Ladies and gentlemen, good day and welcome to the Uflex Limited Q1 FY23 earnings conference call hosted by ICICI Securities. As a reminder, all participant lines will be in a listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this call, please signal an operator by pressing star and zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sanjay Jain. Thank you, and over to you, sir.
Thank you, Seema. Good afternoon, everyone, and on behalf of ICICI Securities Limited, I would like to thank you all for taking the time to join us on Uflex Limited Q1 results conference call. From the company leadership team, we have with us Mr. Rajesh Bhatia, Group CFO, Uflex Limited, Mr. Anants hree Chaturvedi, Vice Chairman and CEO, Flex Films International, Mr. Apurva shree Chaturvedi, Director, EU Operations and Sustainability, and Mr. Vinu Saini, Vice President, Corporate Finance, M&A, and Investor Relationships. We will have the opening remarks done by the management, post which, we will have a Q&A session. I would like to hand over the proceedings to Mr. Rajesh Bhatia, for his opening remarks. Thank you, and over to you, sir.
A very warm, good afternoon to you all on the call. Ladies and gentlemen, my name is Rajesh Bhatia, and I'm going to be giving you the results for the Q1 ending June 2022. For the quarter, it's been a good, reasonably good quarter. Our top line grew year-over-year by 46.5% to a little over INR 4,000 crores, which was backed by 15.7% volume growth on a year-over-year basis. EBITDA was up by about 44% to INR 725 crores on a year-over-year basis. On a QOQ basis, it's up by 4.1%.
PAT is again, you know, up by close to about 42% to INR 375 crores. This is the highest ever PAT for Uflex in any quarter so far. On a QOQ basis also, this is up by 6.9%. The notable contributions, achievements in this quarter was the first is the aseptic packaging business, where we achieved about 91% capacity utilization and this is the expanded capacity of 7 billion packs. We had almost 123% volume growth in the aseptic packaging business on a year-on-year basis. Even on a quarter-to-quarter basis, we had a 16% volume growth in this quarter over the March quarter.
That business has done phenomenally well, and the enhanced capacity utilization which got commissioned in early April came very handy for this season. To the best of our ability, we could, you know, sort of, achieve a very high level of capacity utilization. We could have done a bit better, but, you know, initial teething troubles always when you set up new things are always there. But we've been able to overcome those subsequently. The endeavor is to debottleneck the plant, and the purpose is that, you know, can you with the same facility produce instead of the rated capacity of 7 billion packs, can you do anywhere between 8-9 billion packs? Our endeavor is to do that.
Let's see the next season as to how does it perform on that front. The other notable achievement during this period is we achieved 71%+ capacity utilization at our Nigeria facility. We've been while we commissioned that in Q4 2022. The first two quarters we had you know some logistics and other issues there. Happy to say that now we are ramping up production and the sales from that particular business. The idea is to again you know get it to a much higher capacity utilization for as what we expected achieving in some of the other businesses. Overall you know the quarter has been decent.
We are now looking at the commissioning of our respective CPP facility in Dubai and Ceyhan and our BOPET facility in India later, which will give us, you know, additional revenues as well as profitability. Generally, a good quarter from overall perspective. Thank you.
Sir, should we begin the Q&A session?
No. That's all.
All right, sir. Ladies and gentlemen, we now begin with the question-and-answer session. Anyone who wishes to ask a question may press star then one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking the question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Thank you. We take the first question from the line of Mr. Shubham Agarwal from Geojit. Please go ahead, sir.
Yeah, thank you for the opportunity, and first of all, congratulations to the entire team. My first question is related to the CPP division. Sir, I wanted to know with the commissioning of new line, what would be our current market capacity? Going forward, what is the reasonable growth trajectory that we are looking for this division, given that you have mentioned that we'll expand our capacity to probably 9 billion packs over the next one year.
The current rated capacity is 7 billion packs a year. Now, we are saying expansion, we're not looking at any fresh investment per se, but we are looking to debottleneck our existing facility to see if we can still optimize the production from the same plants which is 8-9 billion pack structure.
Sir, what would be our current market share in this division with this commissioning?
I think we shall have close to anywhere between 22%-25% market share.
What is the reasonable sustainable growth that we can achieve in this division?
This business, as I understand, the growth is about 18%-20% at an industry level.
