Deepak Nitrite Limited (DEEPAKNTR) Q3 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Deepak Nitrate Q3, FL26 Earnings Conference Call, hosted by IISL Capital Services Limited. At the outset, I would like to clarify that certain statements made or discussed on the conference call today may be forward-looking in nature, and a disclaimer to this effect has been included in the results presentation shared with you earlier. As a reminder, all participant clients will be in listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star and zero on your touchstone phone. Please note that this conference is being recorded. I now hand over the conference to Mr. Ranji Sriwamala from IIFL Capital. Thank you. And over to you, sir.

Thank you, Pari. Good afternoon, everyone, and thank you for joining us on Deepak Matride Q3 and 9 months FI26 earnings conference call. Today, we have with us Mr. Mohlik Mehta, Executive Director and CEO, Mr. Sanjay Upadhyay, Director, Finance and Group CFO, and Mr. Somseker Nanda, CFO of Deepak Matride G-Mitred. We will begin the call with opening remarks from the management team, followed by an interactive Q&A session. To begin, Mr. Maulik Mehta will share the views on operating performance and the growth plans of the company.

Followed by Mr. Sanjay Upadhyay, you shall take us through the financial and segmented performance. Thank you, and over to you, sir.

Good afternoon, everybody, and a warm welcome to you all on Deepak Night's Q3N 9-month FY26 earnings conference call. Our result documents were shared with you earlier, and I trust you I will briefly cover the financial highlights and the operational highlights for the quarter and nine months ended 31st December 25. Mr. Upadhyay will then take you through a detailed financial review, following which we would be happy to address your question. The global chemical industry continues to navigate through a very complex operating environment characterized In this backdrop, Deepak Group has delivered a mixed performance characterized by higher volumes with transitionally subdued margins. During Q3, our consolidated total revenue stood at 1,983 crores, registering a growth of 3% on both a year-on-year and a quarter-on-quarter basis. EBITDA for the quarter increased by 16% year-on-year to 219 crores, unscoring the benefits of improved operating efficiencies and prudent cost-control measures. This demonstrates stability despite softer price realizations across select product categories. For a nine-month period of FY26, consolidated revenue stood at 5820 crores, with an EBITDA of 658 crores. While profitability during the nine-month period reflects the impact of challenging pricing conditions, Our continued focus on operational excellence and volume-led growth supported performance stability. Our domestic-to-export revenue mix remains at 83-17 during QC26, highlighting the resilience of our domestic franchise while continuing to strengthen global customer relationships. Working capital efficiency remained a strategic priority, and through tighter inventory planning, supply chain optimization, and improved receivable discipline, we achieved better cash flow management and enhanced balance sheet quality. The phenolic segment delivered a consistent performance during the quarter. Revenue from operations stood at 1334 crores, and EBIT reached 145 crores, representing a 20% year-on-year increase. Increased phenol and acetone sales volumes were driven by higher plant utilization and ongoing process optimization, resulting in better operating leverage. The advanced intermediate segment recorded stable revenue growth with Q3 FY26 revenue reaching 652 crores, reflecting a growth of 18% year-on-year and 11% quarter-on-quarter. This was driven by higher volumes with improved market penetration of key products. EBIT for the segment stood at 15 crores, reflecting this continued pricing pressure arising from aggressive Chinese dumping and global oversupply. A defining milestone during the year has been the strategic integration and ramp-up of new capacities. The commissioning of the nitric acid plant, both the WNA as well as the CNA plant in Nandesari, along with the nitration and expanded hydrogenation plant at the H, completes our vertical integration across the ammonia-nitration-to-amines value chain. This integration enhances raw material security and structurally strengthens our margins through reduced supplier dependency. It also unlocks a broader downstream product portfolio. The Positions Depot group is probably the only completed integrated aromatic to a mine player. Our long-term growth strategy remains firmly anchored in value chain integration and specialty product expansion. The MIBK-MIBC project is progressing well and is targeted for commissioning within this quarter. Our polycarbonate project, a transformational step involving India's first integrated propylene to polycarbonate manufacturing. Plant dismantling activities at Stade, Germany, are underway, marking a major milestone towards relocation to India. In the meanwhile, engineering activities, technology engagement, and site construction, among other initiatives, are progressing at a steady pace. We are accelerating our transition toward green energy by forcing 60-70% of our energy mix from hybrid renewable sources, improving energy efficiency and embedding green chemistry principles across operations. To navigate current near-term headwinds, the group is strategically prioritizing product innovation and geographical expansion, with a specific focus on our fluorination, nitration, diazorization, and amination segment. This strategy comes from a favorable shift in the U.S.-India status policy, along with a complete removal of anti-dumping beauty by the U.S. on Deepak's sodium nitrite exports. Complementing this market expansion, the group's integrated approach of leveraging in-house nitric acid production for downstream nitration and emination is set to steadily improve overall profitability. With this positive backdrop, the group expects a favorable performance in Q4. Notably, the India-EU trade deal provides Indian chemical companies with seamless access to one of the world's largest markets, Boosting global competitiveness through reduced trade barriers. This fosters long-term strategic partnerships and encourages European firms to integrate Indian manufacturers into their high-value supply chain, while also opening up important sectors of the Indian consumer base to European manufacturers for high-end products such as automobiles. EPUB is driving the group's commitment to integrating different value chains, which will increase margins, enhance resilience, and reduce our carbon footprint in both current and future investments. A strategy is guided by three core mantras, achieving the world's best quality, maintaining the world's best capacity utilization, and ensuring complete integration across the baggage chain. While cautious, we remain optimistic. Recent developments in global trade dynamics present an encouraging medium-to-long-term opportunity base. We remain focused on driving operational excellence, accelerating ramp-up of new capacities, expanding our specialty and high-value product portfolios, deepening geographical diversification, and maintaining financial prudence. I would now like to hand over the call to Mr. Sanjay Upadhyay, who will address this forum and take you through the financial performance.

