Kiri Industries Limited Q2 FY23 Earnings Conference Call Insights

Key highlights from Kiri Industries Limited (KIRIINDUS) Q2 FY23 Earnings Concall

Management Update:

• [00:04:00] KIRIINDUS said the margins of dyes intermediate units of the industry and company were impacted by high RM prices that remained high for last couple of quarters and also high legal cost and lengthier payment cycles.

• [00:04:30] The company anticipates a smoothing of liquidity over the next few quarters and return to normalcy for the payable cycle over the next two to three quarters.

Q&A Highlights:

• [00:12:36] Brahma Shetty asked that after the DyStar judgment, how much time it will take to financially turnaround and steps taken to grow on a standalone basis. Manish Kiri MD replied that even before DyStar comes, standalone has to turnaround. KIRIINDUS expects to turnaround in the next quarter or two as the company is rationalizing lot of products.

• [00:21:27] V.P. Rajesh from Banyan Capital Advisors enquired about any update on the ramping up of specialty chemical side. Manish Kiri MD said KIRIINDUS tried to add several products, but unfortunately the market has not been supporting.

• [00:23:11] V.P. Rajesh from Banyan Capital also asked if the company feels its profitability has bottomed out at the EBITDA level and at consol level, and if in 3Q and 4Q EBITDA will be positive. Manish Kiri MD replied that the company is bottoming out now and the change is happening on consol and standalone.

• [00:25:45] Yogesh Tiwari from Arihant Capital enquired about the dependency in imports and exports to China in terms of percentage. Manish Kiri MD answered that currently exports to China is negligible. However import dependency of about 20-25% of RM requirement is still there from China.

• [00:28:46] Yogesh Tiwari from Arihant Capital enquired about the current status of China ports. Manish Kiri MD replied that now it’s smoothing out and getting regularized. Currently situation is much better from Chinese port operations vs. a month or two back.

• [00:30:10] Yogesh Tiwari from Arihant Capital asked when KIRIINDUS will see the benefit of the decline in RM prices.  Manish Kiri MD answered that the major RM KIRIINDUS is dependent on is caustic soda, sulfur and soda ash. All these RM’s prices are still continuing at relatively higher level.

• [00:33:17] Namit Mehta from KC Capital asked about the capital allocation, if there’s any plans for dividend/buyback post proceeds. Manish Kiri MD said the company will deploy majority of funds in projects, phase wise, mainly to larger projects and give some portion back to shareholders by either dividend or buyback.

• [00:40:15] Nishant Maheshwari asked about the role and status of Kiri International Mauritius Limited that was acquired in 2009. Manish Kiri MD replied that it was closed in 2012. However one share of it was there and that’s why the company’s name appeared in the court documents.

• [00:41:39] Nishant Maheshwari enquired about the cash level of DyStar and value of associated companies. Manish Kiri MD answered that the cash level of DyStart by end of December would be more than $500 million and there are no bank loans there.

• [00:44:17] Purab Shah enquired about the reason for trade payables going up QonQ. Manish Kiri MD said that KIRIINDUS had an obligation to pay INR68 crore by Sept. end and that has gone now. So some of the working capital funds were utilized to pay the pre-settled liabilities and all ARC loans have been repaid. But the payables will improve in coming quarters.

• [00:55:08] Dharmendra Jakhodia enquired why the promoter holding is only 27% even after the company expecting a big amount from Singapore court. Manish Kiri MD said the company is always keen to increase its stake and it can be seen in future, but no timeline can be committed. Also fund availability with promoters is a problem to buy from outside.

• [00:57:37] Rohit asked if it can be expected that KIRIINDUS will be profitable for FY23 on a consolidated level. Manish Kiri MD answered that on a consolidated level profitability will be there by end of FY23.