Tata Chemicals Ltd Q3 FY22 Earnings Conference Call Insights

Key highlights from Tata Chemicals Ltd (TATACHEM) Q3 FY22 Earnings Concall

Q&A Highlights:

• Sumant Kumar from Motilal Oswal asked about the reason that interest cost in 3Q22 was lower despite the gross debt at a similar level. Nandakumar Tirumalai, CFO replied that the company did some refinancing and repricing of a lot of loans in the U.S. And have been able to refinance the bulk of the loans which were at L plus 4% to L plus 1.5% during the last 4, 5 months’ time. That’s why the interest cost is lower compared to 3Q21.

• Sumant Kumar from Motilal Oswal enquired about the margin profile for the coming quarter and if input cost pressure is going to subside in the coming quarter. R. Mukundan, MD replied that the full benefit of renegotiated export prices will come in Q4, which should improve the margins further. But the mix impact will continue till it becomes a steady state number equal to what the lease impact was, it was steady year before the pandemic.

• Abhijit Akella from IIFL asked about the margin increase on the domestic side of the business. R. Mukundan, MD said that the way one should look at domestic is there’s going to be a margin of $1 or $2 or $3 at best not more.

• Abhijit Akella from IIFL also enquired that the reason there’s no increase in the domestic business is because the company has multiyear contracts with those customers. R. Mukundan, MD replied that the issue with domestic is that gas prices have gone up and so local trade freights have gone up.

• Abhijit Akella from IIFL also asked about domestic pricing. Zarir Langrana, ED replied that there’s been a steady uptick in domestic list prices. Currently, the pricing is in the range of about 31,000 per tonne list price. Obviously, different customers will be at different price levels. And different geographies will be at different price levels. So that should give you an idea of the way that domestic prices have moved up.

• Abhijit Akella from IIFL asked about the global demand supply gap. Zarir Langrana, ED said that it’s in the region of about 3 million tonnes today. And it’s a number that will continue to hold for the next 3 or 4 years, given the fact that there does not seem to be any substantial greenfield or brownfield capacities coming up in any of the geographies in the next 2, 3 years.

• S. Ramesh from Nirmal Bang enquired that in terms of the U.K. contracts renewal going forward from January, would it also have the same impact of this $30 to $40. R. Mukundan, MD said that it is fair to assume that the pressure seen in Q2 will not continue. And customers have also accepted beyond certain cutoff of pass-through for both carbon and for energy.

• Chintan Modi from Haitong Securities asked about the size of demand for soda ash in these new applications like solar. Zarir Langrana, ED said that the company’s estimate is that for lithium carbonate, it could be anywhere moving up to close to 750,000 tonnes per annum, over the next year or two. And for solar glass, it’s going to be much higher, maybe close to 1 million, 1.5 million tonnes.

• Chintan Modi from Haitong Securities also asked if the company is able to map how much the new applications contribute in the soda ash. Nandakumar Tirumalai, CFO replied the company has a direct linkage to the lithium carbonate operations in South America. And as far as the solar glass is concerned, as the solar glass projects in India take off, TATACHEM will be supporting that.