PCBL Ltd (PCBL) Q4 FY23 Earnings Concall Transcript

PCBL Ltd (NSE:PCBL) Q4 FY23 Earnings Concall dated May. 15, 2023.

Corporate Participants:

Kaushik Roy — Managing Director

Raj Kumar Gupta — Chief Financial Officer

Analysts:

Sanjesh Jain — ICICI Securities — Analyst

Madhav Marda — Fidelity — Analyst

Vishal Prasad — VP Capital — Analyst

Aditya Khetan — SMIFS Institutional — Analyst

Chintan Chheda — Quest Investment Advisors Private Limited — Analyst

Varship Shah — Envision Capital — Analyst

Radha Agarwalla — B&K Securities — Analyst

Dhiral Shah — Phillip Capital BCG — Analyst

Jigar Shah — Maybank — Analyst

Anupam Agarwal — Lucky Investment Managers — Analyst

Jenam Gilani — Swan Investment — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to PCBL Limited Q4 FY ’23 Earnings Conference Call hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Sanjesh Jain from ICICI Securities. Thank you, and over to you, sir.

Sanjesh Jain — ICICI Securities — Analyst

Thanks, Lisin. Good afternoon, everyone. Thank you for joining on for the PCBL Limited Q4 and FY ’23 results conference call. We have PCBL management on the call today represented by Mr. Kaushik Roy, Managing Director; Mr. Raj Gupta, Chief Financial Officer; Mr. Shaket Sah, Head, Investor Relations; and Mr. Pankaj Kedia, Vice President, Investor Relations.

I would like to invite Mr. Kaushik Roy to initiate the call with his opening remarks, post which we will have a Q&A session. Over to you, sir.

Kaushik Roy — Managing Director

Thank you so much, and good afternoon, everyone. Thank you for taking time out to join us today for this call. Our results were announced today and I will quickly take you through the update, and then open it up for questions.

We will

Operator

We will start with the highlights of our performance of fourth quarter. PCBL reported a good operating and financial performance during the quarter. We reported a sales volume of 119,238 metric tons during the quarter. This was backed by domestic sales volume of 80,045 metric tons and international sales volume of 39,493 metric tons. If you look segment-wise, then tire accounted for 79,617 metric tons. Performance chemical reported from volume of 28,126 metric tons, and specialty chemicals sales stood at 11,495 metric tons.

Our revenue increased year-on-year from INR1,219 crores to INR1,374 in Q4 FY ’23. EBITDA increased to INR200 crores year-on-year from one INR148 crores. EBITDA per metric ton stood at INR16,767. PAT stood at INR102 crores during the quarter. Power generation increased from 149 million units in Q4 FY ’22 to 153 million units during the quarter with external sales volume of 96 million unit as against 91 million unit in Q4 FY ’22. With rising demand for power in the country and consequent increase in power tariff, PCBL’s average realization against our power sale saw a sharp jump up to 3.93 per kilowatt hour year-on-year from 3.30 per kilowatt hour in Q4 FY ’22.

Now, let me talk about FY ’23 full-year performance. Our revenue increased year-on-year from INR4,446 crores to INR5,874 crores in FY ’23. EBITDA increased to INR775 crores year-on-year from INR682 crores. EBITDA per metric ton stood at INR17,405, PAT stood at INR444 crores during the year.

PCBL reported sales volume of 445,184 metric tons during the year. This was backed by domestic sales volume of 308,717 metric tons and international sales volume of 136,457 metric tons. If we look at segment-wise sales, tire accounted for 312,209 metric tons, performance chemicals reported sales volume of 92,600 metric tons and specialty chemicals sales of 14,375 metric tons.

Power generation increased from 544 million units in FY ’22 to 597 million units during the year with external sales volume of 366 million units as against 321 million units in FY ’22. With rising demand for power in the country and consequent increase in power tariff, PCBL’s average realization against power sales saw a sharp jump up to INR3.81 per kilowatt year-on-year from 2.99 per kilowatt in FY ’22. Despite steep increase in crude price, EBITDA per metric ton has improved on the back of improvements in operating efficiencies, product mix changes and strong performance from power segment.

Current market scenario and outlook. In the domestic market, demand is growing with continued strong momentum in OEM segment and improvement in replacement market as well. We expect tire demand to remain healthy going forward. In FY ’22 and FY ’23, Indian tire industry volume grew at 10% [Indecipherable] going-forward over the next couple of years, we expect tire industry growth to settle in high-single-digit volume growth. This would help the carbon black industry to increase capacity utilization. International market is witnessing visible signs of pickup in demand, and we expect demand outlook to sustain over the medium-term. We expect further recovery in international market.

PCBL is geared for the next leg of growth with sufficient capacity to cater to demand from India and global market. The company has taken several initiatives to expand its overseas market presence and expects consistent improvement in international sales volume.

Status update on expansion plans. First phase of greenfield project in Chennai in Tamil Nadu, being implemented by [Indecipherable] has been commisioned. Rest of the capacity is going to be commissioned over next months or so. First phase of brownfield expansion of specialty lines at Mundra is almost ready and is under commissioning. So that is the summation I had on the business outlook.

At this point, I’m happy to open it up to the floor for questions. Thank you.

Questions and Answers:

Operator

Thank you. [Operator Instructions] The first question is from the line of Madhav from Fidelity. Please go ahead.

Madhav Marda — Fidelity — Analyst

Yeah. Good evening. Thanks so much for your time. I wanted to ask — I mean I was just reading about the global carbon black scenario. And I think there were some news flow around either Europe or US looking to ban import of carbon black from Russia, I think sometime this year or next year. And also, I think US looking to impose some import duties as well on import of any Russian carbon black. So I just wanted to get your thoughts like is that something which has happened already or something which is under discussion?

