Edited Transcript of BODA.NS earnings conference call or presentation 14-Aug-20 12:00pm GMT

Thank you. And I would now request Mr. Mayur to take up the financial performance in detail.

——————————————————————————–

Mayur Bachubhai Padhya, Bodal Chemicals Limited – CFO [3]

——————————————————————————–

Thank you, Ankit bhai. Good evening to all. On the quarterly financial front, our stand-alone total income declined by 64% year-on-year to INR 1,171 million. Our stand-alone EBITDA loss stood at INR 139 million, which was impacted by higher operating expenditure, as highlighted by Mr. Ankit earlier. Our finance costs have increased year-on-year to INR 27 million, mainly due to higher utilization of working capital limits. It has declined by 10% quarter-on-quarter. The loss before tax stood at INR 229 million and deferred tax led by — led to loss after tax of INR 171 million. Our exports stood at INR 419 million, and its share in total revenue was at 38% in Q1 FY ’21.

During Q1 FY ’21, inventory levels come down to INR 1,524 million from INR 1,855 million in Q4 FY ’20. And trade receivable come down to INR 2,409 million from INR 2,942 million in Q4 FY ’20, leading to improvement in working capital. On subsidiary front, SPS posted revenue of INR 4.2 million, with a loss of INR 20 million in Q1 FY ’21. Trion posted loss of INR 20 million in Q1 FY ’21. We are committed to minimize the losses at subsidiaries going ahead.

Thank you. And now I open the floor for question-and-answer session.

================================================================================

Questions and Answers

——————————————————————————–

Operator [1]

——————————————————————————–

(Operator Instructions) The first question is from the line of Aditya Khetan from East India Securities.

——————————————————————————–

Aditya Khetan, East India Securities Ltd., Research Division – Equity Research Analyst [2]

——————————————————————————–

Sir, my question is on the Vinyl Sulphone and the H-Acid prices. So the current prices, Vinyl Sulphone, you said is around INR 160 per kilo. And during Q1, also, the prices were around INR 163 per kilo. Am I right on this number?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [3]

——————————————————————————–

Yes, you are right. The Q1 average price of Vinyl Sulphone was INR 163.

——————————————————————————–

Aditya Khetan, East India Securities Ltd., Research Division – Equity Research Analyst [4]

——————————————————————————–

So there has been not an improvement in the price, right, sir, currently?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [5]

——————————————————————————–

No. Actually, in June, the price went even lower than INR 150 level. So from that point on, it improved currently. So in June, it was at around INR 150 and even lower. And from that level, now — it is now back to INR 160 plus levels.

——————————————————————————–

Aditya Khetan, East India Securities Ltd., Research Division – Equity Research Analyst [6]

——————————————————————————–

Okay. So what gives you confidence that the prices will sustain? Are you looking that the textiles demand is coming back? Or what is the dyestuff scenario?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [7]

——————————————————————————–

I think, overall, if we look at our volumes and our dispatches, May was very dull, but then June was not bad. June, we had around 65%, 70% of the sales level. And again, in July, also, it has improved to 75% plus. So we see a continuous improvement in the demand from textile and other sectors also. Because our export is around 40% to 50%, it’s very important that all the other economies also open up, which has been gradually improving in the last 2 months.

So what we feel is regardless of COVID situation, I think the global — globally countries don’t have — governments don’t have an option but to open up the trade and open up the country. So that has been improving every week since May mid, since we started our office and most of the plants.

——————————————————————————–

Aditya Khetan, East India Securities Ltd., Research Division – Equity Research Analyst [8]

——————————————————————————–

Okay. Sir, what would be the current utilization levels? And what it was in Q1 of Dye Intermediates and dyestuff, both?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [9]

——————————————————————————–

The utilization in Q1 of Dye Intermediates was around 20%. And — so currently, it is at 78%, 80%. There’s a huge gap there. In dyestuff, it was around 15% in Q1 FY ’21. And currently, it is around — and for the month of July, it was around 40%, 45%.

