Privi Speciality Chemicals Ltd (PRIVISCL) Q3 FY22 Earnings Concall Transcript

Privi Speciality Chemicals Ltd (NSE:PRIVISCL)Q3 FY22 Earnings Concall dated Jan. 28, 2022

Corporate Participants:

Saurabh Kapadia — Research Analyst

Narayan Iyer — Chief Financial Officer

Analysts:

Amar Mourya — AlfAccurate Advisors — Analyst

Nakshita Mehta — Credent Asset Management — Analyst

Dushyant Mishra — SageOne Investment — Analyst

Aashish Upganlawar — InvesQ Investment Advisors — Analyst

Chintan Modi — Haitong Securities — Analyst

Unidentified Participant — — Analyst

Rohit Nagraj — Emkay Global — Analyst

Aman Vij — Astute Investment Management — Analyst

Zubeyr Singh — Mondrian Investment Partners — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q3 FY ’22 Earnings Conference Call of Privi Speciality Chemicals Limited hosted by Asian Markets Securities Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

Disclaimer, this conference call may contain forward-looking statements about the company, which are based on the beliefs, opinion and expectation of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. Actual result may differ from such expectation, projection, et cetera, whether expressed or implied. Participants are requested to exercise cautions while referring to such statements and remarks.

I now hand the conference over to Mr. Saurabh Kapadia from Asian Markets Securities. Thank you, and over to you, sir.

Saurabh Kapadia — Research Analyst

Thank you. Good evening, everyone. On behalf of Asian Markets Securities, I would like to welcome you all for 3Q FY ’22 earnings conference call of Privi Speciality Chemicals Limited. From the management, we have with us Mr. Narayan Iyer, Chief Financial Officer of the company. We shall start the call with opening remarks from the management and then we will move to Q&A session.

I now hand over the call to Mr. Iyer for his opening remarks. Over to you, sir.

Narayan Iyer — Chief Financial Officer

Thank you, Saurabh, and good evening to all my fellow investors and shareholders of Privi Speciality Chemicals Limited. A very, very warm welcome on possibly a chilly weekend evening, I know I am at the threshold of the weekend and spoiling your weekend by maybe an hour or so, but it’s important that I stay connected, Privi stays connected to its very fond investors. And on that count, I can only say that the quarter that has gone by, October to December, was a very decent quarter.

It was a comeback quarter for Privi post a little bit of natural calamity that was a setback in July 2021, 21st, 22nd and 23rd July, the entire Konkan area including Mahad where Privi’s major facilities are located was inundated by water and it was about 8 to 10 feet of water inside the factory. And the factory had to be shutdown for almost about three weeks or so, we were the first ones to restart the factory and come back. And as we did in the past when there was a fire in our factory in 2018, we rose from the ashes like a phoenix, so this time we’re just like flying off like a seagull maybe from the water up coming out and performing to the best of our abilities and we are back with a very, very decent run rate, I will say that, to achieve our targeted goal, the wish-list that we have and move towards the overall ambition of us achieving this year’s targets and then go over to the 3000 program.

This quarter, there were a little bit of setbacks on account as it’s known in the industry because of the increase in the RMC across board, most of the RMC costs like the acids, the solvents, the toluenes, including of course the coal cost, all this had gone up substantially on account of heavy shortages, materials not being available from China and from other countries and, of course, the sporadic freight expenses or the freight costs just keeping on, but I could say that this is all to some extent arrested by Privi and the financial numbers that are there and it’s there in your hands and already displayed. We have been able to offset most of this increase in the expenses on account of yield improvements, process improvements, technical upgrades that we had undertaken in the last two or three years spending a lot of CapEx, some cost cutting, energy saving measures, also undertaking some reverse power or the cogeneration that we have also created within our own factory, all this helped us to tide this unprecedented rise in the input costs. And broadly, I could say that we were able to arrest most of the increase in the so-called input costs by the inhouse measures that we have taken around.

There has been definitely an increase on a quarter-on-quarter numbers as you would also appreciate the efforts that the company has been able to put in around and turn — and give a decent I can say sort of a performance, and I hope most of the investors have not found many surprises in the results because there is an increase in the turnover by almost about 30% as you compare to the immediate September quarter and the December quarter. But I will say that a better comparison will be the December ’20 and December ’21 quarter, where our sales has increased by almost about another 30%-odd. The profit has increased from about INR25.5 crores on December ’20, we have come up to about close to 35%, which once again signifies a 40% increase in the profitability numbers. And there has been an exceptional item as you know that some of the expenses on account of flood is being considered by us as exception.

So, in this quarter, there has been an addition of about INR2 crores, INR2.12 crores, so — coupled with the total expenses of INR17.5 crores, INR10 crores of money we have already received from the insurance company. So, there is a INR7.36 crores as an exceptional loss, I could say that, but it is only time in this quarter we expect the entire money from the insurance company on account of the expenditure and the losses, the business interruption losses that was there. We are fairly confident that the entire money to Privi should be there and it should appear in our financials by March.

So, on this note — and some of our projects, which has been also the highlight that we have embarked upon a very ambitious INR500 crore projects on three main products, Prionyl, I am happy to say and inform the investors that we have commissioned Prionyl as a project at our Mahad Unit 7 and this was commissioned on December 31st and in the month of January now the Prionyl production has started and very happy to say that it was on January 14th, or I could say the day of Uttarayan, that the first invoice for Prionyl was also billed to one of our esteemed customers. And so, that’s something which is there. Yes, the spot business market is something that we will tap around before we are in a position to get into the contractual business. And the other two projects, the Camphor as well as the Galaxmusk is very much on track and we expect that by March most of these other major projects should also be capitalized and they will start bringing in revenues from the first quarter of ’22-’23.

So, based on that, Saurabh, this is my introduction remark. I am sticking now currently only to the quarterly performance. I am open for any questions, any suggestions from the investors and from you all.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Amar Mourya from AlfAccurate Advisors. Please go ahead.

Amar Mourya — AlfAccurate Advisors — Analyst

Yeah. Sir, thanks a lot for the opportunity. So, couple of clarifications. Firstly, sir, on the ongoing CapEx, you had elaborated that Prionyl is already commissioned and Galaxmusk and Camphor will come by March. So, is it fair to assume like this whole capacity will be largely available for the spot or we will be getting some benefit of the contractual also?

Narayan Iyer — Chief Financial Officer

Can I answer you, Amar?

Amar Mourya — AlfAccurate Advisors — Analyst

Yeah, yeah. Please, sir.

Narayan Iyer — Chief Financial Officer

Thank you. And basically see, Galaxmusk and Camphor are huge volume products. So, prima facie, we will be in a position to sell only in the spots from April to June. Some of our customers, they prima facie also tender some — asked for some tenders to be floated for their second half requirements. So, we could possibly participate in some of these customers’ second half requirements, but the bulk volume definitely when we talk about my top 25 customers who are global players, so these two are — out of this top 25, almost about 10 to 12 of them, they go in for annual contracts. So, I have — definitely, I will not be able to get such volumes as we normally undertake for all our other products. So, that is a bus that we have missed, but the delay was beyond our control and beyond our measures on account of the second wave and the oxygen supply is not being made available by Government of India and respective state governments also because it had to be given a preference to the COVID patients and then you had an onslaught of the third wave coming in, price escalations. So, all this led together, there has been a delay. You can prima facie say that for the next nine months or the first nine months of the next year, we will be in a position to sell a maximum on our existing products and to some extent from these three new products, which will come about in fact here.

