GHCL Ltd (GHCL) Q4 FY23 Earnings Concall Transcript

GHCL Ltd (NSE:GHCL) Q4 FY23 Earnings Concall dated May. 02, 2023.

Corporate Participants:

R. S. Jalan — Managing Director

Raman Chopra — Chief Financial Officer and Executive Director of Finance

Analysts:

Rohan Ohri — Emkay Global Financial Services — Analyst

Jatin Damania — Kotak Securities — Analyst

Saurabh Jain — HSBC — Analyst

Sarvesh Gupta — Maximal Capital — Analyst

Vasunath — New Berry Capitals — Analyst

Vishal Jain — Techno Family Office — Analyst

Saket Kapoor — Kapoor and Co — Analyst

Riya Mehta — Aequitas Investments — Analyst

Rohit Nagraj — Centrum Broking — Analyst

Niraj Mansingka — White Pine Investment Management Private Limited — Analyst

Tarang — Old Bridge Capital Management Private Limited — Analyst

Yogesh Tiwari — Arihant Capital Markets Ltd — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to GHCL Limited Q4 FY ’23 conference call. We have with us today Mr. R. S. Jalan, Managing Director and Mr. Raman Chopra, CFO and Executive Director of Finance. 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. [Operator Instructions] Please note that this call is being recorded. I now hand the conference over to Mr. Rohan Ohri from Emkay Global Financial Services Limited. Thank you and over to you sir.

Rohan Ohri — Emkay Global Financial Services — Analyst

Thank you, Sravan. Good evening, everyone. I would like to welcome the management and thank them for this opportunity. I shall now hand over the call to the management for the opening remarks. Over to you, gentlemen.

R. S. Jalan — Managing Director

Thank you, Rohan. Good afternoon, everyone, welcome to GHCL earnings call for the quarter and year ended 31st March 2023. Our adjusted presentation has been uploaded on the stock exchanges and company’s website. For this call I am accompanied by Raman, who is our CFO along with Manu and Abhishek from our Investors Relations team. I’m pleased to announce that we have completed the demerger of GHCL Textiles with a quick fast upgrade [Phonetic]. This will now create two separate sectors focus listed entities and shall benefit all our stakeholders.

Moving over to soda ash, the global market are in-balance. We expect that soda ash demand will get a boost from environment related sector such as solar glass, lithium carbonate and sodium bicarbonate. Input costs including the energy prices have moderated and supply-chain cost is below pre COVID level. This has resulted in softening of soda ash prices and passing the benefit to consumers. In India, also prices have softened. And we have taken a price cut of 3% to 4% in acids [Phonetic]. However, with reduction in input cost, impact on our margin is felt to be minimal. As we intimated to stock exchange, we witnessed a lime kiln breakdown at our plants. This has happened for the first time, we have taken preventive measures to identify early detection in future. We have made progress to contain the loss and production shall normalize by end of May.

Coming to the textile, the sector continues to face headwinds, but demand has started to recover, and we believe that business sentiment will be improved in the next one or two quarters. Our plant has been fully operational, and there is no major inventory buildup. We expect our margins will revert back to the average, market in the range of 17% to 20% in — over a period of time. These results in our reported results as discontinued operations due to demerger. We continue to focus on the implementation of various growth initiatives. We are making progress on the [Technical Issues] project, and basic engineering activities are now starting. We have announced a new vacuum salt project, which will expand our product basket. We shall manufacture edible salt by harnessing the energy from soda ash [Technical Issues]. These projections take approximately 18 months for completion. Salt improvement and digitization projects are progressing well. I will now request Raman to share the financial performance.

Raman Chopra — Chief Financial Officer and Executive Director of Finance

Thank you, sir. Good evening, everyone and a very welcome to our Q4 and year-end FY ’23 earnings call. I will share the financial highlights. As you are aware, the demerger of our textiles has become effective from the 1st April 2023, and the results of this business have been reported as discontinuing operations. Accordingly, all assets and liabilities pertaining to same business have been transferred to GHCL Textiles Limited. The continuing operations now represent inorganic chemical treatments.

For Q4 FY ’23, revenue from continuing operations came in at INR1,141 crores. This represents a growth of 8% on a year-on-year basis and 3% on a sequential basis. The main reason for this growth is better realization over the last year. EBITDA for the quarter stood at INR370 crores from continuing operations, which is an increase of 10% from Q4 of last year. For the quarter, EBITDA margin came in at 32.5%, at compared to 31.9% in Q4 FY ’22 and 33.6% in Q3. The reduction in margin on a sequential basis is due to lower production during the fourth quarter. PAT for the quarter for continuing operations stood at INR251 crores, compared to INR200 crores in Q4 of last year and INR254 crores in Q3 FY ’23.

For the full-year FY ’23, PAT including discontinued operations stood at INR1,117 crores, compared to INR637 crores for FY ’22. This is a substantial increase of 75% in PAT. The dividend for the year has been announced at INR17.5 per share, which is the highest by the company. For the year ’23, we generated a cash flow of around INR1,400 crores, including balance proceeds from the sale of our HT [Phonetic] business. This was utilized towards the capex of INR357 crores, working capital of around INR267 crores, loan repayment of INR342 crores, and dividend of INR143 crores.

