Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue from operations grew by 19% year-on-year to INR168 crore on a standalone basis.
- Consolidated revenue for the first quarter increased by 17% year-on-year to INR265 crore.
- EBITDA on a consolidated basis improved to INR18.08 crore from INR10.93 crore in the previous quarter.
- Operational expenses have reduced, mainly due to a decrease in legal fees.
- The company is embarking on a significant new investment project in the copper and fertilizer sectors, with potential for substantial future revenue and profit.
Negative Points
- Net loss post depreciation for the quarter was about INR2 crore on a standalone basis.
- Gross material margins are still below the peak levels, currently hovering around 23% to 30%.
- The company is facing ongoing legal challenges related to the DyStar case, including appeals from both Kiri and Senda.
- Legal costs are expected to increase again in the next two quarters due to the ongoing appeals process.
- The new investment projects are in sectors where the company has no prior experience, posing potential execution risks.
Q & A Highlights
Q: Can you provide an update on the enblock sale process?
A: The enblock sale process is progressing efficiently. Deloitte, as the receiver, has taken several steps to commence the sale of DyStar. The information memorandum or the sale process is expected to be officially launched within a week or two. The due diligence is almost complete, and there is significant interest from prospective buyers, with around 70 parties showing interest. The entire process should be completed by June 2025.
Q: What is the current performance of DyStar, and how does it impact the enblock sale valuation?
A: DyStar's performance has been strong, with an EBITDA of around $55 million for the first six months of the financial year. The company is running at an EBITDA level of $100 million-plus annually. DyStar has a strong financial position with $570 million in cash and net current assets of over $850 million. This robust performance positively impacts the enblock sale valuation.
Q: Why is Kiri Industries entering the copper and fertilizer business, and what is the rationale behind the INR5,000 crore investment?
A: The decision to diversify into the copper and fertilizer sectors is driven by the need to align with India's growing market and reduce dependency on imports. These sectors are expected to see significant growth in the next 10-20 years. The investment will be phased, with the first phase focusing on copper production and the second phase on fertilizers. The company has already onboarded experienced professionals to lead these projects.
Q: What measures are being taken to ensure the DyStar sale process is fair and transparent?
A: Deloitte, as the receiver, is ensuring the value of DyStar is preserved and the sale process is conducted transparently. The process is confidential, and all bidders are treated equally. Deloitte will decide the best offer based on the highest bid and proof of funds, without disclosing information to the shareholders.
Q: Are there any potential delays in the DyStar sale process?
A: The only potential delays could be related to regulatory approvals required by prospective buyers. However, the court has set a long stop date of December 2025, and both parties are not allowed to apply for extensions. The process is expected to be completed within the stipulated timeline.
Q: What are the expected financial outcomes from the new copper and fertilizer projects?
A: The first phase of investment, around INR2,400 crore, is expected to generate revenue of approximately INR15,000 crore. The second phase, with an investment of INR4,000-5,000 crore, is expected to generate around INR25,000 crore in revenue. The total profit after tax from both phases is projected to be around INR3,000 crore.
Q: How will the proceeds from the DyStar sale be utilized?
A: Approximately half of the $604 million proceeds from the DyStar sale will be invested in the new copper and fertilizer projects. The remaining amount will be kept as a buffer or safety net and may be deployed for future opportunities.
Q: What is the current order book status for dyes and dye intermediates?
A: The order book for dyes is around 1.5 months, while for intermediates, it is less than a month. The company is operating at 50% capacity utilization and aims to increase this to 70-75%, which will reduce the order book duration.
Q: What are the expected legal costs until June 2024?
A: The expected legal costs until June 2024 are approximately INR15-20 crore cumulatively.
Q: Are there any plans to increase the promoter stake in Kiri Industries?
A: Yes, there are plans to increase the promoter stake, and appropriate disclosures will be made at the right time.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
