Rossari Biotech Ltd (NSE: ROSSARI) Q2 2025 Earnings Call dated Oct. 21, 2024
Corporate Participants:
Anoop Poojari — Moderator
Edward Menezes — Promoter and Executive Chairman
Ketan Sablok — Group Chief Financial Officer
Analysts:
Pavan Kumar — Analyst
Sanjesh Jain — Analyst
Rohit Nagraj — Analyst
Dhruv Muchhal — Analyst
Parth Mehta — Analyst
Ravi Singh — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Rossari Biotech Limited Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anoop Poojari from CDR India. Thank you, and over to you, Mr. Poojari.
Anoop Poojari — Moderator
Thank you. Good evening, everyone, and thank you for joining us on Rossari Biotech’s Q2 FY ’25 earnings conference call. We have with us Mr. Edward Menezes, Promoter and Executive Chairman and Mr. Ketan Sablok, Group Chief Financial Officer of the company. We will begin the call with opening remarks from the management, following which we’ll have the forum open for a question-and-answer session.
Before we start, I would like to point out that some statements made in today’s call may be forward looking in nature and a disclaimer to this effect have been included in the earnings presentation shared with you earlier. I would now like to invite Mr. Edward Menezes to make his opening remarks.
Edward Menezes — Promoter and Executive Chairman
Thank you, Mr. Anoop. Good evening, everyone, and thank you for joining us on our earnings conference call. It’s a pleasure to have you with us as we discuss our operational and financial performance. We are pleased to report a steady quarter showcasing the resilience of our business in a dynamic market environment. Our HPPC division continues to demonstrate consistent growth, while the textile business is still navigating headwinds with a recovery expected in the next calendar year. The animal health and nutrition business remained stable during the quarter.
Regarding our exports, we are proud to have expanded our global operations with several geographies emerging as key drivers of our future growth. In H1 FY ’25, exports grew by 32%, providing strong support to our overall performance despite softer domestic growth. We have successfully targeted new customers across both new and existing geographies, while increasing our wallet share with existing partners. Looking ahead, we expect exports to outpace domestic growth, further strengthening our position in the international markets.
In line with this growth trajectory, we have made key investments to support future expansion. Rossari Global DNCC, a wholly owned subsidiary, has established Rossari Biotech trading FZE in the Jebel Ali free zone, Jafza, UAE. This new entity will focus on trading activities, managing the distribution and sales of chemicals and consumer products for export markets, further enhancing our international presence. Additionally, Rossari Global DNCC has agreed to acquire 100% of the equity share capital of Unistar Thai Company Limited, a newly incorporated company that will focus on the manufacturing and sale of specialty chemicals related to our core chemistries. Furthermore, we have acquired a 39,101 square meter plot of land adjacent to our Dahej facility earmarked for future expansion and the development of our manufacturing capabilities.
We continue to pioneer intelligent and sustainable solutions across industries, enhancing everyday life through our ecofriendly and technology driven offerings. Our focus on innovation and customer centric solutions enables us to stay ahead of industry trends, delivering value to products that are both high in quality and sustainability. Alongside our ecofriendly product portfolio, we have implemented key sustainability initiatives across our operations. We have installed 5 kWp of solar capacity at our plants, reduced water consumption by 12,142.5 kiloliters and responsibly treated and disposed 18,505 kiloliters of water. Additionally, we have planted 1,500 trees around our facilities to promote biodiversity. Through our three R waste management policy, reduce, reuse and recycle, we continue to minimize waste and optimize resource use, reinforcing our dedication to sustainability in every aspect of our business.
Lastly, we are pleased to announce the appointment of Mr. Gurudas Aras as an Additional Director, designated as a non-executive independent director effective October 19, 2024. With over 40 years of experience in the textile industry, Mr. Aras brings a wealth of knowledge including expertise in advising on robotics and automation which will greatly benefit Rossari, as we continue to innovate and grow across our business verticals.
As we continue on our growth journey, our focus remains firmly on sustainability, innovation and global expansion. We have laid a strong foundation for the future with our success in international markets, new verticals in our core chemistries and a drive for creating long-term value for stakeholders. While global expansion remains a key driver, we are also well prepared to capitalize on opportunities in the domestic market as recovery gains momentum, ensuring that we are positioned to drive growth across all regions.
