PCBL Chemical Ltd (NSE: PCBL) Q3 2025 Earnings Call dated Jan. 10, 2025
Corporate Participants:
Raj Kumar Gupta — Chief Financial Officer
Analysts:
Mohit Mishra — Analyst
Aditya Khetan — Analyst
Khush Nahar — Analyst
Radha Agarwalla — Analyst
Jainam Ghelani — Analyst
Prolin Nandu — Analyst
Krishan Parwani — Analyst
Bharat Sheth — Analyst
Nishant Gupta — Analyst
Rajesh Jain — Analyst
Presentation:
Mohit Mishra — Analyst
Good evening, everyone. Thank you for joining our PCBL Chemical Limited Q3 FY ’25 results conference call. We have PCBM Chemical Management on-call, represented by Mr Raj Gupta, CFO; Mr Saket Shah, Group Head, Investor Relations and ESG; Mr Pankaj Kedia, Vice-President, Investor Relations.
I would like to invite Mr Raj Gupta to initiate with opening remarks, post which we will have Q&A session. Over to you, sir.
Raj Kumar Gupta — Chief Financial Officer
Thank you, Mohit. Good evening, my friends, and thank you for joining our earnings call today. On behalf of entire PCBL Chemicals Family, I would like to extend warm wishes for a very happy and prosperous New Year. I’ll start with some of the major highlights of the quarter and then would be happy to take your questions. Over the last few years, we have diversified beyond carbon chemistry into new fields within the chemical sector. This growth, both organic and through strategic acquisitions and partnerships has brought us to a pivotal moment.
To mark this evolution, we have recently unveiled our new identity. We are now PCBL Chemical Limited. This name change reflects our broaden capabilities and our dedication to pioneering advanced solutions for our customers globally. Recently, the Andhra Pradesh government has allotted us 116 acres of land in Naidu Peta, which would be used for our next greenfield expansion. This proposed site has proximity to major ports like Katupali,, and, which would facilitate seamless movement of goods with high logistics cost-efficiency. This would be our sixth manufacturing site and is crucial in our journey of crossing the benchmark of 1 million tonnes of capacity.
So during the quarter, our specialty line of 20,000 tonnes per annum capacity in Mundra was also commissioned, taking our total capacity to 7,90,000 tonnes per annum. Sustainability has been at the core of our decision-making. The company has been certified with international sustainability and Carbon Plus, which is ISCC certification. It emphasizes company’s commitment towards responsible consumption and production, also circular economy and reduction of GHG emissions.
On this front, we have recently launched a new grade named EcoGen TM 6000, which is based on recycled materials. Over the last few years, the company deepened its research commitment comprising forward-looking investments in infrastructure, people and processes, resulting in empowerment of the company with proven capabilities in-product applications, process efficiency and product customizations.
Coming to the quarterly performance, PCBL continued with a steady performance in the challenging macro-environment during the quarter, our consolidated sales volume in carbon Black business increased by over 5% year-on-year to 144,000 tonnes. This translates into a capacity utilization of over 9% during the quarter. Consolidated revenue from operations increased by 21% to INR2,010 crores on back of higher sales volume and also a revenue from the newly-acquired business of Aquapharm Chemicals.
Consolidated EBITDA in the same-period grew by around 15% to INR328 crores, while PBT stood at INR124 crore and PAT at INR93 crores. EBITDA per ton in Black business stood at INR19,868 per tonne. Of the total carbon sales volume, domestic sales volume stood at 84,369 tonnes, while international sales volumes stood at 59,132 tonnes. Moving on to our segmental performance, tyre accounted for 86,886 tons. Performance Chemicals reported sales volume of 42,6367 tonnes, while specialty sales volume was 14,247 tonnes. We continue to expand our product portfolio and customer reach.
During the quarter, we have undertaken a major overhaul of our power unit in Dugapur plant, resulting in lower-power generation. Power generation stood at 161 million units during the quarter with an external sales volume of 94 million units. PCBL’s average realization during this quarter stood at INR3.5 per kilowatt-hour. Coming to the nine months performance, consolidated revenue from operations increased by over 40% year-on-year to INR6,317 crores from INR4,491 crores during the same-period last year.
Sales volume increased down 15% year-on-year to lakh 46,110 tonnes. The consolidated EBITDA for the nine months was up 44% from to INR1,067 crore as against INR742 crores during the first-nine months of the previous year. Power generation also increased by 15% in this period to 563 million units. Chemicals reported a steady performance during the quarter. We are already seeing some improvement in the industry dynamics. Further improvement in cost and operational efficiencies and increased market penetration is going to support the company’s financial performance going-forward. We expect strong growth both in sales volume and in operating margins in the financial year.
Aqua Farm quarter three revenue stood at INR328 crores with an operational EBITDA of INR51 crores. The quarterly sales volume stood at 23,000 tonnes. Capacity utilization witnessed remains above 70% during the quarter. At PCBL Chemical, we continue to work on portfolio expansion and capacity additions across business verticals and we are increasing allocation of resources towards strengthening of our supply-chain, our improving the product mix and also optimization of cost.
The long-term prospects of all business segments remain positive and we are on-track to achieve our mid and long-term growth targets. The brownfield expansion of 30,000 tons in PCBLTN is completed and we are currently awaiting consent to operate from the local pollution Control Board. We expect it in next few weeks that also the second phase of expansion of 60,000 tonnes in Tamil Nadu and 12 megawatt green power is currently underway. We expect this capacity to be — project work to be completed in next few to four quarters’ time.