Thank you, Monique. Good afternoon, everyone, and thank you for joining us today on Geek of Nightwaves, Dhanu's goal. I will now take you through the highlights of financial results for the quarter and nine months ended December 31, 2025. D&L has delivered a steady and resilient financial performance during the third quarter and the nine-month period FY26. Despite external headwinds, our strategic focus on social execution, volume expansion, operational excellence, and discipline cost management enable us to maintain stability across our core businesses. Strong capital efficiency continues to underpin our performance, with consolidated ROC at 15%, reinforcing our ability to consist of the eighth value across business cycles. For Q3FI26, the company reported consolidated total revenue of 1,983 crores, reflecting 3% growth, both year-on-year and sequentially. This performance primarily was driven by improved volumes, supported by best-stand utilization, and stable domestic demand. Our diversified product portfolio and agile operating model helped mitigate the impact of software pricing trends across certain categories. On the operational front, domestic revenue stood at 1,647 crore in Q3-FI26 and 4,903 crore for the 9-month-end in December 25. Exports revenue rate 328 crores in Q3 and 864 crores for the 9 months period. On a consolidated basis, export revenue stood at 17% for Q3 FY26. EBITDA for the quarter to 2019 crores, registering a 16% improvement compared with Q3 FY25. This growth highlights the benefits of operating leverage, process optimization initiatives, and sustained cost discipline. The EBITDA margin improved to 11% compared to 10% in the corresponding period a quarter last year. PBT is reviewed at 151 crore, representing a 12% year-on-year increase. Q3 F526 PBT includes one-time exceptional provision of 12.84 crore under the new labor code. For the 9 months and net F526 consolidated revenue is reviewed at 5,820 crore. EBITDA amount is reviewed at 658 crore and PEDS The moderation in profitability during the nine-month period reflects ongoing pricing pressure and margin compression in select product lines. We also incur certain one-off pre-commissioning costs for our new projects. As revenue scales, these expenses will be more effectively absorbed. Now, coming to segmental performance, Phenolips, for a segmental deep segment, the Phenolips business continues to demonstrate strength and stability. During the quarter segment, recorded revenue of 1,334 crores and a EBIT of 1.45 crores, reflecting a 20% year-on-year growth in EBIT. Higher cell-colymin-ephanol and acetone, better net raw materialization, finished goods margin, along with process optimization, efficiency gains contributed to enhanced operating leverage. In advanced intermediate, the segment delivered strong protein growth with Q3F526-0.652 growth, representing an 18% year-on-year growth and 11% sequential increase. Growth was given by higher volumes and improved market penetration. However, EBIT 2015 crores impacted by continued sizing pressure arising from global oversupply, residual inventory, stocking, and aggressive import competition. Finance costs for Q3 FI 26, 2011 crores reflecting higher borrowing associated with growth investments. Depreciation and amortization expenses $258.00, following capitalization of newly commissioned assets like nitrogen and hydrogenation. The company's financial position remains strong, providing adequate liquidity and flexibility to fund strategy growth initiatives, results of which shall be visible in the coming quarters. Working capital optimization remains a priority to improve inventory controls, enhance supply chain efficiency and tighter distributable management, be strengthened cash flow discipline, and improve operating cycle metrics, reinforcing overall balance sheet robustness. Our balance sheet continues to remain robust, supported by disciplined capital allocation and prudent leverage. Consolidated networks 2.5651 crores providing strong financial flexibility to support future growth and expansion. Capital allocation is a clear road, firmly anchored to our long-term strategic priorities with accelerated investments across multiple high-income growth platforms. We continued to scale key projects, including SPANET, Specialty and Coventry, Chemical Manufacturing Capacities, and Deepak Campaign Limited. Alongside MEGA Integrated Complex, establishing a fully integrated value chain from cumin to polycarbonate and other advanced derivatives. Notably, for the upcoming polycarbonate projects, specific financial arrangements and funding are at the final stage, ensuring readiness for both capital and balance sheet perspective. These initiatives are progressing as per schedule and are poised to deliver a decisive step change in the revenue diversification, margin expansion, and sustainable revenue creation. Looking ahead, while near-term market conditions may continue to be influenced by global supply Thank you very much, sir.

We will now begin the question and answer session. Anyone who wishes to ask a question, You may press star and 1 on your touch on telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Nirav Jumudia from Anvil Weld. Please proceed.

Yes, sir. Thanks for the opportunity and good afternoon. Sir, a few questions to ask. So, first is on, in one of the investor presentation slides, we have mentioned that we are in the process of introduction of new products. So, if you can say, like, how many products will be coming up? Where are we in terms of these products with the customers, The user industries or the application, and if possible, the size of revenue which companies are expecting from these products put together.

Thank you, Raj. Thanks for the question.

At the moment, we have a pipeline of about 15 products at various stages between R&D and piloting awaiting customer feedback with regards So, the largest segments in terms of applications would be in applications such as mining chemicals, flame retardants, personal care, flavors and fragrances, and polymer applications.

All right. So, are any of these products coming up in first half of SOSPY27 where some of these could be commercialized and we can see some revenue contribution from them?

So, other than the last one, which I mentioned, which is for polymer applications, which requires medium-sized specs, the others are all already made at pilot scale. The plant mapping is also done in available assets, and the production plan will align with the customer's requirement plan. So, this is going through its validation cycles, including impurity profiling and stability studies. So, as and when those things finish, which should happen in the next couple of months, we will then have a plan with regards to production and dispatching. So, many of these will come over in the next several months in a staggered manner based on the stages of approval.

Correct. The second question is on the sodium nitrite. So, we mentioned that the duties which were there earlier has now been removed. So, let's say before the tariffs in place and post-tariff, how much volume we were exporting before and after the tariffs, which has now got a fair chance to get recooked with the removal of tariffs by the U.S.

So, historically, for the last couple of years, you are referring only to sodium nitrite, right?

Correct, correct.

So, historically, in the last couple of years, when he exported to the U.S. specifically, he goes to the tune of about 5,000 of the year. And over the last eight months, this has been at a tariff overhang between anti-dumping Thank you.