——————————————————————————–

Aditya Khetan, East India Securities Ltd., Research Division – Equity Research Analyst [10]

——————————————————————————–

Okay. So Dye Intermediates utilization is 78%?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [11]

——————————————————————————–

Yes.

——————————————————————————–

Aditya Khetan, East India Securities Ltd., Research Division – Equity Research Analyst [12]

——————————————————————————–

Okay. And sir, on the Trion business, you said — so previously, we were said that the plant will start in Q1. Now it has been shifted to Q2 around.

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [13]

——————————————————————————–

So this is all actually due to being — we were supposed to receive some mechanical items from China. Because this is the only one-off plant in India, and it was set up with the help of some Chinese consultants, so we had identified some issues regarding some safety and some other issues. So last few months we were working on that only. And our shipment was at Nhava Sheva port for a while. So we had issues during the lockdown. So that’s what — the lockdown has delayed the entire process.

——————————————————————————–

Aditya Khetan, East India Securities Ltd., Research Division – Equity Research Analyst [14]

——————————————————————————–

Okay. Sir, in Q1, we were said that because of the weak demand, you had put your CapEx on hold. So now have you at all planned any CapEx for the year? And what would be the amount?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [15]

——————————————————————————–

No. We are currently working on that, in which combination we should go ahead. So earlier — as earlier mentioned about a few months ago that we had deferred the original plan of setting up a caustic, chlorine plant and some other inter — some other chemicals. So that has now been deferred for sure. And we are currently working on some other combinations of organic chemicals and specialty chemicals. So we’ll come out with the plan very soon. But looking at the current situation, we don’t want to be too aggressive to start the investments — to start the spending.

——————————————————————————–

Aditya Khetan, East India Securities Ltd., Research Division – Equity Research Analyst [16]

——————————————————————————–

Okay. So in this year so we will incur mostly the maintenance CapEx only? And what would be that amount?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [17]

——————————————————————————–

Yes, yes, just a routine CapEx that we have around INR 20 crores to INR 30 crores annually. That will be the only CapEx. We are not planning to increase any capacity or setting up any new plants. But obviously, our target is to start some activity at our new site in — near Dahej that we are planning to at least — it depends on how this COVID situation changes, how fast it changes. But obviously, our target is to start the activity in a few months. By the end of this financial year, we want to start spending and start setting up the plant because the process will be 1.5 year, 2 years.

——————————————————————————–

Operator [18]

——————————————————————————–

(Operator Instructions) The next question is from the line of Rohit Nagraj from Sunidhi Securities.

——————————————————————————–

Rohit R. Nagraj, Sunidhi Securities & Finance Ltd., Research Division – Senior Research Analyst [19]

——————————————————————————–

Sir, a couple of questions. One is in terms of our HSE practices and zero-liquid discharge plants, so how are we currently across our facilities in terms of our environmental facilities and on the safety front as well? Because we’ve seen in the last few months there have been a lot of incidences, which have been happening across the chemical industry. So how are we placed on that front?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [20]

——————————————————————————–

In last few years, we have been very clear as a policy matter within the company about the safety and environment. Because these 2 things, like you said, matter a lot. Environment can give us issues in terms of closures or not able to operate the plant. So that’s very risky for us. Also safety, like you said, during this — since this COVID situation, unfortunately, there has been many accidents across India, mainly in Gujarat area. So it’s very unfortunate. But what we have done — we also had a small accident 2, 3 years ago in one our plants in Ahmedabad. So since then, we have improved our overall policies even more. We also have a Director on Board that is — specifically has been elected for the purpose of HSE. So that’s our approach.

And as far as the environment goes, at our main plant, for intermediates, we are a zero discharge unit. So that’s — there is no issue there. And also for dyestuff production, we have set up a multiple effect evaporator. So we are totally complied as far as the norms or the requirements of the government bodies go.

