Jubilant Ingrevia Ltd (JUBLINGREA) Q3 FY23 Earnings Concall Transcript

Jubilant Ingrevia Ltd (NSE:JUBLINGREA) Q3 FY23 Earnings Concall dated Jan. 31, 2023.

Corporate Participants:

Pavleen Singh Taneja — Investor Relations

Shyam Bhartia — Chairman

Rajesh Srivastava — Chief Executive Officer & MD

Prakash C Bisht — President & Chief Financial Officer

Analysts:

Tarang Agrawal — Old Bridge Capital — Analyst

Nitesh Dhoot — Prabhudas Lilladher — Analyst

Rohan Gupta — Nuvama Institutional Research — Analyst

Siddharth Rangnekar — Equirus Securities — Analyst

Dhruv Muchhal — HDFC Mutual Funds — Analyst

Rahul Veera — Abakkus Asset Manager — Analyst

Pranav Tendulkar — Rare Enterprises — Analyst

Harsh Shah — Dimensional Securities — Analyst

Romil Jain — Electrum PFS — Analyst

Sunil Kothari — Unique PMS — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Jubilant Ingrevia Limited Earnings Conference Call for the third-quarter and nine months ended December 31, 2022. As a reminder, all participant lines will be in the listen-only mode. [Operator Instructions] Please note that this conference is being recorded. I’ll now hand the conference over to Mr. Pavleen Singh Taneja, Director, Investor Relations Jubilant Ingrevia Limited. Thank you and over to you sir.

Pavleen Singh Taneja — Investor Relations

Thank you, Thanvi. Good evening, everyone. Thank you for being with us on our quarter three and nine months of financial year 2023 earnings conference call of Jubilant Ingrevia Limited. I would like to remind you that some of the statements made on the call today, could be forward-looking in nature and a detailed disclaimer in this regard has been included in the press release and results presentation that has been shared on our website. On the call today we have Mr. Shyam Bhartia, Chairman; Mr. Rajesh Srivastava, CEO and Managing Director; Mr. Prakash Chandra Bisht, CFO Jubilant Ingrevia Limited; and Arvind Chokhany, Group CFO Jubilant Bhartia Group.

I now invite Mr. Shyam Bhartia, to share his comments.

Shyam Bhartia — Chairman

Thank you. Pavleen. A very good evening to everyone. Thank you for joining us on Q3 FY23 earnings conference call of Jubilant Ingrevia Limited. We are pleased to announce stable performance during the quarter under review amidst the continuing headwinds of higher energy cost and challenging global market situation. We are also glad to share that the Board has been recommended interim dividend of 250% that is 2.50 per equity share of the face value of INR1 each but the FY2023.

This shall result in cash outflow of INR39.8 crores. We are pleased to inform that our specialty chemical business, revenue grew by 34% year-on year. And absolute EBITDA grew 15% year-on-year, driven by higher volumes and improved price realization. In Nutrition & Health Solutions business, the demand of Niacinamide, Vitamin B3 continued to be subdued impacting our price realization. Though we have improved our volumes sequentially.

The flu situation in EU and US regions will still continue thought the situation is improving in EU regions. The demand-related guarantees of Vitamin B3 as short-term and we continue to remain focused towards improving our presence in food and cosmetic segment. In Chemical Intermediates business the revenue on year-on-year is impacted due to lower prices of feedstock Acetic acid meeting to lower sales prices of Acetic Anhydride and Ethyl Acetate. However, we continue to improve our volumes and market share of Acetic Anhydride globally.

The company has strong plans to significantly reduce overall energy costs in a phased manner initiatives such as sourcing power from grid and renewable resources. Optimizing coal consumption through efficiency improvement in conjunction, as well as in generation. We continued to focus our growth plans to new products and platforms and we are committed to deliver robust growth in the future. With this, I now hand over to Rajesh to discuss about the business in detail. Before that, on behalf of the entire team at Jubilant, we wish all of you a very joyful and a prosperous New Year. Thank you.

Rajesh Srivastava — Chief Executive Officer & MD

Thank you, Mr. Bhartia, a very good evening to all of you. At the outset let me welcome you all for joining us today for Q3 FY2023 Investor Call of Jubilant Ingrevia Limited. I sincerely hope that you and your loved ones are keeping very well. Let me now take you through the financial and operational performance of Jubilant Ingrevia Limited for the third-quarter of this financial year. Revenue during the quarter was INR1,158 crore. Overall revenue de-grew by 10% year-on-year basis mainly on account of lower sales performance by Nutrition and Health Solutions business, driven by lower demand due to swine and bird flu in EU and US region and chemical intermediate business-driven by lower-price of Acetic Acid leading to lower realization.

EBITDA is at INR158 crore though specialty chemical EBITDA improved. However, higher energy cost due to non-availability of contracted coal, lower-volume offtake of Vitamin B3 has impacted EBITDA adversely. While the specialty chemical business volumes have grown significantly along with improved pricing. As mentioned by Mr. Bhartia, to minimize the risk of our energy cost increase due to increase in coal price in future, we have prepared a detailed plans to work towards various initiatives to source power from grid at Gajraula and from renewable sources at all our sites. We have also prepared detailed plan and initiatives, including digital implementations to optimize coal consumption through efficiency improvement in consumption as well as in generation.

These plants will start giving benefits in a phased manner. Now, let me take you through the updates on all our three business segments, the Specialty Chemicals business. During the quarter revenue on this Specialty Chemicals business was at INR468 crores witnessed a year-on-year growth of 34% and EBITDA was at INR87crores witnessing an absolute year-on-year growth of 15%. Specialty Chemicals segment absolute EBITDA increased by 15% mainly due to higher volumes and better price realization. EBITDA margin remained lower mainly due to higher-cost of coal compared to same period previous year. Our business team has been successful to pass-on most of the raw material costs and also partially increase the energy cost. Although during the quarter, we witnessed softening of imported coal prices. Specialty Chemicals revenue grew mainly on ground of higher-volume across major product segments, an improvement in price realization.