And the last question from my side is with respect to the FTA with you, because what I could understand from our annual report is that our exports to Europe is substantial, close to around 46% of our channel on business. So, with the kind of product profile we are having, and the kind of opening up of you, probably from next year onwards, how do you see this opportunity shaping up for us in terms of, A, the current product, as well as expansion of the current product in terms of the forward integration? And also, you can share your thoughts, like, are we importing any raw materials currently from Europe, which earlier used to have a duty, and with this EU-FTU had a fair chance of duties getting removed?

Okay. So, Neeraj, you are well aware that the EU-India STA requires a ratification by several countries. So, what is there is a proposal and it will take, you know, whatever period of time, it takes six to eight months. It was, we believe, in terms of full classification by, I think, all the 20-something member countries that we use. Along with that, I would also want to add that whether it is the US or Europe or the UK, all of these are unmitigated tailwinds, are all positive for the Indian chemical industry, specifically also for the park. So, that said, like anything else, this was my short answer. But in the long answer, there are obviously nuances. For example, Europe does not currently have a very high tariff barrier for Indian products to go there. But it increases the opportunity for European companies, which are currently under a real malaise, to have an export opportunity to India. Deepak will also be looking forward to being able to procure some raw materials from Europe at a price, products, for example, such as cyanuric fluoride, where we are dependent on imports. But at the same time, you have a mix between this, between the discussion, the bilateral trade agreement with the U.S., which will also have a lot of products imported into India, and it will open up certain segments, which in my personal opinion, India is highly constrained on, Whether it is in the farm segment or whether it is in the energy segment, where Indian consumers tend to benefit the most. So, I'm not getting into government, but I'm talking about the Indian consumer at large really will benefit, and that will increase the production and the disposable income of all of the countries that are involved. I am not commenting on what happens to government tax and tax revenues, but these kinds of trade deals, where the benefit flows down to the consumer, certainly have the significant advantage that comes to industries such as the chemical industry, the agriculture industry, the construction industry. So, this will have a positive effect when you look at all of these things put together. If you look at only the EU-India trade deal, you will feel like the positive effect is, in my opinion, a fraction of what it will turn out to be, given the progress of time.

So, just as a last clarification, when can you express the full benefit of nitric acid into our operational number?

So, we commissioned the nitric acid plant in the middle of December. This quarter and next quarter will be the first period where we would have pretty much 100% consumption of nitric acid. And we also have expanded our nitration and our hydrogenation capacities. Now, I'm sure this question will come up later on, but we had originally, I mean, there were two points where we, you know, where there was a mistiming impact in Q3, where we had only limited control. We anticipated the commissioning of our nitric acid and our nitration assets at the same time. Unfortunately, that did not happen, and the nitrification with the ETP assets got commissioned earlier, and the nitric asset plant had some technical challenges in the last mile, so that got below to middle of December, which meant that for that period of time, we took it upon ourselves as a strategic call to ensure that we maximize our market presence, Even if it comes at the expense of having to procure raw materials like nitric acid at spot rates. Now, this meant that Q3 looked much weaker. We do believe that we have taken the right approach. Similarly, in sodium nitride, we had an original, you know, judgment in our favor in October, And we were anticipating the public announcement. But after that, the U.S. went into shutdown for about 48, 45, 48 days. And this delayed the formal announcement of the judgment. And that's why it also disrupted our, you know, sales planning as we had originally envisaged through the U.S. So now, both of these challenges are behind us, and we look forward with some degree of optimism moving forward. So I hope that, it's a long-winded answer, but I hope it also answered your question about nitric acid.

Perfect. Thank you so much, and wish you all the best.

Thank you, Neera.

Thank you. The next question is from the line of Sanjay Jain from ICIC Securities.

Thank you. Thanks for taking my questions. I have a few of them. More than first of the stand-alone business, now that we have started at least for part of this quarter nitric acid and the margin, gross profit margin or a material margin at 33.6% probably is one of the lowest we have seen in the last 7-8 years. Can you help us understand which product category where we have seen a significant margin compression? And when you see that we are staring at a favorable Q4, what do we really mean from an advanced material or a standalone point of the business? Which are the product categories which is showing some green shoots for the Q4? Thank you. Okay. So, first of all, the two biggest pinch points that occurred to us, as I said, that he has limited ability to control the outcome. One was the delayed announcement of the anti-dumping duty between the U.S. imposition on India. It's also heartening to just share that the removal of the duty, by the way, is specific for Deepak Nitrite. It is not against, I mean, it is not a removal of duty for Indian manufacturers. It's only for Deepak. But because he stipulated that the announcement, public announcement would happen imminently after the judgment was passed, and it was in the beginning of October, So, there we had our hopes up, but unfortunately, the U.S. went through its own turmoil on this front, and that affected our margins. The second point that affected our margins was, as I mentioned earlier, when we had our nitration capacities commissioned, and our hydrogenation capacities that were commissioned towards the tail end of Q2, It became the tactically sound, even though it, you know, it compressed margins in Q3, you will notice that we mentioned even in our discussion that we did have significantly higher volumes in Q3 than in past quarters. So, this was done, you know, with full knowledge that we were buying the feedstock at spot prices because we were no longer expecting to remain in the market for purchase of products such as nitric acid. So, we had no long-term contracts or quantity discounts or such that we were able to apply in our purchase. Nonetheless, we worked hard to see how to ensure that we are occupying a significantly larger market presence. But within the quarter, this did hit our contribution numbers. Finally, one last point is that for Deepak Nitra, it's a standalone entity. Most of the world, which is going through its own turbulent times, has a financial year closing in December. So, a lot of customers were also already in a depressed state in terms of their own operating activities, and they were more focused on inventory rationalization rather than anything else. All of them also have the impression that India was going through a period where there were high tariffs, uncertainty about a lot of other trade dynamics. So no one was sure about how to place long-term commitments or even medium-term commitments. You look at February, and of course the mood is quite different. And we have to see how this plays out in the remainder

of Q4 and Q1 onwards.

