Galaxy Surfactants Limited — Q2 FY26

Galaxy Surfactants Ltd Q2 FY2025-26 Earnings Conference Call https://www.youtube.com/watch?v=q-FckW1dIJg Published: 6 months ago

0:01 1 second Ladies and gentlemen, good day and welcome to the Galaxy Sense Limited Q2 0:07 7 seconds H1 FY26 earnings conference call. As a reminder, all the participants lines will be in the listenonly mode and there 0:16 16 seconds will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please 0:24 24 seconds signal an operator by pressing star then zero on your touchstone phone. Please note that this conference has been 0:31 31 seconds recorded. This conference call may contain forward-looking statements about the company which are based on the beliefs, opinions and expectations of the company as on date of this call. 0:43 43 seconds These statements are not guarantees the future performance and involves risk and uncertainties that are difficult to 0:49 49 seconds predict. I now hand the conference over to Mr. MK Natranjan. Please go ahead. 0:59 59 seconds Hi, good morning. This is KK Natraan here. Good morning ladies and gentlemen. 1:07 1 minute, 7 seconds Thank you all for joining our second quarter earnings call of financial year 2526. 1:15 1 minute, 15 seconds If Q1 was about resilience laced with optimism, Q2 has been about navigating short-term turbulence while keeping sight of long-term opportunities. 1:26 1 minute, 26 seconds In our conference call for the first quarter 20 FI 2025, we had 1:33 1 minute, 33 seconds highlighted three key attributes which will influence our business in FY 2026. 1:41 1 minute, 41 seconds Number one, the risk of US tariffs and uncertainty surrounding it which we then felt could be inflationary and have an 1:49 1 minute, 49 seconds adverse impact on demand. the fatty alcohol prices which remained elevated. 1:57 1 minute, 57 seconds The India growth story with respect to which we were cautiously optimistic. 2:02 2 minutes, 2 seconds Before we get into the numbers and details for this quarter, it is very important to understand the context and appreciate what has played out in Q2 of this year. 2:13 2 minutes, 13 seconds Starting with imposition of tariffs by the US government on exports from India. 2:19 2 minutes, 19 seconds This had an adverse impact on our business. One needs to understand that additional 50% tariffs not only had adverse impact on our existing 2:27 2 minutes, 27 seconds businesses where tariff is applicable but also had a contraing effect on a project in pipeline. 2:34 2 minutes, 34 seconds During the last conference call which we did sometime in middle of August, uh we had very clearly in a situation of 2:42 2 minutes, 42 seconds assessing the impact. Okay. Since the tariffs were announced on August 1st and we were looking at how do we uh try to 2:50 2 minutes, 50 seconds minimize the impact in the short term by shipping certain material much before uh the tariffs kick in. 2:59 2 minutes, 59 seconds And we also said that we'll be preparing okay to see which of the products we can uh service the demand from our Egypt plant. 3:11 3 minutes, 11 seconds We have made good progress. Okay. But uh we are still in the process of ensuring that all the customer approvals are available. 3:21 3 minutes, 21 seconds As regards India, while we welcome the rationalization of GST rates and believe this is structurally a positive move, temporary headwinds on account of 3:29 3 minutes, 29 seconds inventory adjustments impacted this quarter adversely. The effects of the same continued even during the festive season. 3:38 3 minutes, 38 seconds Lastly, the elevated fatty alcohol prices have now started hurting the business in a significant way. While the 3:45 3 minutes, 45 seconds risk of reformulation is always there, the sign significant spread between fatty acor pers and crude petroleum has never been so high for so long over the past three decades. 3:56 3 minutes, 56 seconds Unfortunately, this risk has played out in this quarter adversely impact our volumes in India. 4:01 4 minutes, 1 second We'll be dwelling on each of these areas region wise subsequently at length but understanding the business context will be the key in understanding the performance that we have delivered. 4:11 4 minutes, 11 seconds This is one of the rare quarters where perhaps all the risks that we had envisaged have played out and continue to do so even into Q3. Moving on now to 4:20 4 minutes, 20 seconds the numbers consolidated volumes for the quarter remain flat yearon year and quarteron quarter while performance of 4:28 4 minutes, 28 seconds factors registered a high singledigit decline. M specialities despite tariff uncertainty clocked doubledigit volume growth driven by non US geographies. 4:37 4 minutes, 37 seconds H1 FY26 consolidate revenues grew 2% yearonear driven by the double-digit growth for specialty care products and 4:45 4 minutes, 45 seconds flat performance by performance affectance. Our repeat declined by 5% yearon year at 251 crores. reserve 265 4:53 4 minutes, 53 seconds close in HY H1 FI25 and consequently H1 FI26 EIDA permit stood at 18,700 per 5:03 5 minutes, 3 seconds metric ton approximately moving on to the regions 5:13 5 minutes, 13 seconds India our domestic growth engine encountered a distinct set of challenges this quarters that G the recent GST rate reduction on FMCG products while a 5:21 5 minutes, 21 seconds welcome come sectional reform prompted inventory adjustments by several large FMCG players. This recalibration led to 5:29 5 minutes, 29 seconds softer uptake and subdued volumes for the quarter. Additionally, persistent high fee stock prices have accepted the shift towards reformulation within the 5:36 5 minutes, 36 seconds performance segment further impacting our tire one category volumes. Despite these headwinds, non-taiwan customer 5:44 5 minutes, 44 seconds volumes grew robustly to compensate the tier one volume decline, resulting in overall flat volume performance for India on both yearon-year and 5:53 5 minutes, 53 seconds quarteron-quarter basis. While the short-term disruption came as a surprise given that nobody was anticipating rulation of GST rates, we remain 6:01 6 minutes, 1 second confident of a of a gradual but steady recovery once the adjustments get done with. We seeing the first size of the 6:08 6 minutes, 8 seconds same in basis the discussions with our large customers we do expect the same to continue. 6:15 6 minutes, 15 seconds As far as the risk of reformulation is concerned your company has undertaken the required capacity readjustments and develop the alternate surfactants 6:23 6 minutes, 23 seconds commercial capability. We expect the required approvals to come in this quarter and business to commercialize from Q4 FI26. 6:31 6 minutes, 31 seconds With both these steps, we believe we should see steady improvement in India numbers starting from Q4 2526. 