We continue to observe a positive traction of demand for our other specialty chemicals from both domestic as well as international customers. We continue to witness higher demand of our Pyridine and its derivatives from Chinese customers as well. Our CDMO pipeline is healthy and progressing positively. Our new GMP and non-GMP facilities projects are slightly delayed by couple of months and are expected to be commissioned in next two months time-frame. Nutrition and Health Solutions business, Nutrition business revenue was at INR132 crores which witnessed the growth by 39% on account of continued lower demand scenario owing to the excess inventory across the value chain, primarily led by continuation of Avian and swine flu in Europe and US markets.

Demand continued to be remained impacted also due to geopolitical situation in Europe and severe COVID restrictions in China. EBITDA and EBITDA margin was significantly lower, mainly on account of lower sales volume and price realization of niacinamide. We continue to increase our presence of Niacinamide, Vitamin B3, in food and cosmetic end use segment.

Our domestic business of choline chloride Vitamin B4, as well as its Specialty pre-mixes have grown in volume and value both on year-on-year basis, as well as quarter-on-quarter basis. We have also seen positive traction or demand from southeast Asia for our choline chloride Vitamin B4, and its Specialty premixes. We believe these challenges to be short team and remain positive on the prospects of Niacinamide Vitamin B3 business in the medium and long-term, and we aspire to retain our leadership position in global market.

Chemical intermediate business, revenue from chemical intermediates segment was at INR559 crores, down by 23% on year-on-year basis mainly driven by lower-price of feed stock by Acetic Acid leading to lower realization of finished products that is Acetic Anhydride, and Ethyl Acetate. EBITDA in Chemical Intermediates segment stood at INR71 crore due to normalization of domestic market condition in Q3 FY23 same quarter last year.

We continue to grow our volume to increase our market-share and maintain leadership position in domestic market as well as in international market, mainly in Europe and Southeast Asia. Global demand of Acetic Anhydride, continues to grow in several use segment and there is no new capacity coming up globally. While we continue to leverage our capacity from existing as well as newly built plant and our upcoming Acetic Anhydride plant at Bharuch is nearing completion and is expected to be ready during Q4 FY23. For the Ethyl Acetate, we remained focused towards our key strategic customers. Outlook and growth capex plan, our Specialty Chemicals segment would continue to grow.

Overall, our FY23 full-year performance is expected to remain in line with our last three quarters. We are fully committed towards our growth aspiration and we are excited to realize the emerging opportunities through our ongoing growth capex plan which we have now improved from earlier INR2050 crores to now INR2,275 crores during FY22 to FY25 period. We continue our efforts towards improving our revenue mix of specialty and Nutrition segments to 65% by FY27 from 44% in FY22 and we believe this to be a key driver for our overall EBITDA and margin improvements.

With this, now I hand over to Prakash, to discuss the financials.

Prakash C Bisht — President & Chief Financial Officer

Thank you, Rajesh. A very good evening to everyone. And thank you for joining us on Q3 FY23 Earning Conference Call. I would now highlight the company’s financial performance during the quarter and nine months ended December 31, 2022. Revenue from operations during Q3 FY23 was at INR1,158 crores as compared with INR1,286 crores in Q3 last year, witnessing a de-growth of 10% on YoY basis. Similarly, revenue from operations during nine months FY23 was at INR3,628 crores as compared with INR3,654 crores during the same period last year witnessing a marginal de-growth of 1% on year-on-year basis.

The EBITA during the quarter was at INR158 crores as compared with INR222 crores in Q3 FY22 witnessing a decline of 29% on year-on-year basis. The margins stood at 13.7% in Q3 FY23 as against 17.3% in Q3 FY22 though, our specialty chemical EBITA improved absolute. The overall impact is mainly due to significantly lower profitability in Nutrition business and non-availability of contractual coal, leading to higher energy cost. Similarly, EBITDA for nine months FY23 was at INR469 crores as compared with INR712 crores during nine-Month FY22. Margins were at 12.9% during nine months FY23, as compared with 19.5% for the same period last year.

The EBITA is impacted due to lower volume offtake of Vitamin B3, chemical Intermediates segment normalization, and high input cost impact in the specialty chemical business due to nonavailability of contracted coal. Depreciation and amortization expenses during the quarter was at INR30 crores. Finance cost during the quarter was at INR6.7 crores versus INR4.9 crores in Q3 FY22. Interest cost was higher mainly on account of increase in the interest rates and higher utilization of working capital facilities. Net-debt was at INR352 crores at the end of Q3 FY23 and blended interest-rate as on December 31, 2022, was 7.03%. The tax expense for Q3 FY23 was at INR30 crores. Fixed expenses for the quarter is lower on account of certain one-time true-ups. The company remains under the old tax regime during FY23 and the ETR is expected to remain around 31% for the full-year. PAT during the quarter was at INR92 crores as against INR129 crores in Q3 FY22 witnessing a decline of 29% on YoY basis due to lower EBITDA.

Similarly PAT for nine months FY23 was at INR256 crores against INR408 crores PAT in nine months FY22. Net-debt to EBITDA ratio was at 0.57x on the basis of trailing 12 months EBITDA. The net working capital percentage and number of days of working capital for Q3 FY23 on the basis of trailing 12 months turnover was at 19.4% and 71 days respectively. Increase in net working capital is driven by strategic decision of inventory building of certain products and temporary lower creditors due to procurement of domestic ethanol. The capital expenditure during the quarter was around INR148 crores.

With this, I would like to conclude our opening remarks. We will now be happy to address any questions that you may have.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Tarang Agrawal from Old Bridge Capital. Please go-ahead.

Tarang Agrawal — Old Bridge Capital — Analyst

Hello sir, good evening. Thank you for your time. Three questions from me. One, if you could give us the volume growth across each of your segments for this quarter? Second, in the press release, I noticed that there is a comment around specialty chemicals garnering a lot of traction in the agrochemicals segment. So if you could give us some sense on what proportion of specialty chemicals business was from Agro customers for Nine-Month FY23 and what was this number for Nine-Month FY22? And the last question is on power and fuel. You alluded to costs softening so how should we look at it going forward for Q4 and probably subsequently from Q1 next year onwards? Thank you.