——————————————————————————–

Rohit R. Nagraj, Sunidhi Securities & Finance Ltd., Research Division – Senior Research Analyst [21]

——————————————————————————–

All right. That was good to hear. Sir, secondly, in terms of the demand, so what would be the trigger from increasing the demand from base level, both in domestic market and international market? And an allied question to that, whether we have seen small players going out of the business because of the working capital requirement or the plant being shutdown for a fairly long time and they were unable to sustain during the last few months? So have we seen any kind of such phenomena?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [22]

——————————————————————————–

Yes. So like I answered in the first question, the demand definitely has been increasing because the numbers I told is not our production numbers, the numbers are actually — come from the VS numbers. So in June, we had about 65 — around 65% of our compared to the last year’s turnover. Again, in July, we had about 75%. So that shows a good sign that — obviously, there has to be a demand, otherwise we won’t be able to sell or dispatch. So there, we are continuously seeing improvement, domestically and internationally also.

And as far as the smaller players, though, it’s a very important point that during lockdown, in month of May, we were able to start with the permissions — getting the permissions from the government. But some of the smaller competitors, especially here in Ahmedabad, who are located in the industrial estate, 2 or 3 key players did not start their plants. So they did not start until July mid, July end. So this is a very clear sign that in the time of competitiveness or very low margins, it’s very difficult for nonintegrated or a single location, single product kind of players. So that really happened — actually happened between May to June and July.

So that’s actually the reality of the trade because few players have been integrating, have become a single location players. So the — so players like us, we definitely have some advantage over some of the traditional players who are still there in the smaller units or multiple smaller units across different sites.

——————————————————————————–

Rohit R. Nagraj, Sunidhi Securities & Finance Ltd., Research Division – Senior Research Analyst [23]

——————————————————————————–

Yes. Sir, one last question in terms of the Backward Integration initiative. So we have already done that in sulfuric acid. Any other initiatives? And during these last 4 months, have we taken any steps in terms of cost optimization or on the digitization front because we have seen the manpower has been one of the constraints, which has also impacted the overall business?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [24]

——————————————————————————–

Yes. So there is no room — there’s not much room for digitization because half of our plants are already operating on DCS systems. So we already have a very upgraded and latest systems, like companies from Honeywell and Yokogawa, et cetera. So I think as far as the digitization of plants, I don’t think there is much room. In some other — most of the other plants, half of the other plants are batch type. So there is no room of DCS systems and all.

We did have some issues regarding people, the labor that’s involved, especially because many of the migrated people left for their states and most of them have not come back. So we did have an issue there, but we have a great image in our area in Baroda at as our main plant. And we are able to source local people who are open to do any kind of work that we require. So we are able to manage. Obviously, there were issues in the beginning. But looking at the July numbers, I think those issues remain, but I think not where the issues can actually affect performance of the company.

——————————————————————————–

Rohit R. Nagraj, Sunidhi Securities & Finance Ltd., Research Division – Senior Research Analyst [25]

——————————————————————————–

All right. Just last one clarification. So at what utilizations level will we be able to break even because certainly, last quarter was a different story altogether? And on the inventory, in the channel, distribution channel, whether the inventories have relatively come down or dried up. And probably once the demand slightly improves, again, inventories restocking will happen?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [26]

——————————————————————————–

It’s very difficult to tell the breakeven production levels for us because finished good prices and raw material prices don’t have a direct connection because most of the raw materials that we use, they are not only produced or sold only to cater to our sector; most of the raw materials also cater to other sectors. So their relation is not very direct. So the control over the prices of raw materials or finished goods, they really vary. So for example, currently, obviously, the finished good prices are low — on the lower side; at the same time, raw materials are also on the lower side. One or two months ago, raw materials were very — some of the raw materials were at probably 5- or 10-year bottom, which have improved because the demand has improved. So it’s very difficult for me to come up to any number, which can be a breakeven number.

——————————————————————————–

Rohit R. Nagraj, Sunidhi Securities & Finance Ltd., Research Division – Senior Research Analyst [27]

——————————————————————————–

All right. And on the inventories?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [28]

——————————————————————————–

Backward integration question that you had asked, so we do — not only sulfuric acid, we also produce some other chemicals which are backward integrated. So for example, thionyl chloride, the plant that we have set up recently, that is also backward integration. In sulfuric complex, we have another 3 or 4 products, which we captively use about any 20%, 30%, 40%, 50%. So — and also, there is another product called beta naphthol. That is also our captive product integrated into making our Dye Intermediates.

