Vishnu Chemicals Limited (VISHNU) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Vishnu Chemicals Q1-FI27 Earnings Conference Call, hosted by NK Global Financial Services Limited. As a reminder, our participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. If you need any assistance during this conference call, please signal for an operator by pressing star and then zero on your touch-tone telephone. I now hand the conference over to Mr. Arya Patel, M.K. Global Financial Services Limited. Thank you, Anubhajitha.

Yeah, thank you, Farah. Good morning, everyone, and welcome to the Earnings World of Vishnu Chemicals Limited for Q1527. I would like to welcome the management and thank them for giving us this opportunity to host them. We have with us today Mr. Siddharth Charupuri, Joint Managing Director, and Mr. Hanumanth Bansari, Vice President, Finance and Strategy. Before we begin this call, I would like to point out that the discussion during this call may contain forward-looking statements reflecting the company's current view of future events and their potential effect on the company's operating and financial performance. These statements involve uncertainties and risks which could cause actual results to differ. The company is under no obligation to provide subsequent updates to this forward-looking statement. I shall now hand over the call to the management for their opening remarks. Thank you, and over to you, Mr. Siddharth.

Thank you, Sebeli.

Good morning. Thanks, Aryan. Good morning, everyone. And welcome you all to the first quarter earnings, FY27.

We are pleased to report a good set of results for the first quarter, continuing the momentum we've built during the previous financial year. Despite an uncertain global environment, we believe we have delivered over 20% year-on-year growth in both operating revenue and FAT, reflecting the underlying strength and resilience of our business. Geopolitical and logistics environments, however, remain challenging at this current tension. While we have not experienced any significant supply disruptions, ocean freight costs have increased sharply amid the ongoing geopolitical tensions in West Asia. We believe such levels are unsustainable, and we expect by trace to gradually normalize over the medium term. Against this backdrop, our diversified geographic presence continues to serve us well. During the quarter, our revenue mixed to approximately 45% domestic and 55% export.

Coming to our individual chemistries, in chromium, we continue to strategically shift

our product mix towards higher value-added product derivatives compared to base speciality chemicals. This transition contributed to margin improvement during the quarter and allows us to participate relatively less competitive product categories. Our Valium business continues to perform consistently with operations running at opting capacity in utilization. We are further investing in our backward integration which should improve raw metal security and enhance product quality for our customers. We are also encouraged by the progress in strontium business and expect the business to deliver value in the remaining quarters of the year. In South Africa, we are progressing with multiple activities required to restart operations including refurbishment, engineering and stability as a sense, recruitment, contractor mobilization, and we expect operations to commence during second half of this financial year. Another important initiative in our continued investment in renewable energy and cost efficiency, we are planning to add approximately 20 megawatts of solar power capacity, which will increase our solar power generation capacity nearly six times from the current level, whereby the average power cost will come down significantly over the years. Another important array department, looking ahead. We have multiple growth levers across the business. Upcoming capacity additions in new specialty chemicals further backward integration in Bayesian. Scaling up of strontium and South African operations are expected to support our growth over medium term despite the near to medium term headwinds for global and domestic market due to West Asia crisis. Our focus remains on being the lowest cost producer in the chemistry to operate. And disciplined execution that will lead to deploying capital in value-assertive opportunities for long-term value. With that, I will now hand over to Hanuman to kick you through our financial performance.

Thank you, Mr. Siddharth, and good morning, everyone. Let me now take you through the consolidated financial highlights for the Q1FI27 results of Vishnu Chemicals Limited. On a consolidated basis, the company reported operating revenues of 433.4 rows in Q1FI27, compared to 346.9 rows in Q1FI26, a growth of 24.9% Y on Y. The gross profit for the quarter stood at 193.9 crores, compared to 158.2 crores in Q1 FY26, a growth of 22.6% Y-on-Y. Abitda stood at 65.5 crores in Q1 FY27, compared to 55.7 crores in Q1 FY26, a growth of 17.5% Y-on-Y. EBITDA margins stood at 15.1% in Q1 FY27, compared to 16.1% in corresponding quarter last year. The profit after tax for the quarter stood at 39.6 crores, compared to 32.2 crores in Q1 FY26, a growth of 23% Y-on-Y. PAC margins stood at 9.1%, compared to 9.3% in Q1 FY26. On a sequential basis, the performance moderated a bit. Due to maintenance shutdown taken in our WISAC facility during the quarter. Overall, we are happy to start FY27 on a positive note with healthy year-on-year growth metrics across three financial numbers. With this, I conclude my remarks, and now we can open the floor for Q&A session. Thank you.

