In terms of the recovery expected in H2, how are you seeing these volumes picking up in subsequent quarters based on your interactions with customers?
So cautious optimism here. And I think all of them, just like us, are all waiting for some degree of clarity with regards to things like U.S. tariffs and overall the situation with regards to crops such as soya and corn and other things. So what we are seeing definitely is that moving forward, the number is no doubt higher than the 0 that it was in Q2. We are not aware of what it will grow to or plateau up to. But right now, what we have in clarity is that material movement is to begin from, I think, this month or next month onwards. And then there are discussions that are ongoing with regards to volumes with regards to diversified geographies where now even China and other regions like India have come into play. So there are multiple conversations that are taking place. Rest assured that on these fronts, especially on these kinds of agrochemical intermediates, we are looking at more traction in H2 than in H1.
What will be the Y-o-Y volume growth in phenol this quarter, and can you guide on FY26 overall volume growth on the phenol front?
In Q2, I think it was very moderate growth. I think it was about 2%, 3%, frankly. And we actually had a very hot summer in Dahej. And these large continuous plants prefer to have nice cool climates. So the cooler the winter, the more efficient our assets will be. We also had a pretty heavy monsoon. So I would say that in H2, we should be able to operate the plant and be able to squeeze out more output in H2.
How much have we spent on the Oman plant so far?
Oman will take some time. So maybe 24 months from now.
In the Advanced Intermediates segment, the 3% revenue decline year-on-year to INR 588 crore — could you give a split between volumes and prices?
I'll give you the answer, but the answer won't make sense because the value drop is from one direction where the volume is not high and the volume bump is in another direction where the margins are not high. Key chemicals being absent from our Q2 sales plan has been a significant contributing factor to the top line as well as the bottom line. But in other places, ironically, our production efficiencies and our throughput continue to remain high even in the face of dumping from China as we are ensuring that we maintain market share because whatever one says, important at this point is to ensure that we keep our plants running at optimized efficiencies, and we remain key in our customers' wallet shares. So we are confident that sooner or later, this kind of dumping either by policy measures or non-policy measures it will start to moderate to levels which have been traditionally there over the last how many years.
With Indians talking of using lesser Russian oil, feedstock prices can increase. Are you seeing that impact, and can it act as a negative catalyst in coming quarters?
See, feedstock prices in products such as toluene, benzene, xylene, normally, even if there are large Indian refiners, there is also a significant trade flow that takes place from Asia, from South Asia. Somehow you don't generally see these products being imported from China, but whether it is Korea, whether it is Thailand, Taiwan, etc, you do see a regular trade flow from these regions into India. And I think that, there is a short-term blip with regards to the dealer distributor network having some sanction threat over them. But other than that, I would not say that Russian oil sanctions would dramatically affect the prices on such things such as toluene, benzene, xylene.
When looking at the difference between Advanced Intermediates and the overall business, we've seen improvement over the last 2-3 quarters. Is it entirely Chem Tech or is there some contribution from polymer compounding?
No, not so far. We're optimistic. I think once the projects start getting commissioned, Chem Tech will become a significant contributor to the group's bottom line. But again, just to be clear that the products that are being made in Chem Tech are products which are largely familiar to the business teams in both Deepak Nitrite and Phenolics. So the teams are across the board working together to ensure that there is smooth project execution and commissioning. There have been delays in the last couple of quarters. There's no doubt about it. But we are starting to ensure that there is a greater degree of control and coordination. And that's why we are more positive about the commissioning dates, as I had mentioned earlier.
Could you please explain the sensitivity of your margins to fluctuations in propylene price, which is the raw material of phenol?
I've mentioned this earlier also, the index, I think because of these short-term challenges, is not a fair representation of the price at which we consume the feedstock. So I think it's a fair question, a good question, but maybe the same question, if it is asked next quarter or in Q1, I would be able to give you a more honest answer.
Can you provide guidance on revenue and profitability for the next quarter or the financial year?
Look, all I can say is that we are cautiously optimistic about H2, which is, I would say, better than what we saw in Q2. And this will partially come from what we hope is an improving market sentiment and a demand sentiment. And partially, it will also come from the commissioning of investments that are in that process in Deepak Chem Tech.
Any update on the BPA part — I think we are yet to finalize the technology?
I look forward to answering that question. Let's give the team the best opportunities they have to get the best technology possible. But just to be clear, rest assured, nothing in this value chain stops us from executing whatever has been signed off. So none of these things are dependent on something else happening first.
In the Advanced Intermediates business, you mentioned expecting better trajectory for select agrochemical intermediates in the second half. When those supplies to global majors were at peak level, compared to Q2 volumes, how much volume erosion has happened from those peak volumes?