And also, we integrated the entire complex with the common utility system, which replaced all the old multiple boilers and which also replaced the more expensive power that we were buying from the electricity board. So that also we’ve recently done. Utilization in the power plant has been not bad. It’s average must be around 70%, 75%, but there is a room to improve about 15%, 20% there also. So we are planning there.

Thionyl chloride also has been — has not been very smooth because plant and quality is not an issue, but the demand levels and this COVID situation has again affected it. So again, we only had utilization of around 50% last month. So there also, there is a lot of room to improve, take it up to about 80%, 90% levels and continuously lower our expenses overheads on that front.

——————————————————————————–

Operator [29]

——————————————————————————–

The next question is from the line of [Sriram Srinivasan from Sincere Syndication].

——————————————————————————–

Unidentified Analyst, [30]

——————————————————————————–

As you said earlier to the response to another question — question from an another investor or an analyst, what did you say that the Vinyl Sulphone cost has improved from INR 150 to INR 163 during — 1 month of difference, right? If I’m right, means, what will be the cost of the Vinyl Sulphone over the period in Q1 FY ’20?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [31]

——————————————————————————–

You are asking for the cost of Vinyl Sulphone in FY ’20?

——————————————————————————–

Unidentified Analyst, [32]

——————————————————————————–

Yes, yes, yes, in Q1 FY ’20.

——————————————————————————–

Mayur Bachubhai Padhya, Bodal Chemicals Limited – CFO [33]

——————————————————————————–

Hello?

——————————————————————————–

Unidentified Analyst, [34]

——————————————————————————–

Yes.

——————————————————————————–

Mayur Bachubhai Padhya, Bodal Chemicals Limited – CFO [35]

——————————————————————————–

Yes. See, what your question is that depends. Prices are…

——————————————————————————–

Unidentified Analyst, [36]

——————————————————————————–

If there is — yes, what is the difference in between the realization? What is the growth or degrowth in numbers of realization for FY ’20?

——————————————————————————–

Mayur Bachubhai Padhya, Bodal Chemicals Limited – CFO [37]

——————————————————————————–

I understand your question. But see, 12 months is a fairly long time. And the prices of raw material are fluctuating in chemical industry. So to give a specific number is very difficult. See, sometimes what happens, last year, we were selling Vinyl Sulphone, say, in Q4, more than INR 200. At the same time in Q1 of current year, the prices were INR 160 plus something. But that doesn’t mean that our profit has erode more than INR 40. Prices of raw material has also fallen. So to give a specific number of cost for Vinyl Sulphone is difficult.

——————————————————————————–

Unidentified Analyst, [38]

——————————————————————————–

Okay. I can understand, sir. I can understand. Okay. Sir, another question from my side is that what is the shift from China to India in terms of the chemical industries boosting so far from the government initiatives? How things are ramping up on your side? How you are — how do you think this will work for the industry?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [39]

——————————————————————————–

Yes. So there has been lots of talk, lot of tweets also officially coming from CNBC and et cetera for last about 30 to 45 days. There’s been a buzz about government coming up with some very positive policy for new investments regarding the chemicals and the chemicals sector. But we are also waiting for that. There’s been nothing — no exact plan has really come out from the government. But for pharma, they had come up with a plan, I think, about 15, 20 days back. So that was very useful for new investments. So I am hoping for a similar kind of policy or help from the government for the chemical growth also because we do have a large piece of land. We also have some other land also, which we are eager to start some — our growth factors there.

So I think it’s a good timing for us because most of the time these policies or the new announced policies from the government involve greenfield projects. So if you are — if any company wants to expand, that’s usually not covered in these policies. So we are at a stage where we have not started any work. So — and we have an option on multiple sites. So we — I think we’re at the right time. If government comes up with some positive policy, we can definitely take advantage of it.

And overall, because of some issues between the governments of India and China at the Kashmir borders, there was a lot of hype regarding India may ban chemicals or may ban many items that come from China. But practically, I don’t see that happening much because it will not be possible, if you look at the WTO norms and stuff. And also just the way how Indian industry depends a lot on Chinese raw materials, so I don’t think that, that will be too big of a step to ban any chemicals, but the government can definitely probably impose some extra duties on some of the chemicals. And then that way, it can help the domestic industry.