Kaushik Roy — Managing Director

Well, there has been this talk going on for some time. Europe talked about banning import of carbon black from Russia from June 2024. US has talked about it, but they have not defined any time line as of today. So, in the current scenario, Russia is still supplying to Europe as well as to USA. But I guess the customers from Europe and US, they are possibly looking at other options as well, which is good for an organization like PCBL. So, while generally there is a bit of a challenge on the economic side in Europe, but because of this vision that they might be looking at alternate sources against Russia, so it will be an advantageous position for us.

Madhav Marda — Fidelity — Analyst

Have you seen any increased inquiries from customers in Europe and US trying to diversify our base submission?

Kaushik Roy — Managing Director

Yes. We have seen some increase in inquiries from both USA and Europe. USA statutorily is also not really in favor of not importing because the supply-demand gap is increasing. There is more new capacity which has come up in USA in recent times, whereas demand has gone up over a period of time. So, you will say anyway structurally they need to import from outside.

And this Russian thing is kind of added problem for them. And Europe, as I already said, they are looking at other options. So, therefore, this is where we stand. And to my mind, it is a sweet spot for us.

Madhav Marda — Fidelity — Analyst

Understood. Got it. Because what we understand is at least reading some of the global commentary on tires or carbon black or auto industry, like it seems like carbon black is in some sort of a shortage or might be in entering into a shortage scenario in Europe and US, like going ahead because of what’s happening, especially in Russia. Is that like a fair understanding to have?

Kaushik Roy — Managing Director

Yeah, I think demand is likely to remain strong. And if Russia is not able to supply, Russia is fairly big. And then obviously, it will be kind of — I’ll not say this shortage really, but I think the demand will be strong, which is good for everyone in the carbon black industry.

Madhav Marda — Fidelity — Analyst

Got it. Okay. I’ll come back in the queue. Thank you.

Kaushik Roy — Managing Director

Sure.

Operator

Thank you. We’ll move on to the next question. That is from the line of Vishal Prasad from VP Capital.

Vishal Prasad — VP Capital — Analyst

Hi, sir. Sir, the battery chemicals that we are working on, so is there any update there?

Kaushik Roy — Managing Director

On the battery?

Vishal Prasad — VP Capital — Analyst

Battery chemicals, carbon nano fuel cell?

Kaushik Roy — Managing Director

You’re right. It is part of our specialty chemicals portfolio. And in that portfolio, we have plus [Indecipherable] in paint, coating and also battery chemicals, carbonate material actually, and the research team is still working on. They have made some progress already. But the final product has still not come out. We have looked at some products which are closer in terms of the specification and characteristics, but some finetuning is still going on. So, I guess, we’ll be there very soon, but a lot of progress was made in this area.

Vishal Prasad — VP Capital — Analyst

Sir, I understand we are still not there, but if you could talk about the opportunities that we see in battery chemicals so that I understand the opportunity size, the kind of customers we are looking at, the continents we are looking at, that will be helpful.

Kaushik Roy — Managing Director

Well, as I already said, it is part of the specialty chemical portfolio. And in terms of opportunity, as more and more EV vehicles come on the road, this will be a kind of requirement for automobile manufacturers and actually for the battery manufacturers. But at this moment, percentage of vehicles with EV is still compared to the ICE engine vehicles, it is much lesser. So, on a absolute term, it is a huge market, but it is likely to be a fast-growing market as more and more fossil fuel-driven vehicles will be replaced with electric-driven vehicles, which is factory-driven vehicle in this case. So we are also keeping pace with that. We are also keeping pace with that. And I think, as soon as possible, we’ll come up with this final product, which then can bring value back to the organization.

Vishal Prasad — VP Capital — Analyst

And sir, usually once we have the product, what’s the approval cycle, it takes years or it’s few months?

Kaushik Roy — Managing Director

Sorry, come again?

Vishal Prasad — VP Capital — Analyst

So, once we have the product, so usually what’s the approval from our clients in battery chemicals, is it months or it may take years?

Kaushik Roy — Managing Director

No, it may not take years, but it can take anywhere between, say, six months to one year or maybe a little more than one year, but not like three, four years or something. No, not really. I think we can manage within a year’s time.

Vishal Prasad — VP Capital — Analyst

Okay. And sir, last question, sir. What are hybrid fillers? You have mentioned it in the deck. So if you could help me understand.

Kaushik Roy — Managing Director

Hybrid filler?

Vishal Prasad — VP Capital — Analyst

Yeah, under specialty chemicals.

Kaushik Roy — Managing Director

Have you read something somewhere you were referring to that or?

Vishal Prasad — VP Capital — Analyst

No, your deck, just beside nanotubes, you mentioned hybrid filler.

Kaushik Roy — Managing Director

That is in the space of material science. Our R&D team is also working on some areas which is relating to that, relating to advanced materials science time. And nanotube is of of them, nano materials are one of them, which have got different applications in not only tire, but much beyond tire also. But it is a completely new kind of product and it is based on fundamental research. So this is the hybrid material that we have talked about in the deck.

Vishal Prasad — VP Capital — Analyst

Okay. I was not talking about carbon nanotech, sir. I’m just focused on futuristic technology, you mentioned hybrid fillers.

Raj Kumar Gupta — Chief Financial Officer

Hybrid fillers, he is talking about the components of polymers…

Kaushik Roy — Managing Director

I will tell you, for different applications in rather particularly, we are also looking at a possibility of mixing different polymers with carbon black and come out with certain properties. It can be for rubber, it also can be used for things like plastic, so both kind of applications we are looking at. But it has not yet taken a final shape because we are trying out with a few different polymers. And we have to come out with the final one, which is putting the requirement of tire, particularly from the angle of the hold grid or noise reduction or reduction of [Indecipherable] bring down the fuel consumption. So these are some of the opportunities we are exploring at this point of time. But it is at the stage of exploration at this moment. And nanotube, what I just now mentioned, that is also one of them kind of.

Vishal Prasad — VP Capital — Analyst

Right. Thank you, sir.

Operator

Thank you. The next question is from the line of Aditya Khetan from SMIFS Institutional. Please go ahead.

