Kiri Industries Limited (KIRIINDUS) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Kiri Industries Limited Q2 and H1 FY27 earnings conference call, hosted by Valorum Advisors. As a reminder, all participants will be in the lesson-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now have the conference over to Ms. Purwangi Jain from Valorum Advisors. Thank you, and over to you, ma'am.

Thank you. Good morning, everyone, and a warm welcome to you all. My name is Purwangi Jain from Valorum Advisors. We represent the investor relations of Kirin Industries Limited. On behalf of the company, I would like to thank you all for participating in the company's earnings conference call for the second quarter and first half of the financial year, 2027. Before we begin, I would like to mention a short cautionary statement. Some of the statements made in today's earnings call may be forward-looking in nature. Such forward-looking statements are subject to risk and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's belief as well as assumptions made by and information currently available to the management. The purpose of today's earnings conference call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. I would now like to introduce you to the management participating with us in the conference call. We have with us Mr. Manish Kiri, Chairman and Managing Director. Mr. Jaish Hirani, Vice President, Accounts and Finance, and Mr. Suresh Gondalia, Company Secretary. I now request Mr. Manish Kiri to give his opening remarks. Thank you and over to you, sir.

Good morning, everyone, and welcome to the earnings conference call for the second quarter and first half of the financial year 2027. I hope you are all keeping safe and well. Let me first begin with an update on our integrated copper and fertilizer project, which remains central to our long-term growth strategy. During the quarter, we made further progress on engineering, procurement, and construction activities. Procurement of major plant and equipment advanced substantially, with equipment deliveries commencing at the site. Several foundations and structural works are also progressing across key operating units. In parallel, we continue developing the supporting infrastructure including the dedicated jetty, desalination facilities and raw materials handling conveying systems. We are also advancing discussions with the international mining companies and global trading houses to establish long-term sourcing arrangements for copper concentrate, rock phosphates and key raw materials for the project. Our approach continues to focus on phased implementation with downstream value-added copper fertilizer facilities planned ahead of the smelting complex. The project remains on track for phase one commencing in first half FY2028. During the quarter, we also completed the acquisition of 40% stakes in Makilala Mining Company in the Philippines. And incorporated Andamina SPA in Chile to pursue mineral resource opportunities. These initiatives are aligned with our broader strategy of strengthening our copper value chain and securing long-term resources availability. With the update on our strategic growth initiatives, let me now run through. to the performance of our existing dyes intermediates and basic chemicals business. The operating environment for dyes and dyes intermediates industries remained supportive during quarter 2 FY27. With market prices of key dyes intermediates, particularly edge asset, witnessing a meaningful improvement, prices of Vinay's cell phone also remained during the quarter. However, a significant portion of our sales During the period was executed against the orders contracted earlier. Consequently, the benefit of improved market prices was only partially reflected in our performance and is expected to get reflected progressively in the realizations over the continuing quarters and the next quarter, subject to the sustainability of prevailing market conditions. On the cost front, operating profitability was impacted by higher input costs, particularly fuel, power, and affluent treatment expenses that we spent in the quarter. While raw material costs increases across several product categories were effectively passed on to the customers. The narrower price cost spread in dice intermediates impacted the sequential material margin performance. We remain focused on improving operational efficiencies, managing cost, and strengthening our product mix while responding to evolving market conditions. On a standalone basis, revenue from operations for Quarter 2 F527 stood at 288 crores, registering a growth of 48% year-on-year. Material margin improved to 29.1% from 26.4% in the corresponding quarter last year. Stand-alone abeta stood at about 7 crore, with an abeta margin of 2.4% compared to the loss of 14 crore in the corresponding quarter last year. Higher operating expenses, particularly fuel, power, and effluent treatment cost. Continue to weigh on operating profitability. Loss after tax stood at 23 crores. For the first half, FY27, stand-alone revenue from operations stood at approximately 584 crores. The company recorded in a beta of about 30 crores during the period. Profit after tax stood at 248 crores. Largely supported by treasury related gains recorded during the first quarter. However, the second quarter performance was impacted by an unrealized non-cash fair value loss on treasury investments. For the quarter, on a consolidated basis, revenue from operations stood at 299 crore, registering growth of 40% year on year. Consolidated EBITDA stood at 2 crores. Consolidated Lodge After Tax stood at 39 crores before accounting for share of profits from associates. On a consolidated basis, revenue from operations for the first half of FY27 stood at approximately 611 crores with EBITDA of approximately 19 crores. Profit After Tax stood at approximately 231 crores. Before the share of profit from associates. Reported profitability during the quarter was impacted by an unrealized non-cash fair value loss of 57 crores on treasury investments, which was an indication of mark-to-market fluctuation. On both a standalone and a consolidated basis, this was partly offset by realized treasury gains and other income. The company's share of profit from associates, primarily contributed by Longshan Kiri Chemical Industries Limited, in which the company holds 40% equity stake, stood at 16 crore during Q2 FY27 and approximately 37 crore during Q1 FY27. Looking ahead, demand for dyes, dyes and intermediates is expected to remain stable throughout the second half of FY27, supported by continued activities in the textile sectors. Although our existing business, the Integrated Copper and Fertilizer Project represents an important part of our long-term growth strategy, the long-term outlook for copper remains favorable, driven by increasing demand from power infrastructure, renewable energy, electric vehicles, and digital infrastructures. Domestic refining capacity continues to lack consumption growth, providing opportunities for domestic players. At the same time, global commodity markets continue to experience volatility arising from geopolitical developments, supply chain disruptions, and evolving trade dynamics, resulting in fluctuations in the copper prices, concentrate availability, And treatment and refining charges. Against this backdrop, our phase project implementation strategy, with downstream value-added facilities being commissioned ahead of the cementing complex, is expected to provide operational flexibility and cash flow to the company. The fertilizer sector also continues to present attractive opportunities supported by India's structural dependence on imports of phosphatic fertilizers. And the need for enhanced domestic production capacity. Our integrated copper and fertilizer complex is therefore positioned to participate in the long term opportunities across both the sectors in the country. The group's strong balance sheet and liquidity position continue to support project execution and future growth initiatives. Our focus remains on sustaining The performance of our existing chemicals business, maintaining financial discipline, and executing the copper fertilizer project in a timely and disciplined manner as we build the next phase of growth for Kiri Industries. With that, we can now begin the question-answer session. Thank you.

Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to withdraw yourself from the question queue, you may press star and 2. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from the line of Priyansh Lakotia, an individual investor. Please go ahead. Yes, please go ahead. Priyansh, your audible, please proceed.

Yeah, we can hear you. Please go ahead.

Okay, okay, great. So, first of all, thank you for the presentation. I think that was very well prepared, and we really liked seeing the progress developments in the corporate mind also, so thank you. The first question is a combination of few factors. So, I want to know what is the latest price of H-acid and minoil sulfide, sulfone, and despite the three times increase in H-acid, and so as I explained in the last AGM, that since Kiwi sells H-acid to Dystar India JV, which consumes it as raw material, so the JV will be realizing higher profit on sales of its end product. But still after consolidating results of the Dijkstra TV, And even if, let's say, if we include the fair valuation loss of around 15.5 crores, there is still loss of 7 crores at PBT level. Why is this so? Is it because the expenses include legal expenses for the Philippine mine-related matters? If so, what is the, you know, what is the amount of such legal expense and whether this is a one-time amount of it, we also see this incurring in the next quarter, basically.

So the legal expenses in this quarter is not much actually. Legal expenses in the quarter is less than 3 crores. So it is not the reason for the profit which you see is comparatively lower with respect to the increase in the raw material prices which have taken place. So, there are few factors which affect the price increases to get reflected with our performance, with Kiri's performance. The JV as well as large part of Kiri sales remain for dyes, for the finished products. So, the impact of increase in the prices of HSA to get reflected into increase in the dyes prices. It takes around a few months time, let's say a quarter time. So the reason why you see the profits comparatively lower is because of the earlier quarters and earlier orders which are being executed mainly pertaining to dice as the prominent business of the company continue to remain selling dice. And that is main factor where the earlier orders execution have not got reflected the current profitability, but it's kind of a one quarter or two months delay. So you will see the impact coming in the current quarter. So where the significant changes have taken place, which you will realize when you see the results of current quarter, which is going pretty strong. Now, with respect to the current prices of H-acid and vinyl sulfone, vinyl sulfone cost has also substantially increased with the highest prices of sulfur as well as aniline going in the market. So, that has not been reflected as an incremental, you know, multifold profit. So, even though vinyl sulfone prices are above 450 rupees today, the cost has also increased significantly. On the other hand, HSE continues to get exported from India to China. Even till last month, the flow of products is continuing to get exported to China. And that has given exceptionally higher range of pricing currently. So HSE prices are ranging from 1,600 to 1,800 for the last three to four weeks. And it is in this range bound. But this is still a decent higher level pricing. And we hope that this continues. Now, because of that, the prices of dice have also increased, and those increased dice prices have now got reflected in the market as well. So these are the factors which have contributed, you know, the reflection of profitability are delayed, you know, compared to the instant effect.

