Ladies and gentlemen, good day and welcome to the Q3 FY 2025 earnings conference call of Garware Hi-Tech Films Limited. 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. Should you need assistance during the conference call, please signal an operator by pressing the star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Vikash Verma from Ernst & Young. Thank you, and over to you, sir.
Thank you, Steve. Good afternoon, everyone. Welcome to the quarter three and nine-month FY 2025 earnings call for Garware Hi-Tech Films Limited. On behalf of the company, I would like to express our gratitude to each of you joining the call today. To discuss the performance of the company and to answer the questions, we have with us from the company, Mr. M.S. Adsul, Director, Technical; Mr. Deepak Joshi, Director of Sales and Marketing; Mr. A. Venkataraman, Senior President, Corporate Affairs and Finance; and Mr. Abhishek Agarwal, the Chief Financial Officer. Before we begin, I would like to draw your attention to the fact that today's discussion may contain forward-looking statements that are subject to various risks, uncertainties, and other factors which will be beyond management control. We kindly request that you bear in mind there may be uncertainties when interpreting such statements. Please note that this conference is being recorded.
We will now start the session with an opening remarks from the management team. Afterwards, we will open the floor for an interactive Q&A session. I would now like to invite Mr. Deepak Joshi to make his opening remarks. Over to you, Mr. Deepak.
Good afternoon, ladies and gentlemen. Thank you, Vikash, and thank you all for participating in Garware Hi-Tech Films Limited earning call for the third quarter and the nine-month period ending December 31, 2024. We appreciate your continued interest and support. Let me start by providing a brief overview of our financial standing. As we reflect on the third quarter of FY 2025, we acknowledge the resilience and strategic agility of our company. Following an outstanding performance in the first half of the year, our performance has demonstrated a stable year-over-year growth trajectory despite the anticipated seasonal softness which traditionally impacts this quarter. While we did experience a Q-o-Q decline, this was largely in line with our expectation given the lower sales of our higher margin IR products, which are naturally affected by the seasonal fluctuations.
Nevertheless, our strategic initiatives and diversified product offerings have allowed us to navigate these seasonal factors effectively, ensuring that our financial outlook and guidance remains unchanged. On a consolidated basis, we have reported a revenue of INR 466.4 crores and a profit after tax of INR 60.8 crores for the quarter. Our CPD segment, which is PPF plus SCF, saw a slight decline of 7% year-over-year. Our IPD segment grew by 24%, driven by increased penetration in newer markets. Let me take you through our transformation since 2018 towards a niche and value-added product portfolio. In 2018, our revenue was INR 874 crores with an EBITDA margin of around 9%.
We have completed and delivered three CapEx since 2018, which has helped us to build a portfolio of newer products, which has significantly increased our revenues by approximately 2.5 x and EBITDA margins at 24%, based on the nine-month FY 2025 on an annualized basis. The fourth CapEx of additional PPF line is on track and is expected to be completed by September 2025. Furthermore, we are pleased to announce that the board of directors have approved an investment of INR 118 crores, which is a first of its kind TPU extrusion line at our Waluj plant. The new TPU is expected to be completed within 18 months with a planned capacity of 360 LSF (Lakh square feet) per annum. Production from this line is set to commence by the end of October 2026, further strengthening our capabilities and expanding our product offerings.
The output from this new line will support the input requirements of both of our existing and upcoming PPF production lines, ensuring seamless integration into our manufacturing process. This strategic move is expected to yield incremental advantages, including an expanded product portfolio, improved margins, and enhanced operational efficiency and cost savings. This initiative not only opens up new pathways for expansion, but also diversifies our growth potential across a range of products in automotive, healthcare, and architectural, to name a few. Now, let me briefly explain our main product lines. Our Paint Protection Film business continues to experience strong demand from key customers in U.S.A., Middle East, and India. There is a consistent traction in this segment, and we are actively enhancing our product offerings and customer experience. We recently introduced two advanced PPF product variants at the Bharat Mobility Global Expo 2025 in Delhi.
The first is Coloured PPF, which is a game changer for Indian auto enthusiasts, offering vibrant color options to personalize and protect vehicles like never before. The second is Headlight & Taillight Glass Protection, providing advanced solutions to safeguard the brilliance of car lighting systems. Additionally, we have launched EMI solutions with Bajaj Finance, making premium protection films more accessible to Indian car owners through low-cost, flexible financing options. We have also introduced PPF insurance in partnership with InsuranceDekho, the first of its kind comprehensive insurance coverage for PPF in India, ensuring long-term stress-free utilization. With these developments, we continue to expand our offerings, strengthen our market presence, and enhance customer satisfaction. We are quite confident of continuous growth and are making provisions accordingly by addressing certain debottlenecking measures and considering further growth plans. Now, I would like to take you to our Sun Control Films.
On SCF business, we experienced 15% year-over-year growth in revenues. This growth is attributed to the expansion of our architectural business. We expect this positive trend to continue, further supported by the introduction of innovative products for the auto sector and new grades in the architectural and decorative film segment. We continue to receive significant interest at various expos and trade shows we participated in, which indicates strong potential for both our existing and newly introduced product lines. Lastly, I would like to talk about the Industrial Product business. The IPD segment has grown by 24% Y-o-Y basis, supported by strong demand for specialty films such as lidding films, PCR, and shrink films. We remain focused on the future of this value-added segment. We have also secured a patent for our innovative floatable shrink film, reinforcing our position as industry innovators and leaders.
