Tatva Chintan Pharma Chem Limited has informed the Exchange about Transcript of Analysts/Institutional Investor Meet/Con. Call
Tatva (Formerly known
Chintan
Pharma
as Tatva Chin
tan Pharma
Chem Limited Chem Private
Limited)
(CIN:L24232GJ1996PLC029894)
Date:
29 July 2022
To, The General Manager, Corporate relationship BSE Limited
department,
Phiroze
Jeejeebhoy Towers,
Dalal Street, Fort, Mumbai-400 001 Scrip Code:
543321
Subject: Transcript
of Earnings Call
Dear Sir/Madam,
Ref No: TCPCL/SEC/2022-23/00043
Stock Exchange of
The Manager, Listing department, National Exchange Plaza, C- l, Block-G, Bandra-Kurla, Complex Bandra(E), Mumbai-400 Scrip Symbol: TATVA
India
051
Limited
Pursuant
to Regulation 30 of SEBJ
(Listing Obligations and Disclosure
2015
post
as amended, please find enclosed results announcement
of financial
herewith
the transcript of the earnings call held on
of
the Company for
the quarter
ended
30 June
2022.
Requirements) Regulations, 25 July 2022
The
above
information
shall
be made
available
on Company's website
of at www.tatvachintan.com.
This
is for your
information
and
records.
Thanking You,
Your Faithfully, For
Tatva
Chintan
Pharma
Chem
Limited
Nayi y Secretary and Compliance Officer
Comp M. No.: A37444
Encl: As above
Registered Office
and Factory:
Plot No. 502/17, G.I.D.C.
Dahej SEZ Unit:
Plot No. Z/103/F/1
Estate, Ankleshwar & 2, SEZ Area, Part-2, Dahej - 392 130, District:
- 393 002, District:
Bharuch, Gujarat, India.
Bharuch, Gujarat, India.
Corporate Office Telephone No.:
and R & D Center
+91 75748
48533
I 34 Fax:
(DSIR Approved) +91
265
263
: Plot No. 353, G.I.D.C., Makarpura, Vadodara
8533
E-mail:
cs@tatvachintan.com Website:
- 390 010, Gujarat, India. www.tatvachintan.com
V-
00351
“Tatva Chintan Pharma Chem Limited Q1 FY2023 Earnings Conference Call”
July 25, 2022
ANALYST:
MR. CHINTAN MODI – CHEMICAL ANALYST - HAITONG SECURITIES
MANAGEMENT: MR. CHINTAN SHAH – MANAGING DIRECTOR– TATVA
CHINTAN PHARMA CHEM LIMITED MR. ASHOK BOTHRA – CHIEF FINANCIAL OFFICER – TATVA CHINTAN PHARMA CHEM LIMITED MR. DINESH SODANI – TATVA CHINTAN PHARMA CHEM LIMITED
Page 1 of 18
Tatva Chintan Pharma Chem Limited July 25, 2022
Moderator:
Ladies and gentlemen good day and welcome to Q1 FY2023 Post Results Conference Call
of Tatva Chintan pharmaceuticals Limited hosted by Haitong Securities India. As a
reminder, all participant lines will be in the listen-only mode and there will be an
opportunity for you to ask questions after the opening remarks. Should you need assistance
during the conference call, please signal an operator by pressing “*” then “0” on your
touchtone phone. 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:
Thank you. Good evening, everyone and welcome to Tatva Chintan Pharma Chem 1Q
FY2023 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 Sodani for cautionary comment. Thank you and over to you!
Dinesh Sodani:
Thank you Chintan Ji. Good afternoon, everyone, we are pleased to welcome you all to our
Q1 Financial Year 2023 Earning 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 Q&A.
Please note that a copy of our disclosure is available on the investor section of our website
as well as the stock exchanges. Please do note that anything shared 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 risk 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 Shah:
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 FY2023 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 that quarter gone by.