So, looking forward to the next quarter, sir. Yes, you will see. Amazing. My next question was, since Giri has now acquired, I think, 40% equity in the Makilala mines in Philippines, we know that as far as established, let's say, global business practice, whenever a company acquires such a significant stake in a JV, then there's definitely, you know, also take a position of a senior CXO, for example, CEO or CFO for that matter, so that we have operational control over the business. So, I wanted to know what is the timeline there or what is the plan there for Kiri appointing the CXO or CEO or CFO in the Makilala Copper Mines?

So, you know, Kiri continues to be the minority shareholder in Makilala Copper Mines. But Kiri continues to participate in the management of the company at a board level deeply, regularly, and continuously. With that, the entire team, the key management team of Makilala Mining has already been changed. So there is a new transformative team, which jointly Kiri and Sodor have appointed, and the new management have taken a flagship. And have already started running and operating the development of the mine with very, very experienced, credible new CEO. His name is Yuloparese. He was a leader with Carbon Copper, the largest operating mine of copper in the Philippines. And we are pleased to welcome him, and he has joined to lead the project of Makilala Mining. So, the team has been transformed. The new team, the new CFO has also taken place, you know, has resumed. And again, Kiri was involved in selecting and choosing each of these new key management individuals who have now been appointed and they are running the company at the moment.

So, if I heard you right, then basically... KMPs are neither from Kiri, but also not from the other partners. They are from, let's say, other recipes, and this is selected in a joint.

Also, Kiri has already made the subsidiary of Kiri operational, where Kiri is deputing its own persons there, which is called Karabau Corporation, which is again a wholly owned subsidiary of Kiri, another subsidiary of Kiri, and which is operating well there as well.

Okay, got it. My final question was, what is the status of the preferential allotment of shares? And it will be better if...

The point is well taken. The process of preferential share allotment is ongoing right now, and it will be completed on its due course. But your point is well taken. As far as I know, the preferential allotment price is, what is the price for this price? Rs. 75. Rs. 475. Thank you, everyone, and welcome to the call. That's the price of preferential equipment.

Okay, I hope you take this into account.

Thank you. Next question is from the line of Suresh Baram Sethi from Barams Financial. Please go ahead.

Good afternoon, sir, Manishar. You remember Suresh from Mildur, Anupadish.

Of course. We always remember you in every fall. You are welcome. Thank you for attending the call.

Sir. Sorry, sir. One question I am asking, don't misunderstand. Sir, I invested in 15 years ago, sir. I bought at 800 rupees. But you are in my place. What do you do to transition? I hope all... My age is completed around 53, but I, actually, generally, stock market investors, already, stock market investors sold all shares after the share price increases, sir, normally. Yes, I am, I am sorry, I am also signed off, you sir. I will, today, I will dispose of all shares, sir. Sorry. I have waited for 15 years. I lose a lot of money. But you are not a region. You are not a cause. I am not blaming you. But I hope this generally stock market thinks I badly leave it to your company. Sorry for this. Any... Actually, I am, before case, you are, court case, after you will give dividends, and at that time, I will hope, but you will not have any dividends.

Sorry, sir, I am not asking this type of questions.

Please, give any guidance or any suggestion. I am not understanding, sir.

Yeah, yeah, let me first address your first concern, okay? You have... As you have mentioned, and I take it what you just said, that you have been with company for a very long time, right? So you have been a strong supporter for many years, right? Now, looking at the time, the point which is, you know, I would call the inflection point where the growth has triggered. The company has embarked on something that will change its performance, profitability, and future outlook as well. So you have come to a point after so many years where we have started the growth journey. My request to you, and if I were at you, please wait for a few more years. Let the fruits of our investment, because the investment phase has just started. All the litigation time that we spent of more than 11 years and post investment of Daistar 15 years, we were all deprived of growth. That growth journey has started. So growth journey will continue now and will be on a fast track if you continue to be associated with the company and enjoy the growth coming. You know, you would definitely benefit. Market would reward when the results and the performance of the new initiatives. And our new projects come in the next few years. So that would be my request to you as the promoter of the company, and also the chairman, managing director of the company. So you should continue to keep trust. You have done it for 15 years, and few more years will get you the fruits of what you have implanted all these years. That would be my request to you.

