Tatva Chintan Pharma Chem Limited (TATVA) Q1 FY23 Earnings Concall Transcript

Tatva Chintan Pharma Chem Limited (NSE:TATVA) Q1 FY23 Earnings Concall dated Jul. 25, 2022

Corporate Participants:

Chintan Nitinkumar Shah — Managing Director

Ashok Bothra — Chief Financial Officer

Analysts:

Nirali Gopani — Unique Asset Management — Analyst

Isha Agarwal — VT Capital — Analyst

Rohan Kamath — — Analyst

Sanjesh Jain — ICICI Securities — Analyst

Nikhil Rungta — Nippon India Mutual Fund — Analyst

Krishan Parwani — JM Financial — Analyst

Ritik Shrawak — Edelweiss — Analyst

Pritesh Chheda — Lucky Investment Managers — Analyst

Shubham Ghorak — Perpetual Advisory — Analyst

Yash Shah — Investec India — Analyst

Chintan Modi — Haitong Securities — Analyst

Dinesh Hotani —

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Q1 FY ’23 Post Results Conference Call of Tatva Chintan Pharmaceuticals Limited hosted by Haitong Securities India. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Chintan Modi, Chemical Analyst at Haitong Securities. Thank you, and over to you, sir.

Chintan Modi — Haitong Securities — Analyst

Hi. Thank you. Good evening, everyone, and welcome to Tatva Chintan Pharma Chem 1Q FY ’23 results conference call. From the management, we have with us Mr. Chintan Shah, Managing Director; and Mr. Ashok Bothra, Chief Financial Officer.

I would now like to hand over to Mr. Dinesh Hotani [Phonetic] for cautionary comment. Thank you, and over to you.

Dinesh Hotani —

Thank you, Chintan ji. Good afternoon, everyone. We are pleased to welcome you all to our Q1 financial year ’23 earnings call. Today on call, we have with us Mr. Chintan Shah, Managing Director, Tatva Chintan; and Mr. Ashok Bothra, Chief Financial Officer, to discuss the performance of the company during the quarter gone by, followed by a question-and-answer.

Please note that a copy of our disclosure is available on the Investors section of our website as well as the stock exchanges. Please do note that anything said on this call, which reflects our outlook towards the future or which could be construed as forward-looking statement must be reviewed in conjunction with the risks that the company faces in terms of uncertainty.

With that, I would like to hand over the floor to our MD, Mr. Chintan Shah, for his opening statement.

Chintan Nitinkumar Shah — Managing Director

Thank you, Dinesh ji. Good evening, everyone. And again, a very warm welcome and thank you to each and every one of you for joining us on our Q1 FY ’23 earnings call. I trust everyone is doing well. I believe you have already got the chance to go through the investor presentation uploaded on the stock exchanges and must be really very anxious to understand the performance of the company during the quarter gone by.

First of all, let me start with the financial numbers. So I’m just briefing you with the financial numbers year-on-year basis. So during the quarter, the revenue from operations was at INR884 million versus INR1,068 million, a decline of 17%. EBITDA during the quarter was at INR152 million versus INR262 million, a decline of 42%. Net profit after tax was INR98 million versus INR231 million, a decline of 58%. During the quarter, EBITDA margin was at 17% versus 25% and PAT margin was at 11% versus 22% year-on-year basis.

As indicated during my earlier earnings call, we had given an indication of anticipating a drop in demands of SDAs for Q1 and also going forward in Q2 FY ’23 due to semiconductor chip shortage coupled the geopolitical issues, which again was further enhanced by COVID lockdowns in China. The drop in sales of SDA is reflecting in our Q1 FY ’23 numbers. In Q1 FY ’22 previous year, SDAs contributed nearly 52% of the revenue, whereas in Q1 FY ’23, the contribution of SDAs to revenue is only 7%. Despite of subdued sales of SDAs, we could still achieve 83% revenues year-on-year basis, which is showing strong growth potential of other product categories as well. As for sure, the impact of SDA sales is just a temporary phenomenon, so the strength of other categories is giving a very promising scenario in the years to come. Despite of lower numbers, there are many positives and encouraging takeaways, which I’m just explaining to you right now.

Though these numbers look subdued, but realistically our performance has been very encouraging considering the drop in sales of SDAs, which was well anticipated in advance. On the full-year basis FY ’22, the total revenue was INR4,336 million, out of which only the SDAs contribute INR2,248 million. The other three product categories, PTC, electrolyte salts and PASC, together contributed INR2,058 million for the whole year. So, on an average, the quarterly sales of these three categories together was at INR515 million. Against this, during Q1 FY ’23, we have achieved a revenue of INR818 million in these three categories, showing an overall growth of nearly 60%. This clearly reflects the growth potentials of these three product categories as well.

Now talking about the EBITDA. During Q1 FY ’23, EBITDA was at INR152 million. This number also includes forex loss of INR49.7 million, so the actual operational EBITDA during the current quarter is INR201.7 million, which translates into EBITDA margin from operations of 23%. Forex loss is because of MTM of forward contract due to depreciating rupee. SDA is a high margin accretive product category. Despite of the drop in offtake of SDAs during the quarter, our EBITDA margins on consolidated basis are quite satisfactory.