So in that case, if something like that comes up with some anti-dumping or some extra duty structure, then we can definitely benefit because we definitely compete with the Chinese. We definitely compete with the materials that are imported from China in our Intermediate segment.

——————————————————————————–

Operator [40]

——————————————————————————–

Thank you. I would request Mr. Srinivasan to rejoin the queue for follow-up questions. The next question is from the line of Dipesh Mehta from SBICAP Securities.

——————————————————————————–

Dipesh Mehta, SBICAP Securities Ltd., Research Division – Information Technology Analyst [41]

——————————————————————————–

Sir, I was — I dropped out in between. So I’m not sure whether you provided this data, but what was the H-Acid and VS realization for the quarter?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [42]

——————————————————————————–

For the Q1 FY ’21, the H-Acid average selling price was INR 347 per kg. And for Vinyl Sulphone, it was INR 163 per kg.

——————————————————————————–

Dipesh Mehta, SBICAP Securities Ltd., Research Division – Information Technology Analyst [43]

——————————————————————————–

And where it would be right now trading at?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [44]

——————————————————————————–

Currently, well, the H-Acid has increased a little, it’s around INR 350 levels, INR 355 levels actually, and Vinyl Sulphone is about same price, but the production level has really picked up because our Intermediate level is — production level is now around 80%.

——————————————————————————–

Dipesh Mehta, SBICAP Securities Ltd., Research Division – Information Technology Analyst [45]

——————————————————————————–

Okay. And now — earlier, our H-Acid and VS used to contribute almost 40%, that’s when H-Acid and VS prices are substantially higher. Now what would be the contribution from these 2 relatively volatile commodity for us?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [46]

——————————————————————————–

No, it is still in the same range. The contribution that comes from H-Acid and VS, it’s still in the same range. It’s around 40% of our top line.

——————————————————————————–

Dipesh Mehta, SBICAP Securities Ltd., Research Division – Information Technology Analyst [47]

——————————————————————————–

Okay. Okay. And whether at this price, now considering overall raw material scenario, we make some money or it is hardly breakeven for us?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [48]

——————————————————————————–

I think there are some slight margins in these price level also because the raw material side is still on the lower side. So I think more important point is we take the utilization higher. In dyestuff, the utilization is still not great, not — compared to intermediates, it is not that high. So overall at a company level, the utilization level we need to increase, so that we can avoid a lot of extra cost. And at this level, yes — to answer your question, at this level, I’m sure there’s — some small margins are there.

——————————————————————————–

Dipesh Mehta, SBICAP Securities Ltd., Research Division – Information Technology Analyst [49]

——————————————————————————–

And earlier in your last quarter call, you alluded about some of the capacity moving out of the market or likely to move out. Are those capacity returned to market or yet not? And any benefit or any price support you are seeing?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [50]

——————————————————————————–

No. So there were 2 plants, which were not operational. And so one of them has not started, and the second one has started just very recently, I think, 2 days back. And there is no movement in the price so far because it has just started, and I think there is also a captive base. So since it is a captive base, not — so the entire plant was shut down. So when they start their intermediates plant, they’ll also start their dyestuff plants. So that way, it’s not going to be a lot of materials that’s going to come up in the market, which will disturb the prices.

——————————————————————————–

Dipesh Mehta, SBICAP Securities Ltd., Research Division – Information Technology Analyst [51]

——————————————————————————–

Understood. And sir, from a demand perspective, by when do you expect some kind of normalcy to return kind of in overall demand trend, which we are observing over the last few months, if you can provide some perspective? And then last debt related question, what would be the debt and inventory position? If you can provide, that’s great.