They're actually... Actually, I will dispose from half of today in my portfolio, but actually I have taken MTF stocks. These are my personal reasons. Actually, I will solve that, but actually price will continually decrease. Last time also, $3.80 or $3.30 it will come in. In future, it will be any house. Support in your side in market, you are also taking 475 rupees sold before call. Actually, your opinion of how growth will continue, how much time wait for, sir, after I will try to, after some time, I will try to accumulate. You have taken? How many years you have taken, sir, in growth processes? Please tell me.

If you look at the execution plan of the growth initiatives that we have started, it is the window of next two to three years. Correct? Number one. Now, number two, for the next two to three years, as in when, you know, the project execution of various... When these milestones get completed, the perceived project risk would reduce. And I am sure the market participants would reward all the shareholders, including me and you, once we see the project risk diminishing, once we see the execution of various milestones getting succeeded. And that would be the time where I think market should reward all of us. Again, this is my personal opinion which I am sharing with you, and this is what I believe which I am transparently sharing with you. Again, it's your call, your decision at the end of the day based on your personal circumstances which I would not involve with. But as far as the growth of the company is concerned, that is going to come in the next few years. And we wish to give you confidence, and we understand your concern.

Actually, I'm not handling that holding, but that's why I'm open. At least I hold 1,500 shares. I will try.

Thank you. Ladies and gentlemen, in order to ensure that the management is able to address all the participants in the question queue, please limit yourselves to two questions only. Should you have a follow-up question, please rejoin the queue. Next question is from the line of Pradeep Rawat from Strategic Alpha. Please go ahead.

Awesome, sir, and thank you for the opportunity. Am I audible?

Yes, please. Yes. Can I hear you?

So my first question is relating to HACED disruption. So we know that the supply for HACED in China was already thin and the environmental norm exacerbated the situation. I just wanted to know if you can provide further color on these norms. If it is hard to implement by Chinese producers without increasing the cost of production, and whether you are seeing a cost advantage against Chinese players due to these new regulations?

So there are certain regulatory reasons because of which the disruption has taken place with regards to H-acid. One, the Chinese production has drastically reduced. And that has happened because of the implementation of the new regulation which requires the nitration to be conducted as a continuous nitration rather than a batch nitration. And that has caused a reduction in production in China that has not allowed the Chinese producers to produce as much quantity as they used to produce earlier. Based on our latest information, they are not able to produce more than 50% of their requirements. So approximately 100,000 ton of HIC is produced in China, and current production is less than 50,000 ton. So that leaves a huge gap, and suppliers from India is trying to bridge that gap. Now, is this a continuous phenomenon? Our opinion is no. There would be a time where all the players and all the producers, at least majority of them, would try to come on stream. They will implement the new regulation and comply with it. We learned that the continuous nitration process in China is advancing with various producers to get implemented in their plant. Once it happens, once the production comes on stream and the regulatory consents are given to them, whoever implement the new guidelines in China, the production in China will resume. Whether that will happen in three months, six months, we don't see a visibility of this getting stabilized at least before next March. So, this financial year would continue to see the disruption till the end of the financial year. We don't have, nobody has visibility what would happen from the next three to four months onwards, but we would learn as the time passes. So, let's see how the Chinese... Our producers are able to comply with the new guidelines and how fast they are able to increase and bring their production on stream compared to what the quantitative production used to be earlier. And then we will be able to see the prices stabilizing, dropping, and bringing it down to the natural prices. So, again, those natural prices which we would expect to happen would be higher than the earlier prices, may not drop as below because the raw materials have also increased significantly. So, in line with how the raw materials have increased, the prices of H-acid may stabilize by half year 2027, I mean the calendar year. So, let's hope, you know, and continuously evaluate the situation evolving in China. And we'll keep you updated.

So, sir, for the cost of production for continuous process as compared to batch process is higher or lower? And if...