At the year-end, we had a surplus of finance, INR525 crores at the entry-level, which included liquid fund investments of around INR365 crores and cash-and-cash equivalents of around INR560 crores. At the year-end, our gross debt stood at INR426 crores for both the businesses together, and there was a net cash surplus of around INR99 crores for the company as a whole.

With this, I conclude my comments and would now request the moderator to open the forum for questions and answers. Thank you.

Questions and Answers:

Operator

Thank you very much, we will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Jatin Damania from Kotak Securities. Please go ahead, sir.

Jatin Damania — Kotak Securities — Analyst

Thank you, sir for an opportunity. So just wanted to check now with the breakdown of the lime kiln that we have seen, what was the production loss that we had witnessed during the quarter?

R. S. Jalan — Managing Director

Approximately around 40,000 ton.

Jatin Damania — Kotak Securities — Analyst

30,000 and when do we expect the lime kiln to come back on the stream [Phonetic].

R. S. Jalan — Managing Director

But it’s not 30,000 tons that is 40,000 tons.

Jatin Damania — Kotak Securities — Analyst

Okay

R. S. Jalan — Managing Director

And the lime kiln, out of that major portion has been recovered and by end of May the full production will be there sir. 80% to 90% of the problem has been solved. Only 10% problem that needs to be solved during the next few days. So, by end of May, we have it full.

Jatin Damania — Kotak Securities — Analyst

So, sir, in terms of the volume, if you want to check, we did 11.4 lakh tonnes of volume in this financial year so, more or less you will be closing FY ’24 on the same number with a lower realized. Is it’s safe to assume that?

R. S. Jalan — Managing Director

Sorry, could you just repeat your question again.

Jatin Damania — Kotak Securities — Analyst

We closed this year, soda ash volume with 11.4 lakh tons now with the breakdown in the lines you will be losing a two month of production. It is safe to assume that for FY ’24 it will be close around more or less under same level of the volume.

R. S. Jalan — Managing Director

I think — I don’t see it in the region of production — sales is lower than that the number which we have achieved this year’s.

Jatin Damania — Kotak Securities — Analyst

Thanks, sir, one last two questions, one from the — your overview on the soda [Indecipherable] that the demand is getting a boost from the solar glass, lithium bicarbonate and sodium bicarbonate. But the other end we have also seen the prices have softened by 3% to 5% even new categories you mentioned about the price cut that we took in month of April. So, with the new capacity that is going to come in inner Mongolia, where do we see soda ash prices given the moderation in input cost and increase in the overall supply in the coming months?

R. S. Jalan — Managing Director

Yeah. I think this is a very valid and very important question, you have asked. Let me give you a slightly picture of long-term as well as short term. If I look at slightly on a longer-term based on the global outlook, which has been presented in the last soda ash content, there very bullish scenario coming in next five to six years. It is 53 million of the total demand at this point of a time, the projected expectations of the demand will be 80 million. And if I say it, all the production, which had been announced or that are likely to come is still the Global Team feels that there just going to be shortage of around 4 million. That means in the longer-term, if you look at there is a bullish exploration into soda ash.

Now let’s come to the immediate in the next few quarters. If I go country-by-country, I think I’ll be able to give you a little better picture on that. If I go to China, in China, what is being said is that alone the solar — solar investments and the solar demand will enhance the soda ash demand by around 6% to 7%. And if I take the normal increase, there is very bullish situation in China. The new capacity which is coming around 1 million tons to 1.5 million tons during this year, will get a job in China.

Now coming back to, U.S. U.S. there is a very balanced demand-supply for the production as well as their supply to the natural markets. If I come to Europe, Europe situation has significantly changed over a period of last one or two quarters because of all the contracts which are there, of course, the demand are very good in Europe and supply is also fully — is fully operational. So, demand-supply balances there. However, the prices have softened because of — because their prices are always strict with the gas price indexing. So, because of that the prices have softened, and they have become competencies.

Coming back to India, India’s demand of soda ash in all the sectors have been good. And the growth into the solar as solar investments and the normal glass and the [Technical Issues] every sector put together, we believe that a 5% of the demand growth will happen in India as well. So, keeping everything in a — and we don’t see any major imports coming in or more than the imports which has been coming in the past, will be coming to India. So therefore, if I look at in the total situation, on one-side demand for goods. Some supply increase like inner Mongolia you said or some in the U.S. will happen, but keeping everything in the demand-supply will be a balance.

In terms of the pricing — pricing and as you rightly said, some softening had happened and maybe some more softening can happen in next two months. However, that will not — because the supply-chain costs had gone down as well as your raw-material prices or the energy prices softened, I personally believe there will not be a significant drop into the margin off going-forward. I hope I’ve been able to clarify to your [Technical Issues].

Jatin Damania — Kotak Securities — Analyst

Yes, Mr. Jalan. Thank you for the detailed answer. Sir last quarter [Technical Issues] before I jump back-in the queue again. So, this is more on the balances now after the demerger our balance sheet has strengthened, which was already there in last year, we have seen a sharp increase in the cash and cash outflow. And as a corporate, we have also done a good job in terms of increasing payout this year, but we were also discussing some of the buyback that the capital deployment that — suppose the company was supposed to be announced in last quarter or the after the demerger. So, any guidelines on the capital allocation for FY ’24 and ’25? And any sort of corporate action that we can see?

