Q1 21/22

Jul 29, 2021

Ladies and gentlemen, good day, and welcome to the Q1 FY 'twenty two Earnings Conference Call of EPL Limited, hosted by Systematic Institutional Equity. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Vishal Sangri from Systematic Institutional Equity. Thank you and over to you, sir. Thank you, Ritujan. Good evening, ladies and gentlemen. On behalf of Systematics, I welcome you all to EPL Q1 FY 2022 earnings call. From the management team, I'll quickly introduce them. We have Mr. Sudhanshu Wats, MD and CEO Mr. Ramasamy, COO Mr. Parag Shah, CFO Mr. Amit Jain, Senior VP, Corporate Finance Mr. Suresh Sawhilya, Head Legal and Company Secretary and Mr. Deepak Ganju, Regional VP for Amica Regent. I will hand over the call to Sudanshu for his opening remarks and post that we can open the call for Q and A. Over to you, Sudanshu. Thank you, Vipul, and very good evening, ladies and gentlemen, on the call. It is indeed my pleasure to welcome you all to quarter 1 FY 'twenty two EPL earnings call. Thank you for your patience. Thank you for waiting for a couple of minutes because some of your colleagues were joining in. So let me start by sharing with you our quarter 1 FY 'twenty two results. As the board and management team of the company, we are very satisfied with the progress which we have made in quarter 1 with under the given circumstances. Let me start by sharing with you our mission once again. So EPS 2.0 mission, this is we are basically committed to delivering market leading revenue growth, and we've defined this as double digit growth year on year. And at the same time, we stay committed to delivering capital efficient consistent earnings growth. Against that backdrop, let me once again share with you the performance of ETL in quarter 1. We are very satisfied with the performance we've delivered and under the given circumstances, these are very good set of numbers. Let me share with you the revenue growth. So on a pro form a basis, we've delivered 12.8% revenue growth. When I say pro form a basis, as some of you will Russia manufacturing operations, which was in the base last year. And also we had opened up a new category called hand sanitizers, which was in our base in quarter 1 FY 2021. So when we talk 12.8% growth consolidated for ETL in quarter 1, we are taking out we have basically knocked off the numbers which are there for Russia manufacturing operations. So the Russia number because we stopped manufacturing in that geography. And we've also taken hand sanitization pipeline out. When I say pipeline, this does not include the total sales which we did. It includes a number of which would have gone into pipeline like for any FMCG company when you launch a new product, there is a pipeline impact which is there. For us, this was an important big category which we launched and there is a pipeline impact which is there. So 12.8% growth, double digit growth. And on growth, I am equally delighted and as a matter of fact, very happy to share with you our India standalone growth. Having had the chance to look at a few numbers which have come of some of the leading FMCG companies that have announced their results, I can share with you our numbers. So our India stand alone reported number is 17.3% revenue growth. This does not include our acquisition on CSPL. So our actual growth in India in quarter 1 leading to 32.5% with CXCL acquisition built into it. So we've delivered a 32.5% growth, both organic and inorganic and 17.3% revenue growth. So on India standalone, are better than anything which has been reported up until now. The second thing which I want to share with you, which is something which we had talked to you last quarter is we've also delivered sequential margin expansion of 60 6 bps. Incidentally, most of the numbers which I have seen which have come in for India, I think the impact of supply chain and supply disruption is being felt by almost every company, especially in the FMCG space. And I've seen that many people have had challenges with margin, both year on year and quarter on quarter. In that backdrop, 66 bps sequential margin expansion is something we are very satisfied with and with these 2 I want to once again reiterate we stay committed to double digit revenue growth which is what we've been talking about year on year And at the same time, we stay committed to delivering sequential margin expansion quarter on quarter from quarter 4 onwards in this year. This is the last year indeed. However, we managed to achieve it, we will talk about it in great detail. But one thing which I wanted to highlight to you is that we've taken price increases across the board. So my colleagues in all the regions have been proactive in taking price increases across the board. 90% of our portfolio now, 90% plus of our portfolio actually has price increase, which has already been agreed to. We have also from a quarter one perspective, I wanted to share with you that we are ahead of plan on our price increases. So that is one big thing which is helping us as we go forward. Having said all of this, it would be a miss on my part if I did not talk to you about the unprecedented supply disruption challenges that we are also facing along with many of our customers and other companies that you may have heard about. So we've managed to navigate these unprecedented supply chain disturbances because I call them now disturbances because not only the raw material price is high, not only is freight cost actually skyrocketing, it is becoming difficult to be able to supply in certain cases. So supply security being able to push out from one place to the other is becoming challenging. So just to give you a few anecdotal examples, China to U. S. Container and we used to be move a lot of laminates from China to U. S. And to some of our other geographies Where a container would normally be available for $4,000 we are currently struggling to find a container at even after when we are willing to pay anywhere between $15,000 to $18,000 So you can imagine it is 4 to 5 times the cost. But despite that, it is not easy to find containers. Even between even within Asia, between Thailand and India, the numbers have gone from $600 to $3,000 almost a 5x increase. So the impact of this is tremendous. As a matter of fact, that leads