Aditya Khetan — SMIFS Institutional — Analyst

Yeah. Thank you for the opportunity. Sir, first question is also the carbon black prices. So, carbon black prices have been correcting and the trend is largely on to the declining side only. So this is led by declining raw material prices or you’re witnessing some sort of demand impact into the exports or into the domestic market for this quarter only?

Kaushik Roy — Managing Director

Raw material price increase, we are kind of immune to cost increase or decrease because in most cases, we have a formal understanding with our customers. So whether it increases or it increases, it is normally a pass-through for us. So we focus more on the market demand side of it. That is from the market side. Clearly, we look at the demand. From our side, what we look at offering higher value products to our customers to gain market share from maybe other competitors and better services. That is from our side purely, and demand is driven by the market, of course.

Aditya Khetan — SMIFS Institutional — Analyst

Okay. And how are you seeing the demand in Southeast Asia? Because I think the larger pie include export market, and considering the inflation biting the consumer budget, do you see any near term stain [Phonetic] demand into the exports market?

Kaushik Roy — Managing Director

So, I think, demand, to my mind, globally will be strong, especially Asia will be very strong from demand point of view. I think we are also well geared off because the Chennai plant, as I mentioned a while back, is in the commissioning stage, first phase has already been commissioned. So we are in a spot where we can capture this growth, which is likely to happen in the South Asian market particularly. And also beyond that, in US capacity, right, Europe is a little bit of a challenge. But overall basis, I think it is looking pretty positive at the moment.

Aditya Khetan — SMIFS Institutional — Analyst

Okay. Sir, volumes in this quarter have gone up quite significantly. So this is largely led by the first phase expansion. So what would be the utilization of the current plant which we have started in this quarter, if you can share the numbers on it?

Kaushik Roy — Managing Director

You were talking about Chennai?

Aditya Khetan — SMIFS Institutional — Analyst

Yes, yes.

Kaushik Roy — Managing Director

Okay. Chennai in this financial year, we are likely to utilize roughly about 40,000 to 50,000 of the capacity. It honestly depends on the approval process of different customers and the time required for that. If we get approved faster, we might be able to utilize it more. But if approval takes more time, then it might get also a little more — we might not be able to utilize [Indecipherable] capital. But based on our understanding of the — sorry?

Aditya Khetan — SMIFS Institutional — Analyst

Sir, 40% utilization on to the 62,000 tons, which we invest, right?

Kaushik Roy — Managing Director

40% is roughly about 60,000, you are right, 40,000 — 40% is roughly about 60,000-odd. So we do expect that we will be able to utilize to that extent.

Aditya Khetan — SMIFS Institutional — Analyst

Sir, one last question. Sir, on to the [Indecipherable] part, we have seen that on quarter-on-quarter basis that pledge has connected. So, are we into a scenario where in the spreads like would continue to decline and come to a normalized level, which we have seen over the last four, five years, or the upcoming specialty black capacity expansion that can offset the decline into the normal rate carbon black. So, how do you see this trend to move from here on?

Kaushik Roy — Managing Director

See, I’ll tell you, the carbon black that we use in tire has got certain properties and certain application in tire, and that will continue. There is no question of it is not being used. It’s a major raw material for tire industry, and the utilization of carbon black will continue. So that one still continues and definitely will grow along with that business growth. And specialty is kind of independent. It has got multiple applications. It goes into particular [Phonetic] application, it goes into paint, it goes into ink, holding batteries — many other applications it goes into. It is like part of our daily life. So both will go to my mind.

Aditya Khetan — SMIFS Institutional — Analyst

So, the only thinng that — for the current quarter, spreads are sustainable or there could be further?

Kaushik Roy — Managing Director

Current quarter of what is sustainable, specialty?

Aditya Khetan — SMIFS Institutional — Analyst

So, the spread of current quarter, what we have reported…

Kaushik Roy — Managing Director

Spread of second quarter? I think it is — yeah, I think in near term, I think we’ll be able to maintain that. We should be able to maintain that. We feel quite positive about it. We’re quite positive about it. I mean, a little bit benefit we got in recent times because of some corrections here and there, which cannot be. But overall, it will be [Technical Issues].

Aditya Khetan — SMIFS Institutional — Analyst

Got it, sir. Thank you, sir.

Operator

Thank you. The next question is from the line of Chintan Chheda from Quest Investment Advisors Private Limited. Please go ahead.

Chintan Chheda — Quest Investment Advisors Private Limited — Analyst

Yeah, hi. Thanks for the opportunity. Sir, my first question is on specialty carbon black. So, this quarter, we have reported record-high volumes in the specialty business. So, how do you see this trajectory going forward for FY ’24?

Kaushik Roy — Managing Director

We should be looking at further growth from here on. Keeping in mind, particularly the Mundra line is going to come into operations. So we do expect a decent growth. I mean, other than the numbers that we have already achieved in Q4 we’ll definitely maintain and possibly improve form thereof. Yes. So, usually we say, this rate will be maintained and additionally maybe we’ll look for an 10,000 to 12,000 overall, we’ll be looking at for sure.

Chintan Chheda — Quest Investment Advisors Private Limited — Analyst

So another 10,000 to 12,000 on this FY ’23 numbers, full year numbers?

Kaushik Roy — Managing Director

That’s right, on the FY ’23 number, which means I’m talking about 25% growth kind of thing.

Chintan Chheda — Quest Investment Advisors Private Limited — Analyst

Yeah. Got it. Great. And secondly, sir, just one question on the spread part. With respect to the — currently coal tar prices have corrected a lot.

Operator

Sir, you can drop, sir. We are not able to hear you.

Chintan Chheda — Quest Investment Advisors Private Limited — Analyst

Is this better now?

Operator

Much better. Thank you.

Chintan Chheda — Quest Investment Advisors Private Limited — Analyst

Yeah, thank you. So sir, recently, we have seen that the coal tar prices in China have corrected quite a bit. So, because of that, are we seeing any pressure on the spreads for our company in the export market?

