Gulshan Polyols conducted conference call on 09 November 2022 to discuss the financial results and performance of the company for the quarter ended September 2022. Ms. Aditi Pasari - Joint Managing Director, Ms Arushi Jain - Joint Managing Director and Mr. Rajiv Gupta - Chief Financial Officer of the company addressed the call

Highlights of the Concall

• Revenue from operations have remained stabled to Rs 276.38 crore in Q2FY23 from Rs 277.28 crore in Q2FY22 owing to peak utilization of its capacities. However, the company continued to witness robust demand for its product across all the three segments.

• The products continue to maintain their dominant market share. However, the commodity headwinds prevalent in Q2FY23 in the form of higher raw material costs (primarily cost of rice and maize), up by approximately 20%-35% and elevated coal prices, which almost doubled and hovered around their all-time high during September 2022, have put pressure on our operating margins.

• EBITDA decreased by 57.0% from Rs 47.40 crore in Q2FY22 to Rs 20.39 crore in Q2FY23 and margins contracted from 17.1% in Q2FY22 to 7.3% in Q2FY23 owing to elevated commodity prices impacting raw material and power & fuel cost.

• The company is observing softening in the price of key raw materials owing to increasing grain reserves as asserted by the government, ban on export of damaged rice and setting in of the new kharif crop. Further, the increasing production of coal in South Africa and China has led to cooling off of the global coal prices and will positively impact it in the upcoming quarters. Additionally, the recent price increase of ethanol from sugarcane is reflective of government's continuous effort for compensating the elevated costs of production.

• Grain processing segment is manufacturing segment is based out of two locations - Bharuch district in the state of Gujarat and Muzaffarnagar, Uttar Pradesh which has a combined capacity of 150000 tonne which the company is looking to expand capacity by 20% in the coming year. Capacity utilisation is 100% of both the plants.

• In the Grain Processing segment, the company continue to remain one of the top manufacturers of sorbitol, fructose syrup and maize starch in the country. All of its product continued to showcase healthy demand in particular the demand for maize starch, used in semi-kraft paper, has increased led by the exponential growth in the e-commerce industry. In order to meet the increased demand, its capacity expansion plan to enhance capacities by 20% in grain processing segment is proceeding on schedule.

• Currently the company has a 50 KLPD ethanol plant at Chhindwara in Madhya Pradesh. Current capacity utilisation is 110%.

• In the Ethanol (Bio-Fuel)/Distillery segment, the company capex plan for establishing a 500 KLPD ethanol facility in Madhya Pradesh is progressing well and a loan of Rs 120 crore has been disbursed from HSBC as of 30th September 2022. The plant's operations are expected to begin in Q4FY23 which will establish us as dominant player in grain-based ethanol and support the current 60 KLPD facility which continues to operate at more than 100% capacity utilization. The developments at Assam plant are also progressing as planned.

• The company expect the revenues from its contract with Meghna Pulp & Paper Mills Limited to start yielding results in upcoming quarter in the mineral processing segment .

• The company aims to grow its revenue by expanding its product portfolio through continual R&D and improve its margins by increasing contribution from higher margin products.

• The company had a total sanction of Rs 170 crore from HSBC for the construction of the 500 KLPD facility at Borgoan, Madhya Pradesh. Rs 120 crore has been utilized till September 30, 2022. The company is expected to commence its 500 KLPD plant operations from Q4FY23.

• The company expects its revenue from operation to double by FY24, on back of significant capacity expansion in Ethanol (Bio-Fuel)/Distillery and Grain Processing segment.

• The company expects incremental revenue from the 500 KLPD facility at Borgoan, Madhya Pradesh as operations expected to commence towards the end of H2FY23. Also it expects resumption of normal growth from existing business capacities going forward.

• The company expects EBITDA margin to improve to 10%-12% corridor in H2FY23 due to softening of basic raw material prices and declining coal prices which will lower its power and fuel cost