Asahi Songwon Colors Ltd. — Call Transcript 2022

Nov 21, 2022

Ref: ASCL/SEC/2022-23/58

November 21, 2022

L, "To; 2./To, The General Manager The General Manager (Listing) Departmentof Corporate Services National Stock ExchangeofIndia Ltd BSELimited St Floor, Exchange Plaza 1st Floor, New Trading Ring Plot No. C/1, ^G Block Rotunda Building, P. J. Tower Bandra - Kurla Complex Dalal Street, Fort Bandra(East) Mumbai - ^{400 001} Mumbai - ^{400 051} BSEScrip Code: ⁵³²⁸⁵³ NSE Trading Symbol: ASAHISONG

SUB: TRANSCRIPT OF CONFERENCE CALL HELD ON NOVEMBER 17, ²⁰²² WITH INVESTORS AND ANALYST ON THE FINANCIAL PERFORMANCE OF Q2FY23

REF: REGULATION ³⁰ OF THE SEBI (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS) REGULATIONS, ²⁰¹⁵

Dear Sir/Madam,

Pursuant to Regulation ³⁰ of the SEBI (Listing Obligation and Disclosure Requirements) Regulation 2015, we are enclosing herewith the transcript of Conference Call held on Thursday, November 17, ²⁰²² at 2:00 p.m. (IST) with investors and analyston thefinancial performance of Q2FY23.

The said transcript will also be made available at the website of the Company at Wwww.asahisongwon.com.

This is for your information and records.

Thanking you,

Yours faithfully, For, ASAHI SONGWON COLORS LIMITED SAJI VARGHESE

JOSEPH

SAJI JOSEPH Company Secretary and Compliance Officer

Encl: As above

CIN: L24222GJ1990PLC014789 Regd. Office: "Asahii House",7 13, Aaryans Corporateite Park, Nr. Shilaj ahhmalRailway FeCrossing, peteThaltej-Shilaj 058Gulere.Road, India |<- ' Registered Tele : 91-79 6832 5000 « Fax : 91-79 6832 5099 ⁺ WebSite: www.asahisongwon.com _|iws.aeuas-conetnws| OF IAF KLA,

"Asahi Songwon Colors Limited

Q2 FY '23 Earnings Conference Call"

November 17, 2022

MANAGEMENT: Mr. GOKUL JAYKRISHNA — JOINT MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER — ASAHI SONGWON COLORS LIMITED Mr. PRATIK SHAH — CHIEF FINANCIAL OFFICER — ASAHI SONGWON COLORS LIMITED Mr. MITESH PATEL — VICE PRESIDENT STRATEGY AND GROWTH — ASAHI SONGWON COLORS LIMITED Mr.SAJI JOSEPH — COMPANY SECRETARY AND COMPLIANCE OFFICER — ASAHI SONGWON COLORS LIMITED

Moderator: Ladies and gentlemen, good day and welcome to the Q2 FY '23 Earnings Conference Call for Asahi Songwon Colors Limited. As ^a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note thatthis conference is being recorded.

^I now hand the conference over to Mr. Abhishek Mehra. Thank you. Andoverto you, sir.

Abhishek Mehra: 'Thank you Rutuja. Goodafternoon and welcomeeveryone. And thank you for joining this Q2 FY '23 Earnings Conference Call of Asahi Songwon Colors Limited. The results and investor updates have been emailed to youandarealso available on all the Stock Exchanges. In case anyone does not have ^a copyof the same, please do write to us and we'll be happy to send it over to you.

To take us through the results of this quarter and answer your questions we have today with us; Mr. Gokul Jaykrishna, Joint Managing Director and Chief Executive Officer; Mr. Pratik Shah, Chief Financial Officer; Mr. Mitesh Patel, Vice President Strategy and Growth; and Mr. Saji Joseph, Company Secretary and Compliance Officer.

Wewill be starting the call with ^a brief overview of the financial performance andit will be followed by the Q&A session. ^I want to remind you all that everything said in this call, reflecting any outlook for future, which can be constituted as a forward-looking statement must be viewedin conjunction with the uncertainties and risks that the companyfaces. These uncertainties and risks are included, but not limited to what we have mentioned in our annual reports, which you will find on our company website. With that said, ^I will now handover the call to Mr. Gokul Jaykrishna. Over to you, sir.

Gokul Jaykrishna: Good afternoon, ladies and gentlemen.I'm happy to welcomeyouto our con-call and thanking youall for attending the Q2 FY '23 call. This also happens to be the Hi '23 -- FY '23 call as well. So we will briefly look at the quarter results, but also the half yearly performanceas well. AndonceI give you little brief, you all have already looked at the results, so you knowthe basics, but I'll just run the group through the results in -- very brief on the consolidatedbasis. And then I'll open the floorfor questions, and I'll take all your questions.

So as you can see, we have hada vertical quarter, one of the most difficult and challenging quarters in almost a decade, if not a little more than that. The general environment for pigments, dyes, colorants and chemical seemsto be extremely challenging. And from various points of view, demandhas been subduedoverthe last three months and continues to remain so currently. Raw material prices, which had risen from last year by about 25% to 40%, they are starting to come-off, but the inventory losses that all companies who are owning raw material as well as finished goods tendto feel. So that takes its own time to funnel through the system.

