India Glycols Ltd (INDIAGLYCO) Q2 FY23 Earnings Concall Transcript

India Glycols Ltd (NSE:INDIAGLYCO) Q2 FY23 earnings concall dated Nov. 14, 2022

Corporate Participants:

Rupark Sarswat — Chief Executive Officer

Anand Singhal — Chief Financial Officer

Sanjeev Gurwara — President, Marketing

Sanjesh Jain — Moderator

Analysts:

Rohit Sinha — Sunidhi Securities & Finance Limited — Analyst

Vaibhav Gupta — Bowhead Investment Advisors — Analyst

Rohit Nagraj — Centrum Broking — Analyst

Sanjesh Jain — ICICI Securities — Analyst

Balasubramanian — Arihant Capital Markets — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to India Glycols Limited Q2 FY ’23 Earnings Conference Call hosted by ICICI Securities. As a reminder, all participant lines will be in a listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Sanjesh Jain. Thank you, and over to you sir.

Sanjesh Jain — Moderator

Yes, good afternoon, everyone. Thank you for joining on India Glycols Limited Q2 1H FY ’23 Results Conference Call. We are joined on this call along with India Glycols Management, represented by Mr. Rupark Sarswat, Chief Executive Officer; Mr. Anand Singhal, Chief Financial Officer; Mr. Sanjeev Gurwara, President, Marketing; Mr. SK Shukla, Head, Liquor Business; Mr. Ankur Jain, Head, Legal and Company Secretary.

I would like to invite Mr. Rupark Sarswat to initiate the proceeding with his opening remarks, post which we will have an opportunity to ask question-and-answer. Over to you, sir.

Rupark Sarswat — Chief Executive Officer

Yes. Thank you and very good afternoon, Sanjesh. Thank you, everybody for joining us for this call. I understand there are a number of calls that you are having to attend today, so thank you for the IGL call. Sanjesh, am I audible enough?

Sanjesh Jain — Moderator

Yes, sir, you are audible.

Rupark Sarswat — Chief Executive Officer

Okay, great. So, let me give a quick update on the last quarter and the Company’s performance, and then me and my colleagues can take your questions. So I’ll jump straight away to the quarterly performance for the quarter that we are discussing. So essentially, in nutshell, it has been quite a challenging quarter as far as the topline is concerned, but I think it has also been a somewhat a resilient performance by the Company as you can imagine, given the specific challenging headwinds that we have faced.

So at a gross turnover level, we’ve done a turnover of INR1,634 crores. As you know, the excise component is quite significant for us, which is down 3.6%. At the net turnover level, it is down 14%, but you would see that the EBITDA is actually nearly flat, which is marginally down by 0.6% at INR74 crores. It’s quite good for us that despite this EBITDA margins have improved somewhat at 11%. And whilst I’m repeating what I’ve said before, but the fact is that we’ve had a significant headwind or — in terms of continued feedstock prices which have been high, and to be honest, they have stayed high longer and higher than what we had imagined and discussed earlier. And we will discuss that in the subsequent slides. As well as the energy costs, which continue to be high. But the freight headwinds are softening a little bit, I will talk about back.

If we talk about the first-half performance, that looks better than that with a gross turnover of INR3,502 crores, up 4.6%, a net turnover of INR1,478 crores, up 3.3%. EBITDA of INR143 crores, which is up 9.2%, and an EBITDA margin of 9.6%. One of the things to note here is there is an impact of the EOD business that was transferred to the joint venture, in the sense that for one quarter last year those numbers were part of the comparative numbers last year. And we, of course, have taken [Indecipherable] to the joint venture this year.

So at a high level, if I talk about the business highlights, as I mentioned to you, in terms of the business performance, the revenue is down 14%. But, the company has been able to maintain the EBITDA, which is marginally down by 0.6% but improved the margins to about 11%. For the half, revenues are up 3.3%, EBITDA up 9.3%. At an overall level, excellent growth in Ennature Biopharma to a smaller but a better margin business for us. The ENA, which is Extra Neutral Alcohol, biopolymers, and IMFL has also registered healthy growth as far as top-line.

One of the challenges that we continue to face is increased feedstock and energy costs, which continue to impact the business. Particularly the global ethanol prices, which I will talk about a little later as well. And the higher energy costs that continue to impact product costs. We have taken several actions to mitigate the cost impact. We have been looking at alternate fuels and we will continue to do that. We have been carrying out changes in our operational philosophies and doing modifications in the plant operations et cetera, et cetera.

Also, freight costs have started to soften and we expect that, that trend will continue, considering that we also have significant exports. It’s worth mentioning that the joint venture performance also got impacted in the quarter on account of high input costs and the pressure on margins, again this thing that I spoke to you about. And in terms of what we’re doing new — the new specialties unit, the first phase investment that we have spoken about earlier. The plant’s erection is in progress, which is progressing as per plan. We expect that our trials will be conducted in January then some more in April, May, and then will be putting in place the new portfolio of specialty products. I’ve been reviewing that with the team and I can say that the product pipeline is robust.

