Tata Chemicals Ltd (NSE:TATACHEM) Q3 FY23 Earnings Concall dated Feb. 02, 2023.
Corporate Participants:
R Mukundan — Chief Executive Officer
Nandakumar S. Tirumalai — Chief Financial Officer
Zarir Langrana — Executive Director
Analysts:
Gavin Desa — Citigate Dewe Rogerson Ltd. — Analyst
Sumant Kumar — Motilal Oswal — Analyst
Abhijit Akella — Kotak Securities — Analyst
Rohit Nagraj — Centrum Broking — Analyst
S. Ramesh — Nirmal Bang — Analyst
Ranjit Cirumalla — IIFL — Analyst
Riya Mehta — Aequitas Investment — Analyst
Chintan Modi — Haitong Securities — Analyst
Vivek Rajamani — Morgan Stanley — Analyst
Akul Broachwala — IIFL Research — Analyst
Manikantha Garre — Franklin Templeton — Analyst
Arjun Khanna — Kotak Mahindra — Analyst
Saket Kapoor — Kapoor Stock Broking — Analyst
Yogesh Tiwari — Arihant Capital — Analyst
Rohit Sinha — Sunidhi Securities — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Q3 FY ’23 Earnings Conference Call of Tata Chemicals Limited. [Operator Instructions]
I now hand the conference over to Mr. Gavin Desa from CDR India. Thank you, and over to you, sir.
Gavin Desa — Citigate Dewe Rogerson Ltd. — Analyst
Thank you, Tanvi. Good day, and thank you for joining us on Tata Chemicals Q3 FY ’23 Earnings Conference Call. We have with us today Mr. R. Mukundan, the Managing Director and CEO; Mr. Zarir Langrana, Executive Director; and Mr. Nandakumar Tirumalai, Chief Financial Officer.
Before we begin, I would like to mention that some of the statements made in today’s discussions may be forward-looking in nature and may involve risks and uncertainties.
I now invite Mr. Mukundan to begin proceedings of this call.
R Mukundan — Chief Executive Officer
Thank you, Gavin. Good day, and welcome, everyone, to our quarterly earnings call. I’m joined by my colleagues, Mr. Nandakumar Tirumalai, CFO; and Mr. Zarir Langrana, our Executive Director. I will start the discussion with a few key highlights, following which I’ll request Nandu walk you through financial performance.
During the quarter, the operations were steady. The U.S., which had some elongated shutdown last quarter has gone back to the return — returned back to the normal production run rate. Revenue and profitability were robust, with better realizations compared to Q3 of last year. Overall, demand for soda ash continues to be resilient, and we believe the market to be balanced, with a bias towards increasing demand, especially with the reopening of China and newer glass applications. Point to be added here, the Chinese inventory is at an all-time low of 2.8 lakh tonnes, unusually low figure. Hopefully, this will catch up and normalize, but that’s the current state of one specific geography. Rest of the geographies are more or less balanced, with India having some winter type slowdown, but we’re going to pick up fully in terms of overall demand. So I think we are going to be witnessing further tightening as we move forward.
Costs are under control. In a sense that the prices of most of the input energy materials are very stable. They are not increasing anymore, and some of them are beginning to trend down a little bit. There are few non-operational one-off items during the quarter, which is why was the PAT was impacted even though EBITDA has been more or less at the same level as last quarter, which is why we wanted to call out what is called as normalized EBITDA, and Nandu will share the specifics of this, and these will flow through from our joint ventures.
Our expansion process are on schedule, more than that, I think our contracts for 2023 have been finalized right up to December ’23, and the flavor of those contracts and the contracting arrangements you will get at the end of the Q4 results, while I will not be making any statement except to say, all our capacities are more or less booked and we are fully able to service our customers.
I now hand over the floor to Mr. Nandukumar, who will take through our financial performance.
Nandakumar S. Tirumalai — Chief Financial Officer
Thank you, Mukundan, and good morning, everyone. If you look at the numbers for the quarter, we had a good quarter. The revenue for the quarter was at INR4,148 crores, a 32% growth over last year’s Q3. The growth was broad-based with all the businesses and geographies performing well. EBITDA grew by 69% and at — starting at INR922 crores for the quarter. EBITDA margins were at 32% versus was 17% in the same quarter last year.
Moving on to individual businesses, starting with India; revenues for the quarter was at INR1,218 crores, higher by 31% compared to last year’s Q3. Growth was supported by higher realization as compared to last year’s Q3. The PAT for the current quarter was lower than last quarter’s PAT on two factors; one was in terms of — in Q2 in India, we had all dividends coming from investments, which came in Q2, didn’t come in Q3. We also had a one-off kind of a tax refunds coming in Q2 or coming in Q3. These two factors led to the quarter-on-quarter PAT coming down, while EBITDA is almost par with last quarter.
U.S. maintenance momentum with revenue and volume growth of 48% and 4%, respectively, for the quarter. Q3 witnessed volume growth over Q2 as well. And we made up for some — we had some shutdowns in Q2 in U.S. for some days. We made up for that in Q3, with higher volumes compared to Q2. The EBITDA margin for the [Indecipherable] around 35% [Phonetic] as compared to 15% in last year’s Q3, due to better operational efficiencies. We also prepaid $65 million of loans in the last nine months’ time.