me to the final point I wanted to talk to you about in terms of the key messages I wanted to give on Q1 FY 'twenty two. So the numbers we've delivered, we are very happy with, but our intrinsic performance is better. And then the reason I say that is that in this quarter, we navigated 3 one offs, which are basically so you know we have our operations in Colombia. In the month of May, because of disturbances in the country, our plant was shut down for entire month. So we lost almost 1 month out of the 3 months of this quarter in one of our geographies in Colombia. We also faced challenges in the severe second COVID wave in India. And one of our leading customers actually had to shut down his plant for a longest period of time, about 2 to 3 weeks. And based on that, let me share with you and I generally believe this is a one off and hopefully will not repeat. This quarter is the very first time we also had to shut down one of our plants for 3 to 4 days because of this disposition. And finally, as I was telling you about supply maintaining supply maturity, I think in the last 2, 3 days of the quarter as the quarter was ending, we were not able to ship out, out of China into U. S. Some of the stocks which were supposed to go. And if I was to take these 3 instances which I have given you, they are one offs and hopefully will not be repeating in future. And they are also one offs which were not anticipated at all from the point of view we had anticipated increase in raw material prices, we didn't anticipated reasonable increase in freight, but I think some of those things were not anticipated. If I was to build this thing as well, we've actually lost at the bare minimum about INR 180 1,000,000 in revenue. And that would have taken our revenue growth to mid teens, which in my opinion, is the intrinsic performance of our business and is indeed very good performance. So lastly, this is also signified by our performance of month, June month is within the quarter because some of these one offs which we saw were in April May and barring the China episode, which I told you, our June performance is better than the full quarter performance on all key parameters. So we've delivered a very good quarter, but more importantly, we've delivered a June month, which is better than the consolidated quarter numbers which you see. With that, let me share with you the financial highlights of the numbers as we have reported there. So revenue growth from operations is at 7.8%. As you know, we've delivered 7,991,000,000 in revenue, which is a 7.8% growth at the global level. And India stand alone, I told you that number is a robust 17.3%. The pro form a revenue growth, as I told you, continues to be 12.8%. That number for India is actually a robust mid-20s number. So India operations have done very well. AMISTA this time has again had a standout performance as a region. We've delivered about 29% growth there. Our EBITDA has come nearly equal to last year, so almost flat with a margin at about 18.1% and margin expansion of 66 bps sequentially over quarter 4 of FY 2021. Our fact actually reported number on fact which you will see is 30.2 percent, but apple to apple comparison here when I tell you pro form on revenue which is higher, I must also share with you that last year we had a one off where we had impaired Russia, some of the assets in Russia. If we take that into account, our path has come in at about 1.1% adjusted, again nearly flat. So I think with this performance, with the cash which the procurement business continues to generate, our net debt over EBITDA ratio continues to improve. That is at about 0.4x now, marginal improvement from even previous year, quarter 1 FY 2021. Despite the acquisition which we announced in quarter 4 of FY 2021. So the acquisition which we announced and the borrowing which we did, despite that the number over is number is 2,457 INR 1,000,000. It's marginally lower than the number a year ago and more importantly, the ratio is at about 0.4x. Because of the capital efficiency and the prudent capital allocation, which we are beginning to demonstrate quarter on quarter year on year, our ROC now is at 20.7%. So this indeed are the highlights. If I want to move on the raw material prices and talk to you a bit about raw material prices. So raw material prices, in our opinion, continue to remain high. They are a bit volatile. So they have come down from their peaks, but they are still quite high. And just to share with you a few examples of a couple of polymers. So MLTP quarter 1 FY 'twenty two year on year growth, which is compared to quarter 1 FY 'twenty one is up 55% growth over last quarter. Even sequentially, when already we talked about this and our polymer prices had started going up and were going up very sharply, even sequentially LNP has grown at 16% over last quarter. So quarter 1 FY 'twenty two versus quarter 4 FY 'twenty one. The same number for LME, aluminum is 61% year on year and 15% quarter on quarter. HDPE is very similar at 52% year on year growth and 8% even 8% growth quarter on quarter. So this is something which we will need to navigate through the year and I'm glad that we put together a very robust plan in the beginning of the year. And I'm happy to share with you the progress which has been made on this plan. The progress is indeed very heartening and I will share with you again all the three things which we talked about. So the first and foremost things we talked about was judicial price increase. So here as I was telling you earlier as well, 90% of the portfolio has been covered. We are ahead of our plan. All these price increases have been agreed. Some of them have flown in quarter 1, some more will flow into quarter 2. And I think with the wherever these are contractual, these pass throughs will continue, although with the lag. So I think that's the peak which is there. So very good progress on price increase ahead of the plan and that's why we signaled it with a green traffic signal. The second important pillar to navigate a tough year like this is our Project Phoenix. And you heard the management talk about Project Phoenix now for a couple of quarters, actually 5 to 6 quarters year on year. So this is cost saving initiative and cost saving is becoming part of our DNA and there couldn't have