Amar Mourya — AlfAccurate Advisors — Analyst

Okay. So, for the next full year for these whole three capacities, should we expect at least 20% to 30%, 40% kind of utilization level?

Narayan Iyer — Chief Financial Officer

For the entire year of ’22-’23 you are talking about?

Amar Mourya — AlfAccurate Advisors — Analyst

Yeah, sir. FY ’23 whole year.

Narayan Iyer — Chief Financial Officer

I think with Privi, yes, we could even stretch ourselves to about 40% of our overall capacities, if it’s possible in fact here.

Amar Mourya — AlfAccurate Advisors — Analyst

Okay. And secondly, sir, this is my second question. Secondly, sir, the capacity which we had actually commissioned in FY ’21 and the benefit of which like kind of INR800 crores, INR2,000 crore benefit was expected to come going forward. So, we’ll be seeing the majority of the benefit in the FY ’23 and how much we had seen of that particular expanded capacity benefit in FY ’22?

Narayan Iyer — Chief Financial Officer

FY ’22 is still on, so definitely there has been an increase in the volume by about close to 3%, 3.5%. Of course, we lost some volume because a month of sale was lost on account of the flood, so I was not in a position to function itself. Otherwise, definitely, we would have been able to achieve all the volumes with regard to the main pine-based products because that was something which was fully being sold to the capacity that we had because these capacities were all put to use by December 31, 2020 and we had contracts in place and it was going around.

I will say that as far as the main pine products are concerned, yes, my factory today is running into full capacities. As far as the specialty chemicals is there, specialty chemicals is just about looking to get the demand in bits and pieces from — and specialty chemicals is something which is used in high-ended cosmetics and perfumes and all other applications. Broadly from the market sentiments, I feel that this should come into a full play somewhere from around April or May and more so from the period of July onwards when actually people start using and there is summer across — globally, people will start using more and more of these high-ended specialty chemicals. And we also expect the global offices and commercial establishments all to start may be post this endemic as it is now looking like. So, people will start moving, travel around the world and all more so from the Q2 of ’22, ’23.

So, we can expect specialty chemicals demand to also move up more so from August and September of 2022, then the capacities on account of the specialty, et cetera, will also go up. So, I am very — rather than using a word I, we at Privi are very, very confident that the pine space will be fully utilized, 100% capacity, maybe it could also go to 102%, 103% if we are in a position to maintain our factories to the core. The specialty chemicals could be somewhere around 70%, 75% of its utilization of its capacities that could be there. The phenol space will be 100% sold out, it’s already 100% sold out I can say that. And the last but not the least phase is pine has always been our forte. So, if I had to cumulatively average it out, we will be something around, I could say, about 85% to 90% of our overall utilization of the capacities that were there before these three new products come in.

Amar Mourya — AlfAccurate Advisors — Analyst

And lastly, sir, in terms of the EBITDA margin, like as you indicated, this is largely because of the RM inflation and other manufacturing cost are at elevated level. So, any solace we are expecting from let’s say fourth quarter or the first quarter, so when we can see the bounce back in the margin and reaching to our guided level of around 15% to 16% kind of thing?

Narayan Iyer — Chief Financial Officer

No, no. We will be back, currently also we are at about something like 15.5%. And as I keep telling all of you investors, the ForEx income that you see in Privi’s balance sheet is not any derivative or a hedge gain. It is prima facie a fluctuation in the timing differences of my sales and purchases and the realization that it happens upon, it’s purely an Ind-AS accounting entry. And all this is coming and from my main flow of business operations, which is sales and exports and possibly purchases and imports. To give my investors a very happy news on this evening, the additional percentages or additional margins will definitely set in right from January 1, 2022 because the contracts that we have entered for calendar year 2022 with most of my global players are higher than what it was in the year 2021. So, that’s a good news that some of these increased expenses on account of the input of RMC as well as the increased freight costs will be met on account of the higher contractual values or higher sales value that we will obtain from our customers going forward in this year and the increase is anywhere on an average between 5% to 8% as compared to the ’21 prices that we had gotten, in fact. So, that’s a very good news and the bounce back you could see in this quarter itself, in fact. Right now also, whatever I am selling is with a bounce back version, in fact.

Amar Mourya — AlfAccurate Advisors — Analyst

Thank you, sir. Thanks a lot, sir.

Narayan Iyer — Chief Financial Officer

Thank you, Amar. Thank you for your questions. Pleasure talking to you.

Amar Mourya — AlfAccurate Advisors — Analyst

Yeah.

Operator

Thank you. The next question is from the line of Nakshita Mehta from Credent Asset Management Limited. Please go ahead.

Nakshita Mehta — Credent Asset Management — Analyst

Good evening, and thank you for giving this opportunity and congratulations on a fantastic set of numbers.

Narayan Iyer — Chief Financial Officer

Thank you. Thank you very much, Nakshita.

Nakshita Mehta — Credent Asset Management — Analyst

Yeah. So, my one question is again the RM cost has — compared to last quarter has gone up by as much as 47%. And if you compare it to the corresponding year quarter, it’s gone up by 25%, 26%, but still the margins are relatively at the same level. So, I want to know what measures you took to preserve the margin, any special measures?

Narayan Iyer — Chief Financial Officer

Okay. Like I really do not know how you got 45% or 70% on an RMC, which is a growth. You also will have to see a threshold because when you are looking at the cost of materials consumed, the changes on account of the inventory will also be forming a part of it. And percentage-wise, to give you the exact numbers because just my Board meeting has got over and we were deliberating about it with the auditors, so there is an increase, overall increase, if I had to give a very, very fair and rational view, the growth or the increased RMC expenditure only for this quarter as compared to the previous quarters has been about something close to 6.78%. If you compare it with the earlier overall nine-month period, if I say, so the increase has been about close to 0.5%. So, that means on a INR1,000 crore of sale, a 0.5% increase is what has transpired. But if you only look for the quarter of December vis-a-vis the quarter of September, or more so the quarter of June, there is an additional 6.74% of RMC increase here.

So, this increase prima facie is on account of the unprecedented increase in the RMC cost, like I am just going to narrate a few examples. Acetic anhydride, which is a very important ingredient for us, what we used to buy it for about say INR70 and INR90 or so, is now currently being — was being bought in this particular period closer to upwards of INR200 and all. It’s come back now to about INR150 or INR160 and we expect it to further come down. Similarly some of the other solvents, phosphoric acid, sulfuric acid, all are — were being sold at a very, very all-time high and these are all chemicals, which we use in bulk volume. And this is what actually has affected my RMC inputs, in fact. So, some of the spot market higher prices that we were getting on the sales has actually helped us sail through this quarter and yet manage the overall margins when we talk about on a sustainable basis, in fact. The measures that we have taken is that we have started reusing some of these acids by recovering these acids and reusing it, so reducing the overall usage of maybe an acetic acid or sulfuric acid, reuse plant has been there. In fact, phosphoric acid is being reused by us.

