Rhi Magnesita India Ltd (RHIM) Q3 FY23 Earnings Concall Transcript

Rhi Magnesita India Ltd (NSE:RHIM) Q3 FY23 Earnings Concall dated Feb. 13, 2023.

Corporate Participants:

Parmod Sagar — Chief Executive Officer & Managing Director

Vijaya Gupta — Chief Financial Officer

Analysts:

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Rajesh Majumdar — B&K Securities Limited — Analyst

Dhananjai Bagrodia — ASK Group — Analyst

Jonas Bhutta — Aditya Birla Sun Life Mutual Fund — Analyst

Sanjay Kumar — PMS — Analyst

Kamlesh Kotak — Asian Market Securities — Analyst

Sahil Sanghvi — Monarch Networth Capital — Analyst

Vipul Shah — RippleWave Equity Advisors LLP – — Analyst

Jinal Sheth — Awriga Capital Advisors LLP — Analyst

Gunjan Kabra — Niveshaay — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q3 FY 2023 earnings conference call of RHI Magnesita India Limited, hosted by HSBC. [Operator Instructions] Please note that this conference is being recorded. From the management team we have with us today Mr. Parmod Sagar, MD and CEO; and Ms Vijaya Gupta, CFO. We will start the call with brief opening remarks and then open the call for Q&A.

I will now hand the call over to Mr. Parmod Sagar for opening remarks. Thank you and over to you sir.

Parmod Sagar — Chief Executive Officer & Managing Director

Thank you very much. Good evening, everyone. I’m Parmod Sagar, Managing Director and CEO of RHI Magnesita India Limited and with me is Ms Vijay Gupta, Chief Financial Officer. I will start with some updates on our recent acquisitions followed by RHI Magnesita’s Q3 financial results for 2023. We executed on India refractory business of Dalmia Bharat Refractories Limited via shared swap agreement that we got January 5, ’23. DOCL being one of India’s leading refractory player and a long-term trusted partner to customers in the region.

It marks the [Indecipherable] step in RHI Magnesita’s strategic growth plan and will enable us to integrate company to increasingly serve our customers with our local for local approach while offering a broader range of products. DOCL gives us a strong inroads into the Industrial segment of the market, we have traditionally, we have been less prominent. Also gives us production footprint in the western and southern markets where we had no manufacturing capacity earlier. Further, we have executed the business transfer agreement with Hi-Tech Chemicals on October 19, 2022 by way of slump sale.

And the process of acquisition has been completed on January 31, 2023. It manufactures high-quality flow control products largely for steel industry. It also has some products for iron-making as well. Hi-Tech will strengthen and in large companies product offering and position in domestic and international flow control refractory business. Both these acquisitions put together takes our local production capacity to be are 5 lakh tons per annum and our market share to about 30%. We have something about 150,000 of unused capacity, which would be sufficient to meet the future demand of the consumer industry for the next couple of years.

We have planned for modernization of the newly-acquired manufacturing assets where we would be focusing on this for next one to two years’ time. The company registered 32% growth in income compared to the nine months of the previous financial year. The 9 month financial year 2022, ’23 income stood at INR1,860 crores. I repeat, 1-8-6-0 crores as compared to INR1,413 crores during the 9 month financial year 2021-2022. The PBT stood at rupees INR287 crores during this period as against two INR227crores during 9 months financial year ’21-’22 impacting PBT margin by minus 0.6% due to higher-cost of trading goods and foreign exchange fluctuations.

Looking forward, all our key strategic initiatives to support future growth and further profitability improvements are now fully on track. On the M&A front, for the integration of Hi-Tech and DOCL, we have initiated a project exclusively named [Indecipherable] to focus on integrating the companies into that RHI Magnesita to leverage the full strength of both companies along RHI Magnesita best talent. The project aim to work together for full integration of the business and drive the maximum common value and synergies. Industry looking-forward on production, the demand from — continue to remain positive.

In fiscal 2023, the cement production is expected to grow by double-digit. This will increase the consumption share across the cement industry significantly. Crude steel production is a better to grow by 4% and aluminum production by 1.5% to 2% in fiscal 2023. Thus the increased production of end-use industry of refractoriness will positively impact the demand in fiscal 2023. Refractory industry demand is expected to reach 1.6 million tonne in fiscal 2023, growing by 6% year-on year basis.

Thank you very much.

Questions and Answers:

Operator

[Operator Instructions] We take the first question from the line of Viraj Kacharia from Securities Investment Manager. Please go ahead.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Yeah, hi, thank you for the opportunity. Just had a couple of questions. First is so sometime back before these acquisitions we had outlined a capex of around INR350 crores to INR400 crores and with all these acquisitions in all, we have a sizable under-utilization in terms of the capacity. So overall capacity of 5 lakh tonnes, we’re operating around 65%, 70%. You also mentioned that we have sufficient capacity available to meet future demand.

So the question is that in one of the press articles few days back we talked about on the overall capex of $400 million and in spend of somewhere between $35 million to $40 million. So can you just provide a perspective in terms of where are — we what is the capex for and how are you seeing the overall demand and play for us the mix three to five years?