And in fact, the first new product for new specialties is already developed and commercialized, it is being exported to a company in the US. Also as we have spoken about before, we have been putting capacities for grain based ethanol plants in Kashipur as well as Gorakhpur, both those plants have been commissioned. We are cranking up the capacities to take them to 100%, but they have been commissioned and we expect that going forward, starting this quarter itself, it will help us improve costs as well as sales.

Costs, because ethanol is an important [Indecipherable] for us for chemicals as well as liquor. And sales because some of the ethanol that we produce will be sold for the biofuels business. And the Biopharma business has also introduced a portfolio of Nutraceutical Ingredients, which includes Xanthogreen, Turminova, and Gingeren. And in the IMFL space, we have launched Zumba Lemoni in UP and Uttarakhand. And I’ve been hearing that the brand has been starting to get a good pickup from the market.

I have mentioned to you about costs. Unfortunately, beyond what we had imagined, the coal cost — our energy comes from coal — continues to remain high, and you must be reading that from something like INR5,500 per ton, which used to be the cost. And as far as I know the government rates are still around that, but because the rates have not been allocated and there has been a priority allocation to the power sector, in fact, we have not been able to pick up the allocated coal to us from the government and we have been buying like many others from the private companies which have been more than doubled the cost of their coal, so that has been a major, major — if we all know that at some point in time, it would streamline because this has never been the case and it’s not that the coal prices have been revised upward by the government.

The other thing is the increase in ethanol cost, which had been up something like 60% over the last one-and-a-half years and that too has remained stronger, or higher for quite some time, more than what we had anticipated, and we understand the reasons for that. I am not going into too many details right now, because I have discussed that before. But the factors driving ethanol costs apart from the COVID factor and the climate transition factors, et cetera, et cetera, one of the reasons why it is — it has still remained high, I suppose, Russia-Ukraine war has a major role to play. One is that Ukraine is a major producer of food grains in the world which has a direct impact because the ethanol comes from plant-based feedstock.

And the other thing is that as the world, and particularly the western world tries to reduce the dependent on — dependence in terms of energy on Russia, which means that there is greater demand for ethanol blending because that directly impacts the energy requirements for these countries. So I expect as far as imported ethanol is concerned, this will continue to remain tight for some more time, definitely I would imagine the next six months, but let us see how things pan out.

Things like steel continue to be expensive, that does not impact direct product costs but definitely capital and other things. Having said that, I think some wrong tails are also coming down. Acetic acid is our wrong tails, where the prices have been coming down, which is a good thing, but that’s a smaller part of what we consume. The other good news is that, I’m sure you’ve heard it in other calls, that the container freights have actually come down quite sharply. So in the last couple of years, they had actually gone up roughly, and I’m referring to the World Container Index, by something like five times. Can you imagine the price on the cost having gone up five times? So there were various reasons for it, however, there is a major correction happening right now and already from around INR10,000 freights have come down to well below INR4,000.

And obviously, the port conditions, the disruptions, the container shortages have been easing, so that’s been one of the factors. The other factor, of course, is that the expectations are that the global economic conditions will be softer, there is a slowdown expected, and I’m told there is also a shift in consumer buying patterns, where people are spending more on services and less on goods like they did in the COVID times. I think that’s a bit of a positive for us going forward for the exports.

Now let me just sum up segment-wise highlights for you. So we, as you know, classify our business into three broad segments: Biobased Specialties and Performance Chemicals, Portable Spirits and Ennature Biopharma. So let me talk about the largest segment first, which is Biobased Specialties and Performance Chemicals. Quarter two has been very tough for chemicals with the revenue being down on a like-for-like basis compared to the prior year by 19.8%. EBIT being down by 14.4%, compared to the prior year. However, if you look at it for the first half, revenue is down by 1.8%, but EBITDA is more or less flat down by about 0.9%. I’ve mentioned this before, we’ve been having this pressure on margins due to sharp increase in ethanol and energy costs.

And also, we’ve had lower sales in biofuels and sanitizers. The reason we’ve had lower fuel sales in sanitizers, obviously, you know because there is hardly any demand for sanitizer now compared to last two years. Biofuels is actually been an internal allocation decision that we have been producing ethanol, but considering that imported ethanol is much more expensive, it made much more sense for us to consume it for captive use. We’ve seen subdued demand in prices in gases, for example, oxygen. There was obviously a huge demand for oxygen last year, but what has happened is, people have also put up more capacities, which has also meant that the prices have been under pressure. We’ve had significant headwinds as far as Glycol Ethers are concerned. It is because the butyl and propyl prices globally have come down, and therefore, it has impacted our Glycol Ethers. Though we do not use butyl and propyl in our Glycol Ethers, but our products compete with them, so that’s the issue.

But for Bio-Polymers and ENA, we’ve registered some healthy growth. And as I mentioned, our grain-based ethanol plants have been commissioned and in-house ethanol will help us improve costs in the Specialties and Performance Chemicals business. I already gave you an update on the new specialties unit earlier, so I’ll not repeat that.