Andat the sametime,the situation in Europe, all of you are very well awareof, is extremely tricky and unpredictable dueto the Ukraineimpact and the energy costover there. Just to give youa little idea of what's going on in Europe, the largest chemical company in the world, BASF,which is located out of Europeis shut down. So,this is like you don't hearthis in ^a long time that BASF hasto shut downits main Ludwigshafen plant. Butthatis the kindofsituation Europeis going through.

In relation to, we are very, very fortunate here in India, thanks to the dynamic handling of the situation by the Narendra Modi government and also decently strong general economic conditionsprevailing in India relativeto the rest of the world, things are not as bad as they are in Europe.

Now coming to the financial performance. Our quarter, we reported ^a turnover of INR 127 crores on ^a consolidated basis. This compares to ^a INR ⁹⁴ crore turnoverin the corresponding three months. And if you look at the performanceon ^a half yearly basis, we reported ^a revenue of INR 291 crores. So this compares to INR 192 crores in the corresponding six months for this financial year.

Moderator: Iamsorry interrupt yousir. Mr. Gokul Jaykrishna yourvoice is breaking.

Gokul Jaykrishna: So comingto the financial performance, ^I will start again that the quarter we reported ^a turnovertopline of INR 127 crores. This compares to a topline of INR 95 crores for the corresponding three months on ^a consolidated basis. The half yearly performance stands at INR 291 crores as comparedto INR ¹⁹² crores in the previous six months comparable basis.

So you can see that there has been significant increase in the turnover. This of course is coming on back of the acquisition of the pharmaceutical business of Atlas that Asahi has acquired. And thatis working out reasonably well even in these very challenging times. On the profit before tax basis, we reported a very dismal performance of only INR 29 lakhs as compared to INR 6.35 crores in the corresponding quarter. And on a six-monthly basis, we made INR 5.82 crores on a PBTbasis as compared to INR 12.82 crores in the previous corresponding quarter.

And then coming to the EBITDA performanceonthe consolidated basis, we made an EBITDA. of INR 7.5 crores. And on ^a six-monthly basis, the EBITDA came to INR 19.26 crores as compared to INR 20.64 crores in the previous six months. So these are the basic numbers. With this, ^I mean, I've already given youa brief of the headwinds that currently are faced by the pigmentindustry in general. It is not PAT for Asahi, definitely, it is one of the weakest number-- set of numbers we havepresented in ^a decade or more even.

Buthowever, if onelooksatit in relative terms to the performance ofother pigmentbusinesses or dyes companies in the space, you will see that it's quite reasonable. We are reasonably strong on EBITDA andontopline also we have done quite well. Our finance costs have certainly gone up, and this is dueto the leverage buyoutofthe pharmaceutical business.

The pharmaceutical business has been bought over by Asahi with ^a stake of 78% and we have paid INR 48 crores amountupfront for this, which has been partially leveraged. And then of course, we acquired a INR 20 crore debt with the company when we boughtit as well. So, this is the reason whyour leverage has gone up. And the reason for some of the numbers showing ^a little negatively is also because oftherise in the finance cost. This, of course, is temporary and we will go back to our longer-term goals in terms of our numbers and morale.

With that, I'd like to open the floor for questions.

Moderator: Thefirst question is from the line of Prateek Chaudhary from Saamarthya Capital.

Prateek Chaudhary: So we have -- ^I think quarter-on-quarter, there was ^a significant decline in our revenuesin our standaloneblue business, could you bifurcate the price rate that into volume decline versus realization decline because the growth baskethas fallen materially?

Gokul Jaykrishna: So Prateek, you are right, there has been a significant decline in our Q-on-Q in our standalone blue business. So our total production is down by 22%, if you compareit to the previous comparable quarter. And in termsof value, in terms of sales value,it is down by 32%. So the basic -- both the reasons you mentioned are prevalent. ^I mean the numberone reason is decline in volumebecause we have losta significant volumedue to the poor demand conditions.

'The demandconditions remain quite sluggish and weak and most of our customers have been caught on the same port in termsofinventory, they have ^a lot of inventory, and everybody in the world is seeming like they want to destock. We wantto destock too. So all our customers andus and our competitors, everybody is ina destocking mode -- and thus, when you club this with ^a weak demand, you can imagine that there is going to be ^a huge pressure on how much you canactually produce withoutsignificant increase in inventories.

So productivity was down by 22% in terms of volume. And in terms ofsales, it was down by about 32%. Andso this was ^a combination of poor demand, so drop in productivity and also prices comingoff.So it's ^a combination of the two, ^I would say, about 70% due to the drop in volumes and 30% dueto the prices comingoff.

'And also addto this the factthat the inventory that wecarry, whetherit's finished goods or raw materials, is now being usedand this inventory is obviously cost ^a company more because the prices have come off now, while the finished good prices are coming off further. So the inventory that we have caught with is also resulted in making the profit before tax andprofit and the profit numbers seen back?

Prateek Chaudhary: 'And what would your viewbe on change in market share if any among your share of business with our customers?

Gokul Jaykrishna: So ^I think our share of business in percentage to has actually improved. Because we are maintaining ^a productivity of about 75-oddpercent. We normally in the Blue business, we are talking standaloneright now. So the standalone, we normally do about close to 100%, and we

strive to do 100% all the time. And we managethis over ^a number of quarters. ^I mean, ^I don't remember in thelast eight quarters when we havemissed the target in the Blue crude business of making 100% productivity. Now we are at 75%.