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [52]

——————————————————————————–

I think in — I have July numbers with me, and July numbers are very — giving a lot of confidence to us. Because earlier in around May, when we were starting the plants, we were not sure what kind of utilization we’ll be able to reach. So within just 2 months, we have reached about 75%, 80% in intermediates and even the other numbers — our Basic Chemicals is at 100%. So overall, I think we are at around 65%, 70%, I think, which is not bad. And what we observe is every week, it is improving. So I think that by Diwali, we should probably reach around 80% levels at a company level, so — which should be good solid numbers, which should create some good margins also.

And for the debt and inventory, let Mayur answer that.

——————————————————————————–

Mayur Bachubhai Padhya, Bodal Chemicals Limited – CFO [53]

——————————————————————————–

As far as the inventory level is concerned, it has reduced drastically because some production was lower and demand was also lower. So whatever we could sell, that is some parties from stock. So inventory level is reduced. And as far as debt level is concerned, that has also reduced to some extent because the recovery from customer was very good than what we have expected initially. So as far as fund inflow, that was good and outflow was a bit limited. So there was some improvement as far as debt is concerned.

——————————————————————————–

Dipesh Mehta, SBICAP Securities Ltd., Research Division – Information Technology Analyst [54]

——————————————————————————–

So is there a number?

——————————————————————————–

Mayur Bachubhai Padhya, Bodal Chemicals Limited – CFO [55]

——————————————————————————–

Improvement means it has reduced.

——————————————————————————–

Dipesh Mehta, SBICAP Securities Ltd., Research Division – Information Technology Analyst [56]

——————————————————————————–

Sir, can you say exact number? Or maybe I can take it offline, if it is not ready.

——————————————————————————–

Mayur Bachubhai Padhya, Bodal Chemicals Limited – CFO [57]

——————————————————————————–

You can take it offline.

——————————————————————————–

Operator [58]

——————————————————————————–

The next question is from the line of Nav Bhardwaj from Anand Rathi.

——————————————————————————–

Nav Bhardwaj, Anand Rathi Financial Services Limited, Research Division – Research Analyst [59]

——————————————————————————–

Sir, I had a brief question as to my understanding was that we do not import any raw material from China. Is that correct?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [60]

——————————————————————————–

No. We do import some chemicals. There are a couple of intermediates, which we require for our dyestuff production that are not actually produced in India. So for those 3 or 4 chemicals, we do depend on Chinese. Other than that, in our imports, there are options in some of the chemicals where the — where it is available in China, but there are other options also. So there, we don’t depend on the Chinese companies, but only for these 3 intermediates, which are required, which are not produced here, there, we have to buy from China.

——————————————————————————–

Nav Bhardwaj, Anand Rathi Financial Services Limited, Research Division – Research Analyst [61]

——————————————————————————–

Would you be comfortable sharing as to the critical ones as to what percentage of the raw materials will they be?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [62]

——————————————————————————–

No, no, he doesn’t want the names. The percentage is hardly 2%, 3% because those are required to be produced for some special colors. So not for any of the high-volume dyes items. So obviously, that is why it has not been developed here because their demand here is very small. And that’s why we have also not started captive, manufacturing of the same because the volumes are very small.

——————————————————————————–

Nav Bhardwaj, Anand Rathi Financial Services Limited, Research Division – Research Analyst [63]

——————————————————————————–

Great, sir. The other question would be, sir, there have been some — a few new companies, which have been granted clearances for setting up new plants in dye chemistry, like Mac Dye Chem right in your backward I think so in Vatva, Ecofine in Bharuch. So what I wanted to ask is like with the current subdued demand, with newer capacities coming up, how do we see the demand supply inside India spanning? And as you rightly said that the Chinese imports are going to continue even in the future. With we already being there and the new capacities coming up, how do you see this coming up, the demand/supply equation, in the, say, year or 2?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [64]

——————————————————————————–

I think if you leave the COVID part apart, then I think there is a consistent demand of around 4% to 6% that comes from the textile industry globally. So — and our trade — particular trade because our dyestuff, which goes into textiles, which is our — which is the higher number among our textile — among our dyes business, there, it’s not only domestic business, but it’s also mainly international business because it’s — we supply dyestuff to all the textile hubs in the world; for example, Turkey, Bangladesh, and then Pakistan, Indonesia. And China actually has a model of self land. So China has had most of the production produced there. But earlier, they used to because — you have a couple of the reasons why — because China was very aggressive in growing up the manufacturing sector. And also, there was an opportunity. So China took a lot of the global share in terms of dyes and intermediates and all.