Rajesh Srivastava — Chief Executive Officer & MD

So, Tarang, on your first question of volume growth. As you can see that the volume growth has come clearly from the specialty chemical business and in nutrition business we have informed you that there is a de-growth in volume, both year-on-year, as well as quarter-on-quarter. In chemical intermediate, though you see the volume de-growth, overall basis but as we informed on acetic anhydride we have grown in volume. So actually, other than the Nutrition business in overall business the volume consistently is growing in Specialty Chemical as well as in Acetic Anhydride and since Nutrition business, Niacinamide situation has not improved. We are not in a position to grow volume.

And question number two on the agrochemical business portion of our Specialty Chemical, if you see the Agrochemical is close to 40% of our Specialty Chemical business, this is almost same in quarter-on-quarter as well as year-on-year basis. On power and fuel, vis-a-vis Q2, we have seen little bit softening of coal prices [indecipherable] and therefore there is a slight benefit, not much very, very little, but in Q4 we are expecting a little more benefit because of two reasons, one is the coal prices are also coming down in import as well as we have now got some clearance of our contracted coal with road transportation. So there will be some benefit of cost, but of course, it will not be the full benefit on our cost of FSA. Hope, I have answered all your three questions.

Tarang Agrawal — Old Bridge Capital — Analyst

Sir, just one question for volume growth, I was actually looking at numbers, specifically for each of the segments.

Shyam Bhartia — Chairman

Yeah, I explained you that in Specialty Chemicals, we have grown both quarter-on-quarter as well as year-on-year in volume. Nutrition we have not grown, particularly on Niacinamide, though we have grown in our Vitamin B4 choline chloride, which I’ve also stated in my speech. On Acetic Anhydride we have grown in volume, both quarter-on-quarter as well as year-on-year, but Ethyl Acetate is not a focus product. We sell only when we get sufficient margin for us and that’s where you see the reduction in volume, we have not sold much Ethyl Acetate.

Tarang Agrawal — Old Bridge Capital — Analyst

Okay, thank you sir.

Operator

Thank you. The next question is from the line of Nitesh Dhoot from Prabhudas Lilladher. Please go-ahead.

Nitesh Dhoot — Prabhudas Lilladher — Analyst

Hi sir, good evening. Thank you for the opportunity. So, my first question is on the Specialty Chemicals. So we see that there is a sequential revenue decline in Q3, so what is that on account of is there a sequential volume decline or a price decline, what exactly it is?

Shyam Bhartia — Chairman

So, the revenue decline on a sequential basis is purely on product mix. As you know, we have almost 60 to 70 products in our Specialty Chemicals segment. So sometime in some quarter you have the product mix, which gives you a little bit of lower revenue, but that doesn’t mean that our volume has not grown. So volume as I said, volume has grown, but there is a product mix change which changes the price realization, but of course does not change the EBITDA and volume.

Nitesh Dhoot — Prabhudas Lilladher — Analyst

Sure. And on the domestic sales for Specialty Chemicals that has declined from INR197 crores to around INR164 crores, so are we facing any pressure in the domestic market? And what would be the status of our Diketene derivatives plan there, what would be the utilization currently?

Shyam Bhartia — Chairman

Yeah. So you are very right in current situation, as you know, we are facing a very low demand in Diketene derivative. This now we can see a positive traction happening even in Diketene derivative this quarter, but yes you are right, last quarter we have seen Diketene demand having lower, but that’s an opportunity for us to grow our revenue in domestic market through Diketene, which we can see now, as well as in other products.

Nitesh Dhoot — Prabhudas Lilladher — Analyst

Sure. Right. And, sir, on the EBITDA. So basically if you see that there is a sequential increase in the Specialty Chemicals EBITDA and the margins have come up to 18.6%. And this is despite the coal availability not easing. So how did we manage to increase the margins in the Specialty Chemicals segment, if you can give some color?

Shyam Bhartia — Chairman

Yeah, so I expressed to you that the increase in EBITDA has come both, one is from volume. Secondly, we also said in the last call that though, we are not — we are not in a position to do anything on coal cost, but we are definitely working with customers to pass- on the cost to our customers and somewhat we are success to partially pass on that cost increase and therefore you see that EBITDA margin improving, and going forward, both we will see the softening of coal prices as well as the realization which we have now taken the price increase to customers, giving us better result in future.

Nitesh Dhoot — Prabhudas Lilladher — Analyst

Sure, so just one clarification here. So, if I remember, on full year discussion, so basically imported coal price movements are generally a pass-through, it is the difference between the FSA coal price and the imported coal price, which is — which is in a way a benefit for us and if the FSA availability is not easing so it does it really you know have any benefit for us. I mean, the imported coal prices going down.

Shyam Bhartia — Chairman

Yeah, so, as we have been saying that our contracted coal issue is only at our one site, which is Gajraula. Rest and all other sites are imported coal. Now in Gajraula also we partially have imported coal. So therefore, the impact in Gajraula products is there, but I also mentioned to you that we are in a position to partially pass on the cost increase even in Gajraula for our contracted coal and therefore you see the EBITDA improvement in Specility Chemical.

Nitesh Dhoot — Prabhudas Lilladher — Analyst

Sure, sure. Sir, next is on the energy efficiency projects that you’ve highlighted in the presentation and the debottlenecking projects, so what kind of margin benefit that we can expect from this and what will be the quantum of investments going into these energy efficiency projects?

