don’t see anything significant in terms of uptick. We may see some customers looking at for some products they are sourcing, whether it’s too critical for them that they can absorb this 10%, they may look at some sourcing, which our US team is working with the customers. But as of now, it’s too early to comment.
The duties on China, on Mexico and Canada has been kept on-hold now for at least a month. If there is going to be duty that will come in, we’ll let us see whether there can be some customers in Canada and Mexico can start looking at getting it from Egypt or India, which we will see. I think, but as of now, we need to wait-and-watch. So that’s well. But yeah, if you — our Prime Minister is there now and then the whole thing is to ensure that for imports from India into US, their duties are not introduced. So let’s wait for that meeting also to happen. That’s, I think probably tomorrow and after that, yes.
Rohit Nagraj
So thanks a lot. All the best. I’ll come back-in the queue.
K. Natarajan
Thank you.
Operator
Thank you. The next question is from the line of Sanjesh Jain from ICICI Securities. Please go-ahead.
Sanjesh Jain
Yeah, good afternoon, Natarajan. Thank you.
K. Natarajan
Good afternoon.
Sanjesh Jain
Couple of questions. First, from the profit perspective, if I look at last five years, we have been hovering around INR300 crores of PAT. How should we see this growth because the Five-Year hasn’t been that great from the growth perspective, from the profitability. And again, adjacent to it is that if I look at the return ratios, which used to be around 18% to 20%, now has dropped to almost 14.5% on ROCE basis and 13% on ROE basis, a significant deterioration this also has to do with the profit hasn’t been growing overall. How should we see this business shaping up because last five years is something which isn’t the trend what we have seen earlier for the company?
K. Natarajan
Yeah, Sanjesh, you’re right. So this is something that we, as I said, are seeing that has happened in the last about — more so in the last about 18 months and we can give a lot of reasons which we have been giving every quarter. But one thing I can actually is in terms of the actions that we are putting in-place is going to start yielding results. Okay, we only want the external environment to be conducive, but as a group, we are fully prepared and we have clear actions in pipeline to ensure that we come back to the growth trajectory that we are known for.
Sanjesh Jain
No, but return ratios, are they structurally down for us or how should we look at the return ratios for the company?
K. Natarajan
Return ratios, because there are some investments that we did over the last two years, which obviously need to start picking-up in terms of capacity utilization, which will happen. So this is more to do with in terms of timing of this investment. So that we don’t see as a concern, it’s temporary.
Sanjesh Jain
It’s temporary. And from the capital allocation perspective, now that we are sitting on a lot of capacity, that’s what ROCE numbers at least tell. How should we see capex from here on that should materially reduce now that we are sitting on the lot of empty capacities?
K. Natarajan
No, not. We are at 70% capacity utilization. So it is not that — so there will be certain products in which we may have to do capacity additions or debottleneck, which we will do. But then we only do when we reach about 80% capacity addition in any products. So which will continue to happen, but we’ll be as-is the case, we’ll always be frugal will only go for debottlenecking. If not, we will go for a brown. That’s where we are.
With regards to the capexes, it will be more in terms of what we’ll be doing in terms of getting ourselves equipped for the future in terms of our IoT four initiatives to make ourselves more capable, efficient, how we’re going to be looking at digitalization in a way that can prepare us to handle the business of the future. So those will be something that will come in, which we will do because they’ll have their own returns in terms of making us operationally much better and giving us better ability to be excess newer revenue streams.
Sanjesh Jain
We used to run probably at largely 70% 75% utilization if I look at so many years.
K. Natarajan
Correct.
Sanjesh Jain
Then the capex is not underutilized that sense because then ROCE is fairly reflective, then what will drive the ROCE improvement?
K. Natarajan
The ROCE improvement will be driven. One is upgrade. Second is in terms of how our specialty ingredients business picks up and that has been something that has been lagging. And as I said, we expected things to get better from H2, which I’ve been saying on the specialties. We do see a lot of pipeline getting built, but they need to start converting. And our team is aggressively working to ensure we converted. Once that happens, things then start falling in-place.