Nowif you compareit to others and generally, the market, the demandis significantly lower than ^a drop of 25%. So ^a lot of our competitors are either closed or running below 50%. And hence, if you look at it simply in percentage terms, our market sharein the Blue business has gone up. And it probably -- it is difficult to give you an exact number, but it would be ^a decent increase in market share in terms of percentage terms.

Butthat is notvery relevant because that doesn't help us right now. See, in ^a market which is growing and demandis strong, any improvement in market share is going to add to your bottom line. Nowit protects bottom line, yes. Butstill, ^| mean, it doesn't save us from the vagaries of the marketright now.

Prateek Chaudhary: Andyou also happen to mention aboutinventory losses -- so given that we are still sitting on ^a 's to hit us in the next one or two very high inventory, would we still expect inventory ^I quarters?

• Gokul Jaykrishna: Notoneor two quarters, but probably for ^a quarter. Yes. However, having said that, ^I perceive -- ^I think that we have already brought the inventory down by about 20%, and we will strive to bring it down by another 20% to getit back to where we are comfortable and normally ^a sticking act. So we are obviously off the peak ofinventory levels now. So the worst ofthat inventory level is over, and ^I sceit declining further from where we are now moving towards ourdesired levels of inventory. Andthis should take no more than ^a quarterI think.
• Prateek Chaudhary: 'And when yousee your spreads normalizing spreads between your raw material basket and your finished goodprices?
• Gokul Jaykrishna: Again, it should bottom out in this December end quarter. And thenstart normalizing in the first quarter of the calendar year,the last quarter ofthe financial year.

Moderator: 'Thenext questionis from theline of Krisha Kansara from Molecule Ventures.

Krisha Kansara: Sir, my first question is regarding the environmentof the industry. So ^I understand that the operating environmentin the pigment industry and chemical industry in general also is not very conducive. But by when do you expect to ramp up the Azoplantto, let's say, optimum capacity utilization?

Gokul Jaykrishna: Krisha Kansara: Sorry, ^I didn't get your name. Can you just her your name again? Krisha Kansara.

Gokul Jaykrishna: Please Yes. So thank you for your question. Yes, the general environmentin the chemical industry, the dyes and pigment industry, the colorant industry is very, very sluggish. And ^I -- it's very difficult to pinpoint as to how longthis will last. I'll give you mytakeonit. ^I think we are already seeing ^a bottoming out. So ^I don't see it getting worse. We have already reached that point where we are at the worst point. And fromhere, ^I do expect the improvement. When this improvement will come through or howlong this -- the bottom phase will last without going any further downis difficult to guess. My best guess, three months.

So weshould be bottoming out by end of December and then the first quarter of the -- from, January '23 onwards, we shouldsee green shoots in demand coming back becausebythat time, ^I do expect that most global companies and evenfor that matter, large Indian companies who are consumers ofthese products would have seen a bottoming out post-Christmas in their inventory levels. See, youalso clubbed this with Christmas coming in and thingswill probably be slowfor another month. then come January, people will see that they are already destocked a lot.

Andif then yousee any greenshoots in demand, then we couldsee ^a reasonably quick upturn in the demand scenario compared to where we are now. And that's whyI say that we have probably we arealready at the bottom and not going to get worst. And then to answer your question aboutthe AZObusiness. So -- and in the AZO business, we were very fortunate in the quarter period, our team did an exceedingly a wonderful job in putting up the plant just under the budgetthat we have set out to do.

And that has really stood us in goodstead. If we were to put up the plant today, it would have probably cost us 25% to 30% more. The cost of land, the cost of steel, cement, construction, labor, everythingis shotupsince then. So we were very fortunate in termsof capex to have completed the budget in good time and under the budget that we haveset out to do. And that was completely financedthrough equity by us and our JV partners. So there was no debtat that time on the balancesheet. Now similarly, when we started the plant and now weare into the first year of operations in that sense.

Wehaveseen that the market conditions have been very, very bad. And the worst I've seen in over ^a decade. So that has put ^a lot of pressure, and we have not beenable to get utilization levels because of ^a poor demand as we would like. So we continue to do utilization of about 35%.This is, of course, not what we expect because the demand scenario is weak. However, the good thingis the team at our tag facility is nowreasonably well set and products also one after the other, are getting said. Weare getting good breakthroughs. Sales-wise, our team is doing ^a goodjob in this two or four market conditions and other businesses, ^a new start-up business in the AZO side of the pigment.

Andwe are now steadily doing about ⁶⁰ to ⁷⁰ tons of production andsales on ^a monthly basis. Weshould look to ramp up this immediately as the demand goes up. So very difficult to predict, but coming January, February, March quarter, we should see ^a reasonable uptick and go definitely beyond the 110, ¹²⁰ tons per month scenario, whereby we'll be at about 55% utilization.

Krisha Kansara:

Asahi Songwon Colors Ltd November 17, 2022

Gokul Jaykrishna: So we would have liked to start the second phase in the first half of the next calendar year. However, this is going to be pushed back given the current demandscenario and we've almost lost six months in that sense. So ^I wouldsay that towards the secondhalf of the calendar year 23 is when we will probably getinto that phase of switching on the project for doubling the

line by whenwe'll start the secondphaseofthis particular capex?

Andsir, one question related to the AZO capex only. So can yougive us an idea on the time

Krisha Kansara: H2ofcalendar year '23, correct?

capacity.

