India Pesticides Ltd (IPL) Q2 FY23 Earnings Concall Transcript

India Pesticides Ltd (NSE:IPL) Q2 FY23 Earnings Concall dated Nov. 14, 2022

Corporate Participants:

Anand Swarup Agarwal — Chairman

Dheeraj Kumar Jain — Chief Executive Officer

Satya Prakash Gupta — Chief Financial Officer

Analysts:

Satish Kumar — SK Investments — Analyst

Karan Shah — GeeCee Holdings — Analyst

Rahul Jain — Credence Wealth — Analyst

Ayush Mittal — Mittal Analytics — Analyst

Rohit Nagraj — Centrum Broking — Analyst

Rohan Gupta — Nuvama — Analyst

Jay Shah — Capital BMS — Analyst

Hemant — Navigdata — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q2 FY23 Earnings Conference Call of India Pesticides Limited hosted by Dolat Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Tejas Sonawane from Dolat Capital. Thank you and over to you.

Operator

From Dolat Capital, I would like to thank the management of India Pesticides Limited for giving us the opportunity to host their Q2 FY23 earnings call. From the management team, we have with us today, Mr. Anand Swarup Agarwal Chairman; Mr. D. K. Jain. CEO; and S.P Gupta, Chief Financial Officer. Without further ado, I would like to hand over to about the call to the management for their opening remarks, post which we’ll open the forum for Q&A session.

Thank you and over to you sir.

Anand Swarup Agarwal — Chairman

Thank you, Tejas, good afternoon, ladies and gentlemen. I hope you and your family are staying safe and healthy. I take the pleasure of welcoming you all for the Q2 FY23 earning conference call of India pesticides. I hope you all had the chance to look at financial statements and earning presentation uploaded on the exchanges and our website. [Technical Issues] 8.8% supported by increased demand of existing products and new product launches. Our margins were impacted by various macroeconomic factors across the Group. Industry faced challenges in terms of raw material prices, with logistic constraints also creating pressure on the business. However, Indian economy demonstrated its resilience amidst such adverse atmosphere. And it continued its performance. All our recently launched products are performing well, and we expect their demand to grow going forward.

Further to this, we have planned INR70 crore capex for expansion at Sandila plant in FY23; 4,000 metric ton capacity at our Sandila will be additionally added under phases over the coming quarters. One herbicide and one intermediate will also be added to this. As an update on our Hamirpur project, EIA report was accepted by MoEF and meeting with AI’s [Phonetic] EAC is underway. During the quarter, our long term credit facilities were rated A plus by CARE rating, which highlights our ability to manage capital efficiently. Management team is fully equipped and committed to drive growth with registration of new products, improving product mix and increasing brand business, which will help companies to scale new heights.

We are constantly working towards our vision of supporting chemical business and farmers across world by producing superior value chemicals by integrating quality and efficiency. Now, I will hand over the further presentation to Mr. Jain. Thank you, thank you very much.

Dheeraj Kumar Jain — Chief Executive Officer

Thank you sir. Good afternoon, ladies and gentlemen. I thank you for taking out time to join this earning calls for Q2 FY23. During this quarter, we continued our journey of product development and customer acquisition. Our business continues to remain resilient despite external challenging environment. This has resulted in the highest-ever revenues during this quarter. However, our gross margins have been slightly dented due to the following major reasons. Number one, carryover of the high-cost inventory. Number two, increasing the operating and fuel cost. We are optimistic that prices should realize — rationalize in the coming quarters. We have been able to partially counter this increase. We are sourcing most of our raw materials locally and backward integrated in most of our products, which has supported our operations. Having the ability to develop chemicals that can substitute and reduce our dependence on imports is an important part of our R&D capabilities. Government’s focus to make India Atmanirbhar aligns with IPL’s growth strategy offocus on backward integration. During the quarter, I am pleased to announce that we are in line with our expectations in terms of growth, capex expansion plans and product category expansions; saying that at the same time, we are constantly working towards customer acquisition, new product development, and identification.

As informed by Mr. Agarwal, our Hamirpur project is on schedule. The application has been accepted and listed for presentation tomorrow, that is 15th of November at the Ministry of Environment expert committee. We hope to get a positive result. We are optimistic on long-term growth on the back of our strong fundamentals and R&D at the core leading to renewed focus on our new product development and head towards the era of growth and higher profitability. With this, I would like to pass on to Mr. S. P. Gupta to walk us through our quarter two FY23 financial highlights. S.P Gupta Ji?

Satya Prakash Gupta — Chief Financial Officer

Thank you, sir. Good afternoon ladies and gentlemen and thank you for joining the India Pesticides Conference call to discuss Q2 financial year 2023 results. Taking you through the financial highlights, the total revenues stood at INR253 crores as against INR182 crores in Q2 financial year ’22. That is Y-o-Y robust growth up 38%. EBITDA in Q2 financial year ’23 stands at INR55 crore. EBITDA margin was 21.7% in Q2 financial year ’23. The PAT stood at INR37 crore in Q2 financial year ’23 as compared to INR42 crores in Q2 financial year ’22. The revenue from export stood at INR122 crores as compared to INR78 crores in Q2 financial year ’22, showing a healthy growth of 56%. And domestic revenues stood at INR128 crores as compared to INR100 crores in Q2 financial year ’22.