Kaushik Roy — Managing Director

Not really because coal tar is not a direct raw material for carbon black. The direct raw material is actually CBO. So, CBO prices have not come down that much. It has somehow marginally, but still there is quite a bit of gap between petro-based products and CBO. So far, we have not seen any major issue or anything really.

And I don’t think that’s the [Indecipherable] as well. My colleague also wants to add something, Mr. Raj?

Raj Kumar Gupta — Chief Financial Officer

I mean, at the current level of coal tar, because of drop in crude prices, it’s still about $78 cheaper per ton. So — and I think this time it will be significantly higher than with CBO.

Chintan Chheda — Quest Investment Advisors Private Limited — Analyst

Okay. So, earlier, we were seeing in the earlier quarters that the difference between CBSH [Phonetic] and CBO had gone somewhere about $300. So how much would be that difference as of date?

Raj Kumar Gupta — Chief Financial Officer

The difference actually went back to almost $500 still a couple of months back, [Technical Issues] $200 to $300.

Chintan Chheda — Quest Investment Advisors Private Limited — Analyst

Okay. So in that case, our, say, blended gross margins per ton, will they be around this, say, INR30, INR31 levels for FY ’24 per kg I’m talking about?

Raj Kumar Gupta — Chief Financial Officer

Yeah. Like our MD just mentioned that we are hopeful on maintaing [Technical Issues].

Chintan Chheda — Quest Investment Advisors Private Limited — Analyst

Okay. Got that.

Kaushik Roy — Managing Director

That can always happen, but by and large, we still will be strong in that.

Chintan Chheda — Quest Investment Advisors Private Limited — Analyst

Yeah. Got that. Thank you very much.

Operator

Thank you. The next question is from the line of Varship Shah from Envision Capital. Please go ahead.

Varship Shah — Envision Capital — Analyst

Yes. Thank you for taking my question. You mentioned earlier that the 10% volume growth for tire industry in this fiscal, but then why have our volumes declined for the entire year? Did we face any strategic constraints like are we operating at max utilization? Hello? Am I audible?

Kaushik Roy — Managing Director

Yeah, yeah. I think there’s some problem with — now it is clear. We talked about growth of tire industry, yes, of course. But last year was a little unusual. I just want to mention that there was huge up and down, which consequently impacted all the crude-based raw material to tire industry. And that led to major inventory management — inventory adjustment at tire industry side.

And what happened in particularly two quarters, in quarter one and quarter three, there were inventory correction on account of tire industry — on side of tire industry, which negatively impacted us. So there’s no direct correlation last year because of unusual volatility in crude, that is what happened last year. But now crude has more or less come to a level, and it is likely to remain within the range. And if it is range bound, then this kind of inventory corrections probably doesn’t happen. So going forward, [Technical Issues] things will be much better.

Varship Shah — Envision Capital — Analyst

And sir, did I hear you correctly that 40% capacity utilization for the new Tamil Nadu plant, so the overall capacity of 147,000 tons, so an additional 50,000, 60,000 tons from that new plant?

Kaushik Roy — Managing Director

Yeah. That is what. Roughly about 40%. Yeah, I’ll tell you, roughly about — against the 147,000 gross, we’ll be roughly getting based on the excess production, around 120,000, 125,000 maximum of carbon black, right? And 40%, 50% of that, we are hopeful to utilize this year itself, subject to certain approvals from different tire companies, which we are hopeful about, and which we have kind of considered planning this year. And additionally, Mundra specialty line will give some volume to us.

And at the same time, what I just mentioned that Q3 and Q1 were not good last year because of inventory correction. Hopefully, this year, it will not happen. That will also add on volume. So overall, from the 445,000 what you have seen this year, we we feel we should be crossing 500,000 tons comparably in the coming financial year, which is FY ’24.

Varship Shah — Envision Capital — Analyst

All right. Thank you. Thank you for taking my question.

Operator

Thank you. The next question is from the line of Radha Agarwalla from B&K Securities. Please go ahead.

Radha Agarwalla — B&K Securities — Analyst

Thank you for the opportunity. So, just wanted to understand on the specialty carbon black side. So, given that the global demand is about 1 million tons, and if we assume India to be at 70,000 tons and we are making 40,000 tons. But largely out of 40,000 tons, 70% we are exporting. So, I wanted to understand in the domestic industry out of the total sales of specialty carbon in the domestic industry. Who are the top players? And if you could — I mean, if you could understand some kind of market share based on the sales of specialty carbon in India?

Kaushik Roy — Managing Director

Okay. I’m requesting Mr. Raj to respond to these question of yours.

Raj Kumar Gupta — Chief Financial Officer

Radha, we are growing very rapidly and aggressively in the specialty space. And therefore, we did not want to depend completely on Indian market demand. And therefore, the focus was to spread out and add more customers everywhere across the globe. So this was a strategic decision taken by the company. And therefore, currently, almost two-thirds of our volumes we are selling in [Technical Issues]. The market size is very large and that will take care of our next five, six years of expansion without even having to eat into other market player shares, because the market itself is growing at 7%, 8% Q-o-Q [Phonetic].

Radha Agarwalla — B&K Securities — Analyst

Understood, sir. But based on the 30% sales volume in India that we are doing, is it safe to assume that we are the largest player in specialty carbon black as well in India?

Kaushik Roy — Managing Director

In the past manufacturing year but in terms of market share no, because lot of specialty material which comes in India. Those grades we don’t have in our portfolio here. And a good part of the Indian requirements is currently being imported but as we keep on adding the grades to our portfolio then, of course, I mean, that’s an opportunity products.

Radha Agarwalla — B&K Securities — Analyst

So are you talking more conductivity that could end up in grades.

Kaushik Roy — Managing Director

No, even if any and all-in the ink paints and dyes segment, there are a number of grades currently, where we are not present.

Radha Agarwalla — B&K Securities — Analyst

Sir, a year back we had 45 grades in specialty carbon and we were planning to add nine to 10 grades every year. So is it that 55 as of now?

