NOCIL Limited (NSE: NOCIL) Q3 2025 Earnings Call dated Feb. 07, 2025
Corporate Participants:
V.S. Anand — Managing Director
P. Srinivasan — Chief Financial Officer
Analysts:
Nirav Jimudia — Analyst
Nitesh Dhoot — Analyst
Aditya Khetan — Analyst
Garge Singh — Analyst
Renjith Sivaram — Analyst
Muskan Rastogi — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Q3 FY ’25 Earnings Conference Call of Norsell Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on-date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone.
I now hand the conference over to Mr V.S. Anand, Managing Director from NoSil Limited. Thank you, and over to you, sir.
V.S. Anand — Managing Director
Thank you, and good morning to everyone. I’d like to start by expressing my appreciation for your presence here today. Joining me are Mr P. Srinivasam, our Chief Financial Officer; and our Investor Relations Advisors from SGA. I hope you’ve all received our investor presentation. If not, it’s available on both the stock exchanges and our company website. To begin with, let me provide an overview of the company’s performance for quarter three financial year ’25. During this period, revenue from operations stood at INR318 crores, reflecting a 7% sequential decline. Volumes saw a 10% degrowth compared to the previous quarter due to lower demand from customers on account of lower production at their end, coupled with some aggressive priced imports as compared to the previous quarters. We see this lower production as transitionary and expect demand to pick-up in the next months. Our prices for the quarter have moved in tandem with raw-material prices.
We have continued to experience intense pricing pressure and product dumping from Chinese, Korean and EU rubber chemical players, which has had a significant impact on domestic rubber chemical prices. The influx of lower-priced imports has created a challenging competitive landscape, putting downward pressure on margins and affecting overall market dynamics. On the export side, the year-on-year growth is encouraging. This is primarily driven by our strategic engagement with customers and product approvals, which have expanded our global reach and reinforced customer confidence in our offerings. Coming to our largest and key customer segment, the tire industry. The replacement and export demand for the tire industry in India is on a positive trend, while there seems to be a slowdown with OEM demand, on the other hand, the expected ramp-up in infrastructure spending is expected to augur well for the commercial vehicle sector going ahead, thereby driving demand for tires in both the replacement and OEM segments. Natural rubber prices have moderated from the peak in recent months, but continue to remain at a higher-level compared to the previous years.
In the domestic non-tire sector, our well-penetrated presence continues to drive growth in this sector. This is largely driven by the auto components, engineering goods and other applications. Internally, on the operations front, we continue our high focus on operational efficiencies as we stabilize our turbine, our cogeneration turbine and enhance our renewable energy sources. On the innovation front, our R&D and application teams are working to innovate value-added products for our customers that we look-forward to launching soon. Moving forward, during these challenging times, we continue to focus on the basics and proceed and expand our approvals. We see this trust as temporary and are quite positive to get back on a volume growth path. We remain focused on strengthening our global presence, deepening customer relationships and leveraging our product portfolio and supply reliability to drive sustainable growth. You may also have noted in the investor presentation the slide on the vision and values, the co-creation and rejuvenation of our vision and values. This sets the direction of our future and a good balance between continuity and change.
That’s it from my side. I now invite Mr Pshri to provide an overview of our financial performance.
P. Srinivasan — Chief Financial Officer
Thank you, Mr Anand, and good morning to everyone. So let’s run-through the consolidated financial highlights. On the sales volume front, volume for Q3 FY ’25 is at 127 index basis, taking a base of Q1 FY ’20 as INR100. So the volume growth this is a degrowth of 10%, which was already highlighted by Mr Narand. On the revenue front, the net revenue from operations for Q3 FY ’25 stood at INR318 crores as compared to INR363 crores for — in Q2 FY sequentially, we lost about INR45 crores. For the nine months FY ’25, the net revenue from operations stood at INR1,053 crores as against INR1,088 crores in nine months FY ’24. For this — during this quarter, we tried to adjust the selling prices in commensurate with a drop-in input prices. So overall on a basis, there was no dip in on the valuation front. We maintain the valuation per kg.