Now let me explain each of the product categories and take you through the developments that took place in each of them during the past quarter. I am pleased to inform you that during the quarter. PTCs have registered its historically highest quarterly revenue of INR403 million, contributing 46% of revenue and a growth of 79% on year-on-year basis. Tatva Chintan continue to maintain its leadership position in PTCs. During this quarter, commercial sales to the recently approved MNC has taken off. Our consistent high-quality and improved logistics support to major customers has enabled us to increase our market share.

Our other product category electrolyte salts registered a revenue of INR69 million, contributing 8% of the total revenues during the quarter, showing a very strong growth. During the full year FY ’22, the previous year, revenue from this category was INR56.8 million against which we have achieved revenue of INR69 million in this quarter itself. The commercial application of super capacitor batteries and sodium and zinc ion batteries are beginning to rise.

I had informed you all during Q4 FY ’22 earnings call about receiving the formal approval from a new customer for energy storage device application. I’m happy to inform you that during this quarter, commercial sales to this new customer has begun. We are working with two more customers for approval of our electrolyte salts in the same area. With the increase in focus on renewable energy, the demand of energy storage systems is on the rise. We foresee a steady increase in demand of our electrolyte salts over the coming years.

Our other product category is the Pharma and Agro intermediates and Specialty Chemicals, PASC, which registered a revenue of INR345 million, contributing 39% of total revenues and a growth of 28% year-on-year basis. I had informed you all during our previous earnings call about one of the products getting into full scale commercialization. I’m happy to inform you that the commercialization of this product has begun and we shall see incremental volumes over the next few years.

In monoglyme, the pilot stage equipment using continuous flow chemistry will be installed in Q2 FY ’23 and trials will begin soon. As earlier discussed for another product, the pilot equipment has been setup and the commercial and trials are already underway. Commercial supplies of this product is expected to take about 15 to 18 months to materialize.

The new product in application area of metal extraction has been formally approved by the customer and commercial supplies to begin from Q4 FY ’23. We are progressing steadily with the development of products using continuous flow application. Our team is making significant progress on development of ultra high curated products. Seeing the traction in demand, we expect a strong growth from this product category over the coming years. Our focus is strongly in developing various products using specialized technologies.

Now talking about the most awaited SDA segment. So as anticipated, SDAs registered revenue of INR59.63 million, contributing 7% of revenue during Q1 FY ’23, a decline of 89% year-on-year basis. This seems now the dust has started to settle. Now we are seeing a renewed interest for demand of SDAs. During Q2 FY ’23, we expect marginal improvement in demand. The customers have started putting in orders for Q3 FY ’23 and we expect full scale demand revival beginning from Q4 FY ’23.

As indicated previously, the approval process and commercialization are progressing as scheduled with multiple customers. Another new very exciting application of SDA-based zeolite catalyst is getting into commercialization phase in area of recycling of waste of global environmental concern. This should be another large volume application area, which will push the demand of SDAs to the next level. I’m happy to inform you that Tatva Chintan has already successfully developed the SDA required for this application. We remain excited to the growth of SDAs in very near future. With the anticipated use of supply of semiconductor chips by Q3 FY ’23, SDA market is anticipated to grow in near ton [Phonetic].

We had announced during the previous earnings call about our foray into the fifth product category, which is flame retardants. I’m happy to inform you that we have successfully completed the pilot trials. Also, the necessary infrastructure has been now installed at the plant scale and full-scale plant trial is expected to begin in this very week. We are very happy to inform you that your company, Tatva Chintan, continues to remain a preferred supplier by its customers in India and overseas for manufacturing high curated products.

Our focus right from beginning has been to have minimalistic impurities, which we have successfully been able to achieve with kind of technology we have put in place. We are far grateful to our team and their hard work, which has helped us to create a niche for ourselves in the marketplace. Since the past few weeks, we have been observing the reduction in freight cost and the price for certain raw materials are getting stabilized.

Your company is well diversified across product categories and our products find application in varied end industries across geographies and impact in demand in one product category is offset by subsequent demand in another product category. We continue to see our clients consuming our products by the strength of all the good innovation and the great support we have been delivering to them over the years. The ongoing capacity expansion of setting up additional facilities at our existing Dahej SEZ is as per schedule and we target to commission the facility by end of Q3 FY ’23.

Due to three weeks of strike across Gujarat for construction materials, we have lost precious 21 days of construction activity. Despite of that, we are hopeful to complete the project as per schedule.

With this, I conclude my remarks. And now, I would like to hand over the call to our CFO, Mr. Ashok Bothra, who’ll take us through the financial performance for the quarter.

Ashok Bothra — Chief Financial Officer

Thank you, sir, and good evening, everyone. I’ll share the summarized financial highlights for the quarter. Revenue from operation was at INR884 million versus INR1,068 million in Q1 FY ’22. The growth was around 17% on-Y-o-Y basis due you lower offtake demand of SDAs. EBITDA was at INR152 million versus INR263 million in Q1 FY ’22, degrowth of 42% on Y-o-Y basis. PAT was INR98 million versus INR231 million in Q1 FY ’22, degrowth of 58% on Y-o-Y basis. EBITDA margin was at 17% in Q1 FY ’23 versus 25% in Q1 FY ’22.