6:38 6 minutes, 38 seconds One important point that I'd also like to share with you is that the fact that while the reformulation and GSTbased adjustments adversely impacted our India 6:46 6 minutes, 46 seconds volumes by single digits, we ended H1 and this quarter flat due to market share gains were registered in this quarter with our non-T1 accounts 6:55 6 minutes, 55 seconds in India and globally. This has been a major positive for us. I now move on to our Amit region. The Amit region 7:03 7 minutes, 3 seconds recorded a modest singledigit volume decline quarteron quarter and a high singledigit decline on yearonyear basis. 7:09 7 minutes, 9 seconds This was primarily driven by continued market erosion in Egypt by the Taiwan segment due to intensate competition 7:16 7 minutes, 16 seconds from aggressive local players who were backward integrated. 7:21 7 minutes, 21 seconds On a more positive note, Turkey delivers strong singledigit uh double-digit volume growth, sorry, on both quarteronquarter and yearon-year basis, 7:30 7 minutes, 30 seconds helping to partially offset this slower than expected recovery in Egypt and other AMT markets. To address these challenges, our teams are actively engaging with customers to mitigate 7:38 7 minutes, 38 seconds headwinds, restore market momentum and reinforce strategic partnerships across the region. 7:45 7 minutes, 45 seconds Now coming to rest of the world. 7:49 7 minutes, 49 seconds Rest of the world region delivered a mixed performance this quarter. Latin America and Asia Pacific maintained their strong growth trajectory with 7:56 7 minutes, 56 seconds posting double digit yearon-year gains fueled by robust demand across both performance and specialty product segments. In contrast, North America saw 8:04 8 minutes, 4 seconds a decline primarily due to reciprocal tariffs and impacted demand and uh reciprocal tariffs that impacted demand and margins in the specialty care 8:12 8 minutes, 12 seconds segment. While within this the segment of specialty products was particularly affected. However, the super specialty 8:20 8 minutes, 20 seconds prestige segment led by trike continued to perform well helping us to sustain momentum and partially offsetting the 8:27 8 minutes, 27 seconds margin pressure. Despite these regional variances, we remain focused on capitalizing on growth opportunities in high performing markets while 8:35 8 minutes, 35 seconds proactively addressing the challenges in impacted geographies. 8:39 8 minutes, 39 seconds Coming to the supply side, there were few encouraging developments alongside persistent challenges. Freight cost east compared to previous quarters 8:48 8 minutes, 48 seconds offering some relief. However, shipment delays continue due to ongoing food congestion and blank savings. Raw material availability showed signs of 8:56 8 minutes, 56 seconds improvement yet pricing pressure remains particularly in the chemical segment. 9:00 9 minutes Despite the harvest season, lower than expected palms and oil production has kept feed stock prices elevated and this 9:08 9 minutes, 8 seconds trend is expected to continue and persist into October and November as well. 9:16 9 minutes, 16 seconds Before we close this call, I'd like to take this opportunity to share the adverse cumulative impact on our IIDA due to the 9:25 9 minutes, 25 seconds reciprocal tariffs imports by the US government. 9:31 9 minutes, 31 seconds For the full year we do see that certain businesses have been put on hold as well as certain projects in pipeline which are expected 9:39 9 minutes, 39 seconds to effectively this year have now been delayed. Cumulatively the impact for the whole year works out in the range of 3 9:46 9 minutes, 46 seconds to 5% of our FI25 AIDA. We are assessing the impact as to 9:54 9 minutes, 54 seconds what would be the implication due to the inflationary effects of tariffs of consumer demand. We are in touch with the customers or they're going slow in 10:02 10 minutes, 2 seconds terms of their commercializing the projects and pipeline because they too are weary of the impacts that the inflation there would have on their 10:11 10 minutes, 11 seconds demand. So essentially all of them are going slow in terms of uh building the inventory in the pipeline. 10:18 10 minutes, 18 seconds To conclude, while volumes remain stable, the near-term outlook appears muted, reflecting global business challenges and margin pressures across 10:25 10 minutes, 25 seconds both segments. Despite these headwinds, our core fundamentals remain strong. 10:30 10 minutes, 30 seconds Structurally, we still believe and are confident that despite these headwinds, the consumption story remains impact. Growth will never 10:38 10 minutes, 38 seconds be linear but always exponential. And to prepare for the same as we navigate through the trouble waters, steadying our ship, sharpening our strategic 10:46 10 minutes, 46 seconds focus, implementing targeted tactical adjustments, enhancing operational agility, and strengthening our portfolio to ensure resilience and sustain relevance in the market will be the key. 10:57 10 minutes, 57 seconds Yes, it has not been easy, but we believe after eight quarters of flat performance due to multiple global headwinds, we as a team are fully 11:04 11 minutes, 4 seconds prepared to take these challenges head on and are extremely positive in terms 11:10 11 minutes, 10 seconds of achieving our strategic vision. Thank you for the continued trust. I now open the floor for questions. Thank you. 11:22 11 minutes, 22 seconds Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press 11:29 11 minutes, 29 seconds star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are 11:39 11 minutes, 39 seconds requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question Q assembles. 11:51 11 minutes, 51 seconds The first question comes from the line of Sanjay Jen from ICICI securities. Please go ahead. 11:59 11 minutes, 59 seconds Yeah, good afternoon sir. Uh good afternoon sir. I got few question and thanks for taking them. 12:06 12 minutes, 6 seconds Yeah on the India there's an issue on the demand side and there's an issue on the reformulation side. 12:16 12 minutes, 16 seconds Correct. 