Future growth expectations in sales/revenue/volumes?

Rossari Biotech anticipates strong future growth driven by capacity expansions at Dahej and Unitop, including a 20,000 MTPA capacity increase at Dahej and an additional 30,000 MTPA Ethoxylation capacity at Unitop to meet rising demand. The new CAPEX of Rs. 178 crore planned in phases over 12-18 months is expected to enable incremental sales of about Rs. 600-700 crore at peak capacity within 2-4 years. Current capacity utilization is high (near 100% at Unitop and Tristar, 78-80% at Dahej), indicating strong demand with some lost orders due to capacity constraints. Growth is expected across segm

Any current/future new fundraising through debt or equity?

The company plans to fund its ongoing and future CAPEX (capacity expansion) through a balanced mix of internal accruals and external debt. No specific debt quantum has been finalized yet, but management is comfortable with current debt-to-equity ratios and repayment capacity. For FY24, some debt may be raised depending on cash levels and CAPEX requirements, with CAPEX spread over 12 to 18 months. No mention of any new equity fundraising during the call. Management expressed confidence in their strong balance sheet and ability to manage debt comfortably even if the entire CAPEX is debt-funded.

Any current/future capex/capital investment/strategic investment?

Rs. 50 crore allocated for Dahej facility expansion (completion expected by Q3 FY25). Rs. 128 crore assigned to Ethoxylation capacity expansion at Unitop, increasing capacity by 30,000 MTPA (phased execution over next 12-18 months). Total announced CAPEX around Rs. 178 crore, with about Rs. 125-130 crore expected to be spent in the current year. CAPEX financed through a mix of internal accruals and external debt, with manageable debt levels. Investments aim to support growth in HPPC division and related products for the Home & Personal Care (HPPC) segment. Additional tank farms and debottlenec

Future growth expectations in earnings/operating earnings/profits/EPS?

The company expects incremental sales of about Rs. 600 crore from ongoing capacity expansion at Dahej and Unitop over 2-4 years. Ethoxylation capacity at Unitop will increase by 30,000 metric tons, currently near 100% utilization, enabling more production for existing segments. Expansion projects will be completed by Q3 FY25, with phased commissioning starting within 6 months. Management expects revenue growth driven by increased capacity utilization, new product additions, and diversified customer base. Margins may remain stable in the near term with focus on volume growth over margin percent

Current/ Expected Orderbook/ Pending Orders?

The company experienced high capacity utilization, with Unitop and Tristar plants running at nearly 100% capacity. Despite strong demand, some orders were lost in July and August due to inadequate capacity, indicating demand exceeded current supply capabilities. The company did not provide specific orderbook or pending order figures but highlighted waiting periods of up to 40 days for orders at Unitop in July and August. This capacity constraint led to lost orders, implying a strong outstanding demand pipeline. To address this, significant CAPEX is underway to expand Ethoxylation capacity by 3

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Rossari Biotech LtdQ3 FY23Chemicals & Petrochemicals

Rossari Biotech Ltd Q3 FY23 Earnings Call Analysis

Revenue, margin, capex, fundraise and order book outlook from management commentary.

Price: ₹535P/E: 18.8Market Cap: ₹2.8K CrSector: Chemicals & Petrochemicals

Management growth scorecard

Revenue

Category 2

Margin

Category 3

Fundraise

Yes

Order

N/A

Capex

Yes

2 of 4 growth signals are positive.

Full analysis

Revenue guidance

Category 2

→Rossari Biotech anticipates strong future growth driven by capacity expansions at Dahej and Unitop, including a 20,000 MTPA capacity increase at Dahej and an additional 30,000 MTPA Ethoxylation capacity at Unitop to meet rising demand.
→The new CAPEX of Rs. 178 crore planned in phases over 12-18 months is expected to enable incremental sales of about Rs. 600-700 crore at peak capacity within 2-4 years.
→Current capacity utilization is high (near 100% at Unitop and Tristar, 78-80% at Dahej), indicating strong demand with some lost orders due to capacity constraints.
→Growth is expected across segments, notably HPPC (Agro, Phenoxy, Institutional Cleaning, Paints, Home & Personal Care), and export markets for Agro surfactants.
→Textile Chemicals business outlook is positive from January 2024 with focus on Bangladesh and select international markets.
→Management projects continued volume-driven growth, prioritizing capacity utilization over margins in the near term.

Margin guidance

Category 3

→The company expects incremental sales of about Rs. 600 crore from ongoing capacity expansion at Dahej and Unitop over 2-4 years.
→Ethoxylation capacity at Unitop will increase by 30,000 metric tons, currently near 100% utilization, enabling more production for existing segments.
→Expansion projects will be completed by Q3 FY25, with phased commissioning starting within 6 months.
→Management expects revenue growth driven by increased capacity utilization, new product additions, and diversified customer base.
→Margins may remain stable in the near term with focus on volume growth over margin percentage; EBITDA expected around current levels by year-end.
→ROCE, currently ~22%, is expected to improve to 23-24% around 2 years post-CAPEX utilization.
→Overall, management is confident about healthy performance across all segments with improving top line and sustained profitability in the medium term.

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Fundraise plans

Yes

→The company plans to fund its ongoing and future CAPEX (capacity expansion) through a balanced mix of internal accruals and external debt.
→No specific debt quantum has been finalized yet, but management is comfortable with current debt-to-equity ratios and repayment capacity.
→For FY24, some debt may be raised depending on cash levels and CAPEX requirements, with CAPEX spread over 12 to 18 months.
→No mention of any new equity fundraising during the call.
→Management expressed confidence in their strong balance sheet and ability to manage debt comfortably even if the entire CAPEX is debt-funded.

Order book

→The company experienced high capacity utilization, with Unitop and Tristar plants running at nearly 100% capacity.
→Despite strong demand, some orders were lost in July and August due to inadequate capacity, indicating demand exceeded current supply capabilities.
→The company did not provide specific orderbook or pending order figures but highlighted waiting periods of up to 40 days for orders at Unitop in July and August.
→This capacity constraint led to lost orders, implying a strong outstanding demand pipeline.
→To address this, significant CAPEX is underway to expand Ethoxylation capacity by 30,000 MTPA at Unitop and other capacity enhancements planned at Dahej, expected to complete by Q3 FY25.
→Management emphasizes ongoing debottlenecking and automation to improve throughput until expansions come online.

Capex plans

Yes

→Rs. 50 crore allocated for Dahej facility expansion (completion expected by Q3 FY25).
→Rs. 128 crore assigned to Ethoxylation capacity expansion at Unitop, increasing capacity by 30,000 MTPA (phased execution over next 12-18 months).
→Total announced CAPEX around Rs. 178 crore, with about Rs. 125-130 crore expected to be spent in the current year.
→CAPEX financed through a mix of internal accruals and external debt, with manageable debt levels.
→Investments aim to support growth in HPPC division and related products for the Home & Personal Care (HPPC) segment.
→Additional tank farms and debottlenecking done to support Ethoxylation capacity and production needs.
→Future scope for further expansion exists due to available land, especially at Unitop site.
→Expected incremental annual sales potential of Rs. 600 crore over 2-4 years upon peak capacity utilization.

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