Coming to U.K., they have been able to perform well, with revenues improving by 24%. While the uncertainty with regards to energy prices remain, we are taking steps towards rating our costs and improving the overall efficiencies.
As far as Kenya is concerned, business did well and had another quarter of good performance, with both revenue and profits having good growth over previous year. And I am also happy to say, for the first time, Kenya is debt-free. We prepaid all debts in the last nine months time.
Regarding nutra and silica, silica operations are at optimal level, and we are working towards increasing the capacity to better meet growing customer demand with better engagement. Additionally for nutra, our efforts are focused on acquiring customer approvals and increasing [Indecipherable] at the existing unit.
As far as Rallis is concerned, the Q3 was largely impacted due to the seasonality of the business. Management has continued its efforts on improving the product mix and cost efficiencies and widening the distribution reach.
As Mukundan mentioned, there were a few one-offs in the quarter, I just talked about that. In Q3, we had — as I explained earlier, India had the dividend income and the tax refunds in Q2 are coming in Q3. Apart from that, in Q3, there was a particular JV income — JV loss in the quarter. We have two, three JVs, one is in Morocco, one is Tata Industries. So overall, for the quarter, the yields in the case of Morocco, the prices have come down, also selling compared to last year’s Q3. Last year had a very good pricing of phosphoric acid. So quarter-on-quarter or quarter over last year’s Q3, the prices were lower, leading to a loss in Morocco in Q3.
We also had a one-off kind of a sale of one of the Tata Industries unit during Q3, and that was booked in Q3. We don’t expect this to continue in future in terms of industries being a one-off case in Q3. So it does again return to the normal numbers going forward, we expect that.
On a consol basis, we had INR2,119 crores of cash at the end of December, majority in India and U.S. and Kenya. The net debt was at INR4357 crores. During the year, the gross debt was lower due to debts being prepaid, and around 15% of debts have been prepaid during the current year. Our consol capex was INR445 crores for the quarter and INR100 crores for nine months ended.
With that, I’ll close my comments and hand you back to the moderator to open up for the Q&A. Thank you.
Questions and Answers:
Operator
[Operator Instructions] The first question is from the line of Sumant Kumar from Motilal Oswal. Please go ahead.
Sumant Kumar — Motilal Oswal — Analyst
Yeah, hi sir. My question regarding soda ash India, we have still a volume of 156,000 metric tonnes, and the similar kind of volume was in Q2, and the Q2 has a production loss because of plant shutdown. So what was the key reason we are not showing the momentum what we have shown in FY ’21, even FY ’22 of a range of 170,000 to 178,000 or 180,000 metric tonnes?
R Mukundan — Chief Executive Officer
I think India volumes largely, I think if you really look at it, there’s no issue in terms of demand in the market, nor is there an issue of — as I mentioned, there has been some bit of issues with respect to markets and some pockets where there has been a bit of a slow pickup in the marketplace and additional imports which have come in during this quarter. But as such, if you look at the overall — leave the quarter-on-quarter shade aside, because we can pick whether it’s 10,000 more or 20,000 less. If you leave the quarter-on-quarter and look at the overall number, right? Globally, the inventory levels are low because the biggest producer, their inventory levels are growing in China. But we expect this one-off imports, which had come in and also one off softness in some of the markets, especially with respect to the pigments market, export market, which — who sort of correct itself through demand from other segments, especially glass and detergents going forward. So I would just place it on these two elements.
Sumant Kumar — Motilal Oswal — Analyst
Okay. Sir, my second question is, when we are talking about recession in the developed countries, U.S., Europe. And if the demand is going to decline from here, I mean we are talking about favorable demand-supply scenario. In that case, whatever scenario currently we have, do you think with the decision, whatever consumption we have of 60 million tonnes, there might be some decline and then there will be a pressure on the margin side in the soda ash. Whatever golden period we are seeing, there might be some pressure on that side?
R Mukundan — Chief Executive Officer
Actually, we are seeing the reverse. We are seeing the opening of China. I think we are going to be short of materials. There is no recession — at least signs of recession in U.S., their demand is continuing to be strong. Even markets like U.K., which have seen very high gas prices, we are fully booked, and our customers have actually contracted fully with us. Kenya is fully sold out, so I don’t think we are seeing any signs — because Kenya exports mostly to India and ASEAN. So we have actually good amount of understanding of what’s happening in markets.
So really, the current situation you are seeing is with China not fully coming back fully onstream. In fact, if China does come fully onstream, which we expect will happen. I think the situation is going to be much — there could [Phonetic] be much more demand. On top of that, I think India is going to have at least three additional lines and China is going to launch about four to five solar glass lines in the interim period. And — so I would say, while there is a talk of recession, we aren’t seeing recession signs in our demand pattern.
And we are prepared for any sort of eventuality. The only thing we can control is our costs. So we are extremely agile and extremely cost-focused. But all I can say is that, that we do in any case. But in terms of market side, we have not seen any signs.
Operator
The next question is from the line of Abhijit Akella from Kotak Securities. Please go ahead.
Abhijit Akella — Kotak Securities — Analyst
Good morning and thank you for taking my questions. Just a couple. One is on the India EBITDA numbers for the standalone India operations. We are still significantly lower than the high watermark that you reported for the June quarter, which was about INR398 crores of EBITDA from India. We’re still at below INR300 crores for the second quarter running, whereas one of our leading peers in India has actually reported more or less stable numbers for the last three quarters. So if you could please just shed some light on what might be happening there?