Volumes for Q3 FY ’25 grew by 3% year-on-year, but showed a decline of 10% on quarter-to-quarter basis. On the nine months performance, the for the nine months FY ’25, the volumes reflected a growth of 7% as compared to nine months FY ’24. It’s very important to note that on the rubber consumption front globally, we are still seeing a degrowth as compared to marginal degrowth as compared to CY ’23. CY ’24 shows a marginal degrowth. In comparison to that, I think we — our performance is slightly better. On operating EBITDA, operating EBITDA for Q3 FY ’25 stood at INR24 crores as against INR38 crores in Q2 FY ’25 with EBITDA margins at 8% in Q3 FY ’25.
For the nine months ended December ’24, the operating EBITDA stood at INR103 crores as against INR150 crores comparing to the nine months of previous year with margin standing at 10% nine months FY ’25. On operating profitability, operating PBT for Q3 FY ’25 stood at INR19 crores as compared to INR32 crores in Q2 FY ’25. The nine months FY ’25 operating PBT stood at INR88 crores as compared to INR124 crores in nine months FY ’24. On the profit-after-tax, the profit-after-tax for Q3 FY ’25 stood at INR13 crores as compared to INR42 crores for Q2 FY ’25, primarily in Q2 FY ’25, there was a step-in tax credit consequent to the taxation rates as per the budget announcement. For the nine months FY ’25, PAT stood at INR82 crores as compared to INR91 crores for the corresponding nine months period of FY ’24.
With this, we would like to open the floor for question-answers.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles the first question is from the line of Nirav Jimudia from Anvil Research. Please go-ahead.
Nirav Jimudia
Yeah, good morning team. Sir, I have two questions. So first, sir, if you can explain geographic — geographically if we see ex-China, how are the various markets in terms of consumption, specifically Europe, Japan, USA, Malaysia, Thailand, if you can just give a flavor of the consumption basket of antioxidants and accelerators in this broader geographies? And also if you can share some thoughts of the the available production capacity in these regions and how much of these regions are currently relying on the imports of rubber chemicals?
P. Srinivasan
So Nirav, good morning. This is here. So, yeah. If you look at the rubber consumption, rubber chemicals demand has derived out of rubber — rubber consumption. Yeah. IRSG, the International Study Group releases periodical data on a quarterly basis. And from that data, one can understand that 36% of the consumption of the world is consumed by China. 12% is done by European Union, 9% is done by USA and India is probably 7.5%, 8%. Japan is 5% and other markets are much different. The key thing is, apart from we see India showing a growth in the volume trend when you’re looking at data, whatever period up to which we have received, we obviously the data till June. But if you analyze that, India is still showing a growth of 4%, 4.5%. China is relatively lower-growth.
Operator
Sorry to interrupt you, sir. MR. Nirav, can you please mute your line while the management is answer.
Nirav Jimudia
Yeah, sure.
Operator
Thank you. Thank you very much, sir. Please go-ahead.
P. Srinivasan
So China is growing at a slow rate as compared to CY ’23, CY ’24 has been at a slower growing growth rate. India is showing 4%, 4.5%. We don’t know what is the data till December, but the trend based on April — January to June indicates that. But other markets are all showing a degrowth. So under the circumstances, we see India and probably Southeast Asia, one or two markets which have shown a positive growth. Rest everyone is flattish or negative growth or degrowth. This is as far as the consumption is concerned. In so-far as the supply is concerned, I think the supply is largely concentrated around China, which is 80%. Then the European Union entities who have operations across the world, they contribute about maybe 14% 15% and the remaining 5%, 6% is supplied by. So I think that’s what we can give us.
Nirav Jimudia
So sir, is it safe to assume that there are other markets who are supplying like Korea, there are other players in India or European, but they do not have their intermediate manufacturing capability. So therefore, I — one should consider them as influenced by China. Correct. So is it safe to assume that, let’s say, out of 10 lakh tonnes of rubber chemical consumption globally. US is 90,000 tons and they don’t have any capacity to produce. So they are they are relying on the imports for their consumption. Is it a safe statement to make, sir?