In the second quarter, regardless of the peak volumes, the volumes that we sent were essentially 0 or close to 0. And this is because there was an intense, I think, 4 or 5 quarters of inventory destocking that took place. And hence, what ended up happening is that customers were essentially not even producing. They were only trying to release their own inventory of finished goods product. Now all of this also meant that the intermediates from our side were impacted, so basically, let me put it this way, that these products are conspicuously absent in our Q2 results.
Since we are in the process of commissioning the WNA and CNA plant, how are we placed in terms of our ammonia contracts, and how are we minimizing storage and transportation costs to minimize the impact of higher ammonia costs from domestic players?
We do have an alignment similar to the way that we have with regards to other key raw materials, which allow us to import ammonia as well as buy from domestic sources. So I think there is a fair diversity in terms of our ammonia sources. And generally speaking, the product that we are buying has a degree of linkage with regards to international indexes. Moving forward, I think from the end of Q3 onwards, anyways, we've already commissioned a storage facility about last year, which about doubled our storage against our consumption. And now I think it will be roughly about 15x how much we would have had over these many years. Now we have multiple storage facilities that are all feeding into our consumption point where pipelines. And we already have in place also a network of tankers that move. Now I think from Q4 onwards, not only will our consumption capacity increase almost to a double or more, but our storage facility will be equal to about 15 days of the higher consumption as against maybe 1 day that we have had for the last 40 years.
Can you share the capacities for both WNA and CNA plants?
I'll tell you the nameplate capacity, but you can reflect on our ex all that nameplate capacity is only a challenge to see how we can overcome. So we would be on an annualized basis, I think, producing roughly between 250 to 270 tons per day. And I think somewhat close to that with regards to concentrated acid, maybe slightly lower because we also are large consumers of WNA.
For the Nitric Acid plant, would it be fair to assume that initially we would try to maximize plant utilization and sell excess production to cover fixed costs, or would it be only for captive consumption?
No, we will make sure that we've been aggressively increasing our nitration capacity and also, in many cases, our hydrogenation capacity. So we're looking at significantly increasing our own self-consumption because that's where we will make more margin. I'll just put it in a simple way. Our Nitric Acid plants will be pushed to their limits regardless of anything. So our consumption plan is happening independently and aggressively, but our Nitric Acid production plan will happen aggressively of its own accord.
The debottlenecking was supposed to grow capacity by around 10%. Shouldn't summer-to-summer show a 10% volume growth, or is there some other constraint in the domestic market?
Let me just clarify. This 10% was something that we said earlier. So I'm not sure about what base it was set on. This was, I think, several quarters ago. So that we have already achieved. That is behind us. Look, honestly, Arun, every quarter, the team says that they're looking at maybe 4% opportunity to debottleneck. And then every quarter, they achieve it and then they come back saying that, okay, now we've identified some other places where we can optimize. So this is an ongoing activity. Even looking ahead, they have similarly come back with the same commentary that they have given every single quarter that while they achieved last quarter's efficiency improvement numbers, they believe that there is some headroom left, and they are targeting to do that. And generally, all of this is around with, I would say, either 0 or insignificant CAPEX. So this is all an efficiency improvement from the plant side.
Can you provide a breakup of the INR 2,000 crore in the balance sheet across the various projects under commissioning, and how much will be capitalized in the next 6 to 8 months?
Most of this is not on phenol and polycarbonate. So Nitration, hydrogenation and fluorination in Dahej, this would be over Nitric Acid in Nandesari. This would be over the R&D facility. This would be over a couple of other multi-purpose plants. So the R&D facility was commissioned. The hydrogenation was commissioned. Nitration will be commissioned at some point either this month or early next month. Nitric Acid will be commissioned this quarter. It's in the process of being commissioned, in fact. And then you will have some balance, the multi-purpose plants, which are going to be commissioned between March and May 2026. And finally, MIBC and MIBK, which will be commissioned by March 2026. And that will be then taking care of all of that INR 2,000 crore that we had announced into specialty chemicals and upstream integration.
Can you confirm that the INR 2,000 crore will be largely fully capitalized by June 2026?
Most of it in this year and I think 2 projects will be commissioned in the first quarter of next year. So by June 2026, I think June end, everything will be done, whatever we had announced.
When can we see the full impact on both the revenue and the bottom line from these projects — by June 2026 or a little elongated?
When it is for upstream integration such as Nitric Acid, we start running hot as soon as we are able to because we don't foresee any challenge in consumption. In nitration, and hydrogenation also, we will see how quickly we can go to 100%. But for the multi-purpose plants, which are going to be commissioned between March and June 2026, there, there will be a ramp-up based on customer validation and on the basis of those stability trial things, which traditionally take anywhere between 3 to 5 months. So there, we will have some production and it will be over 70 customers. But then high operating rates will be from, I would say, mid Q3 onwards, which will then arrive at the end of December or December onwards. So that's how it would be.
