Tata Chemicals Ltd (TATACHEM) Q4 FY23 Earnings Concall Transcript

Tata Chemicals Ltd (NSE:TATACHEM) Q4 FY23 Earnings Concall dated May. 04, 2023.

Corporate Participants:

Gavin Desa — Senior Partner & Account Head

R Mukundan — MD, Chief Executive Officer & Executive Director

Nandakumar S. Tirumalai — Chief Financial Officer & Chief Investor Relations Officer

Analysts:

Sumant Kumar — Motilal Oswal — Analyst

Abhijit Akella — Kotak Securities — Analyst

Vivek Rajamani — Morgan Stanley — Analyst

Arjun Khanna — Kotak Mahindra Assert Management — Analyst

S. Ramesh — Nirmal Bang Institutional Equities — Analyst

Saurabh Jain — HSBC — Analyst

Rohit Nagraj — Centrum Broking Limited — Analyst

Riya Mehta — Aequitas Investments — Analyst

Nitesh — — Analyst

Saket Kapoor — Kapoor & Company — Analyst

Mitel Bua — Unlisted India — Analyst

Janum Doshi — Chris Portfolio — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to Tata Chemicals Limited Q4 FY ’23 Earnings Conference Call. [Operator Instructions]

I now hand the conference over to Mr. Gavin Desa from CDR India. Thank you, and over to you, sir.

Gavin Desa — Senior Partner & Account Head

Thank you, Nirav. Good day, everyone, and thank you for joining us on Tata Chemicals Q4 FY ’23 Earnings Conference Call. We have with us today, Mr. R. Mukundan, Managing Director and CEO; Mr. Zarir Langrana, Executive Director; and Mr. Nandakumar Tirumalai, the 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 presiding the call. Over to you, thank you.

R Mukundan — MD, Chief Executive Officer & Executive Director

Thanks, Gavin. Good day, and welcome to everyone to our Q4 FY ’23 Earnings Call. I’m joined by my colleague, Zarir and Nandu, for today’s call. I will start the discussion with key operational highlights across business and geographies, following which Nandu will walk through the financial performance for the year. We have ended the year on a strong note, as can be seen by the results. Revenue and profitability have registered a big growth. And more importantly, this has been a healthy growth in all our geographies compared to previous year. Performance is largely in line with what we have expected in the soda ash market. We expect in the medium term, the balance to be continuing in the soda ash market, especially because of the continued demand and start of various plants and operations both in India around the world. Our focus is on timely execution of our projects and efficient cost management. Now going specifically into elements which we see are geography specific.

Starting with China, we are very enthused by the strong reopening of China, and this has led to the tightening of dense ash within China and inventories remained low in the dense ash sector because of high demand from the glass and container glass sectors. U.S. continues to register strong demand from all parts of the world. And as can be seen, the contracts, which we had mentioned last time we said would be visible to everybody. Those contracts have started to kick in, and that will continue to hold in terms of margin expansion in the U.S. U.K., as we mentioned last time, we’ll move to fixed margin from Quarter 1. And I think that effect of the fixed margin be fully seen by quarter. Basically, Quarter one of the next fiscal year, the current fiscal year today. And that will continue to hold good because that sort of protects the company from curation, which may come to the risk of gas prices and it sort of protection against that. In terms of Kenya and India, these are almost similar markets. These are the Indian market as well as the nearby markets. We expect a few trends to continue.

As you know, we have taken a price correction during the current quarter. And also in the previous month of the quarter, this was mainly to avoid discounting in the market and make sure all this price was aligned with the pricing levels prevalent in the market. But as we move through the year going forward, while the prices will remain more or less flat, I think our view would be that costs will start to moderate within India. So going forward from beyond Q2, we do believe that the margin would go back to previous levels. Just as a reminder, our contribution in the business used to be at the level of somewhere around a percentage gain which we had gained in the margin structure of whatever we are paying. We’ll be able to go back to the whole margin gains which we had had prior to the high increase in costs, which we had, which is tending to moderate now at a constant price. So all in all, the way we see the market going forward, it will be that the U.S. would continue to lead in terms of both margins and volume for us, and that is expected to marginally improve and then back hold right through the year. U.K. would moderate to fixed margin.

Kenya and India would hold flat at the current margin and start to improve from Q2 once our cost structure has come down because, as you know, we contract for coal, which is stock is run for about four to six months, and they need to be wound down with the new stock, so the prices are at a lower level. So broadly, our view is that demand patterns are good. Prices are more or less stable, except where there is an occasional inventory movement, especially in India, we did see some inventory coming in because of this discounting an increase and we took a siting correction. But overall, worldwide, we continue to see strong demand right across sectors, especially driven off the new solar glass plant that are coming up three lines are expected in India and additional lines are coming up around the world. Just as a benchmark, 100 gigawatts of solar capacity needs one million tonne and every tonne of lithium, the carbonate we said needs two tonnes of soda ash. So that should give you broad ins market the demand growth.

Overall, in terms of demand supply, if you go on a global basis. While the demand growth will continue, reason to reason, depending upon the — where the capacity has come on stream, anywhere between 2% to 6% growth. The supply is not going to keep pace with it, even considering at some point, the 1.5 million tonnes of inner Mongolian capacity, which we have highlighted in the past. While this capacity will come in the interim, I think the key issue is one should bear in mind, which we can go through when we have the Q&A is the fact that this will largely, in our view, because of the high logistics cost to get it to port and beyond fourth we would serve the domestic market. And we do believe that there is a strong reopening of China, this is going to bode well for this capacity to get absorbed. We have continued to maintain the world needs close to about 1.5 million to two million tonnes of capacity every year for remaining balanced.