12:18 12 minutes, 18 seconds Now on the reformulation side uh can you help us understand how many uh what could be the potential impact that would 12:25 12 minutes, 25 seconds have cost on our uh performance volume uh or what percentage of the customers requirement of LA has moved to something 12:34 12 minutes, 34 seconds else u is it material have they reached high single digit in terms of uh uh reformulation where are we in this cycle 12:42 12 minutes, 42 seconds and do you think this more structural or it is because we have never heard reformulation uh in the past now uh it 12:50 12 minutes, 50 seconds appears more structural in nature that be a fair assumption yeah I'll first answer the second question first so we don't see this as 12:58 12 minutes, 58 seconds anything structural because in my last 32 years in this business uh this is probably the fifth time that we are 13:06 13 minutes, 6 seconds going through this situation elevated fatty alcohol prices okay people looking at reformulation so even when we speak 13:12 13 minutes, 12 seconds to our customers okay they're very clear that this is not something they would like to do structural because you're trying to put a petrochemical ingredient 13:19 13 minutes, 19 seconds into a personal care formulation. So this is more in terms of uh the demand environment for all our customers not being so healthy in India coupled with 13:27 13 minutes, 27 seconds the inflationary impact they're all trying to see as to how they are able to manage the short term and that's why very clear that this is not structural 13:37 13 minutes, 37 seconds with regard to the impact like to uh if you see most of the reformulations really started gaining pace say probably 13:45 13 minutes, 45 seconds from uh August of this year and uh probably I think we see that in India we 13:52 13 minutes, 52 seconds could have done about uh in the quarter about 3,000 to 4,000 tons higher volume if this reformulation had not happened. 14:02 14 minutes, 2 seconds Got it. Got it. And and on the demand starting in the Q3 and Q4 do you think that GST thing is largely behind and uh 14:11 14 minutes, 11 seconds from the reformulation we should be starting few new products should help us. Uh what should we uh look at say Q3 and Q4 in terms of the India growth rate? 14:21 14 minutes, 21 seconds See with regard to Q3 okay the way I see it is that I would expect had we I'm looking at from in a positive side it 14:29 14 minutes, 29 seconds being almost similar to what Q3 would be because all our customers in fact even if I see their commentary all of them are saying that even into October and 14:36 14 minutes, 36 seconds the festive season got impacted because of uh the GST. So essentially this festive season and demand is something 14:44 14 minutes, 44 seconds that has has created more demand in the pipeline. In addition to reabeling and all those issues that they have. So when we speak to customers you know most all 14:53 14 minutes, 53 seconds of them are indicating that things should start looking up. Okay from Q1 there's also the added issue which all of them are sharing with us in terms of 15:01 15 minutes, 1 second a very severe and external winter and that does have impact in terms of volumes of uh you know uh your FMCG 15:09 15 minutes, 9 seconds products. So we are in dial with customers but as of now we do see that uh the pain continued even into October. 15:17 15 minutes, 17 seconds So I'd be very happy if we are able to uh end uh our uh numbers uh on similar 15:25 15 minutes, 25 seconds lines as Q3 Q2 sorry clearly so the the recovery doesn't look 15:32 15 minutes, 32 seconds like Q3 certainly looks like should be a dirt quarter again probably hopeful from Q4 and Q1 yes correct 15:40 15 minutes, 40 seconds and and in the the MAT side we are already 30% lower in terms of our annual volumes from the peak which was four 15:47 15 minutes, 47 seconds five years back and we still continue to decline a high high single business. So is there any base there in terms of how 15:55 15 minutes, 55 seconds much can you go down? I thought now the base will catch up and the growth should come back. So so what what is really 16:02 16 minutes, 2 seconds happening in uh uh Egypt there? See what so is happening is that uh you uh if you 16:09 16 minutes, 9 seconds look at all these markets essentially Africa, Middle East, Turkey is majorly led by your uh is majorly a home care 16:17 16 minutes, 17 seconds market in terms of end use application that we cater to personal care does form a uh is we cater to but if you see in a 16:24 16 minutes, 24 seconds market that's a significant part that we uh uh you know are participating now 16:30 16 minutes, 30 seconds these high prices of uh uh feed stock mainly fatty alcohol is also prompting 16:38 16 minutes, 38 seconds some of them to be looking at whether they reduce the active ingredient in the formulation whether they can add a little bit more of a petrochemical 16:47 16 minutes, 47 seconds ingredient into the formulation. So this is something also that is happening because all of them are because in Africa Middle East Turkey all of them are still continue to ravage by 16:55 16 minutes, 55 seconds inflation and all of them are looking at various ways to be keeping cost under control and the reformulation is something that is uh being done there as 17:04 17 minutes, 4 seconds well. That is the only reason why we see that this has been a quarter where we have had a degrowth otherwise uh the 17:12 17 minutes, 12 seconds base essentially the bottom out in terms of it not going further down from here from a demand side. Uh but the high 17:20 17 minutes, 20 seconds fatty alcohol prices okay is prompting people to look at certain deformationations even in the African 17:26 17 minutes, 26 seconds Middle East Turkey market. But but in a I thought we were already engaging with food products right it was India that we 17:34 17 minutes, 34 seconds didn't manufacture I think no in India so there are there two three things one is we don't we we are making 17:40 17 minutes, 40 seconds uh certain uh your certain of your uh fettochemical base we make laps are there okay but then even in labs the 17:49 17 minutes, 49 seconds major issue when I say reformulation in a it is in terms of reducing the active component so it is not about replacing 17:57 17 minutes, 57 seconds any are into even if they replace olive chemical with a petrogly. Okay. Yeah. 18:04 18 minutes, 4 seconds Because even if you look at it's a combination you have oly chemical and petroleum ingredient. So if there is a cost inflation there they like to look 18:11 18 minutes, 11 seconds at reducing active comp content. So if they reduce active content say from 10% to 9% talk about a 10% degrowth in terms of our volumes. That's the way it is. 18:21 18 minutes, 21 seconds We are already down 30% from the peak. 18:24 18 minutes, 24 seconds Yes is correct. that was essentially which we said was due to the loss of shares by all our one accounts uh in the market to the local integrated player. 18:35 18 minutes, 35 seconds So that is what had caused that particular demand which obviously demand has gone out of uh our basket. 18:42 18 minutes, 42 seconds Got it. Got it. The ro uh Mr. Sanjay I'm sorry to interrupt but may I please request you to come follow back in the queue? 18:52 18 minutes, 52 seconds That's fine. Uh thanks NRA sir for answering all. Yeah, please come back. No problem. Thank you. Bye. Thank you. Thank you. Bye. Bye. 19:00 19 minutes Thank you. 19:03 19 minutes, 3 seconds The next question comes from the line of Arun from Aendia Spark. Please go ahead. 