So we have also started project work on one new specialty line, which would cater to application segments like conductive polymers and batteries. Chemicals expansion project of 38,000 metric ton per annum are on-track and likely to be commissioned by March ’25. On the nanosilica project side, we have started placing orders for equipment for the pilot plant and expect the commissioning to happen next few months’ time. Tire industry growth outlook both in India as well as at global industry level continues to remain positive.
In India, the investment in road infrastructure, steadily rising income levels, increasing urbanization rates, premiumization and a grossly underpenetrated vehicle market has created a significant long-term growth opportunity for the entire auto industry ecosystem. With our rapidly expanding product portfolio, market penetration and strengthening supply-chain and R&D capabilities, we have the potential to outpace auto and tire industry growth rate. We are geared up to leverage the emerging opportunities and remain on-track to achieve our mid and long-term growth plans. Also happy to share that our Board of Directors has declared an interim dividend of 550%, that is INR50 per equity share of face value of INR1 for the year ended 31st March ’25.
With this, I conclude my opening remarks and open the floor for your questions. Thank you.
Questions and Answers:
Operator
Thank you. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are request to use handsets while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. The first question comes from the line of Aditytan with Swifts Institutional Equities. Please go-ahead.
Aditya Khetan
Yeah, thank you sir, for the opportunity. I have a couple of questions. Sir, first question, is there any particular reason for drop-in the — in the carbon black spreads on quarter-on-quarter basis, like is it related to general market weakness or the product mix of — of the company has deteriorated? And second question on to this, any further plans on the specialty carbon, like we have completed Phase-2. So are we planning to further expand any plans on that?
Raj Kumar Gupta
Second question properly. Could you repeat that?
Aditya Khetan
Sir, my second question was onto, to is there any further plans to expand the specialty grade carbon black? We have completed the 20,000 tonnes of Phase-2. So is there any newer plan on the table which has been outlined?
Raj Kumar Gupta
Okay. So I’ll answer the first question first. The drop-in realization you asked, right,? Drop-in realization is on account — primarily on account of fruit price movement. Our fruit prices came down by about $6 compared to the previous quarter and you’re aware that our principal raw-material is a derivative of crude, which has an impact on our realization. So partly it is on account of crude prices and also there has been a product mix change during the quarter, which has impacted the realization.
Coming to the second question about next specialty line, I was just talking about the new specialty line. So we have already started work on a new specialty line. It will come up in and here we are planning to manufacture premium grades for conductive plastics and batteries.
Aditya Khetan
Any, sir, numbers we can put how much tons and what is the capex?
Raj Kumar Gupta
So currently, it is under the designing phase, give us few more weeks time. In few to four weeks’ time, I’ll come up with more details on this.
Aditya Khetan
Got it. Sir, my next question is on to — so the recent of plant allocation in Andhra Pradesh. I believe, sir, we are investing around INR3,700 crores. So this would be largely to set-up a carbon black plant only like complete carbon black unit only. So sir, just if I may ask you, so what would be the capacity which we are outlining because I believe with this much of investment, we can add-up around 6 lakh tonnes of additional carbon black capacity. So currently somewhere around 8.5 plus 6, so we can reach to 1.4 million ton versus our — like what we are seeing that is around 1 million tonne. Any sir, like thoughts how much we could add?
Raj Kumar Gupta
Aris, the capex guidance that we shared during our earlier call was on a consolidated basis, which included all the business segments, which had Black, which had and which also had nanosilicon. So when you are talking about this INR3,700 crore number, then this includes all the capex which is planned for all these businesses. Coming to the current land allocation in Andhra, it’s a large piece of land, which can house roughly about 400,000 to 450,000 tons of carbon lakh capacity, but the capacity would come up in phases.
So in the first phase, we expect to put up a 150,000 ton plant only and on a similar-size of plant, we spent roughly about INR950 crore 60 odd crores. I mean the plant that we put up in TN. So — and it will take about two, 2.5 years time for this plant to come up. And then second and third, eventually we will add more capacity here.
Aditya Khetan
Yeah. Okay, okay. Sir, onto the farm, sir like on sequential basis, we were seeing a good drop of almost around 13% to 15% in volumes. Sir, is that like we had already guided for ’25 — FY ’25 volume growth of 15% 20%. Is there a cut on that guidance and what is the reason for this volume drop?
Raj Kumar Gupta
Specialty chemicals generally, I mean this whole industry is facing a lot of headwinds in form of tepid demand and also stiff competition from China. You will see it across all the specialty chemical businesses. It is not unique to Aqua Farms. Those things are there. But what we are trying to do currently, I mean, it is only just about nine, 10 months into our acquisition.
And what we are focusing now is one is on the cost and operational efficiency side and the other is on the increased market penetration side. We are putting more fleets on-the-ground. And with all these initiatives, we expect that going-forward. I mean, gradually over next few quarters, we will be able to deliver better numbers. So it will be visible in our performance from here on. But current year, actually, it is because of strong headwinds of in the industry.
Aditya Khetan
Okay. And sir, this weakness in your — in the Carbon Black and the Aqua Farm business that could percolate in your Q4 numbers also?
Raj Kumar Gupta
Sorry, what is your question?
Aditya Khetan
Sir, the weakness in like carbon Black spreads in the domestic market and business also like remaining weak. So can we expect a similar sort of a performance in the fourth quarters also, like how you see things to change from — particularly from which quarterly?