V.S. Anand
Yes. Some small production, but largely import. Largely European domination and then other digital European sourcing. Yes.
Nirav Jimudia
So correct. Sir, secondly, like after many quarters, we have seen our volumes dipping and Mr Anand in his opening remarks mentioned that because of the lower production from the customers and hence the demand was lesser, but we are seeing those volumes again coming back next month, if I heard him correctly. So just wanted to understand like in our previous interactions on the conference call, you mentioned that the intent is to grow our volumes quarter-on-quarter and this was the quarter where we have seen a dip in the volumes. So if you can explain like when can we recoup this lost volumes and start growing again, A, where we have seen the dip in the volumes, if you can explain between the domestic and the export side? And C, given the kind of current situation in terms of the fall in volumes, are we doing anything in terms of controlling — controlling the cost so that we can save some bit of per kg cost and that could improve our EBITDA per kg?
V.S. Anand
Yeah. Well, so let me — so I think one is like I mentioned very clearly, we are to stay on the growth path. I see this as a temporary blip. I — what has happened is typically, we don’t expect this kind of production drop-in this particular quarter and the way it happened. And so that has had an impact on a domestic market point. Also, there was in the international markets, typically, we do see it every year, it’s not new, it’s the year-end where there is usually a lower inventory offtake because of the year-end. It was slightly a bit more than we had expected. So these two areas did play a role. I would say also with the aggressive pricing, maybe a little bit of the judicious price-mix that we had to play, we had to kind of hold the pricing to a certain extent. But that I think we can retrieve. Otherwise, these volumes we expect to come back-in the next quarters.
In terms of growth, I would see that the volumes are expected to come back-in all the markets that we are focusing on, both domestic as well as international. Surely, as you said, the last part of what you said, there are significant initiatives under the –.
Nirav Jimudia
So sir, my last part was that like given the kind of lower volumes and the pricing pressure from probably the countries which are dumping into India and elsewhere, are we seeing or doing any cost initiatives, which could bring down our cost per kg and hence could elevate some bit of EBITDA per kg margins.
V.S. Anand
Absolutely. I was just coming to that. In terms of internal initiatives, I just briefly touched upon it in terms of operational efficiencies. So there are multi-pronged efforts. One is also in terms of our steam utilizations, the steam efficiencies, there are quite a lot of initiatives underway to look at our ratios. So that is surely going to bring in some cost element. We still get to see the full kicking-in off the turbine, it’s kind of stabilizing and getting on-stream. So that I should see should start giving more benefits going into the next few quarters. With the volume increase, there will be operating leverages that will also kick-in. And quite a few other initiatives also on process yield, et-cetera, which we see will also happen in the next few quarters. So there is quite a few initiatives on that front., you’d like to add something else to it?
P. Srinivasan
So Nirav, actually, if you see the other expenses and the employee cost totality, if you take the conversion cost, basically, what we are looking at is a number of maybe INR350 crores of vis-a-vis INR330 crores of INR332 crores, whereas on the production front, we have seen a growth of 11%, which means when your cost is going up activity is going up by 11%, there are some element of variable-cost which is in there in the conversion cost, which will proportionately grow along with the volume. But what is more important is on the other part, we are trying to control the cost. So overall, if you see on a nine months basis, if I take the other expenditure in and aggregate the employee cost, the overall growth is about 5.5% or thereabout. So in a way, we are the cost-cutting or cost rationalization measure is already in-place, which we can see from the data.
Nirav Jimudia
So to summarize, like if we can infer from the statements being made by you. Is it safe to assume that the lost volumes in Q3 would be recouped in Q4 and possibly from Q1, we’ll again start seeing the volume offtake getting higher from the customer?
V.S. Anand
Yes. So broadly, I would expect the volumes to be better going-forward. But then, yeah, exactly how much do we recoup in a span of three months or six months, I think this we will see as we go along.
Nirav Jimudia
Yeah. Got it, sir. Thank you so much and wish you all the best.
V.S. Anand
Thank you.