First of all, let me start with the financial numbers. I am just briefing you with the financial
number’s on year-on-year basis. During the quarter the revenue from operations was at ₹
884 million versus ₹ 1068 million a decline of 17%. EBITDA during the quarter was at ₹
152 million versus ₹ 263 million a decline of 42%. Net profit after tax was ₹ 98 million
versus ₹ 231 million a decline of 58%. During the quarter EBITDA margin was at 17%
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Tatva Chintan Pharma Chem Limited July 25, 2022
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 demand
of SDAs for Q1 and Q2 FY2023. Due to semiconductor chip shortage coupled with
geopolitical issues, which again was further enhanced by COVID lockdowns in China.
The drop in sales of SDA is reflecting in our Q1 FY2023 numbers. In Q1 FY2022 previous
year SDAs contributed nearly 52% of the revenue whereas in Q1 FY2023 the contribution
of SDAs to revenue is only 7%. Despite of subdued sales of SDA 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. The strength of other
categories is giving a very promising scenario in days to come. Despite of lower numbers
there are many positives and encouraging takeaways which I am 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 FY2022 the total revenue was ₹ 4,336 million out of which only the
SDAs contribute ₹ 2,248 million. The other three product categories PTC, Electrolyte Salts
and PASC together contributed ₹ 2,058 million for the whole year. So, on an average the
quarterly sales of these three categories together was at ₹ 515 million against this during
Q1 FY2023 we have achieved a revenue of ₹ 818 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 FY2023 EBITDA was at ₹ 152 million. This
number also includes forex loss of ₹ 49.7 million. So, the actual operational EBITDA
during the current quarter is ₹ 201.7 million, which translates into operational EBITDA
margin of 23%. Forex loss is mainly because of MTM of forward contract etc, 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
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Tatva Chintan Pharma Chem Limited July 25, 2022
during the quarter, PTC has registered its historically highest quarterly revenue of ₹ 403
million contributing 46% of revenue and a growth of 79% on year-on-year basis. Tatva
Chintan continued to maintain its leadership position in PTCs. During this quarter
commercial sales to the recently approved MNC has picked up, 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 revenue of ₹ 69 million contributing
8% of the total revenue during the quarter showing a very strong growth. During the full
year FY2022, the previous year revenue from this category was ₹ 56.8 million against
which we have achieved revenue of ₹ 69 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 FY2022 earnings call about receiving a formal
approval from a new customer for energy storage device application. I am happy to inform
you that during this quarter commercial sales to that 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 revenue of ₹ 345 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 am 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 FY2023 and trials will begin soon. As
earlier discussed for another product the pilot equipment has been set up and the
commercial and the trials are already underway. Commercial supplies of this product are
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 FY2023. We are progressing steadily with the development of products
using continuous flow application. Our team is making significant progress on development
of ultra high purity 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.
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Tatva Chintan Pharma Chem Limited July 25, 2022
Now talking about the most awaited SDA segment this as anticipated SDAs registered
revenue of ₹ 59.63 million contributing 7% of revenue during Q1 FY2023 a decline of
89% year-on-year basis. It seems now the dust has started to settle down. Now we are
seeing a renewed interest in the demand of SDAs. During Q2 FY2023 we expect marginal
improvement in demand. The customers have started putting in orders for Q3 FY2023 and
we expect full demand revival beginning from Q4 FY23.
As indicated previously the approval process and commercialization are progressing as
scheduled with multiple customers. Another new very exciting application of SDA based
Zeolites catalyst is getting into commercialization phase in area of recycling of plastic 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 am 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 near future. With the anticipated ease of supply of
semiconductor chips by Q3 FY2023 SDA market is anticipated to grow in near-term.
We had announced during the previous earning call about our foray into the fifth product
category which is Flame Retardants. I am 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 purity
products. Our focus right from beginning has been to have minimalistic impurities which
we have successfully been able to achieve with the 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 reduction in freight costs 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 an 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
because of 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 FY2023. Due to
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Tatva Chintan Pharma Chem Limited July 25, 2022
three weeks of strike across Gujarat for construction material 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 to take us to the financial performance for the quarter.