Revenue from technicals and formulations stood at INR182 crores and INR69 crores during this quarter. While our profitability is down, company generating reasonable cash to support capex plan and increased working capital requirement due to higher level of turnover.

We remain confident of continuing our growth trajectory, while extending full support to our, customers, suppliers and other valued stakeholders. With this, we would be happy to take your questions.

Questions and Answers:

Operator

Thank you. We will now begin the question and answer session. [Operator Instructions]. We have the first question from the line of Satish Kumar from SK Investments. Please go ahead.

Satish Kumar — SK Investments — Analyst

Good afternoon. Sir, my question is regarding the dependent of raw material — dependence for — India Pesticides for raw materials on China. See, the latest credit rating report released by CARE as on the 6th of October ’22, they say that we are dependent on Kapton [Phonetic] raw materials on China, and based on annual report also, we could fairly say that around 40% of our raw materials, we are importing. But what we were told that — the company is fully backward integrated for all the products that they are selling and it is basically they are procuring the commodity-type of chemicals from the domestic market. So, can you clarify on this?

Dheeraj Kumar Jain — Chief Executive Officer

Yeah. Thank you, sir. Actually, the Kapton raw material, we are not sourcing from China. We are sourcing very miniscule if any. But more than 90% of which raw material — the critical raw material, we are sourcing outside China. And it is not a commodity part, but all other chemicals required for Kapton production are sourced locally from India itself. That is number one. And the dependence of us — our raw materials on China for some other products are there because we are backward integrating some of the part of what we are making. And there, we are trying to reduce the dependence on China imports.

Satish Kumar — SK Investments — Analyst

Are you saying that for 90% of raw material requirements for Kapton, you are sourcing it locally?

Dheeraj Kumar Jain — Chief Executive Officer

No. One of the — one of the raw materials, we are importing, but not from China.

Satish Kumar — SK Investments — Analyst

Okay, Sir, earlier we had around the six molecules — sorry eight molecules — no, no, it’s correct six and then we have launched eight more. Correct?

Dheeraj Kumar Jain — Chief Executive Officer

Yeah.

Satish Kumar — SK Investments — Analyst

So once we are start — completing the capex work at Sandila, so how much percentage of that are completely backward integrated?, like out of 14 molecules, how much we are completely backward integrated and we can procure the raw materials from the domestic market?

Dheeraj Kumar Jain — Chief Executive Officer

Sir, in many of the products, we are fully backward integrated. We don’t import anything from anywhere. We are totally buying from India itself and such products are at least — if I understand at least five products out of this list of 14. And in the remaining products, one critical raw material in each of these, we are importing from China. And this, we are trying to further reduce this import by developing our own technology and doing still backward integrated product. But, there are some few very bulk products, which are completely out of our range that we try to import from China our other sources.

Satish Kumar — SK Investments — Analyst

So out of 14, you are saying five we are completely backward integrated and nine, partially we are procuring it from China or other countries.

Dheeraj Kumar Jain — Chief Executive Officer

Yes, sir.

Satish Kumar — SK Investments — Analyst

Correct, sir. Is it possible to quantify how much percentage of our total raw material requirement we are still dependent on either China or other countries?

Dheeraj Kumar Jain — Chief Executive Officer

Around 35% of our total raw material purchase is imported and dependency in China is around 20%.

Satish Kumar — SK Investments — Analyst

20% of 35% or 20% of total return?

Anand Swarup Agarwal — Chairman

Entire — entire purchase. Sir, second question is on the operating margin. So if you see after the March ’22, the net operating EBITDA margins have been less than 30%, whereas before that, it used to be in excess of 30%. Now, we claim that we are fully backward integrated. N other Indian company makes this product and there is a huge demand from the existing customers asking for additional quantities and all that. So, in spite of that, I understand there is increasing power cost or logistics and all that. So, we expect there is a drop of one or two percentage. But here the operating margins have fallen by more than 10% over a period of three quarters. Can you give some clarification on this?

Dheeraj Kumar Jain — Chief Executive Officer

Sir, you are right. The margins have slightly, they have certainly reduced. That was number one. That during the last quarters, there were serious problems of logistics — whatever raw material we were buying from outside India, that the logistic problems were too many. So, we had to order a bit more of the raw material to avoid any production loss. So, at that time the prices were high. So now, we have to carry over those inventories, which is exerting us in the reduction in the margin — that is the number one.

And number two, even in the Indian market, the Indian raw materials, they have also increased. There has been serious increase in some of our basic raw materials — what we are using like carbon disulfide and alkali, there has been a — almost more than twofold rise in the prices of these commodities. Though we would pass on some of these to our customer, but full pass on was difficult.