Operator
Thank you. Thank you very much. We now invite our next speaker the next participant. The next question is from the line of Nitesh Dhoot from Dolat Capital. Please go-ahead.
Nitesh Dhoot
Yeah. Hi, sir. Thank you for the opportunity. So need some clarity on your previous answer. So in Q3, despite the moderation in freight costs and initiatives around power cost-savings and others, which you’ve been talking for a while, we’ve seen the opex to be stable Q-on-Q, that’s around INR120 crores or so, despite the lower volumes. So if you could give some color on why not seeing I mean, softening of opex and by when can we see this reflecting?
V.S. Anand
Nirish, I didn’t understand your question. What is this 120, where are you picking-up from?
Nitesh Dhoot
So this is basically if you see the employee expenses and the other operating expenses for Q3, which is at around INR118 crores. And even in Q2, the number was around INR119 crores. So it’s broadly the same number, right? But we have a sequential dip in terms of volumes. So which is what I was referring to.
V.S. Anand
I think what we are — you are only looking at the sales volume degrowth, whereas when we look at that, we are looking at the activity. So when I’m looking at activities for nine months, if you see the nine-month data, we are under control and production levels are already high. And if you see this year — this quarter, our plan already was to produce at a higher-rate than the CQ2 volumes, that was our endeavor. That was the plan resources committed and we have to do this activity. But the — unfortunately, the sales volume dipped because of the demand — lower demand at the customers end. And therefore, this has resulted in a higher inventory. So the inventory buildup is there and you can see it from the stock change in the P&L account, which has a INR21 crores credit. So that’s a clear case where the activity is more than the sales.
Nitesh Dhoot
So I think — I got your point, but sir, this was there in the previous quarter also. So last quarter also you had mentioned that there was a higher production and there was an inventory buildup in Q2 as well and there is not much change on that on that part. So which is why —
V.S. Anand
Which means — which means the expenses are already incurred for a higher-level of activity. And that’s where the key point which we want to say. We — what we are trying to say is the expenses — these expenses, operating expenses are based on the manufacturing activity rather than the volume of quantity sold. So — and fixed costs are largely constant in nature and therefore, you have to keep in mind those aspects also. The variable component will move along with the volume of high-level of activity. The fixed component is almost constant in nature. So when you take the summation of that, this is where the number and therefore that we are getting a INR20 crores credit also in this inventory change. So fact of the matter is, yes, there is a activity is higher than the sales and there is an inventory buildup at the end of December?
Nitesh Dhoot
All right. And just I mean so in the previous quarter, I mean, since there was a buildup in the previous quarter, which I just referred to, so were you — would it be correct to say that for Q3 production, you’re not able to take the full advantage of the input cost-reduction — input cost-reduction that happened in Q3. Would that be correct to say?
V.S. Anand
We moderated in such a way that we had to maintain the valuation per kg, that’s what we did. So our — we have continued to play this game of judicious mix of volume and pricing. So we use that consciously and selectively to ensure that our overall value addition per kg doesn’t rock.
Nitesh Dhoot
All right. And sir, just one last thing. So on your earlier guidance of a healthy volume growth in this current fiscal ’25, where are we expected to-end the year? That is one. And any early indications for FY ’26 in terms of volume guidance. That will be all from my side.
P. Srinivasan
So we have given some kind of an indication also in the investor presentation in terms of the expected volume growth, which is expected to be at least in the 8% to 10% range. And we hope to keep the same level going into the next year also.
Nitesh Dhoot
Sure. Thanks a lot, sir, and all the best.
P. Srinivasan
Thank you.
Operator
Thank you. The next question is from the line of Aditya Khetan from SMIFS Institutional Equity. Please go-ahead.
Aditya Khetan
Yeah, thank you, sir, for the opportunity. Sir, my first question is into the opening remarks. So Sar has mentioned that the pricing pressures into the domestic market that has impacted the realizations. I believe, sir, last quarter also we had a discussion on the same and you mentioned that more or less in higher pricing pressure was largely because of the imports which were happening and that could have been the near bottom. In this quarter also, sir, like we have witnessed again similar sort of a thing and that has actually impacted your EBITDA per kilo front also. In terms of guidance, sir, what you can give like is this the — you think like — so this — so the pressure would be relieved from here on because the cycle has nearly bottomed-out or you see like this to continue for some few quarters and while and as the demand in the international market picks up, then only we could see some uptick. Any sort of a broad sense if you can give how things are shaping up?