Thank you very much, sir. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star followed by 1 on the touch-tone telephone. If you wish to remove yourself from the question queue, you may enter star followed by 2. Participants are requested to please use only handsets while asking a question. We will wait for a moment while the question queue assembles. The first question is from the line of Sarger Jejpani from Phillips Capital. Please go ahead.

Yeah, thanks for the opportunity. My first question is, what is the reason for the sharp correction in the median segment margins? The margins have just dented sequentially and YOY. And what are the sustainable margins in the median segment?

Could you please help us with that? Thank you, Mr. Jetwani.

Answering your question, well, our vegan business is progressing as per the business plan. And, you know, also the, I mean, with that being said, the EBITDA margins are not impacted in the quarter gone by. There was an one-off expense, which was acted in, where the bed-eye prices were retrospectively charged for the last two years. It was an adjustment. Thereby there was a one-time impact for the last quarter close to 8 crore rupees.

This will not be a going concern.

Yeah, good to hear that. And what's the sustainable margins of this segment?

We remain to be very positive, you know. I mean, the barium carbonate, you know, 70% of the production is exported. And also, you know, one of the byproducts which is coming sulfur, even the product value has gone up over 300-400% in the last few months. So, the blended realizations have improved, and will continue to improve, because for both the products, bade in carbonate, sulfur, bade in sulfur, sodium sulfate, the demand environment remains robust. I think we believe the EBITDA margins will continue to remain at 25% moving forward.

Yeah, good to hear that. And secondly, a couple of quarters back, European Union did announce a higher ADD on the Chinese vendors on the barium carburet. Has the benefits of that started to flow in? Any quantification of these benefits? Can you share?

It's already visible in the EBITDA margins. It's hard to quantify them segment by segment, region by region. But we always look at the vendor realization and overall product mix. Ideally, to achieve a 25% return. So, again, you know, it's always based on the marketing plan and the volume allocation in the various regions. So, we go by that. We are not focused on one particular continent. We look at it a lot more broadly, domestic, U.S. market, Latin America, Far East. And generally, how the defined environment is there for these particular products, because most of them are linked to infrastructure growth and real estate growth, in those ways.

Yeah, what I was trying to understand is basically the number of inquiries that you may be looking at or may be hearing at, and, you know, any benefits. Two sides are visible. I am not asking for any dissection here, the bifurcation, but...

The business is already captured in the numbers, let me put it that way. So we have just, I mean, it had added 4-5% margin on top of the regular pricing what we see in other markets. And that we really will continue. However, there is an headwind in terms of higher logistics cost. For the current quarter, which we are trying to see how much we can pass on and how much we should absorb. So that remains to be a little bit of a challenge that is more short to medium term rather than medium to long term, I would say.

And third is that, what was the revenue from the strontium carburet during the quarter? Would you please help us with that number?

25 crores was the revenue from strontium for the quarter gone by.

Yeah. Okay. And what's the pre-cost and the first contain of revenues?

For, I mean, as a business as a whole or?

Consolidated. Yeah.

So, the quarter gone by, it's about 9 to 10 percent is the logistics cost, but it is going to change quite a bit for this quarter. It could be upwards of 20 percent, depending on day.

Yeah, and last question is our tax rate is slightly elevated since last couple of quarters.

Do we see some normalizations here going forward? So, the tax rate in this quarter was 28%, precisely about 28.05%. So, on an average throughout the year, last year, FY27, the tax rate was 27.17%. This is in line with our tax regime that we follow.

I understand. Yeah, thank you.

I'll call back in the tube for any other questions. Thanks a lot.

Thank you.

Thank you. The next question is from the line of Rohit Sinha from Sunivy Securities. Please go ahead.

Yeah, thank you for taking my position, sir.

So, on the standalone side, good to see that our EBITDA margins are gradually improving, but in this quarter, we have some shutdowns also. So, uh... I just wanted to know if you can help us with either volume or value, what kind of clear was impacted because of this shutdown, and if that would have been there, would it be a better, furthermore improved margin on the business?

