Century Enka Ltd
NSE:CENTENKA
Earnings Call Analysis
Q3-2024 Analysis
Century Enka Ltd
Welcome to the earnings conference call for Q3 FY '24, where we'll explore Century Enka Limited's recent financial performance. Led by Managing Director Suresh Sodani and Chief Financial Officer Krishna Ladsaria, the management shared insights on operational highlights, financial results, and addressed future projections and adjustments amid changing market dynamics.
The company reported an uptick in Nylon Tyre Cord Fabric (NTCF) demand on a quarter-over-quarter basis and a modest recovery in two-wheeler sales, though they have not yet rebounded to pre-COVID levels. However, obstacles persist with subdued NTCF demand within India, attributed to reduced tire exports, an influx of inexpensive imports from China, and other regional challenges. The Nylon Filament Yarn (NFY) segment exhibited demand recovery post-Diwali with potential for growth, although concerns linger over muted rural demand and Chinese products impacting the market. The strategic emphasis lies on expanding the share of value-added offerings and achieving cost efficiencies. Amidst these operational activities, raw material prices, such as Caprolactam, fluctuated slightly within the range of $1,628 to $1,663 per metric ton, while initiatives in capacity expansion for both PTCF and NFY moved forward.
Century Enka's operating revenue decreased by 3.8% year-on-year to INR 451 crores. The EBITDA fell by 11% to INR 18 crores, bringing EBITDA margins to 4.08%. The after-tax profits sharply declined by 53% to INR 5 crores. Revenue declines were also recorded year-to-date, with a notable 20% decrease in operating revenue, a 59% reduction in EBITDA, and a significant 70% drop in profit after tax. A specific point of concern was the exceptional loss of INR 2.5 crores related to relocating a wind turbine site due to defense ministry requirements, which impacted the consolidated financials.
The management displayed cautious optimism towards future growth, heavily dependent on the situation in the Chinese domestic market. A surplus of Chinese products in various sectors, including textiles, prompted by less robust domestic demand, has been challenging the pricing and margins due to dumping into the Indian market. The management anticipates that improvements in Europe's tire export market can bolster the industry, implying a potential uptick for the value chain dependent on tire companies. However, geopolitical factors remain a variable element with substantial impact on future performance.
The completion of major expansion for the NFY and the Polyethylene Terephthalate Cord Fabric (PTCF) is slated for Q4 FY '24. The NFY capacity expansion has already started and requires no further approvals. For the PTCF segment, significant revenue contributions are forecasted once the approval of these products by tire companies is finalized, which may take some time, thus not vastly impacting the next financial year's revenue. Post-approvals, additional revenue is estimated at around INR 100 crores from these expansions.
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Ladies and gentlemen, good day, and welcome to the Q3 and 9 Months FY '23 Conference Call of Century Enka Limited. [Operator Instructions]. I now hand the conference over to Ms. Purvangi Jain from Valorem Advisors. Thank you, and over to you, ma'am.
Good afternoon, everyone, and a warm welcome to you all. My name is Purvangi Jain from Valorem Advisors. We represent the Investor Relations of Century Enka Limited.On behalf of the company, I would like to thank you all for participating in the company's Q3 FY '24 Earnings Conference Call. Before we begin, let me mention a short cautionary statement. Some of the statements made in today's con call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by and information currently available to the management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions.The purpose of today's earnings conference call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. Now let me introduce you to the management participating in today's earnings call and hand it over to them for their opening remarks.We have with us Mr. Suresh Sodani, Managing Director; and Mr. Krishna Ladsaria, Chief Financial Officer. Without any deal, I request Mr. Sodani to start with his opening remarks. Thank you, and over to you, sir.