been a better time to actually go all out to be able to do more of this. So as I share with you, we've got detailed projects, actually this very small projects to reasonably large projects, 350 plus projects that we are working on, clearly identified, target set, teams ready, clear accountability. So we are making very good progress on this piece. We are also making progress on multi year Phoenix projects, which I told you. So particularly, I want to highlight here the in house manufacturing of caps and closures. So we started doing work on this and this is something which will deliver towards latter part of this year, but more importantly a lot into next year. And you will see us doing a lot in this area. So again very, very strong progress on Phoenix and cost saving initiatives. We are confident of delivering a number which is which we have not done in the past. It is a substantially higher number than what we had even thought of even in our planning and in our best estimate and that is important for a year like this because as I was sharing with you, the raw material prices continue to remain high and this is a challenge which we will need to navigate. Not only do we have a problem and not only do we have an issue with raw material prices, we now have challenges of cost going up on other fronts, whether it's freight and secondary packaging. So I think our cost saving initiatives are going to be very important. Lastly, our mix improvement is on plan. You will see some of the numbers across regions where Personal Care portfolio is holding or the growth has not been that high. I want to once again highlight to you that we know subcategory growth within these which are very heartening. We know that in the quarter 1 of last year there is a hand sanitization pipeline sitting across geographies and that's why the program which we made on some of these as well is on target and that's how we are talking about this. So where price increases ahead of plan, the Clear Green productivity initiatives and cost saving initiatives, Project Phoenix ahead of plan and mix improvement on that. Therefore, I'm not surprised and I'm happy to report to you that we've delivered sequential margin expansion of 66 bps, which you will find many organizations finding very hard to deliver under these circumstances. And with our holistic margin improvement plan, we are very confident that we will continue to deliver sequential margin expansion quarter on quarter through FY 2022. Continuing to focus on capital efficiency, basically our CapEx is always being prudent, but just to share with you the number for quarter 1 FY 2022, the CapEx stand at INR 531 million. I think we will continue to judiciously spend capital wherever it is needed for growth, wherever it is needed for innovation, wherever it is needed for us to pivot to sustainability and that you will continue to see. As we talked about the point on reduction in net debt and I think that's very heartening again. So if you look at despite GBP 1675 million of cash proceeds paid through Creative acquisition, we've managed our Q1 FY 'twenty two net debt is at 2,457,000,000 or 2,457,000,000 INR already lower than the FY 'twenty one and therefore this is something which we are which is the cash engine which we have in the organization, we'll continue to deliver. And our ROCE has improved at 20.7%. We've made consistent progress across all our identified levers and I am not deciding to go into each one of them for to keep this brief and to be able to answer your questions as we go forward. But I do want to talk about sustainability because sustainability is a very, very critical lever and something which we've made very good progress. So here I want to talk to you about 3 key points. 1st of all, you may have picked up in the media or otherwise that we are now forming sustainability partnerships with our key customers. We talked about it 2 of our global customers and we you will hear from us about other global customers and large Indian players or Chinese players or even big local customers. And that perfectly segues into one innovation, which we've done with an important local customer in Europe and on a category where I'm delighted that I'm sharing with you. This is our platinum success story on a brand called Ella in Europe. So 1st and foremost, it's a food brand. So I think that's the fact that we've been able to deliver a sustainable solution for a food brand, I'm delighted. Secondly, as you know, ketchup is not an easy product to handle. You need to have so the customer was very clear that they require they needed a requirement of sustainability, but at the same time we were aware and sustainable and the customer was aware that they needed very high oxygen barrier. We were backpacking the food materials on top of that ketchup here, which you know is not an easy material to handle. And what I'm delighted to share with you is our innovation team, our sales team in Europe and all our business development teams have done an outstanding job to come together and to be able to deliver EPL's platinum pro solution, which allows Ayla to pack challenging material like cash up in a safe and odorless way. It gives them the barrier which is needed. This technical breakthrough will open up many new things as we go forward. So our confidence of continuing to build our competitive advantage on sustainability is growing with every quarter, with every month. And this also I want to share with you that we will this year alone in FY 2022 and I simply believe journey has just begun, we will be delivering on our sustainable portfolio almost a 4x jump over previous months previous period FY 2021. And in FY 2021, we just started, but in FY 2022, we're actually believe that the journey is just started, but our volumes in unsustainable portfolio will be at least 4x as we go forward. We continue to be socially responsible and our journey on ESG has begun and the work which we are doing on corporate social responsibility is heartening and you will see more of this being done. We are fully conscious of our responsibility in COVID times. And in this period, again, we partnered with Akshaya Patra to be able to give family happiness kits. These are just a driveration to families in and around our plants where we operate. With