On the agrochemical intermediates export stop - are U.S. tariffs also a factor, or is it purely an end demand matter?
The U.S. tariffs have been spread across the whole world. So nowadays, everything is one way or another linked to U.S. tariffs, either the anticipation of tariffs being withdrawn or the imposition of new tariffs or the uncertainty about what is tariffed and what is not tariffed. So this creates a lot of uncertainty in the customers' perspective. I would rather say that while tariffs are certainly a significant portion of the uncertainty, in Q1 and in Q2, but mostly in Q2, the gap has been genuinely simply because of an inventory buildup, which it took a lot longer than it should have to deplete itself. So when our customers are not producing, they are not in a position to buy our intermediates. Moving forward, it is more linked to the consumption plan rather than just the tariffs. The tariffs will, of course, affect the intensity of the consumption.
Are there any preoperative expenses within Advanced Intermediates depressing the results, and if so, can you quantify the impact?
There are expenses which is a part of this. To quantify, it will be around INR 15 crore for the quarter.
Was the preoperative expense a similar number in Q1 as well?
Yes, yes. Similar number.
On the new products proposed for Advanced Intermediates, can you share incremental color on end users, growth potential and revenue potential?
I'm delighted to share that I think we have started production of 7 new products in just Q2 itself. And these are all homegrown, home developed products, which we did not really require any technical technology licensing or anything. All of these products for example, it is into life sciences in another 3 cases, these are into what we call effect chemicals. So they go into applications such as polymers, flame retardants, mining chemicals, etc. Now all of them do have a validation and an approval cycle. I think a large amount of them would go to customers in Japan and in the EU. So they do have a validation cycle required. Happy to share that our product specifications so far have exceeded what is available in the market as told to us by our customers. These qualification cycles can take as little as 3 months or as much as 5 months. And I think by some point, maybe towards the end of Q4 or the middle of Q1, we would be able to have an aggressive ramp-up on all of these. All of these will be done in existing assets themselves. And they will be done in campaigns. All of them have good margin profiles. And they will factor significantly in our FY27 numbers and completely in our Q2 FY27 numbers, but they will start to feature in Q1 as well.
What is the total investment in these new products? Is this part of the multi-purpose plants?
In a couple of cases, yes, for agrochemicals, I think one pharma product, it will be in the multi-purpose plant. In the others, it will be in existing plants, which have already been refurbished to make them more compliant to these stringent specifications. So other than the multi-purpose plant investment, nothing else is, I would say, a significant capital investment, maybe small things such as solid handling systems and powdering systems, HVAC systems, those things. So these are all what we consider as minor.
On agrochemical value chain upgrade — when should we see those products commercializing and will the effect be visible in the second half? Also, on phenol spreads — is it a demand or supply side issue, and where are supplies coming from? Also, which products and geographies are facing Chinese dumping?
On dumping: the significant amount of dumping that we are finding from China would be in products such as sodium nitrite, would be in products such as DASDA, which is an intermediate to make optical brighteners and in a couple of cases of nitro aromatics. Now obviously, it is always going to be a fight about maintaining wallet share versus maintaining a price premium. On phenol spreads: right now, we are in a very strange position where you've had a lot of these situations such as a few traders and distributors in India being sanctioned by the U.S. Government. There has, therefore, been a curtailment of the normal trade flows that one would see between South Asia and India in terms of the large volume petrochemical products. So what you're seeing as indexes are different from what is being felt on the ground in terms of the ease of availability or the premium that is charged over and above the index to service the Indian market. So what turns out to be a negative for the AI segment because of a challenge in bringing petrochemical products into India also turns out to be at least a short-term advantage for Phenolics.
On moving up the value chain in agrochemicals — where are we in the process and when should we see these products commercializing?
Our ability to commercialize will be within the quarter. We're speaking with a couple of potential strategic partners to see how we can do it together, which allows them to have an expanded presence in India without needing to put steel on the ground. What we've also done in the meanwhile is assets which are used for making one agrochemical intermediate are now fungible towards being able to make other agrochemical intermediates or other life science intermediates. So most of our assets over the last 6 months have been made increasingly fungible because we are continuing to anticipate a degree of volatility that we have not seen in the previous few years. First and foremost, our focus has to be to see that we can do multiple products in the same plant in a campaign basis or by saying, okay, let's break this plant up into Stream 1 and 2.
Where are we on the compounding business right now? Have we started that asset and started testing the market?
So we put up a polymer compounding facility, which I would still call a pilot facility in Savli. And this is a state-of-the-art facility. So this is allowing us to create formulations, which are in their validation process. But now in compounding, these validations, unlike agrochemicals and other products, these validations can take up to almost maybe a year or 18 months. So that's the reason we started early, and that's the reason that we have started seeding this. So we've been getting a lot of positive traction on that front. What we're also starting to do is engage with potential strategic players who are already there in this space to see if there's opportunities to approach jointly for certain applications where there is IP on which they have and an interest and intent in getting into the Indian market.