Good morning, Mr. Rohit. Thank you for your question. Yes, your observation is right. Overall, the chromium business performed better in this quarter compared to the quarters gone by. The margin improvement in our standalone chromium chemical business was because of two trends. One was the blended realization for the business improved over the quarter, and that was due to the strategic shift that we have decided to take to sell more of higher value-added derivatives. Such as chromic acid or chromatide green, over our base speciality chemicals such as basic chrome sulfate or sodium dichromate. So, this has changed the entire product mix for chromium as a standalone business. And the higher value added derivatives contributed to nearly 50% of our sales in the quarter gone by, as compared to, say, 40% in Fi26 as a year. So, you can observe that, you know, we have improved our overall sales in chromic acid, chromo-oxide gene, and other variants of chromium derivatives. In fact, I would like to add on this that, though we took a maintenance shutdown during the quarter, We still had inventory that we could sell throughout the quarter and that did not impact our overall revenues as a whole in tandem on business.

Got it.

So, coming quarter we will have further better stop line and these margins should sustain before any benefit coming in from that South Africa mine.

I would request Mr. Sadat to answer this question for you.

Yeah, well, we remain positive for H2, FY28. Basically, I mean, we are expecting the chromatural benefit to fall in from the second half of this year. For the current quarter, I mean, there are certain headwinds related to higher sea rates, which we are finding it a bit challenging to pass on completely. But we are working very closely with the customers and seeing what we can do on that front and also Looking at product mix, product mixes where, you know, sea freight, you know, there is a marginal impact of sea freight, where we are looking for higher value added products for the sporting market.

Okay, okay.

And just on this power cost side, as indicated that OTA is saving some bit of... On that, so just wanted to understand, on an annualized basis, what sort of savings we could be making on this?

Like, currently, we are operating a 5 megawatt solar power plant, out of which, you know, the realizable power will be close to 55-60%, and from a 20 megawatt, similarly, we'll be able to rest 11 to 12 megawatts. I think saving will be close to 15-20% because, you know, 100% we are not in a position to use for our power because of the AP Chalangana rule because certain amount of power should be availed from the discount. But still there will be a significant savings. Would not be able to quantify at this venture because we need to see the output and it will be gradual.

Got it. Got it.

And sir, on the medium side, any, I mean, we have seen strong top line. So, it's a volume increase, it can help you, or the pricing relation where we have been there?

Both, actually. I mean, everything is going as per the budget in terms of production as well as the sales planning. Things will remain positive, and we expect it to grow between 20% in the medium deficiencies. Also, at the R&D level, we are looking at what other value-added products we can derive from in the near future.

Okay. And that's it from my side. Thank you.

Thank you so much.

Thank you.

The next question is from the line of Nirali Gopani from Unique PMS. Please go ahead.

Yeah, hi. Thank you for the opportunity. So, Sarah, to clearly explain the reason for the margins impacted the barium for this 8 crore exceptional item, but when I look at barium and strontium combined, it combined be able to deliver a 25% EBITDA margin, say, from the next quarter onwards, because you mentioned that barium is at 25%.

That's right. No, not on a combination. So, I'm not, we are talking about premium. As an analyst, Trontium, again, currently, you know, we have achieved the volumes, but not the targeted EBITDA. So, we remain EBITDA positive at the moment. Let me put it back to it. So, we need to ramp up volume, improve the yield, and so on. I mean, we remain positive in Trontium, probably by end of this year, we will get those EBITDA levels.

Given the traction from the customers.

Okay, so to be clear, for the remaining part of this financial year, when we do console minus title, the margins will still not reflect the complete impact because of some negative impact from strontia.

It was, let me put it this way, it will still remain over 20%

for

the console, you know, I mean, consolidating, I mean, removing stand-alone, combining B&M and strong share, it will still remain over 20%.

Perfect, very clear. And are we still confident about DMSO and ChromeMetal starting to contribute from next financial year?

We do. I think as per the plan, I mean, the construction as well as, you know, implementation of the equipment is progressing. So, we remain positive that we'll be able to start commercial production by next financial year.

Perfect. And just one last clarification. So, with Chromium, you know, the EBITDA margin improving on that side of the business and B&M insurance. So, next financial year on a consolidated level, can we look at a 20% EBITDA margin? Because you're very confident on growth part of the business, just on this margin part.