Ashok Bothra:
Thank you Sir and good evening, everyone. I shall summarize the financial highlights for
the quarter.
- Revenue from the operation was at ₹ 884 million versus ₹ 1,068 million in Q1 FY2022
de-growth of around 17% on Y-o-Y basis due to lower offtake in demand of SDAs.
EBITDA was at ₹ 152 million versus ₹ 263 million in Q1 FY2022 de-growth of 42% on
Y-o-Y basis.
PAT was ₹ 98 million versus ₹ 231 million in Q1 FY2022 de-growth of 58% on Y-o-Y
-
-
basis.
-
EBITDA margin was at 17% in Q1 FY2023 versus 25% in Q1 and FY2022. As
mentioned by our MD Mr Chintan Shah, the EBITDA number includes the forex loss of
₹ 49.7 million so actual operational EBITDA during the quarter comes to ₹ 201.7
million which translate into EBITDA margin of 23%. However, the margin has got
impacted due to change in the product mix due to drop in demand of SDA which is our
high margin accretive product category. PAT margin was at 11% in Q1 FY2023 versus
22% in Q1 FY2022 the impact on PAT is on account of higher taxes. Our Dahej SEZ
facility is eligible for 50% tax exemption starting from Q1FY23 for a period of 5 years
against 100% for the previous year/s.
- During Q1 FY2023, export stood at ₹ 564 million, contributing around 64% of the 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 IPO proceeds of ₹ 2,072 million, ₹ 832.52 million have been utilized as on 30
June 2022
That concludes my update on financial performance of Tata Chintan. Now we can open
the floor for question and answers. Thank you.
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Tatva Chintan Pharma Chem Limited July 25, 2022
Moderator:
Thank you. Ladies and gentlemen, we will now begin with the question-and-answer
session. The first question is from the line of Nirali Gopani from Unique Asset
Management. Please go ahead.
Nirali Gopani:
Thank you for the opportunity. Chintan Ji my question was on the SDA part. 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
because a drop in the SDA is quite significant. So, if you can elaborate on that part?
Chintan Shah:
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 semiconductor, but it is
nowhere near the required numbers. Now just to explain you why such a drastic drop is
happening in Q1 and Q2, let us hypothetically assume someone is carrying an inventory of
six months and your sales is at 100% levels for which you are maintaining an inventory of 6
months. 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 stop buying the products completely though your business is running at 30%-
40% levels. So, this is what has caused the sudden stock in demand for SDAs and also in
demand for Zeolites in fact for our end customers as well. So, it is a cyclical impact because
of drop in overall requirements for SDA because of this known 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 2022 is what they start intend to start buying the products at a
smaller level and we expect full-scale demand to hopefully begin from December 2022.
Nirali Gopani:
Thank you for this detailed explanation. In our Q4 call we were confident that FY2023 the
SDA revenue will be similar to what it was in FY2022. Now FY2022 number was roughly
₹ 225 Crores and in Q1 we have just done ₹ 6 Crores. So, something has changed, or we
still maintain that in the remaining three month or maybe in the second half we might be
able to cover up on the SDA part?
Chintan Shah:
Q3, Q4 we will strongly cover up but I am 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 full scale recovery begins from October
or from November so a month here and there can have some impact but I am still very
confident that we will not end up with very low numbers on SDA.
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Tatva Chintan Pharma Chem Limited July 25, 2022
Nirali Gopani:
That is great, and the next question is what the sustainable gross margins are for us like
what should be assumed to be a sustainable number.
Chintan Shah:
So, I would say 22% to 27% or 23% to 27% on EBITDA is sustainable on a longer run.
Nirali Gopani:
And last question is that our CFO mentioned something about that tax holiday, but I seem
to have missed it out. So is this a normal tax rate now.
Ashok Bothra:
No, so we have this Dahej facility which is in a special economic zone. So for the first five
year of operations, we had100% 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:
So at the company level what will be the tax rate then.