But — so they also grew rapidly, I would say, about 10 years ago, 15 years ago. But because of the environmental issues that came up a few years ago, the growth has not been great in China. So because of their national level policy regarding the environment and because of a lot of the restrictions that have been implied, the growth of that sector has not — has hardly happened, I would say. So that’s why the Indian companies, which are already producing these products in these cycles benefited a few years ago, and that continues to give the opportunity to the Indian players. Obviously, there were some extraordinary price (technical difficulty) with closures of plants in China, but that doesn’t happen anymore. But still because now there is no more pressure from China, and China not being keen to grow in this — some of the sectors, I think the Indian players, especially the integrated ones, definitely have the opportunity because Indian companies have definitely increased their share in the global markets. And I think they continue to do so.

——————————————————————————–

Nav Bhardwaj, Anand Rathi Financial Services Limited, Research Division – Research Analyst [65]

——————————————————————————–

Great. Lastly — sorry for the line — my line got a little scratchy. You’re talking about some CapEx in the Dahej. Could you please outline the capital outlay and products and the time lines that you’re thinking on the same?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [66]

——————————————————————————–

So earlier, we had announced CapEx regarding chlor-alkali complex and also some of the specialty chemicals include within the same complex. But we had actually deferred that plan. So we had announced that pre-COVID. And during this lockdown and now post-COVID era, there is definitely — there are definitely some changes, but we have not announced — we’ve not finalized yet. So hopefully, within a couple of months, we’ll able to announce our exact plans. But definitely, it doesn’t include chlor-alkali anymore.

——————————————————————————–

Operator [67]

——————————————————————————–

The next question is from the line of Aman SonI, an individual investor.

——————————————————————————–

Unidentified Participant, [68]

——————————————————————————–

I just have one question. Can you help me with the realizations and the price of TCL in the current quarter and the previous one?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [69]

——————————————————————————–

Sorry, can you repeat your question, please?

——————————————————————————–

Unidentified Participant, [70]

——————————————————————————–

The price of thionyl chloride in the current quarter and the previous?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [71]

——————————————————————————–

Okay, okay, thionyl chloride. The price in the current quarter is around INR 11 per kg. That’s around — that’s the average market price right now.

——————————————————————————–

Unidentified Participant, [72]

——————————————————————————–

And what was in the same period last year?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [73]

——————————————————————————–

In the same period last year, was around — in the range of must be around INR 15 to INR 20, between somewhere there.

——————————————————————————–

Unidentified Participant, [74]

——————————————————————————–

Okay. And what was the realization in the current quarter for the same chemical?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [75]

——————————————————————————–

In the current — currently, it is around INR 11, yes.

——————————————————————————–

Unidentified Participant, [76]

——————————————————————————–

No, the realization?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [77]

——————————————————————————–

Realization is the selling price, right? So for that product, when we sell that in the market, we are getting around INR 11 per kg.

——————————————————————————–

Operator [78]

——————————————————————————–

(Operator Instructions) The next…

(technical difficulty)

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [79]

——————————————————————————–

That is INR 150 crore. (technical difficulty) But given our position, we are serving regularly. We have not taken any advantage or any moratorium.

——————————————————————————–

Operator [80]

——————————————————————————–

The next question is from the line of Aditya Khetan from East India Securities.

——————————————————————————–

Aditya Khetan, East India Securities Ltd., Research Division – Equity Research Analyst [81]

——————————————————————————–

Sir, my question is on one of your subsidiaries, which is Sener Boya Kimya, in that, I’m looking at the annual report, the sales of materials is recorded as INR 39 crores, whereas receivables pending are INR 35 crores. I would like to know what is the position of the subsidiary? And in what business the subsidiary is into?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [82]

——————————————————————————–

Let me explain your observation. See, in Turkey, this dyestuff, when we sold in the local market, over there, credit period is a bit higher compared to what we have in India. Sometimes, it goes beyond 6 months to even 9 months also. And the higher level of realization you look at because of the higher turnover, which was happened in last quarter itself. So over there, credit period is a bit higher than what we have over here. But what happened over there — see, we get checks from the customers. So it’s kind of post-dated check. And the system over there is like that whenever you issue a check, it has to get cleared. Otherwise, it’s a very big criminal offense. So normally, nobody dishonor their check and whatever we receive check that gets honored. But yes, credit period is a bit higher compared to what we enjoy in India.