Sanjesh Jain
No. I thought we were at 17% 18 with the mix when we started and then we were thinking of return ratios going better from there.
K. Natarajan
Correct.
Sanjesh Jain
With the mix improvement, right?
K. Natarajan
Yeah.
Sanjesh Jain
We are now struggling even to reach the past level with all the mix probably not very different from the historical trend. So what are we missing in this reconciliation?
K. Natarajan
Essentially see, when it was — we also had certain like in those years when we did, we also had certain one-offs in terms of better realizations even on performance products given the ability to get-in the — like you talked about the COVID years. So there were certain one-offs at that time also. So if you adjust for all that, we are still getting better in terms of the way that we are delivering on the weighted-average on the EBITDA per metric ton. The only issue is our specialty volumes need to pick-up significantly, so we come back there. So that’s what we’re saying.
Sanjesh Jain
And one last question on this topic. How do we look at capital allocation from here? We have negligible debt on the balance sheet. How should we look at capital allocation between the capex, dividend payout?
K. Natarajan
Yeah. So we will follow the current dividend policy. We have certain business agendas and business initiatives for which will require some cash. We will be clearer as we move forward. But yes, our objectives we ensure, how do we use the cash judiciously and ensure that we return back to the shareholders at the appropriate time, which we’ll work on.
Sanjesh Jain
Got it. Couple of questions for this quarter financial. It appears there is a stark difference between the performance of the parent entity and the subsidiary entity, that is consol minus standalone.
K. Natarajan
Correct.
Sanjesh Jain
Consol minus standalone has been pretty much stable, right? In fact, EBITDA margin have only gone up. What has changed in the parent entity business? What such a stark difference between the performance of two entities?
K. Natarajan
Yeah, that’s because one is the parent entity has been where the major volume issue has happened in the India business. That is one. Second is some of the specialty ingredients where the pipeline was being worked out, that hasn’t flowered the way it needs to flower. So these are the two things. So major impact has been on the India de-growth of 7% that has impacted the India business.
Sanjesh Jain
But we have offset that through a much better growth in the ROW, right? And ROW generally isn’t better than…
K. Natarajan
My specialty volumes have also de-grown in the last quarter by 5%. Okay. So ROW also the growth has been majorly driven by performance factors. And that is — probably some of it has happened from our Egypt subsidiaries.
Sanjesh Jain
Got it, got it. And when should we see all this fructifying? Will FY ’26 be a year where we will go back to that INR20 — INR20, INR21 kind of EBITDA per kg and 8%, 9% kind of a volume growth. Are you confident about that?
K. Natarajan
Yes. Yes. Sanjesh, pretty confident.
Sanjesh Jain
Got it. Got it. And then one last question on the cost. Though volume growth is not there, but if I look at our overall cost, particularly other expenses, that’s been quite sharp for last two quarters. Even the freight costs have settled down, what is driving a, 21% 22% of the other expenses increase, while volume has declined 1%?
K. Natarajan
So there have been some of the one-off situations that we aware like a good amount of detection that happened in, say, our Egypt facilities because of all the issues on the supply-chain getting impacted. Even in India, we had because the incoming supply-chain, it started getting better, but you had shipments coming all at the same time. So that’s been thing that has actually gone up. Otherwise, there’s been nothing else to explain that increase. It’s been those one-off in terms of this retention beverage going up significantly.
Sanjesh Jain
So this INR150 crore run-rate, we should again go back to that INR120 crore run-rate say next quarter, right?
K. Natarajan
Which one be…
Sanjesh Jain
The other expenses.
K. Natarajan
Yes, we should look at that, okay. But then there’ll be certain one-offs are continuing in terms of some, I think in Egypt, but then it will be much lower than what it was in this quarter. Correct.
Sanjesh Jain
Got it. Yeah. Thanks, Natarajan, sir, for patiently answering all the questions. Yeah, best of luck for the coming quarters.
K. Natarajan
Yes, thank you.
Operator
Thank you. The next question is from the line of Arun Prasad from Avendus Spark. Please go-ahead.