Now jumping to Portable Spirits. For the quarter revenue is down by 5%, but the EBIT is up by 2.2% compared to the prior year. For the first half, revenue is actually up 13.4%, but EBIT is marginally down by about 0.9%. The sales impact has mainly come in the country liquor segment. And one of the major contributors for us has been a policy change, it is not something that’s going to impact us forever, where they’ve been trying in UP to push the Tetra Pack mainly to prevent misuse of packaging or for those reasons. So we are also installing Tetra Pack capacity and we believe that in times to come we’ll catch up with some of the sales loss that has happened there.

In the IMFL space, we’ve seen growth and as you see our — in IMFL servicing a better product mix has also helped us improve our margins. But nevertheless, margins have been impacted for the same reasons as I discussed earlier, packaging being one more factor. Business — we’ve started business in Delhi which is picking up steadily, particularly traction is seen in the Whiskey segment. We also expect Rum sales to pick up as we see winter coming up. And we’ve also launched Zumba Lemoni in UP and Uttarkhand to [Indecipherable].

Coming to Ennature Biopharma, this segment has performed very well for the first half as well as the first quarter. Their revenues have been up 19.2%, EBIT up 25% for the quarter, and revenues up 23.5% and EBIT up 26.6% for the first half. The good thing here has been the increase in revenues in Nicotine for therapeutic use compared to last year which has been very good.

Thiocolchicoside, we’ve had a difficult market situation, however, we maintained our market share and leadership position there, by increasing customer base in the domestic market. And as I mentioned, there are a few other products — branded products in the Branded portfolio, which is –which includes Xanthogreen, Turminova, Gingeren in the Lutein, Curcumin, and Ginger based ingredients. So that’s a quick snapshot of the highlight as far as the business segments are concerned.

I’ll hand it over to our CFO, Mr. Anand Singhal to give a quick update on the financials.

Anand Singhal — Chief Financial Officer

In Q2 financial year ’23, the revenue the revenue from operations is INR670 crores vis-a-vis INR780 crores in the last year’s corresponding quarter. The EBITDA in Q2 ’23 is INR74 crores vis-a-vis INR75 crores in the corresponding year last year. So basically the EBITDA more or less is same, although the sales has come down. The PBT in the current quarter is INR31 crores vis-a-vis INR47 crores in the last year’s corresponding quarter. And PAT, profit-after-tax is INR24 crores vis-a-vis INR37 crores in the last year’s corresponding quarter. So this is the highlight of the quarterly performance.

For the half year financial year ’23, the revenue from operations, net of excise is INR1,478 crores vis-a-vis INR1,431 crores, so it’s slightly up. EBITDA is INR143 crores vis-a-vis INR131 crores. PBT is INR66 crores vis-a-vis INR306 crores in the last year’s first half. This includes the profit out-of-the sale of the EOD business for INR240 crores. And the profit-after-tax is INR51 crores vis-a-vis INR249 crores, this also includes the profit of the EOD business which we have sold out on 1st July last year. So this is the brief performance highlights. Although we have already given our results which I think you must have seen and after this, yes, we would certainly like to get the questions.

Rupark Sarswat — Chief Executive Officer

So that’s a quick update from our side. And happy to take your questions. I’ve already given an update on the various segments.

Questions and Answers:

Sanjesh Jain — Moderator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Rohit Sinha with Sunidhi Securities. Please go ahead.

Rohit Sinha — Sunidhi Securities & Finance Limited — Analyst

Hello. Yeah, am I audible?

Rupark Sarswat — Chief Executive Officer

Yeah, Rohit you’re audible. Go ahead.

Rohit Sinha — Sunidhi Securities & Finance Limited — Analyst

Yes, so, few questions from my side. Firstly on this Specialty chemical business. So obviously, revenue was down, as sir has mentioned because of the slowdown. But going forward, just wanted to understand with the kind of global pressure which we are seeing, what kind of revenue growth we can expect in this business. And also, as we are talking about the new capacity to commission, so how is the progress there and when we should be expecting commissioning of that?

Rupark Sarswat — Chief Executive Officer

Yes. Rohit, let me try and take that question and Sanjeev [Foreign Speech] please add [Indecipherable] anything to it. So, first of all, we — I mentioned that some of these pressures we expect will continue for the near future. At the same time, we are quite convinced that the strategy that we’ve adopted for growing the chemical business is the right one but we have obviously encountered completely unanticipated situations at a global level.

And you can go ahead and check for yourself that never ever has there been a case where global ethanol prices have jumped from something like 35 to hovering well above 60 right now in a period of one and a half years. We all expected that to come down, but that didn’t happen. Similarly, the situation as far as the energy costs are concerned.

The second point is that, the fact is that as far as the drivers for one, Specialty chemicals or Performance chemicals are concerned, those continue to remain positive more than the world from an Indian perspective because our end market segments like paints and coatings, personal care, or textile auxiliaries, or automobile, will continue to see growth, sometimes it’ll be a little lower, sometimes it’ll be a little higher. You all know that the world is right now wondering about looking at potentially a recession, so those can be some challenges. It is very difficult to — for me to specify.