——————————————————————————–

Aditya Khetan, East India Securities Ltd., Research Division – Equity Research Analyst [83]

——————————————————————————–

Okay. So in what business is this subsidiary into?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [84]

——————————————————————————–

Yes, it’s into distribution of what we produce here, mainly dyestuff. It’s a kind of marketing arm for us.

——————————————————————————–

Aditya Khetan, East India Securities Ltd., Research Division – Equity Research Analyst [85]

——————————————————————————–

Okay. Okay. Okay. And sir, second question is, I’m looking that a good amount of loans are being — is being given to the subsidiary of SPS Processors, that has increased from INR 42 crores in FY ’19 to INR 75 crores. Whereas I believe the revenues and profitability are very less. In fact, it is reporting a loss on the SPS Processor side. So can you help me with the asset and liabilities of this subsidiary?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [86]

——————————————————————————–

Yes. In subsidiary, see, Vinyl Sulphone plant, what we built is from Bodal’s fund only. And at the same time, whatever working capital require increase over there, that is also being funded by Bodal. That company is a debt-free company. We are not enjoying any bank limit from there. So whenever there is a slow period, demand is low, funds do get blocked at inventory level as well as at the receivable level. So that is being funded by Bodal. That is why this has increased.

——————————————————————————–

Aditya Khetan, East India Securities Ltd., Research Division – Equity Research Analyst [87]

——————————————————————————–

Okay. Are you confident that the money given to your subsidiary would be repaid by considering the demand for the next 2 years of Vinyl Sulphone and H-Acid? What makes you confident?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [88]

——————————————————————————–

Definitely. There is no question about it. It will be repaid.

——————————————————————————–

Operator [89]

——————————————————————————–

The next question is from the line of Shantilal Patel from Shanti Patel & Associates.

——————————————————————————–

Shantilal Patel, [90]

——————————————————————————–

Hello? Hello?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [91]

——————————————————————————–

Yes, please.

——————————————————————————–

Shantilal Patel, [92]

——————————————————————————–

I just wanted to know who are our main competitors in terms of production and the capacity, which we have built up and the sales, if possible?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [93]

——————————————————————————–

I think some of the main competitors, which have high capacities like us, in the trade, I think one would be Kiri industries; and second Jay Chemical Industries Limited, but they are more focused on the dyestuff; and also, third one is Colourtex, which is in South Gujarat based, but their focus is even more on dyestuff than dye chemicals. And a similar model to ours would be Kiri Industries and Shree Pushkar. So Shree Pushkar also has a similar model as ours, which has a 3-step integration.

——————————————————————————–

Shantilal Patel, [94]

——————————————————————————–

So impliedly main is Kiri and Pushkar, correct?

——————————————————————————–

Ankit Sureshbhai Patel, Bodal Chemicals Limited – Executive Director [95]

——————————————————————————–

Yes. If you look at similar business model, yes.

——————————————————————————–

Operator [96]

——————————————————————————–

The next question is from the line of Rajesh Sarda. Sorry, we lost his line. (Operator Instructions) As there are no further questions from the participants, I now hand the conference over to Mr. Mayur Padhya, Chief Financial Officer, for closing comments.

——————————————————————————–

Mayur Bachubhai Padhya, Bodal Chemicals Limited – CFO [97]

——————————————————————————–

Thank you very much for attending our conference call. And if anyone’s questions remain unanswered, they can directly contact me, and I’ll be happy to answer it. Thank you, and goodbye.

——————————————————————————–

Operator [98]

——————————————————————————–

Thank you. On behalf of Bodal Chemicals Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.