And until year FY ’27, ’28, we don’t see large tracks of capacity coming on, and this market will remain overbalanced or tight depending on what the current contextual situation is. Geography to geography could vary. So all in all, what we wanted to highlight is that the structural elements of the business remain good. and we continue to invest in this business. Our capacity of 200,000 tonnes would come on stream in two steps. We expect 100,000 tonnes of soda ash to come on stream in India, additional 100,000 tonnes to come a year later. And in addition to that, the salt capacity would also go up in India by about 200,000 tonnes, but that will be slowly absorbed in the market at the rate of 100,000 tonnes per year. In U.S., we are in the final stages of finishing our debottlenecking details. And we do intend to add at least 400,000 tonnes of capacity in U.S. And this addition would come in a period of about 24 to 28 months. Broadly, that is the context of our growth.

In terms of our specialty portfolio, Rallis has had a difficult quarter in terms of cleaning up its balance sheet. With this cleanup behind it, I think Rallis is poised for a steady and strong year-on-year growth going forward. In terms of our two other specialty quarries, these quantities continue to rise, the capacity utilization continue to rise. As far as Cuddalore is concerned, the Board has agreed to add additional capacity of 110,000 tonnes in the short term in addition to the current capacity and also pivot our entire capacity to tire grade, and we would be focusing on that grade going forward more and more. With these words, I just wanted to highlight that our strategy continues to be in place. Structural characteristics of the market continue to be in place and we remain watchful because of the high interest rate environment in the market of market conditions, and we continue to focus on cost management to ensure that we continue to deliver on the margins and the return profiles to our stakeholders.

Thank you. With this, I invite Nandu to give us comments.

Nandakumar S. Tirumalai — Chief Financial Officer & Chief Investor Relations Officer

Thank you, Mukundan, and good afternoon to all. I will broadly cover in four different sections, my transcript. One is in terms of a historic quarter for consol. Two, in terms of the annual performance. Three is geography and fourth ending with cash and capex. On the first part, for the quarter and for the company as a whole, we had good financials for the quarter. Revenues for the quarter grew by 27% over last year’s Q4. The growth was broad-based with all businesses and geographies performing well. EBITDA grew at 47% and stood at INR965 crores for the quarter. The margins expanded by 3%, and it was a 21.9% for the quarter, aided by higher sales and improved cost management. Coming on to the annual performance for our last financial year, our revenues stood at INR16,789 crores, almost 33% more than last year. The EBITDA was INR3,822 crores; 67% more than last year.

The margins improved by 4.5% and a standing at 33%. As far as the whole part is concerned, the profit for the year was at INR2,452 crores against INR1,400 crores last year, a 75% increase of impact. The PAT margin was at 14.6%. The financial year ended March 23 was perhaps the highest ever across all geographies and for the company as a whole. Moving on to individual businesses, starting with India. The revenue for the quarter grew by 17% year-on-year for the quarter. Growth was largely due to higher revenue on account of better selling price amidst stable demand. Salt and Bicarb business as well performed well; higher operating leverage resulted in better margins for the quarter. For the last year in Q4, we had a one-off INR65 crores tax relief, which boosted the income last year, which didn’t come in current year’s Q4. And hence, the PAT numbers for India were lower than last year’s Q4. In the U.S., we saw good performance for the business.

The newer contract, as Mukundan mentioned, entered for the calendar year site in January, and those held us in the quarterly profit that we had available margin for the quarter. Europe as proved by U.K., had a good performance on the back of the high pricing and volumes. Salt and Bicarb registered good growth in turn helping the business to register revenue growth over last year, and PAT grew very well, and we had a loss last year. The benefit of gas hedging remained until March 23, and we got the benefit of that during the quarter. And we also made a one-off deferred tax asset creation in the quarter in the U.K., which boosted the PAT numbers for U.K. for the quarter. Kenya too had good growth over last year because of higher revenues and better profits, and balance sheet and cash flows were strengthened during the year, and Kenya became debt-free during the year ’23.

New [Indecipherable] covered in debt and Rallis, we had a one-off kind of a provision on inventory and impairment of intangibles in silicon business of INR63 crores during the quarter, and that impacted the profits for Rallis for the quarter. On an overall consolidated basis, we had [Indecipherable] crores of cash at the end of our ’23. Net debt was at INR3,898 crores. The consolidated capex for the year in all — it is about INR1600 crores. We are very much focused on cash generation and paying off debt over a part of time.

With that, I pause my comments and hand over back to the moderator to open up for few questions.

Questions and Answers:

Operator

Thank you. We now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Sumant Kumar from Motilal Oswal. Please go ahead.

Sumant Kumar — Motilal Oswal — Analyst

Yes. So my question is for India business. You are talking about margin recovery in Q2 FY 24. So can you talk about whatever the raw material lag we have, say, power cost, we are buying coal from Indonesia. So what is the lag effect? How many months lag is that we have for the soda ash business in India? And any other raw material?