Parmod Sagar — Chief Executive Officer & Managing Director

Okay, thank you very much. Very valid question, and actually my apologies the journalists who was interviewing Stefan actually misunderstood. Stefan, we have spent EUR400 million in our acquisition and further capex, okay? So we already spend almost two $265 million to $270 million, $370 million on these acquisitions and all. And next $25 million, $30 million was the only capex which we were thinking we will spend in that three to five years’ time. Is it clear now?

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Yes, sir. So basically then the second part of the question which is lastly, there was the overall demand environment, either in terms of export and domestic. Now, where you see opportunities for growth? So now we are almost 30% of the market, but there was — we still have very low wallet share [Indecipherable]. And similarly in terms of exports, sir, how do we see growth panning out for us for next three to five years? Can you just provide perspective on that? And we also have — the parent also has a trading business of somewhere around INR500 crores to INR600 crores, so any update on that, if you can share?

Parmod Sagar — Chief Executive Officer & Managing Director

Sure, so I will split this question. I’ll answer in two, three parts. One is the domestic demand. That industry in general, whether it’s steel or cement or glass, the demand is very strong and in spite of having 30% in our market share we see many opportunities to grow the business further, particularly in a few segments where we are not as strong as we can be so there are opportunities to increase the business over there.

If we talk about the export short-term, I would say there is headwinds because of this ongoing war between Russia and Ukraine resulting into short of business in those countries, which we were traditionally doing. And at the same time, it has created this energy crisis in the European region. So because of this, the demand in Europe is subdued I would say. It is like in a recession, so I don’t know really when it will come out of that. But short-term, I would — don’t see any upsurge in export, but in the long-term, we expect that our export will rise to something like 24%, 25% from 17%, 18%, which is now. I hope I cover everything.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Yeah, just one last question, and I’ll come back in the queue.

Parmod Sagar — Chief Executive Officer & Managing Director

Trading, trading. Yes, we are doing some trading business, as you said, INR500 crores, INR550 crores. So this will continue. Though going forward, maybe it will come down a little bit, because if we will start producing some of the products in India with a capacity available now. So this may come down in coming days.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

So my question was more on the trading which the parent entity does, which is outside the RHI Magnesita India.

Parmod Sagar — Chief Executive Officer & Managing Director

I’m not clear, can you come again.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Yeah, I’ll just follow-up on this a little bit clear. One last question and I’ll come back in queue. On the fund raise we talked about close to INR1,500 crores is what you’re looking to raise the money. And since we don’t have any capex requirement the current [Indecipherable] itself from the combined entity will be significant to repay even after the capex. So what is this INR1,500 crores fund raise for — if you can give some color, what is the thought process behind?

Parmod Sagar — Chief Executive Officer & Managing Director

We want to raise this money to repay the loan to some extent and maybe about 20%, 25% is [Indecipherable].

Vijaya Gupta — Chief Financial Officer

Essentially, we have borrowed, so — and for other purposes, so that we are — we have sufficient gearing to take care of the opportunities, if it comes in future.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Okay, so you said 20%, 25% is for other corporate purpose that’s almost like INR300 crores, INR350 crores. So anything in particular there?

Vijaya Gupta — Chief Financial Officer

Right now, we’re not in a position to clarify much.

Viraj Kacharia — Securities Investment Management Pvt Ltd — Analyst

Okay, I’ll come back in queue. Thank you.

Parmod Sagar — Chief Executive Officer & Managing Director

Thank you.

Operator

Thank you. Our next question is from the line of Rajesh Majumdar from B&K Securities. Please go ahead.

Rajesh Majumdar — B&K Securities Limited — Analyst

Yeah, good evening, sir.

Parmod Sagar — Chief Executive Officer & Managing Director

Good evening Rajesh ji.

Rajesh Majumdar — B&K Securities Limited — Analyst

Yeah. I just had two questions. One was that the gross margin we see this quarter is the lowest since we saw in 2Q FY ’21, that is about 34%. We’ve been normally doing between 37% and 38%. Last year at the same time, we did 41%, 42%, but that was another issue. But we’ve come down to 34%, so how should we see the gross margin sustainable going forward? That was the first question, sir.

Parmod Sagar — Chief Executive Officer & Managing Director

Okay. So the gross margin has come down. There are two reasons. One is our own material cost which has gone up because during somewhere I think August onwards, was going up and we had some good inventory in hand, which is of high cost and then all of a sudden normally the prices start diluting or a softening October onwards. So that high value inventory was in place and at the same time this devaluation of Indian currency hit us badly around 11% or so. So this is the reason.

Rajesh Majumdar — B&K Securities Limited — Analyst

Okay, so will that continue into fourth quarter as well, inventory or is it already out-of-the system?

Parmod Sagar — Chief Executive Officer & Managing Director

Yes, this quarter. Running quarter, it will have some impact, a little less than last quarter. But April onwards I think we will have a full present price inventory in place.

Rajesh Majumdar — B&K Securities Limited — Analyst

Okay, and sir my second question was you mentioned that you were raising the funds for repaying that means you have already taken on debt because as of September 30, we hardly had any debt. So what is the debt right now we have?

Vijaya Gupta — Chief Financial Officer

Yeah, that’s right. To fund these acquisitions we have taken loans. And that is what — it is around — we have approval of INR1,300.