So, that’s how we are trying to curtail on some of these unwanted expenses, where we can do a recovery. And secondly, our R&D, where we — our strength is our R&D as my Chairman and Managing Director always says. The R&D has been able to come about with a new technical ideas, new process innovations in manufacturing, my main key products, in fact. And my main key products are five of them, that is basically the dihydromyrcenol, the amber fleur, pine oil, terpineol and [indecipherable] in fact. So, all of these, there has been constant innovations in ensuring that how do we reduce our input costs, how to improve the yield, how we can remove some of the unwanted chemicals that come into it, so that by using these acids and solvents, you burn some of the natural raw material like the pine. So, by using a natural supplement like a resin or reusing some of these acids, we are able to recover the input cost. And that’s how we have been able to improve the yield prima facie getting a final product percentage better than what it was in the earlier quarters or earlier periods. And that’s how you see that our margins have been — we have been able to sustain and maintain the margins, or almost try to maintain the margins that we were achieving. And we are confident that now with the increase in the selling prices, our margins definitely will go up starting from this quarter itself. And as all of you investors know that Privi always is like an MS Dhoni. The first three quarters could be slow, but the fourth quarter always is a big bang for us and we expect this quarter also to be a big bang, in fact.

Nakshita Mehta — Credent Asset Management — Analyst

That’s very insightful. Thank you. Another question is on the debt. So, in our presentation, I saw that there is…

Narayan Iyer — Chief Financial Officer

Yeah, okay, Nakshita. So, just to inform all investors, we have just uploaded investor presentation, sorry I was delayed in sending this across to all of you. I don’t know how many of you have been able to go through it, but I was tied up post the Board meeting yesterday with some other work. And — so you all can see that and this presentation also has the debt portion. Yes, you can continue with the question.

Operator

Sir, sorry to interrupt. Ms. Mehta, may we request you that you return to the question queue for follow up questions?

Nakshita Mehta — Credent Asset Management — Analyst

Yeah. But this is my second question, can I just complete this one? Then I will go back to the queue.

Operator

Okay.

Nakshita Mehta — Credent Asset Management — Analyst

Yeah. Yeah. So, I wanted to ask that the debt on both long-term and short-term, current and long-term debt, are pretty huge. So, is there any reason as in why are they — both of them are, so…?

Narayan Iyer — Chief Financial Officer

Long-term was already approved, it was only that we have not availed it at one go. As the projects kept on moving around, we were drawing these long-term borrowings prima facie from the banks and it was also that a part of our own earnings we were to deploy back into the CapEx. So, the overall CapEx is about INR550 crores, out of it’s the borrowing that we have done in the last three years or so has been only to the extent of INR250 crores plus INR56 crores, INR306 crores or so. So, the delta is the profit that the company earn and was keeping it for the dividend as well as for working capital, the balance has to be — had to be utilized into the CapEx. So, that’s why that you see that the borrowings or the debt looks to be on a higher side. However, having said this, the new CapEx, the new projects, once it sets out and we start earning the revenue from that, your debt position will come down because you are looking at a higher sales, which means higher collections and possibly reducing the overall borrowing of the working capital immediately and the debt — the long-term debt is basically over a seven-year period that we pay off and it will reduce as per the schedule or as per the periods at which we have borrowed from various banks. So, this is a temporary phenomenon that you could possibly see that there is a higher debt in fact and may be for the very first time that overall debt has just etched past my overall equity or the net worth of the company, but it’s a temporary phenomenon, not to worry about. And as I said, if this is going to be a bumper quarter for us, you will see that previous performance in March is going to be a much different scenario as compared to what you are possibly seeing now in December.

Nakshita Mehta — Credent Asset Management — Analyst

That we are confident of. Okay. Just one follow-up on this month. Can you tell us what maturity schedule is the debt on? I mean, how many years are still left to pay off?

Narayan Iyer — Chief Financial Officer

Every loan has been taken for a period of not less than five to seven years, so some of the earlier loans that we had taken, so that will be repaid as per the schedule. So, the first of the so-called — and we are paying on a quarterly basis because these are all two years moratorium or 18 months moratorium with a five-year quarterly payments to each of the bankers, in fact. So, every year, I will have a repayment schedule of about INR30 crores to INR45 crores going forward for the next five years now.

Nakshita Mehta — Credent Asset Management — Analyst

Okay. Great, great. Thank you so much. Thank you so much and good luck for your next quarter.

Narayan Iyer — Chief Financial Officer

Thank you very much.

Operator

Thank you. The next question is from the line of Dushyant Mishra from SageOne Investment. Please go ahead.

Dushyant Mishra — SageOne Investment — Analyst

Thank you. And I know the last call we mentioned that we are still 15 months from commercialization, but I just want to check if there were some updates regarding that, how the technology transfer was going, if there were any hiccups from the company?

Narayan Iyer — Chief Financial Officer

You are trying to talk about Prigiv and the technology transfer?

Dushyant Mishra — SageOne Investment — Analyst

Yeah. Especially with Givaudan.

Narayan Iyer — Chief Financial Officer

So, that process is ongoing, the technology transfer is happening around. Since it’s a greenfield process, it is going to be a time consuming affair. The land has been acquired, the — we have already made an application to the environment commission or as it is known in India EC for the various products that we are going to manufacture in the so-called joint venture with Givaudan at Prigiv. And this we expect could be about close to a 8 to 10 month affair before finally the environment commission gives us the approvals for all the products to be manufactured. Parallelly, we have engaged with a basic engineering company firm, an external agency to help us design the basic engineering with regard to the layouts and the requirements of the equipment for setting up the projects. So, this way we are doing it in this eight-month period, or 10-month period before finally we get the permission from EC, so that we can start being on to the field immediately maybe just prior to the monsoon or so we can start the excavation work and start doing the civil work. So, that work is parallelly going around. Of the set 42 products that Givaudan has asked us to work, close to about 14 of them have been successfully met the standards of Givaudan at our R&D scale, our research lab have been able to manufacture these 14 products through the satisfaction of the Givaudan technical team. Balance about 10 odd products are in the pipeline at the research and development because it’s not that I have an R&D that I can completely stop doing the innovation work for the main parent company and only focus on the 42 products that Givaudan wants. So, it’s a section by section, in fact, and we are doing it and we are confident that this technology transfer what is coming from Givaudan to us will happen in a very synchronized manner. And we have no doubts that Privi will be in a position to manufacture these products to the likes of Givaudan themselves, in fact.

Dushyant Mishra — SageOne Investment — Analyst

That’s wonderful to hear. And just a quick question on our research and development as well. At a time, how many products are we working on? So, this is apart from what we’re doing with the JV partner, just on our own self, at a time, what is our — what is in a pipeline in the research and development? And I am sure not all of them end up seeing light of the day, but just a ballpark idea?

Narayan Iyer — Chief Financial Officer

You want to know how many products we are currently doing research at both my research labs, is that what is your question, Dushyant?

Dushyant Mishra — SageOne Investment — Analyst

Yes, that is correct. That is correct.

Narayan Iyer — Chief Financial Officer

A difficult question to answer, but close to about 14 to 16 molecules we are working, of which we are fairly, fairly, fairly successful with five or six of them and a couple of them we have already started doing at the pilot level, which is what our Chairman in our November 1st address to the investors, he happened to say that the launch of his most ambitious project menthol that Privi was successful at the research level to track the menthol, levomenthol, biochemistry to manufacture levomenthol on the most noble technology. So, that’s something that we have scaled it up to the pilot level, so this could be about 14, 16 products currently that we are working around.