R Mukundan — MD, Chief Executive Officer & Executive Director

Thank you. The main reason why we see that inventory during the first half of the year because it built during monsoon, the shipping delays happened from Kenya, from Indonesia to India to avoid that, we do keep stock. And I said it peaks at about six months and goes down to three months during the year. So we can take an average of four to five months at any point of time in terms of inventory, which is earned. As prices come down, itll take its own time to sort of wash through the inventory.

Sumant Kumar — Motilal Oswal — Analyst

Okay. And do you think India business will reach at whatever the peak margin we have seen in past quarters? Have you reached that level or that will normalize from there?

R Mukundan — MD, Chief Executive Officer & Executive Director

See the margin level in the India business — India has always been a leading margin business, but broadly stating, the next year, I think you will start seeing U.S. to lead the margins massively. I think the key lever for us in terms of performance going forward next year is going to be that, I had mentioned this, U.K. will go to fixed margin structure, which means they will be profitable, but theyll be on a fixed margin. Kenya and India, the margins would moderate to normal levels, but they are much higher than what used to be before pre-COVID, and were going to be in that structure because that is the nature of the current demand-supply environment.

And U.S. would also improve and get to the margin levels we have seen worldwide, but that means theres going to be an expansion in the U.S. margin. So the way we see next year panning out is fundamentally that numbers from U.S. will substantially change. Numbers from India more or less will hold around the same levels. And numbers in Kenya and U.K. would moderate and would stabilize to normal profitable levels. But this will be at a higher level than what we used to see before COVID.

Operator

Thank you — sorry to interpret you Sumant. I request you to join the queue again. I request all the participants, please restrict to two questions per participant. The next question is from the line of Abhijit Akella from Kotak Securities.Please go ahead.

Abhijit Akella — Kotak Securities — Analyst

Good afternoon and thanks for taking my questions. First on the Europe business, this INR225 crore EBITDA for the quarter, is there some hedging benefits still within that? And if so, could you please quantify that? And when youre alluding to a fixed margin structure for the year ahead, would it be possible to share with us broadly? I mean, what sort of EBITDA numbers we should be looking at for the year for the..

R Mukundan — MD, Chief Executive Officer & Executive Director

Yes, Abhijit, I understand your question. I think just wait for next quarter result, that will tell you the constant margin number. I think it is — we would not want to disclose that. But in terms of deferred tax asset and one-offs, I think Nandu can highlight.

Nandakumar S. Tirumalai — Chief Financial Officer & Chief Investor Relations Officer

Yes. So Abhijit, I think we spoke about our hedges being in place up to March 23. So the benefit of our lower cost catch of gas also has split out in Q4 also. And we also had the one-off tax benefit which came in at around INR50 crores in U.K. in Q4. So that wont come back in…

R Mukundan — MD, Chief Executive Officer & Executive Director

So INR50 crore is the — fundamentally the impact of — at the PAT level, its a positive impact of a tax asset. But in terms of the gases, they were in play, but for you to get a peek into the fixed margin, I think just wait for Q1 results. And because of the fixed margin structure, one, we have a very assured volume offtake within U.K. So volumes are not under going to be under pressure at all. And secondly, I think the company will be consistently profitable.

Abhijit Akella — Kotak Securities — Analyst

Okay, sure. And the second question I just had was with regard to upcoming supply additions in the world market. So regarding this Inner Mongolia project, apparently the news from China or at least the claims from China are that they are trying to ramp up this capacity to five million tonnes within this calendar year itself. So is that something that youre seeing as well? Also, if you could just help us with regard to other capacity expansions coming up across the globe. I believe there is something in the U.S. So if you could just help us with that over the next one or two years, that would be helpful. Thank you.

R Mukundan — MD, Chief Executive Officer & Executive Director

Yes, in terms of capacity addition, I believe Ive mentioned already, but I think world needs about one million to 1.5 million tonnes every year going forward. In two years, its going to be 2.5 million tonnes coming and the world needs to be balanced. In exact month and when it is going to come, I think, we cant predict as number broadly. And the additions also, I think, will be broadly in that range or slightly below that range. As far as Mongolia is concerned, our information, our understanding is still 1.5 million tonnes. Over a period of time, they will — but we havent — the last time; the only natural capacity, which came up was in Turkey, and it came up in tranches of one million or 1.5 million spread over quite a long time. So I dont think its going to come in that speed. But if it does, we will keep you posted. Right now, our information is only about 1.5 million tonnes.

And also the second element, which is unlike in Turkey, where the plant is very close to port, I think theres about 200 kilometers support. Inner Mongolia has a long distance to travel to any port and get to any export market. So our view remains that it is a large amount of displacement it will do in the Chinese domestic market, and it is going to challenge the domestic synthetic manufacturers more and they will be under pressure to — and some of the weaker units in China may actually close down. And in fact, they have been pretty much the government has been in China, very forceful in terms of meeting environment targets and shutting down capacity. So youre going to find some kind of a reordering there. I cannot predict how, but it is a natural process, which will happen.

And to give you an example of that natural process in U.S., where we have 12 million tonnes of natural capacity. Prior to this natural capacity coming on stream, U.S. was fully synthetic and all the synthetic capacity in the U.S. got biked out over a period of time because natural capacities came on stream. So any natural capacity coming in any geography, that immediate geography gets to sort of challenge this synthetic capacity there. And as I also mentioned, synthetic plants, they generally cannot export for long distance because the cost of production is large so they cant bear a large amount of logistic cost. So the competitive position of Chinese synthetic plants are as good as our synthetic plant. So I dont see any issues at all Im competing with them. The issue is going to be that how do they step up and compete internally within China, we need to watch.

