Thank you very much. We will now begin the Q&A session. The first question is from the line of Ahmed Madha from Unifi Capital. Please go ahead.

Thank you for the opportunity. My question was first on the caustic business. Can you give some comments on how do you see the current global prices and how is the demand supply behaving in the global market as well as the domestic market? And also we are witnessing that there is some uptick in the prices in the last couple of months. So is it fair to expect that from quarter 2 to quarter 3 there will be some improvement in our realizations?

Yes, sure. So in terms of the global demand supply situation, we do see that there was a slight increase in prices as you suggested as well. This was largely due to China not being in the market aggressively in the past few weeks. But post the Asian Games, we have seen that the supply from China has increased again. So that was a slight uptick in the market and that has corrected. So we do expect that in the coming short term period, next quarter or so, the prices are likely to be range bound.

Okay. And one more question o n the caustic side. We see that the cost has come down from the last quarter. So can you quantify how much are the savings from the renewable power plant and how much are the savings from the decline in coal prices?

So as far as the renewable power is concerned, because of that there is going to be a saving on the variable cost of around 10%. And we will not be able to quantify in terms of how much is from the renewable and how much is from the other sources. But that will be ballpark number.

Okay. Fine. And on the sugar business, are there any one -offs in the sugar business this quarter? I am trying to understand. I know that this is the weakest quarter seasonally, but we have very significant growth in volumes both for sugar and ethanol. So is it just related to the inventory cost which we were carrying from last quarter or are there any one-offs?

I just wanted to understand, I mean, there was loss in this quarter and the volumes were really good. So is it just a factor of the inventory cost or is there any other reason why there was loss?

No, as mentioned in the opening remarks, we have taken a hit of INR45 crores because of the change in the country liquor policy. So that has been a massive hit in the bottom line in the current quarter which we have taken on our P&L and balance sheet.

Okay. Fine. Got it.

Because of the revaluation of molasses because we manufactured through the B -heavy route and the state government equated B-heavy and C-heavy at the same level which is not rational really.

Okay Fine. So was this like a one-off or is it recurring?

No, it's because of the policy where the alcohol output from B -heavy is double that of C -heavy but then they equated it at the s ame level. So it's a one -off. The new policy has come out yesterday and we are evaluating our strategy of what we should do in the current year going forward.

Okay. Got it. Thank you. And just last question on the capex. How is the update on t he capex? So what will be the timeline? Should we expect that it should be commercialized by Q4 all the capex which we have for the caustic chlorine business?

Yes. So I think as mentioned earlier on the call as well, we are makin g good progress with the capex and most of the mechanical completion is almost done. The pre -trials and pre -commissioning will begin. So we expect that by Q4 we will be commissioning and completing the capex.

Okay. And how much balance capex will do for second half?

So we will be doing close to around INR500 crores in the second half.

Thank you. The next question is from the line of Parth Vasani, an individual investor. Please go ahead.

Thank you for the opportunity. In the chemical segment, the capex that we would have done like for the epichlorohydrin, for the hydrogen peroxide and for the caustic soda. So what would be the total amount if you can guide in terms of the capex that we have spent or we are supposed to spend?

So the total spent would be around INR2,500 crores in the chemical segment. And out of that another INR500 crores we will be spending in the next, H2.

So additional INR2,500 crores will be spent in the next coming years. That's what you are saying?

No, INR500 crores only.

I think just to clarify what you are asking, Parth sir, INR2,500 crores has already been spent on a 120 megawatt power plant, on aluminum chloride expansion, on the ongoing caustic soda expansion, ECH expansion, H2O2 expansion. And we will be spending approximately INR500 crores more in the second half of this financial year.

Okay. Got it. And in terms of the epichlorohydrin, when do we expect to get it commissioned?

So yes, we expect it to be commissioned by Q4 this financial year.

Okay. Second question, we are also expanding the caustic soda ca pacity. And what I understand is chlorine is something which is a bottleneck in terms of because it is sold at a lesser price. So I just wanted to understand, once we expand the caustic soda, how we will be managing the chlorine considering the negative price generally prevailing in the market?

So you are right. Chlorine is a key factor in expansion of caustic soda as well. I think we have a couple of factors. One is that we have captive consumption that is also increasing from th e past. We are putting up an epichlorohydrin plant, as you know, that will consume chlorine. We have already commissioned an aluminium chloride plant that is already consuming some of our chlorine. So that will be captive support for the expansion as well . And additionally, we have very strong partners in our customers as pipeline customers. So they have been on the growth journey along with us and we truly value that partnership. So as they also continue to expand, we are confident that a large percentage of our chlorine will be consumed through the pipeline and captively.

So currently what percentage will you be consuming in current capacity and what will be post - expansion?

So currently it is close to 40% as a combination of captive and pipeline as you mentioned earlier. And after the commissioning, we expect this to go up to 50%, close to 50%.