Dushyant Mishra — SageOne Investment — Analyst

Okay, perfect. And what is our quarterly run rate on research and development expenses?

Narayan Iyer — Chief Financial Officer

Close to about INR6.5 crores.

Dushyant Mishra — SageOne Investment — Analyst

Perfect. That’s all from my side. Thank you very much.

Narayan Iyer — Chief Financial Officer

Welcome.

Operator

Thank you. The next question is from the line of Aashish Upganlawar from InvesQ Investment Advisors. Please go ahead.

Aashish Upganlawar — InvesQ Investment Advisors — Analyst

Yeah, hi. So, I just wanted to understand, a lot of things are going around as far as a lot of activities there as far as Privi is concerned. So, if you could enlighten us about the Givaudan tie up, what is the roadmap for that overall in terms of certain numbers or what are we trying to build here with them and the main efforts of Privi because what we have been hearing in the last few interactions with the management is we are trying to basically over the next four, five years around INR3,000 crores of top line and stuff that we have got to know, so if you could just help us understand these aspects how they are working?

Narayan Iyer — Chief Financial Officer

See, the INR3,000 crores of number what we have been talking about by us in the last one year or so is — are going to be from products manufactured by the main parent company and it doesn’t take into cognizance or account something that Prigiv is going to offer because the INR3,000 crore number has come in the AGM of 2020 itself and that was because at that time itself we had embarked upon the CapEx plan for the three products that we are now almost in the final stages. So, this is what our MD had talked about with all this INR550-odd crores that finally we are going to spend around in finishing and completing the three main projects, the backward integration and some of the expansions on the dihydromyrcenol and the amber fleur and the pine oil, all this put together will take Privi closer to the INR3,000 crore mark, depending on the price increase, it could be up and down by 10% plus and minus or so, in fact.

As far as Prigiv is concerned or Givaudan’s products are concerned, Givaudan continues to be my very important customer to me. They’re always at the top two or top three customers and they have been so in the last 10 to 15 years, Givaudan has been very, very important. Why Givaudan has come to us is not because they want some sort of comfort or so, it’s only because they have seen Privi delivering quality technically sound products, not just on the bulk volume, but on the specialty chemicals also. And Privi has the capability of turning around various reactions like the grignard, the pyrolysing, the hot air insulations and all that sort of stuff. So, we have been very, very good. Technically it is a proven thing that our products meet to their standards. Second, we are a sustainable company having the backward integration into our fold, we are not left at the vagaries or mercies of the spot market, which is what the Chinese players normally do in the pine space, in fact. So, we have a backward integration plan and we have contracts from various CST mills across the globe. Pan — US, the Canada, Scandinavian countries, Russia, all of these countries, where there are paper mills and where pine trees are cultivated to obtain the soft wood, craft wood, we have tie ups with many of these mills and which where CST was obtained on tender basis between — anywhere between six month and three years, some of them are on tracks firm price for a year or year-and-a-half or two and some could be on an annual basis, the prices differ.

So, being a sustainable player completely zero liquid discharge in our Unit 2 and very shortly for all our other units also going to be zero liquid discharge. Our Jhagadia unit or the Gujarat unit is already a zero liquid discharge. We are reusing our water, so there is an RO plant in place, there is an MEE, there is an insulator, there is an ESP for the chimney or the coal thing, they feel that we are amongst the top ranked companies following ethical practices in manufacturing chemicals. And that is why they have come to us and looked around and stated, you could possibly be partnering us to manufacture some of these low volume high value products. And that is the reason we have entered into a separate JV because they wanted to ensure secrecy with regard to the technology transfer that they are doing for this 40 products, which currently they are manufacturing themselves for their in-house consumption. They don’t sell it to anyone else, in fact. So, this gives us aperture to prove our credentials that Privi means quality and Privi’s technical capability is none lesser than anyone else in the world, and that’s the reason that — and always having a tie up with the world’s largest fragrance company, it’s a feather on the cap of any Indian company and that’s why we have done and we have agreed for this JV with Givaudan, which gives us our ability to showcase to the world, yes, Privi means quality and Privi means technically very sound company, in fact.

Aashish Upganlawar — InvesQ Investment Advisors — Analyst

Okay. A follow up on that basically, this journey from INR1,200 crores of top line to INR3,000 crores was the kind of conservative top line — the timeframe that we are looking at here maybe four years or five years? And secondly…

Narayan Iyer — Chief Financial Officer

We are looking at another maybe two and a half to three years.

Aashish Upganlawar — InvesQ Investment Advisors — Analyst

Oh, is it? And what would be the JV doing by then, maybe another four years, what significance does that JV bring to us in terms of numbers? So, if INR3,000 crores is…

Narayan Iyer — Chief Financial Officer

JV basically gives some sort of a comfort that Givaudan will continue to be one of my preferred customers, so most of the profits or most of my volumes with regard to the major products on the pine space, they are my largest consumer. So, I also retain their share on my growth in those five big products because as we have been saying in all the investor meets and whoever investors have also come and met in that we will continue to maintain and retain the share of our volume on the pine space going forward also. If any pine like dihydromyrcenol keeps growing at a 4% on an yearly basis, which means we are talking that from a 25,000 ton volume of business, if it is growing at 4% every year, Privi will definitely want to maintain a 30% or 35% share of dihydromyrcenol going forward also. So — and where will this increase be sold, it will be definitely sold to all my customers and especially the top 15 of the giants and top 25 global players, in fact.

So, we would want to ensure that we are in a position to keep growing going forward also, keep our customers very comfortable and treat us as a preferred supplier to them because going forward it’s going to be a world of sustainable renewable raw material, which is going to be a part of any sort of a blend. This is a law, which will start coming around, some other countries have — already taking it very, very seriously and it’s only time that we’ll talk about that by following sustainable measures and a renewable raw material is going to be a prime importance and most of the products that we are manufacturing in the pine space are considered as renewable raw material and the processes and the technical know-how that we are adopting will make us fall under the renewable raw material sourcing suppliers and we will be at high demand going forward in that.

Aashish Upganlawar — InvesQ Investment Advisors — Analyst

Okay, thanks a lot. Thank you.

Operator

Thank you. The next question is from the line of Chintan Modi from Haitong Securities. Please go ahead.

Chintan Modi — Haitong Securities — Analyst

Yeah. Hi, sir. Thank you for the opportunity. Sir, my question is — yeah. Yeah, sir. Good evening. So, my question is with respect to the other expenses going up very sharply during the…

Narayan Iyer — Chief Financial Officer

Yeah. Hello?

Operator

The line for current participant is disconnected. [Operator Instructions] The next question is from the line of Tanush Mehta (Phonetic) from Sanctum Wealth. Please go ahead.

Unidentified Participant — — Analyst

Hello?

Narayan Iyer — Chief Financial Officer

Yes.

Unidentified Participant — — Analyst

Yeah. Firstly, sir, congratulations on a great set of numbers.

Narayan Iyer — Chief Financial Officer

Thank you very much.

Unidentified Participant — — Analyst

Yeah. So, sir, I have a few questions. So, firstly because of — in Q3, we had to have a plant shutdown, so can you quantify like what sales could have been lost during that period?

Narayan Iyer — Chief Financial Officer

Close to about INR80 crores to INR90 crores.

Unidentified Participant — — Analyst

Okay. And sir, out of all these facilities that we are having right now, all of these facilities are zero discharge?

