Pondy Oxides and Chemicals Ltd Q2 FY23 Earnings Conference Call Insights

Key highlights from Pondy Oxides and Chemicals Ltd (532626) Q2 FY23 Earnings Concall

Management Update:

• [00:03:24] POCL said it will see its aluminum division going live in 3Q23. Going forward, the company will realize consolidated growth both in topline and bottom line that will evolve in the next few quarters.

• [00:04:53] POCL also added that it achieved a ROCE of 34% in 1H23 and is in line with the expectation for FY23. The company also reduced its debt to about INR72 crores in 1H23, driven by focus on reducing working capital cycle.

Q&A Highlights:

• [00:08:04] An analyst asked about POCL’s roadmap for growth in future and if any diversification to other recycling products is planned. Piyush Dhawan President answered that lead will remain an integral part for ever. POCL has taken diversification in plastics and full-fledged production will commence from 4Q23. Diversification to other verticals is also planned but in a gradual manner.

• [00:09:00] An analyst enquired about POCL’s plans to fund its capex. K. Kumaravel Director Finance replied that POCL has strong internal accruals of over INR200 crore and plans to invest INR90-100 crore in different projects through internal accruals. Additionally, POCL added that depending on market scenario a combination of various debt instruments from domestic and international markets may be used.

• [00:10:04] An analyst also asked about POCL’s plans to go debt free. K. Kumaravel Director Finance clarified that the company doesn’t have any plans to reduce the debt level drastically. Short term debts will increase depending on new orders. On long term debt, it will be availed based on future requirements of new products.

• [00:12:19] An analyst asked about the projects in the pipeline for FY23. Piyush Dhawan President said the aluminum division is expected to go live by the end of Nov. Also, full-fledged production of plastics and the green lead project is expected to commence from the beginning of 4Q23.

• [00:13:46] Keshav Kumar asked about the levers of growth on a broad level for next 3 years. Piyush Dhawan President answered that POCL is planning to expand lead recycling and manufacturing footprint globally and in India. So, product diversification would give the company leeway into the growth strategy for the next 3 years.

• [00:15:31] Deepak Poddar with Sapphire Capital asked about any diversification into lithium-ion battery recycling. Ashish Bansal MD said the company is currently in the pre-feasibility and R&D stage as currently there is no specific technology that is sustainable for recycling lithium-ion batteries.

• [00:17:53] Deepak Poddar of Sapphire Capital enquired if POCL is looking at INR500 crore kind of revenue in FY24 from plastic only. Piyush Dhawan President answered that in the next two years POCL is looking at about INR200-300 crores.

• [00:19:10] Deepak Poddar with Sapphire Capital asked that if a 100-150 bp improvement per annum is the right trajectory to think of POCL business. Ashish Bansal MD answered that the trajectory seems practical as with lead, plastics and aluminum portfolios coming together, the average should start picking up as the revenues go up.

• [00:20:30] Vaibhav Badjatya of HNI Investment asked about the total investment in plastics business to generate INR200-300 crore revenue. Ashish Bansal MD replied that in initial stages POCL is looking at an investment of about INR10-12 crores and the total should reach INR30-40 over the next 2 years.

• [00:30:44] Keshav Kumar asked that in percentage terms, how much scrap is sourced domestically vs. internationally. Ashish Bansal MD answered that on the lead segment about 70% of the RM is sourced internationally and 30% from the domestic market. In plastics, 70% is procured domestically and 30% from other sources. And in aluminum, about 85-90% should be imported and the balance domestic.

• [00:35:43] Rohit Ohri with Progressive Share Brokers asked about Future Tech and when the numbers will start rolling and hitting P&L. Ashish Bansal MD said that the a good level of numbers hitting the P&L would be in 1Q24. And on a continual basis it will scale up decently.

• [00:36:11] Rohit Ohri with Progressive Share Brokers enquired if the company is happy with the copper business. Ashish Bansal MD said POCL is not happy with the current level of copper business. In FY24, POCL is looking at pushing the copper business and plan to add some products in that portfolio.

• [00:37:37] Rohit Ohri with Progressive Share Brokers asked about the LME guidance for the next two quarters. Ashish Bansal MD answered that H2 in terms of demand should be similar to H1.

• [00:40:11] Rohit Ohri with Progressive Share Brokers also asked if POCL has any plans to raise money via QIP or rights issue. K. Kumaravel Director Finance replied that right now there is no such plan. However, the Board has to decide on it and take the call in future.

• [00:41:48] Rohit Ohri with Progressive Share Brokers asked about the return expectations from the plant for aluminum in Tamil Nadu where POCL spent INR5 crores.  K. Kumaravel Director Finance answered that commercial production will commence from 4Q23 and only post that the return expectations can be given. However, aluminum margins will be similar to lead margins.

• [00:46:28] Vaibhav Badjatya from HNI Investment asked if the company is considering to establish some operations overseas for smelting and sorting out batteries. K. Kumaravel Director Finance answered that definitely POCL is looking for overseas operation but Board has not taken any decisions on it yet.

• [00:50:41] Muthukumar R asked about the capex expected for ewaste and industrial waste. Piyush Dhawan President replied that for the pilot project, it will be between INR3-5 crores.