that, let me sign off with the key messages and once again for FY 'twenty two and on quarter 1. So first and foremost, we continue to remain committed to deliver double digit revenue growth and for the 2nd consecutive year and year after year from now. Our pipeline has begun robust. Quarter 1 FY 'twenty two pipeline growth has been better than any quarter 1 or any quarter growth the past which we've seen. So with very strong win, particularly in Beauty and Cosmetics with some of the global majors, which we see here. So our pipeline continues to strengthen, continues to give us the confidence that our volumes will grow and we will deliver double digit revenue growth in FY 2022. Our quarter on quarter improvement on the EBITDA margin, I spoke about a lot on this, but just to reiterate that we stay committed to on this journey, 9% of the portfolio already covered for price increase ahead of our plan and I think we need all of this and more because I think the challenges on the raw material front and now on freight front are equally strong. Productivity initiatives, we talked about the projects which have been agreed. And I think mix improvement journey, you will see an impact of it moving forward in quarter 2, quarter 3 even more, I think has strongly begun. Sustainability, I believe, is a key driver for our business and we continue to lead the way in the industry here. I just talked to you about the partnerships, I talked to you about innovation on HELLA and I spoke to you about how we are talking about multiples of growth when it I spoke to you about how we are talking about multiples of growth when it comes to volume and sustainability. We are confident of delivering at least 4x in this year. With all of this, we are very confident and committed to delivering market leading revenue growth, which is double digit growth that we've defined and we will continue to do this in capital efficient consistent way. One thing I do want to share with you, which I'm sure many other leaders may have, severe COVID-three and the volatility on raw material prices and the continued freight prices remain a concern. Having said that, at EPS, we are confident of navigating it. We have done it very successfully in quarter 1 and we are confident of maintaining this rhythm as we go through this year. So this is unprecedented times. It's a tough year. COVID has not gone away. Along with it has come huge challenges on raw material inflation, freight inflation, supply security. But we are confident as a company to be able to navigate this well. And with that, I want to thank you all for patiently listening to me and we are open me and my team are now open to questions. Thank you once again and we'll be happy to take the questions. Thank you very much. We will now begin the question and answer session. The first question is from the line of Ashwini Agarwal from Ashmore Investment Management. Please go ahead. Hi, good evening, Suraju and team. Congratulations on a very good set of numbers and very, very trying environment. So 2 or 3 questions there. One is, I was a little puzzled by the change in mix in Europe in favor of oral and against some of the higher margin cosmetics and beauty products. And I was also a little worried about the U. S, where I would have expected to see stronger growth considering most of the U. S. Did open up during the quarter under review. So that's one question. And second is, you guys have done a marvelous job on sustainability, and I really applaud all the effort you guys have put in. But could you also help us understand how does the these partnerships on sustainability, how do they feed through to long term profitability? I mean, do the R and D and material costs offset whatever higher realizations are there? Or is there a meaningful contribution difference on these sustainability products? It would be great if I could get your comments on this. Thank you. Thanks, Ashwin, and thank you for being generous with your other thing. We are very happy with the performance. So let me first share with you the thing on Jora. So two things are happening here. You will see these as we go forward. First thing which is happening in Europe is if you remember last time I had said that we won an oral contract with a global nature, which is the contract which has started from April onwards. So we are happy about that because we have that allows us to balance our portfolio better and we now have 2 large global oral majors whom we work with in Europe, so this is the new addition. So that is one thing which is happening and which you are seeing this in this quarter. But the reason it's got a bit accentuated and you are absolutely right that you were surprised to see Beauty and Cosmetics coming down a little bit on further 2 counts. I think in the base in Personal Care, what is sitting is when we say Personal Care in our context as you all know now, it is beauty and cosmetics, pharma and everything else, actually everything outside of oral care. So I think last year, lot of taken a lot of lead in hand sanitization as well. So therefore, there is a lot of hand sanitization sitting here in the base. So I think that's one other thing. The second thing is that the our Russia manufacturing operations were also largely everything outside of oral. So I think that operations we've discontinued. We believe in the long term that's the right decision we've taken and we will see margin impact of it in the long term as we go forward. So I think you know so that is also coming to play here. So that explains your I think as the year progresses, you will begin to see Beauty and Cosmetics coming in again into Europe. I think there has been some so therefore that demand picking up. You will also see some of the new contract with VM 1 in Europe also playing out towards definitely the second half of the year and that will start winning and fortunately we won a lot of our new wins are in Beauty and Cosmetics with 2 of the global majors. So I think that's the Europe piece that also on the U. S, see what you are seeing is Americas here. So I think and let me break this down into 3. I think one, if you look at Colombia, there is a big setback, it was not off not being able to do almost for one full month there. Our Colombia portfolio incidentally is also very