Arun Prasad
Good afternoon. Thanks for the opportunity. Sir, just you said, again, little bit coming back to the volume growth. So minus 1 percentage Y-o-Y for the quarter. Is this a similar for performance on specialty or there is a difference in the performance between these two categories?
K. Natarajan
Actually specialty degrew by about 4.5%. Performance grew by about 0.5%.
Arun Prasad
Okay.
K. Natarajan
Yeah.
Arun Prasad
So this — but rest of the world did very well, but despite that specialty degrew?
K. Natarajan
Rest of the World. It was majorly fewer — majorly supported by certain performance of some factors that was the business that we did from our Egypt facilities.
Arun Prasad
Okay. So which means that on a sequential basis, we are roughly around 7% to 8 percentage is a decline in the volumes?
K. Natarajan
Yes, correct.
Arun Prasad
Okay. And how much of this 7%, 8 percentage decline is, you know you will attribute to the seasonal from — when you move from September to December quarter and how much is because customers are rationalizing? Can you give a broad indication?
K. Natarajan
Yeah. So there is actually no seasonality. Actually, October, Novem December is a good quarter typically if you look at it. This — the whole thing has been in terms of in India where all the customers have started pulling back-in terms of reducing their inventory in the pipeline. That is what has led to the steel dip in this quarter and in India also.
Arun Prasad
Okay.
K. Natarajan
Yeah.
Arun Prasad
Sir, just if I look at it in another way, our volumes have declined by around 8 percentage sequentially and our absolute gross margin has also kind of declined by around 7%, 8 percentage. So is it right to understand that gross margin per kg should be more on the stable in this last two, three quarters?
K. Natarajan
Yeah, Correct.
Arun Prasad
Okay. So large difference in the EBITDA per kg is because of the other expenses and which you are saying will — if the one-off is not exactly kind of one-off, it will recover, it will keep recurring in the next two to three quarters also?
K. Natarajan
Yeah. So one is where we the gross margins also need to start improving with the mix improving. That’s what I said and-answer certain earlier questions, okay. And in terms of cost, how do we ensure that we are able to keep the one-offs as real one-offs and then internet something manage because it’s more to the export scenario that we’re talking about.
Arun Prasad
Okay. Sir, this second is on the fatty prices, you said — you have mentioned in the presentation that it’s around $2.5 per kg. I see that it’s still even in Jan and Feb, it’s hovering around $2.3, $2.4 per kg. So unless and until we pass some of the spot prices, fair to assume that this kind of a margins will continue to reflect in our numbers?
K. Natarajan
No, we are passing on, as I said albeit with a lag because if you see the prices have been going up month-on-month, it has stabilized, say, probably for the last two months, okay. And the only — the problem is not passing on the increases. The problem is in terms of the impact is having on reviving the demand, which is already pretty low at least as India is concerned. So that is the biggest challenge.
The expectation is customers are our customers are extremely hours to building their pipeline with these high stocks because they are also passing on the price increases. Now what will be the implication of this price increase on the demand-side, we’ll have to wait-and-watch because that is another thing that the market is grappling with.
So the best that can happen is where the prices start correcting, which we expect should happen. If that happens, then it’s going to be good in terms of giving a good impetus to the volume growth in India.
Arun Prasad
Okay, sir, I’ll put it in another way. At what point of time you will say, okay, forget about the demand, we need to protect our margins and I will pass-on. Is there some kind of a framework for this?
K. Natarajan
No, even otherwise, we ensure that we pass-on. It’s not that we do not pass-on. It’s only with the lag. So all increases are passed on. It’s not that we decide to keep volume by not passing on the increase that we never do.
Arun Prasad
Okay.
K. Natarajan
It’s only the timing difference, that’s all. But then if this situation will not happen, if it increases and stabilized, but if you keep it every month, then you may have some impact because it goes to the lag. That’s all.
Arun Prasad
What is the average lag ticket, sir? Are we following M minus on pricing or Q minus on pricing?
K. Natarajan
So there are some contexts are Q minus 1, some contexts are n minus 1, okay. So it depends on what the context will like. There are some customers who buy monthly, some customers who buy quarterly, okay. So we ensure that we are able to have those things covered, but there’s still be inventory that will be able to support that, even if there is a lag.