The technical inputs indicate that the cost would not increase. The capital investment will increase. So the producers will have to put more capex to implement and restructure their plant for this particular step. But the raw material cost... It's not going to change much. Our raw material costs at India as well as at China are going to remain in parity and which are in parity today. So we are not expecting the operational costs at a higher level with Chinese producers. We expect that they would remain at a similar level at which we are and the same situation was earlier as well. The price increase may reflect the proportionate increase in the raw materials, but incremental exceptional margin will go away the moment the production stabilizes in China. And as far as India's capacities are concerned, we are already over-capacitized as of today. So, the consumption in India is somewhere around 3,000 tons a month, around 30,000 to 40,000 tons a year, and our production capacities are close to 60,000 tons a year.

Is there any facility in India or in China that use continuous nitration as of now?

None, no facility in India as such, and as such no facility in China. It has not been established yet. Right, so none of the facilities that we are aware about is using continuous nitration anywhere, particularly for HSA. For other products, yes, but for HSA.

Perfect. And my second question, I'll join back with you.

Thank you, sir. Next question is from the line of Ishaan Bhave from Fident Asset Management. Please go ahead. Yes, please proceed.

Perfect. Could you help me understand of your current capacity for DAI in the UK, how much percentage would you have locked in the prices in the previous quarter for the coming quarter, and let's say how much is sold in the spot price, and within the same... Have the increases in dye prices been in tandem with the increases in the dye intermediates tandem? The crux of the question is, do you plan to shift from using the capacity in-house to selling the dye intermediates as a predominant product in the market?

The answer is no, because the primary business of the company is to... is to sell dyes and the long-term established customers are pertaining to the dye sales and which are used in textile, leather and paper, predominantly textiles. Now, intermediate selling is not the business of the company as such. Whatever intermediates that we produce, today more than 90% of those intermediates are consumed in-house. In our own group units. So that's the, you know, that's the business model. And that is how we have been operating for years. Now the consumption, if it's lesser, then we opt to sell the remaining intermediates in the external market outside. Selling dies is a long-term business as a long-term phenomena for the company. While selling intermediates is not a long-term business model for the company. There is a long-term business model for some companies who are not producing dyes or who are not present in dyes, or the dyes presence is minimum. So there are certain peer group companies who predominantly operate in selling intermediates, which we don't. How much is in-house consumption or captive consumption of intermediates? Around 95% is the captive consumption of intermediates. Now, you know, spot prices sales of intermediates could be temporary, opportunistic, you know, which we could do, but that can happen once our long-term supply orders get completed. So we have a, you know, running order book of at least two to three months of DICE and those products which are being sold to DICE players, they are one of the global, you know, prominent players, including DICE Star. Even though, you know, Kiri exited from DICE Star, DICE Star continue to be, you know, a major customer. And for Dice Star, you know, Longshan Kiri continues to be the single largest supplier globally, correct? So that relationship still continuing. And other customers as well, this is an example. So there are prominent players, global players who rely and who depend on Kiri Group for the supplies of Dice and that reliability, that trust. It needs to continue. Because it is a long-term business model that we have. At the same time, you know, we try to increase our production of intermediates. Another question was how much capacity which we have been able to produce at intermediate level. So with the combination of shortages of raw materials and And our efforts to increase the operating capacity of intermediates. We are still operating overall intermediates less than 60%. So we have room to increase. And that is what the management is trying to implement for the last 2-3 months to increase the production and the operating capacity of intermediates. To have more quantities that we can sell outside, even though we fulfill our entire requirement captively. Right? And those efforts would get reflected, you know, in the coming quarters.

Sir, within my previous question, I also wanted to understand, have the dye prices moved along with the intermediate prices?

Yes, yes, yes. Dyes prices have moved along. Now, reactive dyes prices are around in the range of 1,500 to 1,600 rupees. of HSC base, correct? So dice prices always move based on the increase or decrease of intermediate prices. It's only a time factor. It takes time to get reflected in dice to get implemented because there are pending orders. Majority of the dice are exported, you know, at least 50% exported. So there is a transit time of export. There are dyes which are in inventory sitting in the overseas warehouses as well. So there is a supply chain and there is also an order book and the pending running orders of large and various customers that allows the price increase get reflected with a time length. And that time length ranges from two to three months. That's the only matter, you know. Otherwise, it's... It's always gets reflected into increase in dice prices, and it has always been passed on with a time effect.

Sir, so my final question to you, as you just said a moment ago, you still have a two to three month order book ready to be shipped and delivered soon. So, Q3 might not see a big impact on these asset prices. Q4 is when you might realize the full amount, right? And continuing on the question of new places to invest in, could you please help us understand a bit more as to how the copper mine is going to play into the whole copper and fertilizer expansion that we are getting at? Thank you very much.