R. S. Jalan — Managing Director

Yeah, let me give you this answer in a very safe manner which we have said as a philosophy that ultimately the cash which we have [Technical Issues] will ultimately either go into the growth of the company or will get distributed to the shareholders of the company. Now only thing will be the timing of that things will happen, and the appropriate time. But we are conscious about the rewards [Indecipherable] and the appropriate time though the right decision will be there [Phonetic].

Jatin Damania — Kotak Securities — Analyst

Sure sir, thank you. [Indecipherable] I’ll come back in the queue.

Operator

Thank you, sir. The next question we have is from the line of Saurabh Jain [Phonetic] from HSBC. Please go ahead, sir.

Saurabh Jain — HSBC — Analyst

Yeah, thanks for the opportunity. Again, if you provide more details around the new China capacity that is supposed to come what can — the broad understanding would be the timelines. And [Technical Issues] addition, what is the total size of the project. Any color on that would be very helpful?

R. S. Jalan — Managing Director

No, you are right Saurabh that this investment of inner Mongolia is very coming [Phonetic] in a phase-wise and hopefully this year probably 1 million tons to 1.5 million tons of new capacity, which we are hearing will come in. But still, I would say that the very clearly, my understanding about this, that China in a longer-term period will not be a kind of supplier to the world. Because two things will happen in China itself, the demand the growth will take care of this new addition. Second, their focus on the environmental this thing, they will be looking at some shifting of their plants or closing of their unviable plants. So, my understanding in the longer-term, China and which has been in the global soda ash content as I discussed, China will not be a major supplier to the world.

Saurabh Jain — HSBC — Analyst

Okay, but how big is this project like, phase 1 your spend would be coming this year about 1.5, when do you expect this to commercialize and are there, when would the rest of the phases would be adding to the global capacity. Is it going to next year, or is it going to be spread over a longer-term. How do you see that?

R. S. Jalan — Managing Director

This will be a longer-term Saurabh. This will be a longer-term but literally be coming like I said, 1 to 1.5 million this year, and there will be some addition will be next year. There are a lot of challenges also there. Water is a frequent big challenge to them. The transportation because this is a very far off so transportation from that source to the mainland will also be a big challenge. So even if they want, they cannot come in [Indecipherable], it will be coming in [Indecipherable]. And one more thing which is very interesting in China, I think is happening. I believe if you remember that China was more of a dumping the materials, the cost of the economies was not very important for them. Now the cultural change, which we are seeing there is that they will moderate their production, but they would not like to sell that to [Indecipherable]. So keeping that in the mind, they will definitely come with [Technical Issues].

Saurabh Jain — HSBC — Analyst

But again. Correct me if I’m wrong, this will be a natural soda ash process right compared to rest of the synthetic capacity on Hu [Phonetic] processed in China, largely Hu [Phonetic] processed. So, would it also be right to understand that this pricing for this Orient [Phonetic] project, which is based on naturals in our process, the price would be much lower than what — or the cost of production would be much lower for inner Mongolia compared to the rest of the products in China? And then they can — so that the incremental cost that you’re talking about to bring to the coastline, will that be offset largely because the cost of production would be lower in the inner Mongolia and they can very well then ship out these products out of China into the rest of the countries like India, Southeast Asia, where they are currently pushing their synthetic exports. Would that be a possibility?

R. S. Jalan — Managing Director

No, no Saurabh it’s not — if I can answer this. The natural soda ash is always going to be cheaper in terms of when it comes to the cost of products. Even if you take an example of in U.S. or take an example of Turkey. Okay, there is, definitely their costs are much lower as compared to the synthetic process. There is that. However, the supply-chain costs from the remote location where the plant exist to the seacoast like this, if my memory is correct, this is around 3,000 kilometers away from main ports. So, the supply-chain cost, after taking into account that supply-chain costs. And if want to export to consuming country like China or for that matter, to Europe or some other country, definitely there will be with Indian, or the local producers will always be competitive with that. And this is historically has been seen in the past like the U.S. or the Turkey. Turkey has the same cost of production.

Now if Turkey material coming in India, definitely India has competitive advantage because of the supply-chain cost of Turkish production from there to the port and port to India. You can’t say that because of this production the supply — supply disruption will happen.

Saurabh Jain — HSBC — Analyst

So, what you’re alluding to is that the cost of transportation, will be more than offset the lower-cost of production for inner Mongolia. Is that correct understanding?

R. S. Jalan — Managing Director

Yeah.

Saurabh Jain — HSBC — Analyst

Okay and the other question is that what kind of — so already four months have passed during this year. How do you see the growth in the conventional segment demand for soda ash? And how do you see the full-year demand for from the conventional levers that are there for the soda ash industry? Is going to increase or stable or declining? What would be your view over there?

R. S. Jalan — Managing Director

So definitely it will be positive. I said in my opening remarks also that demand of the soda ash will grow by 45%. Our expectation, conservatively this demand growth will be around 5%. Because glass is doing great, bottle glass is doing fantastically well. Even the rural demand into that [Technical Issues] detergents has picked-up. Even the textile which were struggling and there also that pick up has started happening. Therefore, overall, we are seeing a demand growth is around 5%.