Let me throw some light on the business, then I'll come to the number part later. What we are going to see is... More visibility in terms of business. In the coming months, you're going to enter into a long-term supply agreement for one of our key derivative chromoxide green to a European client. This will bring a lot of visibility. To our volumes as well as margins moving forward. And this will give us a lot more leverage in terms of product mix, what we want to take it up in the quarters to come. Also, at the same time, this is more, I'm talking more on the upstream side. And on the downstream, also the second half, from the second half of the year, we are expecting the crow mode to come in and it will definitely improve the margin. Margins will improve on not just on account of downstream, benefits coming through grow mode, also through upstream product mix improvement. So with that being said, yeah, we will be, very soon we will be achieving the 20% margin. Will that be next financial? Yeah, I remain positive to that.

Perfect. Thank you for answering my questions. Thank you. The next question is from the line of Shivam Gupta from Trinetra Asset Managers. Please go ahead.

All right. Thank you for the opportunity.

I want to know, like, stonium audio mainly coming... Why is it not clear, Mr. Shivam?

Can you hear this in loud? Is it clear now? Yeah, thank you, sir. Thank you, sir.

Initial sodium audio mainly from inter-customer or expert. Also, application is the strongest, where the demand is coming strongest from Nanget, Ceramic, or other.

Sorry, I could not get your question. Can you repeat, please?

The initial story and order may be from internal customer or experts. Also, which application is seeing the strongest demand? Magnet or...

Mostly, flexible magnet.

Sorry? Flexible?

Magnet. Magnet customer.

And because of Patna's plan was short around three weeks during this quarter, what was the impact on production and revenue?

There was no impact. The impact was positive because we had some carry-forward stocks, which values have increased, and that didn't really impact up margins. Also, given the capacity, what we are having, we were able to cover up the volumes lost during the maintenance period.

Okay, that's it from my side. Thank you.

Thank you. Participants with questions, may please enter staff, followed by one. The next question is from the line of Sudhir Beda from Beda's family office. Please go ahead.

Yeah, Siddharthji, good morning, and congratulations for continuously declaring the good results. Thank you for that, and my questions are like... Can you throw some light on your mining operation? I believe that the processing plant and mining together will add substantial EBITDA to our chrome business. So, can you throw some light when it will happen, when the first consignment from the South Africa will arrive in the plant so that the forward integration can be done?

Good morning, Mr. Stude. Thank you very much for your question. I did update in my opening note that, you know, currently, multiple activities have been taken up, including stabilizing the asset, as well as engineering and republishment of the asset, and we are currently working with the contractors to mobilize things up. We are expecting the production to start any time towards end of this month. With that being said, Volumes will start coming from the second half of this financial year. The mining activity is progressing very well. We are currently working on improving the wash plant. And how is the quality of the chrome ore? It's as for what we are using, because we have used material from this mine in the past. We don't want to be in any challenge. Okay, so from the second

half of the year, when we start getting the chrome ore from our own mines, what could be the improvement

in our gross margin? It's very hard to, you know, comment

on it now because we need to, we have to go by Amsterdam's pricing on where the market is, you know, in a few months from now. But I can tell you currently our gross margins, we are at 44-45%. Ideally, we will be getting to 50% towards the end of this year. That will definitely get us to what we are targeting of 20%, let me put it that way.

Great. And, sir, my last question is, we have spent close to around, you know, did heavy capex last year, 240, 250, to 300 kind of capex. So, in which vertical we have done the capex and what kind of ROI we are

looking at these capex which happened last year?

So, we invested this amount into our existing product mix to expand our value-added derivative, which is chrome oxide green. For which we are anticipating a long-term supply agreement and a strategic relationship moving forward. Also, into EMSO, where the major investment has gone into, upwards of 200 crores. This is, again, a value-added derivative and our first organic product, which we are venturing into. Right.

Thank you very much for giving me the opportunity to ask the question, and all the best.

Thank you.

Thank you so much. Thank you.

The next question is from the line of Ashish Khurana from ANK Capital. Please go ahead.