Okay.
there's no reason that, you know, why we should not be able to achieve that growth.
Got it. Sir, with the new capacity at 7 billion packs, what is the total turnover that we can do, and what is the sustainable margin that currently we are doing in this business?
I think we can do a top line of anywhere between INR 1,200 crores-INR 1,400 crores at a 7 billion packs output.
Okay.
From the pack size and all that's why I'm giving a range. The margins could be about 20% and above.
Is it an EBITDA level?
Yeah.
Okay, thank you. Fair enough. Sir, my second question is related to our BOPET division. Last quarter, we have seen in India especially the BOPET margins have started declining. I wanted to know what is the global trend because we have capacities around the world. Q-o-Q from Q2 onwards, how do you see the spread moving?
I will.
Rajesh Bhatia, I can answer that if you check. Hello?
Yes.
Yeah. Am I audible?
Yes, you are.
Okay. In terms of, you know, the pricing posture of the Indian market related to the BOPET product versus the global market. Global market prices are obviously in a very different direction compared to the Indian prices, especially on a gross margin posture. So far right now, the summer season has been of a normal nature of demand. We are expecting a demand recovery in the European market and a demand recovery in the Middle Eastern and North African and African markets for the last quarter of the year, the balance remaining months. From a gross margin side, what you've been tracking, correlating in terms of the India gross margins, that is not going to have extremely strong spill onto the global markets.
Okay. Sir, but globally also we are expecting a lot of lines to come up. Do you feel that the demand would be adequate to meet the additional supply?
If you look from the supply side, the net capacity additions for the BOPET-excluded film portfolio is coming in India and China. The rest of the world, the net capacity addition is very limited and almost negligible if you look at the size of the markets. I think companies with positions like ours, where we have a complete understanding and good presence in the Indian market along with the global market leaders. I think we'll be able to manage the headwinds that develop out of the next capacity addition. Globally, the picture that some of us can relate to of companies needing reliable suppliers close at hand, that story is continuing to carry weight in the market's mind.
Customers, we feel if we do a good job with our assets, customers will be sensitive to the value addition of that.
Okay. Fair enough. I'll come back in the queue. Thanks for answering my question.
Okay.
Thank you very much. We have the next question from the line of Chirag Singhal from First Water Capital. Please go ahead, sir.
Yeah. Thanks for the opportunity. Just to continue the previous participant's question on the aseptic business. If you look at the next 2-3 years or let's say even further, 5 years down the line, you know, what kind of target we have in our mind from the current 7 billion packs? Just to get a broad picture on where we are headed in the aseptic business.
I said, I already answered that. If you say from a turnover point of view, I think the current capacity can lead us to INR 1,200 crore-INR 1,400 crore annualized revenue and EBITDA margin guidance also I gave. Is there anything else you want to ask or is that okay?
No, no. I understood. We are anyways running at 27% capacity utilization for the entire 7 billion packs. I also understood that, you know, with debottlenecking will have 1-2 billion packs by next year or so. Beyond that, you know, by adding new lines. Do you have any sort of, you know, targets that we can work with? That this is the target for the next 3-5 years in the aseptic business, from, let's say 29 billion packs that we can achieve from the existing capacity.
I think we'll be in a position to give you a more clear picture on the capacity additions for the aseptic core by the end of the next quarter. Okay. Right now, considering what Mr. Bhatia has shared, that with the debottlenecking we are getting about 20% more on the total capacity that we have today. I think even if you assume the growth that was in the market of at least 15%-20%, I think there's enough room to balance our existing onshore India capacity with that growth trajectory, and then make a better decision down the line.
Sure. Okay, sir. My next question is on the, you know, was there any one-off expenses in the P&L because of currency depreciation in Russia, for Q1?
Because of the currency depreciation in Russia, we had our loan book swelled by about INR 163 crore.
Okay. Yeah.
The profitability impact is also there in Russia this quarter, because, you know, the currency fluctuated. It went from 75 to 125. 125 it came down to 55. There was impact on the P&L in the normal course of the business. The way we conduct our business, where we collect our receivables, benchmark to certain exchange rates and our payables benchmark to certain exchange rates. We had some, you know, underperformance there because of this, you know, fluctuation impact.
Okay. Could you please quantify the impact on the P&L during the quarter? I think what was the one-off component during the quarter in the P&L?
We will be sure of that.