V.S. Anand
Yeah, you’re right. At least our view at the last call was that we’re close to bottoming out and we should not see significant further erosion. But it has — we did see it play-out the other way that there has been further pressure on prices. I think this is also an result and outcome of what’s really happening in the other markets in terms of demand and capacities that have come on-stream in the last few years, which is which is continuing to play-out. So I would be cautious as far as now looking ahead into the next quarters also seeing that there is — there is still a pressure on prices. But I see — I’m kind of looking at it and saying, okay, possibly it’s getting close to the bottom, it should not go further. But like I said last quarter, I think I’d like to be cautious this time. But that’s the way we see it.
Aditya Khetan
Okay. Okay. And sir, even so, sir has alluded to the fact that improvement in some cost-control efficiencies can have some benefit, but it seems like the benefit couldn’t be that substantial. But eventually, it seems like the business effectively has weakened down. Any sense, sir, like how this business can like revive to the older levels, like would it be the imposition of anti-dumping duty or a reduction in imports that could benefit or the tire demand globally that should go up. So what are the levers like which can change from here?
V.S. Anand
So one is, I was just going to come to that point that you mentioned. So given the fact that we see that the bottoming out is also not really kind of happening. There is significant pressure on prices. We have also moved on the anti-dumping duty front and we have got the investigations initiated for a couple of products and that’s quite a bit underway now. I would say that on the other hand, the prices also moved with raw-material prices corrections. And going-forward, we see that while the market is still in terms of our approvals and what we want to take as business, that still is continuous, that’s still happening. So that’s the positive view on in terms of the opportunity to grow further.
Aditya Khetan
Yeah. Just one last question, sir, in terms of weakening demand, is this also linked to the global rubber consumption like which has degrown by almost 2.5% to 3% for the last three years. And now I think the global rubber consumption is standing at 2018 levels. Is this also one of the reason why demand has weakened and how you see this trend to shape up?
P. Srinivasan
So it has been — so I think we saw it go up post COVID and again come back-down. So it’s kind of like was explaining initially. The growth is really coming from very, very few pockets in terms of overall rubber consumption, that’s natural plus synthetic put together. But in the long-term, we still see that 2% to 3% growth globally which was there, which will come back because rubber applications per se continue to hold a sway and they will continue to be there. So we will see that it should come back to the standard 2% to 3% global growth level there.
Aditya Khetan
And sir, when are we expecting the outcome of anti-dumping duty?
P. Srinivasan
See, the investigation has started. As per the law, there is a time of probably nine to 12 months is what they will conclude the investigation and then thereafter the recommendations will go. So I think it’s subject to the government authority. I think we have to wait for them.
Aditya Khetan
Thank you, sir.
V.S. Anand
Thank you.
P. Srinivasan
Thanks.
Operator
Thank you. The next question is from the line of Garge Singh [Phonetic] from Value Investments. Please go-ahead.
Garge Singh
Hello, am I audible?
Operator
Yes, ma’am, you are. Please go-ahead.
Garge Singh
Sir, my first question was that looking at the import data, so in October, there is a significant increase in antioxidants imports. So my understanding on the company was that antioxidant is our strength and has an advantage with respect to antioxidant products because of the backward integration that we have and also better-quality over the Chinese products. So last two years, the imports were happening mostly in the accelerator, but now there is an increase in antioxidants as well, so which indicates that there will be a loss of market-share. So please help me understand these numbers, sir. What is your take on this?