And number third, major reason was that there has been a tremendous increase in the energy cost — the fuel what we are using. Though we are using green fuel — we are not using any fossil fuel. That way, we have a green certification, but we are using green fuel. But the cost of that fuel has also increased almost three times, which has seriously dented the overall profitability during this quarter.

Satish Kumar — SK Investments — Analyst

Sir, now, I understand this increase is there in generally for all the companies. We being making import substituted product and there is a huge demand from the customer, are we not in a position to pass it on entirely to these customers?

Dheeraj Kumar Jain — Chief Executive Officer

Sir, customers — they are also under severe pressure, no, because they don’t get so much of price increase at their end. So, they keep on requesting us to partially adjust here and there. So, we have to somewhere — in between, we have to settle because we are working in long-term basis. So this year, sometimes you may get the better margins, so, at least try to adjust this time. So like that, we have to keep on slightly adjusting the prices considering the long-term association with the customers.

Anand Swarup Agarwal — Chairman

I want to further add on this issue that one big multinational company was with us and we were getting better margins, but because of the increase in raw materials, we were not gaining anything but we remained continued with that customer in hope that in coming years, we will make some money and that came true. Now the prices are going down. So, we are comfortable with that company.

Satish Kumar — SK Investments — Analyst

Sir, I understand the company’s — what is they keep — tactics or managing the customer, keeping the long-term relations in mind. So if this is the scenario with new capex, new products are coming up, is it possible for the company to go back to 30% operating margin or will it at a relatively lower level, which is sustainable, let us say, keeping three to five years in mind?

Dheeraj Kumar Jain — Chief Executive Officer

Sir, three to five years keeping in mind, though 30% is slightly optimistic, we feel that it should be around 25%, we should be able to manage. Because, the new product what we will be launching initially, they have little higher cost and will take a little time to stabilize. So that would be there, but we are very quite hopeful that in the long run, we should be able to manage around that level.

Anand Swarup Agarwal — Chairman

Minimum 25%, we would be able to handle. We are hoping for more, but we are committing 25%, a little more.

Satish Kumar — SK Investments — Analyst

Okay, sir sir. My next question is regarding the..

Operator

This is operator here. Requesting you to kindly come back in the queue for follow up questions.

Satish Kumar — SK Investments — Analyst

Okay, Thanks. Thank you.

Operator

We have the next question from the line of Karan Shah from GeeCee Holdings. Please go ahead.

Karan Shah — GeeCee Holdings — Analyst

Hi, sir. Thank you for the opportunity.

Dheeraj Kumar Jain — Chief Executive Officer

Thank you.

Karan Shah — GeeCee Holdings — Analyst

Sir, my question is regarding the price pass on and raw material inventory. So, I assume we have higher-cost inventory that was procured in the previous two quarters and that has impacted our gross margins in this quarter as well. So what portion of this inventory would still be there that has been carry forward towards the third quarter and where we will be facing this pressure and that can be, if you can quantify the amount of inventory loss that was there in this quarter? Thank you.

Dheeraj Kumar Jain — Chief Executive Officer

The high cost inventory as on 30th September was around 55%, which we have posted earlier. And there is no inventory loss as such. We are selling our product on profit only, but only margin has declined. Since we have consumed high-price raw material, so our margin has declined, but there is no inventory loss we have booked.

Karan Shah — GeeCee Holdings — Analyst

And sir. So, remaining 45% of the inventory will be utilized in the third quarter? Is it fair to assume that?

Anand Swarup Agarwal — Chairman

The entire high-cost inventory will be utilized in this quarter only.

Satya Prakash Gupta — Chief Financial Officer

It will be consumed and sold.

Karan Shah — GeeCee Holdings — Analyst

Okay, And how was the price passed on across the majority of our top five products?

Dheeraj Kumar Jain — Chief Executive Officer

In herbicide category, we could not pass on the price right fully.

Karan Shah — GeeCee Holdings — Analyst

So, in the other categories, price rise was possible to full extent?

Dheeraj Kumar Jain — Chief Executive Officer

To majority of the extent, we have been able to pass on in other categories. But in herbicides, we could not pass on the — we could partially pass-on the raw-material increase.

Karan Shah — GeeCee Holdings — Analyst

Okay and sir, what was the utilization for the current quarter?

Dheeraj Kumar Jain — Chief Executive Officer

It was 78%, and technical products.

Karan Shah — GeeCee Holdings — Analyst

And what would be the approximate volume growth in the current quarter?

Dheeraj Kumar Jain — Chief Executive Officer

Volume growth was around 32% and value-wise, it is around 39%.

Karan Shah — GeeCee Holdings — Analyst

Okay. I’ll just join the queue again. Thank you.

Dheeraj Kumar Jain — Chief Executive Officer

Thank you.

Operator

[Operator Instructions]. We have the next question from the line of Rahul Jain from Credence Wealth. Please go ahead.

Rahul Jain — Credence Wealth — Analyst

Am I audible?

Anand Swarup Agarwal — Chairman

Yes, we can hear you.

