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00:00S.K.

00:01Natharajan, Managing Director at Galaxy Surfacants joins in now.

00:04Hi, Mr. Natharajan.

00:05Very good morning.

00:06Thank you very much for joining us.

00:08On the face of it, it's tough for us to tell whether it's been a good quarter and what

00:12really lies ahead for you in F525.

00:15So let's start with the picture in terms of demand.

00:19Last quarter as well, demand looked healthy.

00:21You had guided for a volume growth of 6 to 8 percent, which you've managed to maintain

00:25in this quarter.

00:27Last time around, rural demand outpaced urban consumption.

00:30Does that trend still remain and are you pretty confident that you will be able to make 6

00:36to 8 or 8 to 10 percent volume growth for the rest of the year?

00:40Good morning.

00:41Thank you for having me on the show.

00:45Yes.

00:46So it's been a good quarter with volume growth across all the geographies that we cater to.

00:53In India specifically, I think things are looking better.

00:57Rural demand is coming back.

00:58And more importantly, the rest of the world has started coming back with a good amount

01:04of robustness.

01:05So with all this working well, I think we should continue to keep hitting at the higher

01:11end of the guided range of 6 to 8 percent of volume growth.

01:16The only caveat here is that the supply chain situation shouldn't worsen from here on.

01:22We have learned to manage the situation the way it is, but any worsening of the situation

01:27further can be a headwind.

01:30But then we remain positive.

01:32Talk about those supply chain concerns, because I know freight costs are higher, lead time

01:36is longer, Red Sea crisis is still not completely behind us.

01:40But split it up between domestic and your international market, right?

01:45If you can tell me what sort of volume growth you're expecting on both those fronts and

01:49what's the market share for exports and the local market as well, would be helpful.

01:56If you look at India's market, I think most of our customers have reported volume-led

02:05good performance in the first quarter of this year.

02:08I think they've been reported close to an average of about 3 to 4 percent volume growth.

02:15We do expect this to pick up in the coming quarters, with all of them indicating that

02:20they're seeing a good amount of green shots in terms of rural demand picking up.

02:25And with the current budget, which puts a good amount of money in the hands of the rural

02:29consumers, I think this is always well for the India demand growth.

02:34With regard to the export market, Africa, Middle East, Turkey, we've continued to maintain

02:40the momentum in the last three quarters after close to almost six, seven quarters earlier

02:45of a very dip in growth.

02:47We do see that this continuing and with the rest of the world, which is what was impacted

02:53in the previous year in terms of the restocking that was happening and the absolutely low

02:58demand in Europe, that has started getting better.

03:03And we did record almost close to 25 percent of volume growth year on year with regard

03:07to the rest of the world market.

03:09And we do expect this momentum to continue.

03:13So this is reflective of the sort of business model we have.

03:16So the sort of geographical reach that we have enables us to manage the situation in

03:22a way that we are able to grow across the geographies and then able to take care of

03:27balancing any issues that we may have in one of the geographies.

03:31Mr. Natarajan, good morning.

03:33Tamanna here and great to speak with you on this quarter.

03:37Last time when you had spoken to us, you had talked about the Red Sea crisis and how

03:42this was, you know, making things difficult.

03:45I just want to get a sense if this sort of headwind is behind you now and in terms of

03:52how that impacts freight rates and geographical growth, how do you see that panning out?

03:57Do you see the big push continuing to come from ROW or rest of the world?

04:03I see the Red Sea crisis is continuing.

04:08We do see the challenges in terms of availability of slots on ships.

04:15We have increased transit times.

04:17Freight rates have more than doubled in most of the geographies.

04:21Last quarter saw incoming freight situation worsening with congestion happening across

04:27all the ports in Southeast Asia and India as well, like Thailand, Singapore, Malaysia,

04:33India, all of them had conditions which elongated our clearance time as well.

04:38So, what we see is that our team has managed to adjust to this new normal and if things

04:46remain as they are, we do see this momentum continuing well and we can leverage on the

04:51growth opportunities that we have in the various geographies as we have done in the first quarter.