19:10 19 minutes, 10 seconds Um good afternoon Rajan G. Uh thanks for the opportunity. Um my first question um 19:17 19 minutes, 17 seconds so we seems to be we seem to be increasing our volume contribution from the rest of the world but at the same 19:24 19 minutes, 24 seconds time uh our gross margin per kg um has also sequentially has dropped. Um 19:31 19 minutes, 31 seconds typically our rest of the world volumes comprises of more uh u 19:38 19 minutes, 38 seconds premium and mage products. So um what is the reason for this micro 19:46 19 minutes, 46 seconds mean you what you're saying is that with the speciality growth happening the the gross contribution per metric 10 is down is that what is the question? 19:54 19 minutes, 54 seconds Yes sir. Yes sir. 19:56 19 minutes, 56 seconds So see what is also important is that in terms of when you is is a question of the composition. Okay. So if you if you 20:04 20 minutes, 4 seconds look at say in the rest of the world there is we also have a combination of performance affectance and specialtity. 20:10 20 minutes, 10 seconds Okay. So that's what if you see when we when I took told in my speech that uh the tire one impact due to reformulation that has happened majorly in India we 20:19 20 minutes, 19 seconds have recouped to our tire two tire three uh customers by uh being aggressive with them in terms of our uh getting higher 20:27 20 minutes, 27 seconds share of their business. Uh it's also that in we have moved in latam and a in terms of saying how do we bridge the gap in terms of the mitigating the impact of 20:35 20 minutes, 35 seconds the performance affectance as well. So speciality if you see rest of the world is not entirely different. In fact the growth that has happened even in this uh 20:45 20 minutes, 45 seconds quarter we have had performance also contributing to the volume growth. 20:51 20 minutes, 51 seconds Okay. Uh so what I understand is the the the offset coming from the the India impact is not completely offset by the uh rest of the world volume growth. 21:02 21 minutes, 2 seconds Yeah. Yeah. Correct. So it is not enough to be offset in the full uh volume. 21:06 21 minutes, 6 seconds Okay. because that's that's something that uh uh will happen in the month because it's not that you can adjust immediately. So we are working on that. 21:14 21 minutes, 14 seconds Okay. And we should see things getting in place in the coming months. 21:19 21 minutes, 19 seconds All right. All right. Now we have fairly good visibility. Uh what is our would you like to update your guidance on both 21:28 21 minutes, 28 seconds per kg and volume growth? from ID said in the last call also that we are don't want to be giving any guidance although 21:36 21 minutes, 36 seconds I said I don't want to be the changing the long term that we have talked about 6 to 8% growth in this because in the current one I don't want to be either 21:45 21 minutes, 45 seconds revising or stating any guidance but I would say that uh if I I can probably look at Q3 I don't want to be assigning 21:52 21 minutes, 52 seconds any guess for Q4 okay because things are still pretty uh uh volatile in terms of the external situation because there can 22:00 22 minutes be some tailwinds in case there's a deal that US reaches that can have a good impact for us in Q4. Okay. Uh there is a 22:07 22 minutes, 7 seconds possibility that your fatty alcohol prices can correct the GST impact can be better for us from Q4. So I don't want to be attending any guess there because 22:15 22 minutes, 15 seconds I do see Q4 can we can have a lot of positives but if I look at Q3 I would like to restrict my listening to Q3 as I 22:23 22 minutes, 23 seconds even responded earlier to Sanjay. I think I'd be happy if I end Q3. Okay, on the same lines as Q2 22:30 22 minutes, 30 seconds and I should be in a better position to talk about the full year when I'm going to be into the call uh for Q3. 22:38 22 minutes, 38 seconds Understood, sir. Sir, earlier you said in we have seen five instances of uh where the reformulation happened in the 22:46 22 minutes, 46 seconds past. Uh there's the fifth one. uh typically what is a what is the duration for the reversal to happen in the past 22:52 22 minutes, 52 seconds and uh should we expect similar timeline this time this time also yeah so the the uh reversal typically 23:01 23 minutes, 1 second what I've seen is that those reversals happen probably in about uh uh 12 to 15 months that's that's what we have seen earlier after the formulation has 23:10 23 minutes, 10 seconds happened okay so I do see and but obviously uh the reformulation start happening after the auto chemical prices 23:18 23 minutes, 18 seconds start correcting and the customers do see that it is going to sustain and based on the last five experience that 23:25 23 minutes, 25 seconds I've had it's been anywhere from 12 to 15 months and the first indication and this will be the function no sorry 23:34 23 minutes, 34 seconds yes ah so this will be a function of how uh the vegetable oil the palm oil prices 23:40 23 minutes, 40 seconds start coming down so that is what we there is there are some indications of it coming down in the two weeks. Okay. 23:48 23 minutes, 48 seconds But we need to wait and watch. 23:51 23 minutes, 51 seconds Understood. Understood. Sir, my second question is on tariffs. US tariffs you mentioned. Uh you also elaborated on the 23:57 23 minutes, 57 seconds impact we had. Um so uh my my uh worry is that um after a prolonged period of 24:05 24 minutes, 5 seconds you know galaxy not supplying uh volumes to the US customers and US customers getting used to the other suppliers do 24:13 24 minutes, 13 seconds you see the risk of we permanently losing some of this business uh even if the say tariffs reverse back? In fact, 24:22 24 minutes, 22 seconds the first question is when we talk to our customers in US, they are not happy with this uh tariff coming in because you know that every customer would want 24:30 24 minutes, 30 seconds to have uh uh diversified vendor base and also more dependable vendors. So they not in a good situation where they 24:38 24 minutes, 38 seconds they are looking at the earliest opportunity where they can get uh uh back to business with us. Okay, this tariff of 50% is only making it very 24:46 24 minutes, 46 seconds difficult. So even as we are talking about this, we also need to know as I even explained last time and I did allude to that during uh in the speech 24:54 24 minutes, 54 seconds of mine is that there's some products that we're looking at how we can shift that to Egypt. Okay. So we are working 25:03 25 minutes, 3 seconds with customers on approvals. We have already started some of it being shifted there. 