Shyam Bhartia — Chairman

So, honestly speaking, there is not large investment in these projects. These are mostly business excellence projects. So these projects are actually in the– in the four segments. One, wherever our cost of generation of power today is higher with our own generation versus grid like in Gajraula we are opening up to the grid. That will give us savings. Number two, we are going to improve efficiency of operation through the digital intervention. So we are taking a very major program of digitalization in all our energy production that will give us the benefit and third, we are also working on how to minimize the consumption side in the product so combining all these excellent initiatives we are gradually phase-wise going to get benefit of these programs. Apart from being in solar, which is our fourth initiative, which we are talking about in energy saving. So there are clear-cut core initiatives in business we have planned. This is going to be in a phased manner. Some of the initiatives will start giving results in couple of quarters and some initiatives might take longer time because you need to make investments and take the benefit later.

Nitesh Dhoot — Prabhudas Lilladher — Analyst

Sir but can just we quantifiy in terms of like, 100 to 200 basis-points of margin improvement in the Chemicals business or maybe if you can just highlight that?

Shyam Bhartia — Chairman

Yeah, once the entire program is implemented then I can tell you this is going to be a significant benefit. This will be definitely significant benefit, unfortunately I am not in a position to give any number, because we are still working with our partners to put down these numbers on a hard basis maybe after a couple of quarters I will be in a position to give you a certainty of number or some indication of numbers, but I can only assure you this is going to be a significant improvement in our overall profitability if we are in a position to implement all these initiatives.

Nitesh Dhoot — Prabhudas Lilladher — Analyst

Right, maybe I am sorry if I’m repeating, but I mean on the FSA so is there, I mean, you know, we had earlier expected that from January onwards availability will ease but it doesn’t seem that much of the benefit has realized started coming in. So what is our view there. I mean, do we see this coming in a quarter’s time or what exactly are you [indecipherable] over there?

Shyam Bhartia — Chairman

Yeah, so based on our discussions with the various agencies we don’t see this FSA to be 100% clear to us in the next couple of quarters but having said so I am pleased to inform you that from Q4, and I can say from this point onwards we are now allowed to take our contextual coal at the contractual size but from road transportation. So we are going to get benefit in our cost, but not the 100% benefit. So this quarter onwards you will see the benefit in our cost — in our coal in Gajraula, because now we are allowed to take road transportation contractual coal. But as per our information from various sources, we don’t see the full FSA benefit coming to us either in this quarter or next quarter, unless there is a very-very huge production of coal and availability of rigs. Actually, the major issue is happening the availability of rail transportation. In fact, the coal is available, government is also working very, very aggressively to make the rail available for the industry. If they are successful to do it in next two-three months probably we will get the benefit, but at least I don’t see next three to four months, that’s happening, but I think major relief has happened because we’ve got this clearance to get our contractual coal with road transport. So that’s a benefit we will start getting from this quarter onwards.

Nitesh Dhoot — Prabhudas Lilladher — Analyst

Sure, so in that case. I mean, would it be fair to assume 18.5% to 19% kind of margins are sustainable margins for Specialty Chemicals, would that be a fair understanding till the time the efficiency — the energy efficiency projects don’t come up fully so would that be a fair understanding.

Rajesh Srivastava — Chief Executive Officer & MD

Nitesh, this is the discussion we had also three months before when you said that margins will be but you see margins are improving. The reason is that we are not stopping our realization. We are trying to recover the cost increase from our customer from the products we can recover our costs so I don’t say I don’t make any commitments on the margins that it will not improve because it will all depend that, if we can realize better pricing in our product, we can meet our all the volumes projections, probably we should be improving, why not.

Nitesh Dhoot — Prabhudas Lilladher — Analyst

Great.

Operator

Sorry to interrupt you Mr. Nitesh Dhoot if you have any follow-up questions, we request you to please come back-in the queue. Next question is from the line of Rohan Gupta from Nuvama. Please go-ahead.

Rohan Gupta — Nuvama Institutional Research — Analyst

Yeah, hi sir, good evening and thanks for the opportunity. Hope I am audible sir?

Rajesh Srivastava — Chief Executive Officer & MD

Yes you are audible.

Rohan Gupta — Nuvama Institutional Research — Analyst

Sir, first question is on our nutrition and health solutions business, so we understand that there is high inventory scenario, but I think that the impact on revenue is slightly less than what impact we have seen on the profitability or segment EBIT, which has come down too drastically just INR5 crore while in nutrition and health solution has seen some revenue improvement on Q-on-Q basis. So is there any inventory losses we were booked or suggest cleaning up the inventory at lower prices, which is impacting the profitability or the overall realization itself has come down, so what is the reason for such a sharp fall on EBITDA or EBIT on nutrition and health solution?

Rajesh Srivastava — Chief Executive Officer & MD

So Rohan last quarter when we started the pricing was not as bad as what we saw at the end-of-the last quarter. So therefore the margins of last quarter are better. Having said so your observation on revenue increase is correct. So this quarter we have sold a little higher-volume of Niacinamide. The reason that we are getting our customers’ requirement wherever we are selling on a positive contribution, we want to take the orders and some improvements in volume in this quarter has happened and in this — in the current quarter, which is quarter-four, we still estimate that our situation of volumes will be better as well as in this quarter, we are estimating that price should also improve. Because last quarter, there were multiple problems. Number one as we said the swine flu and Avian flu in US and Europe, and the major impact was also from China consumption was much, much lower because China had big restriction on because of COVID and but if you see the China is getting opened up.

Last month, we can see the China demand improving and which is actually making the whole Nutraceutical segment a little bit positive even though the flu situation has not improved, so we have in Q2 of course it was lower, Q3, but we see Q4 becoming a little better than Q2. That’s what we estimate.

Rohan Gupta — Nuvama Institutional Research — Analyst

So sir, unlike the specialty chemicals where any cost increase, we are trying to pass it on Nutrition and Health Solutions business has seen a severe margin pressure and the prices are still under significantly lower than what it used to be. I just wanted to understand that how best this Nutrition Health Solutions business pricing work to the end-customer and how you decide on the margin front, it is just completely driven by the demand-supply scenario, or do you see that there is some cost element — cost-plus element is also there.