R Mukundan — Chief Executive Officer
I think as far as we are concerned, I think our — most of our input costs — basically, if we talk about coal, coke or limestone. In quarter 1, there would have been inventory of the previous year percentage, which would have been — and fresh inventory would have come in, in the current Q2 and Q3. We don’t see any major shift to the cost structure, which is remaining more or less stable. So I don’t want to comment about somebody else. I can only say that, we are operating at optimum level at the current kind of operations. And if at all going forward in the next fiscal year, some of these costs will ease, because we are seeing signs of that happening. That’s all I could say.
Abhijit Akella — Kotak Securities — Analyst
Okay. But so just to understand, should we take this quarter’s run rate as a normal number for the India business, or should we expect to sort of trend back towards the June quarter number gradually?
R Mukundan — Chief Executive Officer
So I can only — I cannot say beyond the point that, as cost — input costs come down, it will go back probably to June. But I think that is a process which will happen. You can monitor the coal prices as much as they can monitor.
Abhijit Akella — Kotak Securities — Analyst
Understood. Got it. And the only other thing I just wanted to check about was, while you did mention that we will be able to provide some flavor on the U.S. contract renegotiations only by end of this quarter, the news reports out there do seem to indicate that the kind of price increases that have been witnessed in the U.S. domestic market are at all-time high levels. So any color you could provide there, at least qualitatively, in terms of whether it has been a satisfactory contract renegotiation season for yourself and the industry?
R Mukundan — Chief Executive Officer
Zarir, do you want to comment on this?
Zarir Langrana — Executive Director
Yes. I think broadly, your comment is accurate. All new contracts that were entered into or well, in our case, all have been entered into, are at significantly high pricing.
Operator
The next question is from the line of Vivek Rajamani from Morgan Stanley. Vivek, your line has been unmuted. We do not have Vivek in the queue anymore. We’ll move to the next question from the line of Rohit Nagraj from Centrum Broking. Please go ahead.
Rohit Nagraj — Centrum Broking — Analyst
Yeah, thanks for the opportunity. The first question is on Kenya performance. So if we look at Q-o-Q performance, the EBITDA is down by about INR10 crores, but the PAT is down by almost INR45 crores. So any particular reason? And you also alluded to the fact that we have repaid the debt. So probably the interest component also must have been lower?
Nandakumar S. Tirumalai — Chief Financial Officer
Yes. Rohit, in terms of Kenya, Q3, we had higher tax provisioning, because the year is looking good, and that extra tax provisioning was made in Q3, that’s why the PAT was lower than Q2.
Rohit Nagraj — Centrum Broking — Analyst
Right. Got it. And second question is particularly in terms of India demand. So was there any weakness in Indian demand during Q3 particularly, because the volumes on a Q-o-Q basis have been flattish? And how are we looking at — when we have entered into Q4?
R Mukundan — Chief Executive Officer
So I already clarified it. #1, that in India, pigments and dyestuff sectors, which takes a bit of soda ash, I think they had export headwinds, and that has been widely reported even in the media. So that has impacted a bit of the demand issue. Also, some imports did come in, in the intervening period, which I think was a one-off. We don’t expect the level of imports with the kind of inventory levels which are in China. So I don’t think that’s going to continue. So this was a one-off issue and which has led to a bit of inventory buildup in India, which will sort of smoothen out as we go through the year.
Rohit Nagraj — Centrum Broking — Analyst
Got it. Thank you so much sir.
Operator
Thank you. The next question is from the line of S. Ramesh from Nirmal Bang Securities. Please go ahead.
S. Ramesh — Nirmal Bang — Analyst
Good morning, and thank you very much. So if I were to understand the U.K. performance, they are going from strength to strength. So the question is, how much is this pricing power sustainable, and is it some kind of a structural turnaround we are seeing in U.K.? And the second thought is, if you can share some numbers in terms of the India consumption for the quarter for the industry in soda ash, and how you see this consumption growing, say, in the next two years in India? And if you can put some percentage growth numbers for the global consumption, that will be useful?
R Mukundan — Chief Executive Officer
Yes. I think the growth rate, broadly, what we are pegging, and I’m going to give you a range, because it’s a range between 5.5% to 6.5% is the growth rate we are expecting, especially on the back of some of the new lines that are coming on the screen. And overall, globally, I think it should be anywhere between 2% to 3% growth rate. That’s really the broad number; because some parts of the world will probably just stagnate, will not grow that much, but other parts like Asia and Africa will continue to grow in a good way.
As far as the U.K. is concerned, just to give a color on what kind of contracting has been entered. We have entered for next year, what is known as fixed margin contracts. So we will have margins which will be protected in the next year. This year, it was a bit of an open contract — was linked to energy costs. Next year, we’ve actually tucked into fixed overall margin. So I think we’ll get a better color of that in Q4, and we do expect that U.K. would perform well, whether it’s going to be this kind of number. I don’t want to comment on that, but it’s going to perform at a steady rate next year.
S. Ramesh — Nirmal Bang — Analyst
So if you talk about U.K. fixed margin, is it going to be on a per tonne basis, or is it going to be on a percentage basis?
R Mukundan — Chief Executive Officer
It is on per tonne basis yes, not on percentage. It is not that it’s — gas prices go 2x, we’ll get also benefit of a certain percentage of the 2-2 [Phonetic]. It is on whatever the pricing of gas is, on top of that, will be a certain number.