Okay. All right. Okay. Just on the recycling part, we have been talking about lot of expansions that we've been doing in various different streams in the overall recycling. Just wanted to understand from a broad picture what kind of total CapEx that you've already spent in the recycling, what is the current capacity, the payback period. Also just wanted to understand when we look at, let's say, a business like aluminum, wherein the recycled aluminum is generally purchased at a discount to the aluminum and hence giving a benefit to the aluminum producers. Is there some similar advantage that we also get when we use rPET instead of virgin PET?
you know, does the cost of production goes down and eventually a sustainable profit per kg, you know, can be achieved over a period of time?
Can I request Mr. Ananth to take over this address?
Sure. Mr. Bhatia, I think you can give the CapEx numbers and the payback numbers. I'd be happy to address, you know, the pricing and the payback cycle.
Ananth, if you can just give the business perspective, I'll add those inputs in time.
Sure. Absolutely. You know, from a perspective of an input-output ratio, you know, it's when we add in any kind of recycled resin from our facilities, it's not exactly the same as what you are describing that the aluminum manufacturers do. You know, because for us, the cost of sourcing, cost of cleaning can vary from geography to geography. However, today, the advantage that we all have as an industry is that RPET material is at a premium as compared to virgin material. It's really today, if we look at the market today, it's just the premium that RPET is sold at that makes up for you know, basically these additional ancillary transition costs to RPET.
Once you hit a certain density, that sort of density is really being defined by the industry because that industry standard has not really been defined as of now. Then you will start seeing some of these benefits that you are seeing that the aluminum makers, you know, sort of get at scale. Until that point, it's really the premium that you get in the RPET market, which also varies by geography. It is, you know, a consistent premium in any geography that you are selling in, that then allows a better risk-taking service material.
Right. Okay. When we talk about premium, could you also help me with the, you know, sales volume that we do for 90% or 100% RPET films as a percentage to the total sales volume? Just to understand that what kind of scale we have achieved and what prospects do we have over the next three to six years.
We can get you back those numbers, you know. I wouldn't have those numbers off the top of my head for every geography.
Sure, sir. No problem.
Yeah. Yeah.
One more question?
Just to give you a supplementary insight that you can carry back into your industry is that right now the adoption of the RPET film products is heterogeneous globally. Certain markets are leading in terms of customer demand, whether it's shaped by the customers or directly by their end customer. In other markets, either because of a lack of regulation or because of a lack of marketing on behalf of the end customers, the demand for 100% RPET polyester film has still not stabilized to the point where we should, you know, start, let's say, exposing more of our film capacities to that product. I think it will happen over time.
That is one of the reasons why, you know, the sort of normalization of the aluminum model is not applying one to one onto the question that you are asking.
Right. Okay. Understood, sir. Mr. Rajesh Bhatia, ma'am, could you help me with the numbers on the CapEx and the CapEx return?
A typical plant, depending on the location and the cost of, you know, civil works at that location will cost between $10-$12 million. It's an investment in the current year. The CapEx should ideally be between about 4-5 years.
Okay. All right. One last question, and then maybe I can join back to you. This is on the specialty sales volumes. If you look at the peer set, most of the companies are giving a break-up of how they are, you know, what is the total component of the specialty sales volume as a percentage to the total sales volume at the moment, and what are their ambitions over the next 2-3 years. Now, the reason why they are giving and, maybe, you know, I think it's interesting that which is what they're trying to imply is there is a sustainable EBIT per kg or let's say sustainable profit margins in the specialty sales vis-à-vis the commodity sales volumes.
Just wanted to understand where we stand currently in terms of our specialty sales volume as a percentage to the total sales volume. Is it fair to assume that there is a sustainable EBIT per kg? Because, you know, we are in a cyclical industry, and the spreads clearly are totally volatile in terms of the demand and supply. If we are able to, you know, ramp up our specialty sales volume portfolio, maybe we can have some sort of sustainable profit per kg going forward. This is the assumption that I'm working with, but just wanted to know your perspective, where we stand in terms of the specialty sales volume at the moment, and whether it is fair to assume that the profits are sustainable in specialty sales.
Can I ask you a question? When you talk about sustainable terms, you know, from your definition and your benchmark, how are you qualifying those terms as sustainable, as specialty terms? Are those specialty terms based on, you know, whatever the company you're talking to is telling you is specialty, or is it that you have a benchmark that defines those terms?