Thank you, and good afternoon, everyone. I would like to welcome you all to our Q3 FY '24 earnings conference call. Let me first brief you on the operational highlights for the third quarter of FY '24, after which our CFO, Mr. Ladsaria, will brief you on the financials. We saw an improvement in the NTCF demand on quarter-on-quarter basis. And although there is an improvement in 2-wheeler sales, which is encouraging, it still trails pre-COVID levels. The NTCF demand continues to be subdued in India due to lower export of tires, especially to Europe, increasing trends of realization in commercial vehicles and increase in cheap import from China against advanced license. This is also affecting our conversion margins.In Nylon Filament segment, we saw recovery in demand post Diwali. While green shoots are visible, worries persist on account of overall lower demand for textiles, particularly in rural areas, along with China with a consequent dumping into India, which is impacting margins. Our focus continues to be on increasing the share of value-added products in our portfolio and cost optimization.On the raw material front, Caprolactam prices over consistently between $1,628 to $1,663 per metric ton. Electricity rate remained at elevated levels with some moderation in chemicals, packing materials and fuel costs.Now to update you on our CapEx project. On a year-to-date basis in the current financial year, there was a total cash outflow of INR 1,025 million towards ongoing CapEx programs. PTCF capacities are expected to be commissioned in Q4 FY '24, while expansion in NFY capacity has been commissioned ahead of schedule in Q3 FY '24.Now I request Mr. Ladsaria to brief you on financial performance.
Good afternoon, everyone. Now let me start with the financial results for the third quarter of this financial year 2024. The operating revenue stood at INR 451 crores, representing a decrease of 3.8% year-on-year basis. EBITDA for the quarter stood at INR 18 crores, which declined by 11% year-on-year. EBITDA margin were at 4.08%. Profit after tax was around INR 5 crores, representing a decline of 53% year-on-year. PAT margin stood at 1.04% for the quarter.It is important to note that net profit is reported after provision for our share in loss of associates, which was an SPV created for our Bharuch unit, which include an impairment provision made by associate amounting to INR 9.8 cores, with our share amounting to INR 2.5 crores for the relocation of the plant pursuant to a notice received from Ministry of Defense. NTCF sales for Q3 FY '24 decreased by around 11% year-on-year to INR 225 crores, and NFY sales for the same period declined by 10% year-on-year to INR 208 crores.Now coming to year-to-date results for financial year 2024, the operating revenue stood at INR 1,276 crores, which decreased by 20% year-on-year. EBITDA stood at INR 49 crores, which is a decline of 59% year-on-year. EBITDA margin for the same period was 3.85%. Profit after tax was around INR 23 crores, which declined by 70% year-on-year and PAT margin stood at 1.76%. The NTCF sales for the period decreased by around 25% to INR 610 crores, while NFY sales decreased by 12% to INR 612 crores.With this, we can open the floor for questions and answers, please. Thank you.
[Operator Instructions] The first question is from the line of Anik Mitra from Finnomics Solution Private Limited.
Sir, radialization of tire has been impacting NTCF volume for a few quarters. And my understanding is radialization will even increase going forward. So on this backdrop, what is the future of NTCF industry? And what is your strategy to compensate decreasing volume?
Yes. So the radialization impacts the medium and heavy vehicle segment only because NTCF is used also in the 2-wheeler and 3-wheeler segment, the farm segment and the OTR segment. So we had anticipated and we have prepared our action plan based on increased radialization in the [ MSCV ] segment, which is expected to mirror the world's or at least Chinese radialization percentage in next few years. And it is going towards that trend. Now we expect that there will be some loss of -- and which could be uneven over quarters. But on a long-term basis, the loss on radialization to a large extent or maybe equal extent, be compensated by increase in demand from 2- and 3-wheeler segment tires, the farm tires in the OTR segment. And the reason to have that viewpoint is that our penetration ratio with the size of population, with the growth of GDP, as well as growth of middle class and improvement in farming techniques is still very low compared to developing or slightly developed or I mean, comparable economies at the current stage at which India is. So we expect that while there could be dips in few quarters or it should either stabilize or maybe a very small growth in NTCF should sustain in the next few years. Our plan to counter that is our foray into PTCF. And first, we have initiated with a small capacity. But going forward, as we have explained in some of the earlier calls, that the downstream equipment are fungible between NTCF and PTCF, so we can repurpose a lot of equipments which are currently used for NTCF for our PTCF expansion in future. That way, we need to spend our CapEx only in the spinning capacity of PTCF. And we would be able to repurpose lot of our current fixed assets for PTCF production, which is used in the passenger tire car and which is expected to grow at much healthier pace and faster pace, given the, again, the same dynamics of Indian population.
Sir, you said, in your presentation you have mentioned that your commissioning of PTCF capacity is going to be by Q4 FY '24.
Yes.
So sir, what kind of capacities, what is the capacity you're commissioning for PTCF? You have mentioned small capacity, if you can quantify that number.
