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Balaji Amines Limited — Q2 FY25 earnings call

Call held 19 Nov 2024

Management summary

Balaji Amines reported a steady Q2 FY25 performance with consolidated revenue of INR 356 crores and EBITDA margins improving to 20% QoQ, despite a challenging pricing environment. The company successfully commissioned its Methyl Amine plant, doubling capacity, and made significant progress on other strategic projects including DMC, Propylene Glycol, DME, Isopropyl Amines, N-Methyl Morpholine, and a 20MW solar power plant. Management expects 10-12% standalone volume growth for FY25 and aims for INR 3,000-4,000 crores in revenue within 2-2.5 years, driven by new capacities and product diversification.

Highlights

Consolidated Revenue from operations for Q2 FY25 stood at INR 356 crores, a 9.41% QoQ decline.
Consolidated EBITDA for Q2 FY25 was INR 70 crores, with EBITDA margins improving by 110 basis points QoQ to 20%.
Consolidated PAT for Q2 FY25 was INR 41 crores, a 10.87% QoQ decline.
The Methyl Amine plant at Unit IV was commissioned on November 10, 2024, increasing annual capacity from 48,000 MT to 88,000 MT (nearly 100% increase).
The company aims for a minimum of 10-12% standalone volume growth for FY25.
Total revenue is targeted to reach INR 3,000-4,000 crores within the next 2-2.5 years post-CAPEX completion.
Balaji Amines is now the only BIS certified Morpholine manufacturer in India.

Concerns

Delays in EV battery manufacturing sector adoption

Key financials

01 Consolidated Revenue ₹356 Cr -9.4%QoQ
02 Consolidated EBITDA ₹70 Cr -5.4%QoQ
03 Consolidated EBITDA Margin 20% +1%QoQ
04 Consolidated PAT ₹41 Cr -10.9%QoQ
05 Consolidated Diluted EPS ₹12.65 -5.3%QoQ
06 Consolidated Total Volume 26,345 metric tons -6.2%QoQ

What they filed

Q1 FY27: revenue up 27.4%, net profit up 110.8% against the same quarter last year.

₹ Cr · quarterly

Line item	Q2 FY25	Q3 FY25	Q4 FY25	Q1 FY26	Q2 FY26	Q3 FY26	Q4 FY26	Q1 FY27
Revenue	347	313	353	358	341 −2%	331 +6%	395 +12%	456 +27%
Expenses	286	267	293	304	281	275	301	340
EBITDA	61	46	60	55	60 −2%	57 +24%	94 +57%	116 +111%
Margin	17%	15%	17%	15%	18%	17%	24%	25%
Other income	9	8	8	9	7	5	8	6
Interest	1	1	1	1	1	2	2	1
Depreciation	12	12	13	14	14	14	14	14
Profit before tax	57	41	54	49	52 −9%	46 +12%	86 +59%	106 +116%
Tax rate	27%	24%	25%	25%	28%	33%	25%	26%
Net profit	41	31	40	37	37 −10%	31 +0%	65 +63%	78 +111%
EPS	12.65	10.24	12.36	11.73	10.67	9.70	19.51	23.13

How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Volume

26,391 metric tons Total

Specialty Chemicals 10,046 metric tons 38.1%
Amines Derivatives 8,685 metric tons 32.9%
Amines 7,660 metric tons 29.0%

Guidance & targets

Capacity

Methyl Amine Capacity Utilization Capacity · FY26 · Medium confidence 50-60%

Maybe in the next year, you will see some 50% to 60%, but we expect in '26 and '27 we should be in a position to utilize more than 70%-80% capacity.

— D. Ram Reddy, Managing Director
Methyl Amine Capacity Utilization Capacity · FY27 · Medium confidence 70-80%

— D. Ram Reddy, Managing Director

Project Timeline

DMC, Propylene Glycol Plant Commissioning Project Timeline · FY25 · High confidence within the current financial year

A majority of the required equipment has already been delivered, and we anticipate commissioning within the current financial year.