Narayan Iyer — Chief Financial Officer

Currently Unit 2 in Mahad and Unit 6 at Jhagadia are zero discharge, and the other units, 1, 3, 7, we are progressing towards zero discharge.

Unidentified Participant — — Analyst

And we can expect them being zero discharge in a couple of years?

Narayan Iyer — Chief Financial Officer

Maybe by March ’23.

Unidentified Participant — — Analyst

Okay. Sir, basically if I was to just look at these specialty chemicals market when it comes to flavors and fragrances, it’s usually seen that a few products when they hit the market, for example, it’s musk or camphor based, they have a extreme long shelf life and it finds it’s usage in different kind of products and varieties. So, how does innovation play a role here because whenever a fragrance that hits the market, it’s usually such that the same product volume keeps on increasing and other players make the same product? So, how do we differentiate here or what is the key USP we have in this sector?

Narayan Iyer — Chief Financial Officer

Okay. The key USP is my technical capability to keep upgrading and innovating to manufacture these products to the satisfaction of each of our customers. Because every customer where could possibly be using the same musk, but they may have a purity level also almost on similar lines. But there is a nose perception, which is known as node, a high node or a low node or a medium node. So, this is something that we are manufacturing and we have been able to control the temperatures when we are manufacturing this on a continuous basis knowing what customers requires which particular nodes and so. And — so the customers are comfortable with the products that we are manufacturing and delivering it to them, and this could be the only differentiation that Privi has as compared to maybe some of its competitors that have because we are continuously innovating and improving on the processes and the technologies that goes into manufacturing some of these bulk aroma chemicals I am talking about, in fact.

And as far as the specialty aroma chemicals is concerned, very few in India are having the technical capability to manufacture the specialty aroma chemicals. Most of these specialty aroma chemicals from some of the overseas competitors that we are having and the overseas competitors were having an Indian arm in fact. So, there, the competition is purely on the technical front and how we are able to surpass on — do an edge as compared to some of our competitors. So, beyond that, even I can’t really visualize as to what could be a better answer than the product quality that we deliver to them.

Unidentified Participant — — Analyst

Yeah, I understand. So, is the pricing — when we talk about the — when we come to pricing because everything boils down to that, so our pricing is as competitive as that of the market in spite of having a better quality than them or how does the pricing go like on a like-to-like basis?

Narayan Iyer — Chief Financial Officer

Absolutely. Okay. So, on a like-to-like basis, we still continue to be an Indian company and I am very proud of it. However, some of the global players still feel that we are not possibly white skinned, so some of my global competition or competitors, they still have an edge as far as the pricing is concerned, but that gap has definitely come down what it was about 10, 15 years ago and what it is today. And I am in a position to get maybe a premium as compared to some other Chinese players who are selling or competing with us, in fact, on especially the pine-based space that we are operating on, in fact.

Unidentified Participant — — Analyst

Okay. And, sir, just a last question. So, we said in the recent comments you spoke about that most of these may be Chinese companies or any companies into this segment, they have these spot supplies being a major part of the top line taking advantage of maybe the pricing or inventory or whatever we call it. So, as a part of our revenue, sir, what is long-term contracts as a part of our total revenue? I mean, is it like our entire sales is based on — basically what I want to understand is that out of the current top line that we have done, how much would be towards long-term contract or how much would be towards spot because then our inventory is also structured in that manner?

Narayan Iyer — Chief Financial Officer

Okay. Broadly — see, the long-term contracts are only with the global MNC players, or even here a company in India like the SH Kelkar or Oriental now known as Camphor, so they — though they are competitors, but they are actually my main customers — main Indian customers also, in fact. And, of course, a host of other companies in India. So, no Indian company believes in giving long-term contracts, so they all believe in peer-based monthly or quarterly requirements or bi-monthly requirements. So, the global players are the ones who enter into long-term contracts. 80% of the major global players go in for annual contracts, about 5% or 10% go for quarterly and about 5% to 10% go for the half yearly contracts. So, contracts prima facie account for about 65% to 70% of my revenue. So, when we are formulating a budget, we ensure that all the main products that we are into and on the pine space, this can even go as high as maybe about 80%, 85%, in fact, so that the bulk of the volume of the pine and on the phenol, if I am able to contract to the top 30 players of the world, it gives me a great sense of relief to know that my annual budget for the next year will definitely be met or surpassed because then I am only left to a very limited number on the spot on the main products. And as far as the specialty and the other products are concerned, in fact, having a very less competition or we being one of the better players in this specialty chemical definitely we will be in a position to sell even in the spot market if we don’t have too much of long-term contracts. So, having said that, for this year also, we have fairly insulated ourselves to ensure that the number that I just talked about have been contracted with all my 15 to 20 major global players of the world, in fact.

Unidentified Participant — — Analyst

Okay. Can I — yeah. If I could just squeeze in another question?

Operator

Sorry to interrupt. Mr. Mehta, may we request that you return to the question queue for follow up questions?

Unidentified Participant — — Analyst

Yeah, yeah. Okay. And sir, all the best for the coming quarters and I hope that you achieve INR3,000 crores top line before your targeted.

Narayan Iyer — Chief Financial Officer

Thank you very much.

Operator

Thank you. [Operator Instructions] The next question is from the line of Chintan Modi from Haitong Securities. Please go ahead.

Chintan Modi — Haitong Securities — Analyst

Yeah. Hi, sir. So, the question that I was asking was with respect to the other expenses, whether there was any one-off in that during the quarter? Because if — when we look at sequentially, we have grown the sales by almost INR95 crores and we haven’t seen any operating leverage benefits flowing down?

Narayan Iyer — Chief Financial Officer

So, you’re only talking about the other expenses increase in this particular quarter?

Chintan Modi — Haitong Securities — Analyst

Yeah, yeah. Yes, sir. Yes.

Narayan Iyer — Chief Financial Officer

This other expenses increase in this quarter is on account of the phenomenal increase in the coal cost because in other expenses, you find the operating expenses of electricity, coal for generating the steam. So, coal cost has shot off from about INR7 or INR8 to close to INR16 and INR17, a bulk of it was also purchased at INR13 and INR14 and INR15 and INR16 and coal forms a very important part of a raw material for me because I require steam in all my products. Steam is an integral part of input to do my distillations or to do my chemical processes because without steam I will not be in a position to do any sort of a chemical reaction. The power cost in this particular quarter has been over the roof, so that’s one major increase, an increase of close to about INR3.5 crores, INR4 crores in this quarter itself I spend on power, that is on coal cost.

The second increase has been further increase in the freight expenses on the export freight. What you are not able to see is the freight expenditure on the RMC, which is actually coming as a part of the cost of raw material consumed and that also is a part mainly contributing to the increase in the RMC cost. But here in the other expenses, you have export freight and selling and distribution expenses, where if I had to compare on the June quarter because September quarter could be a misnomer because the volumes were not there. So, if I compare on June quarter or thus up to the September quarter rates, this quarter further there has been a deterioration in the rates on the export freight and export freight has jumped up by another 15%-odd from the rates that we were giving in September and close to about 22% increase from the rates that we were giving in June. Because we at Privi believe that it is customer who comes first and we go all out to ensure that the products reach my customers on time every time and for which we don’t mind even paying a little bit of extra expenses on the freight, this — we have absorbed it in the second and third quarter, but having delivered the products to my customers on time, most of the customers have ensured that there is an increase, they have also allowed us an increase in the freight expenses when we have quoted for the calendar year ’22, many of them have also agreed to foot the bill on the increased freight expenditure.