With this, I would like to conclude my address and now hand it over to Mr. Ketan for his comments.
Ketan Sablok — Group Chief Financial Officer
Thank you, Edward sir and good evening, everyone. Let me provide you with a brief overview of the financial performance for the quarter ended September 30, 2024. We have reported a steady performance in this quarter with revenues increasing by 3% to INR498.4 crores. Our HPPC division saw Y-o-Y growth of 6% with revenues reaching INR390 crores, up from INR367 crores in the previous year.
The textile specialty chemicals division reported revenues of INR84 crores, down from INR96 crores last year, primarily due to the ongoing headwinds in this sector, though we remain optimistic about recovery in the next calendar year. Meanwhile, the AHN division remains stable with revenues of INR24 crores compared to INR20 crores in the corresponding period last year.
In terms of the revenue contribution this quarter, HPPC accounted for 78%, textile specialty at 17% and AHN at 5%. On the revenue split between domestic and exports, our exports have outperformed our domestic sales. Y-o-Y, our exports have grown by 21% while domestic revenues remained flat. For H1, the exports grew by 32% while domestic saw 5% growth. Exports now constitute almost 25% of our overall sales.
Our gross margin improved by 253 basis points this quarter on the back of our product mix, and our efforts to optimize operations. The improvement comes despite higher costs associated with new growth verticals including the institutional cleaning chemical business. Our overall EBITDA remains increased by 3.6% to INR65.9 crores, up from INR63.6 crores last year with EBITDA margins of 13.2%, stable despite the additional investments in these emerging segments.
In terms of profitability, PAT for the quarter rose by 7.3% to INR35.3 crores compared to INR32.9 crores in the same period last year. Our capex initiatives announced last year is progressing well at both Unitop and Rossari Dahej facilities. In the Unitop capex, the board has approved additional investment of INR18.25 crores, enhancing the budget of the project to up to INR146.25 crores. The additional budget is required on account of some design modifications which were necessary to meet the revised project specifications and structural integrity. These projects will be commissioned in a phased manner over the next coming months.
They are expected to significantly enhance our ability to serve high growth segments such as agrochemicals, home and personal care and specialty chemicals, providing a strong growth leader for the company. Both the projects are being executed efficiently on ground, and are expected to deliver asset terms of three to four times. This aligns with our ongoing commitment to substantially strengthen our return ratios.
On the balance sheet front, the net working capital days are maintained at similar levels as March 2024. Inventory days have gone up with some RM levels being increased for strategic reasons. Receivable levels are slowly coming down.
In conclusion, we are confident that with these investments coupled with our strong operational framework, we are well positioned to capture opportunities as the business environment continues to stabilize. Our focus remains on enhancing capacity utilization, introducing new products and expanding our customer and geographical footprint to drive future growth. That’s all from my side. Just for informing the participant, Mr. Chari has been traveling, so would not be able to attend the call today. And now I would like request the moderator to open the forum for questions and answers that will be there. Thank you.
Questions and Answers:
Operator
Thank you very much. [Operator Instructions] Our first question is from the line of Pavan Kumar from RatnaTraya Capital. Please go ahead.
Pavan Kumar
Sir, can you give us the quarterly breakup of exports Q1 and Q2 and same portions last year, Q1 and Q2. And also secondly, I wanted to understand on domestic side what has been weak? Is it the textile component or is it the agri home care component or the non-agri home care component. I would just like to understand what is the portion where the growth was limited.
Ketan Sablok
So on the exports, you wanted the quarterly export numbers?
Pavan Kumar
Yeah, quarterly numbers. Q2 how much was the export? And Q1 how much was the export? And same numbers if you can give for last year also for comparison.
Ketan Sablok
So, exports for this quarter was about INR130 crore. Q1, we’ve done INR118 crores and Q2 last year was about INR107 crores. And on an H1 basis, our total exports is INR248 crores which were INR187 crores last year H1.
Pavan Kumar
Okay. Thank you. And can you just underline what went wrong on the domestic side? Was it on the textile side or on the home care side? If it was on the home care side, was the problem on agri or non-agri side?