Raj Kumar Gupta
No, we are not seeing any weakness in margins. We are not witnessing any weakness in margin. Even during the current quarter, it is primarily because of operating leverage and product mix. — and, like I said that we are expecting better performance going-forward. So even quarter-four should be a better quarter. As of now, that’s what you know-how we see it.
Aditya Khetan
Okay. Sir, just one last question if I may. Sir, any update on that JV? Sir, how far have we reached onto that part and has the lab testing and sampling? So that has been successful and we can take it to a large commercial-scale also. Just wanted to know on this part.
Raj Kumar Gupta
Yeah, that’s our plan., as part of that process, we are already participating in lot of global battery chemical phase, creating more visibility around the company. And simultaneously, the work on pilot plant is on. I mentioned that we have already started placing orders for project equipment. And in next few months’ time once the plant is ready, then we will start placing samples with the targeted customers. It is on.
Aditya Khetan
Sir, we have also transferred some two patents to the JV. What we have made. Any updates like what is that?
Raj Kumar Gupta
Yeah. So we have had a tie-out with this Australian joint-venture company and all these patents were — all the IPs were developed by them. So as part of the joint-venture arrangement, we got them to transfer these IPs into the joint-venture company.
Aditya Khetan
Okay. Okay. Thank you, sir.
Raj Kumar Gupta
Thank you.
Operator
Thank you. Next question comes from the line of Kush Nahar with Electrum Portfolio Manager. Please go-ahead.
Khush Nahar
Very sir, thank you for the opportunity. So my questions are more on the side. So number-one, like you said that there is some weakness in the US industry. So could you elaborate a bit more this recovery will be because of the recovery in our numbers will be because of company-specific reasons like-new products or it is more of industry recovery that we are betting on? And how much — how much volume growth are we expecting once this recovery happens?
Raj Kumar Gupta
Well, Kush there are 2, 3 things which we are kind of relying on. One, our raw-material prices which were gradually coming down last 1.5 years, they have somewhere stabilized, right, which will therefore stop impacting our margins and possibly would see a uten from here, so which kind of should have a positive impact on our margin. So that’s on the margin side.
Regarding the volume recovery, of course, I mean, industry now possibly has come to a point where we may not see further a deterioration in the industry demand-supply dynamics, possibly we will see some recovery, but we are not depending on that. We are — like I said, we are putting more fleet on-the-ground and we are also trying to reduce our client concentration. So we are creating — trying to create a broader base of clients and also creating more penetration in newer geographies. And of course, I mean, it is not going to happen in one quarter’s time, but the reflection of all these initiatives would become more-and-more visible as we travel into quarters in the next year.
Khush Nahar
All right, sir. Thank you for the detailed answer. And my second question was more on the export side. So I think this quarter our exports have grown lower. So what were the major reasons and when can we expect a recovery in this?
Raj Kumar Gupta
Our overall export volumes have gone up during the quarter.
Khush Nahar
So last quarter to 2.5% for this quarter volumes.
Raj Kumar Gupta
Yeah. But I mean despite all the macro headwinds that we are facing, there is geopolitical issue, the trade relation, trade route disruption and generally, there has been some kind of destocking during the — during last quarter. December typically is a balance sheet month for most of the overseas customers and they tend to reduce inventory in their books to show better capital efficiency, right? And despite that, we have been able to clock better numbers.
Khush Nahar
Okay, sir. Thank you.
Raj Kumar Gupta
Thank you, Punish.
Operator
Thank you. Next question comes from the line of Radha with B&K Securities. Please go-ahead.
Radha Agarwalla
Hi, sir. Thank you for the opportunity. Hello so
Raj Kumar Gupta
Yeah, rather, we can hear you.
Radha Agarwalla
Yes, sir. Yes, sir. Thanks. And so sir, my question was that see Europe was importing around 4 lakh metric ton from Russia. So that has stopped after the ban. And additionally, there were more sanctions that were imposed from 2nd October on the session company OSMK carbon, which had a plant of — plant capacity of 1.6 lakh tons in Russia in Belarest. So with respect to these two events, I wanted to understand that, so customers had started adding huge inventory in anticipation of the bank. So do you think this situation is normalizing now or how long do you think this can continue and when do you expect to witness sequential recovery in carbon black volumes?
Raj Kumar Gupta
Well, on year-on-year, if you look at our volumes, our volumes are still higher, but coming to specific answer to your question, there has been some stocking, some stocking in Europe because of this restriction on import from Belarus and Russia, you’re right. Currently, the customers appear to have a little elevated level of inventories. But despite that our volumes in Europe and North-America is going up and that is because of our being able to add new clients, new customers in these geographies. I mentioned in our earlier calls on calls also that till two, three years back, we were just doing about 4%, 5% in Europe and another 2%, 3% in North-America.
So in totality, we were doing about just 7%, 8% of our total international volumes in Western part of the world. And in last quarter, we have done close to about 35% of our volume in this geography. And that’s the reason why our overall international sales has been going up. If you look at our international sales in last 10 years time, it has gone up by three times. And there is, I mean, significant scope for us to move-up from here. Once the stock levels again come back to the normalized levels, I mean we are very hopeful, we are very confident that we should be able to do more business in Western world. And therefore, we are putting up so much capex.
Radha Agarwalla
Yes, sir. Just a follow-up, how much do you think the inventory is flying with them as compared to what we consider normal.