So it will be close to 10% of the current demand in India and almost the current demand of India is met by 80%, 85% through imports. So we will be catering to just about 10%, I mean, at the current demand. And as I said, with growth in passenger vehicles as well as more penetration and more usage of 4-wheelers, we expect that there should be a good compounded growth for the passenger car tire. And even the tire companies' investments are directed towards making more investment in passenger car tires.
Fair enough, sir. Sir, as you mentioned, like 10% of the current demand. So with optimum capacity utilization, what kind of revenue addition can we anticipate?
So revenue addition for PTCF initially will be somewhere around INR 100 crores.
Okay. Is it possible in FY '25?
FY '25, we expect that we will be going through the process of approval by tire companies. So it is still uncertain how much revenue would be realized in FY '25.
This is a new product for Century Enka. So the tire companies have a very rigorous approval process. And second, this reinforcement is going into passenger car tires where it is more stringent compared to other tire categories. So as of now, while we are confident that our products will get approved, we are not able to give a timeline on when actually the commercial sales will start. But we are hopeful that second half we should be able to give more precise answers to this question.
Fair enough, sir. Sir, the government announced policy on BIS certification for polyester yarns. So do you find any benefit in our NTCF industry due to this?
No. We are also initiating that process through the association, that there should be a QC for all our products. The purpose is that sometimes nonstandard products can come in. As far as NTCF is concerned, the tire companies are importing. They anyway follow a very stringent process of approval. So it may not have any impact in terms of imports or reduction in volumes. The main impact can come on the nylon filament side because the importers are less organized and have less quality-driven approval process. And that is where we -- like it has happened in polyester yarn, we expect that there could be some impact for a few quarters or maybe 2 quarters. Depending on when we get this approval because that's also quite a long process and then to get it implemented is another process because of counter-pressures from users as well on the various ministries. So but we have initiated the process to get both our -- all the products that are manufactured to be having BIS certification.
Sir, what about the NTCF is dumped by China in India. So does it maintain the BIS standard?
See, as I said, the tire companies are themselves very stringent in buying NTCF because they have very huge liability, public liability in case any accident or any failure is attributed to their tires. So that is the reason that they follow a very stringent process of approval, which will, to a large extent, be similar to BIS. Only difference is that in case of a BIS approval, the supplier in the foreign country has to get an approval of BIS through a process, which can sometimes take time. But in terms of quality, they are good quality material, which is getting imported and used by the tire companies.
Got it. Got it, sir. Sir, what is your growth outlook?
So we are cautiously optimistic. The reason to say that is, a lot of it depends on what happens in Chinese domestic market. One of the reasons for squeeze in both volumes and margins is that the domestic demand in China for all our products are not at the optimum level or not robust enough. And lot of material which is available in surplus in China and which is happening in a lot of textile and other commodities as well is getting dumped to India. With the current levels of duty protection, they are able to sell lot of volumes to India. Even if the volumes are, I mean, not significant, their impact to the margin is that the domestic producers can charge because of the low price product that come into India. So that part is something which remains uncertain how Chinese economy in terms of their own consumption will pan out. But we are hopeful on good GDP growth and good demand, I mean, to sustain or to improve in both the segments, which is a positive to partly counter the higher volumes and price -- low price for material coming from China. So that is why there is a balance that -- so we are optimistic, cautiously optimistic on the prospects, but there are a lot of geopolitical things which has an impact. One of the things which is mentioned also in our -- in the opening comment as well as in the -- our presentation is that exports of tire. So if Europe picks up again the way it has picked up in FY '22 and FY '22 particularly, that could be another positive for the entire value chain linked with tire companies, the tire.
Okay, sir. And sir, finally, if you can give the breakup of NTCF and NFY volume.
We have mentioned in multiple times we report everything on a single segment basis. We give as an additional information only the turnover values. And for competitive reasons, we continue to hold the same view.
The next question is from the line of [ Vipulkumar Shah ] from [ Sumangal Investment ].
So when the expanded capacities of PTCF and NYF (sic) will be available and the capacity will be expanded by how much tons?
So our NFY is just commissioned in December, which adds about 3,000 tonnes per annum on annualized basis. And the balance, about 4,000 to 5,000 between that range, depending on the tenure combination is what -- about, I would say, more in the right tenure would -- about INR 4,000 could be added on the -- through the balance expansions that are -- will commission by Q4.