Gokul Jaykrishna: Or financial year, yes, somewherein that area, H2 ofthe nextfinancial year.

Krisha Kansara: 'And sir, my second question is on debt. So for the first time, youare seeing this kind of debt onour balance sheet. So is this something that you're comfortable with andespecially some challenging time?

Gokul Jaykrishna: So certainly, we are comfortable with the debt. So that answer, I'll give youstraight away. ^I mean, Yes, the debt has gone up. This is a conscious decision in terms of growth, and we wouldn't have doneit if we were not comfortable. If you look at the, so on the comfort level first, very quickly, if you lookat our debt debt-to-equity ratio, it is on at 0.45x equity, debt is 0.45x equity on a standalone basis and 0.65x equity on a consolidated basis.

So by any financial parameter, if you look, 0.65x equity is still remaining very conservative. Soin that sense, we are comfortable. We have leveraged consciously in adding the Dahej plant to ourportfolio and spreading our wingsacross the spectrum of pigments looking to 10 years' future. Also, we have acquired the API business in the pharmaceutical space of Atlas Life Sciences, and this is also now owned by Asahi. So there is leverage comingin from both of these places for ^a number ofyears, Asahi was knownas too conservative, too slow, debt-free companyand well run, but not growing at all.

Now we have responded and we have completed that strong phase of five years of consolidation in 2020. And now we areentering five years of growth phase. So between now, now weare already in ²⁰²² and going into '23. So by '25, you will see that the companyin termsof growth levels, is there another level. You can already see the basic green shoots of this coming through. If you look at the top linefor the six months,it is at INR ²⁹¹ crores, so this is more than what we do onan annualbasis forthe past five years generally.

Wehave donein six months. So our top line, if you compareto the last four years to five years, when it was stagnant in the INR 280 crores region has almost doubled out. And this is just the beginning because the pharmaceutical business that we have acquired comes with ^a parcel of land in Chattral, which we are leveraging and putting up an expansion project with

backward integration, which is going to result in EBITDA expansion in the APIbusiness, which currently are lowin the plant that we have acquired.

• Krisha Kansara: Sir, you mentioned about the API business. So ^I have one question related to that also. So are we seeing anychallenges in our APIbusiness becausesince the time we have acquired, the margins have declined severely. So whatis your outlook of the API business as of now?
• Gokul Jaykrishna: Yes. Thank youfor this question. This was something on my mind. ^I wanted to any way brief the group about this because it's ^a new business that we've acquired. Soit's been about six months since we acquired it. The market conditions in the API business generally, not only ours, but generally the market leader in the spaces, Divis and Laurus Labs and all, you can see that all of these API companies have been struggling to maintain margins becausethe pricing pressureis there. So we have no exception. It is similar to the rest of the APIindustries. Our product prices have also come off a bit and the market environmentis challenging.

Having said that, if you lookat the, if ^I just looked in detail at the six months gone by since we procurethe business,and ^I get great comfort because we have been able to increase top line in these extremely challenging times. This augurs very well as we go into expansion into the Chattral business, which should, which is going also ahead of schedule, it was scheduled to start in Diwali. So October, November of '23. And now weare ahead of schedule, and we shouldbeprobably starting in September or even aimingto start in August of "23.

So it augurs very well as we go into the expansion phase that our top lineis doing quite well. As for the margins, yes, prices have comeoff and so the margins, our EBITDA margins, which were at about 7% in the APIbusiness has comeoff to 3.5%. So they have almost the halved in terms of EBITDA margins, However, cash flow has been the saving grace, cash flow has improved. And our borrowings in the API business has reduced significantly by about INR 4 crores. This, given the current marketsituation augurs very well. Our cash flowis good as well as the creditor periods are also working out pretty good. So the general business is running smoothly.

• Krisha Kansara: Sir, ^I have one last question regarding debt only. So what is the repaymentplan currently, given that we still have the ongoing capex, and wealso have as expansion plan on the card. So what does the repayment schedule lookslike?
• Gokul Jaykrishna: So on ^a consolidatedbasis, the debt is at INR 175 crores to INR 180 crores currently, as we speak, it said about closer to INR 170crores. And we seeit peaking out at about INR 210 crores. This is taking into consideration the capex that we are doing in Chattral, the capex is INR 60 crores. So roughly INR ⁶⁰ crores, give or take 5%. So given that wesee debt peaking out at about INR 210 crores.

Andif you look at our ratio at INR ²¹⁰ crores in terms of debt equity, it will comfortably remain at about 0.75. So in that sense, we are comfortable in terms of repaymentofdebt, of course,it has ^a five year repayment schedule for the newloans and the other, the current loans that we have, we have only INR ⁶⁰ crores of long-term debt. So in that sense, those INR 60

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crores of debt will comefor repayment on ^a regular schedule. We will add about INR 30 crores to INR 40 crores of long-term debt given the Chattral project. So total long-term debt should not exceed INR 100-odd crores. And this will have ^a regular repayment schedule and payment, and we should be deleveraging again from that peak.

Moderator: 'The next question is from theline of Nagesh Jain from NJ Investments.

Nagesh Jain: Sir, myfirst question is regarding the drop in the demand in China due to COVIDlockdowns. Recently, the Chinese governmenthave imposedanti-dumping duty on Phthalocyanine grades from India. So just wanted to know, wouldthat affect Asahi?