Saurabh Jain — HSBC — Analyst

This is the conventional segment of the soda ash or the total soda ash or the total soda ash you are talking about?

R. S. Jalan — Managing Director

Broadly, this is conventional segment and then some addition may happen because of the — of course, some demand of the soda ash seems to shift towards the caustic, because of the caustic prices are low but keeping that also into account and a new investment, which is getting into the glass and solar, we believe that conservatively the demand of soda ash will be around 5%.

Saurabh Jain — HSBC — Analyst

Okay, thanks, a lot, sir.

Operator

Thank you, sir. The next question is from the line of Sarvesh Gupta from Maximal Capital. Please go ahead, sir.

Sarvesh Gupta — Maximal Capital — Analyst

Good evening, sir and thanks, a lot for taking my question. Sir, first question on the soda ash side is — this year has been very-very different in terms of the margin, spacing and everything. And this was not the level of profitability that we saw in the previous years. So, but now you are more or less, saying that this is the new normal. So just from an understanding perspective, all the drivers including glass, Chinese, environmental related problems, all these are always there. So, what specifically has changed this year, which has created a new normal in terms of the profitability of the soda ash industry which you think is the — is what it is going to be more or less going-forward?

So that is one, and second is on the textile side. So even after adjusting the one-off, I think we are still coming to like 3% to 4% EBITDA margins. And you said something like 17% to 20%. So how soon do we see the margins reverting to the average levels of 17% to 20%. And if you can throw some more light on the revenue drivers for that. And because of the demerger if you can also show — throw some more light on the management of that business. How has it been done in terms of the top management split between the two companies and what will be the — the thing going-forward for that business? Thank you, sir.

R. S. Jalan — Managing Director

Very good. First and foremost, I don’t think this — the margins which you are talking about, we must be the margin from soda ash. But if you look at in terms of the percentage, if you look at the 15-year history of soda ash in our data, you will find that the margins of around 30% to 32% has been a normal margin. So, — and currently, also if you look at this year as well the margin has been around [Technical Issues], if you come to the pattern of soda ash, if you look at 10 years back, it must-have been maybe some few thousand rupees and every year, there growth of around 9% if I am remembering correct.

Apart of soda ash margin been increasing approximately around 9%, for soda ash, but that’s primarily because of — because of soda ash prices are going up and I think I’ve said in the past also, soda ash prices in [Technical Issues] has been continuously growing except don’t compare this last two years of the COVID period. At that time if we circle that, I would say that or prior to that COVID period, that [Technical Issues] an abnormal, otherwise the margin has been in the [Technical Issues] and the growth in the soda ash pricing as well as the [Indecipherable] growth was happening.

My personal belief is these margins are required for the viability of the soda ash plant not going-forward also. And therefore, I don’t think there is a very abnormal situation on this margin [Indecipherable] profitability of soda ash because of this margin.

Sarvesh Gupta — Maximal Capital — Analyst

[Technical Issues], better metrics because you are alluding that now from April onwards because of the input cost going down. You know the ultimate price realization [Speech Overlap]

R. S. Jalan — Managing Director

No, no that is also down and therefore, you should look at the margins, like if your cost is going down, the PAT is also going down. The margin percentage in that same range should be there. That is number-one. Second, I’ve said to you, that overall, the demand-supply situation because always demand always is ahead of the supply which has been seen in the last many years. So therefore, I personally believe this kind of margin of continuing. Maybe a few percentage here and there could be there, but not so significant upward margin. At least in the near future, I don’t see that. And balance we don’t know if in the longer run-in such a volatile market, what will happen, but at least in the shorter, I personally don’t see any major regional significant of any drop in the internal margins.

Now coming back to your second question, which was on textile see as you likely said after the one-off also there is some, if I remove that one-off there is a margin in that business. And what my belief is that at least for one or two quarters, maybe this quarter as well as the second quarter could be challenging, but you will see improvement in the margins this quarter than in the second quarter and so on. Maybe to 17% to 20% margin, should be possible maybe fourth quarter of this year or maybe third quarter or fourth quarter of this year. But things are looking up in that zone. And the reason of this is primarily because of two reasons, one, last year the comparison was there because on the — on-one side, the cost of cotton was higher whereas the yarn prices were soft. With all the goodwill, they added inventory.

In our case, also you have seen that the inventory we added the part which we have taken a write-off or the one-off, but now the cotton prices have softened and because of that the yarn prices are stable now. And if the demand, the way the demand growth is taking place, probably some improvement in the yarn prices will also. This will lead to a partner expenses.

And again, let me repeat this question I think which I have said the [Technical Issues] is a commodity industry and therefore fluctuation in the margin will happen. If we look at slightly longer-term view like we have seen in last four-five years you will see that our margins are in the range of around 15% to 18%. Now coming back to the third question which you spoke about the management, we have a very competent management there. We have the CEO of that business. We have a CFO in that business. Of course, we have not been taken on the Board at this point of time, but there we have a very competent management there. We have a company secretary. So, there is a complete management team is here. And surely, we will support for some period of time till they get stabilized [Technical Issues].

Sarvesh Gupta — Maximal Capital — Analyst

Understood, sir. And on the textile side, sir the U.S. had a big inventory issue as such. So are we seeing any impact on our business because of the inventory being higher on the export market especially on the U.S.?