Rajesh Majumdar — B&K Securities Limited — Analyst

Okay, so the fund raise is — so this loan is more of a bridge loan for the acquisition kind of thing after which probably repaid with this fund raise is that correct?

Parmod Sagar — Chief Executive Officer & Managing Director

Yeah.

Rajesh Majumdar — B&K Securities Limited — Analyst

Okay. And sir my last question was on DOCL. What do you see sustainable top-line and margins in this company, because last year, so it is a 10% margin and INR900-odd-crores of turnover. So is a steady state [Indecipherable] 85% utilization and by which year can we see that?

Parmod Sagar — Chief Executive Officer & Managing Director

It is very early stage to predict any numbers as of now. We have just acquired Jan 5 and we are just evaluating plant-by-plant, product-by-product. So as of now, it’s really difficult to predict where we in future I will be able to give you some good news.

Rajesh Majumdar — B&K Securities Limited — Analyst

Okay, okay. Thank you, sir. Thank you so much.

Operator

Thank you. We’ll take our next question from Dhananjai Bagrodia from ASK Investments. Please go ahead.

Dhananjai Bagrodia — ASK Group — Analyst

Hi sir, thank you. Thank you for the opportunity. So wanted to understand this market share of 30%, could you basically sub — across which segments and how that works, which segments are 30% in? Yeah, that’s the first question.

Parmod Sagar — Chief Executive Officer & Managing Director

So basically if we talk about 100% business of us so 30% is divided — out of this 30%, 72% is steel and 28% is industrial post merger. And when I say industrial, it is cement, glass, non-ferrous, lime, EC, everything.

Dhananjai Bagrodia — ASK Group — Analyst

Okay. Sure and sir, just wanted to understand how much of our business would be sticky, let’s say, if there is a slowdown tomorrow in steel across then in our business across our three segments, how would that — how it would — would our revenues also drop in line with utilization drop or how would that play?

Vijaya Gupta — Chief Financial Officer

Yeah, I’ll just take this question as — Dhananjai what happens is steel companies keep producing even in a downturn and actually we do not see any such trend because our demand is quite robust. And we see steel growing at a rate of 10% to 12% in the coming years.

Dhananjai Bagrodia — ASK Group — Analyst

Okay, so then would it be fair to assume that even [Indecipherable] incremental growth is happening regardless of utilization level?

Parmod Sagar — Chief Executive Officer & Managing Director

Your voice is very low. Can you please speak a little louder?

Dhananjai Bagrodia — ASK Group — Analyst

Hello. Yeah. So it’s fair to assume that even with the downturn as such if there would be one our demand will still keep growing?

Vijaya Gupta — Chief Financial Officer

Yeah our demand will be high.

Parmod Sagar — Chief Executive Officer & Managing Director

I would say, differently. I would say as of now the thrust from government is on infrastructure. So that’s what Vijaya is trying to say. As of now, we can see that the margin will continue like this.

Dhananjai Bagrodia — ASK Group — Analyst

Okay, sure. And lastly, between the three companies now since we now have a merger between the three between RHI, and now High-Tech and now Dalmia, what would be the return ratios and profile of each company in terms of how they are segmented — positioned segmentally?

Vijaya Gupta — Chief Financial Officer

What we see is together, we will be able to add some margin around 14% to 15%. Individually as Sagar sir has said, it’s too early to make comments because we are still evaluating. Yes, we’ll unlock production capacity what we have — unlock synergies and Hi-Tech, which have acquired is high on value-added segments. So that should benefit. But long-term sustainable is 14% to 15% EBITDA margins is what we’ll see.

Dhananjai Bagrodia — ASK Group — Analyst

Okay, fine, sure. Thank you. I’ll come back.

Operator

Thank you. We’ll take our next question from the line of Jonas Bhutta from Birla Mutual Fund. Please go ahead.

Jonas Bhutta — Aditya Birla Sun Life Mutual Fund — Analyst

Good afternoon, good evening, team and thank you for arranging this interaction. So firstly, just wanted to understand do these quarter numbers include Hi-Tech?

Vijaya Gupta — Chief Financial Officer

No. We acquired it Jan 31 so will be integrating only for March 7 numbers.

Jonas Bhutta — Aditya Birla Sun Life Mutual Fund — Analyst

In the fourth quarter Hi-Tech would come in and would Dalmia also come in or that’s even later?

Parmod Sagar — Chief Executive Officer & Managing Director

Yeah, Dalmia will also come in. It will have a standalone, but we’ll consolidate as well.

Vijaya Gupta — Chief Financial Officer

Because it’s 100% subsidiary.

Jonas Bhutta — Aditya Birla Sun Life Mutual Fund — Analyst

Understood. And ma’am, while you did mention that you have to limit for INR1,300-odd-crores what is the actual drawn down on the balance sheet as on date?

Vijaya Gupta — Chief Financial Officer

INR1,070 crores.

Jonas Bhutta — Aditya Birla Sun Life Mutual Fund — Analyst

INR1,074 crores.

Vijaya Gupta — Chief Financial Officer

As of now, yeah.

Jonas Bhutta — Aditya Birla Sun Life Mutual Fund — Analyst

INR1,070 crores.