Rajesh Srivastava — Chief Executive Officer & MD

So, Rohan good question, so our Nutrition segment if you see, we have 70% of our revenue of nutrition segment coming from feed industry — animal feed industry, and 30% comes from food and cosmetics and others. Now this 70% animal feed is impacting our volume and revenue because of demand. So answer to your question is, it is demand and supply situation. But our efforts for future is that can reduce this dependency on animal feed of our nutrition business, to more food and cosmetics so that we can balance out, so that this kind of impact does not come in our revenue and profitability. So you are right that currently, it’s demand and supply situation which impacts our volume as well as profitability.

Operator

Sorry to interupt sir. We would request you to please come back in the queue sir. [Operator Instructions] The next question is from the line of Siddharth Rangnekar from Equirus Securities. Please go ahead.

Siddharth Rangnekar — Equirus Securities — Analyst

Hi, sir, so just wanted some color in terms of our one we had announced a long-term contract for CDMO INR270 crores over three years. So what is the status of that project?

Rajesh Srivastava — Chief Executive Officer & MD

So, we are servicing that contract and actually speaking, the volumes of that contracts will start increasing from this quarter and onwards. And as you see that the new capacity of GMP which we are building up we are making it ready with that — servicing that contract. And in fact, the overall CDMO traction not only with that concept, but also with other products are showing positive results and we are expected to see better performance of our GMP facility, which we are building up, which will be ready in the next couple of months time. So that is on track and we are servicing it on time.

Siddharth Rangnekar — Equirus Securities — Analyst

So basically FY24 we can see the entire INR90 crores coming in from that project?

Rajesh Srivastava — Chief Executive Officer & MD

No, that, yeah, so you are saying that FY23 annual revenue yes, it should come full because that’s the capacity we are building up. Correct.

Siddharth Rangnekar — Equirus Securities — Analyst

Okay, got it. And secondly, now in terms of Diketene what kind of capacity utilization can we expect in FY24 and FY25?

Rajesh Srivastava — Chief Executive Officer & MD

So, FY24 with our current estimates. I think we are planning to utilize to 70% to 75% of capacity.

Siddharth Rangnekar — Equirus Securities — Analyst

Okay, and the non-GMP[Phonetic] plants also will be at similar levels in FY24, they will take time to ramp-up?

Rajesh Srivastava — Chief Executive Officer & MD

Yeah, as of now it looks like that but you never know if demand improves, we can even utilize better.

Siddharth Rangnekar — Equirus Securities — Analyst

Okay sir, got it. Sir, the last question in the Nutrition segment, have you changed any capex because now we are looking at cosmetics grades with [phonetic] vitamin B3 as well, which was not there before. Is this something new that we have announced?

Rajesh Srivastava — Chief Executive Officer & MD

Yeah, very right. And that’s what I just mentioned to Rohan, also that in nutrition segment now our endeavor is to improve our presence in non-animal feed segment more and therefore we are bringing up more capacity of cosmetic grades as I — if you see my last 3/4 statement I’ve been saying that our focus on food and cosmetic is increasing and we are getting a very positive traction with that. Our demand situation of cosmetics and food has improved and we are adding capacity there.

So that will — that we will make. We will actually make announcement very soon about that new capacity investment. Above that, we also have plans on vitamin B4 which we currently have in animal feed segment. We want to be — we are also going to have vitamin B4 for food segment and that both of these together and once we are ready, we will have a shift in our 70:30 ratio to close to 50:50 ratio of animal feed and food and cosmetic segment. So you are very right, you have correctly assessed it. We have additionally made the investment plan for the nutraceutical segment because that is going to give us much more sustainability and resilience to our profitability and revenue going forward.

Siddharth Rangnekar — Equirus Securities — Analyst

Okay sir. Got it, thank you so much.

Operator

Thank you. The next question is from the line of Dhruv Muchhala from HDFC Mutual Funds. Please go-ahead.

Dhruv Muchhal — HDFC Mutual Funds — Analyst

Yes, sir, thank you so much. Sir, the question probably is a bit repetition of the earlier question. If you can probably share the volume numbers for the Specialty Chemicals segment for this quarter and for nine months. The reason I’m asking is also because for the first — for the nine months, it seems you have grown about 40%, 50%. And I’m just trying to understand, does this — if largely it is volume-driven? Does this pose any limitation in terms of the base business growth for the forthcoming years? Because I’m just trying to understand, are we probably filled up the reading[phonetic] capacity that we have with this kind of volume growth?

Rajesh Srivastava — Chief Executive Officer & MD

Yes. So your assessment is correct. So it is the overall Specialty Chemical, including the pyridine volume. So there is an increased volume of pyridine, and pyridine derivatives and therefore, you see the significant improvement in volumes of Specialty Chemicals. Now on your point whether it will have an impact going forward, we don’t see that because the overall volume scenario of pyridine and pyridine derivative still stands strong. And we have a huge capacity upgrading plant, as we already stated earlier, and we are still utilizing just, say, about 70%, 75%, not more. So we still have capacity. And if the demand comes, we will be in a position to take it more.

Prakash C Bisht — President & Chief Financial Officer

Just to add on — Dhruv just to add on what Rajesh sir is saying, in the capex plan also, you would see that one debottlenecking for pyridine, that will also add to the capacity.

Dhruv Muchhal — HDFC Mutual Funds — Analyst

So I mean, at current — even after the nine months volume growth, which I believe would be probably 20%, I’m not sure. the pyridine capacity 70% to 75% utilized?

Rajesh Srivastava — Chief Executive Officer & MD

Yes, yes. Yes, yes, correct. And remember, this overall volume growth is from existing products as well as from new products. So we do — other than the announced capex, which you will see in our presentation, we have continuously debottlenecking capex and capital investment which happens regularly, which normally we don’t announce. Because that — as you know, we keep doing it based on the customer demand of our existing products.