Chintan Modi — Haitong Securities — Analyst

Okay, sir. Got it. So — and second question is with respect to the mix between exports and domestic, whether there was any change with respect to that mix compared to our normal mix or it remained largely the same? And any specific trends that you could highlight in terms of the various geographies which are picking up?

Narayan Iyer — Chief Financial Officer

No, sir. Mostly — it is all almost on the same lines, there is not much of any change in the geography situation also. And Europe continues to be my major customer, followed by India and US is also a very, very important market for us almost contributing about 16%-odd of the thing. So, markets are almost same, in fact.

Chintan Modi — Haitong Securities — Analyst

Okay, sure. And just one last one that for next year, considering all the price hikes and that we have taken, can we assume your EBITDA margins to come back to the — your — you have been guiding like between 17% to 20% kind of an EBITDA margin range. Can we expect it to bounce back to those levels?

Narayan Iyer — Chief Financial Officer

Absolutely.

Chintan Modi — Haitong Securities — Analyst

Okay. Fine, sir. Thank you, sir. That was very helpful.

Narayan Iyer — Chief Financial Officer

Thank you, Chintan. All the best.

Operator

Thank you. The next question is from the line of Amar Mourya from AlfAccurate Advisors. Please go ahead.

Amar Mourya — AlfAccurate Advisors — Analyst

Sir, thanks a lot for the opportunity again. Sir, just to understand a little bit on this other income, as you were indicating that this other income large quantum is basically a kind of operating income. So, how much percentage of this INR10 crore would be like kind of an operating income we can consider?

Narayan Iyer — Chief Financial Officer

INR9,96,48,445.

Amar Mourya — AlfAccurate Advisors — Analyst

Okay. So, this large part is like operating income only?

Narayan Iyer — Chief Financial Officer

Absolutely.

Amar Mourya — AlfAccurate Advisors — Analyst

And — yeah. And secondly, sir, like just to understand as you indicated like INR3,000 crore kind of a revenue in, let’s say, two and a half to three years. So, is it like this will be more front-ended, let’s say, considering ’23 will be the first year or it will be more back-ended kind of thing like coming in second or third year?

Narayan Iyer — Chief Financial Officer

No, Amar, I am not able to follow your question.

Amar Mourya — AlfAccurate Advisors — Analyst

Sir, so basically what I am saying here is that reaching the INR3,000 crore mark, let’s say, in next three years, right, so largely, let’s say, we will be closing the year at, let’s say, around whatever number and assuming that ’23 will be the first year, ’24 will be the second year?

Narayan Iyer — Chief Financial Officer

Yeah, absolutely. Yeah, absolutely. Okay, okay. So, what you are suggesting is, yeah, about two, two and a half years from now, that’s correct.

Amar Mourya — AlfAccurate Advisors — Analyst

Yeah, yeah. Sir, so basically is it like linear kind of a number or like — because as you said that first year will be like a 40% kind of utilization for the expanded capacity and the new capacity, let’s say, specialty will pick up also in the second half. So, is it like the second year would be a normalized growth year or because when I divide this number into three years basically we see a very hyper growth in your company?

Narayan Iyer — Chief Financial Officer

You can expect that. So, if we spend a huge amount, you should expect that sort of a growth also because this money, what we have spent, has to give me the returns also. Otherwise, we are not interested in spending such INR500 crores or INR600 crores and ensure that we don’t grow, right.

Amar Mourya — AlfAccurate Advisors — Analyst

Okay. Because then you are just talking about more than 25%, 26% growth every year basically.

Narayan Iyer — Chief Financial Officer

Possibly yes. You have seen Privi growing at a CAGR of about 20%, 22% even the last 10, 12 years broadly. So, here, we are talking about — and those time, we were not embarking upon such ambitious projects as we are now doing around and, of course, our bandwidth has also improved. We have good investors like you, we have good — very good bankers who are ready to possibly fund us, we have some good set of private equity investors who have also helped us in this journey. So, I really feel that growing at possibly anywhere between 22% and 27% on a yearly basis should not be a difficulty. There have been some bad years because the prices on some of the aroma chemicals fell very, very low. So, with markets realizing that what should be the correct value of the most of the aroma chemicals and the specialty chemicals, I do believe some of these will come from price escalations and most of it will come from the expansion that we are doing on our capacities, the new products as well as going forward some of the existing products, where we — as I have been and as we in Privi keep saying that it is our zeal and focus to ensure that we maintain our market share on all the top five products as well as on the two phenol products at Jhagadia. We would like to maintain the market share. And if that keeps happening around, INR3,000 crores in the next two to three years should be definitely achievable.

Amar Mourya — AlfAccurate Advisors — Analyst

Thank you, sir. Thanks a lot. Best of luck for the future.

Narayan Iyer — Chief Financial Officer

Thank you very much.

Operator

Thank you. The next question is from the line of Rohit Nagraj from Emkay Global. Please go ahead.

Rohit Nagraj — Emkay Global — Analyst

Yeah. Thanks for the opportunity, and congrats on a very good set of numbers.

Narayan Iyer — Chief Financial Officer

Thanks, Rohit.

Rohit Nagraj — Emkay Global — Analyst

Yeah. Sir, the first question is, probably it might be a difficult question and — so if I am attending the calls for the first time, we have said about INR3,000 crores of top line, how are we placed from the business development team point of view for both our domestic as well as overseas markets? I mean, have we expanded the team we are currently in terms of expansion and how are we placed from that perspective? Thank you.

Narayan Iyer — Chief Financial Officer

Okay. We are not a B2C company, we continue to be a B2B company prima facie. So, that’s a reason that we may not require too much of people at the marketing or the business development level. Having said that, there are two — the new product that is now going to come about camphor, so camphor is a product which is more Indianized, I will say that. It is — a camphor has got a huge amount of relevance religiously and possibly even pharmaceutical-wise also, in fact, for medicinally-wise also, and India is a huge consumer of camphor. I do believe that we may have to possibly look at selling camphor a little differently than what we have been selling on the aroma chemical — other aroma chemicals per se, in fact. So, that’s a strategy that we have already evolved at the company level and our marketing business development people at the business development team has really strengthened up themselves to ensure to enter into the camphor market with all the zeal as much as they have been doing on all the other products. So, that’s the only change that will require how to sell camphor because this will not be a sale that can happen at a 60-day credit or a 90-day credit. As you know, most of the camphor manufacturers are in a position to sell this maybe across the counter in a seven-day or a 10-day, 15-day, 30-day, I think not beyond 30-day credit period not many manufacturers are offering today, in fact. So, those could be some of the changes that we are gearing up internally in our company also.