Sorry, I think your voice got gobbled in between. But I got the point. Malibar, but just one point on the last, the third point you said on the de-stalking from the customers worldwide, but we were able to sell a far more volume, right? So, is it really a reason for us to compress the margin? Or we place that volume somewhere else at a lower margin? Is that the point you want to drive? No, we placed that same product at a higher cost, because we had to buy the raw materials, which we were otherwise intending to mitigate ourselves and manufacture. So, our cost of goods became much higher than it should have been in a traditional situation, and instead of being restrained in the supply of our products to the market, we became aggressive in the supply of our products into the market. When I am referring to these products, the larger markets here are domestic or near domestic. When I am referring to financial year closures and inventory de-stopping, I refer more to the European and the U.S. markets. I hope this clarifies.

No, that clarifies. That clarifies.

And favorable Q4, what are we seeing in the green shoots there? It's largely this issue is getting fixed and margins coming back is what we are looking or we are looking at some green shoots even inside of demand. We are looking at margins coming back to a normalized basis because of our integration. But let me also point out that we are working closely with customers on, as I mentioned earlier, some new products. Those are already in the process of being approved. I just want to also share that whatever it is with regards to trade agreements, it is still quite a turbulent environment. So, I definitely expect Q4 to be better than Q3. I also want to be cautiously optimistic on this front because whatever happens with regards to India and the Western countries that are up for traditional markets, it doesn't change the fact that there is a significant Chinese overcapacity, and this will affect a couple of products. I don't anticipate that it affects every single one of our products. Maybe many of our products, 60-70% of our products, are not as directly affected by Chinese oversupply. But when this oversupply is there, it does affect our customers. So, agrochemicals continues to be a space where there is a marginal improvement in the outlook, but it is not a consistent improvement. It is still a little bit rocky. And places where we expect to see an uptick because of these trade agreements are places such as dyes and pigments, mining chemicals, explosives, polymer applications, food applications, pharmaceuticals, personal cares. Those are places where I expect good improvement, which has nothing to do with the Chinese overcapacity.

One question on the agri-comicallity, which was part of the article.

Sorry, I just wanted to add one thing. In all of this, of course, one thing that remains a bright spot is India's own growth story. So, any product where, such as phenol, you know, that is sold in India, continues to see robust demand, and we remain quite optimistic about the downstream also, as we are investing a significant amount there. Thank you. So, particularly on the pricing side, while we look a little more optimistic, is it more product-specific that we are looking at or we are looking to diversify or as we have spoken earlier that we are moving up in the value chain, some of those efforts are paying up? So, it is a little bit product-specific, but it's also geography-specific. So, when you look at agrochemicals, you know, you're talking about fungicides, herbicides, insecticides, seed treatments, et cetera, et cetera. So, there's a lot of different applications, and weather patterns play as much of a role as overcapacity or inventories. So, the answer will be different, you know, depending on products, product categories, geographies, and levels. When you have commentary coming out from a lot of agrochemical majors, some amount of that is also due to inventory stocking, but some amount of that is also due to what they expect to see in terms of geopolitics. For example, now in the recent couple of weeks, it seems like the U.S. is very bullish on agriculture exports to India, which has never traditionally been a large importer from the U.S. Similarly, you're seeing that there is at the same time an imbalance between what Brazil is producing and what the U.S. hopes to accommodate on the world stage. So these great tensions across geographies do continue to play out, and for us, as an intermediate supplier to these measures, the impact of that is generally seen one to two quarters down the line, Because our products are eventually going one or two steps down the line to these measures. Last one point that I'll just mention on this front is that we've also made a medium-scale investment in the hedge for agrochemicals. That is uniquely positioned because it has tremendous value integration with our chemistries. And the process that we are following is world's first. So, that basis, its carbon footprint basis, its cost, and basis, its product quality will remain unmatched in the world for this product or this product category. That will ramp up along with customer allocations on the basis of whatever, you know, contractual verses available. And that will play out in full for, you know, supplies that go on from October onwards, for calendar years 27 onwards. But it will play a role even in the first few months after commissioning.

Very clear. One last question from my side.

On the phenolic side, generally winter appears to be best for us from the production perspective, and earlier we have optimized ourselves to produce 350,000 metric ton of phenol. Have we touched that kind of capacity in this winter as well? And number two, post-Q3, we have seen a good run-up in the prices of phenolics. Should that also make us positive for Q4 on the phenolic side,

or the spreads for us, even in India, are showing that trend? Thank you.

I want to share something. Today, we manufactured our 2 million tons of phenols.

Wow. Congratulations on that.

I mean, looking back, you know, you focus so much on the months and the quarters that it's also always good to step back and look at the journey so far. In terms of spreads and cracks and all extracts versus global cracks and all of those things, we continue to feel quite optimistic about, you know, finding new spots for potential debottling, like even in our existing assets. Yes. We are seeing some degree of volatility, both, you know, on acetone as well as on phenol. Some of it may be seen as temporarily, you know, positive or temporarily negative. But I just want to clarify that this particular quarter, Q4, is always a quarter where you would expect a degree of volatility, Because China goes in for its new year, customers start looking at their purchase patterns differently, because in India, you have the financial year closing, you have a lot of capex outlays, also based on government investing in construction and infrastructure. So, this is a quarter where any answer that I give you will be outdated within the next week.

Yeah, but from the production perspective, you are hitting that peak, right?

Absolutely, no problem with that. I mean, we have gone past what we thought were peaks in the past.

Very clear. Thanks, Malibai. Appreciate all the answers and best of luck for the coming quarters.

Thank you very much.

Thank you. The next question is from the line of Arun, from Evendus Bar. Please proceed.