S. Ramesh — Nirmal Bang — Analyst
For soda ash?
R Mukundan — Chief Executive Officer
For soda ash and bi-carb.
S. Ramesh — Nirmal Bang — Analyst
Yes. And in the second quarter, there was some mention of some one-off in U.K., and you said you will come back to it. Is it possible to share what was the one-off? Because just to understand the U.K. performance at the EBITDA level, is it something which is the normalized EBITDA for the second and third quarter? Or is there any one-offs — will be glad to understand that?
R Mukundan — Chief Executive Officer
I think you should wait for Q4. Everything will become clear, how that normalizes out yes? I don’t want to give any forward looking statements. I’ve made this point that it’s got fixed margins, and it is going to be profitable. Beyond that, I don’t want to make a point.
Operator
The next question is from the line of Ranjit from IIFL Securities. Please go ahead.
Ranjit Cirumalla — IIFL — Analyst
Hi sir. Thanks for this opportunity. Just wanted to get a bit more sense about post the Anzac exit, of how looking at the exports from U.S. So would it also change the mix that we have currently from that geographies? And second, how to look at the logistic costs over there?
R Mukundan — Chief Executive Officer
In terms of our contracts, they are more or less mixed, and even for exports. So we have carefully contracted. As far as logistics is concerned, I think that we have entered into an arrangement with Anzac, they will still handle the logistics, but they don’t want to handle customer contracts, that is what we understand.
Ranjit Cirumalla — IIFL — Analyst
So these contracts are largely fixed price contracts?
R Mukundan — Chief Executive Officer
In U.S., we have fixed price contract. There is not a — one year fixed price point contract and calendar year.
Ranjit Cirumalla — IIFL — Analyst
Yes. And that is what you are alluding that should start reflecting from 4Q onwards?
R Mukundan — Chief Executive Officer
Yes. Also in U.K., it is calendar year, right? So fixed margin that will also be visible in Q4.
Ranjit Cirumalla — IIFL — Analyst
Yes. So could you share a bit more light on the geography mix from that U.S. exports? Is it more towards which…
Nandakumar S. Tirumalai — Chief Financial Officer
Yes, it is going to remain more or less stable. If you take a broad brush, I think, of the export volume, which is close to about 45% or so of the volume, I think 50% of that would go to LatAm, 50% to Asia-Pacific.
Ranjit Cirumalla — IIFL — Analyst
Sure, sure, that is helpful. Thank you.
Operator
The next question is from the line of Riya Mehta from Aequitas Investment. Please go ahead.
Riya Mehta — Aequitas Investment — Analyst
Hello. Thank you for giving me the opportunity. I just wanted to look at soda ash industry as a whole since we’re not having any global capacity coming up in the next two to three years, everything is coming in 2027 in a major way apart from our — whatever incremental we are getting. What kind of realization jump do you see coming forward because of this?
R Mukundan — Chief Executive Officer
[Indecipherable]
Zarir Langrana — Executive Director
So you’re right in what you’re saying Riya. I think we also aren’t seeing any substantial new capacity coming up, at least till the ’26, ’27 timeframe. In between, you will see some capacity come up, but those will be primarily debottlenecks. There is stock of some natural soda ash capacity coming up in China. But that number has been swinging quite widely over these last few years. Something will come up. The volume and the timeframe is not very certain. So yes, as Mukund mentioned, we are going to see continued– if not complete tightness in the market, the market will continue to remain balanced. A lot of that has flown into pricing in towards the latter half of last year and as we go into this year, and we expect that kind of firmness to continue.
You might see some flavors in various geographies, but we do believe that the trend is going to be positive.
Riya Mehta — Aequitas Investment — Analyst
Okay. And since China reopening and we are hearing their manufacturing PMI increasing to 50.1. Do you see that there we might have some export opportunities out there, or at least the dumping would reduce to an extent and the domestic dynamics would get better, and we can have — whatever price cuts we have taken for soda ash in domestic arena, we can just recoup that? Do we see such a phenomena happening anytime soon?
Zarir Langrana — Executive Director
So very likely, as Mukund also mentioned, that the reopening of China with the new solar glass plants coming up there, with a slight relaxation on regulations on the real estate sector there, we are going to see or are expecting to see a rebound in Chinese demand. Obviously, that is going to have an impact on whatever they exported or had available for export during the zero COVID timeframe. It might open up possibilities again for Chinese importing soda ash, whether those will come out of Turkey or North America, I would take a guess right now. And obviously, that will ease off also on Chinese import pressure that was — that existed for maybe two or three months into the Indian market. I think that will ease off as well.
R Mukundan — Chief Executive Officer
Just to add, I think you would recall, last year, we had exported from Kenya into China for the first time. So we — it is — it may be possible it will move in that direction. So let me just give — again, go back to this point. China reopening is a item– is an issue to watch. Second issue to watch is that, Europe has fared much better than what we anticipated. So I think what we are missing also in this is that, while Europe did go through a bit of a difficult period, I think Europe has fared better.
So the pressure, which has come on the dyestuff and the pigment segment, which I spoke about in terms of exports to Europe, I think that may also be easing off, because of how they have performed, the gas storages are good. In fact, the gas prices in U.K. and Europe have almost come back to the normalized number, well below the peaks we’ve seen. So a peak of GBP7 it has come down to GBP1.5 on already per therm. So that’s been a bit of a — more than 1/4 the figure which we saw at the peak.