Dhruv Muchhal — HDFC Mutual Funds — Analyst

Sure, sir. And sir, two quick questions is your 2 CGMP plants. Both are — one CGMP non-GMP, both are coming online, I believe, in the next quarter. So just wanted to get some better understanding in terms of the visibility of ramp-up. Probably one often sees in the industry that they have contracts in hand based on which the ramp-up visibility is there. So just wanted to get your sense also in terms of the visibility for the ramp-up of these capacities. I mean do you have contracts? Or are these established products? Or are the product already developed so that you only have to market it once they are — the capacities are ready? Just trying to understand on the — get better visibility on the ramp-up sir?

Rajesh Srivastava — Chief Executive Officer & MD

I’ve already stated in the last question that the CGMP plant, which we are building up is based on our new demand and new orders, which we have already got it. And there was actually additional traction. And therefore, we took a little bit more expansion of the existing facility. And therefore, there is a delay of about a month or two. And hence, the utilization of CGMP plant is going to be in a very good situation, as we stated earlier. The first year itself, you will see utilization of more than 70% of CGMP plant. And the same is true for non CGMP plant because CGMP is utilized for more value-added product and non-GMP is utilized for the early derivatives and intermediates. So both plants are going to be utilized as per plan. We have a strong order situation. So as soon as the plant will come next year, we will have a good traction of utilization as we have been saying close to 70% to 75%. And next two to three years — that’s what we said, in next two to three years, we will reach close to 85%, 90%.

Operator

Sorry to interupt you sir. I request you to please come back-in the queue. We will move to the next question from the line of Rahul Veera from Abakkus Asset Manager. Please go-ahead.

Rahul Veera — Abakkus Asset Manager — Analyst

Hi, sir. Sir, a very interesting comment that you gave in the presentation that FY23 year will largely be similar to the past three quarters. So given the improvement in coal costs plus the ramp-up in the CDMO, I mean, shouldn’t there be a very sharp improvement sequentially? I understand you mentioned that it’s going to be very marginal in terms of coal cost improvement, but I still believe there could be a much better opportunity, right?

Rajesh Srivastava — Chief Executive Officer & MD

As I said, in coal cost, it is a marginal improvement. And as also, I have said, that nutraceutical business, we don’t see much improvement. And Specialty Chemicals, of course, there is improvement. So when I say it will be in line with last three quarters. I don’t know what you understand, but I’m not saying that we’ll be significantly higher or better than what we have been doing in last few quarters.

Rahul Veera — Abakkus Asset Manager — Analyst

Okay. Okay. Fair point. And sir, the capex — incremental capex that we have given for [indecipherable] now in the presentation. This is largely going towards the debottlenecking only?

Rajesh Srivastava — Chief Executive Officer & MD

No. So it’s about three things. One is debottlenecking. Secondly, I just explained that we are adding a new capital plan for nutraceutical vitamin B4 for food business, you can see about INR100 crore increase in nutraceutical segment and debottlenecking. And third, we are also having the R&D expansion because of our good CDMO traction. So we are having some R&D investment plan, which we have highlighted in this increased investment plan. Of course, debottlenecking is part of that.

Rahul Veera — Abakkus Asset Manager — Analyst

Sure, fair point sir. Got it, thank you so much.

Operator

Thank you. The next question is from the line of Pranav Tendulkar from Rare Enterprises. Please go-ahead.

Pranav Tendulkar — Rare Enterprises — Analyst

Hi sir, thanks a lot for the opportunity. Sir, I just wanted to ask two questions. About Diketene plant, have we started commercial sales? And has the production quality been accepted by general market? That is first. And if it is, then what is the 100% utilization revenue potential for this plant at current price? That is the first question. Also second question is that, so if the rate availability improves and government allows railway rigs, then how much of the savings could be done in the energy costs? Thanks a lot.

Rajesh Srivastava — Chief Executive Officer & MD

So three questions. I think number one question was on your nutraceutical, I believe. Can you just type your first question?

Pavleen Singh Taneja — Investor Relations

First question is the quality of Diketene, their capacity utilization.

Rajesh Srivastava — Chief Executive Officer & MD

We have told you that we have already started selling the Diketene. But unfortunately, because of the lower demand, we were not in a potion to utilize the plant. But now we see the demand is improving, and therefore, we are very confident that next year, we should be in a position to utilize, as I said, about 75% to 80% or 70%, 75% of the capacity. Now second question on your FSA coal. Now if after the road transportation, which we have just got cleared, if we convert that to total FSA coal on a quarter basis, I think we will — we should be in a position to add about — Prakash, if I’m right, about INR15 crores to INR20 crores of EBITDA further if that happens.

Pranav Tendulkar — Rare Enterprises — Analyst

Right. And diketene plant revenue potential is how much?

Rajesh Srivastava — Chief Executive Officer & MD

So we have a capacity of 8,000 tonnes. It’s difficult to give a price commitment. So there are three products, and each of these products are ranging from a price of INR150 to INR200 or sometime it is more. So based on that 8,000 tonne capacity, you can calculate the revenue. But it also depends that which product you are maximizing to maximize your revenue and profitability.

Pranav Tendulkar — Rare Enterprises — Analyst

Right. So $100, $150 per ton?

Rajesh Srivastava — Chief Executive Officer & MD

No, this is rupee. Plus, as we have been saying, that the Phase II of Diketene is much awaited because this capacity of ours is not for 100% sales, this is for a backward — this is forward integration of building blocks. So this we have built up to make value-added products, which I have been talking all the time. Phase II investments will come very soon. And therefore, the realization from the existing capacity as well as new capacity is going to be higher, and that’s our endeavor not to sell this 8,000 tonnes only as a commodity or bulk volume. So our endeavor is this was a beginning to launch as a building block and then add the value-added product to bring up very soon, the Phase II.

Pranav Tendulkar — Rare Enterprises — Analyst

Right. Great perfect sir, thanks.

Operator

Thank you. The next question is from the line of Harsh Shah from Dimensional Securities, please go-ahead.