Thanks for your opportunity. A few questions. First, on the projects that we have started in this question, can we broadly give a direction, say, to reach, say, 80-200% utilization? How many quarters we will take and how long it will take to reflect in our SPN. That's number one. And second is, broadly in the last three years in the area segment, the plane has reduced from say 3,002 crores to, right now they are closer to say 2,400 crores of the annual

So, for all of the capacity, the investments that we have made so far, it has largely broken I think about 100-odd crores for the R&D facility, which is a strategic investment, so we don't look at operating rates there. Then you have the nitration, you have the hydrogenation, you have the chlorination, and the nitric acid investment. So, on the nitric acid investment, on the nitration, and on the hydrogenation, we are expecting to run at 100% or close enough to 100% utilization from this quarter onwards. There may be, you know, between 95 to 100, 105. That's the kind of range we look at in terms of acid utilization on these fronts. When we are referring to photochemical chlorination and chlorination, that we expect those utilizations to pick up in Q1. And when we talk about the distinct fluctuations as a titration asset, which we commissioned in May, that will have a gradual ramp-up in line with customer experience. And when we talk about MIBK, it will have a ramp-up in Q1 in a safe manner because these technologies are extremely unique. So the process that we have invested in, while it is a high-capex investment, it is probably the most efficient process in the world. And it allows us to have some downstream value-add products also, along with MIBK and MIBC. There we hope to have a reasonably quick ramp up because what we did is on MIBC, we started seed marketing even over the last four months. And we've seen a good degree of customer interest both in India as well as abroad. So, this asset will allow us to be able to permit the customers where we already have a broad degree of acceptance. And finally, on the high-pressure alkylation asset, which will come in around between June and July, that will have a ramp-up between two to three months, based on the customer requirement. And with that, we will complete the entirety of our Phase 1 of investments. And I am not referring at all to any small to medium scale, up to about 100 crores of investment, which are in the bottlenecking assets.

That's understood, Monique. Just one additional

information on this. If you can also, at current prices, what would be the revenue that we are talking for deep pollution loss on a cumulative basis? It will also be helpful. And my question on the AI segment of 3,000 to 2,500, of course, volume and pricing breakage. If you can address that also, we see.

Yeah, we can certainly drill down into that, Arun. Just to, once I can just clarify, about half of the investment that we've made, which goes into things like nitric acid production, we don't anticipate any revenue. This was always clarified as an upstream integration.

I agree, I agree, I understand.

And EBITDA improvement, a substantial EBITDA improvement into the AI business. When we refer to products such as MIBK, MIBC, and the Nitro Aromatics, I think on MIBK, MIBC, the right time to talk about it will be Q1, because Q4 is the period of commissioning. And there is an oversupply right now in the market, but at the same time, India is entirely import dependent. The entirety of the market that we seek to service for MIBK is in India. And we have what we believe is the most efficient process of converting asset onto MIBK in the world. We have to see how this plays out with regards to overcapacity in China versus our It is an integration story. I refer to revenue coming from this only in Q1. With regards to the number that we spoke about in Q3 in the advanced intermediate segment, I would say that at the very moment, substantial amount of this is because of pricing, not so much because of volume. There is some volume impact because of the hydrochemical intermediates, but there is more than that, I would say, a rising impact because of the oversupply situation in China.

Understood. On the hydrogenation, nitration, and chlorination blocks, yeah, photochlorination blocks, they already started. Any ballpark revenue on the current pricing?

No, no, just to clarify, the photochemical clearance will start toward the end of this quarter. The organization which we have commissioned will, right now it is all batch plant transfer key intermediaries with customers. But it will be more of a steady-state thing. So these two are generally looked at together. And we'll refer to the revenue at that time because we're also currently in conversations with key customers about these particular assets. So I want to give business teams the opportunity to, you know, optimistic or cautiously optimistic or whatever.

Maybe we'll get the update from you probably in the next quarter. My second question is on the EUROPUS TA. See, in Polycarp, we have very high aspiration, and Covestro is the market leader there. And probably, does this EUROPUS TA gives Covestro the slight advantage in taking over, in competing right-hand interests in the markets like India? Does it negate the India, I mean, cost benefits in India, especially in, you know, highly grace-specific products like polycarbonate?

I don't believe that it does, frankly. I believe the investments that are taking place in India for consumption of polycarbonate resin-dian compounds. When we first emphasized this project, we were looking at India's import dependency of about 2 lakh tons a year of polycarbonate resin, not even the compounds. So when Covesco exports, they generally import the compounds, and I'm referring to the resin itself that is imported. That was, I think, just about a year, year and a half ago, and right now, India has already been importing in excess of 300,000 tons. So, just within a year, our estimates of what India's domestic requirements of polycarbonate resins has changed by a factor of 50%. We are planning on coming online with this asset over the next two and a half years in an integrated fashion with propylene, phenol, BPA, and then polycarbonate. So, we believe that the resilience of this integration, as well as the investments that are taking place in India for the consumption of the resin, as well as our earlier investment also into the compounding piloting facility to work in partnership with companies such as Covestro, such as TAPEG, such as Sprintio itself, We will help us be very relevant in India's consumption of the resin as well as the compound. So we don't anticipate this or any other trade deal to really derail the advantage of having an integrated

chain in India. Right.

On Phenol also, if you see, European players are operating at a very low operating rate because they couldn't sell to the Chinese when the Chinese started their plant. So, 10% is large because it's a duty Phenol. Should we be worried in Phenol also because at least in Phenol, the market is large in India and infot is still coming.

I don't think so, frankly speaking. India already imports a certain degree of phenol from ancient countries, where it is made more pass-effectively, and it is applied here. I mean, if a place as close to India as Singapore decided to permanently shut down its, you know, manufacturing, I don't anticipate that the removal or reduction of an import duty, and by the way, Singapore is a duty-free import into India, and if, sorry, I am mistaken, it is a 5% import, but it is negligible, to be honest. If it was, you know, if it could have survived operating in Singapore conditions by exporting to India, it would have. I don't anticipate any inflow of any substantial amount of phenol coming from Europe to India. However, I do anticipate with all of these shrink rate agreements and all that and improvement in the consumption of phenol itself in Europe, where there will be a gradual recovery of downstream consumers such as automobiles. So, when that happens, this is good for everybody. At the same time, the way that Chinese investments have been taking place over the last couple of years, now are starting to alarm even the Chinese government. So, they are putting all sorts of inflation control measures, deflation control measures in case. So, what happens with regards to trade deals is to be looked at, in my opinion personally, from the chemical industry, in pretty much a positive light. What happens with regards to China's attempts to rein in its deflationary cycle because of its overcapacities is to be looked at in an entirely separate lens. And there is no real reason to conflate these two.