Raj Kumar Gupta
So it is a very bulky material and therefore, it is unlikely that anyone would be able to stock more than maybe a couple of months stock any point in time even that looks very-high. So we expect the situation to be normal, you are close to normal now.
Radha Agarwalla
Okay. So last quarter or maybe in 3Q, it was slightly above-normal and now you expect the situation to have reached normal?
Raj Kumar Gupta
Yeah, yeah. I think, I mean, the inventory should be and I mentioned that December typically is a quarter of balances for them. So the capital efficiency is also at play there.
Radha Agarwalla
I mean that consideration. So I could not hear you, December is a quarter of?
Raj Kumar Gupta
I mean for most of overseas customers, especially in the western part of the world, December is balance sheet quarter for them, right? And in order to show better capital efficiency, generally there is a tendency to reduce working capital levels and therefore destocking. So we don’t see this trend to continue beyond this quarter.
Radha Agarwalla
Okay, sir. And sir, again, continuing with this question. So this entire 4 lakh tons and this 1.6 lakh tonnes, roughly 5 lakh to 6 lakh metric ton of demand that has been created in European region. So now that the situation has been going on for two quarters, how do you think this — this demand has been distributed among which nations?
Raj Kumar Gupta
So again, I mean there will be participation from multiple manufacturers and countries. It is for the most efficient manufacturer to get the largest share, right? And we are of course going to be one of them. Our volumes have already increased and as a brand-name is very strong. I mean, it’s a very strong brand-name globally in this industry.
Radha Agarwalla
Okay. Sir, second question was with regards to usually in this — in this quarter or in this period, there are negotiations with customers regarding pricing on the carbon black front. So could you please share your thoughts regarding the pricing that we expect on carbon black for FY ’25? How is it expected to fare up when compared to the current prices?
Raj Kumar Gupta
Negotiations mostly happen on the volumes, because our pricing is also dependent on the movement in crude prices. So the level of realization would also depend on the behavior of crude prices going-forward. But we got some new contracts also and I think it will be reflecting in our volumes going-forward.
Radha Agarwalla
The pricing, we would expect in similar levels to current quarter with respect to the new.
Raj Kumar Gupta
I’m not commenting — I am not commenting on pricing rather. Pricing could be anything because tomorrow it crude goes up to $100 and realization would tend to go up. If it comes down from the current level, realization would come down because this industry operates largely on formula pricing. So typically what — normally when we participate in tender, it is mostly for volumes and on the formula.
Radha Agarwalla
Understood, sir. Sir, last question was with regards to ACPL. So just wanted to understand that as majority of the revenue in ACPL is coming from US, so what is — wherein we are supplying this oil and gas chemicals, so what is our market-share with respect to the oil and gas chemicals in the US market and are there imports from China coming in US? And with respect to the new government in US, do you expect any changes in the supply-chain?
Raj Kumar Gupta
I couldn’t hear it properly, but I think your question was what is our share of oil and gas industry, right?
Radha Agarwalla
Yes.
Raj Kumar Gupta
So we currently have just about a percentage of the market-share in oil and gas is a fairly large industry and we have a very small share scale. Like I mentioned that we had significant client concentration. We were not present in number of geographies. Even within North-America, mostly we were doing business in USA of — I mean, while Mexico and Canada also offers equally big opportunity. So now we are focusing on a new geography and customer penetration.
Radha Agarwalla
So any comment on imports from China in the US market or any changes in supply-chain you’re expecting in that market?
Raj Kumar Gupta
I would not talk much about how China as going to play their strategy or whether US is going to impose any tariffs on them, we rather are focusing on our own strategy. So despite — even if you consider that it is going to remain a level-playing field for all manufacturers across all countries, how can we increase our market-share? And that’s exactly where we are putting our energies?
Radha Agarwalla
Sir, what drives the demand in these oil and gas chemicals in that market? Is there anything that we can to understand how the situation is changing there?
Raj Kumar Gupta
Yeah. The market itself, the market size is very large rather. We just have about a percentage of the market-share. So even if market grows at 1% or 2%, historically it has grown at about 1.5%, 2% that’s been the global annual growth rate. But even if it continues to grow at that rate, there is still, you know, such a long space for us to grow
Radha Agarwalla
Understood. Thank you and all the best.
Operator
Thank you. Next question comes from the line of Khalani with Swan Investments. Please go-ahead.
Jainam Ghelani
Hi, sir. Thanks for this opportunity. So I noticed in the results that we’ve taken an impairment of INR554 crores in Aquapharm Chemicals. And I feel that it’s quite soon since our acquisition. So do we expect any further impairment in this company in the near-future or are we done for now?
Raj Kumar Gupta
Well, so I’ll just explain the background of this impairment. This impairment is not there in isolation. You will see that there is an equal amount of write-back of deferred tax equity. Right? So as such, I mean, the impact from our current quarter’s financial is almost negligible. It’s not there. Now I’ll just explain the background. When we acquired Aqua Pharm as part of the accounting requirement, some temporary assets and liabilities get created.
So on one-side, deferred tax liability gets created and then on the other hand, equal amount of non-core goodwill also gets created. And when we merge these two entities, then all these temporary assets and liabilities get knocked off against each other. That’s exactly what has happened. So there is no impact on the carrying amount of other assets in the books of Aqua Pharma Advaya. And there is no reason for us to even think about any further impairment.
Jainam Ghelani
So it fair to assume that it is just because of the mismatch between the assets and liabilities, nothing related to the business performance?