Ketan Sablok
So, on the domestic front, if you see in the HPPC, I think the FMCG home care, the volumes were pretty flat, and with the RM prices coming down we also had some pressures on softening our prices to pick up some volumes. So, that’s where the HPPC growth has been a little softer than what we would have expected. Also, the fact that availability of EO and the capacities of ethoxylation currently running at almost peak capacities, our primary driver was that know we should push more material into the export market, because that’s one area where you know, we are constantly looking for growth, keeping in mind the future plans that we have. So, material, while domestic demand was also not picking up, we concentrated more on pushing products in the export market.
In the textile side, I think domestic volumes were pretty good in the sense, since the volumes were better than last year, the volume growth was about, I think, 6%, 7% volume growth, but we had a pressure on the pricing side. The prices had come down by about 6%, 7%. Secondly, the export plan for textile also took a hit during this quarter with both Bangladesh and Egypt. Our exports were very, very slow compared to what we had anticipated. And Bangladesh, in fact, in the last two months, the offtake was very, very less while there were orders, but given the conditions that were there and, you know, the LCs, etc., not coming through, a lot of the banking issues cropped up. So, we took a little bit of a backseat and did not supply any material till things got stabilized. Currently, we expect, I think over the next month or two, Bangladesh should start coming back in terms of order placement, and in terms of better banking line coming through so that we are safe on the products that we start supplying. So, these were the primarily three, four regions of the volumes and of the top line net not growing as per, you know, our expectation.
Pavan Kumar
Okay. And home care, you were saying it was a non-agri part, which was a problem, or both were the problem, agri and non-agri?
Ketan Sablok
No, it was more of the non-agri part, in HPPC, FMCG home care. That’s what I talked about. And anyway, the quarter to agri season is a little softer than what it is in Q1. Q1 is the peak season for agro.
Pavan Kumar
Okay. Thank you. I will come back in the queue.
Operator
Thank you. The next question is from the line of Sanjesh Jain from ICICI securities. Please go ahead.
Sanjesh Jain
Yeah, thanks. Thanks for taking my question. I got few of them.
Ketan Sablok
Sanjesh, could you be a little louder, please?
Sanjesh Jain
Oh, can you hear me now?
Ketan Sablok
Yeah, now it’s better.
Sanjesh Jain
Thank you. Thank you. First, on the textile side, I just wanted to understand whether it’s a problem on the ground or we are also losing market share to any of the competition. That’s number one, because I can see some of our listed peers have been outperforming us now for probably two years. And we have been struggling, not for just this quarter, but for last two year also, we have been struggling in the textile segment. Again, on the AHN side of the business, we expected in FY ’25 to double our revenue, but the run rate seems to be much more softer than what we thought. So, what’s gone different than what we estimated at the start of the year on the AHN?
Edward Menezes
So, Sanjay, on the domestic front in textiles, we haven’t lost any market share. In fact, year-on-year volumes grew, like Ketan sir just now reported that year-on-year of volumes grew by 6% to 7%. However, since you know that the prices of certain raw materials dropped like acetic acid, butyl acrylate, styrene or silicones, because of which there was pressure on the finished good product pricing. And that is where you see a loss in revenue basically. Whereas in volumes in domestic we have grown. And again, Ketan sir also explained that Bangladesh and Egypt, because of the geopolitical issues, we de-grew by 4% to 5% in volumes in these two countries also. So that’s where you see a negative revenue growth. But having said that, our marketing teams as well as the R&D worked very hard on the product mix offerings, and we saw an increase in gross margins across the product groups, helping us to maintain our EBITDA margins.
And going forward also we are looking at expanding our footprint in newer geographies and add sustainable products to our overseas offerings to grow this vertical in 2025. So, in effect, the textile business has remained steady as or in volume terms, it has grown by about 6% to 7%.