The other two positives that you might like to consider is, I’ve already mentioned that we have commissioned our grain-based ethanol plants, so that’ll help to get our costs down, get our margins up, and get our competitiveness to improve, including helping us register sales in the Bio-Fuels segments. And the last one that you asked, which is also the second positive that I was talking about is that, look, we’ve also — we are starting to invest in a new Specialty chemicals business.

As you know, our Specialty Chemicals business is quite different from the petrochemical business or a five-product or a two-product business, in the sense that it is a knowledge-based business. So you have — we have to build that knowledge, look at those products, work on those chemistries with various customers, but as I said — and this is different from what the joint venture does. We are very clear that this is a non-compete space as far as the joint venture is concerned, but we are quite confident of the pipeline that we have.

And over the years, we believe that this new Specialty chemicals and Performance chemicals portfolio that I talked about will become a significant part as far as the chemicals business forward is concerned. And you’ll hear more about this in — in a couple of quarters because we’ll be getting more and more business and as I said, one of the product is already commercialized as well.

So that’s from me.

Rohit Sinha — Sunidhi Securities & Finance Limited — Analyst

Okay. Secondly, as we are still awaiting that government’s price hike thing on the country liquor. So any update on that front as of now?

Rupark Sarswat — Chief Executive Officer

So, am I audible?

Rohit Sinha — Sunidhi Securities & Finance Limited — Analyst

Yes, sir.

Rupark Sarswat — Chief Executive Officer

So, as far as the price rise in the country liquor is concerned, we are still in talks with the government and nothing concrete has been finalized from the government — from the side of the government as of now. But some news is expected by mid-December or if not by mid of January is what the timeline we are looking at.

Rohit Sinha — Sunidhi Securities & Finance Limited — Analyst

Okay. And one last question from my side. Looking at the power and fuel cost for this quarter, it has come down from as compared to the last quarter although vis-in-vis it’s still higher, but it has come down from last quarter. So just wanted to know which — what things have helped there because looking at the other chemical companies or even other companies which have reported numbers in Q2, their power and fuel costs have more or less increased from even in Q1 also. So where this reduction was there? And is it, I mean we have already signed some agreement with the renewable energy sources, or some other things are there?

Rupark Sarswat — Chief Executive Officer

So there are a couple of things, and one of course, as you see that in some of the power intensive areas our sales itself have subdued, so that obviously gets our power cost down. You saw that for the quarter even though EBITDA was reasonably flat, but our sales were down by 14%, and including Ethylene oxide that we sell to the joint venture, so that is one factor. The second factor as I had mentioned, we are also trying to look at everything that we can do using alternative fuels wherever we could by rice husk or some of the other bio-based materials whenever they were less expensive to us that is what we are doing.

We’ve also carried out modifications in our plan to run much more efficiently, et cetera, so that has contributed. At an overall level as far as the power costs are concerned, those have not by and large changed, right, Manish. That situation has not changed. You did allude to our investment in renewable et cetera, we are working on it. That is not something that we are very close to actually signing a contract as and when we do it we’ll indicate that. But that is not a benefit which has accrued in the last quarter or last half, that is for future.

Rohit Sinha — Sunidhi Securities & Finance Limited — Analyst

Okay, sir. Thank you for that. And, I’ll turn back in the queue. Thank you.

Rupark Sarswat — Chief Executive Officer

Thank you, Rohit.

Sanjesh Jain — Moderator

Our next question is from the line of Vaibhav Gupta with Bowhead Investment Advisors. Please go ahead.

Vaibhav Gupta — Bowhead Investment Advisors — Analyst

Sir, just wanted to understand how is that utilization between ENA and ethanol, and what is the outlook for the next six months?

Rupark Sarswat — Chief Executive Officer

Sorry, Vaibhav, can I ask you to repeat your question and try and just elaborate what exactly you want me to respond to?

Vaibhav Gupta — Bowhead Investment Advisors — Analyst

Sir, the realization of ENA and ethanol, like — and if there is any differential, you can provide a description for that and the outlook for the next six months given the new ethanol policy is already there?

Rupark Sarswat — Chief Executive Officer

Realization, means you want to know what? You mean contribution?

Vaibhav Gupta — Bowhead Investment Advisors — Analyst

Yes, sir, that would also do.

Rupark Sarswat — Chief Executive Officer

Look as far as the new ethanol policy is concerned for blending, so ENA is different from the policy for blending. ENA is extra neutral alcohol which gets sold either for beverages, not ready-made beverages, but it is usually, I think 99%, 99% strength ENA, extra neutral alcohol, or for other applications like pharma and perfumery. Whereas when you’re talking about the policy or the blending policy for the government, the government has announced new rates which are slightly increased, particularly for molasses-based ENA for blending in petrol, so these are two different issues.

We make ethanol for blending, mainly it’s going to be grain-based now though there may be some molasses-based, but molasses-based largely we will use in captive because we have our own requirement for our IMFL and country liquor segment. Also considering that a lot of sugar industries themselves are forward integrating into converting their own molasses into ENA, that is not of such great interest going forward for us, so we will continue to make molasses-based ENA.

