Release Date: May 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Pondy Oxides And Chemicals Ltd (BOM:532626, Financial) has completed the acquisition of 123 acres of industrial land in Mundra, Gujarat, positioning the company strategically for better service in the Western area and expanding its export potential globally.
- The company is expanding its lead production capacity from 132,000 metric tonnes per annum to 204,000 metric tonnes per annum in two phases, with the first phase expected to go live in Q3 '24-'25.
- POCL has achieved top-line revenues of INR42 crores in the aluminum division and INR21 crores in the plastic division in its first year of operation.
- Revenue from operations increased to INR1,524 crores, up by 4% from the previous year on a standalone basis, with consolidated revenues rising to INR1,541 crores.
- The company has reduced its consolidated net debt by 52% to INR71 crores compared to INR147 crores last year, resulting in a net debt to equity ratio of 0.2.
Negative Points
- EBITDA and PAT margins showed a slight drop of 0.5% and 0.7%, respectively, mainly due to a reduction in margins of other new verticals and increased finance costs.
- The company faced a delay in customer orders, pushing some sales from March to April, which impacted Q4 performance.
- The aluminum division experienced a significant downturn, with only INR2 crores of revenue booked in the last three months, reflecting a challenging market environment.
- The company is still in the feasibility stage for its green lead project, indicating potential delays in commercial viability and scaling.
- The EPR (Extended Producer Responsibility) guidelines and penalties are not yet finalized, creating uncertainty in the market and potential future financial impacts.
Q & A Highlights
Q: Could you provide an update on the progress of the MOU with the Tamil Nadu Guidance?
A: We have initiated work at the Thervoykandigai plant in Tamil Nadu, focusing on expanding lead production by 72,000 metric tonnes per annum in two phases. The investment program of INR300-500 crores will span over five years, with the initial CapEx of INR70 crores funded through preferential allotment.
Q: How has the MOU with Tamil Nadu influenced the company's financials?
A: The fundraising strategy will have an equitable mix of debt and equity to reduce the overall weighted average cost of capital. The investments will increase margins and the top and bottom line over time, resulting in robust financials.
Q: How has the company adapted its strategy to mitigate potential impacts on operations?
A: We have diversified our portfolio and are focusing on building a strong procurement base, targeting Tier 1 customers, better capacity utilization, long-term contracts, operational efficiencies, and ESG goals to mitigate impacts on operations.
Q: What are your views on near-term global market conditions and their impact on Pondy's production costs and business operations?
A: The global economic scenario remains volatile, but POCL has consistently delivered results by overcoming business cycles. We have a large customer and supplier base in diverse geographies and are expanding our domestic footprint, which helps mitigate global market impacts.
Q: Can you brief us about the acquisition of land at Mundra, Gujarat?
A: The 123-acre industrial land at Mundra is strategically located 16 kilometers from the port, offering cost advantages for importing raw materials and exporting finished goods. This acquisition gives us a footprint in the Western region, complementing our existing Southern operations.
Q: What is the future guidance for top-line growth in FY25 and '26?
A: We are targeting a revenue range of INR1,800-2,000 crores for FY25, aiming for a CAGR of 20-25% year on year. This growth will be driven by our strategic acquisitions and project executions.
Q: Considering the reduction in EBITDA and PAT margins, what are your future guidelines?
A: Lead margins remain intact at 6.3%. The reduction in overall margins is due to increased finance costs and new verticals. We expect margins to improve as new verticals stabilize and operational efficiencies increase.
Q: What is the revenue contribution from segments other than lead?
A: In FY24, the aluminum division contributed INR42 crores, and the plastic division contributed INR21 crores to the revenue.
Q: Why did the company have low smelting capacity compared to overall capacity earlier?
A: Lead production can occur without smelting capacity by using lead scrap, but it is more expensive. We are increasing smelting capacity to 160,000 tonnes per annum to enhance backward integration and cost efficiency.
Q: What are the CapEx targets for FY25 and FY26?
A: We plan to invest about INR100 crores each year in FY25 and FY26, focusing on expanding lead production and other strategic projects.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