Coming to the animal health and nutrition, we are pretty steady here. Yes, I agree that we had expected a higher growth. However, in the last year we changed a bit of strategy. We, in the previous years, we had focused a bit on the feed component itself, not only on the additives, but also on the feed components. But we found that that strategy was not working out well for us because we were taking a hit on the margins. So, we dropped that strategy of going in for selling the feed part of it. Instead of that, we focused more on the additives part of it. And so, if you see on a year-on-year basis, we have grown 20% in the specialty additives, whereas quarter-on-quarter, quarter two is the festive season, and hence every year this is the weakest quarter for animal health and nutrition business. So going forward, quarter three and quarter four are traditionally the strong quarters for animal health. And we expect, like our marketing sales 1.5 times the normal sales for the quarter three, quarter two or quarter one. So, I think AHN is in line, will show healthy growth in this year. And even in the animal health and nutrition, we have taken actions to add consultants, improve our infrastructure, as we had informed in the past, we are setting up a premix plant, and we are going to launch products in the therapeutic category as well as gut health improvers using our bio-process technology. So, I think for us, quarter three and quarter four will give you strong results in the animal health and nutrition.
Sanjesh Jain
Got it. That’s clear. Thanks for that elaborate answer. Second, on the margin side of it and the operating leverage, now if you look at our EBITDA margin sequentially has dipped by 10 basis point while we have increased our gross profit smartly.
Edward Menezes
A little bit louder please.
Sanjesh Jain
Now is it fine? Yeah. So, quarter-on-quarter we have improved the gross profit margin by 120 basis point, while our EBITDA margin sequentially has declined by 20 basis point. And if you look at on a Y-o-Y basis also, we have increased our gross profit by 250 basis point while the EBITDA margin is up only 10 basis points. Forget about operating leverage, our entire gross profit margin improvement is also not getting captured into EBITDA. What is leading to this sharp improvement in the cost and when should this stabilize?
Ketan Sablok
I think, Sanjay, part of this has also got to do with, you know, the expense. The other expenses that you see have increased during this quarter. They are almost INR59 crores in this quarter compared to INR55 crores in Q1. So given that now we are focusing or at least the export pieces growing, the impact of freight expenses is showing up significantly in these numbers. The freight forwarding costs in this quarter has been significantly high, while we’ve also had some professional expenses which we — which have come up in this quarter. This is more resulting from some of the global restructuring that we are planning to do. So, we hired some people. Also, in the whole sale [Phonetic] business there have been increase in, in the number of employees in the last six months. So, all this has actually led to a good increase in the other expenses and in the employee cost. And part of the gains that we got through the gross profit improvements have got negated with these expenses going on.
Sanjesh Jain
So Ketan bhai, is it fair to say that export business because freight cost is borne by us, will always be a lower margin than our domestic business?
Ketan Sablok
See the way it is that now we are trying to, you know, we are just growing the export business. So, with some of the existing customers we are in a much better position to bargain for the freight, etc., while some of the new geographies and the new customers that we are entering into, there are at times where the freight expenses we need to bear. I think it’s just a question of time when things will even out. Our target is that while we bear the freight expenses, we should build it on actual freight, even if it’s CIF, whatever is the actual freight we should build them. That’s what we are talking to most of our customers, and the freights have actually gone up a little unprecedented in the last six months. So, that’s actually hitting us. But I think slowly we’ll be able to push most of, you know, this trade expenses back to the customer. Some of it is already built into the pricing, and the expense part is coming here and under the other expenses.
Sanjesh Jain
Got it, got it. Just one last question on the domestic business which appears to have declined. I thought we were also in the process to launch so many new products. Are they not helping us to offset some of the underlying weakness, and decline is completely, I don’t think the consumer business in India is declining. What has led for us for such a sharp reversal in the growth for the domestic business?
Edward Menezes
Yeah, actually there is no great decline in the domestic business. What we have done, like Ketan bhai already explained in his opening remarks, opening question. See there is limited ethylene oxide availability, right? And we also have limited capacity for manufacture of the ethoxylates. We saw an opportunity to gain market share in exports, and also realization in exports was quite healthy. And that is one of the reasons why we have focused a little bit more on the export where, you know, we could get, we could grab some market share in certain geographies, whereas domestic has grown by only 6% to 7% domestically. There has been little bit muted demand from FMCG as well as other verticals, home and personal care. But it is a very conscious decision to push our products more in export. The same products would have been also pushed in the local or domestic market, but I believe that we would have got lower gains. So, the marketing team really worked very hard on the product mix offerings both in the domestic and the local market. So domestic and export markets, I think it’s a game which we well played. It was well played by Mr. Chari and his team who look after the sales and marketing, and even help from Ketan bhai on the numbers front. So, with the limited EO availability and the limited ethoxylation capacity, as you said, that we are at peak capacity, this going forward will not be a problem is our opinion, because we have already invested in expanding our capacities there. So, the loop reactors will become functional by I think end November or early December. So then again, the ethoxylation capacity will not be an issue, and therefore, I think things will then average out there.