25:08 25 minutes, 8 seconds So some of it where we are looking at how are we able to uh you know create some ways engaging with customers to see 25:15 25 minutes, 15 seconds as to how we are able to participate uh despite this particular headwinds. uh we are trying to accelerate or gain 25:23 25 minutes, 23 seconds momentum in certain projects in pipeline because all customers when they started they obviously had a local source but they were looking at how do they diversify the vendor base uh with 25:32 25 minutes, 32 seconds someone like Galaxy where we have a local supply chain and they also have a good experience in terms of the relations that we have with them. So I 25:40 25 minutes, 40 seconds do see that they it's not that when chariots do uh alter things will be extremely positive for us that we are 25:47 25 minutes, 47 seconds very clear and customers aren't happy uh getting uh you know only being with certain few vendors locally 25:57 25 minutes, 57 seconds understood and the other thing that we also said other thing also in terms of countering this we are not going aggressive in terms of our special ingredients 26:06 26 minutes, 6 seconds business how we going to quickly convert and build pipelines in Latin America, APAC and Europe and we are seeing good 26:14 26 minutes, 14 seconds amount of momentum that's gathering in terms of building more project pipeline. 26:17 26 minutes, 17 seconds So we have started diverting resources in terms of aggressively building projectction pipeline in the other geographies that is Europe uh latam and 26:25 26 minutes, 25 seconds Asia Pacific. So that's another way to ensure that we stay prepared in case you know there will be some time by the time customers come back in US. 26:35 26 minutes, 35 seconds Understood. Understood. Um thank you very much sir. on this. Thank you. 26:41 26 minutes, 41 seconds Thank you ladies and gentlemen. Before we move forward to the next question, we request 26:48 26 minutes, 48 seconds you to uh restrict your questions to two questions per participants. 26:55 26 minutes, 55 seconds The next question comes from the line of Adita Ketan from SMFS Institutional Equities. Please go ahead. 27:05 27 minutes, 5 seconds Thank you sir for the opportunity. Uh sir just also to reconfirm this uh 27:12 27 minutes, 12 seconds reformulation has led to like loss of volumes in tier one but our aggressive marketing strategies in tier 2 and and tier three has somewhat recouped the 27:21 27 minutes, 21 seconds volume but uh but complete volume hasn't been recovered so which is the reason for the volume loss. Is this correct sir? 27:32 27 minutes, 32 seconds Yes correct. 27:34 27 minutes, 34 seconds Okay s like this is reformulation like how difficult is it for any other competitor other than galaxy to just 27:43 27 minutes, 43 seconds supply in time and even for galaxy like because we have the largest capacity. So how difficult it would be for any other 27:50 27 minutes, 50 seconds player or competitor to reformulate and give supplying time to the customer. 27:56 27 minutes, 56 seconds See the the issue is different here. So we are actually the largest uh player of surfactants derived from the olychemical 28:05 28 minutes, 5 seconds source. We are never into surfactants in India from the petrochemical source. So when people are replacing the chemical surfactants with petrochemical 28:12 28 minutes, 12 seconds surfactants, we didn't have that. We didn't have it because that's not a market we want to be building our capabilities on. So people who are essentially focused only on petroleum surfactants obviously had an advantage 28:21 28 minutes, 21 seconds when the reformulation happened. So we are now working and getting ready by this quarter end in terms of our commercial capability on the alternate 28:29 28 minutes, 29 seconds surfactant uh uh which is petrochemical waste. So that is that is what it is. So when the Z happened our loss was an 28:36 28 minutes, 36 seconds opportunity for our competition over essentially majorly into petrochemical based surfectants. 28:43 28 minutes, 43 seconds Okay. Sir onto the raw material s the raw material price I think sir they started raw material prices going up in Q2 of last 28:52 28 minutes, 52 seconds uh of last last financial year and currently also like it is going one way up only any particular reason why the RM 29:01 29 minutes, 1 second prices are are so and like we have said earlier that RM prices will go down but 29:07 29 minutes, 7 seconds it doesn't seem any so that so that that there is the 29:15 29 minutes, 15 seconds essentially it's because I think uh the lower yield that has happened in Malaysia and Indonesia is what is uh 29:22 29 minutes, 22 seconds impacting uh but then there is also a situation in terms of certain uh uh positions the market takes. So we now 29:31 29 minutes, 31 seconds need to wait because uh the underlying demand okay uh really world over the way we see it is not really keeping pace 29:39 29 minutes, 39 seconds whether you look at Europe or you look at US with all this coming in obviously the demand side is what is now going to be uh because in agricultural 29:48 29 minutes, 48 seconds commodities major uh this thing is driven uh by uh what happens on the supply side the supply side has not been to this thing uh it has not been 29:56 29 minutes, 56 seconds supportive in terms of bringing the prices down but we do as we move forward in terms of all these headwinds on the demand side. Okay, the demand side will 30:05 30 minutes, 5 seconds start bringing the required corrections but we need to wait and watch. 30:09 30 minutes, 9 seconds Sir just last two questions. Uh sir first onto our Aida spread like I think sir we are standing again at a low how 30:18 30 minutes, 18 seconds you see like this could be the bottom and and apart from lower RL prices could support AIDA first question on this and 30:25 30 minutes, 25 seconds uh second sir like how are we w uh how are we looking at the growth I think because of muted demand how you are 30:33 30 minutes, 33 seconds recalibrating the growth for FI26 and FI2. 30:37 30 minutes, 37 seconds So first of all that's what I said I when I had to answer that uh to uh uh the earlier question okay I was very 30:45 30 minutes, 45 seconds clear that I am restricting my this thing to Q3 where I said I would uh uh look at Q3 ending the same as Q2. Uh so 30:53 30 minutes, 53 seconds I don't want to be asserting any guess on Q4. Uh it's suffice to say that you know Q4 should present us some positives 31:01 31 minutes, 1 second but it's too early to comment on that. I don't want to assert any guess. So uh that's what is something that I would like to uh you know mention here with 31:10 31 minutes, 10 seconds regard to Q3. I don't want to look at full year this year and next year. I think for that we need to wait for at least uh two three more months when we meet again. 