strongly skewed towards Beauty and Cosmetics. So I think that has to impact not only but we're not able to sell, but we weren't able to sell what and what would have been stronger from the Personal Care point of view. And I have to share that Mexico growth are good. Mexico is doing very well, which is part of the numbers which are here. And you are absolutely right in coming back. And I think you will begin to see a lot of those in this quarter and quarter onwards. So I think even last quarter we delivered about an overall growth in Americas of about 9%. But I think this will continue to gain in momentum as we go forward because the macros in U. S. Are strong and I think some of this impact particularly with the summer this time, some of the travel now coming back which we saw only towards the end of the quarter I think will begin to take shape. So that's on Americas. And I think your point on U. S. Plateau is absolutely right. We are equally bullish. We are actually, as a matter of fact, installing additional machinery to be able to cater to that demand. And I was you know, so therefore so U. S. Remains strong and you will see that as we go forward. And I think, Jirap, I spoke to you. On sustainability, very quickly, I think the way I will address this is sustainability will give us competitive advantage and continues to give us competitive advantage. Now one of the things which comes with and I just mentioned to you in context of Europe that we won 2 contracts in beauty and cosmetics with 2 global majors. And I think one of the key drivers there has been sustainability. So I think sustainability therefore will continue to improve our share of wallet, will allow us to continue to upsell to our existing oral customers. And to that extent, when we get that beauty and cosmetics on along on sustainability and to get that from some of our competitors, I think that is going to improve the margin and mix. And in certain cases, I've always maintained, we will get a pricing advantage. We are not likely to get pricing premium on every case, but I think we will definitely gain share of wallet. We will gain additional categories or upselling, as I'm saying, and in some cases, premium. Thank you. Thanks. I had one small follow-up question there. So for example, the Colombia plant being shut down was probably unanticipated by you, but a lot of your products, your end products are essentials in many sense. Do your contracts incorporate a failure to supply penalty? How do you deal with that? Did you airlift material from other geographies? Did that have any bearing on your margins for the quarter? [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] So I will briefly answer this, and I'll leave I'll ask Ram to comment on it also in some more detail for you. But I think this was a 1 month disruption. So I think we have we've been able to carry forward some of it into we will deliver in June and thereafter. But overall supply disruption, your question on being sort of airlifting some raw materials to be able to make in some one place versus the other is something which we have to now anticipate and we are beginning to do. But on the contract front and a little bit more detail, let me pass it on to Ram. Ram, over to you. Colombia, primarily, India country is closed, right? It's not only we are closed. So that way, the demand of has not gone away. The demand, in the course of time, everybody's supply chain is stressed. So everybody is building up like we're building up. So going forward, those will see a larger portion of it recovering in the coming months. So that will happen. But there are disruptions in raw material supplies because of 1 month, end of supply chain was disturbed that we are trying to see how to airlift materials because most of those material goes from China to there and or India to there. So we are trying to export those materials. Mostly Colombia is a retail business and more so in beauty and cosmetics and pharma. Oral Care is a very small market there. So those products will bounce back. Okay. Thank you. So, Raju, if I don't come back in the queue, wish you the very best in your future endeavors. All the best. Thank you so much. Thank you. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants, please limit your question to 2 per participant. The next question is from the line of Sanjay Jain from ICICI Securities. Please go ahead. Thank you and good evening everybody. Couple of questions from my side. First on the volume growth, considering that we had such a sharp inflation in the raw material and our revenue growth of 7.8%, if we are just for the Creative acquisition probably is lower. However, in the volume trajectory for us, it looks like it has significantly declined for us. And when we talk about the double digit revenue growth and where the infusion for a raw material on a Y o I basis for all of them is upwards of 50%, it looks like the situation may not normalize sooner and it will be more gradual. That means for the full year, we are again looking at a significant decline in the volume for the ECL. How should we think about the volume growth for the ECL in FY 2022 and for the Q1 particularly? That's my first question. I will ask the follow-up question. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Yes. So let me share with you on the volume piece. So I think the assumption that volume trajectory is or volume is declining is incorrect. As a matter of fact, we have seen one of the most robust volume growth in quarter 1, and we continue to remain committed to a strong volume growth through the year. So the reason we are seeing a 7.8% value growth and you are assuming there is price in it, which is absolute current assumption, But the volume is it's not that volume is not there because in our case, there is also a play of mix. And just to explain to you, if you look at my comparable quarter last year, I think that quarter had lower overall because India was shut down for almost 1.5 months, all of April for sure. Travel tubes were very adversely affected in Europe and U. S, which are beginning to come back now. So we compensated a lot of that through the opening up of hand sanitization tubes and a sharp V shape recovery in China, where the China recovery also had a lot of personal care built in into it. So I think this quarter now as you see, once my pipeline has gone, that's why I'm trying to tell you that. So therefore, there is an adverse mix impact. So I think between my pricing and mix, there is a play. We don't unfortunately share these numbers and therefore I will not be able to share exact numbers with you. But I can tell you and I'm telling you with confidence with our numbers, our volume growth in quarter 1 is better than in many quarters we've seen And our volume growth in FY 2022 will be one of the best volume growth we've seen in many years. So I would allay that fear of your loss totally. And that volume growth gives us the confidence that we will deliver strong double digit growth in FY 2022. 