Vijaya Gupta — Chief Financial Officer

INR1,070 crores, yeah, that’s right..

Jonas Bhutta — Aditya Birla Sun Life Mutual Fund — Analyst

And Sagar, sir, I missed out on your explanation as to what led to this gross margin compression.

Parmod Sagar — Chief Executive Officer & Managing Director

I said one is raw material cost, because the inventories are as of high-value at a higher price bought-out and second is devaluation of Indian currency 11% roughly impact of forex loss.

Jonas Bhutta — Aditya Birla Sun Life Mutual Fund — Analyst

So today with these two acquisitions where does our traded goods purchases go down to as in today, what is the in the 9 months the percentage of our sales and on a sustainable basis going-forward with the acquisition, where does it go down to in two years?

Parmod Sagar — Chief Executive Officer & Managing Director

As of now, roughly we have 20%, 22% goods. In particular quarter last quarter I think it was 38% or so but average if we talk about say INR2,400 crore business and the markets that it is 20% to 22%, so. But I cannot quantify how much it will come down, but definitely it will come down if we start producing locally. But it will take time. We have to optimize product mix and what product we will produce in what plant. What is the logistic costs, what is — dynamics of that plant servicing has to be looked into we have — as a I said beginning we have created a project, Milan [Phonetic]. We have of upstream of all operations, finance, HR everything so operational workstream is looking into it. And what makes sense to produce in India what makes sense to produce in India but in which plant. So they will be working out everything and I think the next three to four months’ time we will have a clear picture.

Jonas Bhutta — Aditya Birla Sun Life Mutual Fund — Analyst

Got it, thank you, sir, come back in the queue.

Operator

Thank you. We’ll take our next question from the line of Sanjay Kumar [Phonetic] from PMS [Phonetic]. Please go ahead.

Sanjay Kumar — PMS — Analyst

Hello, sir, thank you for the opportunity. First is on DOCL. In DBRL standalone balance sheet, there is only INR40 crores of earned debt. So why are we taking on INR440 crores? Is it because Dalmia is transferring the research from DBRL to DOCL on slump sales basis and then selling to RHI? So for the transfer DBRL will receive INR393 crores. So will this hit as a liability in RHI? What is the accounting methodology and what is the structure of these cash outlays? Is it based on milestones, pure debt?

Vijaya Gupta — Chief Financial Officer

Yeah. Sanjay just to answer your question the total purchase consideration was INR2,100 crores out of which INR1,707 crores was by way of shares swap and the balance versus flown which INR395 crores. So this is the transaction value. So does it clear so this will be debt in the books of DOCL.

Sanjay Kumar — PMS — Analyst

Okay. Any comment on the valuation? So if we had set up the same capacity it would have been much lower or the capital raise that you’re doing now it could have been done earlier instead of share swap, because the six months average pricing kind of influenced the purchase consideration.

Parmod Sagar — Chief Executive Officer & Managing Director

Yeah, you mean to say that valuation is more or what?

Sanjay Kumar — PMS — Analyst

More, given the marginal expenditure?

Parmod Sagar — Chief Executive Officer & Managing Director

It is more because historically evaluation of RHI Magnesita India is also good. And we have not bought only the present capacity, but we have bought almost double the capacity which we can use in coming days. So, Dalmia OCL plants put together is having a capacity of 300 lakh tonne. And utilization capacity as of now is almost 55%, 60%. So we have bought almost well at 150,000 tonne additional capacity also which will help us to cater to ever growing demand from steel [Indecipherable].

Sanjay Kumar — PMS — Analyst

But we’re paying valuation for a substandard company. My final question on the loan limit INR1,300 crores, Chris. So what will be the interest cost for this debt in FY ’24 and given the capital raise so what will be the repayment schedule of this INR1,300 crores.

Vijaya Gupta — Chief Financial Officer

So this it will be we have taken a loan which we would like to repay with the equity raise. And rates are what you get in market, at comparable rates.

Sanjay Kumar — PMS — Analyst

Okay, so can we consider that the entire debt will be repaid in FY ’24?

Vijaya Gupta — Chief Financial Officer

We will see as we go. It’s too early to comment.

Sanjay Kumar — PMS — Analyst

Okay, thank you. I’ll come back in the queue.

Operator

Thank you. Our next question is from the line of Kamlesh Kotak from Asian Market Securities. Please go ahead. Mr. Kamlesh Kotak. Please go ahead.

Kamlesh Kotak — Asian Market Securities — Analyst

Hello. Am I audible?

Vijaya Gupta — Chief Financial Officer

Yes, Kamlesh, you’re audible. Please carry on with your question. Yeah, Kamlesh.

Operator

Mr. Kamlesh Kotak, we can hear you. Please go ahead. It looks like you you’ve gone in the mute mode.

Kamlesh Kotak — Asian Market Securities — Analyst

Hello? Sir just wanted to understand a bit more about the synergies coming in with these two acquisitions, could you help us understand more from the product overlap or the client overlap that you may have. These two entities serving which kind of clientele vis-a-vis RHI servicing client and the product profile, vis-a-vis their two companies and ours product profile. Is there any synergy or any complementarity or how the entire thing synergizes for us going forward?