As mentioned by Chintan Shah, EBITDA number indicate the — includes the forex loss of INR49.7 million, so actual operation EBITDA during the quarter comes to INR201.7 million, which translate into EBITDA margin of 23%. However, the margin has got impacted due to change in product mix, by drop in demand of SDAs, which is our high margin equity product category. Freight margin was at 11% in FY ’23 versus ’22 — in Q1 FY ’22. The impact on PAT is on account of higher taxes, because till last year, we were eligible for 100% tax exemption towards profit arising in our Dahej plant. And from this year, we are eligible only for 50% of the tax benefits.

During Q1 FY ’22, export stood at INR564 million. Exports contributed around 64% of our total revenue. Export declined during the quarter, mainly due to drop in the sale of SDA, which is our major export contributor. Out of net [Indecipherable] INR272 million, we could spend INR832 million till June 30.

That concludes my update on financial performance of Tatva Chintan. Now we can open the floor for question-and-answer session.

Questions and Answers:

Operator

Thank you. [Operator Instructions] The first question is from the line of Nirali Gopani from Unique Asset Management. Please go ahead.

Nirali Gopani — Unique Asset Management — Analyst

Yeah. Thank you for the opportunity. Sir, my next question was on the SDA PAT. So when we listen to various auto companies or auto ancillary companies, we get a feel that the semiconductor shortage has eased out. But our numbers are reflecting something different. There was a drop in SDA is quite significant. So if you can elaborate on that part?

Chintan Nitinkumar Shah — Managing Director

Sure. The actual semiconductor shortage is still expected to ease out by October or November of this year. So, there is definitely a slightly improved availability of semiconductors, but it is nowhere near the required numbers. Now just to explain you why such a drastic drop is happening in Q1 and Q2, so let us hypothetically assume someone is carrying an inventory of six months, okay. And your sales is at 100% levels, for which you are maintaining an inventory of 6%. Now your sales for the zeolites have dropped to almost 30%. So, your inventory, which was hypothetically for six months has gone up to almost 15 months now. So, typically you stopped buying the products completely though your business is running at 30%, 40% levels.

So this is what has caused a sudden stop in demand for SDAs and also in demand for zeolites impact for our end customers as well. So, it’s a cyclical impact because of drop in overall requirements for SDA and because of this form factors. Suddenly everyone started feeling that inventory levels are very high. So if the business is going so slow, we need to stop buying anything. So this whole chain eventually stopped buying things for a few months. And now, we have started seeing — the talks have started beginning and customers have started discussing with us about the availability of products coming from — probably from August/September is what they start — intend to start buying the products at a smaller level. And we expect full-scale demand to begin from December hopefully.

Nirali Gopani — Unique Asset Management — Analyst

Thank you for this detailed explanation. So, in our Q4 call, we were confident that FY ’23, the SDA revenue will be similar to what it was in FY ’22. Now FY ’22 number was roughly INR225 crores and in Q1 it was just INR10.6 crores [Phonetic]. So, something has changed or we still maintain that [Indecipherable] second half, you might be able to cover up on the SDA part?

Chintan Nitinkumar Shah — Managing Director

So Q3, Q4, we will strongly cover up, but I’m not absolutely sure whether it will be same number, but it will not be too different. That is my feeling. Maybe with a 10% reduction is where we should end. It again depends on whether recovery — full-scale recovery begins from October or from November. So, month here and there can have some impact, but I’m still very confident that we will not end up with very low numbers on SDA.

Nirali Gopani — Unique Asset Management — Analyst

Okay. That’s great. And so the next question is, what are the sustainable gross margins for us? What should be assumed to be a sustainable number?

Chintan Nitinkumar Shah — Managing Director

So, I would say, 22% to 27% or 23% to 27% on EBITDA is sustainable.

Nirali Gopani — Unique Asset Management — Analyst

Okay, okay. Last question is that our CFO mentioned something about the tax rate, but I seem to have missed it our. So, is this a normal tax rate now?

Ashok Bothra — Chief Financial Officer

No, no. So we have this Dahej facility, which is in a Special Economic Zone. So, for the first five year of operations, we have 100% tax holiday, followed by another five years of 50% tax holiday. So we just ended our five years 100% tax holiday in last financial year. So from this financial year, we have 50% tax holiday.

Nirali Gopani — Unique Asset Management — Analyst

Okay. So, at a company level, what will be the tax rate then?

Ashok Bothra — Chief Financial Officer

Then it will depend on how much [Technical Issues] is bringing. Otherwise on normal level, it should be around 18% to 20%.

Nirali Gopani — Unique Asset Management — Analyst

Okay. Okay. Thanks a lot for answering all my questions. Thank you.

Ashok Bothra — Chief Financial Officer

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Isha Agarwal from VT Capital. Please go ahead.

Isha Agarwal — VT Capital — Analyst

Thank you for the opportunity, sir.

Operator

Isha, we are not able to hear you clearly.

Isha Agarwal — VT Capital — Analyst

Hello. Can you hear me now?

Operator

Much better. Please proceed.

Isha Agarwal — VT Capital — Analyst

Yeah, yeah. Thank you so much for the opportunity. So, my first question is, like since we have a subsidiary in Europe, so how did we tackle on the high power cost or the fuel expense and what are the plans to hedge these power cost going forward?