No, sir. I don't have a benchmark personally, but whatever I've heard, I can put it in front of you. Basically, what the companies are stating is that specialties are no longer considered to be just metallized and coated films. You know, it depends on the applications your films are used in and which are much more specialized than a simple metallized or a coated film. What we have known term of presentation is the opportunity that we have with metallized and coated films. Obviously, whatever we have heard from different companies is that you know, specialty is much more than that. It's not just restricted to the metallized and coated films. Yeah, personally, I don't have any benchmark, but this is what I'm understanding.
Mr. Shah, I'm sorry to spin this on you, but you know, our internal benchmark for what we define specialty is very, very different from what the industry defines as specialty. That's the reason why we don't, you know, sort of review these numbers because a lot of times, you know, what we call as specialty is not necessarily specialty. I'll tell you our internal benchmark for specialty is based purely on volume and margin. Those are the two things that we look at when we, you know, see internal specialty terms, you know. Mr. Ajay can give you more details at a later time, but that's the reason why it's kind of futile to discuss specialty terms because there's no benchmark, right?
What you are calling and what the industry might be calling a specialty term might not be a specialty term as defined by us, you know, as by factory, you know, in actual reality. It is being touted as specialty term because it sounds nice on a presentation or it sounds nice on a, you know, on a sort of, you know, news headline. That's where sort of difference comes in. You know, Uflex's definition of specialty is a far higher standard than I would say the general industry definition.
That's why, you know, a lot of it is due to our IP, and that's why we don't, you know, we don't go into the same detail because we're not looking. You know, we're looking for these products to find home, not necessarily for, you know, these products to boost other things.
Sure, sir. When you say that you have some internal threshold, could you put some numbers to it that, you know, a constant INR 15-INR 20 higher than the commodity spread of INR 30-INR 40 rupees? What is the internal threshold that you have to distinguish specialty, you know, sales from commodity sales?
We can elaborate this later. It's an internal threshold, you know. I think I'll let Mr. Ajay elaborate on that later. Yeah.
Okay. All right.
To give you a rough guidance, as a benchmark, there should be at least a 15% expansion in gross margin on specialty sales. In gross margins. Obviously, you know, there are different companies producing specialty. With due respect to the fact that many companies have different kinds of lines, different kinds of downstream equipment, all of which are important because to produce a specialty film, you still need access to the base commodity product, because you still need the base chemistry and the base rheology of the polymer product on which you can add value, and add value to the end customer. At a minimum, you can say there should be at least a 15% expansion in gross margin on account of specialty sales.
That will be at least the minimum threshold for us for it to be economically attractive to us.
Okay. Right. That was quite elaborate, and thanks a lot for all the answers. I hope that, you know, the promoters participate in the conference going ahead as well. I'll join back in the queue in case of any further questions. Thanks a lot.
Thank you. Thank you.
Thank you very much, sir. We take the next question from the line of Mr. Zaid from Policy Capital Management. Please go ahead, sir.
Thank you. Congratulations on good set of numbers, sir. Most of my questions, almost all of them have been answered. I just want to ask pre-issuance if raw material prices are they going down?
Sorry, what? Zaid, you are not audible. Can you please repeat your question?
Can you hear me now?
Yes. It's better now.
Yeah. I'm saying, are the raw material prices going down?
Yes. In post fifteenth July to fifteenth August, we saw some costing of the raw materials.
Okay. My second question is, there was some issue with the J&K government, as you discussed in the last or last to last conference call. Has it closed some license or has that been solved? Some PLI problems.
That matter now we will have to litigate there to get our due diligence. No accounts with that in our those benefits are not being accounted for now. It's going to take a long time.
Okay. Thank you. Thank you so much, sir, and all the best for the next quarter and the coming years.
Thank you.
Thank you, sir. The next question from the line of Mr. Yash from NatEquity. Please go ahead, sir.
Hello. Am I audible?
Yes, sir.
Yes. Yes.
Yeah. My first question is regarding Nigeria. Even if it was a meaningful capacity utilization, so has it become a bit positive in this quarter?
Sorry.
Has the Nigeria plant turned a bit positive this quarter?
A bit of positive. Yes. A bit positive this quarter.
Okay. Your Dharuhera capacity on your Dharuhera expansion. Hello.