Kaushik Roy — Managing Director

Yeah, I mean if you look at our growth in specialty. So it is not only volume, which is increasing every passing year but the portfolio is also expanding. We already have about close to between 45 to 50 odd grades and if you go through our annual report, you will see fair coverage on that which indicates that all the grades that we have launched in last year. So current year also when we publish our annual report, you will get an insight into all the grades that we have launched or commercialized during the year. So the portfolio is expanding even [Indecipherable].

Radha Agarwalla — B&K Securities — Analyst

Understood, sir. And sir, this feedstock prices between India and China. So previously, it was $300 difference and now you mentioned $415, so what could be the reason because we were largely continuing to increase and even if this event short-term phenomena? So what could be the reason for this reduction in the difference between India and China in stock prices?

Kaushik Roy — Managing Director

See again this feedstock derivative of different things. Our feedstock is a derivative of crude and the price of it depends on the moment in crude prices and is largely carbon black oil, which is a derivative of coal. So the price of that material will largely depend on the coal prices and also the demand-supply of coal tar prices in the economy. So these are two different materials and therefore, the price points are always different, and depending on the demand and supply of each of these materials, the chart between the two material keep changing over a period. I didn’t say that even the current price difference with significant, I mean is that especially on the tire grade. The average gross margin that we make is about $400 per ton of finished goods. So with the $300 plus kind of price difference at raw material level you can’t compete. So despite the drop-in coal tar prices, you can still expect something.

Radha Agarwalla — B&K Securities — Analyst

Understood, sir. Sir, so we were expecting some PR companies to commission their plant in this year in FY ’24, for example, Continental and some capacity in Balkrishna and Epsilon. So, do you expect this to — carbon black prices to reduce in this year because of this it is to continue to reduce.

Kaushik Roy — Managing Director

I think overall opportunity for growth is very large for Indian carbon black manufacturers and that is the reason why even the non-carbon black players are entering this space, right. And so far as we are concerned, we don’t depend solely on Indian market, we have a reasonably good presence across different geographies and in last six-seven years, we have also invested heavily in our supply-chain capabilities across markets wherever we see potential. So we are very optimistic about utilizing our capacities. The whole capacity that we have added now in the next two, one-and-a half years.

Radha Agarwalla — B&K Securities — Analyst

Understood, sir. Thank you. I will come back in the queue. Thanks, Radha.

Operator

Thank you. The next question is from the line of Madhav from Fidelity. Please go ahead.

Madhav Marda — Fidelity — Analyst

I just have one follow-up. I think we have [Indecipherable] incorporated a new subsidiary for specialty chemicals in Europe. Just wanted to understand what is that about right? Are we looking at any new initiatives there?

Kaushik Roy — Managing Director

Madhav, we did not incorporate because of specialty chemical. So in Europe actually or rather in Belgium, we already had our R&D center. Now, there are few projects where the Belgian government is contributing to the whole R&D program. So there the kind of on from the government, but that comes with the condition that only local entities can participate in those projects. Now, our was glass work like a window PCBL India. So it is considered as a local entity, and, therefore in order to increase our R&D spend bandwidth and participate in those program, we decided to convert that brand into a local entity, so that is how it fell behind. So it will continue to out on the R&D activities. Finally and maybe some sales and marketing because now that we have the subsidiaries, we can also cater to the local customer, inviting them on, but primarily it is for R&D activities because already there. Got it, okay. Sir, thank you.

Operator

Thank you. The next question is from the line of Sanjesh Jain from ICICI Securities. Please go ahead.

Sanjesh Jain — ICICI Securities — Analyst

Yeah, thank you. Thanks for the opportunity. I got three questions. First on the Chennai facility, this incremental capacity consumption what we are talking in that you have 50,000 to 60,000 metric ton in FY ’24, do you expect that mix to be more tilted towards export and less domestic, how should we see and what is the implication of this from the overall branded spec. That’s my first question.

Kaushik Roy — Managing Director

Yeah, so I think we’ll have, but we will be supplying from Chennai to both international customers as well as domestic. So it will kind of also depend on how fast we get approval from different customers. Our primary objective initially will be to utilize the full capacity as quickly as possible. So, that is primary objective. So it also depends on approval scheduled from different customers. So we are a little bit flexible on this, but as an organization, international market is important for us, it is a big market and we need to grow in that market quickly and rapidly. So we are open for both. In terms of — in terms of the margin, I think now it is both international and domestic marginal equaling healthy and strong, so we’re not too worried about margins, whether it is India supply or international supply, both are buying neutral. So blended by it is quite, okay.

Sanjesh Jain — ICICI Securities — Analyst

Clear, sir. Second, now we are talking of faster ramp-up in the capacity and we are also seeing an opportunity there. Are we also thinking to add the remaining 50,000 metric ton in Chennai, which we intend to?

Kaushik Roy — Managing Director

Yeah, I think we need to go back, we already having some discussions regarding the market because as we mentioned beyond India there are opportunities outside India also, and being a large player in this field, there’s no reason why you should not grab that. So possibly we will hear some announcement from us on this very soon but before that we want to see how this capacity is getting utilized or integration we get and once we have clarity then possibly go ahead, but that might take longer time because initially when you put our new plant, it takes typically two years times but volatile that we take that much of time, it is normally faster. So that is one advantage of them. So, definitely, we can go ahead with that as soon as we can feel it is always.

Sanjesh Jain — ICICI Securities — Analyst

But will that end all the land available for us, post that, also we have scope to expand the capacity in the channel or we will consume the entire land with that?

Kaushik Roy — Managing Director

See, we have option. One is Chennai if we get some adjustment land, we may go for further expansion there. Even existing one also, we can go for, but we will prefer to have a green special plant. So, therefore, we must put too much of pressure there, other option we have a lot of space available in Mundra plant.

Sanjesh Jain — ICICI Securities — Analyst

Okay.

Kaushik Roy — Managing Director

Mundra is another option where a lot of land is available, so we can look at Mundra also, but will close the there is a on account.