Chintan Nitinkumar Shah — Managing Director

Europe subsidiary is only distribution arm for us. So there is no production activity happening in our US or Europe subsidiaries. They are only distributing the products manufactured by India to the end customers in Europe and US. So there is no impact of the power cost in Europe, which is impacting us in any way.

Isha Agarwal — VT Capital — Analyst

Okay. Sir, my next question is like, since we are export-oriented company, did we see any impact of Europe or US market impacting our order book? Or did we see any curtailment in the demand for our products?

Chintan Nitinkumar Shah — Managing Director

No. In fact, we are saying better demand coming in from US and also slightly better demands from Europe. So US business is on a strong note and Europe demand is also increasing but not as strong as US.

Isha Agarwal — VT Capital — Analyst

Okay. Thank you, sir.

Operator

Thank you. The next question is from the line of Sudarshan Padmanabhan from JM Financial Services. Please go ahead. Sudarshan, your line is in the talk mode. Please go ahead.

As there’s response from the current participant, we’ll move on to the next. That is from the line of Rohan Kamath [Phonetic], an investor. Please go ahead. Rohan, your line is in the talk mode. Please go ahead.

Rohan Kamath — — Analyst

Hi, sir. Thank you for taking my question. I want to know that, just to reconfirm that you mentioned monoglyme market is about 18,000 metric tons. And we are targeting about 3,000 metric tons Is that right, sir?

Chintan Nitinkumar Shah — Managing Director

Excuse me. Can you speak a little softly? Your voice is kind of distorted.

Rohan Kamath — — Analyst

Yeah, sir. Sir, I want to just to confirm that you mentioned monoglyme market is about 18,000 metric tons and we are targeting about 3,000 metric tons. Is that right, sir?

Chintan Nitinkumar Shah — Managing Director

Still I’m not able to understand the question. Can Haitong guys somehow translate the question to me, please?

Operator

Sorry to interrupt. Mr. Kamath, may we request you to go slow with your question?

Rohan Kamath — — Analyst

Yeah. I want to just reconfirm that you mentioned last monoglyme market is about 18,000 metric tons. And we are targeting about…

Operator

Sorry to interrupt. Mr. Kamath, we are not able to hear you clearly. May we request that you…

Chintan Nitinkumar Shah — Managing Director

If I understand correctly, he is trying to ask monoglyme market is 18,000 tons and we are targeting 3,000 tons. Am I right, Mr. Kamath?

Rohan Kamath — — Analyst

Yeah, year. Right, sir.

Chintan Nitinkumar Shah — Managing Director

Yeah. So what is the question about that?

Rohan Kamath — — Analyst

Sir, want to confirm that is about 18,000 metric tons means you have sold at — it has maintained 3,000 metric tons you are targeting?

Chintan Nitinkumar Shah — Managing Director

3,000 metric tons is what we are targeting, yes.

Operator

Thank you. The next question is from the line of Sanjesh Jain from ICICI Securities. Please go ahead.

Sanjesh Jain — ICICI Securities — Analyst

Yeah. Good evening, sir. Three questions from my side, Chintan bhai. Hello, can you hear me?

Chintan Nitinkumar Shah — Managing Director

Yeah. Please speak a little loudly, slightly.

Sanjesh Jain — ICICI Securities — Analyst

Sure, sure. First, on the SDA front, now you said that the demand is slowly but surely coming back and we expect that the demand should be back by December. How is it looking for the coming quarter? Have you seen any improvement from the lows of Q1 or do you still think that…?

Chintan Nitinkumar Shah — Managing Director

No, no. So we will see — definitely we will see a decent improvement from Q1 numbers for the Q2. And Q3 numbers, we are seeing much more decent orders already being punched in. But one of the key customer — you are aware that we have one large customer in China, which is still expecting this to begin by December. So they have not yet confirmed, the reason being the lockdowns is impacting them really badly. So they are still not able to confirm, but they’re are pretty sure, either it should be November or it should be December. So, once that kicks in, then we are back to full-scale demand structure.

Sanjesh Jain — ICICI Securities — Analyst

Okay.

Chintan Nitinkumar Shah — Managing Director

Q3 is a lot better and Q4 will be fully functional is what we have been doing earlier.

Sanjesh Jain — ICICI Securities — Analyst

Okay. Fair enough. Fair enough. And another large customer we were trying to get into, any progress there?

Chintan Nitinkumar Shah — Managing Director

Yes. We have been approved formally now. And now we have to go for a full-scale trial certainly in December of this year. So this has been confirmed now — formally confirmed.

Sanjesh Jain — ICICI Securities — Analyst

So that customer will be available for us in FY ’24 then?

Chintan Nitinkumar Shah — Managing Director

Yes, yes.

Sanjesh Jain — ICICI Securities — Analyst

Got it, got it. Second, on the PTC, is the sharp jump in PTC is because we have more capacity to produce and we are now able to service the customer better than, say, what we were last year when we were running SDAs. That’s the situation or there is general significantly higher demand in PTC, what is still driving the growth in PTC?