Gokul Jaykrishna: Thank you, Nagesh. So the Chinese lockdown,it is difficult to decode the impact of that. But the anti-dumping dutyis an easier one to answer. Generally, we don't, in any way both Chinarelated question, we don't haveanydirect exports to China. So we haveno direct impact of the Chinesebusiness in terms of our marketshare per se or our business.

'And also with the duty, the pigment manufacturers of India have gotten together. ^I am ^a part of that group and ^a member, and we are fighting the Chinese against the anti-dumping duty. However, having said that, the impact of that on Asahi in terms of the duties, directly is nothing because we don't export anything to China. So we don't have to grapple with the problemsthat someother customers who are exporting directly to China are grappling right now with containers onboardor orders yet to be shapedandall of thatstuff.

Theimpact is kind of indirect because with this duty of ¹⁷ or 17.5%, which looks like the currentthing, there would be ^a dentin the Phthalocyanine being exported from India to China and that competition could comeinto other areas of the global market. So that is an indirect impact that will be making the market a little subdued, but no direct impact on Asahi per se. Andalso the Chinese business right now, as you said, because of the COVID thingis slow anyway. So ^I don't see ^a major impact ofthis comingoutofit.

• Nagesh Jain: Sir, mynext question is, you had mentioned the capacity utilization of CPC Blue that is around 75%.So ^I just wanted to know about the Alpha and Beta. So oneis first the Alpha Blue. See, we had someissues earlier regarding supply of this grade to Clariant because if that portion of the business was taken over by Heubach. So just wanted to have that beenstarted out and supplies have becomenormal?
• Gokul Jaykrishna: Yes. So thank you for this question. There is something good that ^I can report on the Alpha yes. The problems that we did have problemswith the product when westarted with Clariant, and these have been sorted out. And after back Heubach taken over Clariant, the Alpha business is going on with Heubach right now, and that's been sorted out. And on the utilization, we are at CPC about 70%, we will probably continueto remain in the area of about 60%, 65% for ^a while. And then as ^I said, January, February, March, we should see much better numbers.

Nagesh Jain: Sir, whatis the utilization for Alpha and Beta Blue, sir?

Gokul Jaykrishna:	So Alpha ~ Beta Blueutilization has been quite good. I think it is about 80%, which is normally what we do in the Beta business. However, the sales have been slow. So there has been some build-up in inventory. But otherwise, Beta utilization has not dropped. Alpha utilization has dropped to -- for the last two months to zero. However, we've just restarted and be coming to 70% Alphashould in -- probably in January, February, March, we should see 75% utilization in the Alpha business.
Nagesh Jain:	Sir, my next question is on the Beta. See, there, we had a tie-up with the DICfor supplying this, BSE grade. And wasselling their inks business to concentrate more on the Pigments business of their -- so that will affect our Beta Blue sales to them?
Gokul Jaykrishna:	I did not understand the question. We do have a relationship -- ongoingrelationship with DIC, are a lead supplier to them, But I didn't understand the question,if and we you could repeat?
Nagesh Jai	Yes. We supply Beta Blue to DIC for their inks business.
Gokul Jaykrishna:	Correct.
Nagesh Jain:	I believe they have selling upthat inks business to concentrate more on pigments. So I just wantto know, first of all, whether this information is correct andifit is correct, will that affect our Beta Bluesales?
Gokul Jaykrishna:	who No. So I don't think -- I mean, I'm notprivy to this information. DIC is a ink company has acquired Clariant andgotteninto the pigment business in that sense, but they do remain a ink of the with 35% world's market share. And I don't think they have plans to sell company the ink business.
Nagesh Jain:	one of the major -- our major customerin So because weare Beta Blue is DIC, if have understood correctly?
Gokul Jaykrishna:	Yes,thatis correct. Thatis correct.
Nagesh Jain:	Sosir, my next question is the INR 45 crores is the sales from the subsidiary as well as the joint venture. If you take out the difference between the standalone andthe consolidated. Just muchit is from the subsidiary. If you couldgive wanted to know how us the breakup there?
Gokul Jaykrishna:	the breakupofthe Pratik bhai, can yougive
Pratik Shah:	Yes,sure. I just you make
Nagesh Jain:	Sir, in the meantime, I have one more question. Like as of now you had mentioned the utilizationis still at around 35% to reach around 55% andexpectit by January, February. I just had sentto wanted to know whatever the samples we different customers for the approval and all, have wereceived any approvals during the last quarter?