Right. So, just to address your first question, with regards to the price increases with quarter three and quarter four, the quarter one and quarter two, these two quarters were good To complete the increasing cost and continuing orders to get completed, you will see a moderate reflection into realization of price increases in this quarter three, which is the running quarter, and also even higher in quarter four, right? Similarly, when the prices start going down, there is also one quarter leg. That means the quarter, even after the prices go down, for the dye sales, it would reflect relatively better compared to the drop in intermediates. So quarter three and quarter four, both will have significantly higher performance compared to quarter one and quarter two where the absorption has taken place. That's your first question, right? And I hope I have addressed it properly. Now, the second one with regards to the mining, the Makilala mining is our first experimental investment into upstream. Now, it will produce 140,000 ton copper concentrate and around 100,000 ton copper concentrate will come to India to our facility. Out of our 1.6 million ton of requirements of copper concentrate. That means that the current expected capacity of Makilala mining coming on stream by 2028-29 would get us close to 6-7% of our total requirement. It's a small portion compared to what we need as a whole, but we would be able to learn during this process. How we are able to handle and manage the upstream operations. So let's see, you know, but the dependency on Makilala mining compared to the total requirement is relatively much lower.

Thank you. Thank you so much. is from the line of Sandeep Raj from Oculus Capital Growth Fund. Please go ahead.

Hi, sir. Good afternoon. Happy Diwali and happy Dandera to see you. So, sir, my question was regarding this mining. So, what is the CAPEX that we will have to do in this mining to get it started?

And for the management got disconnected, please stay connected while we reconnect them to the conference. Okay. Thank you. the line is reconnected. Please repeat your question, sir.

Hi, sir. Am I audible? Yes, please go ahead. Sorry. Yeah, right. No worries. So my question was regarding what is the key fix that we will have to do for the mining for the 40% network required.

Now, the capex which is going to take place at MCB project for Makilala Mining is about $280 million. That's the total capex which will be invested there in Philippines, right? Now, how much equity, how much debt, all those factors are still under evaluation. But as per our assessment, you know, Kirib might have to invest a little bit more than, you know, $40 million as a whole for the, you know, for the equity part of the total capex requirement.

So balance will be as a debt?

Balance will also be the strategic equity, the domestic partner equity, and the debt.

Okay. Off-take, you mentioned like 100,000 tons of copper, right, every year? Yeah, which is 70% of the output there. Okay, okay. Understood. And secondly, regarding this line, the 40% stake that we have acquired, is there anything that Celsius can do? Is there any, basically any hangover that we have for the stake?

You know, there were a few arbitration awards which have taken place. There are many disclosures at various platforms, including Philippines on Australia Stock Exchange by Celsius, and there has been litigation involved as well. Now, you know, the court awards, the arbitration awards, till now are very positive for the development of the mine and for our investment as an overseas investment into Philippines. Celsius has, what we expect, has gone to appeal and we will continue to deliberate and continue to address the appeals court in Philippines whenever the hearing takes place. But we are, you know, our council and we are committed to the project. As far as the project operations are concerned, and the new management team's focus is concerned, which would not be related to the litigation or the legal disruptions, which the management would not be involved in. But yes, the Celsius would contest and Celsius would go to appeal, and we will also represent ourselves in the appeal.

Okay. And, sir, just one more thing. So, what's the timeline for downstream and what is the timeline for the upstream product?

So next financial year, almost all of our downstream products will be operational. And then 2028-29, then this metal fertilizer, precious metal refining, you know, the other units will be operational. But next financial year, almost all downstream will be operational. And all downstream combined together would be around 2.6 lakhs than copper would be operational.

That is the total capacity, right? No, that's the downstream capacity. Downstream capacity. Okay, and what will be the production guidance for the next three years, like once we start?

So once we start, it will be half a million ton, 5 lakh ton copper, 1.1 million ton, 11 lakh ton of fertilizers.

Thank you so much, sir. From the line of Reuben, from Equity Intelligence, please go ahead.

I just wanted to know, with regards to copper cathodes, we've been hearing that we've been purchasing a lot of them from Japan, and now it's in short supply.

Sorry to interrupt, Robert, your audio is not clear. Request you to please use your handset.

With regards to copper cathodes, we've been hearing the U.S. has been importing a lot of them from Japan, and now it's in a little bit of a short supply. Can you give us an update on that, please?