So that will be NFY, right? Both?
That will be both NFY, PTCF. So all the expansions that get announced will get completed in Q4, the major expansions. I mean everything will get completed in Q4 FY '24.
Including both this nylon tire cord?
Nylon tire cord, we had already informed earlier. We have already completed and it is getting used as well because it is more efficient. It's only the balance of NFY and the PTCF.
So then at current prices, what type of revenue growth we can expect from additional capacities which will be commissioned by Q4?
In NFY we have already commissioned in December. NTCF, we are saying that it will be commissioned in Q4, sorry, the reinforcement capacity, which is mainly in PTCF will be in Q4. But revenue, we expect that our revenues will start only after approval of these products, which will be manufactured, which are subject to approval from tire companies. So once those approvals are in place, and it could take a few months for approval, maybe 6 to 9 months or even higher than that. So once those approvals are there, we expect around INR 100 crores of additional revenue from NTCF and -- PTCF and NFY expansion.
So safe to say that in next financial year, there will not be any substantial contribution from this expanded capacities, right, sir?
For NFY, yes, that has already been started, and there is no approval process which is pending, where we have got the approvals. But PTCF, yes, it will be towards the end of the next financial year.
And lastly, sir, can you explain that exceptional item of INR 2.75 crores in the consol results?
So we had implemented a group captive power project for our Bharuch plant. So the site which was there initially identified, the there was some projects from defense, an airstrip was brought in there. And because of that, they did not allow use of that site for putting up wind turbines. And therefore, the SPV had to shift the site from that location to some other location. And out of -- so whatever expenditure was done on that particular site was impaired and moved to a different site. So our share, since we hold 26% in that SPV and we account that SPV as an associate, so we have accounted for INR 2.5 crores towards this exceptional loss in our profit and loss account.
The next question is from the line of Harsheel Mehta from Mehta Vakil and Company.
My first question is regarding the EBITDA margins. On the previous calls we have highlighted that for this financial year we'll be in the range of 6% to 8%. Given the result this quarter and looking at the dumping going on in India by the Chinese, is this still a sustainable -- is this still an aspirational level, the 6% to 8% that we're targeting? Or do you think that will also be difficult to achieve?
In the short term, there will be challenges, both due to the dumping, as we mentioned, and the pricing pressure that is coming from the Chinese import. As also, there have been power rate hikes by the Electricity Board, which has also impacted the margin. But in the medium term, possibly from maybe second half of next financial year or FY '26, we do expect to reach back to these operating EBITDA margins. And the reason, as I mentioned earlier, is we expect that the world order should improve. I mean these are all obviously a few things which have to get in correct. If the geopolitical situation improves, there is a good chance of the EBITDA margins and world becoming more stable in a lot of things. If, unfortunately, if it were to remain similar or get worsened, then it is possible that the margins may come under further pressure. But as I said, we still remain cautiously optimistic because in a growing economy like India, the demand side can be significant and the middle class growing. So there could be upsides. And post-election, lot of things could happen, which have a long-term impact on the Indian economy as a whole. And this being a very -- sector which has a very high linkage with GDP growth. These are few of the reasons that we expect that second half of FY '25 or FY '26 margins should again come back in these levels and the projected levels.
Okay. And my second question is regarding the promoter holding. So the promoter holding and Century Enka is about 25%. Now if I compare that to other group companies as well, it is the lowest in Century Enka. So are there any conversations going on about increasing promoter stake in the company given that by conventional metrics, by the more conventional metrics, the stock seems to be quite undervalued. So is there any thought process wherein the promoters are looking to increase their stake?
Actually, we can't comment on that. But I can only say that since this point has come up in past calls as well, we have raised and apprised of the concerns and the suggestions of various members to the Board, which has promoter representation as well. But there is nothing concrete to say anything about it in this call.
The next question is from the line of [ Keshav Garg ] from [ Counter Filter ].
Sir, I'm trying to understand what is the net cash that we have as of date post all the CapEx?
It is around INR 290 crores, which is there presently.
Sure, sir. And sir, going forward, we don't have any CapEx?
There are no significant CapEx. As we said, we have completed all our expansion, which was there approved by the Board. So going forward, there could be small CapEx which Sodaniji has talked about on PTCF, but nothing firmed up at this point in time.