Sanjesh Jain — ICICI Securities — Analyst

Got it. Got it. The second — next on the market situation, so I was looking at the presentation there clearly showing that you are having the demand-supply gap in favor of demand and have the Europe market, which is now becoming favorable with the probable regulatory curtails on the Russia side of it. Do you think export market becomes too lucrative for us and do you think it is sustainable over a longer period of time.

Kaushik Roy — Managing Director

I think, international market, we will definitely look at it, no doubt about it, and then I think as it’s the mindset of being a global player we should not focus so much between India and outside India.

In India, we are a leading player, of course, we maintain that fulfillment trading position but at the same time, we want to grow in different parts of the globe, especially US and I think the team is ready for that and this is a structural situation, like in USA, the demand-supply gap has only increased over a period of time. So it will be kind of would be when questionable over a period of time. Europe, I’m not sure whether they will go back to Russia as combined, but even in Europe, there is no new facility coming up as such, but the demand is growing. So it will be in Europe structurally, yes, Russia is next, tomorrow it will be in inventory control restrictions and so on, there will be a bit of a challenge, but I think we are equally capable to face that kind of challenge. The net debt, my take on this, the international market is very attractive for us going forward and at the same time, we will definitely maintain a leadership position in India.

Sanjesh Jain — ICICI Securities — Analyst

Got it. I understand. Just one last question from my side on the telecom part of it now that Tata Chemicals is also expanding its capacity. Do you think that silica that become a bit of a challenge for us going forward as more-and-more percentage we have is replaced by carbon to silica?

Kaushik Roy — Managing Director

No, not cannot be utilized beyond a certain percentage because in properties of cargo and cylinders are quite different. The properties which are offered by carbon black, silica cannot offer and more silica offers certain things which the government cannot offer. So to my point, both will have it’s own take. Silica is growing in one side and we will be growing in our own take. So it is not that will be each other’s share that has not happened yet.

Sanjesh Jain — ICICI Securities — Analyst

So, sir what is the share of carbon black and silica in tires at an optimal level, you think?

Kaushik Roy — Managing Director

Carbon black in terms of volume it is close to about 24%. Silica, I don’t remember exactly, I think it is somewhere around 2%, 3%, 4% — 2%.

Sanjesh Jain — ICICI Securities — Analyst

Fair enough, sir. Thank you. Thank you. Thank you for answering all the questions and best of luck for the coming quarters.

Kaushik Roy — Managing Director

Thank you. Thank you.

Operator

Thank you. The next question is from the line of Dhiral from PhillipCapital BCG. Please go ahead.

Dhiral Shah — Phillip Capital BCG — Analyst

Yeah, good evening, sir. Thanks for the opportunity. Sir, my question is again pertaining to this spread, right? You mentioned that the current spread remains the same for the next few quarters but for the full-year ’24, you still reiterate to improve by INR1,000 per tonne or maybe INR1 per kg as you’ve guided earlier.

Kaushik Roy — Managing Director

Yeah, I will just give it to Raj for the discussion. Welcome, Raj.

Raj Kumar Gupta — Chief Financial Officer

Thank you, sir. Again, the year has gone by through the product mix, operating leverage and also building manufacturing efficiency. It is likely that our margins would expand by about INR1,000 a year. So last year, if you look at the jump in the period was close to INR2,500. Now, a good part of that was because of higher power realization and how will a highlight of our the rate, right with the increase in power segment profitability. And also about INR600, INR700 out of the total margin was on account of opportunity. We’ve got created because of disruption in the market. This is all within the now market opportunities and these are not structural changes in our efficiency. So, therefore this year, I think this year with further improvement in our efficiency, we should be able to maintain what we could obtain in last year. So it is not going to increase by INR1,000 over last year from there.

Dhiral Shah — Phillip Capital BCG — Analyst

So just to understand, sir, at least for FY ’23 average, which was there on the gross margin per kg side, which is around INR32, that we will try to maintain or maybe on the EBITDA part, which is around INR16.44 that we try to maintain for FY ’24.

Kaushik Roy — Managing Director

Yeah, yeah, that we are hopeful of.

Dhiral Shah — Phillip Capital BCG — Analyst

Okay. And sir on the power side, what is our guidance for FY ’24, and what kind of average power that we can assume, so for FY ’23 it was like INR3.81. So what will it be for FY ’24, sir.

Kaushik Roy — Managing Director

I will not comment on power tariffs because that’s a function of again power market demand and supply but as of now it looks like the overall energy demand is in favor of power tariffs. Power tariff is a number of payers that has gone up. So it is unlikely that power tariffs are going to come down sharply from the current level. In terms of volume, I think last quarter, power volumes are reflective of our next year’s performance.

Dhiral Shah — Phillip Capital BCG — Analyst

Okay. Okay. And sir, what is the outlook on the debt part, sir, and what could be the peak debt by March ’24, as we are still expanding on the specialty part?

Kaushik Roy — Managing Director

Most of that spending has already been incurred, a good part of that. So, a very small portion is left out now and if crude remains at current level, we don’t see any increase in the offset.

Dhiral Shah — Phillip Capital BCG — Analyst

Okay. So it will be same as FY ’23.

Kaushik Roy — Managing Director

[Technical Issues].

Dhiral Shah — Phillip Capital BCG — Analyst

Okay, okay. Thank you so much, sir.

Kaushik Roy — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Jigar Shah from Maybank. Please go ahead.

Jigar Shah — Maybank — Analyst

Good evening, and congratulations for good performance for FY ’23.

Kaushik Roy — Managing Director

Yes, thank you.

Jigar Shah — Maybank — Analyst

My question is regarding your specialty strategy. So the specialty you — as per guidance or your answer to one of the questions should grow at about 25% this year. Also, it should touch about 50,000 tonnes, say over the next few years when it goes to 80,000 or 100,000 tons on an annual basis, where would it put us on the global map, like we are 6th or 7th largest globally in the carbon black business, where would 80,000 or 100,000 tonnes of sales volume put us in terms of the specialty players. And what all else you are looking to do to get to that position?