Thank you. Good morning, Siddharth Ji Hanumanji. Firstly, comrades from my side as well for a decent quarter given the context of the overall situation and the planned shutdown. And I think it's heartening to see that on the chromium side, we are moving to value added products like chrome metal in the future and chrome oxide green. So, congrats for that. So, firstly, my question was on the strontium side. So, I think we have previously indicated that the gross margins there we are expecting are in the range of 50 odd percent. But this quarter, I mean, won't be able to hit that because there was some news that some of the raw materials like semi-site, etc., had seen spikes. So, are you at 50% already or is there a temporary margin pressure there?

Good morning, thank you so much for your question. More than the margin pressure, it's the stabilization space for a strontium chemistry business. It's very hard to say that the current margins that we have achieved in strontium are the normalized ones because we are anticipating that as we improve our chemistry, as we improve our operations, the operating leverage as well as the efficiencies will also start coming in in this business. What we can see in terms of market confidence is that our operating revenues itself in Q1, like it was highlighted earlier, have crossed 24 rows, which was nearly the entire revenues for the full year last year. So, as we go ahead, as we see the quarters going forward, we are going to have a better clarity on the gross margin and EBITDA margin that this business will deliver.

So correct me if I'm wrong, but I mean the yearly benefits, the fixed cost benefits, the operating leverage benefits would maybe fit below the gross margin line. But on the gross margin itself, I mean, are we at 50% or where do we want to be? Are we there correctly?

Yes, that's a good question. So right now, because we have not yet fully stabilized the chemistry, by that if we can simplify it, the input-output ratios that we are anticipating from this chemistry is still sub-optimal, which will improve in the quarters to come, and that will automatically improve our gross margins.

Got it.

Secondly, on the mining side, while the answer to the previous participant kind of hinted on that, but am I correct to assume that the old transfer to India would mostly happen at cost and the profit benefits would sit in our standalone business and not in the subsidiary, right?

See, we have to follow the transfer pricing mechanism, which is already in place, and... We have to look at that aspect before deciding on the price at which the transfer will happen because we cannot have too much of margin sitting in either of these countries. And because the transaction is between related parties, we need to be very clear on the transfer pricing mechanism. So whenever there is a trade between our South African entity and Indian entity, it will be asked for the regulatory norms as prescribed in transfer pricing regulations.

Got it, that is fair. Just two bookkeeping questions. So, on the standalone side, I think there was a shutdown, and we saw the costs, including the power costs, selling costs, and all that come down, but the manufacturing cost line item on the standalone side went up by around 200 basis points. I think earlier in our annual report, it had labor costs and some other costs. So, what was the reason for that, like, for that increase in that line item?

In manufacturing costs, one of the line items is also repairs and maintenance. And because we had a maintenance during that quarter, there was more spending that was done on repairs and maintenance, which is captured under the manufacturing head.

I got it, so one-time cost. And lastly, so there is a spike in other income, so is that foreign exchange related or something else in this quarter, sequentially?

That's correct. The other income, as you rightly observed, increased as a result of 31% higher exports during Q1 FY27 in comparison to Q4 FY26. And as a result of that, we saw higher net foreign exchange gains, equivalent to 11.9 crores. Thereby, the overall other income reported in the company stood at close to about 12.87 crores.

I love it. Thank you. That's it from my head. All the best for this update. Thank you. Thank you very much.

Thank you. Ladies and gentlemen, if you have any questions at this time, you may enter star followed by one on your handset. The next question is from the line of Disha from Sapphire Capital. Please go ahead.

Hello. Am I audible, sir? Thank you so much, sir, for this opportunity. A couple of questions. How much of this was given by volume, and how much of this was given by employees in the area?

Your question was not clear, Disha. Could you please repeat?

Yeah, I was just asking the revenue route this quarter. If you could just give me a breakup between how much of this was given by volume, and how much of this was given by value?

So, we achieved the total revenues, operating revenues of 433 crores in this quarter. In comparison to Q1 FY26, that is the same quarter last year, we saw increasing revenues because of multiple factors. One is our stanchum business's operational law, which is also contributing to the overall revenue as well as value. Our barium business capacity utilization, as well as blended realizations, have improved over the last four years. And overall, even the domain business has seen a shift in the product, which has led to higher realizations. So it's a combination of both volume increase as well as value increase.

Will it be possible for you to quantify how much is the volume buying, how much?

No, as a company, we do not quantify our volume or value growth.

Okay, but we do expect this momentum to sustain, that there was no one.