But I may also add, the reason for not being able to talk about larger CapEx now is first to look at the market for next few quarters. But the company management as well as the Board is looking at opportunities to productively utilize the balance sheet strength for opportunities for growth. So as and when there is a concrete proposal and approval of the Board, it will be announced through appropriate medium.
Sir, also, sir, what -- approximately what percentage of the total NTCF demand comes from MHCV?
About 55%, 55% to 60% -- approximately 55% to 60%.
[Indiscernible] all CV.
All. MHCV includes the truck, bus and the LCVs.
Sure. Sir, so apart from this 55%, sir, what is the contribution of 2-wheeler and what is the contribution of tractor tires and OTR?
I mean you can take it from ATMA report, but -- that's our own source. But I mean I will just give you but approximately I think 20% is 2-, 3-wheelers, and balance is -- 22%, 25% is 2- to 3-wheelers and balance would be the farm and OTR.
Sure, sir. And sir, what is the international experience in western markets where radialization has already happened? In those countries, sir, what is the breakup of NTCF demand?
See, there is a difference in the advanced countries and say China because what has happened in advanced countries is they have actually stopped most of the tire manufacturing which uses NTCF as a reinforcement. But there is a very large capacity of NTCF in China, which continues to operate. And that is the reason -- one of the reasons that if their domestic demand or if the world demand falters anywhere in the region, that material flows to India because NTCF still has a fair good demand in India. So in China, the breakup would be similar. But as I said, it is, to a large extent, depending on the various segments, how are the 2-wheelers doing there, how is the tractors doing there. So it cannot be an apple-to-apple comparison because the population mix is very different in many countries. The priorities are different in the country. But China is a much better mirror or a comparison to India than any developed country.
Sure, sir. And sir, lastly, sir, like the previous participant mentioned, sir, our net cash is already 1/3 of our market cap and the stock is trading far below book value. So if you could -- sir, I'm sure you must be proposing to the Board. Sir, but if you could just enlighten your shareholders also that what is the thinking of the Board that despite these facts being there, why is there reluctance to proceed ahead for the share buyback? So the understanding of shareholders will also increase.
I think we have already informed the Board and these are decisions which have to be taken through the promoter as well as the Board as a whole. So as and when anything is done, I mean, it can't be made in public in terms of what are the thinking, and it's not also shared with the management. The management role is to be -- act as a bridge between the investor and the Board and which we are doing. We will come back in case there is anything. And it will definitely be announced in the right forums, if there is anything, decision is taken by the Board on that account.
The next question is from the line of Aman Madrecha from Augmenta Asset Managers LLP.
Sir, in one of the previous con calls you mentioned that the profitability of NTCF is far -- is much better than the profitability of PTCF. So can you throw some more light on this? Like what are the dynamics that run behind it and how we are looking at the PTCF thing going forward?
The response was more in terms of the current market scenario. But as I said, we are seeing that changing even in quarter. So it can be similar. It can be different than what we had given in the past. And it depends on -- since we are now connected with the world in every way, so a lot of interplays happen between the capacities and demand, not only in India, but also in the region and more importantly, as I said as well in China as well. So these are interplays which can happen and -- but this was more a trend that we saw in past of at least a few quarters and last few years. But with a more robust growth in PTCF, it is possible and we are very hopeful that similar profitabilities or better margins would also come in this segment because normally that gets associated with higher capacity utilizations and what kind of expansion demands are coming in. It's an interplay of multiple things. And the response earlier was maybe more in terms of the pricing that is prevailing from in the international markets.
Okay. And also, sir, I'm bit new to the industry. So sir, I just wanted to understand, what are the 1 or 2 triggers which you are looking at so that the NTCF profitability could come back to the normalized number of limit, let's say 7% to 8% operating margin. We know that China is dumping NTCF big time. So what are the 1 or 2 key triggers? Because last quarter also the capital action price is around $1,600 to $1,650. So what are the key 1 to 2 triggers that could lead to jump in the profitability of this NTCF as a whole?