Rahul Jain — Credence Wealth — Analyst

Sure, thanks for the opportunity. Sir, with regards to the gross margin, earlier we have always maintained that our gross margins will remain at around 50% plus including you had mentioned in thee earlier calls, the new molecules, the new products which we are adding, they will all have a 50% plus gross margin. Last two quarters, we have seen for the first time after almost four or five quarters, when the margins — gross margins fell below 50%. In first-quarter, it was around 48.5% and in the current quarter, it is around 43%. So in medium to long-term, say next one to three years, how do we look at our gross margins?

Dheeraj Kumar Jain — Chief Executive Officer

We are expecting our gross margin to stabilize around say 50%.

Rahul Jain — Credence Wealth — Analyst

So okay and that could happen in say next two, three quarters?

Dheeraj Kumar Jain — Chief Executive Officer

Yeah., yeah. This quarter it may not happen since we are carrying higher price in raw material and other inventory, but next quarter onwards, we are quite hopeful. And in terms of gross margins, can we assume that the 43% could be among the worst margins, which you could have and so from here on, you may see some improvement or maybe stable gross margins for next one or two quarters, but not further deterioration? Further deterioration will not be there, but it will improve gradually in next two quarters.

Rahul Jain — Credence Wealth — Analyst

And sir, with regards to the capex part, so in the current year, till-date, how much we have spent? We were expecting to spend around INR70 crores in the current year on our existing premises and around INR20 crores for the Hamirpur Facility in the current year.

Dheeraj Kumar Jain — Chief Executive Officer

Yeah, Yeah.

Rahul Jain — Credence Wealth — Analyst

Till how, how much has been spent?

Dheeraj Kumar Jain — Chief Executive Officer

Yeah, we spent INR35 crores in half year first half.

Rahul Jain — Credence Wealth — Analyst

Do expect — and further INR35 crores will come in the second half?

Dheeraj Kumar Jain — Chief Executive Officer

Yes, yes, yes.

Rahul Jain — Credence Wealth — Analyst

Sure. And in Hamirpur, do we expect to spend some capex in the current year given the current situation at which — we have already got the EC approval.

Dheeraj Kumar Jain — Chief Executive Officer

We have you spent some money on land and as soon as we receive the approval, I think in the last — first — fourth quarter of current year, we will be spending more on. Our budget is INR20 crore — to spend INR20 crores.

Rahul Jain — Credence Wealth — Analyst

Sure. Sir, last — in the last quarter, you had mentioned about utilization is around 80% and current quarter, you just mentioned to the previous participant, we are at around 78%. And, we have had almost 30% volume growth. So I’m just a bit confused in the three things put together because there is no capacity increase in this current quarter, right?

Dheeraj Kumar Jain — Chief Executive Officer

Yes, there has been no capacity increase.

Rahul Jain — Credence Wealth — Analyst

Okay. So, I’m not able to understand in spite of a volume growth of 30%, our capacity utilization remains almost the same?

Dheeraj Kumar Jain — Chief Executive Officer

In some products, seasonality involved. Actually, we have commissioned new product for business season starts from the fourth quarter to first quarter of next year. Some products, they are seasonal in nature for our domestic market.

Rahul Jain — Credence Wealth — Analyst

Sure. Yes one last question. So, we continue with regards to the new products, which we have introduced. You expect further two molecules to be introduced in the second-half. So this eight molecules, they will all be around 50% plus gross margins, number one. And number two, what could be the contribution from this products in say FY24.

Dheeraj Kumar Jain — Chief Executive Officer

Sir, we would be adding these two new products during the remaining period of this year and the overall revenue we expect to be almost about 2.5 times asset turnover, no, what we are expecting. And we have done the capex of about INR70 crores last year and INR70 crores this year, we will be doing. So we can expect accordingly and revenue increase next year, compared to last year based on that.

Rahul Jain — Credence Wealth — Analyst

So next year, we could — we are well on course to achieve our stated INR1000 plus crores of topline?

Dheeraj Kumar Jain — Chief Executive Officer

Yeah, yeah, certainly.

Rahul Jain — Credence Wealth — Analyst

Sure, thank you so much, sir. And wish you all the best.

Dheeraj Kumar Jain — Chief Executive Officer

Thank you, sir. Thank you much.

Operator

Thank you. We have the next question from the line of Ayush Mittal from Mittal Analytics. Please, go ahead. Good afternoon, sir, First of all, congratulations on the growth in business.. Two questions, sir. One, when we see the balance sheet we are seeing there, consistent increase in inventory level — inventory value. Can you share what is happening on this front and why?

Dheeraj Kumar Jain — Chief Executive Officer

Yeah, there are few regions. One, important reason is we have purchase a lot of inventory in Q1 in anticipation — there was lot of distress in logistics and due to our was, raw material prices were increasing. We have contacted a lot inventory for our production — high cost inventory. Secondly, in last quarter, we have started one herbicide, which will meet used in fourth quarter of current year and first quarter of next year. We are building up stock of that herbicide since it is a B herbicide in India. So that inventory has already started declining. In October and November, inventory in absolute number has declined.