Any Chinese capacities coming this year? New capacities coming this year in Shino?

Last year, a year before that, a year before that, this year, next year, every year. I know, right? Traditionally, we don't, India has not traditionally been in the past, even with the kind of overcapacity, even with the physical proximity of China to India. India has not really been the destination for Chinese.

No, but it does depress the spreads, right? If there is a suddenly higher capacity there, and people who are selling to Chinese couldn't sell there.

I mean, look, we may end up finding some volume coming. It's an ocean, right? So, material flows happen the way that they happen. We have to be resilient no matter what, but I just want to share that this is not a new phenomenon. This has been taking place since we commissioned the project, since we conceptualized the project, and it will remain always. In the meanwhile, we have to see whatever we can do to be as internally resilient as possible. Even in the last couple of months, there have been announcements about Far East station capacities shutting down permanently this year. There is in Singapore an announcement of a shutdown, in the Far East an announcement of a shutdown, in China the announcement of capacities coming in, capacities that may be constrained because of the government's campaign. In Europe, capacities being brought down permanently. So this is a very dynamic situation.

Yes, please. One book teaching presented by Kandai, Lai, or Kandaji, we have seen the standalone revenue, reported standalone revenue, and reported TI segment revenue closely matching in the past, but up late in the last two quarters there is some difference, small, but still this difference is keep increasing. So, how should we, what should be the reason for this, sir?

Difference in what?

Difference in reported standalone revenue versus AI segment revenue. And as well as the EBIT.

This is because of the inclusion of people can take their relative business into people's right trade, they are different.

But Sajaybhai, segment revenue is lower than the standalone revenue and debit is also lower than the standalone EBIT.

So, there are other incomes also because of that.

Okay.

So, segment EBIT includes other income for the respective segments. That is what you are saying? We will interrupt that, whereas, sir, this is not there in a bit.

If it's okay, I can call you on Monday and discuss it.

No problem, sir. No problem, sir. We will do it separately. Thank you very much, and Malik, thanks for answering all the questions, all of us.

Thank you, everyone.

Thank you. The next question is from the 9 of Kishar from Omega Portfolio Advisors. Please proceed.

Yes, Dr. Nusa, and thank you for the opportunity. I just wanted to know the new products that are coming up, like 10-15 products, firstly the competitive scenario in India, and in that specifically the application of mining and explosives, and the polymer ones. Sir, are right to be in this segment. Your view on that, sir?

On the mining, explosives, and which segment?

Okay.

So, first of all, on all of these, we do have an extremely strong right to win because we manufacture all of these in an integrated fashion. The teams are already working along very tightly along with customers to see how there is a significant value addition that Deepak is able to provide to customers. So, for example, one of the applications which has turned out to be a significant one in terms of volume in India is the exposure segment. So, products such as tri-nitro-goluin, which seem to be in very high demand all over the world for their mining applications as well as their defense applications. So, Deepak is a strong partner to these applications and these customers. And there's a very high degree of, I wouldn't call it dependency, there's a very high degree of collaborative partnership, where the technical teams of both sides work hand in hand to see how to improve the performance, to make it meet and exceed military grades at global standards. So, this is something which has actually transpired over the last year. We expect to see the outcome of this over the next three months, six months, whatever, as it picks up, because the kind of investment that's going here is very major, not at our end, but at our customer's end. In terms of other mining chemicals, as I mentioned, we already started seed marketing products such as MIBC, and that has also been received very favorably, but we've been waiting for our main plant to come up so that we can start manufacturing volumes in line with customer demands. So, we will see how that progresses, and I should have good feedback to you, but rest assured, the market across geographies is looking forward to Deepak value and volume addition here. Finally, when it comes to certain other segments where you have energy, things like heat treatment and things like that, again, we are working along with customers. We were more bullish a couple of years ago when global industrial policy also encouraged more of these investments. But lately, between the U.S. and other regions, they have deprioritized these. That said, our product quality is excellent. It's been received well, and there are still good customers in these segments, not so much yet in India, but in other regions, and we're working with them. So, this is something that we expect to see landing in somewhere over the next six months. Until then, these will be small-scale volumes.

Fair enough, sir. And, sir, this Chinese white ribbit removal and the Chinese anti-revolution stand, so there are some companies, even from India, supplying intermediates to global giants. They said that the prices have improved, adjusting that white ribbit thing. Do you see that for our product basket?

Thank you. Among you will also get their 5-year strategic roadmap, I think the 15-5-year plan. Let's see how much it features into that. Until then, these are all conversations which are more intent-driven rather than on-ground reality.

Sir, on the phenolic front, the major laminate players in India have been increasing their capacity and major companies' capacities are on-chain as well. So, do you see a place where, you know, you might go for a phenol de-water making or some capex in case if the polycarbonate plant, you know, gets a little extended?

Yes, we continue to remain vigilant about departing opportunities. Even right now, we are seeing how we can do a little bit more, a lot bit more, even on the existing site. But in the meanwhile, to be very clear, the second Sino plant that is coming in will have some amount of its product being consumed internally for polycarbonate, and some amount of it will be placed outside for market sale. So, we expect to remain as relevant as a percentage of India's consumption as we are right now. So, if the current, you know, phenolic's consumption in India's requirement is, I'd say, I think, 55 to 60 percent, we're working hard to ensure that it remains that moving forward also. I don't want to speculate, but in, you know, in the Q2 console, I had found it quite upbeat Let's talk about Q3 performance. You can assume that the delta between how a beta was and what it turned out to be would be an accurate reflection of the gap between having our own self-consumption versus buying it as spot rates. So, the rates that we ended up buying, you know, these raw materials goes obviously higher than we would have procured if we were not investing in our own asset and if we continue to buy large volume risk discounts and contractual agreements in place.

Fair enough, sir. And, sir, in the polycarbonate business, we are working with…

Sorry to interrupt, sir. Fair enough, fair enough. Please rejoin the queue as there are more participants left in the queue. Thank you. The next question is from the line of Pranita from Morgan Stanley. Please rotate.