So this whole element of that inner Mongolia capacity will play itself out, but maybe play itself out very differently from the way Turkey played because Turkeys capacity had to be absorbed in other markets. Large amount of displacement they did was in Europe. And it did find its way to multiple markets. So I would leave it there, and I think we should watch this very closely. Our view is not, I would say in terms of our view, is that it may not disturb the world markets as you can would expect. Of course, there are always years that we need to be prepared. So we are focused on being cost competitive and being ready for them.

Operator

Thank you. Abhijit do queue again for a follow-up question. Next question is from the line of Vivek from Morgan Stanley. Please go ahead.

Vivek Rajamani — Morgan Stanley — Analyst

Hi, sir. Thanks so much for the opportunity and congratulations for the result. Two small clarifications and one question from my side. So just to clarify, there are no one-offs on the India cost side. Its just the lag effect of your inventory, which will normalize. Is that fair?

R Mukundan — MD, Chief Executive Officer & Executive Director

Yes, that is fair, absolutely fair. I think it would normalize over a period of the year, and thats where thats, the way we believe. Because I think the costs will normalize over a period of time, but the market pricing would we have to implement immediately in line with the expected cost structures, which we have.

Vivek Rajamani — Morgan Stanley — Analyst

Sure, sir. And when you see a normalized level of margins, would the first half of financial 23 be a good benchmark? Or what should we consider to be normalized margins for the segment?

R Mukundan — MD, Chief Executive Officer & Executive Director

I think it will be closer to Q3 of — maybe between Q3 and Q4, thats where I would keep it around. So, it will be better than Q4 over a period of time, but maybe a tad below Q3.

Vivek Rajamani — Morgan Stanley — Analyst

Im sure, sir, very helpful. And the one question I had was on the demand side, if you could just throw some more light with respect to the downstream demand trends that youve been seeing across your key markets and across your portfolio, that would be super helpful.Thank you so much.

R Mukundan — MD, Chief Executive Officer & Executive Director

Sorry, can you repeat the question?

Vivek Rajamani — Morgan Stanley — Analyst

Yes, sir. If you could just throw some more color with respect to the downstream demand trends that youre seeing. You obviously mentioned demand is healthy. But if you could just give a little bit more color in terms of the segment thats driving demand if youre seeing really good growth? Or if theres any slowness in any particular segment? Some more color on that front would be really helpful.

R Mukundan — MD, Chief Executive Officer & Executive Director

Im just going to highlight that growth across segments, across categories is fairly good. And the growth drivers, as I mentioned, are all sustainability drivers, which is shift to glass. And when I say glass, it is more due to solar glass and container glass where sustainability is playing a big role and also for lithium carbonate. Let me just say the small pocket of weakness, which we do see in some markets is the light ash demand. And I think that this is about the producers portfolio not keeping pace with the demand patterns. I think we — some of us need to sort of shift the product portfolio towards more dense ash and less light ash, but thats the only element to all. Otherwise, And its also in pockets. For example, its in pockets and markets where synthetic plants exist, mainly in China and maybe partly in India. But light ash not travel because the port authorities dont tend to give approval for light ash unloading because the material tends to disperse a lot in the air and very difficult to get it across to multiple ports, except as back cargo.

Operator

Thank you. Vivek Ill put you in the queue again. [Operator Instructions] The next question is from the line of Arjun Khanna from Kotak Mahindra Assert Management.Please go ahead.

Arjun Khanna — Kotak Mahindra Assert Management — Analyst

Sure. Thank you for taking my question and congratulations on a good set of numbers. Sir, the first question is in terms of the capex. So you did allude to or you did explicitly say youre looking at an expansion in the U.S. market, debottlenecking. Have we talked about what would be the capex for the same? How much would that cost?

R Mukundan — MD, Chief Executive Officer & Executive Director

Yes, well come with the exact numbers in the next quarter because by next quarter, we would be very clear about the contents of that to be — are doing detailed engineering and we would sort of — its almost the final leg. The India capacity also will move from the current one million tonnes, which will be fully — the current expansion will finish. India capacity also will move to 1.3 million tonnes, another 10,000 tonnes is being added in Mithapur. So that adds up to about 700,000 tonnes. And we are also looking at which are the other geographies we can sort of add another 300,000 tonnes to take an additional one billion tonnes overall. So Indian capacity is going to — the 200,000 tonnes coming immediately to go to one million tonnes and then go to 1.3 million tonnes in the next step, where detailed engineering work is going on, which also should be completed by this quarter, and well be able to give exact specific numbers. And as far as U.S. is concerned, the 400,000 tonnes there also will get completed and well be able to give in that numbers.

Arjun Khanna — Kotak Mahindra Assert Management — Analyst

Sure. Secondly, in terms of the amount of debt, so we are down to $770 million gross debt, and we also saw the interest costs and are increasing globally. How do you anticipate this debt position to play out going forward? Given that we have a heavy capex, do you anticipate the net debt from around INR4,000-odd crores to come down going ahead?