Ashok Bothra:
On normal level it should be around 18% to 20%.
Nirali Gopani:
Okay thanks a lot for answering all my questions. Thank you.
Moderator:
Thank you. The next question is from Isha Agarwal from VT Capital. Please go ahead.
Isha Agarwal:
Thank you so much for the opportunity. My first question is like since we have a subsidiary
in Europe. So how did we tackle on the how high-power cost or the fuel expense and what
are the plans to has these power cost going forward.
Chintan Shah:
Europe subsidiary is only distribution arm for us. So, there is production activity happening
in our U.S. or Europe subsidiary. We are distributing the products manufactured by India to
the end customers in Europe and U.S. So there is no impact of the power cost in Europe
which is impacting us in any way.
Isha Agarwal:
My next question is like since we are export oriented company. So did we see any impact of
Europe or U.S. market impacting our order book or did we see any curtailment in the
demand for our products.
Chintan Shah:
No in fact we are seeing better demands coming in from U.S. and also slightly better
demands from Europe. U.S. business is on a strong mode and Europe demand is also
increasing, but not as strong as U.S.
Isha Agarwal:
Okay thank you Sir.
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Tatva Chintan Pharma Chem Limited July 25, 2022
Moderator:
Thank you. The next question is in the line of Sudarshan Padmanabhan from JM Financial
Services. Please go ahead. As there is no response from the current participant, we will
move on to the next that is from the line of Rohan Kamath an investor. Please go ahead.
Rohan Kamath:
Sir I want to confirm that it is about 18000 metric tons means you have told that it has
maintained 3000 metric tons you are targeting.
Chintan Shah:
3000 metric tons is what we are targeting yes.
Moderator:
Thank you. The next question is in the line of Sanjesh Jain from ICICI Securities. Please go
ahead.
Sanjesh Jain:
Yes, good evening, Sir. Two questions from my side Chintan bhai. First on the SDA front.
Now you said that the demand is slow but surely coming back and you expect that the
demand should be back by December. How is it looking for the coming quarter have we
seen any increments on the lows of Q1
Chintan Shah:
No, so 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 customers 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 badly. They are still not able to confirm, but they 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. Q3 can be a lot better and Q4 will be fully
functional as what we have been doing earlier.
Sanjesh Jain:
And another large customer we were trying to get into any progress there.
Chintan Shah:
Yes, we have been approved formally now and now we have to go for a full-scale plant trial
I think in December of this year. This has been confirmed now, formally confirmed.
Sanjesh Jain:
So that customers will be available for us in FY2024 then.
Chintan Shah:
Yes.
Sanjesh Jain:
Second on the PTC is this sharp jump in PTCs 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 is that the situation or there is a generally significantly higher
demand in PTC what is being driving the growth in PTC.
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Tatva Chintan Pharma Chem Limited July 25, 2022
Chintan Shah:
So, there are two reasons for that one reason what you have rightly said is since we are not
making SDA, so we are able to sell more PTCs into the market with given capacities. So
that is one of the 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 logistic
arrangements for that customer stocking up our inventories in Europe and this has really
helped to mitigate their concerns about getting late deliveries and stuff like that from their
other supplier. We have been able to capture almost 80% of the business volumes on this
particular customer which has definitely pushed the demands in PTCs.
Sanjesh Jain:
That is good and what is happening on the electronic chemical side now we said that we
will be growing 2x, 3x, but it looks like this year it is 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 could become very big what are the new customers you said that we are in
discussion with.
Chintan Shah:
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 I would say a demonstration project kind
of a thing for them as well where they are consuming these volumes of electrolyte salts
which is 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 is now being picked up quite fast and we expect this segment
definitely I would not say in this very year or in next year, but we see a very robust future
for this particular segment. So, things are moving faster than what we were anticipating.
Sanjesh Jain:
When we say energy storage we mean battery or this is battery for the EVs.