Dharuhera.
What kind of upside would this capacity add on full capacity utilization?
Dharuhera expansion could give you about INR 50 crores per month if you produce 4,000 tons.
INR 50 crore per month at full capacity utilization.
Yes, yes. No, not full. Full will be about 400 tonnes.
Sorry to interrupt. Do you include actually the plant in that? Sorry.
If I sell 50 tons per month.
That is flat, right? That is also flat, right?
Flat line.
Sorry. Okay. Also, raw material pricing, could you elaborate more on this, how much the pricing has been revised? Would you be able to quantify?
I think it's too premature. I think this trend has only been for a few days. Let's not hazard a guess on that. When we will have, you know, the next quarter, I think we will, you know, give you know, as to what happens to prices.
No, obviously, you guys are just-
As of now, there has been the fall in the raw material price has been really marginal only. I think, anything to elaborate beyond that will not be possible for us today because, you know, the time periods involved have been very, very short.
We have fallen from $115 to, I think, $90 approximately. The raw material pricing isn't cooling at the same speed that I think it went up, right? Is that showing very good demand side?
No, we've already seen that, you know, this is last quarter versus this quarter, how the two have also behaved. It's in line with trend. There is nothing exceptional to, you know, to those fall and all.
Also, your operating OPM expansion, is there any visibility into coming quarters?
For? Our what?
The OPM. No, no. Overall operating margin. Or are you comfortable with 18%?
I think 18%, as I've been saying earlier, a range of 17%-19% is quite a comfort zone for us. Again, if the raw material prices fall and the margins are sustained, so your EBITDA margins would always look much higher, you know, in this picture.
Also, would you be able to elaborate on the demand in Europe and U.S.?
Sorry?
Would you be able to elaborate on the demand trend for Europe and U.S.?
The demand right now in Europe is struggling with its own energy issues and all that. The demand is bit soft. You know, typically that's been the phenomenon in this period generally over the years we've seen. I think nothing much to get bothered about. You know, on an annual basis, we will be able to outperform the last year of, I think, in the year.
Also, on your operating profit margins trend, you said that you are comfortable with 18%, right? Would you be able to give us guidance for the coming quarters with any? Or will you be able to maintain with the same margin?
No, we're not giving any guidance for the next quarters as of now. For the year as a whole, I think we've earlier also said about 17%-19% is our range.
Okay. Also, what's the update on the Dubai listing?
On the?
Dubai listing. For the facility that you're planning to list it in the Dubai Exchange.
I think the markets right now are not conducive. As and when they are back, we'll be touching base also on that front.
Also, my last question on the debt front, when by which quarter are we expecting the debt to start coming down?
The debt, as we said that, you know, the debt hasn't gone up in this quarter also. It's the same what was there in the last quarter, despite the fact that, you know, we have now you know, CPP and the BOPET facilities under commissioning for which the new debt is being drawn. The current amortization structure versus the new debt added for those projects is almost, you know, keeping the debt at a static level. I think the debt will peak by March 31, 2023. Thereafter, you know, it will start coming down.
Could you talk about the new strategy that you've announced for the new plant, right?
We've announced a backward integration facility at Panipat, where we're going to manufacture the resin for BOPET films. That is the project which we are undertaking. That project will come up in FY 2026. We will, whatever is the debt added on for that, the current amortization over the next two years will neutralize that new debt which is taken for that project.
Could you make me understand about how that project is going to help ICICI? Is it going to help ICICI expand the OPM?
Two things important in that is one is that will help us protect margins. We've seen in the last couple of years that, you know, both the availability as well as the pricing on our even raw material side was getting a bit erratic. Just because we have an overall global presence, we've been able to, you know, sort of, meet our raw material requirements from wherever we can for India as well as our overseas facilities. Availability issues, supply chain issues are the order of the day at least for the last year or so.
That's why, you know, we've taken the decision to backward integration so that, you know, even today for some of our facilities in global markets, we source from India, we source from Southeast Asia, and we source from Middle East. That's where, you know, we've been supplying raw material to our offshore businesses. This will help us, you know, both quality-wise, the consistent quality. You're not, you know, moving from one quality, one supplier to another and that resultant fluctuation in quality. You know, all those things are going to be plus from this. Plus the margins are definitely there.