Parmod Sagar — Chief Executive Officer & Managing Director

So RHI Magnesita is having this existing plant of mainly [Indecipherable] plant is flow control, Cuttack plant is the Malaysia [Indecipherable] plant is bricks and mix it. Dalmia is also having from higher alumina plant, some basic bricks plant, burned and unburned. And the High-Tech is also having flow control plants. So I would say this is complementing each other and at the same time, there will be some product which RHI Magnesita India was not production and after this acquisition we will be able to produce or already produced in these new acquisition facilities, but definitely there will be some synergies, but it is too early to quantify those.

Kamlesh Kotak — Asian Market Securities — Analyst

And in terms of clientele service by these three companies whether India or globally, is there any synergy or any benefits coming out of that as well.

Parmod Sagar — Chief Executive Officer & Managing Director

Yes, so looking forward definitely it will happen.

Kamlesh Kotak — Asian Market Securities — Analyst

I don’t know whether you answered this question sir, what will be the revenue and profitability of these two companies as of now, though they are not yet consolidated in our numbers. Any ballpark range of the run rate at which they are operating in terms of revenue and margin profile?

Parmod Sagar — Chief Executive Officer & Managing Director

Very difficult to tell, but I think last year the number, I can say.

Kamlesh Kotak — Asian Market Securities — Analyst

No, I want the latest numbers. Last year’s I would have got somewhat.

Parmod Sagar — Chief Executive Officer & Managing Director

Let’s wait for that. I don’t have really come ready — we don’t have numbers.

Kamlesh Kotak — Asian Market Securities — Analyst

Alright. And finally, geography-wise also, is this going to be materially different in terms of these two companies more into Indian market vis-a-vis RHI looking at export markets also in terms of the future growth?

Parmod Sagar — Chief Executive Officer & Managing Director

No. I think all three companies are fit for export as well, domestic as well as export, Dalmi, Hi-Tech, RHI Magnesita India.

Kamlesh Kotak — Asian Market Securities — Analyst

Okay. And lastly, sir last — in the last meeting, you discussed upon lot many products which are meant for exports purpose to RHI Global as well as some products which we are developing in terms of imports of in terms of our own brownfield capex at all the three locations. So any update on that in terms of the timeline and how those products — project commissioned happening?

Parmod Sagar — Chief Executive Officer & Managing Director

Yes. I was talking about some high-end product, very niche market products which we are bringing to Indian market from our parent company. So, out of the three projects, two projects are almost at completion. And I think we should look-forward to commercially launch it in next two, three months’ time. We already did some trails in some plants with very good results.

Kamlesh Kotak — Asian Market Securities — Analyst

So should we assume them to start contributing from this current quarter or it will be next year, how you see that contribution?

Parmod Sagar — Chief Executive Officer & Managing Director

I think in the next financial year.

Kamlesh Kotak — Asian Market Securities — Analyst

Okay, right. And finally sir, how the global demand is in terms of what you said already, there is some kind of [Indecipherable]. But do you see that thing is receding and now over next — what is the medium-term outlook for the growth in the exports markets, as you see?

Parmod Sagar — Chief Executive Officer & Managing Director

I see it really not that picking up. I don’t see that at least till June, any substantial demand pickup in global level.

Kamlesh Kotak — Asian Market Securities — Analyst

Okay. Alright. Okay sir, thank you very much. That’s it from my side.

Operator

Thank you. We’ll take our next question from the line of Sahil Sanghvi from Monarch Networth Capital. Please go ahead.

Sahil Sanghvi — Monarch Networth Capital — Analyst

Yeah, hi, sir, good evening. And amazing performance on the revenue side should. Sir, can you tell us the volume growth either on Y-o-Y or Q-on-Q basis?

Parmod Sagar — Chief Executive Officer & Managing Director

If market is growing by say 5%, 6% we will also be growing with market maybe a little more.

Sahil Sanghvi — Monarch Networth Capital — Analyst

Sir, I’m asking about the 3Q performance. I mean, what was the volume growth in 3Q FY ’23.

Vijaya Gupta — Chief Financial Officer

7.5% volume growth over previous quarter target.

Sahil Sanghvi — Monarch Networth Capital — Analyst

Previous quarter, quarter-on-quarter you’re saying, right sir.

Vijaya Gupta — Chief Financial Officer

Yeah, and compared to previous year, Y-o-Y it is 29% volume and 32% revenue growth.

Sahil Sanghvi — Monarch Networth Capital — Analyst

Got it, got it, ma’am. Second is I wanted to understand that what is the trend in the RM cost right now? I mean from whatever we are hearing from the peer, there is a decline in the absolute RM costs. So are you seeing the same?

Parmod Sagar — Chief Executive Officer & Managing Director

Yes, it is going down.

Sahil Sanghvi — Monarch Networth Capital — Analyst

Okay, okay. And what about the realizations, have you started passing on the decrease in RM cost?

Parmod Sagar — Chief Executive Officer & Managing Director

Not really. We still have a high-value inventory in our stocks, but we also start getting present price inventory. So it is a mix of both.

Sahil Sanghvi — Monarch Networth Capital — Analyst

So sir, we will start giving these in pass-on in Q4 or do you think it will happen in Q1?