So that explains the broad trend in the world. Of course, I cannot be — I can’t predict the economy, and most economists also would not dare to predict economy. There is still talk of recession, but we are not seeing that in our business. That is all I can say.
Zarir Langrana — Executive Director
And just — sorry, Mukund, I am glad you mentioned this. EU just yesterday released that container glass sales figures for last year, and it’s at a record high. It’s the highest it has ever been, in a year that the R word was being used and is still being used. So that’s another indicator.
Operator
Thank you. [Operator Instructions] The next question is from the line of Jinesh Sukhia from Haitong Securities. Please go ahead.
Chintan Modi — Haitong Securities — Analyst
Hi sir. This is Chintan Modi from Haitong Securities. So two questions. One is despite having such a great year in terms of demand and also in terms of profitability. If you look at our volumes have — for nine months have degrown by almost 3% — and I understand the Q2 phenomena, I mean, the one-off that we had. But even if that was a normalized quarter, I don’t think we would have seen a big growth in the volumes. So that was one. And secondly, from — despite having such good profits, our ROCs are just inching closer to 10%. So would like to know like, how does the management think about this, and how do you plan your future capital allocations in the long run?
R Mukundan — Chief Executive Officer
So I think, firstly, on the volume piece, just to assure you, we are operating at full utilization almost, we are producing whatever we can. So I think unless we expand — I don’t expect the volumes to go up substantially. And of course, the Q2, where we had extended shutdown, I think that has played a part in this. I think that’s where we stand. As capacities come on stream, that’s only when you see the volume uptick happen. And that should come in phases, as we move forward during the course of the next financial year, broadly.
In terms of the…
Chintan Modi — Haitong Securities — Analyst
Capital employed.
R Mukundan — Chief Executive Officer
Capital employed, we are fairly clear in terms of putting our capital to the businesses which yield return, and we are using them judiciously. But in terms of ROCE, I think that there is a fair degree of the investment book which we have, which also partly is attributable to this whole process. But other than that, I feel as a business, we are very clear that our return ratios are at a premium to a weighted average cost of capital. Ideally getting close to, I think, anywhere between 15% to 20% broadly.
Chintan Modi — Haitong Securities — Analyst
Yeah. And in terms of investment book, any plans to, say, monetize a few — some of the investments?
R Mukundan — Chief Executive Officer
I will only say no comments. And our past history shows that as and when there is — in a phased manner, it has been happening over a period of time. But that certainly is the board’s decision. That’s about it.
Chintan Modi — Haitong Securities — Analyst
Okay. Thank you.
Operator
Thank you. The next question is from the line of Pranita from Morgan Stanley. Please go ahead.
Vivek Rajamani — Morgan Stanley — Analyst
Hello. Hi, this is Vivek from Morgan Stanley. Sorry, sir, I dropped off the call before, apologies for that. And I’m sorry if you may have touched upon this question earlier. But if you could just give some sense on the demand trends that you’re seeing in different geographies? I know you mentioned that you’ve — all your capacities are booked for 2023. But if you could give some color in terms of the demand trends that you’re seeing from your bigger end segments, that would be really helpful. Thank you.
R Mukundan — Chief Executive Officer
So overall, the demand is firm, I can only say that. The demand-supply situation is balanced with tending towards a tightness or biased towards tightness, especially because China has reopened, their inventories are running low. I think we are continuing to see a very positive buyer right across. And I also mentioned that India did see a temporary blip with respect to one or two segments like dyes and pigments and also some one-off imports coming in Q3, but that is not reflective of the growth trend in this market, which is close to about anywhere between 5.5% to 6.5% growth rate, which we are going to expect, especially on the back of new capacities of glass lines coming on stream.
China also is going to grow with at least five, six more glass lines coming onstream and Zarir already alluded to record container glass production in Europe and we are mainly selling in the U.K. to container glass, no other segment. And lastly, LatAm continues to make steady progress in terms of their sectors too.
So really, if you say, where is LatAm growth going to come from and where is the Australian growth going to come from, it will be mostly from lithium carbonate and lithium businesses. Rest of the world is seeing a very strong pull coming from the solar glass business. And the other segments are actually holding steady and growing further. So all I can say is, the world GDP is going to grow, I think soda ash will be needed and bicarbonate will be needed all the chemicals we make will be needed.
Vivek Rajamani — Morgan Stanley — Analyst
Thank you, sir. And just a second question on U.K. and Kenya, again, very strong numbers there. You had highlighted in the past that you could see some normalization in margins. Any color in terms of how you see this trending maybe in the next couple of quarters? I know you said that operations and demand are still very, very strong there. But if you still maintain a bit of normalization might happen? Any color on how that could trend over the next couple of quarters would be really helpful? Thank you.
R Mukundan — Chief Executive Officer
I think quarter four, without saying anything in U.K., as I mentioned, we have got a fixed margin, and you will get a color of that when we do the results for the quarter four. And this is the Q1 of the calendar year, the first of the contracts we just shifted. And so it will be a profitable operation, but [Indecipherable] use is the right word, but I can’t go beyond that.
In Kenya, certainly, the revenue side is not going to see any major change because the prices are holding in all markets. So I don’t see that as an issue. But I think the fresh hedges of oil, which we are taking, HFO which we are taking, are all coming at the current trended oil — HFO prices. So there is going to be a bit of a normalization there also. So I’ll leave it there.