There is, today, both in India as well as in international markets, the markups on the industries have shot up quite a bit, in this case.
In the last con call, if you remember, I had asked you to have any plan, plans of especially packaging as a strategic entity, and you said it is the idea and management will, you know, think about it. Has there been any, something in that front?
No, we've not given any thought process as of now.
Also in the existing packaging plant, how much would you be able to expand more in your brownfield expansion?
At this plant now, we can duplicate the same capacity given the resources in terms of land and others what we have presently at this plant. Currently the endeavor is not to set up anything new. We are only trying to be efficient and see whether the existing plants can be taken more out.
At this same plant, if you choose to double your capacity, you can.
Yeah.
Right. Thank you. Thank you so much for answering my question.
Thank you, sir. Next is Mahesh from the line of Mr. Shivam. Sana, please go ahead, sir.
Yeah. Thank you for taking my question. Congratulations for good set of numbers. Only one question is that, what will be the impact of plastic ban from this quarter onwards Q2? What it will reflect at the end? In this quarter, how much will be the impact?
There's no impact on Uflex for any of the plastic ban because none of the items in the plastic ban affect Uflex. They, you know, for as part of the aseptic packaging for certain segments, we've been using the plastic straws, so they'll be replaced with the paper straws as we've already ordered those machines.
Would it be, which you say it will be a positive impact on the company if there's a plastic ban? Can we say that?
I think there's no impact. I think let's remain on that as in, you know, how the substitutes for the, you know, for the items which are being banned and how do they impact, you know, you know, the, what are the alternatives which emerge from there and how does it help the, you know, the, flexible packaging films companies and all that. I think, let's wait and watch and see the impact of that.
Have you taken any price hikes recently after the raw material, and any price hikes were taken, and then will they continue in this quarter also?
The price highs earlier had also been taken based on the raw material price increases. Even in this quarter, if you see the top line grew by close to about 57%, while the volume growth is close to about 16%. There's a substantial increase in the price on a year-on-year basis. If you see the last quarter we had a 65% top line growth, but 38% volume growth. This quarter again, the impact of the price rise has been there. As we said that in the last one month or so, three weeks to be precise, the raw materials have also come down.
To that extent the raw materials come down. You've been, you can depending on the demand supply situation, you can either pass on the prices or you can keep some of the margins to yourself depending on that. I think that's how business takes on a regular basis. Last couple of years we've seen that, whatever is the price increase, that is being constantly passed on to the customer. Only in the flexible packaging business there may be certain lag in passing on that prices. But generally in the larger business areas for us, we're passing on the prices.
Basically you are saying the commodity price goes down and you reduce the pricing or the customer can also reduce the prices also. The operator can reduce the prices more. Right?
Yeah.
Understood. Got it. Thanks.
Thank you. A reminder to all the participants, anyone who wishes to ask a question may press star and one on their touchtone phone. We take the next question from the line of Mr. Rishabh Raj from Kotak Mahindra Advisors. Please go ahead, sir.
Thank you for the opportunity. First question, when do we expect the new facility to commission?
We're targeting Q3 later or Q4 beginning. That's what we are targeting.
Okay. On the aseptic debottlenecking, will that also be concluded in this financial year itself?
No, I think this year the season is now off. January next only now the season will start. Hopefully by that time we should have sorted the things out.
Okay.
Keep the question. I think just wanted to confirm, have our debt levels on a net basis remained flat because our finance cost has actually gone up 7% sequentially? Wanted to understand that part.
Debt level on a constant currency basis has remained the same. We've overall, if you see the net debt has gone up by INR 150 crores. You know, if everything else I were to keep aside, I were to see only Russia. Because of the currency appreciation there in rupee terms, their debt has gone up by INR 150 crores.
I think while you were answering a previous participant, you said that we have taken a new debt for commissioning of this new plant. Has that debt been taken at a higher rate or is it still in line with the previous debt levels?
It's only when you will take the rupee loan, it will always be, you know, sort of costlier than foreign currency loans in our global businesses. What right now we are adding to our debt level because the offshore projects were already commissioned last year itself. But yes, on a quarter-on-quarter basis, if you see because last year we didn't have Nigeria projects, it was commissioned in Q2 towards Q2 2010. This year in Q1 versus last year of Q1, we have the debt of the Nigeria project which has resulted in. That's where you see the debt almost remaining the same. You see a higher interest outgo.