Ayush Mittal — Mittal Analytics — Analyst

Okay. So, this should come back to normal levels of like usual, I think, inventory days used to be 70, 80. I think that is the level you will bring it down to or this will remain elevated?

Dheeraj Kumar Jain — Chief Executive Officer

By March, I think it will be at that level only

Ayush Mittal — Mittal Analytics — Analyst

Okay, okay. Second, all these new products that we have been introducing, do we have any metrics by which we can share how much of contribution these new projects are contributing in absolute overall revenues or what is the progress on the same — something on those insights from these new products?

Dheeraj Kumar Jain — Chief Executive Officer

This quarter, new products have contributed INR30 crores of revenue.

Ayush Mittal — Mittal Analytics — Analyst

INR30 crores, okay, that’s very good. So far this year, this new products will be doing more than INR100 crore?

Dheeraj Kumar Jain — Chief Executive Officer

Around INR100 crores. Already, we have achieved INR52 crores of turnover.

Satya Prakash Gupta — Chief Financial Officer

That would be more than INR100 crores what we anticipate, Mittal Ji. We want to be very conservative.

Ayush Mittal — Mittal Analytics — Analyst

Thanks, okay. And sir, some more capacity addition that we’ll be doing in Sandila?

Dheeraj Kumar Jain — Chief Executive Officer

Two more blocks they are coming up. One block will be operational by November end and another block will be operational by — in fourth quarter. That will be for our intermediate and this — one block that is expected to commission in this November. It is herbicide and and intermediates.

Ayush Mittal — Mittal Analytics — Analyst

Okay, great sir. So hopefully in FY24, can we expect that from Sandila, we can grow beyond INR1,100 crores to maybe closer — more than that once all these projects come online and they get stabilized?

Dheeraj Kumar Jain — Chief Executive Officer

Sir, last year, our revenue was INR650 crores and after that, we started on the journey of adding these eight products wherein we have added INR70 crores plus INR70 crores –INR140 crores of capex. And we expect a lesser turnover of at least 2.5 times. So, we expect the turnover to be in that range INR140 crores x 2.5 plus INR650 Crores. So, it will be thousand plus this year end. And next year, in FY24, it will be certainly more. But at the time, all these will be fully in operation.

Ayush Mittal — Mittal Analytics — Analyst

Great, sir. Great. Thank you and wish you all the very best.

Dheeraj Kumar Jain — Chief Executive Officer

Thank you sir, thank you so much.

Operator

Thank you. We have the next question from the line of Rohit Nagraj from Centrum Broking. Please go ahead.

Rohit Nagraj — Centrum Broking — Analyst

Yeah, thanks for the opportunity. Sir, we have done commendable volume growth during the quarter and first half. Did we see any demand side challenges from say domestic market or exports market given that there has been a lot of issues in the European market, which is going on plus U.S.A’s inflationary pressures. So any demand related setbacks that we are currently facing or any order postponements or cancellations of that sort any happening? Thank you.

Dheeraj Kumar Jain — Chief Executive Officer

Sir, we have not yet received any cancellation of orders till now anything. But there are some challenges in Europe because Europe, this year has been very dry. But now, people are planning for the next year. So, we have not received any cancellation of the order. And on domestic front, there has been erratic monsoon all across India. And that has resulted in somewhat different utilization of our capacities at different — in different regions. And this has slightly affected us in few of the molecules in the domestic sale. But, internationally, we have not found any challenge till now. Even the Ukraine-Russia war — because we don’t have serious business in Russia or Ukraine, so there is not much of effect that all. Right sir. Got it. Sir, second question is in terms of the price pass-on. So, are we facing challenges in terms of a completely passing on the prices in the domestic market or international market or it is equally across both the markets? Thank you. Sir, passing on — passing of the increase in prices, it is always a difficult task because the customer — they also have their own limitations. And we — though we have good discussions and then at least partial increase, we are able to effectively do. But some cost, no, we could not pass on, especially the energy cost, etc., and as informed by Mr. Gupta, in one of our herbicide products, we could not pass the full increase because considering the long-term relationship with the customer and we hope that we will get compensated in future for that.

Rohit Nagraj — Centrum Broking — Analyst

Right sir. Sir, last question on the projects, which are currently ongoing. So are we facing any delays from the project commissioning or everything is on track and will be commissioned as per the timelines so that our future growth will not get hampered? Thank you.

Dheeraj Kumar Jain — Chief Executive Officer

They are, more or less seeing — timeline is on track except very slight delay in commissioning one of our herbicide plants, which we expected to commission in September and October, which is going this year because this month, it will be commissioned. That was because of one of the critical equipment, we got at very delayed time. That was the problem because it was a very special equipment requiring Esterline [Phonetic] lining, etc. So, that took a little more time for us to decide and to procure that equipment. But now that equipment is in place and all the raw materials have been already ordered, which are expected to be received by last week. So, we would be commissioning this plant by end of November or firsy week of December. But, otherwise, all other projects are on schedule.

Rohit Nagraj — Centrum Broking — Analyst

Sure. Thank you so much for answering all the questions and best of luck, sir.