R Mukundan — MD, Chief Executive Officer & Executive Director

I think this year, our plan is to — I said last year that we plan to pay down about $100 million. In fact, weve done more than that across all geographies. I think $80-odd million in U.S. and about $40 million in Kenya and then about $20 million in U.K. So weve done more than what we had planned. This year, our plan is to do anywhere between $200 million to $250 million of paid on our debt.

Arjun Khanna — Kotak Mahindra Assert Management — Analyst

Sure. And this would obviously be after the capex that we have envisaged for this year?

R Mukundan — MD, Chief Executive Officer & Executive Director

Yes, this is including all the — we are not having any borrowing or equity plan to the rest.

Operator

Thank you, Arjun. I would request you to join the queue again. The next question is from the line of S. Ramesh from Nirmal Bang Institutional Equities. Please go ahead.

S. Ramesh — Nirmal Bang Institutional Equities — Analyst

Thank you. Good morning and congratulations on the good results. So if you look at the U.S. market, the way the volumes and margins are performing. Is there an expansion in the U.S. domestic market? And secondly, we were going to understand that there is competitive pressure in exports to LatAm, Malaysia because most of the U.S. producers out of ANSAC. So is that concern abating based on the pricing power you see? So how do you read the competitive landscape in the U.S. for both U.S. market as well as for export from U.S.?

R Mukundan — MD, Chief Executive Officer & Executive Director

I think U.S. tends to supply mainly into the North American, Southern American. And when we say U.S. market, we actually say Canada, U.S. and Mexico is one market, which is the domestic market. And the LatAm and the Far East, that is where the material goes and some to Southeast Asia. So as far as our exit from ANSAC is concerned, there are no pressures. We are fully sold out. Our exit also in terms of quantities do wind down over a period of time. I think this year, our own volumes will be about 1/3 of the total export volume out of the U.S., and it will wind down in a phased manner over three years. And we were able to place all our volumes with customers through contracting with them all the way through and we dont see any issues in markets and markets for the dense ash out of U.S.

S. Ramesh — Nirmal Bang Institutional Equities — Analyst

So if you see the U.S. realization based on the fourth quarter results, that is going to be sustainable over the calendar because last year, you got a commendation from your customers when your costs are going up. So given that there is a deflation across the serious cost items, would there be some requests from customers asking you to reduce the price during the tenancy during the current contract period?

R Mukundan — MD, Chief Executive Officer & Executive Director

There is no such move. And I think you will see Quarter one results when they are announced, Quarter two when they announced the numbers. I think they are pretty much intact, and we have no reason to sort of state anything otherwise.

Operator

Thank you. Ramesh, Ill request you to join the queue again. The next question is from the line of Saurabh Jain from HSBC. Please go ahead.

Saurabh Jain — HSBC — Analyst

Thanks for the opportunity and congrats for a very good set of numbers. On the U.S. contract, would it be possible for you to quantify your — the new contracts that youve signed or at least give us a percentage from last year?

Gavin Desa — Senior Partner & Account Head

Saurabh to interrupt you, but we lost your audio while you were asking the question. Can you repeat once again…

Saurabh Jain — HSBC — Analyst

[Technical Difficulties]

Gavin Desa — Senior Partner & Account Head

Saurabh, sorry once again, but the audio is not clear at all.

Saurabh Jain — HSBC — Analyst

Is the audio better now?

Gavin Desa — Senior Partner & Account Head

Slightly better.

Saurabh Jain — HSBC — Analyst

Sorry about that. I wanted to know whether the U.S. contracts, is it possible for you to highlight what is the percentage increase from last year? Or if you can give us the amount of the fine that is negotiated to?

R Mukundan — MD, Chief Executive Officer & Executive Director

Its reflected in the results. And I think next quarter also will look like that I think if you track that, I think well not increase.

Saurabh Jain — HSBC — Analyst

But the thing is it is a mix of both exports and the domestic prices. So that is why we…

R Mukundan — MD, Chief Executive Officer & Executive Director

Granted. And I think both have gone up, and I think that would give you a blended number. Last year also was a blended number, but the overall blended number has gone up, and it will continue to — this quarter is reflective of that. Next quarter will be even more reflective of that.

Saurabh Jain — HSBC — Analyst

Okay. And additionally, on the China capacity, what kind of reserves would be there in China? I wanted to get a sense of what can be the scale of them being able to continue to supply the markets for the next few years?

R Mukundan — MD, Chief Executive Officer & Executive Director

But generally, when anybody opens up a natural mine, they look at a 20-year mine life, more or less. Its very rare anyone opens up a mine with less than 15-year mine life.

Saurabh Jain — HSBC — Analyst

Okay. So it will at least be a 20, 25 years kind of reserve. But can it reach to a scale of like what U.S. has? Any insights on that? In terms…

R Mukundan — MD, Chief Executive Officer & Executive Director

The biggest world deposits are in the U.S. I think there are multiple deposits there, and U.S. reserves can last over 1,000 years.

Saurabh Jain — HSBC — Analyst

Yes. Okay. So China still we dont — were not in a position to know whether these results can last for the next 50-odd years or anything of that sort?

R Mukundan — MD, Chief Executive Officer & Executive Director

Certainly, I can confirm that it is 20 to 25 at last. Turkey is the one which probably has a lesser reserve like than that.