Over a long-term fundamental, yes, definitely. In the near to medium term, we need to look at the global factors which also come into play. And those are the reasons why it's very hard to quantify how a particular quarter will look like. So, instead of focusing on quarter-to-quarter variability, we would like to talk about year-on-year aspects of our time.

Right, right. I thought there's content, so I think there's a contribution this quarter was 25 years. What is the current utilization there, and what sort of overall contribution from this segment are we looking at for this year and for the next year?

Thanks for your question. So, yes, we have a capacity of close to about 10,000 tons in this Hanson business. We are currently operating at 50% utilization over there, and we would like to end the year at close to about 65 to 75% capacity utilization. Also, as the business improves, as our chemistry improves, we are also going to see better margins flowing in this business. This year we have a total capital KPEX outlay of close to about 200 to 250 crores.

And could you give a look of how much we are spending there?

Yes. In DMSO, our total project estimated KPEX is between 205 to 240 crores, of which we have spent close to about 60 crores up to 30 in June. Chromium, we are expanding our derivative base. Almost 50 crores will be invested over there. I'm saying in total, some of that is already spent in the last year. South Africa business capital outlay will be very limited in the range of 20 to 25 crores. Barium business, we are expanding our backward integration line, and we are likely to see an investment of close to about 40% to complete this project.

Okay, and just the last thing on the margins. You said in the second quarter, we were expecting margins to go down a further because of the cost increase. But then in the second half, what sort of margin levels are we looking at? And on a blended basis, 5-5-27, what sort of EBITDA margin are you looking at?

We are not giving any guidance for the second quarter or the year as a whole. Of course, on a targeted level, we are looking at 20% EBITDA margin. That's our stated target for a very long term. And for that, we would like to see overall momentum from the macro environment also to come into picture. However, if we look at our growth factors, it will be a combination of the capex that we will complete through the year, including the one that we highlighted about launching the new speciality chemical, DMSO, and completion of our backward integration in bearing business.

Okay, okay. That is it for myself, all the way. Thank you. Yes, thank you. The next question is from the line of Maheq Talati from Agility Advisors. Please go ahead.

Yeah, hi sir. Thank you so much for the audience. I still wanted to understand...

I'm sorry to interrupt, sir. Your voice is not very audible.

Is it audible now?

Yes, this is. Thank you.

So, if you wanted to understand, you mentioned

that there will be 20% logistic cost in

F522-F527. So, will the entirely incremental logistic cost be priced on to the customers?

We are working on it. It remains a challenging and a sensitive area. Given our relationship, we will be able to marginally pass it on. Because some of our peers, like in South Africa and Turkey, they are not impacted by the Red Sea or Hormones, because most of the cargo is flowing through Cape of Good Hope and there's a meditative inside. So, in certain accounts, we've been successful. The rest of them, we are continuously engaged in seeing what we can do on that side.

So, how much are we expecting an impact on our margins this quarter because of this incident, a lot of switchboards, any ballpark member and such?

I won't be able to share because we are still negotiating with the shipping lines thoroughly also with our customers. Okay. But there would be some impact. As a strategy, in order to outweigh this impact, we are trying to focus more on the domestic phase for this quarter-end quarter to go in, right? So, I mean, both our domestic and export team are working hand-in-hand and seeing what volumes are available and going as per the production plan, what we need to tweak for this particular quarter. And we'll make adjustments because we remain very dynamic, even.

Sir, you mentioned four different KPEXs, DMSO, Chrome, Metal and Barium Blackboard. Are we expecting all the KPEXs to go live by FY28? There will be some push forward as well.

DMSO, yes, I think we are, we remain positive. The CAPEX is ongoing as per the plan. ChromeMetal, very soon you'll be, you know, I think we've been going back and forth with this for quite some time, but we decided to take a call now. I think you'll receive an announcement very soon, which will be a little strategic in nature, which is linked to a long-term supply and a strategic business partnership moving forward. So, this will definitely change the way... Our products mix as well as the business will function moving forward in the Chrome, and gives us a lot more visibility in the upstream, both in terms of revenues and margins, and gives us a lot more leverage in terms of which products to manufacture, rather than, you know, depending on lower margin derivatives.

And so given Chrome... 528. Okay. And so, given the whole method is a bit of a complex material, are we planning any tech transfer or tech type for development or everything will be done in-house R&D?