R. S. Jalan — Managing Director

No, rather I would say that inventories are now getting, to some extent and inventory has got liquidated and therefore the new demand has been generated. And for us, one good thing is there, which is I think we have done in last three-four years. To a great extent, we have moved from a commodity space, this is the slide in every segment of the yarn. And because of that, in-spite of in the past, if you look at last few quarters you will see that many of the industry are exceeding industry, they’ve have been running under-utilized. Somebody was running at 60%, 70%. We have always run on full capacity of 90%. And we have not built inventory, so our customer-base and our product basket has been designed in a manner so that we have an advantage over the competition.

Sarvesh Gupta — Maximal Capital — Analyst

Understood, sir. And excess capacity build-up in that business is not a threat for us as such, because of this?

R. S. Jalan — Managing Director

Excess capacity [Indecipherable] always it happen. Whenever the times are good, some new capacity gets added and whenever there is a bad time, the module capacity or nonviable capacity gets closed. So, this is a very common phenomena in that business. The good part in that business is now. Earlier I was seeing because I have seen the business for a long period of time. A small investment needs to come in big way. Now that is not happening. That’s a good sign for that business. [Indecipherable] earlier somebody was putting 10,000 or 15,000 [Technical Issues] that is now not happening. Now only the largest capacities are coming, and because of that, some consolidation will happen going-forward [Technical Issues].

Sarvesh Gupta — Maximal Capital — Analyst

Thank you, sir and all the best.

Operator

Thank you, sir. The next question is from the line of Vasunath [Phonetic] from New Berry Capitals, please go ahead.

Vasunath — New Berry Capitals — Analyst

Hi, good evening. Thanks for the opportunity. A question on the lithium carbonate, you have mentioned in the initial remarks also, then you see it new market opening up because of batteries, lithium carbonate. I would just like to know what sort opportunity size it is and whether we have started communicating with any battery manufacturers? How would be the margins in this area and whether we will participate in volume or value price of things.

R. S. Jalan — Managing Director

First and foremost, lithium carbonate has a huge potential. Of course, it will be more in China. Because this — today also worlds total 70% of the production of lithium carbonate gets produced in China. And this is also one of the drivers out for China becoming a — not becoming a more exporter to the soda ash, because there also, lithium carbonate consumption of soda ash in the lithium carbonate also multiplies in next few years. In India, some reserve has been found out. However, it’s still not in a very significant manner, there lithium — consumption of soda ash and consumption of lithium is happening. Maybe going-forward that will happen. So therefore, at this point of the time, I will not be able to say that okay some volume — our volume is growing in that segment, or in near-future that volume will be growing. But globally the lithium carbonate will be a big driver of soda ash consumption.

Vasunath — New Berry Capitals — Analyst

Okay, so in India, you see the ability after one year looking into small kind volumes would start? Yeah, you can say that, yes. Okay, understood. Thank you. That’s it from my side.

Operator

Thank you, sir. The next question is from the line of Vishal Jain from Techno Family Office. Please go ahead.

Vishal Jain — Techno Family Office — Analyst

Good evening, sir. Just two questions regarding the demerger of the Textile unit one, by when we can expect the listing of the demerged company — that textile company. And secondly, the cost of acquisition, what would be the cost of acquisition, would the company shares any directives for that?

R. S. Jalan — Managing Director

See Vishal if I look at the in terms of the listing, hopefully, I think by this month-end the listing should happen. I’m sure that you must-have got the share [Indecipherable] in your portfolio. And processing yarn and hopefully by this month-end the listing will happen. The second is that in terms of the costing, we are working on the costing hopefully, we will come back soon to the shareholders that’s what costing in your balance sheet, you have to take into account by transferring these costs from — from joint investments [Technical Issues] picture side. But that number will be I think will be a good number.

Vishal Jain — Techno Family Office — Analyst

Okay, so that also we can expect by another 10 to 15 days?

R. S. Jalan — Managing Director

Yeah, 100%.

Vishal Jain — Techno Family Office — Analyst

Okay, thanks, a lot and all the best.

R. S. Jalan — Managing Director

Thank you.

Operator

Thank you, sir. The next question is from the line of Saket Kapoor from Kapoor Co. Please go ahead.

Saket Kapoor — Kapoor and Co — Analyst

[Foreign Speech] Thank you for this opportunity. Sir, this — this will take into account the additional volume that will be coming from inner Mongolia, more understanding is that it could be consumed by the Chinese market itself and that will be more towards these the solar requirement with the type of the projects that — that China has [Technical Issues] over a period of time. Is this understanding is correct, that is — that this material is not going to grow to other geographies?

R. S. Jalan — Managing Director

I think this is what my understanding, at this point of time.

Saket Kapoor — Kapoor and Co — Analyst

And then sir secondly, taking into account how or what is your understanding on the raw-material basket in the power, fuel costs shaping up and what factors would be driving the tail? Your thoughts on this thing?

R. S. Jalan — Managing Director

Power cost and the raw-material cost are softening and it has softened a bit. And hopefully my personal belief is that, this still remain soften or this will remain, at this level going-forward also.