And as far as realization for ENA is concerned, I think the end prices have not moved up that much. However, what we are looking for this quarter, if that helps me answer your question, is that our costs will certainly come down because we have commissioned our grain-based ethanol plants. And I think those numbers we will be able to bring to you and share in subsequent quarters. Right now our plants have been commissioned. We know for sure that those costs are lower.

Sanjeev [Foreign Speech], would you like to add something?

Sanjeev Gurwara — President, Marketing

No, I think Rupark [Foreign Speech] has explained. Just one small, I think correction, ENA which is used for portable alcohol and is used for blending in various, I think, alcoholic beverages like Whiskey, Rum all this. And it is 96.4% and while the alcohol which is used for blending in petrol, Bio-Fuel is 99.9%. So, I think that is the only correction. And I think from the company’s point of view, the value is seen where I think we derive higher values, allocations are made accordingly. And as Rupark has pointed out, that the cost of our alcohol is going to go down as our grain-based alcohol production is increasing.

Vaibhav Gupta — Bowhead Investment Advisors — Analyst

Okay, sir. Thank you, sir. Some color on the contribution and margin. How has it’s been towards the [Technical Issues] before like two — over the past two, three quarters?

Rupark Sarswat — Chief Executive Officer

Sorry.

Vaibhav Gupta — Bowhead Investment Advisors — Analyst

Sir, how have the contribution margins of the ethanol segment changed over the past couple of quarters?

Rupark Sarswat — Chief Executive Officer

Yes. So, I kind of responded to that earlier. That look, our cost of ethanol and energy have gone up and therefore the contributions have come up. If you see, I also commented on the same as far as the profitability of the country liquor and IMFL businesses are concerned, that — those are affected our contributions in a negative way as far as ENA is concerned. But the overall contribution in IMFL just has been better more because of the improved product mix that we are selling.

Vaibhav Gupta — Bowhead Investment Advisors — Analyst

Okay.

Rupark Sarswat — Chief Executive Officer

Okay, and the contributions have been under pressure but in subsequent quarters including this quarter, we will see an improvement.

Vaibhav Gupta — Bowhead Investment Advisors — Analyst

Sure. Thank you, sir. That was [Technical Issues] description. Thank you.

Sanjesh Jain — Moderator

Our next question is from the line of Rohit Nagraj with Centrum Broking. Please state your question.

Rohit Nagraj — Centrum Broking — Analyst

Yeah. Thanks for the opportunity. Sir, first question is on the JV performance. So on a sequential basis, the JV performance has drastically come down. Any specific reasons particularly from demand-side challenges or was it purely because of the operational challenges that were faced during Q2? Thank you.

Rupark Sarswat — Chief Executive Officer

Rohit, thanks for the question. I think the major contributors has been the fact — one of the major contributors has been the fact that Ethylene oxide costs because of ethanol and because of energy for them has gone up. And still, a major part of the joint venture sales actually comes from domestic sales, though one of the key areas for the joint venture is actually to position these bio-based products in the international markets. That continues to improve and the margins in exports are better. But still, it is not large enough and the major impact has come because of subdued domestic sales mainly because of cost reasons. But as you also know, there have also been some challenges as far as the markets are concerned, particularly textiles and some of the others as I understand.

Sanjeev [Foreign Speech] if you have something to add on that?

Sanjeev Gurwara — President, Marketing

I think this is mainly, I think, ethoxylates business, which goes into various industries like textiles, agro, oilfield, home care, personal care, I think there was a little slowdown in the last previous quarter. Overall, I think this impact was felt globally also and in the domestic market as well. So I think the main reason — especially, I think what I understand is the textile market, there was a slowdown in production of various types of fabrics that [Indecipherable] are used so that is the main reason because of that. But right now what we see is that it’s encouraging and things are moving, I think slightly on the up trend at the moment. And we hope that it carries on to Q4 as well.

Vaibhav Gupta — Bowhead Investment Advisors — Analyst

All right, sir. Got it. Sir, second question is now our Gorakhpur and Kashipur facilities have been commissioned. The Specialty Chemical CapEx is also going as per schedule and probably will be commissioned by Q4 what is the plan for next leg of CapEx, because in terms of gestation period, I suppose they will be at least 12 to 18 months of gestation period for the next level of CapEx. So since FY 23 CapEx is more or less coming to fruition, what are the plans for future FY ’24 ’25 CapEx? Thank you.

Rupark Sarswat — Chief Executive Officer

So I’ll take part of it and the other part, I’ll request Anand ji to comment. One, we’ve made significant investments in Grain-based as well as Specialty Chemicals, so this is a significant slug of CapEx and I think the major focus of the team is to realize value through this CapExs. And however we are evaluating whether we should invest more in either ethanol capacity, will that makes sense for us to reduce our cost to or also increase our sales in the biofuels space, we have not come to a conclusion there as and when that will happen we’ll let you know.