Dheeraj Kumar Jain — Chief Executive Officer

Thank you.

Operator

Thank you. We have the next question from the line of Rohan Gupta from Nuvama. Please go ahead.

Rohan Gupta — Nuvama — Analyst

Yeah, hi, sir. Good afternoon. Thanks for the opportunity. Sir, first question is on the current capacity utilization, sir. If you can just give some number, what is the current realization rate?

Satya Prakash Gupta — Chief Financial Officer

This is around 77% — 77%, 78%.

Rohan Gupta — Nuvama — Analyst

Okay and sir, we have plans to close to INR70 crores more capex with the 3,000 tons addition — 4,000 tons I think additional capacity, right, that takes about total technical capacity to close to 28,000 tons or.

Dheeraj Kumar Jain — Chief Executive Officer

27,500 tons.

Rohan Gupta — Nuvama — Analyst

Right. So on this the new plant also, the new product also which you mentioned on the herbicide product, which had been launched this current year with a INR100 crores rupees turnover. On that sir, if you can give some more clarity, what is the product and whether it is exports market and how much potential you see going forward on this?

Dheeraj Kumar Jain — Chief Executive Officer

Sir, this product is herbicide mostly used on rice and majorly it will be sold in India. It is for the domestic sale and it is a very big product in India. And we have already commissioned this plant and we are producing this product regularly. As Mr. Gupta has told, no, the season starts late fourth quarter — third-quarter and it continues to the fourth and first quarter of the next year. That is a major season for this herbicide. So, we are stocking this product presently. And we hope that we would be able to get more than INR100 crores revenue from this product when it goes [Speech Overlap]. Sir?

Rohan Gupta — Nuvama — Analyst

Is this a 9-3 registration or the product has already been there in the market and we are new to.

Dheeraj Kumar Jain — Chief Executive Officer

No, no, the product has been in the market. Product has been in the market and it is there since quite some time. It is not 9-3. But, majority of the intermediate has been imported up till now. But we have started making these intermediate also in our plant. That is the backward integration of what we told that this intermediate is a very critical intermediate, which has — more than 90% was being imported up till now. So, that import will get reduced. And we having integrated our system, we would be in a better position to compete in the market.

Rohan Gupta — Nuvama — Analyst

Right, sir. Sir, in terms of our backward integration, you mentioned that roughly out of the 14 products, roughly five you are fully backward integrated and balanced. Nine, you still are import dependent up to the extent of 35%. How do you see that and this balanced product also, we can be backward integrated in what timeframe and what can be the investment requirement for that and will it enhance our margin further?

Dheeraj Kumar Jain — Chief Executive Officer

Sir, we are trying our best to reduce the dependence on imports, but still there are few products and few intermediaries, which nobody is making in India and which needed to be imported. And we are trying to reduce this dependence by developing technologies for these intermediates also. So the one, we already done. In other products, we are doing it — plant is under erection. Similarly, we are working on two more intermediaries, which can be used hear itelf rather than importing.

Rohan Gupta — Nuvama — Analyst

Got it, sir. Sir, thanks sir from my side. Thank you.

Dheeraj Kumar Jain — Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions]. We have the next question from the line of Jay Shah from Capital BMS. Please go ahead.

Jay Shah — Capital BMS — Analyst

Hello, congratulations for a good set of numbers. Sir, my question is more on the broader side because of this prices in Europe and because agrochemical demand is also increasing, are we getting enquires from export market, more for contract manufacturing or CDMO kind of enquiries or even do white labeling from them. Is there any kind of tailwind that we’re seeing on that front?

Dheeraj Kumar Jain — Chief Executive Officer

We are getting lot of enquiries from overseas with multinationals and they keep coming to us and they keep on asking new products. And we have regular discussions with them and we are open to any contract manufacturing also if they require. There is no doubt about it. And we are in discussion with many multinationals on this account,. And we have identified few products with them and we are already working on those products, which we would be implementing it our Hamirpur site.

Jay Shah — Capital BMS — Analyst

Okay, that’s great to hear. And sir, secondly from the new product that we will be introducing over the next few quarters, are they majorly going to be domestic focused, it has good flip between export regulated markets and the domestic markets.

Dheeraj Kumar Jain — Chief Executive Officer

One of the product, which will be commissioning this month and next month, it will be completely for export. And the one intermediate what we would be making, that would be mostly for indigenous requirements.

Jay Shah — Capital BMS — Analyst

And sir on the export side, could you throw some light, what kind of market cap would that product have. I mean what is that total requirement that is there.

Dheeraj Kumar Jain — Chief Executive Officer

Sir, we are putting up a plant, which can give us the revenue of initial next year at least INR50 crores to INR60 crores. And when we get full utilization of the plant, it can give revenue of almost about INR100 crores. And, this is also a herbicide, which is registered in Europe and U.S.A etc., and we are already registering our product there.

Jay Shah — Capital BMS — Analyst

Okay. So sir, going ahead for the next say two to three years, will it be fair to assume that the next leg of growth will come more from the technical and herbicide and like from the formulation. Would formulation as a percentage of total revenue be stable or flat or probably decrease.