Harsh Shah — Dimensional Securities — Analyst

Hi, good evening, sir. Sir just revisiting your capex guidance, the first time when we had announced the capex in FY22, the business outlook looked quite stable, we used to make 16% to 18% kind of margins even better. But now today, where we stand, with the Europe slowing down, the prices of many of our commodities have eroded quite a bit and demand sort of struggling, so how confident are you about the expectations of your — of the revenue guidance that you had given for FY27, that it will come through, because the business dynamics have changed quite a bit over the last 1.5 years?

Rajesh Srivastava — Chief Executive Officer & MD

So from where we are seeing, I’m sure you’re also seeing the same angle, what we have said[Phonetic] for FY27 is still standing through, and all the investments which we have planned has no change. What is changing is mostly short term which we have been talking. Number one, nutrition business of vitamin B3 is not long term. I mean this is the first time in last two decades, I know this business, this kind of flu has never extended to two or three quarters. But nevertheless, it is not going to long last. This is one.

Secondly, with energy cost. You see we are taking a lot of initiatives apart from getting the government coal of contract. I don’t see this is longer term. This is going to be short term. We will be behind it. Beyond this, I don’t see anything which is currently in problem, except for the global situation of demand. Now the global situation of demand, as we all know, India as far as chemicals is concerned, is definitely on a very high demand. So even though the global recession will happen, Indian companies or chemical will keep doing good because there is a huge shift which is happening on demand from China to India. We have still not served the entire volume of China. We are still just in single digits of percentage which we can take from China. We have a huge opportunity. So I don’t see the future as you are trying to explain.

Harsh Shah — Dimensional Securities — Analyst

Fair enough. That helps. That really helps, that was it. Thank you so much.

Operator

Thank you. The next question is from the line of Romil Jain from Electrum PFS. Please go-ahead.

Romil Jain — Electrum PFS — Analyst

Hello. Sir, thanks for the opportunity. I just wanted to understand question on relation, so I think we are doing [technical issues]

Operator

Sir, your voice is breaking up in between. If you can speak in the handset mode, please.

Romil Jain — Electrum PFS — Analyst

Yeah, can you hear me now.

Operator

Yes.

Rajesh Srivastava — Chief Executive Officer & MD

Yes, it’s better.

Romil Jain — Electrum PFS — Analyst

I just want to understand a little bit on flourination. So I think we are doing some capex on that. So maybe what — where are we standing right now in terms of our capabilities and whether the capex has started and when do we expect to commission maybe some details on that? And second question is on the Life Sciences Chemicals. Are we seeing some rebound in prices and maybe Q3 was more of a bottom kind of a quarter there? These two questions, if you can please answer.

Rajesh Srivastava — Chief Executive Officer & MD

On fluorination, as you can see in our presentation, we have still not committed the capex. The products which we talked about is still under development and scale-up. We hope that next year — sometime next financial year, we will be bringing up that capex. And that time, I will announce it. On your question on Chemical Intermediates, as I stated, acetic anhydride, our volumes are growing. The reason for growth is that overall demand is increasing, but there is no additional capacity, which are being available globally. And also in Europe, our competitors are not in a position to produce in full volume because their cost has gone up. So I see a continued positive traction of acetic anhydride demand. And therefore, as you know, we are having the new plant coming up even next quarter, we are very positive about utilization of that plant also in the future because of these regions.

Romil Jain — Electrum PFS — Analyst

Okay. Sir, just one question on the food grade acetic acid. So I think that was the plant that we had started. So what is the utilization there? And maybe if you can just point out what kind of revenue are we generating and at what broad margins? And do we expect more capacity expansion there, because I think that was a very positive development that was there? So any insights on that?

Rajesh Srivastava — Chief Executive Officer & MD

On food-grade acetic acid, as we have said earlier, we are under the regulatory approval process. We see we are going to start the commercial supplies from end of this quarter, definitely; or if not, beginning of next quarter. And we see a good traction of demand from our international customers. So actually, the realization of revenue of food-grade acetic acid, you will see in next financial year. This year, because of several regulatory approval process, as well as the FSSAI approval, et cetera, it took about five to six months time. I think we are going to through in next one or two months. Next financial year, you will see the revenue realization of food-grade acetic acid.

Romil Jain — Electrum PFS — Analyst

Okay sir, thank you so much sir. All the best.

Rajesh Srivastava — Chief Executive Officer & MD

Thank you.

Operator

Thank you. The next question is from the line of Sunil Kothari from Unique PMS. Please go-ahead.

Sunil Kothari — Unique PMS — Analyst

Thanks for the opportunity, sir. Sir, you said because of this road transportation, we’ve chosen for this transferring call, will it still INR15 to INR20 crores per quarter? And will it be effective from current quarter or next quarter?

Rajesh Srivastava — Chief Executive Officer & MD

No. I think you noted wrongly. What I — somebody asked me that from the road, if you get 100% rail transportation, we will have additional benefit of INR14 crores, INR15 crores. But from the earlier quarter, now when we got road transportation, there is a benefit of about INR10 crores to INR12 crores, which we should accrue.

Sunil Kothari — Unique PMS — Analyst

That is per quarter, right.

Rajesh Srivastava — Chief Executive Officer & MD

Per quarter, you are right.

Sunil Kothari — Unique PMS — Analyst

And second question is, sir, we said that we got a little bit ease of coal prices in current quarter, but should take a percentage of the revenue, that has gone up from 14% to [technical issue] power and fuel cost. So why it has happened, if you can a little bit explain.

Rajesh Srivastava — Chief Executive Officer & MD

No, because all that what you are seeing softening is happening only end of the last quarter. What you will see is this quarter, in fact, not in Q3. Q3 from beginning, it has been very high. It has just happened in the month of January, beginning when — or let’s say, end of December when the softening of prices have happened. So you have not seen the impact of that in the last quarter.

Sunil Kothari — Unique PMS — Analyst

Okay. So both the benefit of road transportation and softening of price, both can materialize in current quarter and onwards?