Parmod Sagar — Chief Executive Officer & Managing Director

Yeah, Q1 next year.

Sahil Sanghvi — Monarch Networth Capital — Analyst

Okay, okay and sir now that we want to re-pay all these loans as soon as possible are we now also open to inorganic acquisitions.

Parmod Sagar — Chief Executive Officer & Managing Director

Nothing is on the table and we don’t see immediate future anything is happening. But such small — very fit into our scheme of things, complementary, definitely we will look into it.

Sahil Sanghvi — Monarch Networth Capital — Analyst

Right, sir. And lastly, on High-Tech Chemicals what could be the sustainable margin range, because we understand it is a very high value-added product over there. So can be sustainably do more than 25% over there going ahead?

Parmod Sagar — Chief Executive Officer & Managing Director

It is really a hypothetical thing. I will not comment on this 25% or so. But yes, the products which are High-Tech is producing is high-value products. And it will have a better profitability than the other units. But I don’t like to give the number as — because when we merge into RHI Magnesita there is our way of taking the plant to next level. There will be safety aspect and all those things, and we are very particular about compliance and everything and leveraging cost money also. We don’t want any non-compliance issue as well.

Sahil Sanghvi — Monarch Networth Capital — Analyst

Yes, sir. And on the export side, sir now that we are also hearing that in Europe now that the winter is parched now, a bit of moderation in the energy costs also and therefore a bit of recovery is expected. What are you seeing over there? I mean, how far is the recovery? What do you think?

Parmod Sagar — Chief Executive Officer & Managing Director

Yes, first, energy costs have come down quite a bit, but still it is not that level which it was before this crisis. And at the same time some of raw material like graphite and so zirconium particularly these are not only seeding, they have gone up to certain level and they are hovering around that level only. So there is a mix of that I would say. And if war stops today, I think in next three months-to four months go on down the line, things will start improving in a better way.

Sahil Sanghvi — Monarch Networth Capital — Analyst

Lastly, sir, do we have any exposure to Turkey or Syria, sir?

Parmod Sagar — Chief Executive Officer & Managing Director

Turkey, we have our own mines. Now, recently, we acquired one more company in Turkey and we are bringing a lot of mixes from Turkey also for Indian market which about say, seven, eight months back was really bad because of this energy crisis and devaluation of Turkish lira, their currency. Now things are settling down again.

Sahil Sanghvi — Monarch Networth Capital — Analyst

My question was more from the point of the earthquake, so how does that impact our RM cost or maybe our sales to those countries if we have any exposure on the revenue side?

Parmod Sagar — Chief Executive Officer & Managing Director

We don’t have much export in Turkey, but yes, we have some export and because of this higher energy cost their production rather bit low, but now I think things are improving in Turkey as well, and raw material prices and also coming down. So I think it will have a positive impact.

Sahil Sanghvi — Monarch Networth Capital — Analyst

Okay, okay. Thank you, sir and all the best, sir.

Parmod Sagar — Chief Executive Officer & Managing Director

Thank you. Thank you very much.

Operator

Thank you. Our next question is from the line of Vipul Shah from RW Equity. Please go ahead.

Vipul Shah — RippleWave Equity Advisors LLP – — Analyst

Hello, can you hear me, sir?

Parmod Sagar — Chief Executive Officer & Managing Director

Vipul ji, we can hear you.

Vipul Shah — RippleWave Equity Advisors LLP – — Analyst

Firstly, sir, congratulations on nascent sales performance. So couple of questions from my side is how do you see the sustainable gross margin on an annual basis? I understand there will be quarterly variations but if I go back to 5, 7 years also, 3D [Phonetic] merger, everything we never had such low gross margin. So on an annual basis, sir, how do you think the gross margin should look like?

Parmod Sagar — Chief Executive Officer & Managing Director

So Vipul ji, I think it in terms of the EBITDA I will tell you the sustainable margins should be 14%, 15%.

Vipul Shah — RippleWave Equity Advisors LLP – — Analyst

All right. Secondly, sir, in terms of the Dalmia OCL acquisition we also got access to some mines which were held by the company. So in terms of these mines which we have also acquired by virtue of this acquisition, how much of this health serving our raw-material security.

Parmod Sagar — Chief Executive Officer & Managing Director

Not much, actually the mines are quartz based mined which we are [Indecipherable] silica bricks in our [Indecipherable] plant, and the rest is a bauxite mine, which is not very good bauxite. So still we are using 20%, 25% with high and good bauxite from abroad. So it is helping us, but not in a good way.

Vipul Shah — RippleWave Equity Advisors LLP – — Analyst

Last question sir is that it’s been great that this company has taken an initiative to host the call post the results so that investors can better understand the developments. So will this be a regular feature sir going-forward on a quarterly basis?

Parmod Sagar — Chief Executive Officer & Managing Director

If you wish, yes it well, it depends.

Vipul Shah — RippleWave Equity Advisors LLP – — Analyst

There is no question, there is no question. We’ve in fact reached out to the CFO also earlier, specifically asking for such initiatives. Yeah, so that would be great, sir, on a quarterly basis because we also like patient long-term investors so great to know about what the company is doing on an ongoing basis. So thank you very much.