And as far as the people and the structure per se for achieving almost double the sale that we will be doing in about two to three years time, the company already has good two tier and three tiers of top level, middle level people, all professionally qualified in most of the departments and most of the areas, whether it is the — starting from my own finance, I have a good solid two to three layer people, there is a VP Finance already in place, there is a GM Finance, in fact, and then you have Deputy GMs heading each Functional Head whether it is the banking per se or their taxation per se. So, those structures have been put across. Similarly in the production level, each of the units are considered as SBUs and above them there is going to be a functional head, then you have a VP at the sectional places overall in charge that is also at the very senior level. And all these functions — at business development also, there is country-specific heads, then you have the CRM that is the customer relation managers most of the strategic and key customers that it is so, and then you have the India head. So, that way, those layers are put in place, in fact, and we do believe that what we have done in the last three, four years it should help us really go ahead and meet the target of 2x Privi and possibly beyond that whenever we come out with various launches, we should be in a position to handle that sort of a volume. At the operational level, we will possibly require some new people, some new thought process. So, that recruitment keeps happening around and HR is on their toes to ensure that those requirements are met ASAP, in fact.

Rohit Nagraj — Emkay Global — Analyst

Right, sir. That was a really comprehensive reply. Sir, just aligning to that in terms of the succession planning from the promoters, any thoughts?

Narayan Iyer — Chief Financial Officer

Okay. As you are aware, we are having two promoters, the Rao family and the Babani family. As far as the Rao family is concerned, his all three sons are in the Privi business basically, so one of them is heading the US operations, entire marketing and sourcing and procurement and et cetera. His eldest son is already into the technical front, he has been serving Privi for almost more than now 15, 20 years, he is basically a chemical engineer and he is a part of the production gamut, in fact. And his — the elder son is a person who is second in line to the commercial head as of now, in fact. So, the Rao family is very much into the Privi business. And the succession has been thought about. And the main promoter, Mr. Mahesh Babani, who is the Chairman and MD, his eldest daughter is already — is a finance professional and she has been into the company’s finance and a little bit of the marketing operations, et cetera, and she does help us in getting an overview of that. So, training has already been imparted, so that the succession planning for Mahesh-bhai to pass it on to his eldest daughter, Snehal Babani, happens around and possibly at the right time a few announcements will also be made up.

Rohit Nagraj — Emkay Global — Analyst

Got it. That was very helpful. The second question is in terms of R&D, you explained the process in terms of the number of products in pipeline. So, generally, what are the criteria that are used to screen the new products in terms of, say, market size, margins or return ratios, competition, how do we usually screen on those once these are successfully done in the lab as well as pilot testing and we want to go in full commercial?

Narayan Iyer — Chief Financial Officer

Excellent question, and I am very happy that someone from the investor fraternity has asked this question, like we keep talking about R&D, R&D, R&D. A very beautiful question and the answer to that is also very interesting. Our — all our new products that we look in at R&D are basically customer-driven. So, as we say that we give huge importance to most of our customers and Mr. Mahesh Babani who takes care of the R&D as well as the marketing, in fact, in his various visits to the customers or in various seminars and conferences across the globe that we attend on the pine space as well as on the aroma chemical space, the hunt is always that is to what could be the new molecules that Privi can manufacture to grow apart from, of course, growing in the space that we are already into. And these ideas culminate from various of the customers across the globe or sometimes it also eliminates — comes across from our competitors who try to talk about and look into it. So, this hunch is picked up from there, then — and study of the market is done. Then we come back and try to find out what could be the source ingredient and the technical capabilities that it will be requiring to manufacture such products, is it within the so-called purview of Privi that we are doing it and if not how different it is from Privi’s own vision of the four main key space that we are into, whether it will be possible or not possible. Sometimes even if it is…

Operator

Sorry to interrupt. The line for management is disconnected. Please hold while we’re reconnecting. Ladies and gentlemen, the line for management is reconnected. Thank you, and over to you, sir.

Narayan Iyer — Chief Financial Officer

Yeah. Okay. Thank you. Thank you, Jacob. And Rohit, sorry, I think the line got disconnected for some reason, in fact. Can you just possibly tell me till — where I was audible for all of you, in fact?

Rohit Nagraj — Emkay Global — Analyst

Yeah. You were talking about you get those connects from the customer competition and then you come back and you start working on the drawing board in terms of sourcing the raw material, et cetera…

Narayan Iyer — Chief Financial Officer

Absolutely. And in some cases, it is also market driven as I said as was so in the case of Galaxmusk, in fact. And we — first and foremost, we do it at our lab scale. And you are aware that both our R&D centers are recognized by Government of India. Post doing it at that lab and getting a clear picture as to what are the products and what are the ingredients that are going into manufacturing this product, we also do a very deep stick study on — with regard to the market for the product, how it could be, what could be the margins, what could be the IRR, potential market for the product, who are our competitors currently, how good are their relations with our customers, where they are selling it across and how much — how many of our customers are ready that if at all Privi looks at manufacturing these products we shall be in a position to get a share, what could be the share that we can look and tap it and finally what could be the growth potential going forward once we enter into this market in the next three, five, 10, 15 years. So, honestly speaking, all this is done about, a complete IRR is done, a feasibility study is undertaken, a deviation — a delta deviation study is also undertaken what if it doesn’t happen, there is a 10%, 5%, 15%, 20% deviation to what we are thinking about on being a practical and an optimistic guy and then thereafter we go in and look in to invest into this particular CapEx, in fact. And we have a robust CapEx committee and we have a beautiful independent Board, where all these projects are put forth, the IRRs are calculated, there is a beautiful discussion that happens around and a consensus is vowed around and then only we go ahead and take the step of actually starting spending money on commercializing a project.

Rohit Nagraj — Emkay Global — Analyst

Right, sir. That was really helpful and comprehensive answer. Thanks a lot, and best of luck to you, sir.

Narayan Iyer — Chief Financial Officer

Thank you very much, sir. Thank you. Thanks, Rohit.

Operator

Thank you. [Operator Instructions] The next question is from the line of Aman Vij from Astute Investment Management. Please go ahead.

Aman Vij — Astute Investment Management — Analyst

Good evening, sir. My first question is on, when we reach that INR3,000 crore sales number, what kind of volumes will we be doing as well as what kind of gross profit we can achieve, gross profit margins?

Narayan Iyer — Chief Financial Officer

So, volume could be closer to the 50,000 ton mark, so that’s the expansion that we have already put in and it’s going to be there by March ’22 and my existing is around 37,000 tons plus and minus 10% here and there, I think that’s what we are looking between 47,000, 48,000 to 52,000 tons, we should be in a position to touch closer to the INR3,000 crore mark. And gross margins, I will not get into too much of nitty-grittys, but as we have kept repeatedly telling the investors and all of you, you should be looking at a margin anywhere between 17.5% to 20%-odd on the EBITDA level.

Aman Vij — Astute Investment Management — Analyst

Sure, sir. If you can briefly talk about, we have four segments, specialty, citral, phenol and pinene. If you can talk about where are the gross margins the highest, if you can give it in order, I’m not asking exact numbers, but…?

Narayan Iyer — Chief Financial Officer

So, specialty — definitely specialty, the gross margins are the best there because these are highly, high, high specialty products, very less competition, so the margins are beautiful. The second one could be on the pine-based because we have now backward integrated ourselves, so we have isolated ourselves from the vagaries of the Chinese and the spot market players. So, that’s going to be my second space. The third will be the citral and the sandal-based products. And last but not the least is the phenol. Phenol is something, which is bulk volume, very lesser margins, in fact, and — but it is required in every blend. So, this is how I could possibly tell you how the gross margins work about.

Aman Vij — Astute Investment Management — Analyst

So, just one clarity. The three projects which we are doing, what is the peak sales we can get in Camphor, Prionyl and Galaxmusk, respectively?