Chintan Shah:
Basically, 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 do not make any
electrolytes for the lithium batteries, but for the rest of the three energy storage systems we
manufacture the electrolytes. These areas are now really picking up.
Sanjesh Jain:
And you are telling it could be anything right it could be electric vehicle, it could be a solar
form
Chintan Shah:
Yes, in electric vehicle it does not 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
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Tatva Chintan Pharma Chem Limited July 25, 2022
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:
On the continuous flow dimension that you are starting the pilot plant in Q4 FY23 right did
I hear it right.
Chintan Shah:
Yes.
Sanjesh Jain:
And this is for an intermediate product.
Chintan Shah:
Not only the pilot plant, but the actual full-scale plant will also become operational by the
end of Q3 at Dahej.
Sanjesh Jain:
And this is for an intermediate product or a MonoGlyme.
Chintan Shah:
No MonoGlyme still we are only beginning the pilot trials will happen in Q2, so we are just
waiting 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 trials.
Sanjesh Jain:
So, what is starting in Q4 which you spoke in the opening remark what is that product there.
Chintan Shah:
No so that is a different product so this I have been talking about the 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:
Got it, it is of the four products we spoke that which was in an R&D one of them
Chintan Shah:
Yes one of them. So that we are through with the development and actually the piloting is
currently underway in the plant.
Sanjesh Jain:
Got it and flame retardant we said we will start in July right.
Chintan Shah:
No this week itself so probably on Thursday we will start our first plant scale trial,.
Sanjesh Jain:
Okay full scale, that we showed like 50, 60 metric ton per month right.
Chintan Shah:
Sorry.
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Tatva Chintan Pharma Chem Limited July 25, 2022
Sanjesh Jain:
What will be the quantity there it will be 50, 60 ton per month right.
Chintan Shah:
Yes.
Sanjesh Jain:
And full-scale commercial plant.
Chintan Shah:
And this will scale it up once we have the new capacities available.
Sanjesh Jain:
Just couple of clarification on forex loss of ₹ 49 million can you explain what was the
nature of that.
Chintan Shah:
See basically we has our sales so when you have a purchase order typically, we book a
forward contract and do our hedging. So now when let us assume we have hedged this at
75, so we have basically booked our sales at Rs.75 and on which calculation we had taken
the purchase order. So now we are assured that we are going to get 75 and that has been
booked and the dollar has moved from 75 to 80. So, this is a 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 gained this Rs.5 Crores more. So, if we had left this unhedged then this gain would
have been happened. This is what it is indicating.
Sanjesh Jain:
So what we are telling that we have this ₹ 5 Crores of additional sales because we are
finally selling at $80, but we have hedged it so there is a loss of ₹ 5 Crores or there is an
increase of cost in ₹ 5 Crores so the net, net our EBITDA is then the EBITDA should be
exactly same right this EBITDA what is reflecting is…
Chintan Shah:
No, this is showing that if I had not hedged then my profit would have been higher by ₹ 5
Crores. While we have hedged I am loosing ₹ 5 Crores of opportunity that is what it
indicates. Our actual operational EBITDA is 23%, but because I am losing this opportunity
that is why it is coming down to 17%.
Sanjesh Jain:
No, that would have been an extraordinary profit because of currency movement if we
would not have hedge that.
Chintan Shah:
In last whole year, in last whole financial year this Forex was a gain of ₹ 3 Crores in the
whole of financial year roughly about ₹ 3 Crores 80 lakhs in the whole financial year while
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Tatva Chintan Pharma Chem Limited July 25, 2022
in this particular quarter it is showing a loss of ₹ 5 Crores but that is actually nothing to do
with our operational EBIDTA.
Sanjesh Jain:
And high tax rate is because we sold more from Ankleshwar and marginal from 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% hence 18% to 20% is the rate.
Chintan Shah:
Yes, and now we are subjected to 50% taxes from Dahej as well.