And this was a great opportunity to, you know, grab the export business, whereas the local business was very, very competitive during this quarter.
Sanjesh Jain
But EO was not even part of our core four chemistries. So, we have this acrylic where we were launching series of product, then we add surfactant, silicon, so, enzymes, right. So EO was never even the part of the core chemistry. If it came with our acquisition to Unitop, and we had a lot of launches planned in these four chemistries. So, your problem I completely appreciate, and I know that that capacity once come in, that will drive additional growth. What about these four key chemistries of our and all the products that were supposed to get launched in these chemistry lines?
Edward Menezes
So Sanjesh, I would like to beg your pardon, to correct you. Surfactants was one of our four pillars, and ethoxylates is the major part of surfactants that Rossari used to use. And therefore, the acquisition of Unitop, the logic behind acquiring Unitop was surfactants, basically. So, I would like to correct you there, that it is not our core chemistry, that is number one. But however, having said that, if you look at the production at Rossari, as we said that we had introduced a lot of new products there. So, what has happened is in the last two quarters, we have produced a large number of esters like CAPB, CDA, SNO, SML, ester quartz, as well as resins, but these were consumed internally, and therefore it is knocked off, you know, during the intercompany — what is that, intercompany sale, you cannot see this sale. If you add both these together, then you will see that all these new products have been introduced now. Now that these new products have introduced and have been consumed internally because these are all the hydrophobes and the products that go into Unitop. So first we focused on producing these new products, consuming them internally. Going forward, we’ll increase our — as in his opening remarks, Mr. Ketan has said that we have added capacity both at Unitop as well as at Rossari. These additional capacities, when they come up, then these products will be available for sale to the domestic market as well as to the export market. So that’s how it goes.
Sanjesh Jain
Got it. Got it. Thanks. Thanks for answering all those questions, and best of luck for the coming quarters.
Operator
Thank you. [Operator Instructions] The next question is from the line of Rohit Nagraj from Centrum Broking. Please go ahead.
Rohit Nagraj
Thanks for the opportunity. So, the first question, again, delving on the ethoxylation part. So, you said the loop reactors will be functioning sometimes by the month of November. How is the progress from Reliance front in terms of EO availability? And are we going to coincide the EU availability with our commissioning or is there any other plan for the same? Thank you.
Ketan Sablok
Yeah. So, Rohit, currently the way we plan is the EO availability, we’ve are already talking to Reliance for additional quantities of EO, at least starting of Q4. That’s what indications they have said that they will start providing us additional volumes of EO. So, we’ll have to wait and see. These capacities will come up by the end of maybe November, December. So, assuming we start off from January, we will start some, at least some part of production till it takes some time for it to reach its peak capacities. But we should have enough EOs to start the functioning of the loop reactors.
Rohit Nagraj
All right, second question on the exports market, so particularly which subsegments or user segments are we trying to tap? And how has been, I mean, which and all other particular geographies or countries where we are getting this traction from? Thank you.
Ketan Sablok
Yes. So, sector I think majorly home care, personal care, cosmetics and also on the agro side, these are the key sectors in HPPC. And the key geography I think continues to be Europe, South America. We also know exploring some countries in the Middle East. So, Turkey is one of them. On the textile side, again with, given our current mix of products, we are looking at of course expanding in Bangladesh, assuming that business comes back at least probably towards the end of Q3, is what we are given to understand. And then of course Vietnam, Egypt, we are also looking at few markets in North Africa for the textile business. We got some good feedback from there, and so that will help us there. Turkey again becomes a market for us also for textiles. So, these are broadly the geographies and the segments that we are looking at to drive growth. In AHN, again, we are looking at growing the exports in Bangladesh, Nepal and Sri Lanka, little bit in Philippines also. So, these are the growth countries that we are looking at for AHN.