Gokul Jaykrishna:	have seen a numberof Yes, we have -- see that we samples, and we have also received a to 70 tonsofsales, are doing 60 tons of pigmentof60 decent approvals andalso orders. So we havegot of which about 45-oddtons local. So we internationally as well as locally good decent approvals in actually five of our products.
	have received, can you namethe companies?Is Nowthis -- whatever the approvals we it like 'Sun Chemical orlike where everor like where you are approaching them?
Gokul Jaykrishna:	I would notlike to go into the names right nowbecause -- it is a little sensitive in these market conditions, given the poor market conditions, we don't want to disclose the breakup of customer names. Butthe big accounts have notyet started.
Nagesh Jain:	'Thatis fair.
Gokul Jaykrishna:	So the names you mentioned are still under trials and their demandin Europeis very slow. So - - but yes, they are under trial, and we have got someapproval.
Nagesh Jain:	Sir, any ~- that data they could get a subsidiary and JV?
Management:	Yes. The breakup is from NPAsubsidiary,it is INR 34 crores. And from Azure subsidiary,it is 1 lerores. INR
Nagesh Jai	business still we Okay. So that means the Azo must be making last sir?
Gokul Jaykrishna:	Yes, absolutely.
Moderator:	of VipulkumarShah 'Thenext question is from theline from Sumangal Investment.
Vipulkumar Shah:	So myfirst question is, sir, whatis the value addition we we convert CPCinto get when Alpha and betain percentage terms?
Gokul Jaykrishna:	Pratik bhai, can youtake this questionin termsofvalue addition?
Pratik Shah:	Yes.Sir. Just a moment.
Vipulkumar Shah:	of our AZO can you give the EBITDA Yes, sir. And business subsidiary also, you said the revenue was INR 11 crores, right?
Gokul Jaykrishna:	thereis EBITDA Yes, that's right. INR 11 crores. And negative.
Vipulkumar Shah:	Yes. But can you quantify it, sir?
Gokul Jaykrishna:	for the AZO you quantify the EBITDA Yes. Pratik, we will do thatalso in numbers. Can business?
Pratik Shah:	2 Yes, Just. It's negative INR crores.

Vipulkumar Shah:	MinusINR 2 crores.
Pratik Shah:	For the quarter ended September.
Vipulkumar Shah:	'Andwhatis the sort of valuation we get for alpha andbeta as compared to CPCblue?
Pratik Shah:	Sir, is it okay if youtake this question offline one-on-one with you?
Vipulkumar Shah:	Yes. Whom should I contact sir?
Pratik Shah:	You can get in touch with our Compliance Officer, Mr. Saji Joseph.
Gokul Jaykrishna:	Saji Joseph.
Vipulkumar Shah:	Sorry.
Pratik Shah:	Mr. Saji Joseph, whois our CompanySecretary and Compliance Officer, you can get in touch with him.
Vipulkumar Shah:	And sir, you said you had sizable inventory losses in this quarter. So if it No problem,sir. is possible, please quantify the inventory loss also thatif it is possible?
Gokul Jaykrishna:	Pratik bhai, can you?
Pratik Shah:	It won't be possible right now. So we'll take this one-on-one with you, and wewill come back particular questionas we areready and when onthis with the requiring formation.
Vipulkumar Shah: business?	breakeven level for our subsidiary for this AZO what is the EBITDA Andsir, pigment
Gokul Jaykrishna:	So generally, the EBITDAbreakevenlevel, I would say, would be in the area of about 55% to 60%.
Vipulkumar Shah:	So right now, we are at around 30%, right?
Gokul Jaykrishna:	30%, 35%.
Vipulkumar Shah:	40%, 45%.
Gokul Jaykrishna:	No. 30%, 35%.
Vipulkumar Shah:	So weare long away from
Gokul Jaykrishna:	Yes, because the demandis very low. We are right now, and at 35% it would normally take about 55%, 60% utilization for breakeven.

Gokul Jaykrishna:	We would hope to do thatin January, February, March.
Vipulkumar Shah:	will be able to doit No. Considering the demandsituation, we in January?
Gokul Jaykrishna:	hopingto Yes. We are do it. But then as you rightly said, it's considering the demand. The demandcould get stronger or weaker one cannotpredict right now, how it will be in January, February, March, but I do think thatit's going to be improving. Andif it improves, definitely, 180 tons of pigment. Sothat our plant is already geared to make should not be a problem once the marketis better.
Vipulkumar Shah:	the difference between the AZO Andsir,it's a little confusing. So whatis pigment and alpha Blue. So both are sameor andbeta they aretotally different products?
Gokul Jaykrishna:	No. They're completely different products. Alpha and beta Blue are Phthalocyanine pigments are AZO and rad andyellows pigments. So they are completely different in terms of the, I mean, oneis red and yellow andthe others are blue and green. But the application the end application is the same,inks, paints, plastics, rubber, textile, dispersions
Vipulkumar Shah:	Andsir, since 50% of our revenue is coming from exports, and it must be dollars. So we must currencyin havegot sometailwind of the this quarter also, no?
Gokul Jaykrishna:	Yes.
Vipulkumar Shah:	have reportedlossat Still evenafter that tailwind we that level?
Gokul Jaykrishna:	Yes.
Vipulkumar Shah:	inventory losses will continuein 'Andyousaid this quarter also, right?
Gokul Jaykrishna:	Yes. It will take a couple of months or a month or so forit to settle down.
Vipulkumar Shah:	Andsir, lastly, regarding this AZO business, if I remember correctly, you have, our JV partner of the production. So we are operating at 30%. So weare is supposed to lift 20% not able to sell any meaningful quantity outside of our JV partner,is that understanding correct?
Gokul Jaykrishna:	Yes,that is to an extent, correct. We are not able to export quantities much beyond the JV have donevery partner. Butlocally, we well. Locally, we are doing about 45 tons. So the JV partneris contributing 15 tons, 20 tons.
Vipulkumar Shah:	Restall is sold domestically.
Gokul Jaykrishna:	have a number of customers. So product approvals have comethroughto Yes. The rest all we already. Andthe problem is, I mean, whether it is my manycustomers JV partner, whether it's Sun, namethe company, whichever company youtalk about, generally, the demand is very slow. It's very difficult to push material to customers whenyou have a startup.