So one key trigger is pickup exports of tires to Europe. After a very robust growth in FY '22, there was almost a 15% volume drop in tire exports and the Ukraine war was completely unexpected, and then the energy crisis and sort of -- I mean, industries have to relocate or rethink on their utilizations and other things. So we see that now Europe is more stabilizing, that energy prices are more stabilized. They found out alternate ways of replacing Russian gas. So that is one important trigger. And since the inflation is -- last year, in fact, I mean, even previous quarters, if we look at, the inflation was decadal hide in almost all European Union and U.S. And since that is coming down, that is one positive trigger that once the inflation comes down, once the energy prices are more stabilized, the normal consumption patterns and the consumption that was there before the Ukraine war should reverse. So that is one important trigger. Second trigger could be the Chinese economy as such, which is less opaque compared to -- or I mean at least from an external world, we don't get the same kind of confidence in that versus what happens in Europe and U.S. because of the way the various indices or issues are reported. But that could be another big trigger if Chinese economy were to stabilize and some of their stress sectors like the real estate or other things get more normalized. These are one -- third is obviously our own GDP. If post election the push on infrastructure and farm sector continues, which is linked with our more demand for tractors, OTR vehicles and if rural income were to improve, consequent to that also the 2-, 3-wheelers. So these are the triggers which will have a definite impact on the total domestic demand for NTCF.
Okay. And sir, last question, can you just tell me at today what is the total capacity across NFY, NTCF and PTCF? Like, for example, in FY '24 what will be the total capacity as a whole for NFY, NTCF and PTCF on a combined basis?
So we had given -- see, there is some changes which happened because of denier mix in terms of the tonnage. So we had given on a normalized denier mix. It should be close to 94,000 once all projects are completed by Q4 FY '24. And we are in that range and except for not PTCF it would commission in this quarter. We will be there in that range. It could be plus/minus 1,000 tonnes, depending on the denier mix, which is again based on the demand for various segments because the [Audio Gap]can change in the denier mix of the sectors that buy. But that is a range that we expect that the total capacity would be.
And also, sir, can you just tell us like what could be the -- like, for example, if someone is supposed to come and set up a 50,000 tonne of NTCF [indiscernible] what would be the cost [indiscernible] so as a whole. So what would be the cost as of today? We can see the replacement cost of the total plant or total infrastructure we have?
It's very difficult answer to give because the plant is not set up only by the equipments which are used for manufacture of NTCF, there are lot of utilities, other infrastructure that has to be made. So we don't have an offhand answer to give that what is the total CapEx requirement for 500 tonnes per day because it is not easy to give the current cost of all the utilities that we have at both the sites. And that is also quite a significant CapEx amount.
Okay. And sir, lastly, what about the CapEx you spent on this PTCF expansion?
Close to INR 100 crores.
The next question is from the line of Anant Mundra from Mytemple Capital.
Sir, my first question is on the write-offs that we've taken, the impairment of our investment in one of the associates. Sir, so will this affect the savings that we were incurring in the power cost? Will there be any, I mean, adverse effect there?
No. See, power cost goes as an operating cost for us. So we purchased power from this [ FTV ]. And the rates there are fixed for the period of this agreement. So those savings are separate, and this is a one-off item impacting their capital cost. So in any case, capital, it's mostly funded on a very low equity base. So it will not have an impact on the savings which is there.
Okay. So what exactly has this affected, sir?
I mean, it wasn't -- I mean I wasn't able to follow the answer that you had given to the earlier participant. Basically, if their project cost was INR 200 crores, it would have gone up by INR 10 crores and project costs would have gone by INR 210 crores and the extra INR 10 crores which we are to make available for alternate site, those have been impaired. So the site which became unused -- not usable because of approval not received from defense, they have impaired that site and incurred those expenditure on alternate site. Yes. This is --
FTV is fully commissioned, right? The project was fully commissioned?
Project is fully commissioned and it's operational. It's supplying. So the land value which would have been there in their books. And now it is not usable, so they have impaired it.
Okay. All right. Got it, got it. And sir, what is the annual PTC of demand in India currently?
Annual PTC of demand is somewhere between 28,000 to 30,000 tonnes per annum.
Okay. And what is the growth rate expected? Will this track the growth rate of passenger vehicles? Or should it be higher or lower? If you can give some color on this.
Yes, it will be somewhere higher than the passenger vehicle growth because there is replacement which also happens. So it is -- broadly you can say that it will mirror the passenger vehicle growth.
Also, as I said, tires and, maybe you're already tracking, there is a very large portion of tire exports which happened from India and even passenger car tires are now approved from Indian manufacturers in multiple countries. So that itself is also a trigger and a lot of investments. The tire companies have made is all in the passenger car tires plant. So one is obviously the growth in the domestic consumption in the new cars as well as the replacement market, but also the export of passenger car tires.