2. Fair enough. Now this Russia impact, previously when we spoke about it, we said that we will be able to yield those supplies through the other manufacturing plants in Europe. Where are we in the plan? Are we setting up the supply chain? And hence, we are looking at an adjusted growth rate for Russia? And how much time we would see before reaching the previous levels of supply in Russia? This is a good question. So let me try and explain the Russia and I think we talked about it briefly in one of our earlier calls, but let me spend a couple of minutes because that's important. See, when we look at our portfolio and we keep doing this from time to time, our plants and our portfolio and particularly Europe in our journey of improvement of margin, one of the things which we realized that rationalization of manufacturing and basically shutting down manufacturing operations in Russia is going to be long term beneficial to us from the margin point of view. So I think that is something which we stay committed and you will see that impact coming in this year itself in fullness of time. I think in terms of being able to supply to the key customers, I think we are going to look at them as long term strategic customers where we are building up additional capacity in our Poland plant and you will see basically us being able to service those. And then there were some tactical customers where we will decide whether we service them out of Poland, does it make sense for them or we do not service them. I think those are the calls which we will take as we go forward depending on how we want to margin maximize our Europe geography because one thing you are aware we stay committed to in the medium term is to drive up the margin and the profitability of Europe business. So I think so that's how so to answer your question, are we gearing up to supply to strategic places and do we have plans in place? Yes. And then there are a few customers with whom we have the pipeline discussion as well as following this. Some of the people whom we already had, are we be able to supply from there? The answer is yes. But are we rationalizing our operations in Russia? The answer is yes. That's why we have shut down our manufacturing plant there. So I think so therefore and that impact in this quarter is significant for us to call out. I think as it goes forward, I think this will be an impact which may not be that significant. Got it. Thanks, Sudanshu, for that answer. Just one last question. More of a Consolidated reduction, Mr. Jain, may I request that if you rejoin the team, we have participants waiting for the call. Fair enough. Thank you. Thanks, Sudanshu, and best of luck. Thank you. Thank you. The next question is from the line of Sameer Gupta from IHS. Please go ahead. Thank you for taking my question. Sir, I have two questions and I'll probably ask them together just in case there is some interlinkage. So first on the MSR portion, even adjusted for acquisition, I look at the revenue run rate in absolute INR 1,000,000 is still better than 4Q. Now in our COVID impacted quarter, India, we know that May was a lot impacted here. So what exactly is driving such a good top line performance in India or AMESA? And in U. S, our EBIT margin has seen a very sharp decline. And I understand that there is a lower Personal Care contribution and one of the customers is moving production from Colombia to Asia. So is that the only thing? Or is there something else in this margin decline? And also this Colombia to Asia movement, are we servicing that customer from Asia? [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Yes. So let me take up both the questions. So first, Samir, first, thank you for highlighting our India top line performance. Deepak is sitting with me. You are also complementing him and his team. I can see him smiling as you shared that comment. So thank you. I think indeed we've done very well. I think the reason you see this is something which we've been talking to you for a couple of quarters now. I think a lot of the work which we have done in last year in FY 2021 and of course it's continuing. But the work which we've done in last year in Amica, I think is highly commendable on particularly opening up of pharma. So I think there is a lot of growth which you will continue to see with our addition of pharma customers. Opening up entirely of building a new category, I think which is very interesting, a local innovation where we are converting a lot of manly cones into tubes. I think just to give you one illustration of that, but working with Claire. I think India team along with the China team to be fair, but India team working with a lot of startups with very, very strong responses time with what we call new emerging brands. So I think it is share of wanted gain, it is competitive gain and I think you are now beginning to see those results. You saw a robust performance in quarter 4 and relatively both these quarters, the competitors have been weak, so the numbers look very, very strong. But I think relatively speaking compared to other companies and others I think our performance is very good. It was true for quarter 4, it is true for quarter 1 on FY 2022 and I'm confident that in year of FY 2022 and then moving forward Amica would have turned a new lead and I think you will see Amica delivering strong growth as we go forward. So a lot of competitive game, a lot of share of wallet game, some sustainability games here as well, which you will see and therefore our sustainability portfolio coming into play and we will talk about it. On the