Saket Kapoor — Kapoor and Co — Analyst

And on the salt front, sir I think so the improvement in the salt in-part, when will the company start reaping the benefit of the same? And for the current THS [Phonetic] we will be also getting the benefit of the expanded capacity from RBC. So, then your thoughts, when we’ll that flow into our numbers?

R. S. Jalan — Managing Director

This is so-far as this RBC is concerned — sorry so-far, as this [Indecipherable] we will start seeing the benefit in this year, but not 100%, but gradually, but some benefit or good benefit will be seen this year itself. In terms of the RBC, maybe some of the benefits that we’ve seen this year. Of course, RBC market is slightly — slightly effected for this time. And therefore, may not be very significant bottom-line I think this year, but in the longer run as I have been saying that this flue gas treatment, some of the consumers of the flue gas treatment their trial has been very-very successful. So, we are clearly seeing in the near-future lot of upsides into the conjunction [Phonetic] of the flue gas treatment or bicarbonate conjunctions into the flue gas treatment. It may take some time to really get the full benefit of expansion which we have done.

Saket Kapoor — Kapoor and Co — Analyst

As you mentioned, the demand is sluggish. So, we have I think so added, the 30,000 tonnes, in the last quarter and our capacity and our capacity has doubled from 30,000 to 50,000. So what kind of replacement levels.

R. S. Jalan — Managing Director

Well, Saket at this point of a time to give a specific number will be difficult, but like I said, market is sluggish and our volume has increased from 60,000 to almost around 120,000 tons.

Saket Kapoor — Kapoor and Co — Analyst

Thank you. The capex number mentioned post the Board meeting what we INR336 crores. So, if you could elaborate where this money is going to be spend?

R. S. Jalan — Managing Director

So obviously, we’ve seen some money. It is going to be spent on the [Indecipherable] project and vacuum salt which I have just mentioned in my speech on my opening remarks, which is a new product basket. The investment will be there also and regular like a [Technical Issues] some investments will go into the Green Energy those kind of a thing.

Saket Kapoor — Kapoor and Co — Analyst

Okay so there is no incremental volume performance this year, we will be we would be producing 1.2 million taking into account also that the effect of the breakdown. Can you look-forward for this year for the production of 1.2 million tons per year as a whole?

R. S. Jalan — Managing Director

See our capacity is 1.2 million tons. And based on that, for what we have been doing in the past and keeping it [Technical Issues], let’s see what numbers we achieve.

Saket Kapoor — Kapoor and Co — Analyst

Sir in the presentation also said you want to mention about some losses because of surrender of lease of land to GIDC, to the tune of INR17 crores. If you could explain that — the reason for the same?

R. S. Jalan — Managing Director

See we have been allotted some land [Technical Issues] GIDC. And in 2013, the Board has approved, some of the land required by the GIDC for the, [Technical Issues] and that land, we have given back to GIDC and because of that, whatever the cost that land had in our balance sheet, we have taken a write-off on that.

Saket Kapoor — Kapoor and Co — Analyst

Sir, we are not going ahead with the proposal for which the land was acquired?

R. S. Jalan — Managing Director

They needed this land I think on the [Indecipherable] and therefore we had to give it to them. This will not impact any of our growth plan or something, [Technical Issues] little away from our factory. We won’t be compensated for that. This loss has to be taken by us even after claiming of the land.

Saket Kapoor — Kapoor and Co — Analyst

Yeah.

R. S. Jalan — Managing Director

They will give me only the land with only value, which they are as per — that what’s they have given to us and — and that we will be getting from them.

Operator

[Operator Instructions] The next question is from the line of Riya Mehta from Aequitas Investments. Please go ahead.

Riya Mehta — Aequitas Investments — Analyst

Hello. Thank you for giving me the opportunity. My first question is in regards to the demand. So basically, Monday I think the [Technical Issues] been demand is going on inbounding, what [Indecipherable] do you think that the newer sectors of solar and other lithium carb, is overcompensating for the loss of detergent?

R. S. Jalan — Managing Director

No Riya, I don’t think there is — there will be a loss in the detergent segment demand and the demand of the detergent sector is still good, and going-forward, we believe that the normal growth into the detergent demand will continue. As you know that rural population, the demand now good there. And therefore my personal belief is that the demand, will continue to be good. This demand of solar where the new capacity has come or some of them are likely to come in few a few months, which will add to the demand of soda ash which as said around the demand growth will be around 5%.

Riya Mehta — Aequitas Investments — Analyst

Okay and then on China we are seeing some demand slowdown over there. So basically, the imports from China have increased in India. So what is the scenario right now for that?

R. S. Jalan — Managing Director

I don’t personally, I said, the demand in China is very good. Particularly on their — on the solar side as well as the lithium carbonate side, along with the regular consumption also. So overall demand in China is good. And overall, we don’t see any major volume coming into India from China in the near-future.

Riya Mehta — Aequitas Investments — Analyst

Okay, and in terms of [Technical Issues], do we see the realization going downwards in tandem with the decrease in raw-material costs? And we will be able to maintain the margins of last year?

R. S. Jalan — Managing Director

Riya I have said that overall prices are softening. And the cost of production is also softening keeping that everything into mind. There could be a kind of it. And this should not be any marginal or there should not be any major impact on the margins.

Riya Mehta — Aequitas Investments — Analyst

Okay, okay. Thank you so much.