Rohit Nagraj
All right, one last question. In terms of the guidance that we had given earlier, and looking at the first half performance, are we likely to stick to the guidance in terms of the top line growth and the margins front or do we want to reassess it? And just another question, any issues in terms of getting the payments from Bangladesh and for the exports market, is the working capital cycle higher than the domestic market or comparable? Thank you.
Ketan Sablok
So, Rohit, I think on the forecast that we had given, I think I had said that we are in a low double-digit kind of top line growth. I think I still expect that we will grow at that number, around 12%, 13%. I still anticipate that growth is going to be there, because if you see the H1 number, we are already around 11% top line growth. I think second half is — second half should be better than that. So, I still expect that 12%, 13% is what we will grow.
And on your second question, in terms of payments from Bangladesh, I think as I said, we faced issues in Bangladesh and that was precisely the reason why we went slow two months. Actually, we didn’t dispatch much material into Bangladesh, keeping in mind the payment situation, it’s still a little sticky over there, but from what our teams in Bangladesh tell us, I think probably another month or so. We anticipate December onwards it should be much better. In terms of the receivable cycle, I think the first half is generally higher given that we just passed the agro season where the payment stretches a little longer, probably towards the end of the year, by March, I think, we should be much better than what we are as on September.
Rohit Nagraj
All right, just on the operating margins front, whether we will be able to keep the same margins similar to last year or do we expect slight given the operating expenses have been going up in the last couple of quarters. Thank you.
Ketan Sablok
I think what — we will stick to what we’ve done till now in H1, kind of 13.2%, 13.3%. So, we’ll be around between this and 13.5%.
Rohit Nagraj
So that’s helpful and all the best. Thank you.
Operator
Thank you. The next question is from the line of Dhruv Muchhal from HDFC Asset Management company. Please go ahead.
Dhruv Muchhal
Yes, thank you so much. So, from the comments, it seems that the pricing pressure driven by RM has intensified in this quarter, and hence the pricing you mentioned there is a drag because of the pricing. So, should we expect this to continue for the next few quarters until the raw material prices probably increase, so causing some drag? Probably there will be volume growth, but the pricing will have some offsets in the growth for the next few quarters.
Ketan Sablok
So, Dhruv, I think sitting today we can expect that this trend will remain around the same level. And that’s why, you know, we are trying to focus more on the export side, where we see that these kind of issues on pricing and all are much lesser than what is there in the divestiture market. And also given that now we have capacities where we can play around within either domestic or export. So, our focus continues to be to cater more to the export market. In textiles, also, I think we would have surely seen a good growth in the quarter had the situation Bangladesh and Egypt not happened the way it has turned out to be, because we had good set of orders for Q2 where we actually took a voluntary decision not to do it, given the issues around the collection and thing. But I’m sure once that eases out, we’ll have the textile experts also doing, doing pretty well. So, we expect that these pricing issues which we see in the domestic side will ease out once we have a good export potential to push our products.
Dhruv Muchhal
Got it. I understand your product mix is very different and changes regularly, but some sense on what is the pricing, RM pricing or whatever pricing impact on a quarter-on-quarter basis for your product — across product baskets by rough range.
Ketan Sablok
We didn’t understand your question.
Dhruv Muchhal
I was just trying to understand what is the pricing impact on a quarter-on-quarter basis across our portfolio?
Ketan Sablok
It would be very difficult to say, because [Speech Overlap]
Dhruv Muchhal
Sure, sure. No worries. The second question is, is it possible to share what is the share of EO based products in overall sales?
Ketan Sablok
See, it is all ethoxylates is the major chemistry for us or surfactants. Everything linked to surfactants [Speech Overlap] HPPC will be all 70% is all EO based products.
Dhruv Muchhal
Okay. Of the HPPC, 70% roughly is EO based products.
Edward Menezes
60% to 70% should be.
Dhruv Muchhal
And you mentioned about backward integrating into, I think ester you mentioned which goes into these EO based products. So, if you can give us some sense of what was the external purchase earlier, how much it backward integrate now, and how much of the value are you capturing through this backward integration?