Okay. Understood. That was all from my side. Thank you for the opportunity.
Thank you. We take the next follow-up question from the line of Mr. Subham Agarwal from Aequitas. Please go ahead, sir.
Yeah. Thank you for the opportunity, again. My question, given the promoters are there on this call, I would like.
Hello? Hello?
I think we lost the line from Mr. Subham. I'll promote the next question from the line of Mr. Yash. Please go ahead, sir. Mr. Yash, your line is on talk mode, sir. You can go ahead with your question.
My question is regarding the dividend payout ratio. Has there been any thought put to that? I think either because in the last 5-10 years your dividend payout ratio has only declined every year.
You're not audible at all.
Hello? Am I audible now?
You're not audible at all.
Hello?
Hello, Mr. Yash.
Yeah. Am I audible now, sir?
A little better. It looks like, but only when you complete your question.
I try my best.
Listen, Yash.
Hello. Now?
Yes. Much better.
Yeah. My question is regarding the dividend payout ratio. The dividend payout ratio from the last 5, 10 years has only come down. Has there been any thought put to that? When are we looking to increase the dividend payout ratio since you said by the end of this year, we'll hit our peak debt level. Is there any plans to increase the dividend payout ratio by then?
I think the dividend absolute payouts are being increased. That's what I can say. Yes, in terms of the payout ratio, you're right that you know may have gone down. The only reason for that is as we've spent a lot of capital in terms of our growth and that's where you see basically if you see in the last you know we had an EBITDA of close to about INR 700 crore. In the last quarter, we had INR 7.5 crore now. Today we are looking at an annual EBITDA of anywhere between INR 800-odd crore up from about INR 900 crore what we had about 4 years ago.
All this additional EBITDA generation has come against the backdrop of fresh investments being made into the businesses, whether it was Aseptic or the new facilities or brownfield or greenfield being set up in the offshore locations and now the digital integration into. There's been a lot of CapEx. As part of the CapEx, when you go to your lenders for the fresh borrowings, I think there are kind of you know sort of guidance from them also as to how much you need to plow back from cash to CapEx into your businesses. All that has been done keeping in mind, is there enough equity resources in the business to fund those projects. That's been the primary decider in the spending cycle.
Yes, sir. Hence, my question was based more about the future.
Future.
I completely understand why you spent money and why you haven't paid out a lot of dividend in the last 10 years. As an investor when I look at other stocks in the same, you know, industry doing business, if you're expecting your peak level of debt to come down in this financial year, then wouldn't you look at rewarding the shareholders too?
I think the intention is to create a shareholder's value, and that has been done over the years. It may not necessarily have been through dividends, but it's also reflected in the stock prices which are again backed by the performance of the company. Overall basis, the value creation in the last three years has been good. Yes, I agree with you that, you know, your expectations on dividend payouts may have been not met to the extent some of the other players are doing. But yes, our endeavor is to, you know, keep the growth momentum on.
Because you understand that, you know, some of the competitors you are talking about, they are, you know, while we have three or four separate businesses or maybe more, such as some of the intermediaries like chemicals, cylinders, engineering, you know, they themselves are separate businesses. Then on top of that, the three mainstream businesses, which is aseptic packaging, the flexible films and the flexible packaging. They have their capital requirements from time to time. Very difficult for me to say that, you know, how will the future pan out in terms of the further growth plans today. Whatever we have, we keep on announcing to the market.
Yes, on the whole, we are a progressive company and wherever we see, you know, that we can generate a much better returns rather than, you know, sort of, dividending, giving it in the form of dividend. If there are opportunities, reasonable opportunities for growth, I think, we'll be pursuing that. Once we stop pursuing that, then yes, of course, you won't keep the idle cash with yourself. So there'll be distributions for sure and,
Yes, yes. Yes, sir, I completely get that. The only reason I asked this question was because, definitely in the near future we are looking at a point where debt levels hits their peak, and once the peak is over, I was just wondering what the company plans on doing with the cash that's coming in. If you have further growth plans, that's well and good. If you don't have further growth plans, you'll also be looking at reducing your debt and deleveraging your balance sheet, right?