Dheeraj Kumar Jain — Chief Executive Officer

No, the percentage of formulation would also increase in line with our increase in technicals because the technicals — what we make now, that will be used for our formulations. We are trying to expand the basket of our formulated products. So the growth expected in the formulation business is also similar to our technical growth. So, the ratio would remain more or less same.

Jay Shah — Capital BMS — Analyst

Okay, okay, sir, okay. Thank you so much and all the best for the future.

Dheeraj Kumar Jain — Chief Executive Officer

Thank you.

Operator

We have the next question from the line of Hemant from Navigdata. Please go ahead. Yeah, hi, [Foreign Speech]. I just have a couple of questions, sir. One is like this quarter, we have done good sales — that is increase. Is it due to exports or domestic? And I just want to understand a little bit about the mix of exports versus domestic this quarter and what is projected, sir? Do we expect growth coming from exports or domestic book.

Dheeraj Kumar Jain — Chief Executive Officer

This quarter, our export has grown by 56% and domestic, it has grown by 28%. So more on domestic front. So, sorry more on export front,

Hemant — Navigdata — Analyst

Sir, what would the future hold like, let’s say one year from now, is that ratio what is like export versus domestic this quarter, would that hold or do we have any specific focus on export or domestic [Indecipherable] understand that.

Dheeraj Kumar Jain — Chief Executive Officer

Yeah, we are projecting around 15% from export and 50% from domestic, in medium range

Hemant — Navigdata — Analyst

Okay, okay, thank you sir. Sir, that was first question. Second question, sir I have is like this quarter, we have our cost of goods sold increased. But I do not really understand if this is due to the imported raw material or domestic raw material or both. Is it like across the board, the raw material prices have increased? Any specific price, which is probably imported or domestic — specific item for which the prices have increased?

Dheeraj Kumar Jain — Chief Executive Officer

It is for both the imported and, as well as for domestic — for both the raw material. Price rises were all the different raw materials.

Hemant — Navigdata — Analyst

Okay, sir. Thank you, sir. No more, — two questions I only have. Thank you and all the best to you. Thank you

Dheeraj Kumar Jain — Chief Executive Officer

Thank you.

Operator

We have the next question from the line of Satish Kumar from SK Investments. Please go ahead.

Satish Kumar — SK Investments — Analyst

Sir, thank you for the opportunity. Sir, in the opening remarks, you have mentioned the environmental meeting is expected to happen tomorrow. In the investor presentation, you mentioned that you’re confident of commissioning the Hamirpur plant by Q4 FY’24. So one question is, are you confident of getting this approval by this quarter? And once you get that, are you confident of commissioning because you had mentioned you will do it in block-wise commissioning of the plant at Hamirpur. So you would be able to start the first block before Q4 of next year?

Dheeraj Kumar Jain — Chief Executive Officer

Yeah, I would say if we get the clearance in tomorrow’s meeting, then certainly we should be able to start something by quarter four ’24, because we feel that it will take almost about a year for us to put up the infrastructure and one or two manufacturing blocks. And then, we will be adding block-wise every year. And tomorrow is the meeting and let us see if we don’t get any serious questions, then we should get it cleared. So that is what we are hoping. If we are stuck-up here, then probably it will get slightly delayed. But if we are able to clear that, then we are quite hopeful that in thir-quarter or last quarter of FY ’24, we should be able to produce something. [Speech Overlap]. We lined out two products. The products are already there in the design stage.

Satish Kumar — SK Investments — Analyst

I know. Sir, in case if this doesn’t get through in the tomorrow meeting, how often these meetings happen — once in a month or once in a quarter, sir.

Dheeraj Kumar Jain — Chief Executive Officer

No, the meetings happen every month, meetings happen every month. But they would be requiring some clarifications, some additional work, or some additional calculations need to be done or something to be done. That requires some time — again to resubmit the modified thing, whatever additional information they ask for. So if that we are able to do immediately, then probably it can come up in the next month or so.

Satish Kumar — SK Investments — Analyst

Okay, fair enough sir. Sir, my second question is the capex that you are doing at Sandila around 4,000 metric ton for the remaining six months of this year. My first question is, one — can we expand — further expand after this expanded capex or there is no more space there?

Dheeraj Kumar Jain — Chief Executive Officer

Sir, there is no more space, maybe a very small plant here and there; INR5 crores, INR10 crores that could be added, but not much because the site is more or less full now and we don’t want to get too much congested here again from the safety results. We want it to be relatively very safe plant and with a reasonable spaces between the different production blocks.

Satish Kumar — SK Investments — Analyst

Okay. so you said — one new herbicide during this month or next month and the intermediate next quarter, that new intermediate is for this product only or for any other products that we are already sending?

Dheeraj Kumar Jain — Chief Executive Officer

No, no, that is for other product, for some other product, not for this product. The product, this herbicide, what we are adding, it is already from backward integrated plants, we are already putting up. We are starting from again CS2 and chlorine, etc., and this is a seven, eight step process. So it is a relatively big plant.