V.S. Anand
So like I mentioned also on the pricing front and obviously with antioxidants being the largest component in the rubber chemicals, the — as the prices drop, there is going to be an incentive for players domestically to also import to see that the delta and pricing is taken advantage of. In terms of quality, I would say we are comparable. And when you look at imports from both China and Korea, Korea also coming with very aggressive pricing. We see that is playing out, but it’s also kind of at the same time come at a time when the demand — the production itself has dropped a bit, yeah. And from that point-of-view, I don’t see a significant loss in-market share. I don’t see that and I think it’s a correction that’s expected to happen again in the next quarter or so.
Garge Singh
The quality of the products that we are making in antioxidant is comparable with the quality that is coming in from the channel.
V.S. Anand
Yeah, I, I wouldn’t I wouldn’t comment to say that one or the other is superior or inferior. I could say they are all.
Operator
Sorry to interrupt. Saying we are unable to hear you. Your voice is breaking. Can you please check?
Garge Singh
Yeah. Hello. Is it better?
Operator
Yes, please go-ahead.
Garge Singh
Yeah. So with the higher entire customers like MRF or BKT or other the higher-end products. So these antioxidant products when we supply to the high-grade tires, so still even in those products, it will be replaceable with the Chinese and Korea yes.
V.S. Anand
So the large share is with all customers still continues to be with Nosil due to the supply reliability and the support that we provide at the local level. In terms of what mix they use it for, we will not be specifically able to comment there.
Garge Singh
No, sir, I understand that we have the largest market-share, but just wanted to understand with respect to the quality perspective, with the higher-grade tires, is the product comparable to in the antioxidants.
V.S. Anand
Yeah. — so like I said,, I — if it’s also every tire company, the application and the way they use it is quite different. So it’d be very difficult to kind of generalize to say which of the products they use for higher or for lower-end tires, we would not be in a position to comment.
Garge Singh
Okay, sir. Sir, second question was that you mentioned that there is an inventory liquidation happening on the tire side. So again, my understanding here was that the entire ancillary companies would normally have an understanding of the inventory position and the production schedules of the tire companies at least 1/4 in advance. So considering that we already had higher inventory in last quarter and we would definitely would have the production schedules of the tire companies for this quarter as well. So considering all these factors, it was surprising that we saw still a higher closing stock for this quarter and then the last quarter for two consecutive quarters. Just any comments on that?
P. Srinivasan
So here. Actually please look at the tire company’s results, at least three, three, four of them have released and all of them, if you see in their own income statement which has been released for the quarter, they also have a stock change credit, which means the production is more than the demand. And what is happening is in a situation where the demand is downside and they have — see, the entire company plans its activity in advance. We understand what you’re saying and advance, it’s very nice, exactly correct. But when they source, they sourced from multiple sources. They could be domestic source, there could be an import source. And whenever the production activities moderated during the quarter because of the demand schedule, the way it is corporate business is operating, the local player will generally suffer because the import is already committed. This shipment has already come into the country, he has to play on it. So therefore, the domestic industry, the domestic suppliers will go through that crisis. Conversely, in a situation as the demand suddenly picks up, the domestic player will be the beneficiary.
Garge Singh
Understood. Sir, third and last question, sir. I appreciate how the company is being run both operationally and financially. But at the same time, what I wanted to understand from the management team is regarding the plans for diversification. So while the efforts have been taken by the company to increase share of business with the overseas customers, in this quarter, specifically, we have seen that those efforts are getting nullified due to higher dumping in India. So this issue has been there for the last two to three years. So on the balance sheet front, we have around INR550 crores cash and investments on-book, but we have not done any product diversification to combat this. So while other chemical companies are diversifying and entering into new businesses, where there is high-growth potential, this — this part of diversification has not been seen in the company. So what is the plan for diversification and utilization of cash to grow the business going-forward?
P. Srinivasan
So first let me kind of respond on the rubber chemicals itself. So the rubber chemicals, as you have seen that we have also announced investments to further expand our capacities because we see that there is potential and long-term growth possibilities given the market-share and the market-share that we can also gain over a period of time with the China Plus One playing out also. So that’s on the rubber chemicals. So — and we also look at innovating in the rubber chemical space, like I briefly mentioned, looking at products that we can add to our portfolio that is also work-in progress. But also we are — we are actively looking at what other areas to look at beyond rubber. So there are some adjacencies that we can look at based on similar chemistries or the expertise that we can take into other industries that we have in quite a few areas. So both are underway, Gargi.