Vipulkumar Shah:	question regarding our API business.I think there, we have taken Andsir, mylast expansion, which is roughly around INR 60 crores, right?
Gokul Jaykrishna:	Correct.
Vipulkumar Shah:	So post expansion, what type of EBITDA wecanexpect from that business?
Gokul Jaykrishna:	Post expansion, we could expect EBITDA of about INR 15-oddcrores from the busines
Vipulkumar Shah:	INR 15-odd crores, in percentage terms.
Gokul Jaykrishna:	EvenINR20 crores.
Vipulkumar Shah:	it will be more than 5%? In percentageterms,
Gokul Jaykrishna:	Yes. It will be more than 5%.Certainly, more than 5%.
Moderator:	of Praveen Sharmaan 'The next questionis from theline Individual Investor.
Praveen Sharma:	destocking scenario, which is playing out. Now Gokul bhai, have a question andthis end consumer demand,the end product demand, which is paint, inks, plastics, that particular thing you are witnessing slowdown or it's the destocking thing because whatI'm seeing all over is the pains demand, automobile sales are roaring. The textile sales are good andthe ink, the world has opened, the ink demandhas also gone up. So it's the end consumer, end product or demandand consumer demand, whichis facing the problem the intermediaries are actually destocking. Whatis the scenario?
Gokul Jaykrishna:	because generally, let me I thinkthere is a combination of the two. And putit this way, it is basically a major destocking that is taking placein the industry globally in our industry. This is because we saw two years of increase in prices, whether it's raw material or our ownprices, our top line, our EBITDA,our numbers, ourprofits, everything continued to increase for two competitor or my whether it is me or my supplier or my years every quarter. And customer, everybody was buying material more than they needed. For example, let us talk about Assai. So as Asahi, we operate in on the Japanese system of just in time. So we keep very minimal inventory levels of anywhere between seven to 15 days. Fortwo years, we changedthat policy to maximum inventory that we canstore. So we were doing 30 daysto 45 days ofinventory stocking during two years period. This paid off very very well, continuously. It continued to be well every quarter because every time the order weare inventory, next quarter, the prices would go up and we would thinkthat pretty good at it. Similarly, our customers did the samething. So they ordered morethan they needed from meor anyoneelse. Andthey stocked up too because every time they stocked up next quarter, the prices go up and they think that, okay, this is really good that we have stacked up, otherwise, we would have paid much more. So everybody was in a cycle where they were

stocking morethanthe needed and morethan they consume.

Then about four, five months, three months, four months back, as you know very well, generally, commodities and demandandprices all started to comeoff. As soon as people saw this happening for more than two months, one month was okay, two months was okay, but the third month, then they immediately decided that, okay, now what if the prices are actually going to come down? And this immediately urgently started thepolicy that let us not hold any material. And because they don't wantto hold any material and they are holding ^a lot, they had to destock. So the destocking effect was major, it wasn't normal. It was 2x what it should normally or evenin somecases 3x, not for me, but generally for ^a lot of people. That made the whole demand environment extremely slow. Top it up with general global scenario where Europe is doing extremely, badly right now because of the Ukraine crisis. And general inflationary conditions that are prevailing in the world, everybody is spendinga little less.

So, yes, ^I mean, what yousaid is right in paint and someofthese in packaging industries, we have seen some revival of demand, butit has fallen sharply over the six months. Now we are seeing bottomingoutor revival of it slowly. So it will take about three months, four months for this revived demand to show up after the destockingofinventories over.

So clubbed with destocking of inventory at high stock levels and a slowglobal scenario with inflationary pressures and lower spending across the globe Yes, people started spending on travel, post-COVID,hotels and flights and restaurants and all. But generally, because ofthe energy problems, a lot of businesses in Europe are slow and consumption there is generally slow, people are afraid how they'll go through winter. So because of this scenario, general, demand was very slow. So the two combined together made a very prolonged slowdown, which is now bottomedout.

• Praveen Sharma: But as far as AZO is concerned, the major supplier was China. So there, the supply choke is also there, correct. So do we see any supply chuck of AZO production from China? And hence, whenthis destocking will be over the -- we will immediately get an impetusin terms of higher production and higher demand for us?
• Gokul Jaykrishna: So on ^a macro level, what you are saying is something that we've always thoughtis possible to play out. Immediately, right now, the demandis so sluggish that the slide chocking up from China, it's not completely dried up because AZO production in, like you said, China is dominant in AZOsunlike Phthalocyanine, where India dominate completely and China is afraid of India. - in AZOs, China is 70% of the global market. But their supply is not completely dried up. Despite COVID supply being slow, the market is so much slow that it hasn't trickled down to India as much as one would have liked. But on ^a macrolevel, this thing is likely to happensoonerorlater.
• Praveen Sharma: And these automotive paints andall those things, which are sold domestically in India because we are seeing rolling demands of automobile here in India and other pains are, of course, part ofautomobile integral part of the raw material for automobile industry. This demand the buyer buy globally, these like Suzuki will buy you from Japan and then the supply here? Or how doesit happen the paint because weare only pigments. Ultimately, this will go -- our product

is a part of a particular product, which is further a part of another product, which will go into the end consumerproduct requirements. So it's ^a supply chain. So the domestic buying by the largeplayers, it happens throughthe global channels or it domestically also they buy?

Gokul Jaykrishna: So normally, this is happeningthrough global channels, which is the top automakers have their channel of supply for that particular paint and this is coming through global channels. Andthe volumes are not huge. The busines is good, but the volumes are very small.