Chintan Nitinkumar Shah — Managing Director

There are two reasons for that. One reason what you have rightly said is, since we are not making SDAs, so we are able to sell more PTCs into the market with this given capacities. So that is one of the four reasons why sales on PTCs have really jumped. And the other reason is, I talked about adding one MNC customer. So what we have done is some fantastic logistics arrangements for that customer stocking up inventories in Europe. And this has really helped to mitigate their concerns about getting late deliveries and stuff like that from their other suppliers. So we have been actually been able to capture almost 80% of the business volumes on this particular customer, which just definitely pushed demands in a big way in PTC.

Sanjesh Jain — ICICI Securities — Analyst

That’s good news. And what’s happening on the electronic chemical side, now we said that we will be growing 2x, 3x, but it looks like this year it’s going to be much stronger on the electronic chemical, do you think electronic chemical over next two, three years the way it is panning out should become very big. What are the new customers — we said that we are in discussion with two more customers?

Chintan Nitinkumar Shah — Managing Director

So, this business, what has happened during this quarter is, with the new customer being added up, and this is their only first project kind of our, I would say, a demonstration project kind of a thing for them as well, where they’re consuming these volumes of electrolyte salts. So this is basically into energy storage device system. Now, we are also into approval process with two more such customers in different geographies. So, we see that these applications for the energy storage systems now being picked up quite fast. And we expect this segment — definitely I would not say in this very year on the next year, but we see a very robust future for this particular segment. So things are moving faster than what we were anticipated.

Sanjesh Jain — ICICI Securities — Analyst

So, when we say energy storage, we mean battery or batteries for the EV vehicle or batteries for the solar pumps?

Chintan Nitinkumar Shah — Managing Director

When you generate any kind of renewable energy, you need a battery system to store that. So typically either you have the conventional batteries, lithium batteries, now you have a new function of sodium batteries and zinc batteries. So, we have — we don’t have any electrolytes for the lithium batteries. But for the rest of the three storage systems, we have the electrolytes. So these areas are now really picking up.

Sanjesh Jain — ICICI Securities — Analyst

Okay. And you are telling, it could be anything, like it could be electric vehicle, it could be a solar farm, it could be a wind farm, agnostic of that, right?

Chintan Nitinkumar Shah — Managing Director

Yes, yes, yes. In electric vehicle, in present go directly as a battery, it goes as — the super capacitors are used in EV vehicles in a hybrid system. So most of the EV vehicle runs on lithium battery, but when there is a need for excessive power, this is what is given by super capacitor batteries. So this is a kind of a new model, a hybrid battery model, which includes lithium battery as well as a super capacitor battery.

Sanjesh Jain — ICICI Securities — Analyst

Got it, got it. On the continuous flow, you mentioned that you’re starting a pilot plant in Q4 FY ’23, right? Did I hear it right?

Chintan Nitinkumar Shah — Managing Director

Yes, yes.

Sanjesh Jain — ICICI Securities — Analyst

And this is for an intermediate product or…

Chintan Nitinkumar Shah — Managing Director

Not only the pilot plant. Sanjesh ji, not only the pilot plant, but the actual full-scale plant will also become operational by the end of Q3 at the hedge.

Sanjesh Jain — ICICI Securities — Analyst

Okay. And this is for an intermediate product or a monoglyme?

Chintan Nitinkumar Shah — Managing Director

No, no. Monoglyme, still we are only beginning the — pilot trials will happen in Q2, so that we are just awaiting for the pilot equipment for running monoglyme on continuous basis. So the piloting will happen in Q2 and then let us take about eight to nine months for commercialization post the pilot plants.

Sanjesh Jain — ICICI Securities — Analyst

No, no. So what is the starting in Q4 then? An intermediate a different product, not a monoglyne, right?

Chintan Nitinkumar Shah — Managing Director

Sorry, sorry. Please repeat.

Sanjesh Jain — ICICI Securities — Analyst

So, the Q4 plant, which we spoke in the opening remarks. What is that product then?

Chintan Nitinkumar Shah — Managing Director

No. So that’s a different product. So this I have been talking about a product where we have used the zeolite-based catalyst to offer an ultra pure product. So this is the product which we are piloting right now.

Sanjesh Jain — ICICI Securities — Analyst

Got it, got it. It is of the four products we spoke that which was in R&D, one of them or…?

Chintan Nitinkumar Shah — Managing Director

Yes. Yes. One of them, yes.

Sanjesh Jain — ICICI Securities — Analyst

Okay, got it. Got it.

Chintan Nitinkumar Shah — Managing Director

So that we are through with the development and actually the piloting is currently underway in the plant.

Sanjesh Jain — ICICI Securities — Analyst

Got it, got it. And flame retardant, we said we will start in July. That’s begun, right?

Chintan Nitinkumar Shah — Managing Director

Yes. No, no, this week itself, so probably on Thursday we will start our first plant scale trial batch — full scale trial.

Sanjesh Jain — ICICI Securities — Analyst

Yeah, full scale. That we sold like 50 million, 60 million metric ton per month, right?

Chintan Nitinkumar Shah — Managing Director

Sorry.

Sanjesh Jain — ICICI Securities — Analyst

What will be the quantity, then it will be 50 million, 60 million ton per month, right?

Chintan Nitinkumar Shah — Managing Director

Yeah, yeah, yeah.