31:22 31 minutes, 22 seconds Outlook on spreads also think that would be similar like we would be waiting for something. 31:26 31 minutes, 26 seconds Outlook on spreads and epida spreads grow spreads. 31:31 31 minutes, 31 seconds Yeah. Yeah. we need to wait because I think there are too many moving parts now. So things have to settle down. So that's why I don't want to be uh giving 31:40 31 minutes, 40 seconds any uh this thing which I really do not have today. I want to be as transparent as I can be but that's based on what information I have as of today. So I 31:47 31 minutes, 47 seconds don't want to assert any guess. Suffice to say that Q4 should give us some positive uh tailwinds but I need to wait for that. 31:57 31 minutes, 57 seconds Got it. Thank you sir. Thank you. 32:03 32 minutes, 3 seconds Before we take the next question, a reminder to all the participants to limit your questions to two questions per participants. 32:11 32 minutes, 11 seconds The next question comes from the line of Rohit Nagaraj from 361 Capital. Please go ahead. 32:20 32 minutes, 20 seconds Thanks for the opportunity. Uh so first question is on the Egypt. So we've seen that in the last few years a has been 32:29 32 minutes, 29 seconds grappling with some of the other challenges and despite having uh our own facility in locally in Egypt we have 32:37 32 minutes, 37 seconds again said that uh during this quarter there has been a amid intensified local competition. So what is the strategy that we are looking at from a volume 32:46 32 minutes, 46 seconds growth perspective in Egypt and for the entire AIT region incrementally. Thank you. 32:52 32 minutes, 52 seconds So first of all that's what you know one is we need to look at Africa Middle East Turkey as a market and one is Egypt as an entity our galaxy chemicals Egypt. So 33:01 33 minutes, 1 second first thing that needs to be understood is as a entity Galaxy Egypt is doing very well uh in terms of its product 33:09 33 minutes, 9 seconds portfolio. So actually it's been a uh it's been a great move for us in terms of going into Egypt. Okay. and we continue to stay positive and remain 33:17 33 minutes, 17 seconds focused on how do we start enhancing our uh capabilities in our Egypt entity. Now coming to the market that is a region of 33:25 33 minutes, 25 seconds Africa, Middle East, Turkey, we do see that most of the economies are ravaged by inflation and this is something that 33:32 33 minutes, 32 seconds we have seen uh that as things get better for one year and it also with all the geopolitical tensions and everything 33:40 33 minutes, 40 seconds you have two to three years of a very muted situation. So the way that we're working on is how are we going to be 33:45 33 minutes, 45 seconds looking at uh you know the uh markets okay other than in the rest of 33:53 33 minutes, 53 seconds the world look at how do we enhance things in Latin America in Asia Pacific okay and for uh you know Egypt entity 34:01 34 minutes, 1 second Latin America is a very good market because it in terms of your uh logistics supply chain uh uh capabilities I think 34:10 34 minutes, 10 seconds that's the best place so that is how we are working And as we are looking at how do we enhance uh business in some of the countries because we ought to also be 34:18 34 minutes, 18 seconds careful in terms of uh you know the uh volatile situation that happens in this in terms of demand. So you cannot be uh 34:26 34 minutes, 26 seconds basing all your this thing in terms of the way things would happen in Africa Middle East. So it is a two-pronged approach as we continue to remain 34:33 34 minutes, 33 seconds focused and look at how do we enhance our presence in the geographies to the extent that we can within Africa Middle East Turkey. Okay, given all the 34:42 34 minutes, 42 seconds constraints, we're looking at how do we use our uh relationship and our presence in other parts of rest of the world to 34:48 34 minutes, 48 seconds be enhancing our volumes there and you'd see that that actually has shown results even in the last quarter in terms of Latin American APC really doing well. 34:59 34 minutes, 59 seconds Sure. Uh thanks. Uh so second question is on the UPC contract. So is there any possibility of recognizing any fees 35:06 35 minutes, 6 seconds during FI25 or and when will we be able to recognize the entire fees maybe to 35:14 35 minutes, 14 seconds I think my my group CF for Aijit will answer this I think he is better positioned to answer that. Yeah. 35:20 35 minutes, 20 seconds Yeah. Hi. So, the project is progressing well that we have currently. But again, as this is a sort of a construction type of a project, we'll be only able to 35:28 35 minutes, 28 seconds recognize revenue based on certain basic minimum completion of the project percentage. So, currently we will not be 35:36 35 minutes, 36 seconds able to give any number as to what we'll be able to recognize uh towards the year end. But it will be sufficient to say now that it's progressing well and as for the timeline. 35:47 35 minutes, 47 seconds Uh so the just a clarification the entire recognition will happen maybe in next two years time. 35:53 35 minutes, 53 seconds Yeah it's a more than a year project so it will be spread over a period of more than a year. 35:58 35 minutes, 58 seconds Sure. And just one clarification I probably missed the number of diga per metrics done during this quarter and any 36:06 36 minutes, 6 seconds specific reason for omitting it from our press release or presentation. Thank you. 36:14 36 minutes, 14 seconds AIA for the quarter. So we are given for Q2A for the quarter was 17,300 per metric term. 36:25 36 minutes, 25 seconds Sure. Uh thanks a lot and all the best. Yeah. Thank you. Thank you. 36:32 36 minutes, 32 seconds The next question comes from the line of Kor Panda from ICICI Credential Life Insurance. Please go ahead. 36:40 36 minutes, 40 seconds Uh thank you. Uh hi team. Uh sir first question is on the uh just volume discussion you are having. So uh keeping 36:49 36 minutes, 49 seconds aside uh the reformulation part overall industry growth point of view are you seeing demand recovery for say India 36:57 36 minutes, 57 seconds volumes considering the entire industry both tier 1, tier 2, tier three all the clients. So at the industry level u is 37:05 37 minutes, 5 seconds demand reviving uh and second on the rest of the world uh and possible slowdown as you're talking about because 37:13 37 minutes, 13 seconds of the tariffs uh and higher base for us for last couple of years in rest of the world as a direction should we see 37:22 37 minutes, 22 seconds lowering of the volume growth in rest of the world. So basically industry trend uh uh for both India and rest of the world uh say in next two three quarters. 