Sanjesh Jain:
No so that is fine because we were at 7%, 8% last year so we are earning any which ways
for 18% factoring that 50% benefit will go out but 28% was base why that is because the
entire profit is coming from Ankleshwar plant that is a fair assumption right.
Chintan Shah:
Yes.
Sanjesh Jain:
Got it Sir. Thank you very much for answering all the question and best of luck for the
future.
Chintan Shah:
See last you see basically this quarter Ankleshwar did a revenue of almost ₹ 41 Crores and
Dahej did revenue of ₹ 42 Crores and in earlier year the revenue from Dahej was almost
doubled in 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:
Fair enough Sir. Thank you, thanks for all that answer.
Moderator:
Thank you. The next question is from the line of Sudarshan Padmanabhan from JM
Financial Services. Please go ahead. As there is no response from the current participant, we
will move on to the next that is from the line of Nikhil Rungta from Nippon India Mutual
Fund. Please go ahead.
Nikhil Rungta:
Hi! Sir, thanks for this opportunity. Sir you mentioned that SDA for four year we might see
say around 10% decline right.
Chintan Shah:
Right, and we have very strong recovery from Q4 definitely will back to normal but Q3 also
we expect a good recovery to happen so I am pretty hopeful that we will recover this lesser
sales in those last two quarters.
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Nikhil Rungta:
And the other products basically the non-SDA part which is around 48% of the total. So
that showed a very good or strong growth in Q1. So, if I must combine all those non-SDA
products so what type of growth can we expect in FY2023.
Chintan Shah:
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 products 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
we will see demand once we have this new plant 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 functional from
November 2022 and this is probably going to coincide when the demands for SDA is also
going to come back live. 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:
Basically 60% to 70% of Y-o-Y growth in the non-SDA segment right.
Chintan Shah:
This is something exceptional at a rate 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:
where I am 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 FY2023 correct.
Chintan Shah:
This quarter we did roughly about 80 Crores of the three other segments so we expected to
continue with this average again in the next three quarters. So ₹ 300 to ₹ 320 Crores
revenue from the three segments is what we are expecting and then the balance comes from
the revenues from SDA.
Nikhil Rungta:
Perfect that is all from my side. Thank you so much.
Moderator:
Thank you. The next question is from the line of Krishan Parwani from JM Financial.
Please go ahead.
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Tatva Chintan Pharma Chem Limited July 25, 2022
Krishan Parwani:
Chintan bhai thanks for the opportunity. Just two clarifications. Sir in the last call we
mentioned that our new capacities will be delayed by only like 8 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 Shah:
We are still very much on schedule. 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 absolutely sure
that we will still be able to complete this project by end of November.
Krishan Parwani:
That is great Sir and last thing on the capex, what kind of capex that we are envisaging for
the next financial year and for this year as well
Chintan Shah:
So after completion of this particular project, we may not see any major capex happening in
next financial year. If you remember we already procured one additional land for the next
phase of expansion. We have applied for environmental clearance which typically takes
about 12 to 15 months to get. So hopefully within next financial year nearing by end of
2023 we expect to have the EC in place and only after that we can think of going into
expansion so probably in next financial year FY23, we might not have any significant capex
to be done, but yes in the next year after that 2024 we will see capex to be done.
Krishan Parwani:
Understood Sir, wish you all the best for the future. Thank you.
Moderator:
Thank you. The next question is from the line of Ritik Shrawak from Edelweiss. Please go
ahead.
Ritik Shrawak:
Sir, good evening. I just want to ask a question on flame retardant like what is the market
size in India and globally.
Chintan Shah:
Global market size we understand is close to about 1,60,000 metric tons roughly in the
ballpark number of 1,50,000 to 1,70,000 metric tons and the plant what we are intending to
set up is with a capacity of 5,000 metric tons right now.
Ritik Shrawak:
Sir who are the competitors in India currently.
Chintan Shah:
Currently we do not have any competitor in India we do have three large MNC competitors.
Ritik Shrawak:
Can you please name them Sir?