Sanjesh Jain — ICICI Securities — Analyst

Okay. And commercial — full-scale commercial plant…

Chintan Nitinkumar Shah — Managing Director

And this we will scale it up once have the new capacities available.

Sanjesh Jain — ICICI Securities — Analyst

Just couple of clarification. One, on the high — this forex loss of INR49 million, can you explain what was the nature of that?

Chintan Nitinkumar Shah — Managing Director

Basically we had our sales, right. So when you have a purchase order, typically we move the forward contract and do our hedging. So now when — let us assume we have hedged this at INR75, so we have basically booked our sales at INR75. And on this calculation, we had taken the purchase orders. So now we are assured that we are going to get INR75 and that has been booked, and the dollar has moved from INR75 to INR80. So this is the kind of a book entry loss that is happening as an MTM loss that is showing. So had we not taken the hedge, then we could have won this INR5 crores more. So if we had left this unhedged, then this gain would have been happened. So this is what it is indicating.

Sanjesh Jain — ICICI Securities — Analyst

So what you are telling is that you have booked by INR5 crores of additional sales, because we are finally selling at $80, but we have hedged it. So there is a loss of INR5 crores or there is an increase of cost in INR5 crores, so the net-net our EBITDA is — then the EBITDA should be exactly same, right? This EBITDA what is reflecting…

Chintan Nitinkumar Shah — Managing Director

This is showing that, if I had not covered — if I not taken the hedge, then my profit would have been higher by INR5 crores.

Sanjesh Jain — ICICI Securities — Analyst

But hedging is normal..

Chintan Nitinkumar Shah — Managing Director

Going back, because I hedge this, I’m losing INR5 crores of opportunity, that is what it indicates.

Sanjesh Jain — ICICI Securities — Analyst

But we generally do hedging…

Chintan Nitinkumar Shah — Managing Director

Your operational EBITDA is 23%. But because I’m losing this opportunity, that is why it is coming down to 17%.

Sanjesh Jain — ICICI Securities — Analyst

So that could have been an extraordinary profit because of currency movement if we would not have hedged, right?

Chintan Nitinkumar Shah — Managing Director

In last whole year — in last whole financial year, this forex was a gain of INR3 crores in the whole financial year, roughly about INR3 crores — INR3.80 crores in the whole financial year. In this particular quarter, it is showing a loss of INR5 crores. But that is actually nothing to do with our operational EBIT.

Sanjesh Jain — ICICI Securities — Analyst

And high tax rate is because we sold more from Ankleshwar and export-oriented unit because SDA was not running. So, the profit is significantly coming from Ankleshwar. So there is a high tax rate of 20-odd-percent or 18% to 20% is the rate that we are…

Chintan Nitinkumar Shah — Managing Director

Yes, yes, yes. And also, now we have — we are subjected to 50% taxes from Dahej as well.

Sanjesh Jain — ICICI Securities — Analyst

No, no. So that is fine, because we were at 7%, 8% last year. So we are [Speech Overlap] 18%, factoring that 50% benefit will go, but 20% was waste, why that is because the entire profit is coming from Ankleshwar plant. That’s a fair assumption, right?

Chintan Nitinkumar Shah — Managing Director

Yes, yes, yes.

Sanjesh Jain — ICICI Securities — Analyst

Got it. Got it. Thanks. Thank you very much for answering all the questions and best wishes for the future.

Chintan Nitinkumar Shah — Managing Director

Thank you. See, last year, see basically this quarter, Ankleshwar did a revenue of almost INR41 crores, and Dahej did revenue of INR42 crores, right. And in earlier year, the revenue from Dahej was almost double than the revenue of Ankleshwar, even slightly more than that. So this is what is the impact. So basically since we are not doing SDAs from Dahej, so the profit from Dahej is lesser. And the whole facility of Dahej for making the SDAs is technically almost unutilized. I would say, maybe 10% occupancy. So that is what is being reflected here.

Sanjesh Jain — ICICI Securities — Analyst

Fair enough, sir. Fair enough. Thank you. Thanks for all the answers.

Operator

Thank you. [Operator Instructions] The next question is from the line of Sudarshan Padmanabhan from JM Financial. Please go ahead. Sudharshan, your line is in the talk mode. Please go ahead. Sudharshan, we are not able to hear you.

As there’s no response from the current participant, we’ll move onto the next. That is from the line of Nikhil Rungta from Nippon India Mutual Fund. Please go ahead.

Nikhil Rungta — Nippon India Mutual Fund — Analyst

Yeah. Hi, sir. Thanks for this opportunity. Sir, you mentioned that SDA for full year, we might see, say, around 10%-odd decline, right?

Chintan Nitinkumar Shah — Managing Director

Sorry, sorry. Please say again.

Nikhil Rungta — Nippon India Mutual Fund — Analyst

SDA for full FY ’23, we try to complete it as big as FY ’22 but we might flow that maximum of 10% decline, right?

Chintan Nitinkumar Shah — Managing Director

Right. Nearly about, yeah. We anticipate very strong recovery from Q4, definitely we will back to normal, but Q3 also we expect a good recovery to happen. So I’m pretty hopeful that we will recover this lesser sales in those last two quarters.