Okay. This includes both the internal consumption and the pipeline customers?

Captive consumption and pipeline customers, yes.

Up to expanded capacity.

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

Thank you for giving me the opportunity. I have two-three questions. First is in terms of what is the current c austic realization as far as China has started and we have seen internal utilization also improving – so on that?

It is approximately around INR26,000. We are talking about ECU.

INR26,000. Is it fair to assume that INR26,000 and July was kind of a bottom out.

And my second question is in terms of sugar. So what would be our cost of production for last season?

As we said it is already been mentioned. It is at INR3,200.

That's inventory, right? Sanyog Jain Right. Inventory valuation.

I am talking cost of production?

That's the direct cost of production.

Okay. That's the direct cost of production. Got it. And in terms of timeline for the current capex for the distillery?

No. We have already commissioned the distillery. The 120KL D multi-feed distillery , It is already commissioned.

Right. And in terms of the new 2,100 TCD which we have just announced?

That is expansion of one of our sugar plants and that will be commissioned by the sugar season '24 - '25. It will be ready by October '24.

October '24. It will be ready. So recently in UP, there are other peers who said that the FCI for the grain based is not getting grains and they have shifted to maize and like. So what is our strategy there?

So our strategy keeps evolving depending on the price of the raw materials available. So as mentioned earlier, ours is a multi -feed distillery. We can process rice, wheat or maize. So depending on the prevalent spot prices, we will take a call.

Okay. And what are the yield expectation and the cane crushing expectation for the next year for us?

That is a little difficult to say. But this year, we will be utilizing the fully expanded capacity in Ajbapur, which was commissioned by, three weeks after the season started last year. So we will be utilizing our entire 41,000 TCD.

41,000 TCD entirely, right? And actually I was talking in terms of the cane area and the crushing, do we expect it higher than last year, apart from the new incremental capacity addition?

Yes. The crop looks good. So we do expect a higher crush compared to last year.

Basically in Fenesta, we have been making windows and doo rs for many years now and we are the leader in that. But we are getting into façade, which is the fixed windows like you have in airports and other multi-storey office buildings, etcetera. So for that, we have tied up with a party in Dubai to get their inp ut and their technology to put up a manufacturing plant in India. So that is what we are working on.

Right. And what will be the kind of revenue potential for the capex involved in this?

I think it's a little early becau se we are still discussing with our potential partners of what is the size, scale, scope of this plant. And we will be growing it starting with a size which is more practical and then keep growing it. So we have not yet worked out the details of what is the capex on it.

Got it. And in terms of power cost savings, what is it? Could you give your outlook there going forward and in the coming quarters by. How would the power cost savings? Because we have commissioned the new plant as well and the power prices have also gone down. So what would be the savings in that aspect?

Okay. So what we expect is that, there will be a saving in the variable cost approximately of around 10% because once this power plant comes in, it becomes critical.

Okay. For 10% improvement we can see in terms of...

Yes. Approximately, INR1 per unit. That is what we expect.

INR1 per unit, right. Thank you so much for answering my question s. I will get back in queue for further questions.

Thank you. The next question is from the line of Saket Kapoor from Kapoor and Company. Please go ahead.

Yes. Greetings, sir. And thank you for this opportunity. Sir, just dwelling to the last point, what would be the annual savings in the absolute number if you could share for the power cost, from power cost?

It would be close to around, what we expect is INR100 crores of savings when it is operational at its full capacity.

And there are two components to it. First is the new power plant and then is the renewable one also. So for the renewable segment, 43 megawatts, what is the plant load factor and average we are taking into account?

Renewable power is 43 megawatts. Actual load would be around 22 megawatts that we will receive. And what the price a t which we will receive is around INR4.20 per unit. So that is the expectation from the renewable power.

That's right. Yes.

And the capex we have done for this thermal power plant, what is the payback for this plant?

It's around 20%.

20%?

Yes.

Correct, sir. Sir, as you were me ntioning that the ECU currently is in the band of INR26,000 to INR27,000. So earlier also, we have seen historically that PVC and this caustic prices have an inverse correlation because of the reasons explained by you earlier also. But what currently is the outlook in terms of, especially for the caustic prices, the capacity built up has been, in our country domestically, there has been one million tonne additional capacity that has come up. But globally, how are things shaping up? If you could give some more color on the same.

Sure. So fundamentally, we are seeing that at a global level, the demand is not very, very robust. Of course, Europe, there are challenges in terms of demand. The war also has created an uncertain outlook. The other factor which can have implications is of course China. And China has been pushing material into the global market aggressively as well. So we do expect that in the coming quarter or couple of quarters, the prices are likely to be range - bound. And in India, yes, as you indicated, there is an increase in supply. So unfortunately there is a demand factor and a supply factor. Which is why in the short term we see prices to be range -bound. Medium to long term, we expect a positive outlook.