Like I said, I reiterate what I said that you will be, you know, getting an update from relatively soon.

And like I said, it will be linked to strategic long-term supply as well as a

business partnership moving forward. We're very excited about this. Let me put it that way. Okay, wonderful. That's it. How much do you think?

Thank you. Participants with questions, may please enter star followed by one on your handset. The next question is from the line of Yash from Mavira AMC. Please go ahead.

Yeah, hello. Hi, sir. Thank you for this opportunity and congrats on a good set of numbers. So, my question again is around the Chrome portfolio, the long-term tier that you spoke about. So, one is that it will be margin creative rather than margin dilated. Is that understanding correct, sir?

Yeah, indeed. It's going to be margin-assertive, A, and also gives a lot more visibility because it's tied to a long-term supply agreement and a formula-driven pricing. Understood. Sir, any color

around the quantity of the contract?

I'm afraid not at this gesture because we have signed an NDA and we won't be able to talk much about it, but I can say they're very excited. It's going to bring, you know, good visibility or a chrome business moving forward. Understood, sir.

And, sir, how much CAPEX are we doing on the solar project from 5 to 20 megawatts?

The total KPEX outlay for solar will be close to about 5 to 6 crores, and the rest will be under the SPV model, wherein we will be able to buy the solar at a fixed price on the longer term.

Okay. Understood, sir. Sure. Thank you so much. Thank you.

Thank you. To ask questions, please enter star and run. The next question is from the line of Siddhartha Matthew. Please go ahead.

Hello. Thank you for taking my question. Am I over here? Yes, sir, you are.

Please please.

Just to follow up on this supply agreement that you were talking about, when you say that it will give the company a lot of disability,

what exactly do you mean? Can you share a little more?

Well, I think we are looking at a certain fixed volumes for the over next 10 years, specifically for our chrome oxide green, and this supply will be a binding supply agreement linked to an exchange, plus the incidentals like the logistics cost and all that. Whereas in the current environment, the products what we do is more on a quarterly, like on a spot basis of what our peers are doing, whereas this one is a lot more strategic in nature, kind of a take-or-pay agreement, where both parties are obligated and it gives us a lot more visibility moving forward.

Okay, okay.

And just a question regarding the current debt levels.

Can you let me know how much debt the company is carrying?

Thank you, Mr. Fiddharth, for your question. So, let me answer your question. We paid tax at full 27% plus sales levels. Sorry, your question is related to debt.

How much is currently on the debt?

Yeah, so I'd... As per the balance sheet that we have reported, ending 31st March, the total debt in our boots is about 527 crores. That includes the long-term borrowings and short-term borrowings, which is at a debt-to-equity level, so 0.49.

Okay, okay. That's for the current quarter as well, including the planned tax.

No, we don't share the balance sheet figures on a quarterly basis. So, we will be able to update you the balance sheet figures only once our second quarter results come out.

Okay, that's it. Thank you. Thank you.

Thank you. The next question is from the line of Diman Shah from IDN Mutual Fund. Please go ahead.

Thank you. Hello. Yes, good morning. Good morning.

Just a quick one on, you know, how long before we see a massive improvement owing to the starting of your mine in South Africa, we see no improvement in the gross margins whatsoever. So, is it... Is it likely to come from the second quarter or any timelines on that?

Thank you for your question, Mr. Devan. Like you said, the gross margin improvement would be a function of both upstream and downstream, like I mentioned.

No, just a moment. Because when we took over such a big asset, the idea was that this gives us a reasonable protection in terms of gross margin behavior. But nothing is visible whatsoever. So, what is the endeavor? Because if you cannot prove improvement in the gross margin, then the whole acquisition goes for a toss or the very basis of acquiring and creating such a long period means that the capital allocation has not played out the way it was envisaged. So, can you quickly comment on this?