Satish Kumar — SK Investments — Analyst

Okay. Sir, with all these capex commission, you said we would have added 6,000 metric tons during the current year, which will take us to 27,500 capacity at Sandila. Correct, sir? Yes, sir. Yes, sir. So, my last question is about the launching the new products. So, with all these, we would have launched around eight new products since the IPO. Now, whatever the new products, that will entirely depend on the commissioning the Hamirpur plant. Is that assessment is — understanding is correct?

Dheeraj Kumar Jain — Chief Executive Officer

Yes, sir. Yes, sire, maybe some smaller products, which does not require lot of capex, no, and requiring very small space, we may add up in Sandila where we already have some registrations. From longer point-of-view, we may add one or two, but majority of the major projects will come at Hamirpur site.

Satish Kumar — SK Investments — Analyst

But, that smaller product product — the volumes may not be that much, correct?

Dheeraj Kumar Jain — Chief Executive Officer

Volumes could be reasonable, sir, at least 400 tons, 500 tons.

Satish Kumar — SK Investments — Analyst

400 tons, 500 tons?

Dheeraj Kumar Jain — Chief Executive Officer

Some special molecules may be requiring very small volume, but they are good value added — good at margins [Speech Overlap].

Satish Kumar — SK Investments — Analyst

So if that is the case, if 400 tons, how much it can contribute to the revenue, sir.

Dheeraj Kumar Jain — Chief Executive Officer

400 tons, it can contribute to the revenue of almost about INR30 crores.

Satish Kumar — SK Investments — Analyst

Why I was asking this is, the growth in FY’25 would be solely dependent on the commissioning of Hamirpur plant, no.

Dheeraj Kumar Jain — Chief Executive Officer

FY ’25?

Satish Kumar — SK Investments — Analyst

Correct, sir.

Dheeraj Kumar Jain — Chief Executive Officer

FY ’25, majorly, it will be from Hamirpur site and the utilization of these existing because now we have added eight products. They will get established at the full capacity. So, they will also contribute.

Satish Kumar — SK Investments — Analyst

So, how many new products you’re planning to launch at Hamirpur, sir.

Dheeraj Kumar Jain — Chief Executive Officer

Sir, Hamirpur site, we would be launching, almost in four years — four to five years, at least 15 products.

Satish Kumar — SK Investments — Analyst

These are all new products?

Dheeraj Kumar Jain — Chief Executive Officer

New — for us, it is new. Some are existing and some are — will be new in the sense, it will be only for export, which nobody is making in India or very few people are making in India.

Satish Kumar — SK Investments — Analyst

But all these products as you had told us earlier, they will have 50% gross margin and minimum 25% EBITDA margins?

Dheeraj Kumar Jain — Chief Executive Officer

That is what we are calculating, sir. And again, it depends on the market scenario at that time, no?

Satish Kumar — SK Investments — Analyst

Okay, okay. Sir other than this INR20 crores, which you may do during the current year, over a period of next two years, how much capex is planned for Hamirpur plant.

Dheeraj Kumar Jain — Chief Executive Officer

So, we have planned almost about INR100 crores to INR125 crores every year for the coming four years.

Satish Kumar — SK Investments — Analyst

And here also, can we expect asset turnover of 2.4?

Dheeraj Kumar Jain — Chief Executive Officer

Yeah, between 2.25 to 2.5.

Satish Kumar — SK Investments — Analyst

Okay, and there also the ramp up can happen over a period of one to two years?

Dheeraj Kumar Jain — Chief Executive Officer

Sir, we will be adding as I said in block-wise.

Satish Kumar — SK Investments — Analyst

I know sir. As and when you keep adding, can we expect to run over a — 50% in the first year and maybe 100% in the second year.

Dheeraj Kumar Jain — Chief Executive Officer

Of the total plant?

Satish Kumar — SK Investments — Analyst

No, sir, let’s say you add some 2000 metric ton capacity in FY ’24. That, can we expect 50% utilization in the FY ’25 and 100% in ’26. That’s what I’m asking?

Dheeraj Kumar Jain — Chief Executive Officer

Yes, yes, yes we are, you are right.

Satish Kumar — SK Investments — Analyst

Over a period two years, based on their date of commissioning or year of commissioning, it will take around 18 to, 24 months?

Dheeraj Kumar Jain — Chief Executive Officer

Yes, sir, Yes, sir.

Satish Kumar — SK Investments — Analyst

Okay sir. Thank you very much and wish you all the best. Thank you, sir. Thank you.

Operator

Thank you. That was the last question.

Anand Swarup Agarwal — Chairman

Thank you sir.

Operator

I would now like to hand the conference over to, Mr. D.K. Jain, CEO, for closing comments.

Dheeraj Kumar Jain — Chief Executive Officer

Thank you everyone for your participation. For any further queries or clarifications, please do get in touch with our Investor Relation team. Thank you once again and have a nice.

Operator

[Operator Closing Remarks].