Arun Prasad
Okay, understood. Sir, just in the — to answer the previous participant’s question, you said you are working on certain actions to improve structural profitability of the business. Can you give us what is the kind of actions that you are taking and which of those actions will give yielding in the near-term and which will take some time to reflect in our numbers?
K. Natarajan
So, two things, how do we build a strong revenue pipeline with regards to our specialty ingredients, that’s something lot of actions have been taken and we’re building good amount of projects in pipeline and that is something that’s going to start yielding results as the quarters progress. That’s very clear. The other thing is in terms of how do we make — prepare ourselves well in terms of the organization to be able to partake in the sort of extent growth opportunities that we see as far as this market is concerned.
So these are the two critical things. And then how do you start getting structure to keep it focused on all the critical initiatives, be it digitalization, be it building certain country-specific portfolios on specialty ingredients. So that will be the key initiatives that we will do. The other stuff that are pretty much more internal.
Arun Prasad
Right. All right, sir. Thank you very much for answering all the questions. All the best.
K. Natarajan
Thank you.
Operator
Thank you. We have the next question from the line of Archit Joshi from Nuvama Institutional Equities. Please go-ahead.
Archit Joshi
Thank you, sir for the opportunity. [Technical Issues]
Operator
Sorry to interrupt in Archit, but you are not clearly audible.
K. Natarajan
Yeah.
Archit Joshi
Is this better?
K. Natarajan
No, your voice is breaking.
Archit Joshi
Hello. Hello. Is this any better?
Operator
A little better, sir, please go-ahead.
Archit Joshi
Yeah. Sir, my question was understand our India business a bit better. I was looking at the customer profiling that we continue to report in our investor presentation. The mix that we generally maintain, especially the MNC customers largely 50%, 55% and then there is regional and some other players that we continue to report.
So that mix has largely been similar for the last few quarters is what I was observing. And given the guidance of kind of maintaining our volume growth to the extent of 6% to 8%, has there been any strategy to kind of deviate or rather have a makeshift arrangement to kind of get into the smaller players of their extensive amount of new brands that have come in the personal care category.
So do we also have any propensity to shift that mix or we believe that the 6% to 8% volume growth will be a function of the existing customer mix that we have?
K. Natarajan
No, see, if you look at it in India, when you look at the entire one, Tier-2, Tier-3 as we call it, yeah. There is no way that we can decide that I want to focus only on Tier-3 or Tier-2 even temporarily because it’s important that we focus on all the customers and the requirements in terms of serving their needs are very different. So example, we in India deal with all the D2C brands. But the issue that has been there is that most of them have been not able to scale-up if they wanted to given that there is a cost push, plus there is a demand cutback that has happened in the urban market. All of them are talking about many of them wanted to go from online to offline, they have held it back.
They weren’t waiting for probably the right time to be doing that. So we don’t choose between the customer categories because our objective is to ensure that we grow the business in the market, retaining our significant share and we need to be engaged with all of them equally well. The need to be served is very different, which the team is aware of and we serve them very differently. But we need to keep the focus on all of them. We can’t decide to prioritize one over the other.
Archit Joshi
Sir, what I was trying to understand a bit better is, for example, this quarter you said that the festive demand was not as good as even the customers had anticipated. But since the Tier-2, Tier-3 and Tier-4, the products that are being introduced in the market, the — hello?
K. Natarajan
Yeah.
Archit Joshi
Yeah. So I was saying, so the bottom of the tier or maybe Tier-2, Tier-3 kind of customers who are also getting into the market, they have faced a similar phenomenon or is it that there are certain pockets where we can still have some room to gain more wallet share?
K. Natarajan
See, is there we have seen — if you see, we have gained wallet share in — even when we lost volumes in India, but with some customers, okay, because that’s the continued excess, but that is not enough to mitigate the sort of you have from your large customers. No. It is not that you don’t go. So individually if we look at when we review internally, there are customers need to grow our volumes with them. But those are on a small base, correct? And it offset the entire degrowth that happens from the Tier-1 customers, correct?
Archit Joshi
Correct.
K. Natarajan
Yeah.