All right. All right. All right. But sir, the annual demand figure is 28,000 to 30,000. That seems very -- I mean, our installed capacity currently is about 89,000, 90,000 and the -- I mean, the total demand from PTCF is only 30,000. So I mean, is it that NTCF has consumed more in tires and the PTCF quantum is lower?
Yes. Seem NTCF is consumed more in truck and bus segment and where the truck tire weight is almost -- I mean, as a very rough thumb rule is about 10x the weight of a car tire. So that obviously means that the reinforcement is 8 to 10x more per tire consumed in a truck versus a truck tire versus a car tire. So that changes the dynamics of the quantum of tonnage significantly. Secondly, again, the 2-, 3-wheelers numbers are significantly higher on the road and new which are sold compared to the cars. And so that's the logic of -- I mean, either the tonnage of the weight of the tire is significantly high, or the numbers as in 2-wheelers is significantly high. So that on a combination basis makes the NTCF market significantly larger than PTCF.
The next question is from the line of [ Mehul Parak ], who's an individual investor.
So one of my first question is that since we are saying that we have an impact from China, Chinese dumping, which part of that value chain is the maximum impacted, from Caprolactam to nylon chips or from nylon chips to the yarn or directly the [indiscernible] yarn. Which portion -- we are present in all the 3, so which portion of this is impacted the maximum?
Well, maximum impact is on both our finished goods categories. See, when we are buying raw materials, we are not impacted because the raw materials domestic sole pricing is always -- is on matching with the Chinese import pricing or the international pricing for that matter.
No, sir. What I mean is that we import Caprolactam also and we import nylon chips also, right? So we have a conversion from Caprolactam to nylon chips. So that portion is relatively less impacted or that is more impacted than nylon to yarn or finished product?
No, it's impacted mainly on the finished products because in that part we are almost in line with what the Chinese are offering. And they have such significant capacity that that pricing is more on an index basis on a more listed basis whereas these products are not listed products. These are more contracts done directly by companies to the manufacturer. So that is where the hit comes more in terms of the finished products. So both our finished product segments are more hit. There is no significant impact on the purchases that we do either from China or from India.
Okay. So the conversion cost that you mentioned in the presentation [indiscernible] worth the finished product?
Yes.
Okay. And this advanced license imports which are happening vis-a-vis without the advance license how much is the impact, sir, on that in terms of percent, price percentage?
No, advanced license, what happens is that product once it is imported against advanced license, that was volume reduced from the total demand available for the domestic capacity.
Right. Right. But a tire manufacturer would be importing [indiscernible] advanced license because we are getting promised cost savings, right --
We have advanced licenses from exports made in past which were unused. So at that point of time, the Chinese prices were more competitive, more pricier compared to current pricing. So they were not utilizing the full advanced licenses at that point of time. Now since the pricing is also low and they're able to get material easily from alternate sources, so they are importing more against whatever is available with them. But since the pricing has also fallen even on full duty benefits also, they are not very -- I mean, they are able to compete with the Indian prices.
Sir, so this advanced license, what I mean is that when, let's say, for example, XYZ tire company is importing on advanced license, vis-a-vis buying from Century Enka. So they would be having some percentage advantage to do that, right? So that is what I am just trying to estimate --
-- there is a custom duty, there's a basic custom duty of 20% on NTCF.
Okay. So that is what they save basically?
Yes, yes, yes. So they save on that.
The next question is from the line of [ Tushar Khurana ] who is a retail investor.
I have 2 questions, sir. One is the value addition that we are going to do for the NFY segment. So I just want to understand when can we start seeing the impact of that value addition and when will it be coming on stream for this? And my second question is regarding -- so there was some mention about the export market that we're looking at for the Nylon Filament Yarn made from green polymer. So if you could talk about these 2 things, please.