Praveen Sharma: Samething ink's printing inks and packaging Inc., this all happens, like demandscenario in India is pretty good. ^I was wondering whether the buying happensthrough the global channels orit happens domestically...

Gokul Jaykrishna: No, not in ink. Unlike paint in ink, it doesn't happen through any global challenge,it will probably come directly towards...

Praveen Sharma: And as far as this API business is concerned, oncethis expansion is over and we are backwardly integrated, do you see -- is there ^a scenario there also demandby the time we do expansion, the demandwill slow down or something orthis PG product, which is the API which we supply has ^a constant demandandit doesn't undergo ^a cyclical structure because at the end of theday,it's ^a pharmaceutical product?

Gokul Jaykrishna: This is ^a very good question. I'm glad youasked this. This is ^a very, very thoughtful and smart question. So I'll give youa very clear answer on this. So Pregabalin is our main product. In the newplant also, weare going to put up somecapacity for Pregabalin. Of course, we are going in with backward integration. So our EBITDA numbers and our reliance on suppliers is going to diminish substantially.

Weplan to make CMH making us completely self-reliant. Not only that, we would start selling someofthe CMH make in the open marketas well. So that will make us ^a very strong in that sensein the in the pregabalin business. We also hope to go in for exports there in ^a major way. Andnow to talk aboutpregabalin, as you said. So unlike many of the other products in the API space, pregabalin is in its initial stage of growth. And it doesn't -- it also is not looking like ^a product dependent on too much ofobsolescencerisk.

So ^I think over the nextfive years or seven years, we should see ^a very goodtimein terms of demandfor the pregabalin business. Andtalking about the cyclicality ofit. So we are already seeing cyclically ^a downturn in the pregabalin or evenin the general API space. So ^I think, hopefully, by the time the plantstarts, we should be able to catch the cycle on the upside. The cycle is always right now on the downside. And again, ^I would probably say that in January, February, March, we maysee bottomingoutofthat cyclical trend that we normally see.

Praveen Sharma: Yes, pharmaceutical industry is also undergoing destocking -- and there, the end user product demandis not ^a concern becauseat the end of that pharmaceutical is an essential commodity. So ^I think things will improvefrom there

Gokul Jaykrishna:	Weareactually -- no, thank you for your questions. They were very big well thought out. And we are very optimistic aboutthis entry into the pharmaceutical API business, wise gives us a you can see that we gooddiversification as well as it sets us up for 10 years. And are nearing now INR 250 crores , INR 200 crores and INR 300 crores of turnover on a half yearly basis. So we should be at about INR 550-odd crores plus on a full year basis immediately.
Moderator:	Next question is from the line of Prerit Choudhary from Green Portfolio.
Prerit Choudhary:	So I have a couple of questions. So first one is related to the balance sheet -- so in H1, we added some newplant, property and equipment. So if you can give a breakup of a what you
Gokul Jaykrishna:	is echo. I I could not hear you. Are you on speaker becausethere can't hear you.
Prerit Choudhary:	plant property and equipmentthat wegotin So just wanted the breakup of new the H1.So can breakupofplant, you provide methe property and equipmentthen that is added in the first half ofthis year?
Gokul Jaykrishna:	Pratik bhai can you
Pratik Shah:	Basically, per se, there is no addition. The impact is only coming out of consolidation because ofthe API business getting consolidated for the first half.
Prerit Choudhary:	me compareit to the FY No. Butlet '22 numbers. The assets have actually grown
Gokul Jaykrishna:	So on a stand-alone basis, you mean for Asahi songwan?
Prerit Choudhary:	No. Onthe consolidatedbasis.
Management:	'Thatis whatI'm saying. See, on a consolidated basis, the only difference it is making is becauseofbusiness will be getting consolidated forthefirst time.
Prerit Choudhary:	Mynext question is on capital work in progress. So we have very significant addition during the HI. So what are the breakup for the same?
Gokul Jaykrishna:	It is mainly pertaining to the API expansionproject at Chhatral.
Moderator:	Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conferenceover to Mr. Gokul Jaykrishna for closing comments.
Gokul Jaykrishna:	Good. Thank you, ladies and gentlemen, for attending the call. I really am happy with the interest that we areseeing from the group, and there were somevery, very good questions, and I enjoyed interaction with the group. I would like to leave you all on a note ofpositivity. I well in this half year, reaching INR think turnover-wise, Asahi has donequite 290 crores. This was our aim, which weset out to have that we should cross the INR 500 crores to INR 600 ourselves well with little diversified business and outlookfor crores top line mark andset the next 10 years.

Last one year, we have been able to do that -- do this pretty well. The top lineis already starting to reflect that. We have ^a whole range of pigments where weearlier only had ^a full range of blues. And now wealso have an entry in the API business through ^a well-run, profitable ongoing company.

Soit gives megreat pleasure in trying to go forward over the next three years, consolidating this growth phase and taking the company to ^a newlevel. We hopefor the caveats are that we hope for improvementin the market conditions, which are really fairly poor currently, one of the worst ^I have seen in over ^a decade. And as soon as this improves, ^I think we should be placed well to take advantage of the upswing. And ^I think when the upswing comes, this may take three months, this may take six months, but ^I think the upswing, the longer it takes the stronger the upswingwill be. Thank youfor attending the conference.

Moderator: On behalf of Asahi Songwon Colors Lid that concludes this conference. Thank youfor joining us, and you may nowdisconnect yourlines.