Operator

Thank you, ma’am. The next question is from the line of Rohit Nagraj from Centrum Broking. Sir?

Rohit Nagraj — Centrum Broking — Analyst

Yeah, thanks for the opportunity. Sir, my first question is on the vacuum salt project. So in terms on our all your administrative on a product-line expansion in terms [Indecipherable], we have not been able to scale-up this particular initiative. So, on the vacuum salt project, what is the kind of philosophy that we are working on, will it be a product which is re-branded our page or we will be absorbed partly manifested for, some other branded blends [Phonetic] and how do we expect this to scale-up over a period of, say, three to five years? Thank you.

R. S. Jalan — Managing Director

I think it is very interesting and very-very important question Rohit. [Technical Issues], this vacuum salt which we are producing is going to be consumed with a bit of energy of [Technical Issues] for that month. So therefore, this production will be very cost-competitive except for salt and sub cost, all the energy will be kind of free on this entire process. And the second, therefore, this project is going to be definitely a good back to the addition to that. At this point of time, we are not looking at branding of these products, we are looking at this product to be sold in a bulk as a bulk volume. In the longer-term, probably we will see those opportunity of a B2C, or branding one, but at this point of time, no.

Rohit Nagraj — Centrum Broking — Analyst

Sure, got that. Sir, my second question is just on the volume front. So, in Q4 we had the adverse impact from the line crane breakdown of almost 40,000 tons. What is the expected impact in Q1 and after this incident, what is the kind of preventive action that we’re taking that such an incident doesn’t occur with maintenance [Phonetic]. Thank you.

R. S. Jalan — Managing Director

So, Rohit very rightly you said, first and foremost is this has happened with — breakdown has happened in the first time basically in the last 35 years. And we have taken this very serious — seriously and lot of preventive action has been taken. It’s not one or two that may be on that. I don’t want to at this point of time to give you the technical answer of this, what infrared or what kind of cameras [Technical Issues]. Now in terms of the — in terms of the first quarter, I think as I said, to a great extent the production has come to the normal in the month of May and whatever the small GAAP is there, it will get covered by the end of May. So therefore, by end of May, the full production will start. And hopefully this month or in this quarter, so that we tend to sell 10,000 to 15,000 kind of number drop will be there, because we have already announced into the stock exchanges information also. And balance next quarter onwards, it is a full production and full production.

Rohit Nagraj — Centrum Broking — Analyst

Sure, thank you and best of luck there. Thank you.

Operator

The next question is from the line of Niraj Mansingka from White Pine Investment Management Private Limited. Please go ahead.

Niraj Mansingka — White Pine Investment Management Private Limited — Analyst

Okay, just two questions, what is the production of soda ash for the last quarter and the year?

R. S. Jalan — Managing Director

It’s just that number probably will be difficult for us to give.

Niraj Mansingka — White Pine Investment Management Private Limited — Analyst

Okay, can you give a utilization for the quarter?

R. S. Jalan — Managing Director

Like I said, production is almost around 40,000 lower. In terms of utilization, I can give you utilization percentage. Utilization percentage is approximately around 94%.

Niraj Mansingka — White Pine Investment Management Private Limited — Analyst

94% and for the year?

R. S. Jalan — Managing Director

For the year as a whole?

Niraj Mansingka — White Pine Investment Management Private Limited — Analyst

Yes sir.

R. S. Jalan — Managing Director

It is almost around 100%.

Niraj Mansingka — White Pine Investment Management Private Limited — Analyst

Okay, and sir what is the status on the greenfield capacity. They were some [Technical Issues] which were little delayed. Any status update on that and how — when do you see the spending for that good stuff.

R. S. Jalan — Managing Director

Like I said, when the capex detail I was giving or even in my opening remarks also I have said, basically engineering was awarded. And the basic engineering work is getting started now. And hopefully that environmental clearances also all the formalities has been completed. So hopefully, the environmental clearances also should get in next few months. So, I think just physical activity of all this basic engineering, detailed engineering and all those things could happen in the third or fourth quarter of this year. And in terms of that likely completion of the project maybe some delayed definitely will happen as expected, but I think ’25 or by ’26, probably we should see the products.

Niraj Mansingka — White Pine Investment Management Private Limited — Analyst

Okay sir, thank you.

R. S. Jalan — Managing Director

I’m sorry. One clarification I want to give. I think the production, which I gave you the number was wrong its number was 86%, I’ve given you the number of days. I’m sorry for that. And overall, our [Technical Issues] in the full year is around 94% not 100%.

Niraj Mansingka — White Pine Investment Management Private Limited — Analyst

Yeah, that’s what I wondered. Okay, thank you.

R. S. Jalan — Managing Director

I’m sorry, I’m sorry for this.

Niraj Mansingka — White Pine Investment Management Private Limited — Analyst

Thank you, sir. The next question is from the line of Tarang from Old Bridge Capital Management Private Limited. Please go ahead.

Tarang — Old Bridge Capital Management Private Limited — Analyst

Good evening, sir. Just wanted to check, for the greenfield soda ash project, has there been an upward revision in terms of the outlay, that you’re looking at now.