— D. Ram Reddy, Managing Director
Pharmaceutical Grade Propylene Glycol Commissioning Project Timeline · FY25 · High confidence within the current financial year

The commissioning of this capability is also expected within the current financial year.

— D. Ram Reddy, Managing Director
Di-Methyl Ether (DME) Commissioning Project Timeline · FY25 or Q1 FY26 · High confidence end of this financial year or the first quarter of the next financial year

We project the commissioning by the end of this financial year or the first quarter of the next financial year.

— D. Ram Reddy, Managing Director
Isopropyl Amines Plant Commissioning Project Timeline · FY26 · High confidence next financial year

The plant is scheduled to commissioning in the next financial year.

— D. Ram Reddy, Managing Director
N-Methyl Morpholine Plant Operational Project Timeline · FY26 · High confidence next financial year

the plant anticipated to be operational in the next financial year.

— D. Ram Reddy, Managing Director
Solar Power Plant Commissioning (8MW DC / 6MW AC) Project Timeline · FY25 · High confidence within this financial year

an 8-Megawatt DC of 6-Megawatt AC solar power plant expected to be commissioned within this financial year.

— D. Ram Reddy, Managing Director
NBPT Plant Undertaking Project Timeline · FY26 · High confidence next financial year

This project is scheduled to be undertaken in the next financial year.

— D. Ram Reddy, Managing Director
Acetonitrile Technology Agreement Signing Project Timeline · November 2024 · High confidence by the end of November 2024

We expect to sign the agreement by the end of November 2024

— D. Ram Reddy, Managing Director
BSCL Phase-1 Completion Project Timeline · November 2025 · High confidence 11-12 months from today

You can take Phase-1 exactly 11 to 12 months from today. The Phase-1 will be completed.

— D. Ram Reddy, Managing Director
BSCL Phase-2 Completion Project Timeline · November 2026 · High confidence another 12 months from the date of commencement of the Phase-1

And Phase-2 will be another 12 months from the date of commencement of the Phase-1.

— D. Ram Reddy, Managing Director
Unit 1 De-bottlenecking (Piperazine, DETA, TETA, AEP) Project Timeline · March-May 2025 · Medium confidence 4-6 months' time

Probably, it may take another 4 to 6 months' time whereby you will see not only Piperazine and DETA, we are likely to get the additional new value addition products like TETA also we are likely to get and most of the EDA will be consumed for producing these things.

— D. Ram Reddy, Managing Director
DME Blending Notification Project Timeline · November 2024 · Medium confidence by end of this month

Maybe by end of this month, the notification may out.

— D. Ram Reddy, Managing Director

Capex

Balaji Specialty Chemicals Limited (BSCL) Phased Investment Capex · High confidence 750 crores

This project involves a proposed phased investment of 750 crores.

— D. Ram Reddy, Managing Director
Acetonitrile CAPEX Capex · High confidence 40-50 crores

Acetonitrile, there may be 40-50 crores we will be spending

— D. Ram Reddy, Managing Director
NBPT and N-Methyl Morpholine CAPEX Capex · High confidence 70-80 crores

NBPT and N-Methyl Morpholine these two together may be about 70 crores. I am telling approximately 70 to 80 crores will be the CAPEX in that.

— D. Ram Reddy, Managing Director

Volume

Standalone Volume Growth Volume · FY25 · High confidence 10-12%

by end of the year we expect minimum 10% to 12% of the volume growth.

— D. Ram Reddy, Managing Director
Volume Addition from New Plants Volume · next financial year · High confidence 40,000-50,000 tons

after commissioning this, you will see the minimum 40,000 to 50,000 tons of the volume will be added into the total manufacturing in the next financial year after commissioning this Di-Methyl Ether and the other two plants.

— D. Ram Reddy, Managing Director

Pricing

Price Increase Pricing · end of the financial year · Medium confidence actual realistic increase prices

if not in this quarter, definitely you will see the end of the financial year, you will see the actual realistic increase prices.