Archit Joshi
Yeah. Got it, got it. Thanks for the clarification. Thank you and all the best.
Operator
Thank you. The next question is from the line of Shalini Gupta from East India Securities. Please go-ahead.
Shalini Gupta
Sir, I just wanted to check what is your view on where do you think fatty alcohol prices will be in the next year and the next quarter?
K. Natarajan
Yeah, next quarter should be probably flattish at the current levels of INR400. I don’t have a crystal ball in front of me, but my only wish is that it should settle down much lower, probably around $1,500 to ensure that you demand robustness, it gets back-in with the customers because that’s important. Otherwise, the consumers end-up paying there and they start taking their own actions in terms of reducing consumption, which is not good. So — but then I have no idea as to where settle. But next quarter, I can based on my understanding, it probably will be stable at these levels. But yes, it should come down for it to be beneficial for a growth momentum, it should come to $1,500 level.
Shalini Gupta
Sir, what in your opinion led to this sudden price hike?
K. Natarajan
That was more driven by the prices going up for your palm oil and palm kernel oil. So if you see the entire edible oil complex has gone up, okay. And this essentially has moved up in sympathy with this majorly with regard to your palm oil going up. So today your palm kernel oil from which coal is made is about $1,700 FOB, Indonesia, Malaysia. So that is what. And the same thing, the same time last year it was at around $900 to $950. So that explains.
Shalini Gupta
So you’re expecting palm oil prices to come down?
K. Natarajan
Yes, based on the high season months commencing, that’s what I said.
Shalini Gupta
Okay. And sir, my other thing was that that earlier you were facing some supply-side issue challenges. So have those eased now?
K. Natarajan
Yeah, they have eased. It should — it can be better, but certainly it’s not as acute as what it was in the first two quarters.
Shalini Gupta
Okay. And sir, my last question, sir, you had — you had said that you are expecting that you are expecting yeah, guidance at 20,000 per metric ton to 21,000 per metric ton. So that you’re saying will — that you are — that for the next two, three years you maintain?
K. Natarajan
Yes. As of now, I don’t see any reason to revise the guidance.
Shalini Gupta
Okay. And sir, I just want to confirm EBITDA per kg in this quarter has been INR15.7?
K. Natarajan
No, it’s been yes 16 — sorry, it’s been INR17,500.
Shalini Gupta
INR17,500. Okay, sir, thank you so much.
K. Natarajan
Thank you.
Operator
Thank you. The next question is from the line of Rohit Nagraj from B&K Securities. Please go ahead.
Rohit Nagraj
Yeah. Thanks for the follow-up. Few clarifications and a couple of questions. One, in terms of alcohol prices, so you — I mean historically whenever such sharp surge has happened, you said it lasted for a couple of quarters, which in current include 3Q and 4Q and probably from 1Q onwards, the coal prices should normalize. Is that the right assumption?
K. Natarajan
Yeah, actually, because if you see the ice season once in Malaysia, Indonesia for harvest of farm fruits and palm kernel is typically beginning of May. So that is what leads to us. So then that leads to inventory being higher and then you have the palm and palms and oil prices coming down and deflecting in alcohol prices. So that’s the expectation. And as of now, that’s what the market expect that things should start now because everyone does say that it is currently positioned at a very-high level and it has reasons to submission indication it should come down and we expect that the same lines.
Rohit Nagraj
Right. And our FY ’25 EBITDA per metric ton guidance of INR20.500 to INR21,500 is now postponed by one year to FY ’26. And thereafter, I mean, historically we’ve been saying that it will be growing by about maybe 4%, 5% annually. Is that the right assumption to work with?
K. Natarajan
Yes. So this year, so I said I don’t want to change the guidance because I don’t — I see this as a short-term blip. So this quarter — this year, we will not be achieving that. It will probably be a 4% growth and a close to around 19,000 tonnes of EBITDA per metric ton, but then we do see that we’ll come back, okay, to the guided range in the next year, okay, as the months — as the quarters progress. But if there is anything that we see structurally different, we’ll come back and say whether we need to revise, but we don’t see any reason to do that as of now.