Copper cathodes from Japan, with a bilateral treaty between India and Japan, are duty-free. Right, so Japan is the only country that can provide duty-free cathodes to India. So Japanese cathodes are preferred. And Japanese cathodes are not sufficient enough to cater the entire requirements of India to import cathodes. So, Japanese cathodes are always going to remain in scarcity because of the duty-free agreement. So, the cathodes are also available from other origins where the duty is implied. But one has to, you know, look at the combined cost of cathode. You know, we would not be able to, as a country, get all the cathodes that we need from Japan duty-free. So then whatever is available from Japan, what I understand is the Japanese cathodes coming to India is around 2 lakh ton, 200,000 ton. But our requirement is much, much larger than that. So then the cathodes come from other parts of the world where the duty factors are involved. So one has to, like us, has to estimate the blended average cost of cathodes once we start using cathodes. But then when the furnaces are operational, in addition to cathode, we will be making cathodes ourselves. So, the blisters, anors, scraps, a lot of secondary material available in the market would be sufficient to process.

Okay. So, there will be sufficient supply. So, that will not be an issue once you start. Okay.

It's only the cost factor that you have to balance out.

And we could ask you to rejoin the queue, sir, for the follow-up. Thank you. Oh, okay. Thank you. Next question is from the line of Harshit Khadka from RoboCapital. Please go ahead.

Thank you for the opportunity, sir. Am I audible? Yes, sir. Thank you. So, just wanted to understand, sir, what can be the peak revenue that we can achieve from a dive business?

Right close to about, you know, 1,300 to 1,500 crore of revenue in that range. That would be the peak revenue.

And so I figured how much of that would be a-chastered and venased telephone? Would it be around 800,000 crores?

I would say more than 95% would be dye sales. H-acid and vinyl cell phone would be consumed by us, whatever we produce. But the sales which get reflected on a consolidated basis is all dye sales. So one is the dye sales of Kiri Industries Limited, and then the dye sales of JV. So, the consumption between Kiri and the JV put together is around more than 95% of our own production. So, everything is consumed in-house, and the finished products as dyes are sold in the market, domestic as well as exports.

And what kind of EBITDA margins can we make on this 1,300 to 1,500 crore top line?

Right now, if you look at the last quarter, it was hardly 3 to 4 percent, but I would say going forward, we'll be able to have at least, you know, 8 to 10 percent. The target is to have that.

8 to 10 percent. All right, sir. Thank you.

The next question is from the line of Pradeep Rawat from Strategic Alpha. Please go ahead.

Thank you for the follow-up. So, my next question is relating to our dye business. Given the dye staff, manufacturing also involves polluting processes. So, can we expect potential or less intense such asset-like disruption in dye manufacturing business as well in China?

You know, H-acid, as you very rightly said, you know, producing H-acid is not only a matter of install capacity, and all plants across, at least in Gujarat, are all zero discharge plants, right? Every H-acid producing company is limited by the quantum of effluent that it can treat and zero discharge, which means that we can evaporate. So that defines the capacity. It's not the installing vessels that define the capacity. And same thing is now prevailing in China as well. So if you look at over the years, because of the environmental sickness in China, in the last 10, 12 years, from 2014 till now, you know, we calculated, I mean, the numbers which we calculated earlier were 16 to 17 plants producing HSA. Today, it's hardly three plants in China, you know, who have survived and who are producing H-Acid in China. So, they've also gone through this consolidation process over the years, and the consolidation was, you know, was driven by the market forces and especially the regulatory There are three norms which continue to get strengthening in China as well. So there are limited players globally from next year onwards who would be, you know, who would be operating in making H-Acid, in fact, in India and China both.

Yeah, so the HACET part was quite clear, so I just wanted to understand that similar thing could happen in dye manufacturing as well, because similar to HACET, dye manufacturing also involves hazardous processes.

I don't think so, because dye manufacturing is not that much of effluent generating. Dye manufacturing is also vastly in India being done at unorganized level with large number of MSMEs present in the market as well. And it's relatively easy to treat and to recycle the effluent of dyes. And capex is also lower. So, what you have seen at the adjacent level can happen. With other intermediates, but synthesizing dyes across India as well as in China doesn't require that much of the capital investment on the treatment and the treatment itself, the process and the technology is pretty easier because the pollution load in dyes manufacturing is much lesser.

That was helpful. And one quick question.