Edward Menezes
We don’t have these numbers handy, but actually if you can get in touch with Ketan sir. He can give you all these things because sure, we used to do a lot of job work or rather Unitop and Tristar would do a lot of job work for all these raw materials which have been completely 100% produced at Rossari now. So, that has been a big change within the group itself. So, I think Mr. Ketan can give you these.
Dhruv Muchhal
Sure, I’ll get in touch. Thank you so much and all the best. Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Parth Mehta from Vallum Capital. Please go ahead.
Parth Mehta
Yeah, hi sir, thank you for taking my question. Just wanted to know what would be the sales for institution cleaning for this quarter? And on the qualitative side, how, how was the institutional side for the quarter?
Ketan Sablok
Institutional sales during this quarter is about INR70 crores and INR73 crores, around that number.
Parth Mehta
Okay. And about the annual guidance that you are given, around INR250 crores for FY ’25. So, do we stick to it? Any updates in the institutional cleaning during this quarter or we launched any new products or something.
Ketan Sablok
If you see, for the first half, we’ve done about INR130 crores in the institutional business. So, our take of INR250 crores, which we had said, I think we are in line with that. And what was your other question?
Parth Mehta
Any new products that we have launched or any other update for the institutional cleaning.
Ketan Sablok
In the institutional cleaning, we haven’t launched anything new, but we have got new customer, a new customer base. So, they are — also what we have done is we have a lot of new brands which have been rebranded. We have rebranded our own old brands. So those are now taking shape. So mainly we’ve got a lot of the government laundry business, we’ve got a lot of institutional cleaning businesses in airports as well as in the railways. So, that’s the new business that we’ve got. As far as new products are concerned, I don’t think we’ve launched anything, any new molecule. There may be new formulations for the particular cleaning application, but we haven’t launched a new molecule. Only one product that is new is the cleaning in nuclear facilities in India. And I think our product there has been approved in about 25 facilities, and we hope that that’s a good, good product to be in basically that category.
Parth Mehta
Okay, great, sir. And on the animal health side, so last quarter you have indicated that there were some pricing pressures in the integrated [Indecipherable] on the margin side. So, is there any improvement on that side?
Edward Menezes
I’m sorry, I am not able to hear you properly, and can you just speak up, please?
Parth Mehta
Yeah. So, in the last quarter you had indicated that there are some margin pressures in the animal health side in the integrated and pre-mill [Phonetic] segment, we are facing some headwinds there. So, is there any improvement over there?
Ketan Sablok
Yeah. So first, I think we expect the second half now to be a much stronger half for us in terms of the animal health. Yes, there have been improvements there. The issue there was more on in terms of collectability of the sales. So, we have been a little strict on that, going a little slow. But now I think things are much better. So, we hope and we anticipate that the second half of this year would be much better than what we’ve done in the first half.
Parth Mehta
Okay, thank you.
Operator
Thank you. The next question is from the line of Ravi Singh from Cosmic Horizon. Please go ahead.
Ravi Singh
Hi. Thank you for this opportunity. So, the majority of our RM costs come from acrylonitrile, which is basically crude linked. Now, crude prices have already started to come off, and in a scenario where the wars kind of come to an end, and crude price settles back to, say, the $55 to $60 a barrel. In other words, say, if crude prices correct by another 20% to 25%, will our guidance of doubling revenue on the FY ’23 base hold or will there be a significant deviation?
Edward Menezes
This is quite an assumption, Ravi. If the crude prices go down to 50%, 55%, prices are going to come down. I mean, it’s very logical that the prices will fall, selling prices. Then the focus will be more on the volumes and the margins, you know, that you can get from there, rather than just the revenue toplines.
Ravi Singh
Right. Thank you. That’s all from my side.
Operator
Thank you. The next question is from the line of Pavan Kumar from RatnaTraya Capital. Please go ahead.
Pavan Kumar
Sir, can you just outline the capex for this year? You are talking about some modifications in existing capacities. So, I just wanted to understand the quantum of capacities that are coming online in next three, four months. How much is the investment? And what is the potential return at an optimum limit.