Hello, sir. Thank you for this opportunity. I have two questions, one on advanced intermediates. So, taking into account the anti-temping duty withdrawal as well as the U.S.-India deal and the EU deal, Could you give us some color on the outlook of this segment going forward?

The outlook of the segment 4, the advanced intermediate service for dehydrated.

Advanced intermediate would be better.

So, as I mentioned earlier, we are cautiously optimistic. Q4 will be better than Q3. Q4 will also be better than Q3. Q4 will also be better than Q1 will continue in that positive direction. Q4 will be better, Q1 will be better soon.

Sir, on the follow-up on the initial question in your answer on the food industry, I think that the amount of the current exports that we do to the US in terms of food industry, as you said, around 5 KTPAs, what we used to do a few years ago?

No, no, no. I said for the last few years, we've been doing 5 KTPAs. It was an anti-dumping duty even when there was a 50% reciprocal tax on India. So the anti-dumping duty was specific on sodium nitrite and the reciprocal tax was on all Indian exports to the U.S. We were operating in a regime where there was about a 100-506% total gap between the, you know, ex-factory price here and the price within the U.S. for defox sodium nitrite. That will be significantly reduced now because the anti-numping duty has been reduced from whatever that 45-48% was to essentially zero. The countervailing duty continues to remain as it was, more or less, I think 3-4-5%, something like that. And then you have the 18% reciprocal duty as against the 50% reciprocal duty. So the data, as you can see, is down from about 106%. So it is certainly heartening use for Deepak Nitrate in particular. And we're still seeking customers to understand, you know, what the near term and the medium term looks like, both in volumes as well as in value.

Thank you, sir. That was a detailed explanation. I had another quick question on phenol. Does the company get a premium pricing to the benchmark market pricing on phenol and azotone?

The answer is not universally yes. In some segments it does because our quality is superior and 100% it is superior compared to the co-mingled phenol or acetone that is imported into India. We have also, of course, recent development has been that we have also started selling pharmacopoeia-draged acetone. Small volumes. This is the beginning and we see how to ramp this up moving forward. But in terms of the premiumization of the product, it is a very relevant one. And in some segments, I would say that our phenol is over-spec, so we don't really get any value premium for that. The premium that we get with regard to our physical proximity to the customers, our ability to supply to them in different packaging types, drums, or tanks for IBCs or those kind of things, and as well as having a really strong customer relationship and a dealer network. So, the premium that comes is the premium of convenience, in most cases, and in some applications, customers do pay a justifiable premium because they require a higher quality, and we supply a higher quality.

Thank you, sir. That was super helpful.

Thank you.

Thank you. The next question is from the line of Rohit Nagraj from 361. Capital, please, please.

Thanks for the opportunity. First, quick question on polycarbonate facilities. So, based on the current status of the project, when is the facility likely to be commissioned?

Hi, Rohit. Anticipated timelines. Plus-minus couple of months, it is basically aligned with that. I think December is what we had. Sorry, December 2017. My mistake, my mistake. I am getting lost in these days. But December 27th is when we have talked about being on stream. One second. Sorry. December 27th. If there is any delay on that, we will let you know. But so far, all the activities with regards to site dismantling at Shrade as well as site construction work at H. Both of those things are progressing. This is a very delicate execution where you have to get those assets here properly and meanwhile you have to have these assets built here and you are doing this in partnership with the equipment and technology suppliers where they will also be Thank

you very much,

everyone, and welcome to the Q&A, and welcome to the Q&A,

and welcome to the Q&A, Along with the upstream propylene at PLM, Petronet. So, that we have D-linked from the polycarbonate asset. If they all happen along the same time, no problem. If there is a misalignment also, we have worked with the assumption that there will be a

misalignment and we are going with that production schedule.

And second question is on the advanced intermediate. So, given that probably some products where there is continuous oversupply and because of which the pricing, margins are under pressure, are we recalibrating some of the product plates to focus more on better margin products or something new where the valuation can be there? Thank you.

So, while we are doing new products, we prioritize on the assumption that we need to see how to maximize in line with our assets which have been debauched, like the new investment that has come in, we have a familiarity with the market, and we have a nitric acid plant being commissioned, and our anticipation originally was that all of these are going to happen around at the same time. In fact, the nitric asset plan would be commissioned a few weeks earlier than the nitration assets. So our first priority and target was no matter what happens, let's make sure that we are being aggressive with market presence here. Even if it comes as come short term, price drops because we want to be significantly higher in line with our upstream investment. That was a plan. It was a good plan, unfortunately, because Nitric Assets got delayed in its commissioning. Even during that period where it was being delayed, we did deliberate on this, and we believed that the right thing to do was to remain the course, continue to see how to ensure that we are aggressively utilizing our recently commissioned existing assets, place the product in the market, even if it comes at a short-term impact on price.

Sure, that's helpful. All the best, and thanks.

Thank you.

Thank you. The next question is from the line of Senil JN from Ambit Capital. Please proceed.

Hi, sir. Thank you for the opportunity. So, I just have two questions. So, the first one is, can you let us know the

APEX outlay for 26 and 27?

2,500 crores.

2,500 crores for FI 26.

FI 26, 27, not 26, 26 is already ended. So that is around 100 crores pending, so around 1,200, 1,200 crores. Okay.

Okay, understood. And the second question is that if

we see the phenol spread, they have declined sequentially, but if we see the gross margin of the phenolic business, then the gross margins have improved by 150 bit sequentially. So, can you help me understand the disconnect The spread that you are referring to are the international indexes. Yeah, and what cracks you refer to. And in terms of our margins, one element of that is that in India, there is an increased pressure also on suppliers, So, we have been able to see that our raw material procurement and our FG pricing, the cracks there are slightly different compared to global cracks. And secondly, there is a value add that comes from increased capacity utilization, which allows you to iron out more and more of the potential inefficiencies that you consider into what you calculate as a crack in other companies.

Okay.