Sir, when we look at your capital work in progress, it has moved up to now closer to , it is INR2,357 crore . So for the coming for H2, what percentage -- what amount would get capitalized? And if you could just dwell, which projects are going to get commercialized within this financial year?

So we are saying that ECH, H2O2 and the P120, all these projects will , and also caustic 850 TPD. All these projects will get capitalized in H2.

Okay, so we have spent the entire amount?

No, so we still have to spend around INR500 crores on these projects.

Okay. But we were about to commiss ion something for the third quarter, I think. The December quarter we will be commissioning...

P120, we will be commissioning sometime in November.

The P120 plant trials have already started. So it is already running. We are gradually taking it up. So by the end of November we expect it to run to a reasonable capacity which will contribute to the power requirement for the plant.

Sir, P120, can you elaborate? I am not aware.

We are putting up a new power plant of 120 megawatts.

Okay, P120 power plant. Okay, fine, sir.

Now trials have started and we will then keep increasing capacit y gradually in a structured way based on the rules and regulations laid down for reaching full capacity of a power plant.

Correct. Sir, when we look at your net debt number, we were cash positive. So how did we achieve this for the first half?

So it is largely because of the liquidation of the sugar stocks and also receipt of the FICC dues.

The subsidy part?

Yes, yes, fertilizer.

Fertilizer, a nd that is the reason why you have mentioned in the subsidy segment that that is also carrying a negative balance?

Yes, correct. It carries a negative balance which will get adjusted against the future billing.

Okay, so for FY ‘24, what should be the debt number, closing debt number we should look forward?

Yes. Too early to give that number because it depends on government policy also regarding the FICC dues.

Correct, sir. Now, sir, coming to this, our farm, the bio seed part and the farm production business, particularly for the bioseed segment, if I correctly remember two quarters back you did mention about some policy changes and things to be put into place so that this segme nt will start contributing. So where are we in midst of the bioseed part of the story?

So as mentioned in the opening remarks, I mean, we made good progress in our vegetable seed and we are doing trials based upon the R&D. And with government permissions, we are doing extensive trials on a couple of other crops and more launches are lined up on wheat and vegetables in the upcoming Rabi season.

We see a positive outlook because our pipeline is strong and I mean, it's very difficult to s ay, depending on climatic factors and very strong El Nino in prediction for next year. But we do see a strong outlook.

Sir, coming to the sugar distillery part, my second point was I think the sale of grains by FCI was abruptly stopped. What is the status on the same and our dependence on FCI sale?

No, so we are buying from the open market and as I mentioned earlier, ours is a multi -feed distillery. So depending on the spot prices of grain, broken rice or maize, we take a call de pending on a spot basis and purchase whichever raw material is more advantageous at that point of time.

And how are the prices being sir? The raw material price basket, since it is now all from market sources?

Compared to FCI, it is higher. And we are now waiting for the revised ethanol prices both on the sugarcane juice, B-heavy, C-heavy and different grains going forward from the central government.

Sir, the prices were revised higher, sir, I think so, last quarter itself? The September month…

For the grains, yes.

I didn't get you, sir. Is it from the grain part only?

For grains, yes. They were revised for the grains. And now, again, a new revision is due which shoul d come within the next week or two weeks.

Right, sir. Sir, also in the ethanol part, I think in the liquor -- country liquor part we mentioned in your presentation that there was a INR45 crores loss we had booked because of some government po licies. Can you tell more about what was this all about? This INR45 crores is for the first half?

As I mentioned earlier in answering a question, the state government has equated the quantum of country liquor supply or alcohol supply for B -heavy and C-heavy. However, the output from B-heavy is double that of C -heavy. So, if you make a ‘X’ reservation for C-heavy, based on C -heavy, you are supposed to make a 50% reservation based on B-heavy. So, equating both B-heavy and C-heavy is not correct.

So, we have made our presentation and this will be revised or it is done and dusted?

As I mentioned earlier, the new policy for reservation has come out only yesterday. We are studying it and depending on what is most desirable for our company, we will take that method forward in the coming season which starts this week.

Okay, sir. Can you come again? Which policy, sir? I missed your point.

Okay, for this sugar season? The current sugar season?

For sugar season, for ‘23-‘24.

Correct, sir. Thank you, sir. I think the only growth part in our total segment is currently for the Fenesta. And as you were earlier mentioning also, taking into account the pillars that you are getting and also improving our product profile. Sir, say three years down the line, what kind of business are we looking up to set up from the Fenesta ve rtical itself? If you could throw some more light on the same, sir. And the key competitors in the segment?

I will just correct you. The growth part is happening in all our businesses, except fertilizer manufacturing business. We growing in all our businesses. And please appreciate, it is very difficult to give a clear picture. When you are still moving in a growth path, one cannot give any figures like this.