Ketan Sablok
So, we already have two projects, one at Unitop, the other at Dahej. We’ve already spent, I think, about INR60 crores, INR65 crores in this capex. I think similar amount will be spent over the next six months. Some of these projects will come up in Q3 and Q4, and some of them will come up in the first quarter of the next year. That’s what we plan it.
Pavan Kumar
And how much would be the potential? revenue potential?
Ketan Sablok
Yeah. So, we should do an asset turn of roughly between three to four.
Pavan Kumar
Okay. Okay. I just wanted a clarification. So are we saying this quarter or in H1 to the answer to some other participant. I guess, you mentioned saying there were new products that you have actually been actually developed, but they are being used as raw materials to your existing projects. So is it the case that there has been some margin compression because of increase in your freight expenses and stuff, which is not allowing the new product revenues to show — sorry, new product contribution to show up in the margins. Is that the right understanding or there is something wrong with my understanding?
Ketan Sablok
Yeah, so, yeah, so in a way you can say, yes, our freight forwarding, our overall expenses have gone up in this quarter compared to what it was in Q1. A major part of it is to do with freight forwarding, especially on the export side, as our export market is increasing. So, a lot of the new customers that we are bringing on board in the export side, we are to start with bearing some of the export, the freight expenses. But our plan is that over a period of time, once we have a better partnership, better relations with these customers to build up all these expenses into the pricing. You must appreciate that in the last few months, the freight expenses have gone up very, very significantly, and it is not possible for us to immediately pass on the freight increases to the customer. It takes time, but it’s a relation that we are building. It will happen over a period of time.
Operator
Mr. Kumar, you have any other follow up questions?
Pavan Kumar
Yeah, just basically, so what does our overall guidance remain for the year? Since I think we were talking about 15% to 20% kind of revenue growth. So, does that still hold or how are we looking at that?
Ketan Sablok
I’m not sure. When we spoke about a 20% revenue growth…
Edward Menezes
I think it was 15.
Ketan Sablok
We’ve all said that we do low to mid double-digit kind of growth, given that the half the year is, I think we should be around that number of 12% to 13% kind of top line growth. That’s what we have.
Pavan Kumar
Okay. That is what is the realistic expectation. And one more thing, so when these other expenses and everything settle down because of the new product contribution, do we expect an increase in gross margins? What can the gross margins be once this whole or EBITDA margins be once this whole thing settled down? What I am trying to say is, on a normalized freight cost, what can that potential be?
Ketan Sablok
Pavan, as of now, it is very difficult for me to give any number onto that. My only submission is that in the current year and maybe half of next year, what we see is we need to start full utilization of our capacities. All the new products, the new initiatives that we are taking, that the key for us to kind of meet. And within that, those targets for the EBITDA are, if you are at the levels that we’ve done in the first half on that number plus/minus a few basis points, I think we would be happy with that. Then probably once we scale up and we reach a certain product and revenue size, then we can look at further improvement in the overall margin. But currently this 13.2% to 13.5% is what we are looking at.
Pavan Kumar
Okay, fine. Thank you.
Operator
Thank you. The next question is from the line of Rohit Nagraj from Centrum Broking. Please go ahead.
Rohit Nagraj
Thanks for the follow up. Just one question. Do we also have propoxylates in our portfolio?
Edward Menezes
Yes, we also make propoxylates.
Rohit Nagraj
So, you mentioned about 60% to 70% ethoxylates. So, is there any similar numbers for.
Edward Menezes
No, I mean, EO, PO together will be 67%.
Rohit Nagraj
All right. And in terms of PO availability, are there any challenges given that? I think it’s completely export — imported.
Edward Menezes
Yeah, if you don’t plan well enough and there are some storage issues also because we are not a very large consumer of propoxylates, I mean propylene oxide. So, there are some challenges, but once we become large enough, probably then we can have some storage at the ports, you know.
Rohit Nagraj
Sure. That’s helpful. Thank you.
Operator
Thank you. As there are no further questions, I would now like to hand the conference over to the management for closing comments.
Edward Menezes
Okay, thank you everyone. I hope we have been able to answer all your questions satisfactorily. Should you need any further clarifications or would like to know more about the company, please feel free to contact our team or CDR India. Thank you once again for taking the time to join us on this call, and good day to all of you.
Operator
Thank you. [Operator Closing Remarks]