Parmod Sagar — Chief Executive Officer & Managing Director

You’re welcome.

Operator

Thank you. Our next question is from the line of Jinal Sheth from Awriga Capital Advisors. Please go ahead.

Jinal Sheth — Awriga Capital Advisors LLP — Analyst

Good evening to the team. Like to touch upon a question raised by another gentleman on the equity raise. So, our net worth should be approximately INR2,800 crores both the issue of shares to Dalmia and our debt is around INR1,100-odd-crores, rough debt-equity, you’re talking about 0.4. So wanted to understand the thought process of the management in terms of raising equity at valuation — at current valuations given equity high-cost and the point being that our cash flows in the coming years are going to be strong so we could one base could have been where the parent [Indecipherable] at a lower-cost or even we raise money from domestic institution and still pay that off. So just wanted to understand your thought process on that.

Vijaya Gupta — Chief Financial Officer

See, our RHI’s debt equity ratio with this borrowing is 1:1 and not 0.4. Yeah, you’re right. Moving ahead, it would be that, but we as a company have never taken so much on borrowing and so and you want to as I said that we want to have this flexibility with us. In future if required we have the capacity to borrow and see how things pan out. So that’s the reason.

Jinal Sheth — Awriga Capital Advisors LLP — Analyst

I face your point there, but you — I hope you also understand there is a cost of equity as well, right?

Vijaya Gupta — Chief Financial Officer

No, that won’t be significant. I don’t think so the earnings of shareholders will be jeopardized.

Jinal Sheth — Awriga Capital Advisors LLP — Analyst

Fine, okay. Thank you.

Operator

Thank you. We’ll take our next question from Rajesh Majumdar from B&K Securities. Please go ahead.

Rajesh Majumdar — B&K Securities Limited — Analyst

Yes, sir. Thanks sir. I had a question on the goodwill. Do you know by now or have an idea as to what is the kind of goodwill that will be accretive from acquisition because the purchase price is way above the fair value of Dalmia? That was the first question.

Vijaya Gupta — Chief Financial Officer

Yeah. No, no, it is still that we need to work it out within 60 days. So that’s still going on. That work is going on.

Rajesh Majumdar — B&K Securities Limited — Analyst

Okay. Okay and the other question was regarding our market share you talked about further some people were asking about further inorganic equation, but my understanding is that when you have already reached 32%, 33% has there not been an issue with the Competition Commission as to the market-share as to how far we can go in terms of market-share? Will there be kind of peak in terms of market share hit after this acquisition for some time to come?

Parmod Sagar — Chief Executive Officer & Managing Director

I said we are going for any other acquisition, I said we don’t want, but if some small acquisition which very well fit into our scheme of thing and then and where we are open to discuss that. Okay. So I don’t think we are going for a big acquisition where Competition Commission will come into the picture.

Vijaya Gupta — Chief Financial Officer

We’ll not like to get into all that.

Rajesh Majumdar — B&K Securities Limited — Analyst

Okay, thank you.

Parmod Sagar — Chief Executive Officer & Managing Director

You’re welcome.

Operator

Thank you. Our next question is from the line of Gunjan Kabra from Niveshaay. Please go ahead.

Gunjan Kabra — Niveshaay — Analyst

Sir, thank you, for the opportunity. Sir, firstly I wanted to understand so we bought the plant at INR400 crores of capex that we planned initially. So is that a part of the acquisitions that we have done, I mean, if there is, I mean the Dalmia and the High-Tech is included in that, right, so there are no more capex or no more capacities to be added now? Is that correct?

Parmod Sagar — Chief Executive Officer & Managing Director

Absolutely, you are right. We are not going to add any capacity. Yes, there will be some capex used to modernize to upgrade the plant.

Gunjan Kabra — Niveshaay — Analyst

So the total capacity stands at 5 lakhs tonnes, is it correct?

Parmod Sagar — Chief Executive Officer & Managing Director

485 lakh tonnes.

Gunjan Kabra — Niveshaay — Analyst

Okay, so sir, you guided that we have an unused capacity of 1,500 lakh and Dalmia Bharat is also operating at around [Indecipherable] so sir, how are we — at hindsight I don’t know if you can guide post capacity utilization with High-Tech of phasing that, so how are we planning to ramp it up in the coming years, so how do you see the market in next two to three years the perspective to RHI? I mean, if you didn’t give a broad guideline — a broad that how you how you plan to have ramp-up the capacity.

Parmod Sagar — Chief Executive Officer & Managing Director

Like Dalmia, High-Tech plant is also running at about 60%, 65% capacity. So put together both we have additional capacity with that’s about one 150,000 tonne which we have visualized that if steel industry and cement industry and all other related industry will keep on growing like they are growing so they need capacity and the will help us we immediately ramped-up. We have a capacity it is just a matter of ramping-up. So it all depends upon market. If the market is, they are, we are ready to cater to that market and apparently as of now includes market is strong in India.

Gunjan Kabra — Niveshaay — Analyst

And the RSI facility is operating as at full capacity utilization. Is that correct?

Parmod Sagar — Chief Executive Officer & Managing Director

Not really. As of now I think we are at about 75% capacity level put together, all three plants [Indecipherable] Vizag is 65% something like that.