Operator

Thank you. Saurabh, Ill request you to join the queue again. [Operator Instructions] The next question is from the line of Rohit Nagraj from Centrum Broking Limited. Please go ahead.

Rohit Nagraj — Centrum Broking Limited — Analyst

Thanks for the opportunity and congrats on good set of numbers. The first question is now since the European energy issues are normalizing, whether incremental capacities are coming — I mean, people who are on sidelines are operating at lower rates. Have they come back completely? And will that have any impact on the short-term demand supply and pricing? Thank you.

R Mukundan — MD, Chief Executive Officer & Executive Director

In Europe…

Rohit Nagraj — Centrum Broking Limited — Analyst

Yes, sir.

R Mukundan — MD, Chief Executive Officer & Executive Director

Actually, see, most of our supplies is within the island of U.K. And I think we have generally not seen major material land except from Turkey, and we dont see any major change in that position. And we have not seen anything to say that we will have any issues with the quantities we have there, and we have fully sold out through contracts as we speak. And the fixed contract also ensures that both us as a company and our customers are well protected.

Rohit Nagraj — Centrum Broking Limited — Analyst

Right. Sir, second question is on natural soda ash capacity. So from an incremental capacity perspective, what is the dynamics and timelines that are usually followed? Maybe a 0.5 million tonnes capacity of synthetic and natural, how much time does it take? And again, a similar question from Chinese perspective. So currently, we have said that there is one million to 1.5 million tonnes additional capacity. If they were to take it to five million tonnes, what would be the constraints or what will be the key drivers for the same? And within what period of time they can get to that? Thank you.

R Mukundan — MD, Chief Executive Officer & Executive Director

Normally, a synthetic plant would take anywhere between, I would say, 2.5 years to three years to put up and stabilize, sometimes a little longer depending on what is the level of environment clearance need. That usually varies from country to country from one to two years. So from the time we got a go ahead, usually, it ends up almost being four to five years in terms of execution time. If it is a debottlenecking where you dont need major environment clearance, it can be done in about 24 months at best and most people finished in 36 months. So thats really the way we see. Every incremental capacity needs a fresh environment process to be done by most players because thats how the environment run in most countries, and thats what we are aware of. So this broadly should give you the time line of most of the projects.

Operator

Thank you. The next question is from the line of Riya from Aequitas Investments. Please go ahead.

Riya Mehta — Aequitas Investments — Analyst

Hello. Thank you for giving me an opportunity. So my first question is in regards to India demand. So I was just thinking a couple of articles and detergent demand on a Y-o-Y basis has not grown significantly. And for India, for the geography, the contribution from glass and lithium has been lesser. So what incrementally you think that will drive demand in India?

R Mukundan — MD, Chief Executive Officer & Executive Director

So detergent, youre right, which is why I mentioned that the light ash is a bit soft in some parts, especially also that includes India. And we do hope that, that corrects for a bit time. But the real growth in India is going to come from increased glass lines which are getting invested. This year, we do see in the next two quarters, which are three new glass lines coming. And annually, there are multiple additions being planned. As the country India industrializes, you would find that the key driver then moves to container glass and the flat glass, and that would continue to be the case in India. And also the solar glass capacities are coming, and thats another addition, which I mentioned to schemes and other schemes, those capacities also will get established.

Riya Mehta — Aequitas Investments — Analyst

Okay. And glass as a percentage for India demand, how much it would be? And what would be the kind of growth we are looking at…

R Mukundan — MD, Chief Executive Officer & Executive Director

About 45% would be the glass demand in India, and I think it is a faster-growing sector, close to about 68% volume.

Riya Mehta — Aequitas Investments — Analyst

Okay. And if — I think last quarter, we were seeing some — out there.

Operator

We are sorry to interrupt you. We are losing your audio…

Riya Mehta — Aequitas Investments — Analyst

Am I audible?

R Mukundan — MD, Chief Executive Officer & Executive Director

Yes.

Riya Mehta — Aequitas Investments — Analyst

So last quarter, basically, we had seen that there were imports from China had increased to India, and hence, we have taken price cut. So how is the imports from China in this current quarter and going forward in the month of April and May? And second would be, since China would be going towards natural mining. Will the synthetic player be more motivated to export the soda ash to India?

R Mukundan — MD, Chief Executive Officer & Executive Director

Yes. I think we have seen, lets say, normalization of some turning down of the imports coming in. Overall basis, I think they have landed — consignments have landed from U.S., from Turkey as well as from China. Its not just one place where has landed in India in the past. We do believe that this will normalize. As far as China is concerned, the broad issue, what synthetic play does do is that those who are competitive and large-scale plants will continue to export synthetic plants, but it will put pressure on the domestic smaller plants and weaker players domestically. So its going to be a combination of putting pressure on the domestic players. Some synthetic players who may have the margin, lets say, cost competitiveness to export, they will export. But those who cant will have to will face increasing pressure to run increasing pressure with difficulty to run and run their operations.

Operator

Thank you. Next question is from the line of Nitesh [Indecipherable]. Please go ahead.

Nitesh — — Analyst

Hi, sir. Thanks for this opportunity. So my question is for the results declared today, behind container and flat glass demands, particularly in Europe. I just wanted to know that how much of our soda ash volumes go into flat glass typically? And are we also experiencing any slowdown there? And whats our outlook?