Sorry to interrupt, Mr. Rawat. May I please request you to rejoin the queue, sir? Thank you.

Oh, for sure.

Next question is from the line of Pushkar Jain from Millie Capital. Please go ahead.

Yeah, hi, sir. I'm audible. Yes, we can hear you, Pushkar. Yeah, so I just wanted to understand why, despite its huge price hikes, our margin would be, you know, 8 to 10 percent when our peers are, you know, doing substantially higher margins. It gives some clarity on that. And also, you said reactive dial prices are like $1500 to $1600. So what was it before the recession?

So, regarding your first question, I already explained, I think, two times earlier in the call, and I would humbly request you to go through the earlier transcript, yeah? Where we explain with regards to the margin, yeah? We explain with regards to the time like it takes to get the price. No, no, sir.

Sorry, sir. No, no, I got that. But it's just complete another year. Since my margin profile, why our margins are, you know, can't they take two times? Because I understood that we'll pass it on a lot.

Right. Because we both. Yes. If you have heard earlier conversation, we... Our business is to sell dyes and when the price increases getting reflected a few months, you know, later than the intermediate prices when they actually happen. Yeah? That's one part. Right? Second, before the price increase in HSA started, H-acid was around 400 to 450, maximum 500 rupees. So that was a range, 400 to 500 rupees, where H-acid has been hovering for almost five years, in fact, before the price hike started. That's the normal range. And that also is defined by the prices of naphthalene, prices of sulfur, prices of caustic, prices of methanol. So methanol prices have gone up. Caustic is relatively gone up. Naphthalene has doubled. Sulfur price has gone up seven to eight times. Those factors have affected increase in the HSC cost as well. So, but the price increase from $500 to $1,600, $1,800 is much larger than the increase in the cost. So, the incremental margin is...

Okay, okay.

Thank you. Next question is from the line of Ishaan Bhave from Fed and Asset Management. Please go ahead.

Sir, last time in the call, you had talked about going to the LME event to secure proper sourcing for the new downstream project. Could you elaborate a bit more on that?

Yeah, so we, our entire team participated in LME event, LME Week, you know, about last month. Very, very productive, you know, very informative. Poppers' future, metals' future, right? How the supply demand looks like, you know, how the price ranges are getting defined for next year's supplies. Which are the quantities available from which mines, which processor, right? What is everyone's outlook on next year particularly? All important information along with the networking of major players in the market took place when we were there. And now we have fairly good visibility. We will have almost 80% of our requirement. To be secured visibility on copper concentrate, as well as other, you know, copper semifinish products. So we have got better visibility, we have got few more quantitative assurances from the suppliers, and we are satisfied, you know, to come to almost 80% of our total requirement to get almost lined up. Or our book for sourcing is stacking up to the needs, which is quite positive, in fact.

Also, one last thing. With these changing proper prices that are happening at a very regular basis, what do you think might happen if proper prices go down? How would it impact our new ongoing project?

The most important part, there are two things. When we started and when we conceived this project, the copper price was around $8,000 LME. Today it is $14,000, correct? And the processing business of copper is pretty standard business where you get a spread between LME minus sourcing and LME plus sourcing. Just to answer your question, the spread between LME minus to purchase and LME plus to sell, depending on products you sell, right? That spread remains constant irrespective of the, you know, LME prices, number one. Number two, the risk what you carry is an operational risk between buying the raw materials and selling the finished goods. And I think all the seasoned players in copper globally, you know, there is an established process to do hedging, and there is a separate desk for hedging, and we will have the same, and every purchase is hedged with a price. You know, with the time, with every sell that we are going to make, correct? So it's completely hedge. It's, you know, it's 100% hedge business on the purchase and sales side so that you don't either make anything on the higher fluctuation on the higher side or you don't lose anything on the lower fluctuation on the lower side. But your spread continues to remain constant and consistent. So that is the business model.

Thank you so much.

Thank you. Thank you. Ladies and gentlemen, we will take this as the last question for the day. I now hand the conference over to the management for the closing comments.

Thank you all for participating in this earnings conference call. I hope we were able to answer your questions satisfactorily and at the same time offer insights into our business. If you have any further questions or would you like to know more about the company, please reach out to our investor relations managers at Valorum Advisors. Happy Diwali to all of you. Thank you. Wishing you the greatest day ahead. Thanks a lot. Thank you.

Thank you very much, sir. On behalf of Kiri Industries Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.