— D. Ram Reddy, Managing Director
Prices Stabilization Pricing · next quarter onwards · Medium confidence realistic levels

definitely next quarter onwards, we feel that the prices should come to the realistic levels and that will give an advantage to the companies who are having the readymade capacities.

— D. Ram Reddy, Managing Director

Capacity Utilization

DMF Capacity Utilization Capacity Utilization · rest of FY25 · High confidence 80-85%

We are aiming for, if not 100%, at least 80%, 85% capacity should be utilized for the rest of the year.

— D. Ram Reddy, Managing Director

Capex Funding

BSCL Phase-1 CAPEX Funding Capex Funding · High confidence 300-400 crores from internal accruals

Phase-1 may be about 300 to 400 crores, which will be met from the mostly internal accruals.

— D. Ram Reddy, Managing Director
BSCL Phase-2 CAPEX Funding Capex Funding · High confidence 100-200 crores from borrowing

At the end of Phase-2, we may need 100 to 200 crores from the borrowing.

— D. Ram Reddy, Managing Director
Balaji Amines CAPEX Funding Capex Funding · High confidence from internal accruals only

And Balaji Amines, all the expansions will be done from the internal accruals only.

— D. Ram Reddy, Managing Director

Revenue

Standalone Annual Turnover (current prices) Revenue · Medium confidence 1,300-1,400 crores

On standalone basis, I feel that we should definitely reach to with the same prices also 1,300 to 1,400 crores annual turnover.

— D. Ram Reddy, Managing Director
Standalone Annual Turnover (improved prices) Revenue · Low confidence 1,700-1,800 crores

If the prices improve, our top line also may improve to towards 1,700, 1,800 crores also.

— D. Ram Reddy, Managing Director
Total Revenue Revenue · in two years from now · Medium confidence 3,000-4,000 crores

They should be between 3,000 to 4,000 crores if the prices go to the realistic level. Suppose you know the Acetonitrile used to sell at 170-180 reasonable prices rather than high price up to 400 also, and lower price is 110-120 also. If the product goes to the reasonable level, so we can definitely touch the kind of capacities we are established. We should be in a position to reach 3,000 to 4,000 crores in the two years from now.

— D. Ram Reddy, Managing Director

Profitability

EBITDA Margin for all new investments Profitability · Medium confidence 18-22%

The EBITDA will be between 18% to 22%, for all the investment what we are doing.

— D. Ram Reddy, Managing Director

Risks & concerns

Delays in EV battery manufacturing sector adoption
high

Battery manufacturers have not started production as anticipated, delaying orders for NMP and other battery chemicals, pushing realistic commercialization to Q1 FY26 or later.

Both acknowledged
China dumping in specialty chemicals
medium

Major dumping from China impacting DMF, NMP (parent company), and EDA (specialty chemicals), requiring efforts for anti-dumping measures.

Management acknowledged
Capacity utilization ramp-up for new plants
medium

New Methyl Amine plant (doubled capacity) will take time to reach optimal utilization, with 50-60% expected in FY26 and 70-80% in FY27.

Management acknowledged
Market acceptance and profitability of new products (DME)
medium

DME is a new product in India, and its market acceptance and actual margins will take 6-12 months to ascertain, with initial expectations of 15-20% margins being uncertain.

Management acknowledged

Areas of evasion (1)

specific EBITDA/profitability for the DME project

Q&A highlights

1 direct, 1 evasive

DME blending notification and first-year capacity utilization Partial

Too early, Rajeev. See, it's a product first time in the country and introduction as an alternate to the LPG also first time in the country. It will take some time, and it is too early to assume any numbers or any capacities.

Reveals uncertainty and long gestation period for the new DME product's market acceptance and utilization, despite the plant being commissioned.

Asked by Rajeev Rupani

Delays in battery chemicals demand and orders Direct

nobody is going to start at least the first quarter of the financial year... Probably, it may take a minimum of another 4 to 6 months' time, may be in first quarter of the next year only, the realistic commercial things will happen.

Highlights significant delays in the anticipated demand from the EV battery sector, impacting the ramp-up of related specialty chemicals despite Balaji Amines being ready.