Yeah, we look at it slightly differently, because, you know, this is a new line of activity, and the timelines are more or less the way we are looking at. You know, I think acquisition has been completed in November 2025. Thereafter, it took two months to transfer. And like I mentioned, it takes time to repurpose and organize the manpower and so on. So, yes, I agree there is a delay, but not to an extent where it creates the alarm. So, we still remain positive, and things are progressing very well with respect to mining, and the product what we are seeing on ground seems to be suitable for our production. With that being said, we are expecting the material to start. Going into India from the third quarter of this financial year. Now, if you ask me how much, will that improve the gross margin by 50% right away from 44? I think partially, yes, it will get closer, but it will be hard for me to quantify exactly when it will be, when we will be getting to 50%. I limit towards the end of this year. That would be a combination of... Both upstream as well as the downstream support. Upstream in terms of this product mix change as well as downstream, the grow more falling. Because as you know, currency being a commodity and price play a very big impact. Even the movement cost within South Africa, from the mine to the plant, the costs have gone up.

No, by far, but your relative advantage still remains, right?

Our relative advantage still remains, but it's hard to quantify how much, but definitely relative to our peers, yeah, we do remain competitive, and what could be retained in the business, what could be passed on to the customer moving forward, we need to take a strategic call. Okay.

No, no, but, you know, if you treat the acquisition on a standalone basis...

The mind is also a function of the quantities what we produce. The unit economics play a very important role. As we go up...

The entire thesis was that it gives us the... No, no, it gives us the pole position in whatever we are doing. So entire thesis was of acquiring this mind was only that, right? It gives you competitiveness against the Chinese and puts you in the top echelon of the cost curve, and hence any vagaries of any variety can be smoothened out or will be reasonably bypassed in a way.

The question is the scalability which we are going to do in the second half of this year. I think I'll be able to better answer your question towards the end of this year. On when we will be able to get 50%, I think I'll come back to you with a clear answer, let me put it there.

No, but that's on track. That's the...

That's on track. That's the reason I'm saying that I have to see the volumes coming out. I have to see the scalability happening, which we remain positive.

Right. Secondly, after in your medium bifulfate, which was, you know, it took time for you to see that with the paint guys, again, only one-of-a-kind manufacturers. Again, that also seems to not have given any advantage, or is it still pipeline in the works, or can you...

Same is, I mean, it's already visible in the numbers, since it's, you know, we are not quantifying, and actually we don't in terms of what product, what is the margin, but it's as per the plan, and I think in terms of demand visibility as well as customer approvals are already in place. Both in the domestic and export market, and during our last concourse, I also did mention about increasing the volumes, moving forward, and that plan is on.

Yeah, but with due respect, two things that we have done for positive incremental gross margin impact don't seem to be working. So, what is pulling it down? Is there a certain category where we are losing? The margin ability or age you can, only you can highlight.

I would say, well, I mean, generally the demand environment for chrome, especially the leather industry, continues to remain challenging. But what I mentioned that moving forward, product mix would change, even in this quarter it was visible. It's not that we are going to do away with our basic chrome sulfate, the leather volume, but we are going to bring that volume down sequentially over the year. And our focus will remain to be on chrome oxide, mainly going into chrome metals, refractories, pigments, as well as chromic acid going into functional painting. And once we move in the direction which we are, there will be a lot more improvements in the gross margin, is what we do.

And lastly, what I just joined the call, can you enumerate, and sorry for the repetition, but can you enumerate what are the different things that we would be now looking to, you know, deploy capital or incremental CAPEX towards?

Yeah, we have investing closer to 360 crores into CAPEX. Bulk of this investment is going into dynetal sulfoxide. Over 200 crores being invested into this product. Again, an import replacement. It's a solvent going into pharma and agro industry. As well as in order to meet this long-term agreement, we are enhancing our chrome oxide green production at our bisac plant itself. Whereby more sodium dichromate will be used into producing chrome oxide 3 moving forward. So close to 350 crores is going into this, and over and above certain characteristics will be happening in our finance for some improvement, but that will be marginal.

Okay. Thank you. Thank you so much, and I'll come back and meet you. Thank you.

Thank you. Thank you, Mr. Chair.

Thank you. I'll spend some discussion, special star and one. As there are no further questions from participants, I hand the floor over to the management for closing comments.

In conclusion, kindly note that our results, earnings release, and investor presentation have been uploaded on the spotch exchanges, and they will also be available on the company's website. If you have any questions, feel free to connect with us on investors at the date vishmuchemicals.com. Thank you, everyone, for your valuable time.

Thank you very much. On behalf of NK Global Financial Services Limited, that includes this conference call. Thank you for joining, and you may now disconnect your line. Thank you.