So, what will be the utilization rate for the phenol business?

I think we are at a good, significant utilization rate. We are trying to work through some debottleneck exercises, and we are trying to align that in time with what we would traditionally have as shutdown periods for regular inspection of things like boilers and all that. So, there's no specific number I can give you. That number passed a long time ago.

Okay, okay. Understood. Thanks. That's all from my side.

We have some room between where we are and where we can be. And we continue to invest in other opportunities for the debottled making.

Understood. Thanks. That was quite helpful. Thank you.

Thank you.

Thank you. The next question is from the line of Krishan from GM Financial. Please proceed.

Yes. Hi, sir. Thank you for taking my question. I'm not sure if you have already answered it. So, sorry for the repetition.

I just wanted to understand a couple of things.

First, what has led to the delay of close to two years in commercialization of our MIBK and MIBC project?

Krishan, first of all, it hasn't been a delay of two years. There has been a delay, no doubt about it. We honestly, if I'm being very frank, we attempted something which generally is not practiced in the chemical industry. So, worldwide, I think we would be the only chemical company in this kind of chemistry We decided to go ahead with a divided wall column, saying that India is inherently disadvantaged against places like China when it comes to energy cost, as well as energy quality in terms of power and the steady state availability of energy. So, we went ahead with a technology which is new to this space. We put a lot of our own engineering hard work into that. And in the construction of this technology, there were a lot of hiccups that took place. Luckily, they have been ironed out, but it ended up taking longer than it should have. In line with that, what we hence therefore did was we started street marketing of the downstream of MIPK earlier. So, this was one of the areas where we had a delay. On the other hand, the second phase that we had a delay is where we said that, look, there is a Chinese overcapacity, there is a situation. While the plant is taking, it's time being constructed with these technical hiccups. What can we do with regards to further optimizing on certain things like this? Catalyst. So we've been working to see how we can improve on that front, improve the recyclability, improve the cost, those fronts. Our original schedule was it was ambitious.

Okay. Perfect. So, I think I understand where you are coming from. It's just probably technical delays, but it could have been helpful if, you know, or probably in the future it would be helpful if you could probably indicate that, you know, this is probably a tentative timeline, not the exact timeline, maybe. So, you know, that way there is some bit of a buffer for building in those numbers. So, that was one point suggestion. Secondly, Malibai, you mentioned that in the AI segment, there's a pricing pressure which has led to kind of a subdued performance. So, does that mean that your volume growth could have been almost like similar to 20% YY growth that you have shown in the AI segment this quarter?

I want to just clarify, I think partially the pricing pressure and the margin pressure, to be completely honest, were a little bit self-inflicted, as I mentioned earlier, because we tried tactically to be excessive in, you know, placing our product in the market. That would allow us to also ensure that, as usual, if there are any technical hiccups or this and that, in newly commissioned plants, they get ironed out, you know, as you're making it, ensuring the quality is the right quality, placing it in the market. So, some small challenges, for example, would be things like the ETP running as efficiently as it needs to be, product being supplied in drums versus tankers versus other SKUs. So, some of these things get ironed out when you commission, and we decided to be a little bit aggressive post-commissioning, even before the upstream integration was commissioned. So, that is where we ended the quarter. If I look at this quarter and the next few quarters, our job will be to ensure that we maintain our market presence now that we have our upstream integration. And we see whatever we can do to improve the prices where it doesn't look like as a key supplier we are in such a hurry to push. The volumes are there. We were maybe overexercised because we wanted to ensure that, you know, our quality matches. And, you know, even if it is with a discount, this and that, now the customers are satisfied with the quality and the consistency of our supply. We work with them to see how we can, over a period of time, optimize on pricing. I want to clarify that this is not something which is across the board. This has been in certain products. Key amongst these, for example, would be a product called Paranitrotol, which is made as an isomer, and it was anyways a soft market. I think by increasing our production and supply to the market, We may have softened it a little bit more. We will work to see how we can improve the margins. Over and above the margin expansion that comes from the integrated raw material.

And lastly, if I may, so, have you started manufacturing, you know, BTA from BTC, and consequently, you know, have you started using the nitric acid in-house? So, at which stage I'll be, and, you know, will those benefit our AI margins to improve going forward?

Okay. Krish, just to clarify, BTC is made by the photochemical halogenation of toluene. BTF is made by a halic replacement of those three chlorines into three chlorines. So, there is no nitric acid consumption there.

However, the nitric acid consumption is made by the photochemical halogenation of toluene. And the nitric acid for the other reactions, let's say probably meta-amino-menro-dryphoride, MLBTS, you would use that there or maybe before creating ClearSnap somewhere, or for the other products also. So that was the whole question.

Okay, first of all, amazing clarity on the product profile. I really have to commend you there, Krishan. And the second point that you mentioned with regards to BTC to BTF, as I mentioned, I think, a couple of questions ago, was that this will come online in Q1. While the asset for fluorination has been commissioned, I think, about a year or a year and a half ago, there were challenges with regards to getting the right quality of the BTC. I hope that, you know, as we're speaking right now and in the next month, those gremlins will have gone out of the system. And from Q1 onwards, we anticipate either BTC to BTS or other products which have the exact same chemistry. So, if you have solvene, you would just replace solvene with something else. Those will feature in, and they will continue to have the nitration reduction and calcium effect also being consumed for the same thing. So, we have a degree of multi-product flexibility. Same process, multi-product. And nitric acid is something that we have been already manufacturing from the middle of December onwards, and as I speak, I think about close to about 100% of our requirement is already made ourselves, 100%, and there is, over the next couple of months, we're still seeing that there are opportunities to be bottling both the nitric acid as well as the nitration acid.

Fair enough, sir. Thank you so much for patiently answering my questions, and wish you all the best. Thank you.

Thank you.

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

Thank you very much, and I look forward to speaking with you for the Q4 results conference call, and every opportunity to speak to you in the interim. Thank you.

Thank you. On behalf of Deepak Nitrite and IISL Capital Services Limited, that sent you to this conference. Thank you for joining us, and you may not disconnect your name. Thank you.