In an interaction with Maulik Patel, CMD, Epigral Ltd

We have witnessed improvement quarter on quarter, even when the overall chemical industry was under pressure, says Maulik Patel, CMD, Epigral Ltd.

Can you outline the key financial highlights for Q3FY24, including the reasons behind the fluctuations in revenue, EBITDA, and PAT?

Epigral witnessed growth quarter on quarter in profitability till Q3FY24. Our revenue remained almost flat in Q3FY24 vs Q2FY24 as the demand scenario didn’t improve as expected. However, operating profit (EBITDA) and PAT improved by 14 per cent and 29 per cent respectively on a QoQ basis.

In fact, the EBITDA margin of Epigral has improved every quarter from Q1FY24 onwards. EBIDTA stood at 26 per cent in Q3FY24 vs 21 per cent in Q1FY24. We were able to improve our margins on account of a diversified business model where newly commissioned products contributed when the Chlor-alkali business in FY24 was under a bit of pressure. So, we have witnessed improvement quarter on quarter, even when the overall industry was under pressure.

What specific strategies are in place to increase revenue contribution from the derivative and speciality segment, and how do you foresee this segment's growth trajectory in the coming quarters?

In FY2019, 100 per cent of our revenue was coming from Chlor-Alkali business. Since 2018, we decided to add Derivatives & Specialty products to our portfolio to diversify our business model and consume Chlorine and Hydrogen in-house and strengthen our integrated complex.

In the last four years, we have commissioned Chloromethanes, Hydrogen Peroxide, Epichlorohydrin and CPVC Resin. As a result, today we are equipped to cater to more than 13 industries. As of 9M FY24, 58 per cent of revenue comes from the Chlor-alkali business and 42 per cent of revenue from the Derivatives and Specialty business.

This strategy has played a key role, especially in FY24, when markets were dull. Moreover, the percentage revenue contribution from the Derivatives & Specialty segment will keep on increasing as our future all capex is towards the Derivatives & Specialty segment.

Can you provide insights into the company's current capex plans and their execution?

We commissioned Epichlorohydrin, CPVC Resin and an additional capacity of Caustic Soda in FY23, which has contributed partially in FY24 in terms of volume growth. Similarly, the capex planned for FY24 will be for the Chlorotoluenes Value Chain, additional capacity of CPVC Resin and CPVC Compound, which is expected to drive volume growth for FY25 and FY26.

In FY24, we will spend around Rs 370 crore in Capex while for FY25, we have estimated to spend around Rs 300 crore on capex towards Derivatives and Specialty segment, targeting consistent growth.

Could you give an outlook on the chemical industry?

FY2024 was the lowest for the chemical segment in the last 15 years. The industry faced issues related to overstocking which led to destocking globally, subdued demand on account of higher interest and oversupply on account of commissioning of new expansions.

However, we observed that the performances of companies which majorly focused on domestic business improved Q-o-Q as compared to those that were export-oriented.

Globally, we believe demand may revive in the second half of FY25 and believe that FY25 will be better than FY24.

Currently, what are your top 3 strategic priorities?

We have been focusing on our capex to grow our business on a volume basis and currently, our top three priorities include:  

1. Ramping up our plants – focusing on the additional capacity of CPVC Resin, CPVC compound and Chlorotoluenes value chain, which will be commissioned soon.
2. Strengthen our downline value chain of Chlorotoluenes through innovation & research; the R&D centre that we inaugurated in November 2023 will help us distinguish ourselves as innovative chemical manufacturers in India.
3. Announce and initiate new projects for consistent volume growth, thus, lending growth to our topline as well as bottom line.

Through strategic capex plans and a focused business strategy, we wish to make India Aatmanirbhar on the chemicals and speciality chemicals front in the coming years.