Rajesh Srivastava — Chief Executive Officer & MD

But remember that any reduction in coal price imported, customers are also smart, they will ask them to pass on. As we take increase in pass on, they will also ask reduction in pass-on. So please don’t just calculate in mathematics and [indecipherable].

Sunil Kothari — Unique PMS — Analyst

Sir, our other expense on top line of same INR3,600 crores approximate for nine months, has gone up from INR336 crores to INR432 crores, almost INR100 crores, almost 30%, 35% increase. What is the reason for this, other expenses I’m talking about?

Prakash C Bisht — President & Chief Financial Officer

So Sunil, if you take on the quarters, other expenses.

Sunil Kothari — Unique PMS — Analyst

No, sir, I want to understand about — for nine months. Because quarterly, I understand there is some specific reason. But if you take nine months, 336 to 432.

Prakash C Bisht — President & Chief Financial Officer

For nine months, Sunil Ji, so primarily the reason for increase in other expenses is, A, the weight and forwarding cost has increased; and then it’s partially also due to the processing charges and the warehousing charges and repair and maintenance. So these are the four or five reasons on account of which the overall other expenses have increased.

Sunil Kothari — Unique PMS — Analyst

Yes. But is the subs — the same revenue, we have spent INR100 crore more. That is why I’m just trying to understand. This is — I mean, we are getting control on any cost or it is going out of control?

Rajesh Srivastava — Chief Executive Officer & MD

No, no. Just [technical issue]. Don’t worry about control of cost, very, very much controlled. Let me explain you, last year, nine months, all other costs there based on the volumes which we have sold. The transportation costs, travel costs, repair and maintenance costs, everything is — this year is going up because our capacity utilization is going up, our new plants are coming up. So all that is going to increase our expenses. But at the same time, you are very right, we are in full control and we have plans to improve efficiencies all over, and this is a continuous exercise. So there are some costs, which this year has gone up like travel expense now, which is — which is usual because we are back to our normal situation of FY ’22.

Sunil Kothari — Unique PMS — Analyst

Sir my last question is.

Prakash C Bisht — President & Chief Financial Officer

Maybe just to give you a perspective, because I think you are seeing the revenue number as the same. But our volumes have increased, it is just that prices of Chemical Intermediate segment has come down, that is why you see the revenue at the same level. So volume of business has already increased. So the expenses are in relation to the volume of business. So perhaps you are just seeing the same level of revenue or you’re feeling [multiple speakers].

Sunil Kothari — Unique PMS — Analyst

Certainly correct. Absolutely correct. My request will be so many people were asking about the volume growth. I think on a 64-page PowerPoint presentation, we should have — every time why somebody should ask, what is the volume growth quarter-on-quarter or year-on-year. I think we should follow — because every now and then, I’m observing that people are asking about volume growth and we are not able to provide those [indecipherable]. I request, please make it a practice that we should announce or we should announce that we are not going to talk about anything about volume. So please follow one practice that is my request. And sir, my last question to Rajesh, sir, basically what we’re talking about is we’ll be improving our Specialty Chemical and Nutritional business to 65% over the next three, four years, and that will give us far better margin and very respectable ROE and ROCE. But looking at this nutritional segment situation currently, and I understand this is the first time in this two decade, so are you, I mean, comfortable and confident about whatever your thought process and your observation or your strategy to achieve some respectable margin over the next two, three years?

Rajesh Srivastava — Chief Executive Officer & MD

So you’re asking about revenue or you’re asking about margins?

Sunil Kothari — Unique PMS — Analyst

No, sir, margin. Because we are saying that Nutritional business and Specialty Chemicals will become a major part of our revenue, and that’s why we’ll be having a very respectable margin.

Rajesh Srivastava — Chief Executive Officer & MD

What I can only tell you, of course, it’s very difficult to see the future, but it is very easy to make a strategy for future. So what we have done, we have a very strong strategy. And I’m very personally very confident that all the strategy we have prepared, we are going on track and we are very confident. Having said so, I think you need to realize that there are certain situations which are beyond our control like today [phonetic]. Now you may ask that last year, you said this, but you did not achieve it. The question is, this can happen either side. FY ’23 for us was — FY ’22 for us was a fantastic year, nobody asked a question. But FY ’23 is a tough year, so obviously you have rights to ask questions. If this kind of situation happens, it’s beyond control. But having said so, what we can do best is we are trying.

If you see our intent, our energy cost going up, we had a huge plan to bring down overall energy cost. That should give us resilience of any such trouble which we can face in the future. So we are continuously changing our strategy to see whatever we are getting short-term impact can be minimized and that’s what our intent. That’s what anybody can do the best. So having said so, I’m very confident that the strategy we have at place should realize the way we are looking at it. And now the other part, I want to answer that on volume. I think you must appreciate the kind of declaration we give as Jubilant Ingrevia is much more than anyone else. What we definitely not want to give, you must appreciate Jubilant Ingrevia, which is your company, we have leadership position in many products. And if we start giving volumes number of our product wise, you must appreciate globally, we are faced with many competitors. I hope you will appreciate huge [multiple speakers] so please respect our declaration. And on a different side, if we discuss, I can even talk to you what kind of volume growth we are talking. But on a call like this, if you ask me to give you volume growth product-wise, I think it is too much to ask. You must appreciate the kind of presentation details we had given, usually other companies, whether you get this kind of detail. So please appreciate that.

Sunil Kothari — Unique PMS — Analyst

Sure sir, thanks a lot for the detailed reply. Thank you very much and wish you good luck.

Rajesh Srivastava — Chief Executive Officer & MD

Thank you.

Operator

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Prakash Bisht for closing comments.

Prakash C Bisht — President & Chief Financial Officer

We thank you all for joining this call today. We hope we have been able to answer your queries. For further clarification, we would request you to contact our Investor Relations team. Thank you once again for your interest in Jubilant Ingrevia Limited. We also wish everyone a very happy and prosperous new year.

Rajesh Srivastava — Chief Executive Officer & MD

Thank you, everyone. Thanks a lot.

Operator

[Operator Closing Remarks]