R Mukundan — MD, Chief Executive Officer & Executive Director

See, in U.K., we are mainly — we dont have flat glass lines at all in U.K., which we sell. Our products on sales only in U.K., we dont export out of U.K. and the USA is mainly container glass, and we are fully sold out. And there is no slowdown in container glass demand, and we have no exposure to continent of Europe.

Nitesh — — Analyst

So I was asking about flat glass. So…

R Mukundan — MD, Chief Executive Officer & Executive Director

Yes. Sorry, correct. Thats right. Thats right. The flat glass all in Continental Europe, in U.K., mainly container glass plants and we sell to them.

Nitesh — — Analyst

Sure. And sir, my second question is basically South Africa rejected our application to set aside this 40% antidumping duty that is imposed on U.S. imports?

R Mukundan — MD, Chief Executive Officer & Executive Director

It has no impact on us. In the past, we have a preferential duty of 7%. We were trying to get the differential duty, it didnt come, so it has got no impact. So we would have gained a little bit had they not suck it down, but in terms of volume and all it doesnt only…

Nitesh — — Analyst

Understood. Thank you so much, sir.

Operator

Thank you. Next question is from the line of Saket Kapoor from Kapoor & Company. Please go ahead.

Saket Kapoor — Kapoor & Company — Analyst

[Indecipherable] Thank you for the opportunity. Sir, firstly, about the employee cost. If you could explain the increase in the employee cost Q-on-Q, both on the stand-alone numbers as well as for the consolidated numbers. And as a percentage of sales also going ahead of how material — what should be the number going there?

R Mukundan — MD, Chief Executive Officer & Executive Director

So in the stand-alone, actually, the number is some actuarial adjustments they have done, which happens in the Quarter 4. So I would not read beyond that. And in the international one, it is there is no major change in headcount. I can only assure you that. The second one is in terms of internationally, it is also some translation issues with respect to the exchange and some at rupee has fallen as well as there would also be actuarial adjustments internationally.

Saket Kapoor — Kapoor & Company — Analyst

And they will remain in this facility on a 10% of sales have many being…

R Mukundan — MD, Chief Executive Officer & Executive Director

We dont see any major change. I think in terms of increases also which we have, they are all in keeping with the local trend. Certainly, I think the increase has been employee increases have been because of high inflation higher than what wed normally give, but we do make that up over a period of time through productivity increase and control on account.

Saket Kapoor — Kapoor & Company — Analyst

Sir, on the RBC part, do we see any slackening of demand from the RBC front? And also you get as an opportunity, whats the understanding of — on the same as — the requirement…

R Mukundan — MD, Chief Executive Officer & Executive Director

What is RPP we couldnt get what you mean.

Saket Kapoor — Kapoor & Company — Analyst

Sodium bicarbonate.

R Mukundan — MD, Chief Executive Officer & Executive Director

So that is a steady growing sector. It continues to grow between 5% to 7% broadly. So I dont see any issue on that front. And it reads into multiple sectors, including animal seed, poultry, it goes into human seed food applications and then pharmaceutical applications, and they continue to grow.

Operator

The next question is from the line of Mitel Bua from Unlisted India. Please go ahead.

Mitel Bua — Unlisted India — Analyst

I had a couple of questions relating to TCNA. So we have spent around $1.2 billion to acquire TCNA over a period of time, like 2008, we spent $1 billion. And we have had a free cash flow of around like $50 million to $100 million. So getting subpar return on equity of 5% to 10%. So going ahead, if we want some 15% kind of return on equity on the TCNA. So can we expect like $180 million kind of free cash flow? Isnt it fair for a shareholder to expect that?

R Mukundan — MD, Chief Executive Officer & Executive Director

Sorry, I will not comment specifically, but you watch for the results in Q1, Q2, Q3, we will be able to add those numbers up.

Mitel Bua — Unlisted India — Analyst

Okay. But like over the period of like last 15 years, we have not made that kind of returns. So isnt that same in the case of even Tata Chemical Europe, we make up for that period actually? Given that now we are going to fix that kind of profit so…

R Mukundan — MD, Chief Executive Officer & Executive Director

Europe is a very different situation. I think in Europe, I think we are moving more and more to value added. You will find by the year-end, pharmaceutical salt capacity will come on stream by the year-end. And so next year, we will have a pharma-salt, which well be bringing to market it will be a higher-margin product. And in U.S., I think our competitive position is fairly strong, and the margin and the earnings profile is very good, and it will pay down its debt, and it continues to give us adequate return on capital, and you would see those numbers as they inform. I wouldnt want to make a forward-looking specific statement on U.S.

Operator

The next question is from the line of Janum Doshi from Chris Portfolio. Please go ahead.

Janum Doshi — Chris Portfolio — Analyst

Congratulations on the good set of numbers. Just two questions. First one is how are we seeing the lithium bicarbonate demand shaping up? And second one is whether we are planning to foray into any bromine-based specialty chemicals.

R Mukundan — MD, Chief Executive Officer & Executive Director

So on the demand, demand is, as I mentioned, that every lithium carbonate unit meets about for every tonne we need two tonnes of soda ash and that demand is good, and we have good contracts in South America with respect to that. In terms of bromine, we have a small bromine capacity, and we continue to work on options to sort of increase the extraction. And if anything specific were to happen in the bromine area well come back.