Raj Kumar Gupta
It is not because of mismatch in assets and liabilities. It is because of the accounting regulations around mergers and acquisitions which is the normal adjustment which has happened, which would have happened in any kind — any similar kind of acquisition. And this is — as I said that this is not impacting the bottom-line.
Jainam Ghelani
Okay. And sir, my second question is that you mentioned earlier that usually December quarter is a quarter where we see a drop-in volumes. But in the last — in the last four years, three years, we’ve witnessed gain in volume. So is that because currently we have high inventory levels or if you could just quantify what would be our inventory levels currently in days or in absolute figures, please?
Raj Kumar Gupta
Okay. So of course, I’ll answer your first part of the question. You said that in last three years, we have grown. So in isolation, there would not be any drop-in volumes or destocking. It will also depend on demand-supply situations in the market. When customers see that they already have some level of stocking in their — in their manufacturing facilities, they will tend to buy less and they will try to reduce inventory, right? And if you track or to an entire commentary, you will see that the destocking is happening in the entire supply-chain and which did not happen in last two to three years, last two to three years, the market remained pure and therefore, even in December quarter also, the sales went up, right?
Now coming to — coming to the inventory position, typically what happens, see, if you look at our sales volume, right, when crude prices go up or down, then — and when customers want to destock, then only 3% to 4% is what they can actually manage, you know, inventory reduction or increase because it’s a bulky material. And if you look at our last quarter’s volume and compare it with this quarter’s volume is just about 3.5% that has the decrease in the volume. So it is not significant in terms of overall inventory accumulation.
Jainam Ghelani
Okay, sir. Thank you. That’s it from my side.
Raj Kumar Gupta
Thanks, gentlemen.
Operator
Thank you. Next question comes from the line of Prulin Nantu with Edelweiss Public Alternatives. Please go-ahead.
Prolin Nandu
Yeah. Hi, Raj. A few questions, Raj, from my side. You. First of all, on the pricing negotiation, right, you mentioned that it’s a formula-based kind of a negotiation. So are you alluding to that, that Kombola has largely remained same? And what did you — can you repeat as to what — how — I mean, how are those negotiation on the volume part?
Raj Kumar Gupta
Yeah. So we have to in tenders, which is — so international market, the formula also changes, right? And we have to bid on both volumes and formula. Right. Typically, the formula pricing takes care of two — I mean three things. I mean formula pricing allows for variable-cost pass-through, right? And so that is one part of the formula. And the second part of the formula is the margin over pass-through beyond the pass-through part. Variable-cost includes three things, which is raw-material cost, the outward freight and currency. If you are selling in any currency other than dollar.
Prolin Nandu
So Raj, what I wanted to understand was that this EBITDA — EBITDA per ton range that we have been reporting, let’s say, on a last four-quarter average basis, is that likely to continue going-forward as well based on the negotiations that you had on the formula?
Raj Kumar Gupta
Yeah. So like I said that when we are bidding, we are bidding on pass-through of variable-cost and then there is also margin. But once we bid and once we fleeze the formula, then our margins tend to remain same over a period of time. So during the quarter period.
Prolin Nandu
Okay, so that markup — margin markup has not changed versus last year is what I wanted to understand, right? I mean, on variable-cost, the margins that you charge on the variable-cost, that has not significantly changed, right, over the last negative not
Raj Kumar Gupta
That should not change significantly. To some extent because of product mix, it might go up-and-down.
Prolin Nandu
Okay. Okay. And then that will always have a positive bias, right, given that our share of product mix is tilting towards specialty, right?
Raj Kumar Gupta
It does, but I mean it also depends on-demand supply situation. So when we are bidding, we’ll also have to keep that factor-in mind.
Prolin Nandu
Yeah. Sure, sure. And coming to the slightly more medium-term to long-term outlook on export and maybe specifically on Europe and North American market, right? Now what is happening is that there has been a stocking which has taken place and you called out that maybe this December quarter was weaker because of stocking. But going-forward, you know, when you think about the — probably the ban on Belarus capacity of Russian operators, so is there a positive outlook on volumes going-forward? Or do you see some risk that in case if there is some de-escalation in geopolitical matters, there could be some headwinds on volumes as well. How do you — how should one think about the medium-term outlook in export for Europe as well as US?
Raj Kumar Gupta
So mid to-long-term, we remain fairly bullish on the growth outlook of the industry and our ability to increase our market-share. Now all these events which are happening, the sanction on Russia or Belarus for that matter. This we believe would going to be there for maybe few quarters or few years at most. And also it is not that they will stop selling in global markets. If they are not able to sell-in Europe, they will find their customers elsewhere, right? And if they don’t sell to their regular customers, that means they are going to sell at a discount to other customers. So which is again margin negative. Right.
So this asset don’t give us any benefit other than maybe increase our market penetration to some extent. So we can — I mean, like in Europe, what happened earlier, it was very difficult for us to get access to those customers. The windows were not opening only for so many years. And then suddenly this issue in Eastern Europe happened and all the customers they were willing to buy from us. And once the relationship gets established, then it becomes kind of a long-term relationship. So that’s the benefit what actually we are depending on, nothing beyond that. Rest all is our quality of product, our quality of service and our cost efficiencies through the pricing.
Prolin Nandu
Okay. Understood. And one question on Aqua Farm, if I may, right? So in Equaform, in Q3, you mentioned that there were some macro US or related kind of headwinds. Q4 onwards, things should be better. But again there is the outlook on medium-term, right, as to in terms of the profit numbers or operating profit numbers that we did or on that before the acquisition, how soon should we be able to see those numbers there?