Operator
The next question is from the line of Akul Broachwala from IIFL Securities. Please go ahead.
Akul Broachwala — IIFL Research — Analyst
Thank you so much for the opportunity. Just a follow-up on U.K. again. So for the nine months, we’ve reported INR390-odd crores of EBITDA. So could you quantify the benefit that we are kind of getting from carbon capture unit?
R Mukundan — Chief Executive Officer
We don’t have the figure readily. I think we’ll keep that ready for next meeting, and we’ll be able to give you some color on that. Sorry for that.
Akul Broachwala — IIFL Research — Analyst
Sure. But overall, like, there was this news article stating that you’ve also entered into a contract with a European manufacturer for the — probably sourcing of low carbon. So what’s the sense out there? I mean, are you looking at this very closely in terms of yielding further benefits?
R Mukundan — Chief Executive Officer
It’s a heads up term agreement for an MOU, and it’s an early phase. I think U.K. government is very keen on green and hydrogen economy. So we are fully supportive, and we will work closely, but it’s in a phase of early contract — sorry, understanding. What I mean to say by that is that, for the Vertex to sort of go ahead with their investment, they need customer arrangements, and also arrangements from government in terms of support to hydrogen, which is what we are securing as of now. As it sort of gets more mature, you should look at it. But for next two years or so, I don’t think you need to bother about this agreement. It’s only much beyond that, that business agreement will come into play.
Akul Broachwala — IIFL Research — Analyst
Understood. Secondly, specifically for North America, like many of these large manufacturers have either revived their capacity or announced new capacity. So are we also looking at that opportunity in near term or maybe few years down the line for adding fresh capacities?
R Mukundan — Chief Executive Officer
Yes, I think we’ve already announced that we will be moving from 2.8 million to 3.2 million tonnes. I think that’s already in the works. And in India, we are going to 1 million, and there is also a 1.3 million expansion happening in India. So I think these are part of the expansion processes on our journey to double our overall — nearly double our overall capacity.
Operator
The next question is from the line of Manikantha Garre from Franklin Templeton. Please go ahead.
Manikantha Garre — Franklin Templeton — Analyst
Yeah hi. Thanks for providing the opportunity sir. Sir I remember, in the commentary that you mentioned that has signed…
Operator
Manikanta, we are not able to hear you clearly. Please speak with the handset.
Manikantha Garre — Franklin Templeton — Analyst
Yes, I am on handset only. How about now?
Operator
Still the same.
R Mukundan — Chief Executive Officer
Please go ahead.
Manikantha Garre — Franklin Templeton — Analyst
Sir, you mentioned earlier that your capacity has — capacities have been fully booked for this calendar year. Just wanted to understand, typically any take-or-pay percentage loss in this quarterly and annual contract that you signed? That’s the first question.
R Mukundan — Chief Executive Officer
[Technical Issues]
Manikantha Garre — Franklin Templeton — Analyst
Okay. So this 100% of the [Technical Issues] The second question is, as you have pointed out that as we have been tracking, gas prices in U.S. have fallen significantly in Q3 also. But I feel, costs going up sequentially in U.S. and U.K. Is it because of the hedges that we have placed and as [Indecipherable] we are not seeing the basis yet? And in derivatives [Phonetic], which quarter we expect to see the current low gas prices [Technical Issues].
R Mukundan — Chief Executive Officer
So as referred, we’ve already seen the benefit of agency plays, as the hedges unwind, it will go to realistic figures of current gas prices, which have tendered down. So I think what has really happened to us, is because of the hedges, we were not affected by peak gas prices, and they are all [Indecipherable]. And I think we’ve said through that entire process through, input costs almost remaining steady.
Operator
Thank you. The next question is from the line of Arjun Khanna from Kotak Mahindra Asset Management. Please go ahead.
Arjun Khanna — Kotak Mahindra — Analyst
Thank you sir for taking my question. Sir, I just wanted some color on our specialty piece. We understand what’s with Rallis, it’s a separately listed entity. If you could just give us a flavor how does one understand the seasonality in this? Because we see profitability change substantially quarter-to-quarter. And secondly, if you could — you mentioned in the opening remarks certain losses in Tata Industries. So could you bring out that number? What was that loss per se? And how do you see our Morocco JV pan out, given that phos acid prices are on the way down? Thank you.
Nandakumar S. Tirumalai — Chief Financial Officer
If I talk about second part first, Mani [Phonetic] one in terms of the heating [Phonetic]. So we have the JV loss INR91 crores in the quarter that consists of three or four JVs, and we don’t really give a breakup of that in terms of which JV has made how much losses. But it consists of the — one is the Morocco, where the phos acid prices have come down in Q3 compared to Q2. In fact, they made a profit in Q2 and a small loss in Q3. And in the case of Tata Industries, one is a normal, two is the one-off loss they had in the quarter in Industries, and we got our share of 9% we hold in the company here. And that, we don’t expect that to repeat going forward. So it’s more like a one-off only for the quarter, on account of a business sold by them to outside industries.