37:35 37 minutes, 35 seconds First of all India I this I have to answer in two parts because the market growth rate is relevant as far as India 37:42 37 minutes, 42 seconds is concerned because we obviously have a significant share. So in India till if I read all my customer uh con call and 37:51 37 minutes, 51 seconds their investor presentations all of them have talked about the GST thing impacting their results. In fact, few of 37:57 37 minutes, 57 seconds our big customers even gave an an interim uh guidance saying that it will be lower and the impact and they all 38:05 38 minutes, 5 seconds said he they expect the pain to continue into October but they also added saying that since this is structurally good okay we do see that this really helping 38:14 38 minutes, 14 seconds demand getting reactivated and obviously that's I do see that that should start happening from uh Q4 of this year 38:22 38 minutes, 22 seconds because any saying that Q3 is going to be a problem because we miss the festive demand And second is they they do see a extended and a more uh you know severe 38:31 38 minutes, 31 seconds winter. Now that answers to now we have to wait that's what I said we need to wait for Q4 to understand whether in India the demand the industry demand 38:40 38 minutes, 40 seconds growth rate is picking up. If you look at it for last 6 months all of them have reported either flat or most of them have 38:48 38 minutes, 48 seconds reported close to 1 or 2% growth okay in underlying volume growth. Now I come back to rest of the world. So rest 38:56 38 minutes, 56 seconds of the world what the market goes don't bother us because it's not that we have a very high share there. So it's all about how we hunt for new customers and 39:04 39 minutes, 4 seconds farm more share with our existing customers. Okay. So that is what is happening and that's what showed results in Q2 and we don't see any reason why I 39:12 39 minutes, 12 seconds can't do that. Even suppose you have structurally the market that uh doesn't grow as well as it's supposed to that is not something that will be a concern for 39:20 39 minutes, 20 seconds us. Okay. because we'll be able to start progressing uh certain uh developments is only that the customer's outlook okay 39:28 39 minutes, 28 seconds has to be positive on specialty chemicals because they would start looking at approvals okay but on performance effects we don't see there's 39:35 39 minutes, 35 seconds an issue because uh we are not any having any great share in those markets 39:42 39 minutes, 42 seconds okay fair enough uh so second question uh either say in specifically to say oliochemical based surfectant players 39:51 39 minutes, 51 seconds glo globally uh or basically whoever are your large competitors globally uh any 39:58 39 minutes, 58 seconds any say financial challenge to because of such prolonged slowdown. So any supply side or say supply cut possible 40:07 40 minutes, 7 seconds uh or financial deteration uh in health of any of your peers. uh uh that is uh uh first point which either leads to 40:15 40 minutes, 15 seconds lower supply or which either provides us uh opportunity to uh acquire or to have some kind of inorganic opportunity. 40:26 40 minutes, 26 seconds Yeah. So uh essentially uh this this can this I can say will only happen if uh 40:33 40 minutes, 33 seconds structurally things are going to be uh different and it's going to be a continued uh situation. But I don't see 40:40 40 minutes, 40 seconds that uh being a structural situation now. So I think all my peers would have the ability to go through with this uh 40:50 40 minutes, 50 seconds uh short-term situation. But it's a different story if structurally it remains to be so uh but I think as I said we need to wait at least for uh the 40:59 40 minutes, 59 seconds next one year to be able to understand this implication. 41:02 41 minutes, 2 seconds Understood. Answer this last question on your based on your analyst meet where you mentioned uh diversification into uh 41:11 41 minutes, 11 seconds uh personal care or skill related products. So uh any any update on uh progress on say organic or inorganic uh 41:20 41 minutes, 20 seconds uh opportunity that you have. So we you may not have finalized but any progress either organically or inorganically if 41:28 41 minutes, 28 seconds you have shortlisted some or have seen organically we have we have in fact the recent in cosmetics in Bangkok we 41:35 41 minutes, 35 seconds launched five products all in the sunare range the latest second generation sunscreen molecules. 41:42 41 minutes, 42 seconds Um so which was essentially November first week so that is as recent as now. 41:47 41 minutes, 47 seconds Also with regard to what we said on the beauty segment we said we'll be on to more on the leave on skin formulations. 41:53 41 minutes, 53 seconds So we have had a good range of products also that we have launched on that front and uh I'm happy to share that a very 42:01 42 minutes, 1 second healthy pipeline projects and pipeline is being built across uh say uh APAC Europe and US in terms of these 42:08 42 minutes, 8 seconds molecules. uh the when we launched these Sunare ingredients five of them in Bangkok. I think we received a very fantastic response from all our 42:17 42 minutes, 17 seconds customers and uh uh probably I think we are seeing that uh that essentially is going to be uh taking off. Well, I can 42:26 42 minutes, 26 seconds have much better uh you know view on that in the next quarter when we talk and 42:34 42 minutes, 34 seconds inorganic inorganic years. So we we obviously on the lookout uh but there's nothing that we are currently working 42:40 42 minutes, 40 seconds on. Uh we know uh you know uh what needs to be done uh but that's something that uh 42:49 42 minutes, 49 seconds we are reviewing but it's not something that we have anything on hand where we're going to conclude something. 42:56 42 minutes, 56 seconds Noted sir thanks and all the best. Thank you. Thank you. 43:03 43 minutes, 3 seconds The next question comes from the line of Umang Shaha from Banyan Tree Advisor. Please go ahead. 43:11 43 minutes, 11 seconds Hi sir, thank you for the opportunity. Am I audible? Yeah, you are. Okay, great. Uh, thank you so much sir. 43:17 43 minutes, 17 seconds Sir, first question was uh first question was uh we mentioned that we have gained some market share in India. 43:24 43 minutes, 24 seconds Uh from what our understanding was, we already had a very high market share. Uh so can you help us understand in which segment or in which uh vertical were we able to gain this market? 