On the cost control measures seen in the standalone business — should we expect this run rate to continue?
Yes, yes. I mean that is an ongoing exercise. In fact, I had mentioned in last conference call also that the Company is actively pursuing the cost-cutting measures because the market being whatever it is, these tariffs, I mean certain things are not in our control. But cost cutting or reducing the spend on this, we can certainly do and you are seeing in the first half and you will see in the second half also. Going forward, there will be reduction in the fixed cost over and above whatever we have achieved so far.
The CAPEX guidance for this year was about INR 1,500 crore. Are you holding on to that?
More or less same.
For the downstream integrated polycarbonate project, how should we think about CAPEX for fiscal 2027 and fiscal 2028, and can you provide an update on commissioning timelines?
Commissioning, we had mentioned earlier, it will be in the month of January to March 2028 quarter. And we are trying to see all the project goes on stream by and large at the same time because it's a very integrated approach we are taking. So some project may start late. But ultimately, completion should be during the same time. Now we are still working on 1 or 2 products on that. So on the exact dates we will come back to you later. But by and large, our endeavour is to complete at the same time by March 2028. If there's a delay in propylene supply, then we may have to push back our project also or we may run through imported BPA.
Can you give an indication of CAPEX spend over the course of this March 2028 startup — for fiscal 2027 and fiscal 2028?
You want the CAPEX outlay for next 3 years. It will be around INR 3,000 crore to INR 4,000 crore. Because the total outlay is around INR 9,000 crore. So, INR 3,000 crore, INR 3,500 crore this year and then INR 4,000 crore next year.
How does the new state-of-the-art R&D center at Savli combined with Deepak's existing digital and intellectual capital enable a more nimble and multi-purpose incremental CAPEX approach, avoiding prolonged rigidity risks associated with large dedicated CAPEX in a volatile world?
The R&D facility has a 3-pronged approach to it. One is to develop new molecules. The other one is what we call process intensification, how to make the same molecules more efficient. And the third one is to basically look at processes independent of each other. For example, I have a plant that makes sodium nitrite or I have a plant that makes nitrotoluenes. What can I do using AI? What can I do using the data lake that we have generated? And what can I do to identify other products that can be made in the same reactor assembly without compromising on safety. One of the key things that we have done, thanks to that is, as I mentioned, we have genuinely accelerated our ability to take products from idea to commercial. Now they do appear to be attractive to customers, but they have to go through their validation period. And we've cherrypicked ones which would be made using assets where there is currently a lower occupancy. By the end of next year, we will be at least in India, a company that has the maximum amount of chemistry platforms under one house compared to any other Indian chemical company.
Given India currently imports all polycarbonate, what market intelligence beyond 'import substitution' underpins conviction in future domestic demands from EVs, electronics, and healthcare?
A lot of the investment that is going into all of these, what we would call sunrise segments in India. What I qualify in India is a second-mover advantage where a lot of these applications are already finding a high degree of maturity and acceptance. Polycarbonates are the backbone in a sense. What is important is the changing formulations and the compounds that are created by using polycarbonates as a backbone. India actually imports a substantial amount of the polycarbonate backbone itself. Our effort, step 1 has been to make polycarbonate as cost efficiently as possible. But what we've done is, in the meanwhile, we have gone downstream and we started seeding ourselves into the mind space and the factory space of our customers to say that here, we are offering you compounds, which are made using polycarbonate as a backbone. Now as these compounds start getting accepted and validated at our customers' end, those are electronics, those are things like mobile phones and auto components and those things. Then it will just simply look like polycarbonate manufacturing was an upstream integration.
On the polycarbonate project — working backwards from the March 2028 start date, what are the latest periods for finalizing engineering, ordering long lead items, and breaking ground?
I think I can just say one that we've already broken ground, first of all. So there is already a site development that is taking place. In the meanwhile, we've already appointed the dismantling contractors in Q1. Dismantling has already started in Stade in Germany. We have also, as I mentioned, as Mr. Upadhyay clarified, that this is our goal with regards to ensuring that this is an integrated complex. If there is a mismatch in timelines for whatever reasons, we have already ensured that the investment includes that degree of flexibility where we are able to afford a degree of mismatch.
The endeavour is to start polycarbonate resin capacity before the deadline but flexible on BPA or phenol — is that correct?
We've already signed an agreement for licensing and basic package for the phenol plant. As you're aware, we've already signed an agreement with Trinseo for the technology and assets to make polycarbonate resins. We've already approved the dismantling contractor in Q1. We've already appointed an EPCM for polycarbonate and all the offshore off-site and utility packages. And we are in advanced stages of our discussion with regards to certain utilities being supplied as part of the integrated asset. So I think across the board, there's a lot of activity.