Other than that you will see some investments as, I talked about, for example, in increasing capacities in Country liquor space as far as Tetra packaging is concerned. And in the IMFL space as we ramp up our sales that continues to grow, but other than that I don’t see any significant CapEx immediately coming other than these that I’ve already spoken about. Anand ji?

Anand Singhal — Chief Financial Officer

In addition to what Rupark he had just told, the grain distilleries has been completed but it will get relating to boiler and turbine Houston buses. So for both the distillery the boiler and turbine is in the process. So for both the distilleries the boiler and turbine is in process and hopefully will be completed by June ’23. That is in process. Apart from this the new especially chemical unit is also in process. So these will be the CapEx which we hope will continue in ’23 ’24. So this is from my side.

Vaibhav Gupta — Bowhead Investment Advisors — Analyst

Right, sir. Anand sir just one more clarification. One is that now we have sold the stake in the JV, so we will be receiving about INR66 crores. And I understand that from the Clariant deal we were also supposed to receive INR190 crores. So when are we likely to receive this entire amount of maybe INR250 odd crores? And how does our debt look like at the end of FY ’23, post receiving this amount? Thank you.

Anand Singhal — Chief Financial Officer

Regarding the realizations on the JV, out of the INR191 crores, we have already received 20 crores from them in June. And, hopefully we’ll receive another INR40 crores by March ’23. So in this year we are hopeful that we’ll get about INR60 crores out of INR191 crores. Rest of the amount will come in the next year, that’s what is our understanding.

Regarding the debt, hopefully, after the payment of the regular term-loan, our term-loan will be at around INR650 crores as on March ’23. And ECB will be about $23 million. Okay. Working capital, yes, there is a working capital which will be hopefully will be utilized at 75%. So this will be the debt as on 31st March ’23.

Vaibhav Gupta — Bowhead Investment Advisors — Analyst

All right, sir. Just one clarification. Will this include the money received from the JV stakes sale INR66 crores.

Anand Singhal — Chief Financial Officer

JV means KIFTPL?

Vaibhav Gupta — Bowhead Investment Advisors — Analyst

Right. Right, sir.

Anand Singhal — Chief Financial Officer

KIFTPL has been considered into this.

Vaibhav Gupta — Bowhead Investment Advisors — Analyst

Okay. Thank you so much and best of luck, sir. Thank you.

Operator

Thank you. Our next question is from the line of Sanjesh Jain with ICICI Securities, please state your question.

Sanjesh Jain — ICICI Securities — Analyst

Thanks, sir. Thanks for taking my question. Sir, from my side, first on the grain-based ethanol and the strategy to use that. How do you want to use this ethanol? How much of it will go into as ethanol for blending? I understand 75%. And what is the remaining 25% we plan — do we plan to sell it or do we plan to use it internally to reduce the cost as you said in your opening statement? And will this be constant or when the prices are most stable globally you would want to sell 100% of grain-based ethanol and for the other consumption you want to import. How should one look at the utilization of this ethanol from internal and external perspective?

Rupark Sarswat — Chief Executive Officer

Sanjesh, you’ve actually given the answer in your question. In the sense that you understand this quite well except that, I would like to mentioned that you have assumed that 75% of this will necessarily go to biofuels. It is a condition provided we are availing the subvention benefit. If we don’t then it is not necessarily a condition. Anand ji, am I right?

Anand Singhal — Chief Financial Officer

Correct, sir.

Rupark Sarswat — Chief Executive Officer

So that is the position we will take based on what our best possible allocation is and in this very volatile scenario, honestly, I have myself come here and spoken to saying, we expect imported ethanol prices eventually to come down and that has not happened. And I mentioned to you the reasons why that has not happened. And so we continue to look at our scenarios, as I said, we are in some ways in a better position because we have what I call the three-by-three metrics, we have three potential sources of ethanol, imported ethanol, molasses based ethanol, grain-based ethanol and three potential uses of ethanol, which is either we use it in captive for our beverages segment which is country liquor, IMFL or we use it as an intermediate for our chemicals or we sell into bio-fuels. So that is so dynamic but we are on a quarterly basis reviewing this scenario and seeing how best we can maximize our profitability.

Sanjesh Jain — ICICI Securities — Analyst

And just one follow-up on that. This subvention is annual process or we have to avail it now and that benefit will be available for the years described? How does that work?

Rupark Sarswat — Chief Executive Officer

For our Gorakhpur project we have already opted out from the subvention scheme.

Sanjesh Jain — ICICI Securities — Analyst

Okay.

Rupark Sarswat — Chief Executive Officer

Regarding the Kashipur, we had — although we have not opted out till now, but in future we have to be out from the subvention scheme because we are not — we don’t want to commit the supply of 75% alcohol for ethanol blending.

Sanjesh Jain — ICICI Securities — Analyst

Right now how much of our total quantity requirement do we import or buy from outside and assuming that we don’t sell any of this as a bio-fuel, will we be self-sufficient on entire requirement of the ethanol?