Gunjan Kabra — Niveshaay — Analyst

So, sir, with these acquisitions done do we have any — can we expect any one-time expenses that they need to start operating these plants or any expenses on that — on those times can come in from next quarter or something?

Parmod Sagar — Chief Executive Officer & Managing Director

Not really. Definitely there will be expenses and we will do that, but it will not be quarter basis, even if I order one mixture it will cost we only INR1 crores. I will say this about lipid eight months. We will start doing will have a deliberate and lead times. And after that a installation it Group value using results. So nothing is going to say, India in let’s say three, four months times Poly thing is sir, we can go into how we can further increase that productivity. How that we can reduce our rejection level and all those things on the made about as dispatching place doing good, all the things we will be focusing hard next three-four months time.

Gunjan Kabra — Niveshaay — Analyst

Okay. Sir, also I wanted to understand that in increase, it’s been our books from last if you see, it has been increasing remained basically somewhat reason for that?

Parmod Sagar — Chief Executive Officer & Managing Director

Initially, it was a very thought of the decision by the management by us. Here, but globally. We should have Rob healthy inventory in our stock, because during those they you go that total supply chain was the containers was not available on the spot. Shipments are involved are very-high. So we have a lot of ethanol as contract lines on that under percent business. So we created this video entry to make sure that we are we have a business where our partners are relying on us 100% we should not. It cost us happened little bit, but at the same time, we were the first people, we’ll keep on supplying, irrespective of the OPEC situation. Because advisors considered decision, and now we are tapering it down.

Gunjan Kabra — Niveshaay — Analyst

So what does the numbers time today as of December 31 if you can guide?

Vijaya Gupta — Chief Financial Officer

Yeah, so we have 87 days inventory, — no 87 is our conversion cycle, and the inventory what we have is.

Parmod Sagar — Chief Executive Officer & Managing Director

109. It was 124 days, now it is 109, and gradually it will come down to regional level of about 90 days.

Gunjan Kabra — Niveshaay — Analyst

Sir, and receivable days, if you can? Also wanted to understand that on the raw-material front how much China-based sourcing and from a parent company RHI Magnesita if you can bifurcate?

Parmod Sagar — Chief Executive Officer & Managing Director

Roughly, 25% is from China. And maybe 10% percentage from parent company. We can increase in any case we can rely other than China, so backward integration in crossover North America, Europe. So as of now it is about 10% or so, 10%, 12% from parent company.

Gunjan Kabra — Niveshaay — Analyst

Sir 10%, 12% is parent company, 25% is imports from China.

Parmod Sagar — Chief Executive Officer & Managing Director

That is from India, and from other sources like Turkey. Some products are from our company, some products are coming from other Africa like Graphite etc is totally coming from South Africa, Australia, so we have in many countries other than China and complete from we have on severe welcoming. And India is also big source for low-grade DBM or Bauxite.

Gunjan Kabra — Niveshaay — Analyst

Okay, okay. Sir and Dalmia Bharat that also, if it operates at maybe an optimum capacity utilization is there a potential of margin expansion there also or like currently I think we are doing around 14%, 15% of EBITDA margin, is that possible with Dalmia because it’s tuned at around 10%?

Parmod Sagar — Chief Executive Officer & Managing Director

It is going to be time takine when we really understand how much margin we will be generating from that business, because the business dynamics is totally different. They are catering that Damia OCL is scattering to low-end products are also like bricks and mixes which are not very competitive or niche market products, is like a commodity product where the margins historically had less than niche market products. So I cannot say it will reach to 14%, 15% or so. But I can say overall, when we consolidate it will be what industries.

Gunjan Kabra — Niveshaay — Analyst

Okay sir, I’ve heard even also consolidate it will be around 14%, 15%, but I thought that even RHI Magnesita the Indian plant also had bricks and they also have especially those be passed that we been, the product profile is different industries that are near-future agree, but I thought that, we can go-around 14%, 15%, is that a possibility for Dalmia Bharat also, because — I thought production is not very ready in time.

Parmod Sagar — Chief Executive Officer & Managing Director

I think there is a difference in product mix. But let’s agree on this, what you are saying, but it will take this time, I cannot comment on the timeline.

Gunjan Kabra — Niveshaay — Analyst

Okay, okay. Got it, sir, thank you so much and good luck.

Parmod Sagar — Chief Executive Officer & Managing Director

You’re, welcome. Thank you so much.

Operator

[Operator Instructions] I would now like to hand the conference back to Mr. Parmod Sagar, MD and CEO; and Ms Vijaya Gupta, CFO, for closing comments. Over to you.

Parmod Sagar — Chief Executive Officer & Managing Director

Thank you very much everyone part taking out time from your busy schedules and standing by us, supporting us throughout and looking-forward to your continued support in coming days I from RHI Magnesita management side can assure you we will try our best to run your company as efficiently as we can and try to improve the margins wherever possible. So rest assured, we will not lose our focus on growing this company. Thank you so much.

Vijaya Gupta — Chief Financial Officer

Thanks a lot, sir, and thanks everyone for joining us and look forward to interactions in future. Thank you. Have a nice day.

Operator

[Operator Closing Remarks]