Nikhil Rungta — Nippon India Mutual Fund — Analyst

Okay. Okay. And the other products, basically be non-SDA part, which is around 48% of the total. So that should have very good or strong growth in Q1. So, if I had to combine all those non-SDA products, what type of growth can we expect in FY ’23?

Chintan Nitinkumar Shah — Managing Director

So this is what — so the average what we have seen in this particular quarter, we might even see slightly better performance going forward in Q2, Q3, Q4, because one of the product on PASC, which has gone into commercialization in Q1, so the demands are picking up. So we expect better revenues to come from that particular product. And also the PTC segment, see, we once we have this new planned operational, see all these years what has been happening is, we have been compromising on sales of PTCs so that we can sell more SDA. Now in this event when our SDA is kind of a vacuum, so we are able to sell the actual potential of PTC into the market. So once we have this new plant function from November, and this is probably going to coincide when the demand for SDA is also going to come back to life. So by the time we have SDAs, we will also have an additional facility to produce that. So we will not have to compromise on sales of PTCs, which we have been doing traditionally. So I expect this trend of sales in the three segments to continue.

Nikhil Rungta — Nippon India Mutual Fund — Analyst

So basically 60% to 70-odd-percent of Y-o-Y growth in the non-PTC segment, right — non-SDA segment, right?

Chintan Nitinkumar Shah — Managing Director

But this is something exceptional, because this is showing that we were compromising somewhere and now we are giving the full potential. So I would not say that in next financial year again we will see a 60% growth in this PTC particular category.

Nikhil Rungta — Nippon India Mutual Fund — Analyst

No. Where I’m coming to is like 50% of our revenue SDA might report 10% decline, whereas the remaining 50% might go to 60% to 70% growth. So at the entire revenue level, we can see a growth of around 30% to 35% for FY ’23, correct?

Chintan Nitinkumar Shah — Managing Director

So basically let us assume that we are doing — so this year — this quarter, we did roughly about INR80 crores of that three other segments, but we expected to continue with this average again in the next three quarters, so INR320 crores — INR300 crores to INR320 crores revenues on the three segments is what we are expecting. And then the balance comes from the revenues from SDA.

Nikhil Rungta — Nippon India Mutual Fund — Analyst

Perfect, perfect. That’s all from my side. Thank you so much, sir.

Chintan Nitinkumar Shah — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Krishan Parwani from JM Financial. Please go ahead.

Krishan Parwani — JM Financial — Analyst

Yeah. Hi, Chintan bhai. Thanks for the opportunity. Just two clarifications, sir. Sir, in the last call, we mentioned that our new capacities will be delayed by like eight to 10 days and be operational by December this year. So just wanted to check what is the status and timeline of the same.

Chintan Nitinkumar Shah — Managing Director

We are still on schedule very much. This quarter, we actually had a strike of 21 days in availability of construction materials in Gujarat. The whole state was not getting any kind of materials for construction. But despite of that, we are pushing and we are — there is, I would not say 100%, but we are almost absolutely sure that we will still be able to complete this project by end of November.

Krishan Parwani — JM Financial — Analyst

Okay. That’s great, sir. And sir, last thing, on the capex, what kind of capex that we are envisaging for the next year — next financial year and for this year as well, if you can give us?

Chintan Nitinkumar Shah — Managing Director

So, after completion of this particular project, we may not see any major capex happening in next financial year. So basically if you remember, we already procured one additional land for the next phase of expansion. So we have applied for environmental clearance, which typically takes about 12 to 15 months to get. So hopefully within next financial year nearing the end of — by end of ’23, we expect to have the issue in place. And only after that we can think of going into expansion. So probably next financial year, we might not have any significant capex to be done. But yes, in the next — year after that ’24, we will see capex to be done.

Krishan Parwani — JM Financial — Analyst

Understand, sir. Wish you all the best for the future, sir. Thank you.

Chintan Nitinkumar Shah — Managing Director

Thanks. Thank you, sir.

Operator

Thank you. The next question is from the line of Ritik Shrawak from Edelweiss. Please go ahead.

Ritik Shrawak — Edelweiss — Analyst

Hi, sir. Good evening. I just wanted to ask on flame retardant, like what is the market size in India and in globally?

Chintan Nitinkumar Shah — Managing Director

Global market size, we understand, is close to about 160,000 metric tons roughly — roughly in the ballpark number of 150,000 to 170,000 metric tons. And the plan what we are intending to set up is with a capacity of 5,000 metric tons right now.

Ritik Shrawak — Edelweiss — Analyst

And sir, who are the competitors in India currently?

Chintan Nitinkumar Shah — Managing Director

Currently we don’t have any competitor in India. We do have three large MNC competitors.

Ritik Shrawak — Edelweiss — Analyst

Can you please name them?

Chintan Nitinkumar Shah — Managing Director

They are very well known. So basically ICL, then you have Lanxess and Albemarle.

Ritik Shrawak — Edelweiss — Analyst

Okay. Okay, that’s it from my side. Rest of my questions were answered. Thank you and good luck for the next quarter, sir.

Chintan Nitinkumar Shah — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Pritesh Chheda from Lucky Investment Managers. Please go ahead.