Narayan Iyer — Chief Financial Officer

If we are able to sell all the three to its full potential, you can expect a sale of anywhere between INR700 crore to INR1,000 crore.

Aman Vij — Astute Investment Management — Analyst

This is three projects combined, sir. I am asking individually if you can give a range?

Narayan Iyer — Chief Financial Officer

I will have to calculate and possibly maybe in my next presentation, I will be ready with that calculation too, broadly. If I have to get back into my numbers, 4,500 tons of camphor average — because it all depends as to what sort of a mix I will be selling the camphor. Because if I am going to sell everything on pharma grade, my revenue will be different. If I am going to sell something on the IP grade, the revenue will be different. So, I can only possibly tell the mix once I start manufacturing camphor and sell in the market. So, there could be a trend that maybe it’s 50% perfume grade, 25% industrial grade, 25% pharma grade, fine, so I know this could be an average. So, those things are too early today for me to really state what could be exact turnover of camphor. I can only talk about volumes when I am talking it is 4,500 tons of camphor and 4,500 tons of Galaxmusk. So, the permutation combination will be left as per the demand for those products from the market, in fact.

Aman Vij — Astute Investment Management — Analyst

Sir, Camphor if you leave out, what is the peak revenue from Prionyl and Galaxmusk, if you can talk about those things?

Narayan Iyer — Chief Financial Officer

I told you, close to INR800 crores for all three products put together.

Aman Vij — Astute Investment Management — Analyst

Okay, sir. Thank you. I will get back in the queue.

Narayan Iyer — Chief Financial Officer

Yeah.

Operator

Thank you. The next question is from the line of Zubeyr from Mondrian Investment Partners. Please go ahead.

Zubeyr Singh — Mondrian Investment Partners — Analyst

Hi, Mr. Narayan. Thank you very much for this presentation.

Narayan Iyer — Chief Financial Officer

Hey. Hi, Zubeyr. Good to hear you back, in fact.

Zubeyr Singh — Mondrian Investment Partners — Analyst

Thank you. I do want to understand, so we are talking about the INR3,000 crores for the next two three, years, I know we discussed sometime beyond that. I want to understand that the numbers beyond that figure, does that include menthol or are we talking about menthol being an optionality there and the existing utilization of the top five products and the new three products would take you to the numbers beyond INR3,000 crores?

Narayan Iyer — Chief Financial Officer

Menthol will definitely be in the story beyond INR3,000 crore. So, as and when it happens, it will happen around. Initial launch was done on November 1st. And as our MD himself stated and I have personally also spoken to you and many investors, it is at the pilot level. At the research level, we have been able to successfully crack the novel technologies that we talked about and which is also there on our investor presentation. So, as and when — it takes about five to six months for the pilot to really do a simulation as to what’s done in the R&D level for us to really take the next step, of course, whether we can go ahead and commercialize the so-called technology that we are talking about. So, as of now, I may not be in a position to give you too much of details what is beyond INR3,000 crores. So, definitely up to INR3,000 crores, it’s very clear with all the CapEx, with all the expansion that we had done, INR3,000 crores looks very much in sight, in fact, in the next three years.

Zubeyr Singh — Mondrian Investment Partners — Analyst

And just one other thing would be on the other expenses. I know you’ve discussed the power and fuel and the freight, which is very understandable, but one thing you see as you’ve grown that the other expenses have grown year-on-year even as a percentage of your revenue. So, that’s fine, you’ve grown. But at what point can you expect a level of operating leverage, where we do see some sort of reduction — not — even if not reduction, but at least that expense flattening out? Or do you think the current power and fuel and the forwarding cost, do you think they’ve peaked and we expect some normalization as we move into next few quarters and years and that broader number as a percentage of your revenue in a longer-term perspective, please?

Narayan Iyer — Chief Financial Officer

Okay. You are talking about what could be the idealistic situation of the numbers with regard to the fixed expenditure mitigating the volume of sales. Yeah, so it’s — prima facie if you see my fixed expenses actually have not gone up even in this particular quarter, it is the variable expenditure which has shot up in this particular quarter, the quarter that’s just gone, the bygone quarter. So, whether it has been the fuel or the freight expenses or some of the RMC costs, all this contribute directly to the variable expenditure. The fixed expenses has been very nominal, in fact it has reduced because there is actually very limited travel happening around because of the pandemic that’s going around. The salaries have been frozen for the last one, one and a half years, there has not been too much of a hike within the company, in fact, and most of the expenses are under tight scrutiny. So, the budget itself is very, very low. So, I can only visualize that going forward from the quarter of January ’22 or the Q1 — Q4 for Indians and Q1 for you and based in London, you will see a change in the operating margin because the volumes definitely are going to increase, so is the revenue — I am talking about. And to also inform all the investors that the sale performance — or the revenue performance that Privi has clocked in the third quarter, that is December 31, 2021, is a record, is a record for Privi. We were not able to do the INR400 crore mark in the consolidated one, but however, we are capturing the other income somewhere around INR405 crore. But it was a zeal that we do INR400 crore in this quarter itself. Having said that, we should be able to definitely clock much better revenue starting from this quarter downwards from our existing product streams itself and with new products coming in and most of the contracts will start settling from July and bulk of it will start coming from December 2022. I feel Privi is in up for good times and the variable expenses have already been considered, while we have gone ahead and taken some of the price escalations from our customers and spot business definitely we look into what could be the best and how best we can absorb some of these expenses in the spot sales that’s happening around. So, you will see normalcy getting restored from this quarter itself and better off it will start coming in from the Q1 of 2022.

Zubeyr Singh — Mondrian Investment Partners — Analyst

Just a very quick question on the mix, so would it be 65/35, 35 fixed and 65 variable cost for you?

Narayan Iyer — Chief Financial Officer

Overall variable could be about 70% and balance will be fixed. Yeah, so your fixed cost will be about 15%-odd, so your percentage of profit should improve around, in fact.

Zubeyr Singh — Mondrian Investment Partners — Analyst

Okay, that’s fine. So, 70/30 is the breakeven?

Narayan Iyer — Chief Financial Officer

Broadly. Broadly, yeah.

Zubeyr Singh — Mondrian Investment Partners — Analyst

Okay, that’s fine. Thank you very much. Appreciate that, Mr. Narayan.

Narayan Iyer — Chief Financial Officer

Thanks, Zubeyr.

Operator

Thank you. Due to time constraint, that was the last question. I now hand the conference over to the management for closing comments.

Narayan Iyer — Chief Financial Officer

Thank you all of you investors. It’s been a pleasure talking to you all, talking and interacting with all of you. I can only say that Privi stands for commitment and deliverables as far as the aroma chemical space is concerned. Of course, now we have an added responsibility for creating wealth to our investors, but our track record and history says that whoever having our investors, whether it was privately held or now publicly held, investors have always been happy around because our promoters mean business, our promoters only talk sleep, eat and is completely passioned towards the aroma chemicals. So, with such a strong focus from the key promoters and a very, very, very strong lineup of the professionals who run this business or run Privi here, we are in for good times going forward. And the next two, three years looks to be very, very prominent for Privi and all those people who are associated with Privi.

So, on that front, a great weekend to all of you, enjoy the balance day of Friday and thank you very much and stay invested in Privi. That’s what I will say. Thank you.

Operator

[Operator Closing Remarks]