Rohit Nagraj
Sure. Now my other question is on the capex front. So given that this year there has been muted volume growth and we probably have capacities to place the volumes even next year. Would the capex guidance of say INR150 plus-minus crores be lower for next year or year-after that or will you stick to the same guidance?
K. Natarajan
Look, I would want to be with that because there are some things that we are already planning. So we see no reason as to why we need to cut-back on capex because we are always pretty deliberate and very frugal about both the timing of our capacity additions and also in terms of the cost at which we add the capacities. So whatever we see in terms of this required to keep us prepared to serve our customers, we will do that. So we’ll be pretty deliberate about investing, but I don’t see that we’ll end-up having significantly lower capex is next year. We don’t see that.
Rohit Nagraj
So and one last question. So we’ve been scouting for maybe any inorganic initiatives given that there is good amount of cash on the books. However, we have not been successful. So is the hindrance coming from any material technologies pickup in our line-of-business or there is any other factor that, I mean traditionally whatever surfactants we’ve been using, the same have been modified to an extent and being used now.
Only thing is that moving to some green chemistries, but there are no such players who are working on any better technologies or a substantially better or other sustainable products and that’s why we are not able to get any leaks? So, just your thoughts on this.
K. Natarajan
No. So there are like we are engaging with customers and certain partners where we are able to get into some sort of a partnership to get that done. So many times you don’t have to just make an investment. We will end-up making investments or doing some of your inorganic acquisitions. Only when we see that there is a need to do that to ensure that we are able to be secured. We are evaluating we have been evaluating a lot of such options, but we don’t find them terms of the optimal situation which we would want to be going ahead. But this will be a good part of our strategy to grow forward because we have an aggressive growth agenda ahead of us. So we are constantly on the court, but we will — just because we have cash, we’re not going to get into any acquisition that we are very clear. It has to be at the right value and for the right strategic purpose.
Rohit Nagraj
Sure. Thank you and all the best, sir.
Operator
Thank you. The next question is from the line of Aditya Khetan from SMIFS Institutional Equities. Please go-ahead.
Aditya Khetan
Yeah, thank you, sir, for the follow-up. Sir, my question was largely when we look at a span of four years, so last four years. So cumulatively around INR700 crore has been invested in capital expenditures. Although on the EBITDA front, the number hasn’t been that impressive because of higher other expense as you mentioned. But on gross side also, the — so the conversion has been lower despite your mix remaining the same between the performance and specialty, that has not been deteriorated. So what explains this not?
K. Natarajan
No see the capacities that we set-up have been for the premium specialties. So that is what we have been saying where the sort of deceleration happened when you have in Europe and US, lot of projects got held up or they got suspended because of the destocking and inflation there. It started picking-up in terms of — the projects which have been getting built only in the last about six to nine months, okay. So the capacity we have set-up out for premium specialties, so that needs to gain traction and then that would send everything back-in place. That’s what I said even when I answered some question on similar lines previously.
Aditya Khetan
Okay. And sir, this INR700 crore like which we have invested, any idea like so wherein we have invested like particularly into the specialty debottlenecking and what was the amount if we can just…
K. Natarajan
That we don’t share, but then I’ll say that out of INR700 crores because major was towards the specialty ingredients.
Aditya Khetan
Okay.
K. Natarajan
Yeah.
Aditya Khetan
So there the capacity has been expanded you mean to say?
K. Natarajan
Yes, correct.
Aditya Khetan
Okay. And sir, further guidance on to the capex, any…
K. Natarajan
So we probably will stick to that same INR150 crores that we do, but then we will see when is the guidance, but then we end-up investing only when we see there is a real reason for us to be kicking off. So that will continue.
Aditya Khetan
Okay, got it. Thank you.
Operator
Thank you. We have no further questions, ladies and gentlemen. I would now like to hand the conference over to Mr. K. Natrajan for closing comments. Over to you, sir.
K. Natarajan
Thank you, ladies and gentlemen. Thank you for coming to this Q3 analyst call. And I look-forward to talking to all of you again and with a much better numbers. Thank you.
Operator
Thank you. On behalf of Galaxy Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.