Pritesh Chheda — Lucky Investment Managers — Analyst

Yes. We understood the math that you were telling of SDA and non-SDA in terms of revenues for ’23. I just wanted to understand the capacity that we are creating and the products that we are introducing, so I could understand that there is some capacity being added on line chemicals, there is some capacity added on PTA and there is some capacity to be — a new product as flame retardant, right? Have I missed out on any of it other than these three? And for these three via capacity expansion or a new product addition, what is the additional revenue potential that we have?

Chintan Nitinkumar Shah — Managing Director

So basically we already have roughly about 200 kiloliters of reaction capabilities across both the plants. And what new setup we are doing is we are expanding this by another 200 kilo. So, [Technical Issues] we are expecting to have a potential to double our revenues.

Pritesh Chheda — Lucky Investment Managers — Analyst

This would include the electrolyte?

Chintan Nitinkumar Shah — Managing Director

Basically when you talk of PTCs, electrolyte salts, PASC or flame retardants, these were all kind of a multi-purpose facility, which are fungible between the categories. Only SDA is something unique where we need an absolute dedicated setup to do that.

Pritesh Chheda — Lucky Investment Managers — Analyst

Perfect, perfect. For this 200 kiloliters, which means we’ll add, let’s say, another INR300 crores, INR400 crores of revenue, right. Because today you already are you INR80 crores for third quarter.

Chintan Nitinkumar Shah — Managing Director

[Speech Overlap]

Pritesh Chheda — Lucky Investment Managers — Analyst

Okay. Okay. Okay. Thank you very much, sir.

Chintan Nitinkumar Shah — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Shubham Ghorak from Perpetual Advisory [Phonetic]. Please go ahead.

Shubham Ghorak — Perpetual Advisory — Analyst

Hello. Thank you for taking my question. I just wanted to ask, can you provide us with some insights for the kind of inventory that we are building for demand that will come after — once semiconductor shortage eases out?

Chintan Nitinkumar Shah — Managing Director

Yeah. So basically we are already continuing to hold that inventory, which can run us through at least one full quarter of full demand. So that is what we are already running on inventory that most of the people have been asking me why you are running on such high inventories. But now this is the precise question that you have asked. And this is absolutely the reason why we are running one such high inventories all the time. Because when there is demand coming in from customers on SDAs, it is always coming in larger volumes. So unless and until you have this inventory, we will not be able to take up that opportunity.

Shubham Ghorak — Perpetual Advisory — Analyst

Okay. Thank you so much, sir. Wish you all the best.

Operator

Thank you. The next question is from the line of Yash Shah from Investec India. Please go ahead.

Yash Shah — Investec India — Analyst

Hi, sir, I had couple of questions. The first one was basically a clarification question, regarding flame retardant. Also, will this be also of fungible capacity itself, sir, of the 200 kiloliters which you are adding?

Chintan Nitinkumar Shah — Managing Director

Yes. Technically speaking, yes.

Yash Shah — Investec India — Analyst

Okay. So we won’t require additional capex for the same. Okay. And till when are we expecting it to reach peak utilization, sir?

Chintan Nitinkumar Shah — Managing Director

No. We will make certain specific capex for that, which is not a huge amount but this is for storage of the key raw materials, which require a special banking system. So that is what we have already undergone and that is the reason why now we are going to start the plant trials in this week. So pilot trials already happened in end of May. But since the special storage tanks were being installed at the sites and now we are ready with the safety audit and everything, so now we will start to kick tip the plant trials from this week.

Yash Shah — Investec India — Analyst

And was it a significant amount, sir, or do we spent on the special storage tanks?

Chintan Nitinkumar Shah — Managing Director

I mean, so once we have this new facility and the requirement of the storage tank goes to full capacity, so when we are talking on 5,000 metric tons levels, we are looking at about INR3 crores to INR3.5 crores of capex.

Yash Shah — Investec India — Analyst

Okay. INR3 crores to INR3.5 crores, got it. And sir, my second question which I had was about metal extraction product, which we are going to start supplying soon. Can you please provide more specifics on the same? So basically when are we going to start that? And how much — is there any potential for that?

Chintan Nitinkumar Shah — Managing Director

We have been now fully formally approved for those products. And we have received orders for one container each of these products to begin from October of this year. And we expect the full-scale commercial, once these products have been approved at full scale plant trial levels, we expect probably December or January when full scale commercialization will happen. So that’s why I’m saying Q4.

Yash Shah — Investec India — Analyst

Got it. And sir, at full show, what is the demand potential — like what is the revenue potential for this product?

Chintan Nitinkumar Shah — Managing Director

So roughly at a full scale, once it is there, it would be in the range of about INR30 crores to INR40 crores.

Yash Shah — Investec India — Analyst

Got it, sir. Got it. Got it, got it. Thank you very much.

Chintan Nitinkumar Shah — Managing Director

Thank you.

Operator

Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for their closing comments.

Chintan Nitinkumar Shah — Managing Director

Once again, thank you, everyone, for joining us and your continued support and trust on us. We hope that we have been able to address most of your queries. You may reach out to Mr. Ashok Bothra, our CFO, or our Investor Relation Advisor, Ishwar, for any further queries that you may have. And they will connect with you offline. Thank you and have a great evening.

Operator

[Operator Closing Remarks]