Raj Kumar Gupta
My sense is, I’ll answer the second part of the question. My sense is that by 4th-quarter of next year, we should reach the run-rate of how the business was performing a couple of years back, right? Coming to the first part of your question, we are seeing some recovery in the industry. The headwinds are not as strong. And additionally, we have also been able to add new customers and we are also preparing to launch some newer grades in the market and with expansion of product portfolio and higher customer reach, we expect the volume and margin recovery.
Prolin Nandu
Sure. So by Q4 FY ’26, we should be tracking a run-rate on revenue as well as margins of what we did in FY ’22. Is that correct?
Raj Kumar Gupta
I would not comment on the revenue because again, I mean there is some kind of relation between the raw-material prices and realization. But EBITDA for sure, we are confident that we should be reaching about somewhere around at least INR80 c INR90 crores, if not more, the quarterly run-rate.
Prolin Nandu
That’s great. Thank you so much, Raj. I’ll join back the queue. All the best.
Raj Kumar Gupta
Thank you.
Operator
Thank you. Next question comes from the line of Krishan Parwani with JM Financials. Please go-ahead.
Krishan Parwani
Yeah, hi, sir. Thank you for taking my question. So firstly on Carbon Black, just on the destocking bit, do we not work on just-in-time model given high correlation with the crude?
Raj Kumar Gupta
No. So the way we work, see, a good part of our volumes still go to tire customers by about 60% and there we kind of forecast our demand 1/4 in advance and basis that we do our procurement and everything, our production planning and everything. But two things happened in last quarter. One, good prices came down by about $5, $6 and the customers know that if they defer part of their procurement to the subsequent quarters and formula price working, they will tend to get that material at a lower-cost, right? And second, some of the working customers because of balance sheet consideration, etc., they also do it just to show better capital efficiency on their books.
Krishan Parwani
Okay. Fair enough. And so given the current scenario by when do we expect to achieve, let’s say, 160, 170 KTPA kind of quarterly sales volume in carbon like business?
Raj Kumar Gupta
Okay. My sense is that maybe by 4th-quarter of next year, but for that we would require our capacities to be ready because currently we can only go up to maybe 1506, 157 based on our current capacity. So this TN lines have to come up.
Krishan Parwani
Okay. So that means even though the volumes have been declining for last two quarters, we will still continue with the capacity additions, correct?
Raj Kumar Gupta
Yeah, we are currently operating — even last quarter, we were at 90% capacity utilization. So we don’t have any capacity cushion now, Kristian. We’re very close to full capacity.
Krishan Parwani
No, not. So okay. And last bit on carbon glass. So this lower sales is by any chance accounted in the INR20 per kg EBITDA that you reported for Carbon or is it not?
Raj Kumar Gupta
Yeah, operating leverage has. It is partly operating leverage and partly also the product mix.
Krishan Parwani
Okay. And secondly on the, can you please give other income number for this quarter previous and 1Q ’25?
Raj Kumar Gupta
Aqua Farm doesn’t have much other income. They just have about INR1 crore a quarter, a crore a month, INR2 crores to INR3 crores every quarter is good.
Krishan Parwani
Yeah. Okay. So in that case, so last quarter, if I see depreciation, I think it was closer to INR30 odd crores. I think this quarter depreciation closer to INR40 odd crores. So what’s the jump on account of?
Raj Kumar Gupta
Aqua Farm depreciation is — has been almost kind of equal, I mean, INR1, INR2 crore here and there. There has not been.
Krishan Parwani
I’m referring to, let’s, let’s say, last quarter INR20 crore, we had reported EBIT in the press release and this quarter is about INR11 crore. And last quarter in the presentation, we had EBITDA of INR50 crore and this quarter we reported EBITDA of INR51 crore. Deducting that. That’s why I’m asking where the disconnect?
Raj Kumar Gupta
PBT
Krishan Parwani
Difference between EBITDA and EBIT
Raj Kumar Gupta
It is same, I guess. Where do you get EBIT numbers?
Krishan Parwani
In your press release.
Raj Kumar Gupta
No, we have not mentioned any EBIT number. You may have looked at the segmental number, but there are some also — there are some adjustments also in that. We’ll look at those numbers and explain it to you, Kristian, but the numbers are consistent, there has not been any change from last quarter.
Krishan Parwani
Okay. So depreciation is INR30 crores or INR40 crores.
Raj Kumar Gupta
Yeah, it is more or less similar note. There would not be a INR10 crore difference in the depreciation, but also what has happened is during the quarter, the merger has happened between the acquisition vehicle and Aqua Farm. So some items might have got created because of this merger thing. Let us look into that and we will revert all this to you.
Krishan Parwani
Okay. And just last bit, if I may. In the absence of the amortization of the goodwill that is written-off, let’s say that is impaired. So I think more amortization number should go down, that means EBIT number should look up, right, going-forward?
Raj Kumar Gupta
No, no, no, no questions. So this impairment is of the non-core goodwill. Goodwill in any case was not getting impaired. Goodwill is kind of whatever goodwill is there on the books is going to remain there. So as long as our profit projections do not change and we don’t see any change in profit projections, right? So whatever exceptional items you see in this quarter’s financial report, that is because of the merger. This is the merger accounting. And you will see that impairment is backed by equal amount of deferred tax liability write-back. So as such, these transactions — transactions are not impacting our current quarter or current years profitability. So this is profit neutral, all these adjustments.