Correct, sir. Thank you for the presentation, sir. It is very vivid and very elaborate. And we hope for the continuity, sir. And happy Dipavali to the entire team, sir. Thank you, sir. All the best.

Thank you. The next question is from the line of Narendra from Robo Capital. Please go ahead.

Hi, thanks for the opportunity. Sorry if the question is repeated, but I wanted to kno w domestic sugar prices given there are reports of lower harvest in the season?

Sugar prices?

Yeah, domestic sugar prices, yes, right.

So, the domestic sugar prices as was mentioned in the opening remarks is between INR38 and INR40. And sugar being a controlled commodity, the government releases on a monthly basis. So, I do not see the sugar prices firming up any further going forward.

Okay, got it. And could you please mention your ethanol capacity once?

Ethanol capacity is roughly 18 crore litres per year.

Okay, 18 crores litres. And in the KLD terms?

That depends upon the raw mat erial mix being used. Be it C -heavy or B -heavy or cane juice. So, it will depend upon the mix of your raw material.

So, as we shared earlier also on the call, the near term outlook, we expect the pricing to be range bound. But in the medium to long term, we do see positive upside.

Yeah, yeah. Could you repeat that? I missed it.

So, as we said earlier, in the near term, given the demand supp ly scenario, we expect the prices to be at their current levels. But going forward in the medium and long term, we are bullish on where the prices will go.

Okay, Thank you so much. Happy festivities. All the best. Thank you.

Thank you. The next question is from the line of Pratik Tholiya from Systematix. Please go ahead.

Yeah, hi sir. Thanks for the opportunity. So, what is the chlorine prices currently?

So, it is around 26,000. Chlorine? Chlorine is negative INR5,000/T.

Chlorine is negative INR5,000/T. And this is the same number for Q2?

Pardon?

The second quarter is INR5,000/T. This is currently in the month of October?

Between INR3,000/T and INR3,500/T.

And so, this INR26,000/T that you said was ECU and not caustic, correct?

Yeah, yeah. Correct.

Okay. And the second one is sugar business. Is there any red rots sort of incident happening in our cane area also? Because some of the companies in the ir call have been mentioning about red rot infestation in some parts of UP, especially in the low -lying regions. So, are we also seeing anything on that front?

Yes, there has been red rot in our area as well. However, our cane team is taking very proactive steps and mitigati ng the red rot. And also, we are progressively changing the variety of 238 to other varieties which are less red rot.

So, what is the mix right now with respect to our cane variety? How much of our cane variety has now shifted outside of 238?

It will be difficult to give that estimate as of now.

No, there has been no announcement so far.

Understood.

However, the FRP by the central government was raised by INR10 a quintal three months ago.

Right. Right. So, is it going to be in line with that or higher than that? What is your say?

There has been no announcement so far.

And lastly, I think, Fenesta has really done well. We are now clocking almost INR200 crores of quarterly top li ne with an 18% EBIT margin. So, I am guessing our EBITDA margin will be 20% plus. So, what is the roadmap over here? Is this sort of a revenue run rate, quarterly revenue run rate now sustainable? And also on the margin front, you think this 18%, 20% sort of margin is now sustainable? So, what is really changed in this business and how do you look at this, going forward over the next two, three years?

I think I will put it this way that as we discussed, we expect growth of 15% to 20% in the Fe nesta business. Going forward by moving into new geographies, introducing new products. As I mentioned earlier, we are looking at facades. That is a new business we are getting into. This is an ongoing business. We put up two more ex trusion plants at a Kota factory, which gives us a larger number of profiles available. And we are seeing that the real estate market in India is growing. And the aspiration of people is growing. They want a better product, better quality, which gives better insulation, less dust, less noise, less heat. And this is where products like ours have a positive impact. So, we are positive on this business.

Understood, understood. That's very helpful. Yeah, that's it from my side. Thank you so much and wish you all the best.

Thank you. As there are no further questions. I now hand the conference over to the management for closing comments.

Thank you. Thank you, ladies and gentlemen, for your participation in today 's call. Our strategic investments in diversifying our product mix and enhancing operational efficiency are on track to yield results by the end of this financial year. With India continuing to grow, we are well prepared to grow intelligently across our diverse business portfolio. Thanks to our healthy balance sheet, we are well equipped to fuel our growth initiatives and drive positive change in the markets we serve. And thank you all for being a part of our journey. We thank you for taking out time during the onset of the festival season. And we take this opportunity to wish you along with your families a very safe and happy Diwali and a healthy and prosperous year ahead. Thank you very much.

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

This is a transcription and may contain transcription errors. The transcript has been edited for clarity. The Com pany takes no responsibility of such errors, although an effort has been made to ensure high level of accuracy.