EBIT margins in U. S, I think the U. S, the some of the challenges continue to remain and I must be absolutely upfront with you, particularly in U. S. I think the challenges which we've spoken about earlier, so very briefly touching upon them, again, I think our ability to get people onto into the factory, ability to get them to continue to work when we hire them, continue to retain them, especially at the starting level. And so I think that's where we have the challenge because of a very peculiar circumstance in U. S. At the moment. You are aware it is not true only for us, it is true for many companies. I think with the current program of the U. S. Government and I think the help which they are getting from the U. S. Government, there is a huge pressure on industry in terms of manpower. But what we are all confident of is, I believe this is going to last and will build sort of anniversary out in September, I think so which is just a couple of months from now. And hopefully that will bring back people back into factories, back into workplaces. And I think with the vaccination drive that U. S. Has taken, that will make it further will make it even better. So I think the point I'm making is that U. S. What you are seeing is again I would request a somewhat one offs because these are costs which we are incurring disproportionately higher because of COVID in this particular geography. And I think as you will see in quarter 2 of this year and from there onwards, I think we will build on these EBIT margins and build them back very quickly to where U. S. Used to be. So I think so therefore, I wouldn't worry about U. S. Margins at all. Got it, sir. I'll come back in the queue for any follow ups. If I am not able to, best of luck, sir, for your future endeavors. Thank you. Thank you, Subhash. Thank you. The next question is from the line of Sveilok from Ajithya Birla Life Insurance. Please go ahead. Yes. Hi, good evening everybody. I just wanted to kind of get more of some clarity on European operations. So we understand obviously that Russia plant is what is what it has been shut down by the company. But when do you sort of apply some other plants? I mean, I'm just curious to understand more in detail why would that why would should the plant decision have an operational impact on the business? [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Yes. So I explained Tilok to, I think, one of your colleagues earlier, Sanjay, I think, in that context. See, Europe operations and the Russia decision has both immediate term and a medium term implication for us. So I think in the medium term, I think the reason we've looked at that operations is because that was not from a margin perspective long term viable for us. We were of these and we stay committed to improving Europe margins in the medium term and taking them to high teens. I think in that context, we have taken that decision. And I think by definition when we've shut down the plant there, we are rationalizing our Russian business. So where we need to supply we will supply, where we need to perhaps supply and build maybe even pipeline for the future we will do that. We are building capacity as I told you in that earlier one in Poland But I think we do have a near term or an immediate term impact, and that's what we've highlighted now. So is it fair to conclude that the reported number in European region is primarily because of that particular plant? [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Yes. So I think it's fair to assume 2 things in case of Europe and I said that and I want to reiterate. I think one is because of Russia, which is basically you're absolutely right. And I think the second is also like many other geographies, but even in Europe and maybe Europe a little bit more than other geographies are hand sanitization category building work which was done was brilliant last year. So I think therefore that is also in the base and I think because of that pipeline also there is an impact which you have seen in this quarter. But I think moving ahead, you will basically so these 2 will begin to come down and you will see European numbers continuing to grow because what I'm confident of is that in Europe as well, and I spoke about it, I think, in my opening remarks, we have won beauty and cosmetic orders with 2 global majors. Now these will start, I think, playing out they will play out towards second half of this year. So I think that impact will also begin to come in. And I think we will continue to gain more and more competitively both share of wallet with existing customers and also new customers. So that work will happen. And then therefore from a share of wallet perspective and our competitive position in the market, we are very satisfied with where we are in that. That. Okay. Got it. Thank you and wish you good luck for the future endeavor. Thank you, Usdin. Thank you. The next question is from the line of Suman Kumar from Motilal Oswal. Please go ahead. Yes. Yes. Can you talk about the creative Stylo performance? And it is, I think, including Amisha, so can you segregate the extra creative Stylo system, Amisha? [SPEAKER SRINIVASAN VENKATAKRISHNAN:] So I think, 1, broadly on the creative performance, we are very happy with the progress which we made in the 1st full quarter of the acquisition. I think we've seen very robust growth in creative and I'm here talking creative growth quarter on quarter. So very robust top line growth, strong EBITDA growth. I think the and the work done by the creative team along with our team in Amica on pricing is again commendable. So I think on both sides of their portfolio, the co excluded plastic portfolio and laminate portfolio, they have made very good progress. I think on the Amica number, as we you have the numbers here, the Amica growth is 28.5% with creative. And I think if I was to look at organic comparable growth, that number will be in very high teens. So I think it's a high teens growth without so on a comparable basis, but to look at organic without creative. So I think that's the way it is. And overall creative performance is good. Their growth are far superior to the growth which you are seeing for the Avisa region. So as we said, revenue growth is accretive, their EBITDA growth is far superior, their margins are superior. So from the hypothesis which we went in with on growth, revenue growth accretive, EBITDA growth accretive and margin accretive, I think this acquisition is playing out to our plans. Integration is progressing very well and we will be you will hear more from us on this as we go forward. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] And the clients moved from the Sloane to Asia, so will we get the business for earnings here from that time? Can you repeat the question? I lost the question. Can you just say the question? The client moves from the Colombia to Asia. So will we get the business from this client in Asia immediately? [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Yes. We keep looking at it. We don't comment on individual clients, but yes, you are absolutely right. I think between our EAP business and this, so I think there are places where when these businesses move, our other regions clearly benefit. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] the Mr. Sudanshu, you are very enthusiastic and energetic in terms of presentation and so are the numbers of profitability, etcetera, which gives us a lot of confidence in EPL. That's point number 1. I have a small question that our return on network TTM 12 months would be 12.5, which is very not very happy to be around. That's 1. Number 2, if you see maybe 12 quarters, loans have been jumping up or going up. And India continues to be high cost country in terms of cutting costs. I would like to bring your attention to that. Whatever you want to reply, I am feeling very happy investing in EPL. Thank you. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Thank you so much. Thank you for your confidence in EPL. I think I just wanted to share with you that as a consolidated as EPL Global and at consolidated level, we continue to evaluate our cost of capital. And I think Amit is sitting here, he manages our treasury really well. So I think we continue to look at how do we manage the cost of capital at which we borrow, how do we borrow and how do we maximize some of these things as we go forward. I can assure you as a concept that this is the rate of interest at which we borrow from across the world, what is the weighted average interest for our listing, how are we utilizing our capital in different geographies and how are we optimizing it and maximizing it as we go forward to stop off our agenda. Unfortunately, I didn't follow through the numbers you spoke about and maybe we can take them offline and so that our finance team can understand better from you. But I can tell you capital efficiency and consistent capital efficiency is at the heart of what we do. And I can assure you that our team is doing a very good job on this. So I think we can you can perhaps take it offline with our finance team. And thank you once again in your confidence in EBI. It's a great company. It will continue to grow and go from one and go from one aspect to the other. So therefore, continue to grow as we go forward. Thank you. Thank you so much, sir. Thank you. The next question is from the line of Sidharan Kanodia from Rustomani Securities. Please go ahead. Yes. Good evening, sir. Sir, I have a couple of questions. First, sir, how many days of raw material inventory do we maintain? So Bharat, could you address that? The number of days of inventory which we maintain. So the ideal inventory would be in the region of about 45 to 50 days. These are difficult times in terms of the supply chain disruption that we are seeing. So we would build a bit of safety stock there until these challenges in supply disruption are completely abate. Okay, okay. And the second question will be what will be our utilization levels? So we do not view our utilization levels. Suffice to say that we have always invested and we continue to invest CapEx for the growth of the business. We've said this many times that you will see CapEx expenditures grow in time, but we do this in a prudent fashion. So again, to repeat, we don't need to build greenfield plants, and we are able to grow our business with adequate cash flow or CapEx. The next question is from the line of Shivaji Mehta from an individual investor. Hi, thanks for this opportunity. I had just one question. This is regarding the recent acquisition of Piramal Glass and Blackstone. And now that Piramal Glass is a part of the portfolio company of Blackstone, Is there any synergies that we could get from this? Just if you could share some thoughts on that? So we are you're talking to the EPL management, maybe the audience, maybe the people whom you sort of. So I think Blackstone invests in different companies from time to time. We always explore wherever there are synergies. I think in case of pyramidal glass, it is very early for me to comment, but conceptually, we always explore synergies wherever we can. And I think at an appropriate moment, if we have something more to share with you, we will. Thank you. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Thanks, Thank you. Ladies and gentlemen, as this was the last question for the day, I would now like to hand the conference over to the management for closing comments. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Thank you. Thank you, Richita. Thank you, ladies and gentlemen on the call. Thank you once again for your energy and your enthusiasm and your confidence in ETL. And I want to share with you that we've begun FY 2022 very well in an extremely tough time, with some unprecedented supply security and supply chain issued. We've done very well. We, along with the management, are confident of sharing this and navigating it really well as we go forward. EBL is a great company. On a personal level, I want to thank all of you for your support of this organization. I also want to tell you that I'm moving on. For personal reasons, I've enjoyed the 17, 18 months which I've had with this organization. They've been short, but they have been very, very enriching, challenging and enjoyable personally for me. Thank you for your support to the organization. Thank you for your support to me and thank you for all your good wishes. Thank you so much. Thank you and bye bye. Thank you. On behalf of systematic institutional equity, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.