Kaushik Roy — Managing Director

Well, Jigar, current cap between the top three players and us is significantly large. They are all about 100,000 tonnes already. All three of them. And our volume of last year we are already at fourth position.

Jigar Shah — Maybank — Analyst

You are already at.

Kaushik Roy — Managing Director

We are already in the fourth position on the specialty side.

Jigar Shah — Maybank — Analyst

Right.

Kaushik Roy — Managing Director

Now, over that 100,000 ton in next four-five years is not going to change of around but certainly, it is going to close the gap between us and the third player, ProLogis Specialty Chemicals.

Jigar Shah — Maybank — Analyst

Right.

Kaushik Roy — Managing Director

What we are doing is essentially there are three things, one, of course, we are launching newer grades every year. So we are expanding our portfolio. Also always newer grades, which we are launching can’t be produced on the equipment that we have. So there is again a lot of times increase in the import quota system, [Indecipherable] and equipment technology. So, there is a team which is working on creating equipment which can give us the desired property in the grades.

And third, I mean is the marketing-related related strategy. So we are reaching out to more customers across both and expanding the customer base, so that with the volumes of the existing rates as well as when we launch newer grades, then we have ready access to all the customers. So the strategy for facilities-based on probably would you want to add something.

Raj Kumar Gupta — Chief Financial Officer

Just one thing, I want to add there, while are looking at specialty, and at the same time, we’re keeping an eye on the value-added specialty growth it is like a pyramid. The first born being a battery buffer and then it comes down to the lower activity which is industrial applications, but our focus is more on the value-added products. So the objective is growth but profitable growth. That is the objective.

Jigar Shah — Maybank — Analyst

Thank you so much. Appreciate this, response and wish you all the best.

Raj Kumar Gupta — Chief Financial Officer

Thank you so much. Thanks.

Operator

Thank you. The next question is from the line of Anupam Agarwal from Lucky Investment Managers. Please go ahead.

Anupam Agarwal — Lucky Investment Managers — Analyst

Yeah. Hi, sir. Congratulations. Just a clarification on the second phase of your Chennai plant commissioning, if you can give the timeline, please?

Kaushik Roy — Managing Director

Come again, sorry, I missed your first part. Come again, please.

Anupam Agarwal — Lucky Investment Managers — Analyst

The timelines for commissioning the second phase of the Chennai plant.

Kaushik Roy — Managing Director

Okay. I think one part, I mean almost 50% of the plant has already been published, we have announced and rest also, right now the trials are going on and we didn’t make [Indecipherable] around that, we will be formally commissioning it.

Anupam Agarwal — Lucky Investment Managers — Analyst

All right. And Mundra, about 20,000 plus, 20,000-odd incrementally 40,000 together, what is coming from all that or that’s also improving.

Kaushik Roy — Managing Director

We are almost there that is almost in final stage. Within the next month or two we will be announcing the commissioning of that also, out of this 40. And that might somewhat take some more time. Second phase will take some more time.

Anupam Agarwal — Lucky Investment Managers — Analyst

Will that get commissioned by FY’24 or FY’25.

Kaushik Roy — Managing Director

I think possibly will go into the end of this financial year, maybe early next financial year.

Anupam Agarwal — Lucky Investment Managers — Analyst

Okay. Second clarification on the debt. The repayment schedule, I had missed the earlier participant’s question that the volume increase in the debt early repayment schedule, you can help us with that.

Kaushik Roy — Managing Director

Yeah, I’m requesting Raj to respond to this, let’s see, if he can answer your question.

Raj Kumar Gupta — Chief Financial Officer

Most of our — first of all our long-term loan book is very small. It’s about INR270 odd crores. And second, most of these loans are for a period between five to seven years. So it is in a well spread over next four-five years. So it is INR50, INR60 crore kind of incremental every year. It’s INR250 crore repayment every year.

Anupam Agarwal — Lucky Investment Managers — Analyst

Yeah. All right. We have INR1,100 crores on WIP. I understand that part of the Chennai plan. So what will be the capex like in FY ’24?

Kaushik Roy — Managing Director

So like I said that we are almost through with our capex program. This year there will be incremental about INR150 odd crore investment on the Brownfield expansion and maybe about INR100 odd crores in Chennai roughly about 250 odd crores in the retrofit for the current year.

Anupam Agarwal — Lucky Investment Managers — Analyst

Got it. Got it. Lastly, just qualitative guidance if you can give us, over the last two, three years, we have been talking about a million domains every year. How far are we in meeting our target, what is happening on ground with respect to that? Just some ballpark color will be helpful.

Kaushik Roy — Managing Director

I will take your question on debt. Can you repeat, please?

Anupam Agarwal — Lucky Investment Managers — Analyst

Yeah, what I’m saying is last two-three years, we’ve been talking about yield improvements. So what exactly is happening on ground with respect to our targets, are we what percentage are we are there. How far are we in touching our targets and if you can give some color there.

Kaushik Roy — Managing Director

Anupam, we have been talking about this improvement not two-three years but four-five years and there have been congestive improvement. In fact, the increase in margin performance is what you are seeing now in the last two years is also partly on account of yield improvement. In some of the grades, we have already set the industry benchmark. So we are leaders there. I mean, there we are the best performers in the grades, and in some of the grades we are closing the gap with the best manufacturers of that grade. And, of course, I mean, there is further scope for improvement. So it’s also, I mean largely the gap is, wherever the gap is that is we have to identify, but in some cases that would require replacement of equipment and based on the trade-off, the tender is life of the equipment and the benefit that we will get out of the equipment. There is lot of [Indecipherable]. So it makes sense for us to allow participants to be depreciated completely and then when we replace them they need to fund efficiency system, but most of this addition will be visible in the new plant in Tamil Nadu [Indecipherable].

Anupam Agarwal — Lucky Investment Managers — Analyst

And the benefit of the yield movement will also flow in the first year itself.