I think the balance sheet is not leveraged. If I see my net debt to EBITDA basis, if I annualize my net debt, net debt and the earnings numbers, we are talking about less than 1.5x of a net debt to EBITDA. I think we are in a comfortable zone over there. Given your point that, you know, I think once we come back to that situation where there are no further opportunities to grow, I think the management will consider probably a different payout ratio, at that point in time. You know, very difficult to predict anything on this call at this point in time.
Okay, sir. Also, I just have one more thing on the investor front. What are the steps the management is looking to make in more utilize a more investor attractive opportunity? You know, I'm not talking in terms of growth. I think you guys are firing on all cylinders. But you recently hired a new PR agency too, right? If I'm not mistaken. In that front, can I understand what steps the PR agency is taking or what steps the company is taking in trying to expand investor highlights?
I think that's an agenda which is currently under discussion with that. As part of that agenda only, you know, this is the first time you see the promoter group on the call this time. We are in constant discussion with our consultants and next couple of quarters we'll give you more guidance on. Or you will see for yourself as to what we've done to, you know, improve our investors' relationships.
Yes, sir. Also, from next quarter onwards, it would be very helpful if you could give some sort of guidance in terms of the fees in the coming future. That would be really helpful as an investor for me to understand where the business is heading. Thank you so much for the opportunity. Have a nice day. Thank you.
Thank you, sir. We have the next follow-up question from the line of Mr. Subham Agarwal from Aequitas. Please go ahead, sir.
Thank you for the opportunity. Am I audible? Hello, am I audible?
Yes, sir. Please go ahead.
Yeah, you are audible.
Thank you. Given that the promoters are there on the call, I would like to take this opportunity to understand from them what is the vision that they have in place for the company over the next 3-5 years? What are the areas that they are focusing on? Any new specific areas that they would like to talk about? Given that Mr. Bhatia said there are multiple growth levers that we will be investing in. Broadly, just if you could help us understand what you are thinking, that would be very helpful, sir. Thank you.
Mushrif, do you wanna start with this?
Yeah, sure. Obviously we're going to grow more in the film business. The film business will continue to grow. Along with that, as Mr. Bhatia has explained earlier in the call, there'll be certain CapEx also to improving the availability and security of raw material, because obviously we'll be geographically diverse. We'll continue to commit to that strategy of geographical diversification on the expansion of the BOPET capacity. Certain amount of capital will also go for the polyester raw material. Along with that, the aseptic business is something that, as we said earlier in the call, after debottlenecking, we can take a longer-term perspective on the aseptic business.
Mm-hmm.
To also make it grow. Along with that, obviously as the team capacity goes up, there'll be room to further penetrate the available value additions available in the films, in the film sector. That is also, that's also under review by management. Along with that, obviously this is also diverse. You know, we have. We are seeing what's happening in energy and we're seeing what's happening in this, what's marketed as a transition to a different energy base. If there's any room to grow in those sectors, we can look at that as well. As of now, the priority will be more growth in the film business. A certain amount of CapEx for the defensibility of the raw material chains and along with growth in the aseptic business as well.
Indeed. Got it. Sir, secondly, we understand over the last few years we have gone through a significant shift in cycle, and we have delivered when it comes to numbers. At the same time, it's not reflected in the share price. Sir, I think it's a very good opportunity for the promoter itself to buy shares from the market. Obviously you bought some shares last quarter, but what are your thoughts on that?
That is a very small percentage that was bought by the promoter. That was only 0.4%.
Right.
Since, you know, the capital requirements are today elsewhere, so there's no such plan to, you know, sort of, look at any large scale, you know, sort of buyback kind of structures. I think, but, you know, to still give more value to the shareholders, the wealth creation for the shareholders, we thought of other routes as to how we can do it. Listing for Dubai and DIFX was one such route, which we are pursuing just because, you know, the markets will come back, once the interest rates cycle is sort of a stabilized by equity markets.
That would be one huge fillip to the way the company is valued because whatever discussions we have in the roadmap that our investment bankers are showing us for that listing, this will help the company reflect parent, you know, valuation also in a completely different perspective.
Sir, how much are we looking to value from the Dubai business?
I won't divulge any details of that at this moment.
No problem. I understand. Thank you. Thank you again, for the opportunity.
Thank you very much. Ladies and gentlemen, that was the last question for the day. Thank you, everybody. On behalf of ICICI Securities, I conclude this conference call. Thank you for joining us, and you may now disconnect your lines.