Krishan Parwani
Okay. No problem, sir. Thank you so much for patiently answering my question. Wish you all the best.
Raj Kumar Gupta
Thank you.
Operator
Thank you. Next question comes from the line of Bharat with Quest Investment. Please go-ahead.
Bharat Sheth
Hi, Raj, thanks for the opportunity. Hello.
Raj Kumar Gupta
Thank you, you.
Bharat Sheth
Yeah, so that Europe, I mean Russian or carbon blade is in India also. So can you give little more color on that?
Raj Kumar Gupta
Sir, would you please repeat your questions? I couldn’t hear you proper
Bharat Sheth
See this, hello, Russian crew, I mean Russian carbon lag are also coming to India since they have discontinued to Europe. So some are going to China and even India also are getting a lot of import from Russia. Is that happening and how that is affecting domestic market?
Raj Kumar Gupta
Yeah. So Russia because they are not able to sell it in Europe. So they are selling it mostly in Asia now and that is kind of impacting our margins. But mostly they are selling in spot market to small, small users, consumers. None of the large tire companies are buying from Russia because tire companies are also exporters in global market and if they buy directly from Russia, then it might attract some kind of sanction from US.
So, I mean in our earlier commentary also, we have been mentioning that this restriction on Russia is not only creating positive side or benefits for us, but it also has a negative side. It is also kind of impacting our margins. So in some of the customer segments, especially the smaller ones, our margins are getting impacted because of Russian imports.
Bharat Sheth
Is it possible to quantify something?
Raj Kumar Gupta
It is not much. It is not significant. So India in any case is importing just about 100,000 tonnes every year and about roughly currently about 80% of that is from Russia. Okay. Not significant, but even to whatever extent if they are getting 1,500 or 2,000 tons on an average monthly. To that extent, you know there is some impact which is — which we have to be at.
Bharat Sheth
Okay. And second thing on this, our export sales has increased. So can you quantify how much export is in the color cut?
Raj Kumar Gupta
Sorry, sir, you’ll have to repeat your question again.
Bharat Sheth
How much export is in dollar currency and how much?
Raj Kumar Gupta
Ours is almost 95% in dollar terms, or even our sales is mostly in dollar terms. So about 95% of our international sales is — is contracted in dollar terms. Even when we are selling in Europe, our underlying contracts are in dollars. So very small portion is in very small portion of our sales, 4%, 5% is in non-dollar terms.
Bharat Sheth
Okay. Okay. So do you think that in coming quarters, I mean, with rupee depreciation, we will have some kind of a benefit on account of that?
Raj Kumar Gupta
Yeah, we are also imported. Most of our raw-material also comes in dollar terms, right? It is — the contracts are in dollars. So as such, we don’t, you know, get benefit or get negatively impacted because of movement in currency as long as we keep our position hedged. And our policy is to keep our currency exposure fully hedged.
Bharat Sheth
Okay. And coming to the specialty side of the carbon Black, so can you give little more color how much new product has been added during these nine months and how many customers?
Raj Kumar Gupta
Last year, we did a total sales volume of 57,000 tonnes around that. And this year, we have visibility of somewhere around 63,000 64,000 tons on a full-year basis, right? So this is more or less in-line with our earlier guidance to the market. And every year, we are adding newer lines. So like last year, we added one-line and then recently also we launched commissioned one more line. And with all these new lines, we are getting into newer application. So it is not only vertical volume growth for us, it is also expansion of portfolio, which we are achieving through these new lines.
Bharat Sheth
And this new application are more profitable or more value-accretive for us or there is more less.
Raj Kumar Gupta
These are all — we are actually moving up the value chain even in the specialty portfolio. So gradually, see, one year is not the right period to measure the improvement in contribution. But over next two to four years time, we expect decent margin growth in this segment.
Bharat Sheth
Fair. And any color, how much net — I mean borrowing vis-a-vis quarter Q2 to this quarter, gross borrowing and net borrowing?
Raj Kumar Gupta
Our net borrowing has gone up roughly by about INR98 odd crores in this quarter.
Bharat Sheth
So this is largely on account of what? If you can still
Raj Kumar Gupta
Largely on account of some extra inventory that got accumulated.
Bharat Sheth
Okay. Thank you and all the best.
Raj Kumar Gupta
Thank you.
Operator
Thank you. Next question comes from the line of Nishant Gupta with Minerva Global Capital. Please go-ahead.
Nishant Gupta
Hello. Thank you for the opportunity. Sir, my first question is what kind of a debt-equity level we can see going-forward since the finance cost is affecting the bottom-line?
Raj Kumar Gupta
Nishant, our — we have fairly high-visibility around increase in our earnings. Year-on-year profitability would go up. Last year, we had a debt-EBITDA of about roughly 4.5%. By this year end, we should be somewhere around 3.3, 3.4 and a year from now, we should be below 3 for sure. Now where we are comfortable, we are not comfortable with long-term debt in our books. So over a period of time, once we are through with our expansions, we would pay our debt. So in maybe next — not in five years because next five years are going to be a kind of growth period for us, significant growth we are going to achieve in this five years. So we’ll do capex and there will also be some investments, but maybe over a period of next seven, eight years you will see reduction in absolute debt also.
Nishant Gupta
Got it, sir. Thank you. Sir, my next question is, sorry to clarify this on previous con-calls around the nanosilicon, the JV, which we have done. So what kind of commercial operations commencement date we are kind of looking at and what kind of market and revenue are you looking from that particular segment?