Rupark Sarswat — Chief Executive Officer

Yes, just second, sir, I just [Indecipherable]

Sanjesh Jain — ICICI Securities — Analyst

Yes. Sure.

Rupark Sarswat — Chief Executive Officer

I think, in short, by and large, we might have to procure something. So Sanjesh, the annual requirement for our captive consumption like for our chemical division and for our potable dividend would be around 80 million bulk liter.

Sanjesh Jain — ICICI Securities — Analyst

So with this entire grain-based assuming we use internally?

Rupark Sarswat — Chief Executive Officer

Yes, completely decoupled from the external volatility of the ethanol. That’d be a fait assumption.

Anand Singhal — Chief Financial Officer

If we are going out of the suspension, then most likely except the tender which we have already accepted, we could use the whole of the quantity for our captive.

Sanjesh Jain — ICICI Securities — Analyst

One related question. In a longer-term. Our view earlier was that it is better-off to sell as a biofuel initially when we started doing this call. And imported was what we were looking. Has the degression materially changed and do you think it has changed for the long-term for us to make big difference in our allocation of ethanol in last few years?

Rupark Sarswat — Chief Executive Officer

Sanjesh, honestly, we’ve been doing this call since August last year and I don’t think I ever expressed the view that we are showing that imported ethanol is going to be the feedstock per our chemicals for sure. Because it was a couple of years ago completely because it was cheaper. However, we will, as I said, we will continue to look at it. If for example imported were to come back to prices deferred 1.5 years ago, the obvious strategy for us would be to maximize usage either in beverages or biofuels and get imported ethanol for captive consumption. Does that answer your question?

Sanjesh Jain — ICICI Securities — Analyst

Not that answer, that means, every year we will have to make a decisions telling how will be using this grain-based ethanol, is that a fair assumption?

Rupark Sarswat — Chief Executive Officer

Yes. I [Indecipherable] every year. We look at it every month.

Sanjesh Jain — ICICI Securities — Analyst

Okay. Fair enough, sir. My second question is on the specialized product which we have commercialized. Can you elaborate what is the product, what are the application? I know we did disclose a lot about it in the previous call worked various products. But I am more interested on the product which we have commercialized.

Rupark Sarswat — Chief Executive Officer

Okay. So it is specialty [Indecipherable] okay I can only tell you that much. And it finds application in oil piece. It is being sold to a major Company which supplies ingredients to oilfield, majors like Slum, Aramco et cetera and so that’s the product and it is in the oilfield space. And we’ll probably be introducing a few more products in this portfolio as well.

So it’s just a start one of the reasons why we not kind of downtown about it is, let the portfolio dwell up, sometimes these are things where you walk two-step forward and you take one-step backwards then you walk three steps forward that’s how the specialty chemicals business is. But we are sure we want to build a knowledge-based business and I’m happy that even before the plant is up and running we’ve been some how able to use existing assets to start something going lease, so that’s been encouraging from that point of view.

Sanjesh Jain — ICICI Securities — Analyst

Great. Can you elaborate on the R&D effort parallely for us to understand how serious are we on the specialty? How many products are in the development pipeline? How are we looking at R&D itself now some say three to five-year perspective?

Rupark Sarswat — Chief Executive Officer

And this had pretty serious about having my job, so we are pretty serious about.

Sanjesh Jain — ICICI Securities — Analyst

No, no I completely. I don’t disagree on that but I just wanted to understand how deeper are we into what are investing.

Rupark Sarswat — Chief Executive Officer

Yes. So maybe we could have a more detailed discussion some time. So we’ve done several things to give you some assurance that — So we don’t want to go big-bang and just create a global R&D center. I think the thing is to identify where we want to build based on our center, so what we’ve done is we’ve first of all what was our Specialties kind of R&D center was made a part of the joint-venture, so that was separated. We’ve now created using some existing building et cetera, new R&D center for IGL. You happy to visit and see that in a couple of months time that will be ready. We’ve also recruited more people, seven or eight people definitely. And we are working on several areas, one of them being oilfield, I spoke about some of the others that we’re evaluating right from Amines to plasticizers to polyol.

So we have — how can I tell you — we are very serious about it because we believe that we had to make that kind of either you can call the portfolio in addition, a portfolio shift to make sure that, despite some of the sense in bio-based materials et cetera we create an overall portfolio, which is much more resilient.

Sanjesh Jain — ICICI Securities — Analyst

Fair enough, sir, fair enough. I think there are many people still waiting in the queue. I will come back in the queue. Thank you. And best of luck for the coming quarters.

Rupark Sarswat — Chief Executive Officer

Thank you.

Sanjesh Jain — Moderator

Thank you. Our next question is from the line of Mr. Balasubramanian with Arihant Capital, please state your question.

Balasubramanian — Arihant Capital Markets — Analyst

Good evening, sir. Thank you so much for taking my question. My first question is there any pricing pressure on QTL and propyl prices in the glycol ether space?

Rupark Sarswat — Chief Executive Officer

Just to clarify, Bala, is this — you are asking that the prices of Butyl and propyl?