R Mukundan — Chief Executive Officer
Going back to the Moroccan phos acid entity, firstly, I think by DAP prices and phos acid prices are coming down, the issue is going to be that, that also reflects back into the raw phosphate prices. So while there could be some course correction period there price fall, but the raw phosphate price may [Technical Issues]. Phosphate may be coming in through some internal — sorry, past purchases — as those stocks sort of get consumed, it will also normalize. So generally, these have tended to move in the same direction. So with some margin expansion in the periods of tightness. So DAP, phos acid and raw phosphate move almost in the same direction. So — and there’s a margin which you earn and the margin expands if there is a tightness in the market.
As far as our view of phosphate is concerned, it also remains a key resource and we do believe that — the world will continue to see phosphate consumption on a growing pattern, as food production gathers even more momentum in terms of access to high-quality fertilizer.
Nandakumar S. Tirumalai — Chief Financial Officer
And also in terms of the same topic, Arjun. I think if you look at Morocco, we had very huge profits last year. And also again [Indecipherable] normalized as per the past trend. So now what is being seen is the right numbers in terms of the profits.
Arjun Khanna — Kotak Mahindra — Analyst
Sure. Just to understand that, when you say right numbers in terms of losses, or do you see this entity move back to historical…
Nandakumar S. Tirumalai — Chief Financial Officer
Yes, I think if you look at the historical numbers of the profit in Morocco in the last few years, we make about INR200 crores or INR300 crores [Phonetic] of profit every year as a company, we get 1/3 of that. That’s the past trend. Last year was a normal year in terms of the pricing shot up and we made a big gain. Otherwise, towards [Indecipherable] and what they made generally year-on-year in Morocco, we get 1/3 of that in our books here.
Arjun Khanna — Kotak Mahindra — Analyst
Perfect. Well understood, sir. And the first question, sir?
R Mukundan — Chief Executive Officer
Yes, Rallis’ seasonality is like this. I think their best quarter tends to be Q2, and…
Arjun Khanna — Kotak Mahindra — Analyst
Sir, Rallis’ seasonality is understood sir. Just speaking ex Rallis, is there seasonality to the business ex-Rallis?
Nandakumar S. Tirumalai — Chief Financial Officer
There’s no seasonality.
R Mukundan — Chief Executive Officer
There is no seasonality in the other business. During monsoon, some offtake may reduce, which is — because some of the industries may be having lower production during monsoon. But otherwise, there is no seasonality. Our tire line and silica is fully booked 100% utilization. Our food line and silica is about 75% utilization, that goes mainly into two phased and battery separator markets. And the tire line goes to the tire manufacturing and rubber manufacturers.
As far as our phos acid is prebiotic [Phonetic], the fermentation platform is concerned, there, the utilization is about 68% or 70% broadly. I think as the utilization moves up, these will move towards positive.
The GC margin in this business tends to vary between — 25% and fermentation at 13%. So I think those percentages will keep improving as the utilization improves. So we have to get more customer orders and increase our sales of these products. That’s what we are putting effort on. But there is a broad acceptance of these products. The customer base is good. But I think we have to continue to serve them to get the utilization.
Operator
The next question is from the line of S. Ramesh from Nirmal Bang Equities. Please go ahead.
S. Ramesh — Nirmal Bang — Analyst
Yes. So on the India Speciality, is it possible to give a time line in terms of when we can see a positive EBIT in your standalone reporting?
R Mukundan — Chief Executive Officer
Yeah, In standalone reporting in terms of positive EBIT, I can only say that we have to scale this beyond their current pilot scale. So as I mentioned to you, the board has cleared a 50,000 tonne silica expansion. I think that will take time to come onstream. So I think at least 24 months to execute that project. We’ve just finished the acquisition of land and the groundbreaking in cargo. So till that time, those are pilot plants, as I mentioned, I think these were to get customer acceptance [Phonetic].
S. Ramesh — Nirmal Bang — Analyst
Okay. And just going back to your second quarter call, there was some mention of some one-off items in the U.K. P&L. Is it possible to share that? And are we to understand that the U.K. performance in third quarter is without any one-off item?
Nandakumar S. Tirumalai — Chief Financial Officer
So there is no one-off in third quarter in terms of U.K.
R Mukundan — Chief Executive Officer
Yeah, U.K. is a normal operational third quarter. And fourth quarter, we will be switching to fixed margins for the next calendar year.
S. Ramesh — Nirmal Bang — Analyst
No, I’m referring to, as you mentioned in the second quarter call, there was a reported onetime item in the U.K. payable for second quarter, it was supposed to come back on that. So if you can give us some clarity on that view?
Nandakumar S. Tirumalai — Chief Financial Officer
So some land sold in U.K., which was a small gain booked in Q2, Ramesh. Apart from that, there is no other one-off in Q2, and Q3 is without any one-offs in the U.K.
S. Ramesh — Nirmal Bang — Analyst
Okay. Thank you very much and all the best.
Nandakumar S. Tirumalai — Chief Financial Officer
Thank you, Ramesh.
Operator
The next question is from the line of Saket Kapoor from Kapoor Company. Please go ahead.
Saket Kapoor — Kapoor Stock Broking — Analyst
Namaskar sir. Sir, can you please explain the reason for the increase in power and fuel costs on a Q-on-Q basis from INR700 — I’m talking about the consolidated effect? And the freight and forwarding charges. Your thought process on that. I’m talking about the power and fuel cost of 901.