Raj Kumar Gupta
Currently we are putting up a pilot plant which will be mostly for sampling. Once we stabilize the product in the pilot facility then we are going to put up a proper commercial plant of 2,000 tonnes. Now this 2,000 ton based on our pattern, the envelope calculation should give us somewhere around INR1,70 crore INR1,800 crore kind of a top-line and roughly about INR800 crores to INR900 crore kind of a EBITDA. That’s how we are seeing it.
Nishant Gupta
Okay. Okay, sir. Any timeline when this proper plant will be coming up?
Raj Kumar Gupta
Our sense is by 2027, we should have this plant ready and running. And by maybe somewhere between 28 or 29, we should be able to fully utilize this capacity.
Nishant Gupta
Okay. Okay, sir. And the $44 million which you mentioned in the previous PPT, that would be sufficient to fund this proper plant?
Raj Kumar Gupta
Or so that this is not capex heavy. We expect to incur just about $20 million, $25 million on this capacity. Rest is mostly for our conventional business and Aqua Pharm.
Nishant Gupta
Got it, sir. Thank you, sir. Thank you and all the best.
Raj Kumar Gupta
Thanks, Mr.
Operator
Thank you. Next question comes from the line of Rajesh Jain with RK Capital. Please go-ahead.
Rajesh Jain
Hello, sir. I have two questions. So what will be the interest cost trajectory over the next four to eight quarters? Will the interest cost remain elevated such that the major part of the growth in revenue and EBITDA will be eaten up by the interest and even the employee cost? And when will the PAT growth start becoming visible?
Raj Kumar Gupta
So our PAT growth will be visible from next year itself. Last year, we did not have this interest cost and also the amortization. So this is setting a new base for this year expense structure. And in terms of absolute reduction in finance costs, the interest rates generally are coming down. And also we — when we acquired Aqua Farm, we also borrowed money for this acquisition. And acquisition money typically comes at a premium. It doesn’t come at the normal cost.
Now gradually, I mean that acquisition borrowing is getting repaid, while our overall borrowing may not go down, but we are utilizing our cash flows first to repay the acquisition debt. And consequently, the weighted-average cost of borrowing would also come down. We expect overall borrowing cost to go down, my sense is that it should go down by at least 3% to 4% in overall terms. So currently we have about INR120 crore quarterly run-rate. Maybe we can see INR5 crore INR6, INR7 crore kind of quarterly reduction going-forward.
Rajesh Jain
That will be from as soon as the next quarter or rough three, four quarters down the line.
Raj Kumar Gupta
Next quarter also we’ll have some reduction because there is some repayment which will start happening. So the first — actually we have already started repaying, but a big chunk of repayment would happen in January and therefore that impact will be there. It may not be INR5 crore INR6 crores in this quarter, but it will be there. I mean, you will be able to see that. And from first-quarter of next year onwards, gradually you will see reduction in overall finance costs.
Rajesh Jain
Okay. And sir, are you seeing a noticeable slowdown in Europe economy and the auto sector? And do you see the risk of an impact on your carbon black exports to Europe?
Raj Kumar Gupta
No, really, not really. So first of all, the commentary from tire and auto industry in Europe is not negative, right? They — historically, they had been growing at about 1.5% and for calendar year ’25 also their commentary remains similar to that. Both US and Europe, the commentary is positive. It is not negative, first of all. Second, while our absolute volumes in Europe has gone up, but still it is a very insignificant portion of their overall requirement and it is unlikely that they are going to restore their relationship with Russian suppliers soon. So our share in European market is going to go up from the current level.
Rajesh Jain
Okay. And sir, in your EBITDA in your PBT, like how much impact do you see of the container freight rates increase due to the Red Sea and other issues.
Raj Kumar Gupta
So actually, container freight rates have started softening since last quarter. There was a spike in second-quarter, but for the last two, three months, we are seeing some downward trends. The situation is coming back to normalization.
Rajesh Jain
Okay. So you are hopeful of, I mean a returning to baseline or no impact basically.
Raj Kumar Gupta
If not baseline, at least I mean it will not remain as elevated as it was in July or August.
Rajesh Jain
Okay. Okay. And sir, to my first question, when you said that the PAT growth will start becoming visible year-on-year from next year. So next year, does it mean like four quarters down the line, I mean, what exactly do you mean by next year?
Raj Kumar Gupta
No, I’m saying from — see what happened this year, last year we did not have borrowings and consequently, our numbers, I mean EBITDA — the difference between EBITDA and PBT was very small. But this year because of acquisition borrowing coming in, interest and amortization is eating up into our EBITDA. And consequently, there is a huge gap between EBITDA and PBT, right? But it is setting a new base. So current year’s performance has set a lower base. And on this base, next year onwards, from the first-quarter itself, you will start seeing improving numbers.
Rajesh Jain
Okay. Okay, that is from the June quarter.
Raj Kumar Gupta
Yeah, yeah, just to put it in — just to put it in perspective, if you look at our EBITDA, that has grown significantly from last year. Even in the first — even in the first 3/4, our EBITDA has grown by over 40%. So overall operational performance has gone up, but because interest and amortization has eaten into this profitability, therefore, bottom-line reflection is lower.
Rajesh Jain
Okay, okay. Thanks, sir. Okay. That’s all from my side. Thank you.
Raj Kumar Gupta
Thank you, Rajesh.
Operator
Thank you. On behalf of PCPL Chemical Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.