So I would say we have been also talking about this in the last couple of years at the calls. There have been quite a few cases which where we were quite close, but didn’t kind of work-out the way we would like it to. So we were still on it. That’s an active process that is underway.
Garge Singh
So just a of four to five years back, we have expanded the capacity. And at that time we are projected to reach full utilizations much — much before than what the current performance is. So now with your current guidance to the previous participant, with the current capacity that we have, it would take around another four years to reach full utilizations. Still, you have planned for INR250 crores capex to expand the capacities in the existing products itself, wherein we are seeing dumping and also there is an issue in-demand from the demand front. So is there — is there any plan to defer the capex or you know, what is the near-term capital allocation plan with respect to that?
V.S. Anand
So while we’d also mentioned that the capacity which we mentioned is for a basket of products here. And these basket of products are at different utilization levels. So while we have mentioned that for some of the products, there’s still the utilization level has some way to go and we will take time to fill it up. On — some of the products are already at 95%, 100%, 90% that range. So it takes time to bring these capacities on-stream and we feel that there is growth opportunity. So only for those specific products, we first start with debottlenecking, we look at what we can do to get additional volumes just from that. And only if all those are exhausted, we look at going-in for brownfield from what we have — what we have announced. So it is for that specific product where we are already completely out on capacity.
Garge Singh
Yeah. And how much would that product contribute to the revenue, sir?
V.S. Anand
Yes. So we haven’t announced details of this product as yet in the public domain. We will do that as we get closer because the product is getting more on-stream only in the second-half of next year.
Garge Singh
So with the current capacity by when do you expect to reach full utilization?
V.S. Anand
Yes. I’d refrain from giving a certain guidance on this given the uncertain external environment. But yeah, I think we should — we should get there in the next short-to-medium term.
Garge Singh
Yeah. Okay, sir. Thank you for answering all my questions and all the best, please.
V.S. Anand
Thank you.
Operator
Thank you. Thank you. The next question is from the line of Renjith Sivaram from Mahindra Manulife Mutual Fund. Please go-ahead.
Renjith Sivaram
Yeah. I just wanted to understand that.
Operator
Sorry to interrupt you, Mr Shevran, we are unable to hear you, sir. Can you speak a bit louder?
Renjith Sivaram
Hello am I audible now?
Operator
Also you are sounding can you please connect on your handset mode.
Renjith Sivaram
You said okay now?
Operator
Yes better. Please go-ahead.
Renjith Sivaram
Yeah. Hi, sir. Just wanted to change with you like, we were believing that a lot of these Japanese tire companies were previously buying from China for rubb chemicals and given our capacity additions that and they were also looking at China plus one, we will be one of the biggest beneficiary of the alternate sourcing that is being looked up by these Chinese — Japanese tire companies. So in that also, there was a lot of activities happening. They were also checking our quality. A lot of test were going on. So in that aspect what action have you made into making inroads into this Japanese tyre companies. Hello.
V.S. Anand
Yeah so it’s a bit muscle, but I think I got what you were trying to ask, Sanjit, let me give it a shot. So, yes, the China Plus One is playing out. It’s not limited only to Japanese. I think you could broad-base it a bit more. And that traction is happening in terms of what I mentioned in terms of product site approvals, samples, commercial lots and then larger bulk lots going and that is underway. Albeit at a pace in some cases, fast, some cases not so fast. So it’s a mix of both ranges, yeah.
Renjith Sivaram
So what phase are we in some of — with some of these customers, like it takes six months-to one year for them to approve our product and then they will start giving us orders. So that we understand that it takes almost one year. So where are we with these large companies in terms of how many of these companies we have approved — they have approved our product and they can give us the production order.
V.S. Anand
So quite a few have already begun. It’s again even within the same company that, there could be products at different stages depending on the need, some of them are prioritized accordingly. So some of them have already flown into the numbers that we see today and some are still on the way at different stages. So that’s — that’s ongoing.