43:34 43 minutes, 34 seconds I didn't say I think I need to correct you what I said was we gained a larger share of our uh business with tire two 43:43 43 minutes, 43 seconds and tire three customers because in tire one we did get impacted by the reformulation. So that's what I said but that that to a large extent 43:50 43 minutes, 50 seconds mitigate but not fully the sort of volume impact. So it is not the overall market share. Yeah. Okay. 43:55 43 minutes, 55 seconds Okay. Okay. Got it. Got it. Uh and sir uh second question was uh now that there are these tariff headwinds and 44:03 44 minutes, 3 seconds globalization itself is in under consideration are we looking to expand capacity in trike and uh the revenues 44:10 44 minutes, 10 seconds there have not grown as much as the other entities. So what is the plan there? 44:15 44 minutes, 15 seconds Oh yeah. So uh obviously we have we are you know looking at how do we respond to this because on the tariff side to take 44:23 44 minutes, 23 seconds any investment decision you need to have clarity in terms of uh how uh sustainable those tariffs will be and we also have to work out in terms of how 44:31 44 minutes, 31 seconds the demand is going to get impacted already uh you know there are some murmurss in terms of inflation ring it in the US. So we'll have to wait. So we 44:40 44 minutes, 40 seconds as we are preparing our plans on the drawing board uh to be ready. Okay. And we also are very clear that we need to set up companies that can be cost 44:47 44 minutes, 47 seconds competitive. Okay, because we know that US as an economy is not uh is when we set up any investment, it's going to have its own cost implications. So we 44:56 44 minutes, 56 seconds are reviewing all that and we are getting ready on the drawing board but right now we are not looking at uh moving on that once everything falls in 45:04 45 minutes, 4 seconds place. Okay, we have the balance sheet to move on that quickly so that's not an issue. 45:10 45 minutes, 10 seconds Sure sir. Thank you. I'll get back in the queue. Yeah, thank you. 45:18 45 minutes, 18 seconds The next question comes from the line of Dyanch Gupta from Latin Advisor PMS. Please go ahead. 45:26 45 minutes, 26 seconds Am I audible? Yeah. 45:28 45 minutes, 28 seconds Hi. Just one question with respect to your opening comments where you said in let's say US because of tariffs there is a project delay and product approval 45:36 45 minutes, 36 seconds delay. Is it specific only to galaxy and 50% tariffs in India or is it in general 45:44 45 minutes, 44 seconds because if it is general even if the tariffs go back then the challenge of uh customer demand in US or inflation will 45:52 45 minutes, 52 seconds remain. So just wanted to get a sense on that. So, so if if you ask me, I'm I'm just to underscore what I'm trying to communicate. If one of the biggest 46:00 46 minutes players and our customers in the US uh uh market has very clearly talked about uh US being a cause of concern for them 46:09 46 minutes, 9 seconds and they're looking at China as their way to be able to compensate that. So that tells you currently what people are seeing in the market. So I would I have 46:17 46 minutes, 17 seconds every reason to believe that it's not only specific to us. It's to all everyone who has got an impact because of tariff because there is a tariff even 46:25 46 minutes, 25 seconds the local players but then from India the impact is much higher because we are at 50%. Whereas every person even for 46:32 46 minutes, 32 seconds the feed stocks the local players have to be bearing a tariff. So the delta between the tariff implication is what is making them and other thing is see 46:41 46 minutes, 41 seconds the reason is all of them are rebing the supply chain. So when someone is in the process of rebing all my customers are rebing the supply chain what is coming from where what we need to do how can I 46:50 46 minutes, 50 seconds make it sustainable how do I manage the short term what should be my plan for the medium term so when all this is happening okay uh their ability to focus 46:57 46 minutes, 57 seconds on currently building projects that we are working with them it's not that they have shelved it okay they're saying that we need some time that is where the 47:06 47 minutes, 6 seconds impact has happened got it understood that's also thank Thank you. 47:16 47 minutes, 16 seconds The next question comes from the line of Umang Shaha from Banyan Tree Advisor. Please go ahead. 47:23 47 minutes, 23 seconds Uh hi sir. Uh thank you again for uh taking my question. Uh just to understand uh when we are looking at 47:30 47 minutes, 30 seconds specialty surfactants um we had various types in that uh right from mild surfactants to other segments also. 47:39 47 minutes, 39 seconds Would you like to call out any segment which has had either a disproportionate benefit or a disadvantage while we are going through this on the tariff side? 47:49 47 minutes, 49 seconds Yes. Yes. Both tariffs and overall slowdown. 47:53 47 minutes, 53 seconds Yeah. So it is product wise. I may not want to get into the specifics uh because we are also working on finding solutions in terms of regging or supply chain for some of the products in Egypt. 48:03 48 minutes, 3 seconds So for the sake of convent I don't want to be mentioning in specific. Okay. But it's suffice to say that uh we're 48:10 48 minutes, 10 seconds looking at how good portion of this impact if it continues the tariff can be managed through our rejiging supplies win to my Egypt facility. Okay. And 48:19 48 minutes, 19 seconds we're also looking at if these tariffs are going to be sustaining how do we look at building certain capacities in Egypt. Okay. But as of now we will not 48:27 48 minutes, 27 seconds be able to discuss in specifics on the product categories. 48:31 48 minutes, 31 seconds Oh sir not a problem. And second question was our CWIP is around almost 260 crores as of FY25. 48:40 48 minutes, 40 seconds Um can you help us understand where will this new capacity be put in? Yeah, most of them will be in India. 48:47 48 minutes, 47 seconds Some of it in uh Egypt but most of it will be in India in terms of what projects we initiated a year and a half back. Okay. Are they coming to fruition? 48:56 48 minutes, 56 seconds So those are all what are there in the uh capex cap working. Okay. Sure. Thank you. 49:06 49 minutes, 6 seconds Thank you. 49:09 49 minutes, 9 seconds As there are no further questions, I would now like to hand the conference over to management for closing comments. 49:17 49 minutes, 17 seconds Thank you ladies and gentlemen uh for uh uh your interest in our organization and uh uh uh being patiently listening to us 49:26 49 minutes, 26 seconds and posing certain very uh crisp questions and very insightful questions. 49:30 49 minutes, 30 seconds Thank you so much. look forward to being with all of you again 3 months from now. 49:35 49 minutes, 35 seconds Thank you and all the best. Have a good day. Thank you. 49:40 49 minutes, 40 seconds This brings the conference call to an end. On behalf of Galaxy Serfectance Limited, we thank you all for joining us. You may now disconnect your lines. 49:49 49 minutes, 49 seconds Thank you.