04:57In terms of your segmental mix, just want to understand how the speciality segment is

05:03moving or going to go ahead and how you see that panning out.

05:08You have seen a low teens volume growth there.

05:10Is that sustainable?

05:12And as well as for surfactants, I know overall you have guided 6 to 8 percent.

05:16Does that continue and what is the mix that you see between these two segments?

05:22This quarter actually the speciality segment grew pretty significantly.

05:26We grew by about 15 percent.

05:28The performance of surfactants grew by about 5 percent.

05:32So, combined we delivered about 8 percent of volume growth.

05:35The speciality segment, I think what we are looking forward is in terms of our premium

05:41specialities which actually got a little bit of a headwind because many of the customers

05:47in US and Europe stopped progressing on projection pipeline because of the destocking that happened

05:53there in the low demand environment.

05:55Things have started picking up.

05:56So, we do see in the coming quarters the premium speciality ingredients that we have should

06:01start gaining traction.

06:03But speciality segment, we are pretty enthused with the way that it has delivered over the

06:09last two quarters and we do expect this momentum to continue.

06:13So, while volumes is solid, demand is picking up, what is happening on margins?

06:19This quarter as well margins are coming slightly softer than what we have seen in the same

06:24quarter last year.

06:25You have already mentioned a few concerns and the fact that your fret costs are much

06:29higher today.

06:30What is the outlook on the margin front?

06:33Is there any upside risk to margins for the rest of the year?

06:38We do see margins getting better from here on.

06:42This quarter typically also got impacted in terms of the higher freight rates which gets

06:46passed on with the lag.

06:47So, we do see that getting taken care in the coming quarters.

06:50Plus, as I said earlier, the premium specialities ingredients business are gaining traction

06:57in the developed markets in the coming quarters.

06:59All is well in terms of our margin growth as well.

07:04I am assuming the margin range will sustain at this.

07:1012.5, 13, 13.5, 14 is largely what we should be expecting as a street.

07:16Last time around it also talked about investing close to 150 crores for maintenance and de-bottling

07:22initiatives.

07:23How are you in terms of capacity and what are the plans there?

07:28Any expansion plans?

07:29You have talked about how you are open to inorganic acquisitions as well.

07:32So, you want to walk us through what is happening on the M&A side of things?

07:36First of all, on the EBITDA margin, we typically do not look at margin percentage.

07:41We guide the market EBITDA per metric ton of 20,500 to 21,500.

07:46So, that is a better indicator of the way that we are able to manage our portfolio.

07:51The second with regard to CAPEX plans, it is very much on track in terms of the 150

07:56crores per annum that we are talking about.

07:59It is happening across India and Egypt.

08:07I forgot your last question.

08:11About the fact that capacity currently is well managed from what I understand.

08:17Are you looking to add additional capacity?

08:20Keeping in mind that the future is probably going to be better than the times that some

08:25of you and your industry peers have seen in the past?

08:30Yes, we currently have about 70% capacity utilization.

08:33I think with the capacity additions that we are looking at, we are preparing well for

08:37the future because we do see that the environment is going to be pretty good moving forward.

08:43There are some challenges now, but the long-term structural story is extremely exciting.

08:48We are preparing for the future and we are well positioned to cater to the increasing

08:55demand that we are seeing in these markets, both on the performance-affected side as well

09:00as on the special ingredients side.

09:03Just one last point, Mr. Natarajan.

09:07What is the non-organic growth path looking for you for the year ahead or even further?

09:12Any acquisitions on the anvil?

09:15I think there was some talk that you would be looking at this route.

09:20We are actively looking at it and we have a criteria basis which we would want to move forward.

09:27Once all the boxes get ticked, I think we will go ahead.

09:34I would like to say here only that we are actively looking at opportunities and we should

09:40see as to how it progresses in the coming months.

09:44Okay.

09:45We will hope to hear something soon from you.

09:47Thank you so much, Mr. Natarajan, for speaking with us.

Subdued Q1 For Galaxy Surfactants | NDTV Profit

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