Kaushik Roy — Managing Director

Yeah, largely. It should be there but stabilization takes time. So first year might not be indicative of the centers, I hope second year would be a better indicator of the plant efficiency.

Anupam Agarwal — Lucky Investment Managers — Analyst

Perfect. Perfect. That’s all from my side and wish you all the best. Thank you so much.

Kaushik Roy — Managing Director

Thank you.

Operator

Thank you. The next question is from the line from Jenam Gilani of Swan Investments. Please go ahead.

Jenam Gilani — Swan Investment — Analyst

Hi, sir, thanks for giving me the opportunity to ask the questions. So, sir, what would be our capex plan for FY ’25?

Kaushik Roy — Managing Director

’25, I think we have mentioned that you’ll see dropping out our growth path and it will also depend on the utilization in the next few quarters. Having said that, it’s a wave of market conditions remain volatile, but on top of long-term growth perspective, we are very optimistic and we believe that in next five-six years, we will continue to grow double digits, [Indecipherable] and that would require capacity addition every passing year. So it is a little early for us to give you some indication about the capex for ’25, but maybe in next two quarters or so, we would have gone away, we would be able to give you more clarity.

Mundra second line, we will work and come up either by end-up this year or early next year. It’s a small capex, actually, but not much. So like I said for 2024, we are going to incur about 150 odd crores, 2025 if we were to add capacity on ground then it will be a small expenditure budget but tied to go a little large then again between 2025 and 2026, I think we will be incurring about close to INR800 crores to INR900 crores.

Jenam Gilani — Swan Investment — Analyst

Okay, sir. Sir, what is your target ROC for the next two years?

Kaushik Roy — Managing Director

Last five years, if we look at our horizontal, we have been around 18%, 19%. So, I mean if there is capacity addition, I mean and we inculcate a difficult challenge, there is no return on that capex during the period — implementation period so once that is completed, the ROCE increases. So, I think we should be, our overall objective overall, I think we should remain around 20%. That’s obviously because we will be in a constant capex between now and 2030. That’s how we see it. With that, ROCE should be around 30%.

Jenam Gilani — Swan Investment — Analyst

And sir, one of the earlier participant’s had asked a question about gross margin. So, I just wanted to confirm whether we think that we can reach 29% to 30% gross margins in FY ’24 or I got it wrong, sir.

Kaushik Roy — Managing Director

It’s still not appropriate to look at our margin in percentage term because that will vary depending on the crude levels.

Jenam Gilani — Swan Investment — Analyst

Okay.

Kaushik Roy — Managing Director

So in absolute terms, whatever we have achieved in the current year, we are hopeful that we should be able to maintain that and build upon that going forward because of change in product mix and in the manufacturing inefficiencies from them.

Jenam Gilani — Swan Investment — Analyst

Thank you, sir. That’s it from my side. Thanks a lot for answering the questions and all the best. Thank you.

Kaushik Roy — Managing Director

Thank you, Gilani.

Operator

Thank you. Ladies and gentlemen, we will be taking the last question that is from the line of Aditya Khetan from SMIFS Institutional. Please go ahead.

Aditya Khetan — SMIFS Institutional — Analyst

Sir, thank you for the follow-up. Sir, during this quarter into the specialty black business, we have witnessed almost 30% jump-in volumes on a quarter-on-quarter basis but despite this our growth, our gross spread contracted by 7%. Sir, just wanted to know if the specialty volumes are going up, we are commanding around 2%, 3%, and 3.5% times margins than the normal spread. So our spreads should ideally have been remained constant or might have gone up to some extent, but you are replacing spreads, so should that indicate that the normalized grid business and the performance chemicals business? So we are struggling quite hard. Is there anything visible on the business shaping onto that trend because the numbers are not actually?

Kaushik Roy — Managing Director

Hello. So are you sure what happened in last quarter? Well, there was a significant inventory reduction at our customer’s end for specialty as well as export customers. Now, therefore we have quarters where we have only three high inventories in the last quarter, which was based on high raw material prices. So that volume when we sold in this quarter, our margins were not at the same level, right? So, we had a significantly lower-margin in that one, and therefore, the blended margins for the year, fourth quarter looks a little lower compared to the previous quarter. That is the reason.

Aditya Khetan — SMIFS Institutional — Analyst

Okay. And sir, our guidance also, we have reduced by INR1 per kilo for the next two years. I suppose we are responding by the similar passion to specialty black we are, we would be adding 10,000 tons volume per annum, what is the reason like you downgrading your guidance to INR1 per kilo? So we will be maintaining that? Are you witnessing that’s been into the performance chemicals which is from the [Indecipherable] side that will continue for the next year also on the tire segment you are witnessing some demand constraints because the guidance and the numbers are not that we are not getting that correctly.

Kaushik Roy — Managing Director

I don’t think, Aditya, we haven’t changed our guidance. There is no change in our guidance if you look at our numbers.

Aditya Khetan — SMIFS Institutional — Analyst

So we are maintaining our EBITDA per kilo for the current quarter. Earlier you had stated you will be increasing by INR1 per kg per annum in specialty chemicals. [Speech Overlap].

Kaushik Roy — Managing Director

So, Aditya, when we are saying INR1 per kg per year. So we were mentioning that on an average in the next five years’ time, our average EBITDA performance is going to increase by INR1 per kg but last year and this year if you compare our EBITDA, it has gone up by INR2.7. So in a particular year, if there is a significant jump essentially that full amount will account from internal efficiencies, part of that is also because of the opportunities in the market. So therefore we are saying that in the current year, we will try and ensure that we remain at last year’s numbers. Even that number, it will be a little higher than what was indicated a year back. So based on our one-year guidance, our 2024 EBITDA per ton should have been somewhere around INR15,400, we’re still talking about the same INR15,700 or INR17,000. So that’s little higher than the guidance given. So you have to see it in that perspective.

Aditya Khetan — SMIFS Institutional — Analyst

Okay, sir. Got it.

Operator

[Operator Closing Remarks].