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Tatva Chintan Pharma Chem Limited July 25, 2022
Chintan Shah:
They are very well known so basically ICL then you have Lancxes and Albemarle.
Ritik Shrawak:
That’s it for my side the rest of my questions were answered. Thank you and good luck for
the next quarter.
Moderator:
Thank you. The next question is from the line of Pritesh Chheda from Lucky Investment
Managers. Please go ahead.
Pritesh Chheda:
Sir we understood the math that you were telling of SDA and non-SDA in terms of
revenues for 2023. 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 and there is some capacity added on PTC and there is some capacity for new product
which is 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 Shah:
Yes, so basically we already have roughly about 280 kilo liters of reaction capabilities
across both the plants and what new setup we are doing is we are expanding this by another
200 kl. So theoretically we are expecting to have a potential to double our revenues.
Pritesh Chheda:
This would include the electrolyte.
Chintan Shah:
When you talk of PTCs, electrolyte salts, PASC or a flame retardant these are 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:
Perfect so these 200 kilo liters which means we will add let us say another 300, 400 Crores
revenue right because today you already have 80 Crores for that.
Chintan Shah:
Yes.
Pritesh Chheda:
Okay thank you very much Sir.
Moderator:
Thank you. The next question is from the Shubham Khorak from Perpetual Advisory.
Please go ahead.
Shubham Khorak:
Thank you for taking my question. I just wanted to ask can you provide us with some
quality insights for the kind of inventory that we are building for satisfying demand that
will come after one semiconductor shortage eases out.
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Tatva Chintan Pharma Chem Limited July 25, 2022
Chintan Shah:
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 doing and 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 on such
high inventories all the time because when there is a demand coming in from customers on
SDAs it is always coming in larger volumes. So, unless and until you have this inventory
you will not be able to take up that opportunity.
Shubham Khorak:
Okay thank you so much Sir. Wish you all the best.
Moderator:
Thank you. The next question is from the line of Yash Shah from Investec India. Please go
ahead.
Yash Shah:
Hi! Sir, I had a couple of questions. The first one was basically clarification questions
regarding flame retardant. So will this also be a fungible capacity of 200 kilo litres which
you are adding.
Chintan Shah:
Yes technically speaking yes.
Yash Shah:
So, we would not require any additional Capex for this product category.
Chintan Shah:
Yes.
Yash Shah:
And till when are we expecting it to reach peak utilization.
Chintan Shah:
No, we will need 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 tanking 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 this special storage
tanks were being installed at the site. So now we are ready with the safety audit and
everything. So now we will start kick off the plant trials from this week.
Yash Shah:
And was it a significant amount what we spent on the special storage tanks.
Chintan Shah:
It is I mean so once we have this new facility and the requirement of this storage tank goes
to full capacity. So when we are talking of 5,000 metric tons levels we are looking at about
₹ 3 to ₹ 3.5 Crores of Capex.
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Tatva Chintan Pharma Chem Limited July 25, 2022
Yash Shah:
Okay ₹ 3 to ₹ 3.5 Crores got it, and my the second question which I had was about the
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 how much is the revenue potential for that.
Chintan Shah:
We have been now 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 2022 or January 2023 when full scale commercialization will
happen. So that is why I am saying Q4.
Yash Shah:
Got it and sir at full so what is the demand potential like what is the revenue potential for
this product.
Chintan Shah:
So roughly at a full scale once it is there, the revenue it would be in the range of about ₹ 30
to ₹ 40 Crores and growing.
Yash Shah:
Got it. Thank you very much.
Moderator:
Thank you. Ladies and gentlemen that was the last question. I now have the conference over
to the management for the closing comments.
Chintan Shah:
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 EY for any further queries that
you may have and they will connect with you offline. Thank you and have a great evening.
Moderator:
Thank you. Ladies and gentlemen, on behalf of Haitong Securities India that concludes this
conference call. We thank you for joining us and you may now disconnect your lines.
Thank you.
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