Yes. So we continue to make -- I mean, we have not invested anything further other than what we have done in our value-added hardware. But there is value addition also in terms of the different products that we can make from our current machinery, which are specific and unique for the particular customer. And that's where we do not face more price competition because they are very unique and the buyer or the customer has more confidence in sourcing it from us rather than importing from China or sourcing from any other domestic supplier. So that category is what we call a value addition in addition to where we do a secondary processing. So instead of selling base yarns, if we can give them a yarn with a specific or a different characteristics or parameters, which is helping them to get a typical or a desired fabric, that becomes a value added because we are able to realize a higher value through some small changes that we do in our processing, which benefits the final customer and he is able to realize a better value for this finished product. And we continue to do that. We are already utilizing most of our normal value-added capacity where we add a process and we change the basic characteristics of the yarn and sell it to, direct you to the final weaver. So that portion is already continued. We continue to look at opportunities to grow into the various segments instead of remaining in the base products and where the competition intensity is high, and that is the intention of mentioning that that our whole strategy in the NFY segment is to look for more niche segments, more differentiating segments and more value-added segments, which are not easily importable or are -- there is very specific requirement for the particular customer. Regarding -- sorry, what was your second question?
Second question was on the export market that [indiscernible].
We continue to export, though if the quantity is very low, and we realize better value compared to virgin cases on those products. But there is a lot of seeding that is required and most of these yarns actually go to Western World, Europe particularly, which, as I mentioned, is still going through some geopolitical challenges. But what we are doing is more is getting approval and seeding of our products so that as and when the economy bounces back in these countries, the importing countries, we can scale up the volumes very fast.
Okay, sir. And are we also adding like more applications for this NFY to go deeper into this value addition?
Yes. We engage with not only the weavers, but also the final garmenters or final retailers to understand and also the trends of what is imported as fabric because we have to work with the value chain to see that we can give a product which the garmenters are satisfied with compared to the imported fabric, for example. So we do continue to work with them, and that is another way which we try to add value to our NFY portfolio.
The next question is from the line of Anant Mundra from Mytemple Capital.
So just wanted to understand what is the realization on PTCF versus NTCF per tonne realization? How does it compare?
I mentioned earlier, we do not give specific product-wise details for competitive reasons. And all numbers are reported as synthetic yarn on an average basis. Not for the company specific but in general, like is PTCF more expensive than NTCF or is NTCF more expensive that PTCF, or they are similar prices.
As mentioned earlier, in the current scenario, NTCF is more priced than the PTCF imports.
Okay. And sir, coming to the textile side the NFY side of business, are we doing anything in technical textiles wherein there are some niche category for -- something specific for brands, which is approval-based. I mean is there anything that we are doing there, like where there is approval required for the brands?
We supply some technical yarns to the fishnet segments, but we have not forayed into technical textiles used by brands or specific segments that way because that is still a development area, but we look at all the opportunities in case they come out because it requires a complete ecosystem and maybe a different set of hardware and competencies to cater to that segment. But that's something which is being -- I mean, we'll explore that in terms of opportunities that may open up for our segments in nylon.
So there was a [ PLI ] that was announced for technical textile. Have we participated in that, sir?
No, no. In fact, I mean, we are not participating in any PLI because one is that we don't -- I mean, the PLI doesn't look like a workable PLI in terms of the terms that they have put in. And second is we don't have any significant outlook on our -- on that segment in terms of growth. So we are not either applied or participated in PLI.
Okay. But sir, is there anything tangible that you can share or anything that we are working on in technical textiles, which could be probably for defense or maybe the badminton strings because all of that is majorly imported. So is there anything that we are doing on that end?
No. As I said, there's no specific initiative to currently report on. But these are always items which we are exploring. So it is only at an exploration stage in terms of -- because there are lot of competencies and hardware which are specific to deliver requirements of technical textiles. And it's not easy to switch from making normal filament yarn versus a technical textile yarn in terms of meeting that requirement. We can do some similar -- as I said, we do supply to fish net segment because it is very similar to the yarn we are currently making. But other yarns and other finished products require a different ecosystem to make that. And these are only at exploratory stage. We have nothing concrete to report as of now.
Okay. And even for the fishnets that we make, that is going mainly to the unorganized sector or that is going to brands, to the organized sector?
I am not aware if there are fishnet brands, but there are large producers of fishnets to whom we sell.
I now hand the conference over to the management from Century Enka Limited for closing comments.
Thank you. We thank everyone who has joined the earnings call. Hope we were able to answer all the questions. If there are any further questions or would you like to get more information, you can reach out to our Investor Relations Manager at Valorem Advisors. Thank you.
Thank you. On behalf of Century Enka Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.