Nandakumar S. Tirumalai — Chief Financial Officer
That — if you look at the whole thing, see we got — power and fuel has got two competence. One is in terms of your consumption of coal in India and gas in U.K. and U.S. and also U.S. consumes coal. So broadly, the quarter-on-quarter, the gas part have gone up and has come down now. So that reflects the increase in the gas prices across geographies, maybe in U.S. and U.K. It went up sharply in Q3. It has come down to let’s say GBP1.5 a therm in U.K. as compared to GBP4 or GBP5 in Q3.
Saket Kapoor — Kapoor Stock Broking — Analyst
So this is — there is a pass on in the realization also. It did not have a dent on demand, it is to be underscored?
Nandakumar S. Tirumalai — Chief Financial Officer
Correct, correct. So whatever you’re seeing as an increase in the power and fuel and freight, is coming into top line.
Saket Kapoor — Kapoor Stock Broking — Analyst
Okay. Sir, as you mentioned that China is having the historically low inventory — and for India domestic domestically, we are having some inventory. So was it that this inventory being from the Chinese only before the reopening? And if you refer to the Chinese prices, sir, just referring to their website, the Chinese prices have moved up more than RMB 110 over a period of last one month. So does those prices have any relevancy on how the market is shaping up? Would you like to share some thoughts on the same, sir?
R Mukundan — Chief Executive Officer
In terms of India inventory, I think broadly, most companies hold between 12 days of inventory that has probably gone to 20 days of inventory. It’s not a big number. So I just wanted to leave it there. And the Chinese domestic price is moving up and down. I think that’s a separate phenomenon. But all I would say is that the international prices are currently steady and holding.
Operator
Thank you. The next question is from the line of Yogesh Tiwari from Arihant Capital. Please go ahead.
Yogesh Tiwari — Arihant Capital — Analyst
Thank you, sir. Am I audible?
Operator
Yes.
Yogesh Tiwari — Arihant Capital — Analyst
Sir, my first question is on U.K. So if I refer to your presentation, the sales volume for soda ash has declined on a quarter-on-quarter basis from about 69% to 63%. So what would be the driver for it?
R Mukundan — Chief Executive Officer
It’s just the timing. So it’s a very minor decline. It’s just a timing issue, nothing else.
Yogesh Tiwari — Arihant Capital — Analyst
Okay. And even on a year-on-year basis, it has been a decline. So any reason for the continuous decline, like?
R Mukundan — Chief Executive Officer
So I think we are fully servicing all the orders. I think that’s what we are doing. We may have cut out some of the low-yielding sale, which was going to some customers, but I think they are running the business to maximize bottom line.
Yogesh Tiwari — Arihant Capital — Analyst
Sure, sir. And last question on the India business, so in November, we actually took a price reduction in light and dense soda ash. So how is the situation like in India, in terms of prices and pricing?
R Mukundan — Chief Executive Officer
Yes. I think there again was a bit of a seasonal move, which has to be — which was made, and I think also reflective of some input cost reduction, which we were seeing coming in. But in terms of — if you ask me, as the inventory situation eases, this is what we are expecting in the next two months. I think the prices should again be on a former footing.
Operator
Thank you. The next question is from the line of Rohit Sinha from Sunidhi Securities. Please go ahead.
Rohit Sinha — Sunidhi Securities — Analyst
Yeah. Hi sir, thank you for my question. Just a few things. I mean, one is, as you mentioned that, this pigment and dyestuff industry has facing some headwinds because of which we lost some bit of demand. So just wanted to understand what kind of percentage, if at all, could you mention that this industry is consuming soda ash?
R Mukundan — Chief Executive Officer
4% to 5% overall demand.
Rohit Sinha — Sunidhi Securities — Analyst
Okay. Okay. And secondly, on the power sourcing, just wanted to understand that whether we — I mean, how we are looking to go ahead with the green energy kind of thing, or are we looking to reduce some power costs with sourcing for renewable power?
R Mukundan — Chief Executive Officer
Yes I think we have four different units which are on a different trajectory. U.K. already is 100% on gas. And I think the next step for them would be to explore hydrogen because they are one of the cleanest fuels in terms of carbon intensity already. And Magadi, it will move from HFO to mostly solar for the energy requirement. And U.S. would move — they are 25% on gas, 75% on coal, they would also switch to gas over a period of time, and that is the trajectory they will take.
India is going to have a combination. India will move a combination from 100% coal to renewable solar, as well as to biomass, as two fuels which are options which we will be doing over a period of time.
Rohit Sinha — Sunidhi Securities — Analyst
Okay. Any time line, I mean, in this…
R Mukundan — Chief Executive Officer
Our teams are working to reducing 30%, which means wherever it’s 100%, we’ll go around to 70% carbon intensity, which means the core usage should come down to 70% at the current level.
Operator
Thank you. That was the last question for today. I now hand the conference over to management for closing comments.
R Mukundan — Chief Executive Officer
Overall, I just wanted to quote by saying that we are continuing to see steady demand-supply situation. Next year looks to be in a good, steady [Indecipherable] with the reopening of China, as well as better-than-expected European performance, especially with respect to the gas storage and the ability to manage in this difficult cost situation which they were facing. With this, we are confident that our trajectory which we have laid out for our business is on the right path. In addition to that, just adding a further point to the last question, we are also augmenting our efforts both in the area of sustainability and going green, and adding a digital layer to our operations, and we will continue to report progress of all these efforts quarter-on-quarter. Thank you all, and have an excellent quarter going ahead. Thank you.
Operator
[Operator Closing Remarks]