R. S. Jalan — Managing Director

I think [Technical Issues] this happened, but at this point of time, we do have a full number at this point of time, but yes, some upward revision will happen because the couple of new thoughts which we are bringing into that. One we are bringing is how to build the carbon reduction or I would say that the technology of the energy in a manner so that for the longer period of time, the carbon costs are getting reduced. Because you know that the carbon cost in the Europe is very-very high. So we are coming with a technology where in the carbon footprint should be lower. Slightly different technology, more increasing in technology, all these put together. So definitely some upside and the cost will be going up, but once we are ready with that we will share with our investors about the full period.

Tarang — Old Bridge Capital Management Private Limited — Analyst

Is it in the ballpark of INR4 crores to INR4.5 crores?

R. S. Jalan — Managing Director

At this point of time, it is difficult to talk about that number. Once we are ready with the number we will definitely say that.

Tarang — Old Bridge Capital Management Private Limited — Analyst

Okay, the second question was, if you could give us the production volumes for FY ’21 and FY ’22 for soda ash?

R. S. Jalan — Managing Director

We don’t give a specific number, I’m sorry for that Tarang. But like I said we have — this year we are higher than the last year by 4%.

Tarang — Old Bridge Capital Management Private Limited — Analyst

Okay, and what is the utilization last year ’22 and ’21, capacity utilization?

R. S. Jalan — Managing Director

Last year our capacity was 11 lakhs. Okay, last year our capacity was 11 lakhs and this year our capacity is 12 lakhs at the more. So, utilization behind numbers will not give us [Technical Issues].

Tarang — Old Bridge Capital Management Private Limited — Analyst

Okay and, okay, sure enough. Thank you, sir.

Operator

Thank you, sir. The next question is from Yogesh from Arihant Capital Markets Limited. Please go ahead. Yeah, yeah, good evening, sir.

Yogesh Tiwari — Arihant Capital Markets Ltd — Analyst

Yeah, good evening, sir. Thanks for the opportunity. I had two questions, one question is there has been some increase in other expenses on a quarter-on-quarter basis by about 6%, so what would be the driver for it on a quarter-on-quarter basis.

R. S. Jalan — Managing Director

I think I will request someone to answer this.

Raman Chopra — Chief Financial Officer and Executive Director of Finance

Yeah, has taken into impact of land surrender, you know the capital loss on account of surrender of land to GIDC impacted around INR14.5 crores. That [Technical Issues] if you eliminate that the other expenses were lower than corresponding quarter.

Yogesh Tiwari — Arihant Capital Markets Ltd — Analyst

Thank you, sir. And my last question is on the demand from lithium segment. So have we done any calculation, what would be the impact on soda ash demand only from lithium industry? Any unit economics how much soda ash is required for lithium battery? Anything on that front.

R. S. Jalan — Managing Director

So yes, we have done on a global scale, because if my memory is correct, that figure is around 5 to 6 million in the next seven to eight years.

Yogesh Tiwari — Arihant Capital Markets Ltd — Analyst

Okay, so like 5 million to 6 million so if demand is around 80 million like 5 million to 6 million will come from lithium? Am I correct?

R. S. Jalan — Managing Director

Currently at this point of time, I think around 1.5 million tons and this will lead to something of more than 5 million tons in the next five to seven years.

Yogesh Tiwari — Arihant Capital Markets Ltd — Analyst

Okay sir, thank you, very much. That’s all from my side.

R. S. Jalan — Managing Director

Wait for the second, I will just give you very specific number we had been listed by the global, using it I will give you the numbers.

Yogesh Tiwari — Arihant Capital Markets Ltd — Analyst

Yes sir.

R. S. Jalan — Managing Director

Roughly around 6% means roughly around 5 million [Indecipherable].

Raman Chopra — Chief Financial Officer and Executive Director of Finance

Yeah, around 1.2 million.

R. S. Jalan — Managing Director

[Technical Issues] and currently is roughly around 1.2, 1.3 million. So that kind number we should see roughly around 4 million [Technical Issues] demand will be coming in the next four five years, or six years from lithium carbonate alone.

Yogesh Tiwari — Arihant Capital Markets Ltd — Analyst

Okay, around 4 to 5 million from in the next five to six years for lithium carbonate.

R. S. Jalan — Managing Director

Yes.

Yogesh Tiwari — Arihant Capital Markets Ltd — Analyst

Thank you, sir. That is very helpful. Thank you.

Operator

Thank you, sir. As there are no further questions. I would now like to hand the conference over to the management for closing comments.

R. S. Jalan — Managing Director

Thank you, very much to all stakeholders and like I had always been saying this call definitely has us to take the feedback from the you people. And to improve upon our performance on a period-to-period basis and I think over a period of last five to seven years we have been able to do a good job in terms of growing the business and growing the profitability. I remember that a couple of years back and now onwards there is a significant change which has happened into the business. On one side, the profitability has multiplied many folds. And the volume or the growth into the business of volume growth has also been happened. I think we are very few companies in India, where our profitability of the profit-after-tax is more than INR1,000 crores. We have achieved this year INR1,100 crores of profitability. With your support, we will continue to do that — do the good improvement or the good work onto the site. And also continue to allocate our capital in a rightful manner keeping into account growth and rewarding the shareholders and that will be our priority always. Corporate governance is going to be a one of our major focus, and we will continue to do our journey on that also. Thank you, everyone. [Operator Closing Remarks]