Operator

We move to the next question. Next part is Sumant Kumar from Motilal Oswal. please go ahead. No response. We move on to the next participant. The next question is from the line of Abhijit Akella from Kotak Securities.Please go ahead.

Abhijit Akella — Kotak Securities — Analyst

Thanks so much for the follow-up. Just two questions from my side. One is the U.S. domestic volumes seem to have declined quite sharply this quarter, down to about 237,000 tonnes. What might be the reason for that?

R Mukundan — MD, Chief Executive Officer & Executive Director

We are basically exporting more. Theres nothing specific to it. I dont think we have any issues. We are almost on — we are producing flat out and moving the material flat out. And I think it will be just that export contracts would have exported more during the quarter.

Abhijit Akella — Kotak Securities — Analyst

Okay. Thank you and the second thing was just with regard to this tax benefit in the U.K. If you could please just help us understand exactly what has happened there and what we should expect as a normalized tax rate going forward for the U.K. and for the overall company?

Nandakumar S. Tirumalai — Chief Financial Officer & Chief Investor Relations Officer

So is in U.K., we had this deferred tax asset. What it means is that U.K. has made losses for many years time? And does a tax benefit on account of that. Now whenever you foresee that youre going to make a profit going forward based upon some assumptions and having made property in the current year, as per accounting, you have to make a tougher tax you are to create an asset, which means then the possibility of the past process being consumed going forward on the tax point of view. So you had a onetime kind of a DTA in March quarter, which brings asset, which means profit. Its a onetime kind of event for the quarter. Accounting impact. Theres no cash impact investment. So going forward, in terms of what tax woman, depend upon how much press we have carry forward. So we expect to consume those losses for some time. So thats where we stand, Abhijit. But this is a onetime which came in Q4, which wont repeat.

Operator

The next question is from the line of S. Ramesh from Nirmal Bang. Please go ahead.

S. Ramesh — Nirmal Bang Institutional Equities — Analyst

So in response to the question about the slowdown in flat glass, you were saying the U.K. is only continued last, but is there a risk of the capacity of soda ash both of them are using dense — so is there a difference in the grade of soda ash to extend your market for container glasses protected? Or is there some fungibility in terms of the soda ash between EUR5,000 in Europe and thing. So is there any risk to some substitution of competition from U.K.s soda ash capacity we can release with the [Indecipherable]?

R Mukundan — MD, Chief Executive Officer & Executive Director

See, they are some good, you can move the flat glass, the dense soda ash to both flat glass as well as container glass. There is no — youre absolutely right on that. I mentioned to you that we are contracted out fully for the full year and we see no issues with respect to our customers, and they continue to produce well and they continue to consume. Weve not seen any demand slowdown as far as our customer base is concerned, in the U.K.

S. Ramesh — Nirmal Bang Institutional Equities — Analyst

Okay. Thank you very much.

Operator

Next question is from the line of Sumant Kumar from Motilal Oswal. Please go ahead.

Sumant Kumar — Motilal Oswal — Analyst

In U.S. business, you said this — say, this quarter, we had USD91 EBITDA per tonne, and you said it is going to further improve from here also. So considering this and a strong balance sheet, why are we not aggressive for soda ash expansion in U.S.

R Mukundan — MD, Chief Executive Officer & Executive Director

In the U.S., we are expanding. I think we are in the final stages of, as I mentioned, detailed, we were willing to go ahead with the project, and the project is approximately 400,000 tonnes of the past additional.

Sumant Kumar — Motilal Oswal — Analyst

So this four lakh is, I think, too conservative and going by your balance sheet and a strong balance sheet and the kind of margin we are making, can we knot a 40% or 50% kind of capacity expansion in the U.S. for the next 3, four years?

R Mukundan — MD, Chief Executive Officer & Executive Director

See, as a vision, our vision is to lead in this market. We have already announced we will be aiming to be the leading player and nothing less than being a leading player. You know the capacity of where the leading players are, well be ahead of that. But I can only announce what I have taken to the board and what the board is supporting us to go — thats the vision. Vision is to be number one in all the businesses we are in, including soda ash, bicarbonate, salt, and silica. These are four products weve identified per division.

Operator

Thank you very much. I now hand the conference over to the management for closing comments.

R Mukundan — MD, Chief Executive Officer & Executive Director

Thank you, and thank you all for attending this conference call. While this quarter has been good, we continue to focus on executing our strategy. The market conditions, while they remain robust, there are also words of caution because the interest rate has risen sharply. While it may have peaked in this quarter, and we anticipate most interest rates to stabilize for some time before they come down. We are preparing for that interim period, so that we remain focused on delivery with cost competitiveness. Our focus is going to remain to be very competitive and support our customers. At the same time, our growth plans are robust and theyre moving in a phase in a structured manner to execute and participate in the growth in this sector.

And lastly, we do believe that we need to continue to work our way through improving our balance sheet and move towards a reasonable level of debt and hopefully, the current trend continues. We would continue to make sure that weve got net debt levels, which are almost 0 in the near term of three to five years. This year, as we committed, we will be reducing our debt further, and that would also help us to weather any disturbances, if they do occur and also reduce the interest burden in the company. So overall, we see we have a robust frame in terms of expansion growth, also improving our fitness and continuing to serve our customers in a competitive manner. Thank you all for this, and see you next quarter, and have a safe year ahead. Thank you.

Operator

[Operator Closing Remarks]