Balasubramanian — Arihant Capital Markets — Analyst

Yes, sir.

Rupark Sarswat — Chief Executive Officer

Have they come down, reduced or is it constant for us? What is the question?

Balasubramanian — Arihant Capital Markets — Analyst

Okay sir. And like what kind of realization for biobased MEG and in international markets it is witnessing a traction, so if you could some more light on that?

Rupark Sarswat — Chief Executive Officer

Bal, can you just repeat your second question?

Balasubramanian — Arihant Capital Markets — Analyst

Sir what kind of realization for Bio-based MEG and are international markets witnessing traction for these products?

Rupark Sarswat — Chief Executive Officer

I can respond to that. Look, the — let me give you the difficult side of the news first. The difficult side of the news is that as far as crude based MEG prices in the market are concerned compared to our biobased MEG prices, the difference has increased from something like 2X to 3X, which means that we are — that’s — the differentiator has increased which puts pressure on us. But the good thing, which is an encouraging thing for us is that despite this significant increase as far as the differential price of biobased MEG and crude-based MEG is concerned, we have continued to grow our customers in the biobased space.

To give you — five years ago, roughly five years ago, 95% of our business used to come from one customer, and that particular customer shifted completely to recycled PET for whatever reason. Having said that, we now have something like 15 different customers in various parts of the world which includes Japan, Taiwan, Korea. And I was looking at the numbers, even though our volumes have come down quite significantly, our overall contribution for Bio-based MEG is still of the order of 75% 80% percent of what it used to be five years ago. So volumes have come down something like 60% but our contribution has come down, something like 20%. Because despite the major 95% consumer are buyer from us, having shifted away completely. So that’s kind of is the situation. I believe biobased MEG, we will — we are very encouraged to see this kind of traction.

Our new customer pipeline is robust. We do have some headwinds, we need to continue to work with them. I think when we are working in a portfolio like this, sometimes as I mentioned earlier, I would like to believe it’s not a 20-20 match, it’s a test match. we need to make sure our positioning is correct, sometimes its prices will go up, sometimes its prices will come down. But I think we are in the right space. We are probably pulled to find it very difficult to suddenly start to replace crude based MEG in polyester but that’s not the game we are in. But we continue to see decent traction by a number of customers even though they are smaller, niche customers for Bio-based MEG.

Balasubramanian — Arihant Capital Markets — Analyst

Okay, sir. Got it. Sir, like in last call you had mentioned the packaging cost went up by 60% to 70%, right now this softening or cooling off or we are facing the same kind of cost right now?

Rupark Sarswat — Chief Executive Officer

So Bala, just to give you a perspective rate in terms of like, the glass prices, right. So the basic ingredient for glasses is soda, which has gone up by 30% and and the suppliers from whom we source glass the fuel that is used for them their furnaces, the natural gas it has also shot up by in the range of around 40% to 45%. So yes the packaging cost for the IMF business continues to pose a challenge for us. And yes while we are facing this pressure we are also like in the project process of finding another couple of vendors who can help us in reducing the cost.

We’re in talks with them so that’s the detail I have with me right now.

Balasubramanian — Arihant Capital Markets — Analyst

Thank you so much sir. That’s it from me. Thanks.

Sanjesh Jain — Moderator

Our next question is from the line of Rohit Sinha with Sunidhi Securities. Please go ahead.

Rohit Sinha — Sunidhi Securities & Finance Limited — Analyst

Hello. Yes, sir. Just a follow-up question on this grain-based capacity. So how much was the utilization level for this quarter and basically what kind of cost-saving was there, if you can quantify?

Rupark Sarswat — Chief Executive Officer

Rohit, we could get back to you with the numbers. I don’t have them ready because we’ve been going through the commissioning process. What I know is that utilization will soon in the next quarter be closer to a 100%. And the prices have been varying, we have been — having to run our plants to get our efficiencies up at sectors. But I don’t have exact numbers to share right now.

Rohit Sinha — Sunidhi Securities & Finance Limited — Analyst

Okay okay. So next quarter probably we’ll be operating at almost 100%, right?

Rupark Sarswat — Chief Executive Officer

Yes, yes.

Rohit Sinha — Sunidhi Securities & Finance Limited — Analyst

Okay. That’s it from my side, sir. Thank you.

Sanjesh Jain — Moderator

Thank you. This is the last question for the day. I would now like to hand the conference over to Mr. Rupark Sarswat for closing comments. Please go-ahead, sir.

Rupark Sarswat — Chief Executive Officer

Thank you, Sanjesh and I just would like to thank everybody for patiently listening to us. And we try to respond to the questions. Hope we’ve been able to respond to them to their satisfaction. Nothing there from my side. From me and my colleagues, have a good evening and that’s all. And we’ll see you in the next quarter. Thank you.

Sanjesh Jain — Moderator

On behalf of ICICI Securities that concludes this conference. Thank you for joining us and you may now disconnect your lines.

Rupark Sarswat — Chief Executive Officer

Thank you, Sanjesh. Thanks a lot.