Asked by Mukul Deshpande

EBITDA expectations for the DME project Evasive

Mr. Anil, it is very difficult to assume. That is what you people are looking. Everybody, you will be very hurry. Before starting the plant, you want to know what is the EBITDA and what is the profit.

Management was unwilling to provide specific profitability guidance for the DME project, citing its novelty and market uncertainty, which could be a red flag for investors seeking clarity on returns from new large CAPEX.

Asked by Anil Shah

3 min read 7 chapters

Detailed narrative

Q2 FY25 Financial Performance Overview

Balaji Amines reported a steady Q2 FY25 performance with consolidated revenue from operations at INR 356 crores, a 9.41% QoQ decline from INR 393 crores in Q1 FY25. Despite revenue pressure, consolidated EBITDA margins improved by 110 basis points QoQ to 20%, reaching INR 70 crores. Consolidated PAT stood at INR 41 crores, down 10.87% QoQ. For H1 FY25, consolidated revenue was INR 749 crores, a 12.59% YoY decline, while standalone EBITDA saw a 17.43% YoY increase to INR 128 crores, with margins expanding from 16% to 19%.

Strategic Capacity Expansion & New Projects

The company is actively pursuing several strategic projects to enhance its portfolio and market position. The Methyl Amine plant at Unit IV was commissioned on November 10, 2024, doubling annual capacity from 48,000 MT to 88,000 MT. Other projects include the enhancement of DMC and Propylene Glycol plants, installation of Di-Methyl Ether (DME), and modifications to the Ethyl Amine plant for Isopropyl Amines production, all expected to be commissioned by FY25 or FY26. A new N-Methyl Morpholine plant is also anticipated to be operational in FY26.

Methyl Amine Plant Commissioning & Utilization Outlook

The successful commissioning of the Methyl Amine plant at Unit IV marks a significant milestone, nearly doubling the company's capacity. Management anticipates achieving 50-60% capacity utilization in FY26, further increasing to 70-80% by FY27. This expansion is expected to provide a significant cost advantage and strengthen the company's overall profitability, although full utilization will take time to ramp up.

Specialty Chemicals Growth & China Dumping Impact

Balaji Amines is making significant investments in specialty chemicals, with a proposed phased investment of INR 750 crores for Balaji Specialty Chemicals Limited (BSCL). The company acknowledged facing major dumping from China in products like DMF, NMP, and EDA. However, management expects prices to stabilize and increase from Q3 FY25 onwards, and is pursuing anti-dumping measures where necessary. New technologies for Acetonitrile are expected to provide a competitive edge.

Di-Methyl Ether (DME) Project & Market Introduction

The installation of the DME plant is advancing, with commissioning expected by the end of FY25 or Q1 FY26. The gazette notification for DME blending with LPG is anticipated by the end of November 2024. While management is bullish on DME being a 'game changer' as an LPG alternative, they remain cautious on specific profitability, stating it's too early to ascertain realistic margins, which may take 6-12 months post-production commencement.

Battery Chemicals Market Delays

Despite being ready with products like NMP and carbonates for the EV battery sector, Balaji Amines is experiencing significant delays in customer adoption. Management noted that battery manufacturers have not yet started production, pushing potential orders to Q1 FY26 or later. This delay impacts the anticipated revenue ramp-up from these new-age chemicals, despite product approvals and readiness from Balaji Amines.

Financial Strategy and Future Revenue Targets

The company maintains a debt-free strategy for Balaji Amines, funding all expansions through internal accruals. For BSCL, Phase-1 CAPEX of INR 300-400 crores will be from internal accruals, with INR 100-200 crores for Phase-2 potentially from borrowing. Management targets a standalone annual turnover of INR 1,300-1,400 crores at current prices, potentially rising to INR 1,700-1,800 crores with price improvements. The long-term vision is to achieve INR 3,000-4,000 crores in total revenue within 2-2.5 years, driven by new capacities and diversified product offerings.

This is an AI-generated summary of a publicly available earnings call transcript.

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