Renjith Sivaram
Okay. And currently, what will be our utilization and with these companies coming up, how confident that we can reach to optimal utilization in how many years so that will give some advantage in terms of our operating leverage. Just wanted to understand that.
V.S. Anand
Yeah, I think that’s clearly our endeavor that the utilization with the volumes and that’s why we are quite positive that we will stay on the volume growth path. And with the pricing situation, it has to be a judicious call from a quarter-to-quarter. And so that’s the balance we actually continue to play. I think today we are at about 65% to 70% utilization.
P. Srinivasan
Operating leverage.
V.S. Anand
Yeah. And we see that we should keep pushing it up from quarter-to-quarter.
Renjith Sivaram
Including that INR250 crores of additional capacity, right?
V.S. Anand
Sorry, can you repeat the question, please?
Renjith Sivaram
This utilization that you spoke about is excluding that INR50 crore.
Operator
Your voice is still sounding muffled, so it is not very.
V.S. Anand
Yeah, I got what you’re asking. Yes, yes. Yes is the answer.
Renjith Sivaram
Yeah. Okay. So that INR250 crores of additional capacity when it kicks-in, there will be further room for volume growth, right?
V.S. Anand
Yes, yes.
Renjith Sivaram
Okay, okay, sir.
Operator
Thanks thank you. Ladies and gentlemen, to ask a question, you may press R and one now. The next question is from the line of Muskan Rastogi from B&K Securities. Please go-ahead.
Muskan Rastogi
Hi, sir. Thank you for the opportunity. Sir, I wanted to ask you in US, ADDS has an ADD on China for rubber chemicals. So with Trump, has the AD been extended on China? And with tariffs on Mexico and Canada, do you see the gain in-market share in the US market, sir?
V.S. Anand
Yes. So the EDB is not only limited to China, but a few other countries also that the application is for. With — yeah, so it’s — as you know, and all of us know that the overall tariffs that were announced in the last week seems to be so dynamic. Some of them do present opportunities which are there, we see some inquiries also increasing on that front. But I would really, you know, kind of let’s say, keep my fingers crossed on how that whole thing develops, Muskan, yeah. But there will be opportunities. I at least have that.
Muskan Rastogi
Okay Sir, in terms of cost, we are the best when compared to the peers. The power cost is less, depreciation is less, interest is less. However, I wish to understand where else do we spend most of our time during discussions, Board discussions and internal meetings. Basically, I want to understand the future growth and diversification plans that you mentioned one of the participants. Apart from that, what else do we discuss in the Board meetings?
P. Srinivasan
I think a lot is about is clearly how do we expand our market presence, what is it that we need in terms of competitiveness and the kind of plants that we operate, I would say there is always scope for us to continue to work on operational efficiencies. We’re also now looking at digitalization to help us in our operations to leverage that more to bring in operational efficiencies and improve our cost positions. A lot of it is that and you mentioned it to look at what are the areas that we can do beyond rubber. So that’s also a discussion,.
Muskan Rastogi
Okay, okay, sir. And the last question. What is the delta that would have in terms of margins when compared to companies that make rubber chemicals who do not make intermediates?
P. Srinivasan
So we don’t have any — so we don’t have a data right now, but what we can find out, but what we can say is we have compared with China sunshine. China sunshine with their volume of activity much on a much higher scale than Mosul. And with the subsidy what they are getting from the government on their export more chemicals we can say that our margins per kg is marginally better than China Sunshine.
Muskan Rastogi
Okay, okay, sir. Okay, sir. Thank you.
V.S. Anand
Thank you.
Operator
Thank you. Ladies and gentlemen, as this was the last question for today, I would now like to hand the conference over to Mr V.S. Anand for closing comments.
V.S. Anand
Thank you thank you. I’d like to take this opportunity to thank each one of you for joining the call today. I hope you’ve been able to address all your queries. For any further information, kindly get-in touch with me or Strategic Growth Advisors, our Investor Relations Advisors. Thank you once again, and have a nice day.
Operator
[Operator Closing Remarks]