Our strategy includes expanding the specialty segment, improving capacity utilization, and enhancing operational efficiency. These initiatives will help us strengthen our market presence and further drive profitability for the IPD business. We actively work on expanding our team by bringing in resources from across the world, participating in key industry events, and increasing our digital media presence globally. We are also proud to share that this quarter gone by, we were awarded the winner in packaging and allied activities by Dun & Bradstreet, further reinforcing our excellence. Looking ahead, we are confident in our ability to build on the progress we have made, and we continue to uphold the forecasts we've previously communicated. Our surplus cash reserves are being strategically deployed to fuel the next phase of growth with our recent announced capital expenditure expected to mirror the triumphs of our past capital investments.
As market demand remains steady and our strategic initiatives take shape, we are fueled by a robust product lineup, strategic investment, and targeted efforts to broaden our market reach. With these elements in place, we are hopeful of realizing improved performance in the forthcoming quarters. Thank you once again for your time today and for your continued trust in Garware Hi-Tech Films Limited. With this, I now request Mr. Abhishek Agarwal, our CFO, to take us through the highlights of the financial performance. Over to you, Abhishek.
Thank you, Deepak. Good afternoon to everybody on the call. To start with our financials for Q3 FY 2025. The consolidated revenue was INR 466.4 crores. This is a 2.8% growth over the previous year-over-year number of INR 453 crores. Our nine months ended December 31, the revenues were at INR 1,561 crores, marking a 27% year-over-year growth from INR 1,230 crores for the nine months of FY 2024. This growth was driven by sustained demand across our key business segments. Despite industry headwinds like geopolitical tensions, supply chain disruptions, we have delivered a steady performance and a strong EBITDA for Q3 FY 2025, which is now standing at INR 93.7 crores, an increase of 10.7% over INR 84.6 crores of the previous year. On a nine-month basis, EBITDA stood at INR 374 crores, registering a 61.7% growth compared to INR 231 crores in the nine months of FY 2024.
This improvement reflects the positive impact of our high-value product mix, deeper market penetration, and continued operational efficiencies. On the PBT side, the Q3 FY 2025 stood at INR 81 crores, again reflecting an 11% increase from INR 73 crores of Q3 FY 2024. For the nine months FY 2025, PBT stood at INR 336.7 crores, marking a 75.2% year-on-year growth from INR 192 crores. On the PAT front, our Q3 FY 2025 number is at INR 60.8 crores, up 81% against INR 55.9 crores in Q3 FY 2024. For nine months FY 2025, PAT stood at INR 336.7 crores, reflecting a 75% growth over INR 192.2 crores in nine months of FY 2024.
Exports continue to be a strong contributor, comprising approximately 74% to our performance, with value-added products comprising 85% of our product mix and playing a key role in our global expansion. Our financial position remains strong, and we are pleased to report that we have a cash surplus of INR 572 crores as of 31st December 2024. We continue to remain zero net debt, positioning us well to advance our strategic products. The newly announced capital expenditure for the TPU extrusion line is expected to drive operational improvements and enhance our profitability indicators. Given our strong cash flows, we will fund this expansion through internal accruals. Looking ahead, we are confident that our efforts will continue to drive measurable improvements in financial performance. With this, I will turn the call over to the moderator for the Q&A session. Thank you.
Thank you very much. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Dhwanil Desai from Turtle Capital. Please go ahead.
Hi. Good morning, everyone. Congratulations for the sturdy set of numbers. My first question is, as you indicated, this was a seasonally soft quarter. Going into Q4, how do you see the demand, especially given the overhang of tariff backdrop that is happening Sun Control side? I think February, March when we start doing the shipments. What are you hearing from your customers and has anything changed since our last interaction? Going into FY 2026, we were looking at INR 2,500 crore kind of a number. Are we still on course to do that? If you can talk a bit about that.
Thanks for your question. Like I said in the opening remark, the guidance for this financial year and next financial year remains unchanged. We are very confident that we are going to meet the guidance given previously. As we speak about the tariffs, as of now, it is like we are hearing a lot of things, and we are continuously in touch with our customers. Given the government initiative to reduce the tariff for the goods like Harley-Davidson and all those things, which was actually discussed during the campaign of Mr. Trump, that has been lowered, and we hope upcoming visits between the countries will subside the risk. In the worst phase, if I say, worst-case scenario, there can be a counter reciprocal tariff, which does not affect much because it's hardly 2%-3% difference.
I would like to reinforce one thing, that the duty on our neighbor China is around 35% now, vis-à-vis our duty stands at 6.6%. We have a lot of headroom available in U.S. market, and we are treating it as an opportunity for us . Our entire sales force and the team works to get the advantage of this scenario.
Very good to hear, Deepak. The second question is, I think we have indicated that our margins will remain 25% ±3%. I think this quarter we are lower than that range, maybe because of the seasonal fluctuation. I also see that even on a year-over-year basis, the commodity mix has increased significantly. Anything to read into this and as we bounce back on revenue, are we on course to do that 25% ±3% range on the margin side?
Yes. As you rightly indicated, Q3, as we stated in our previous calls, that the highest margin product for us is Sun Control, especially Sun Control IR films, which goes to its minimum in Q3. That's how the margins were lower in the previous quarter. If you see nine-month numbers, we are still at 24%, which is a very healthy sign as compared to the past.
Q4, we expect to maintain these kind of numbers. We are really well on course. All the guidelines have been given, which are still valid. No change in that.
Thanks. One more question on the-
I'm going to interrupt, sir.
Sure. I'll come back on this.
Thank you. Ladies and gentlemen, please limit your questions to two per participant, as there are several people waiting for their turn. The next question is on the line of Nikhil Kanoria from Monarch Networth Capital. Please go ahead.
Hello. Good afternoon, sir. Congratulations on a decent set of numbers. I had a question on the TPU CapEx that you have announced.
Number one, you stated in the press release that it is to be incurred within a span of 33 months. If you can give us some yearly guidance on the CapEx that will be incurred for this facility, as well as the upcoming PPF facility. That's number one. Number two, from the understanding point of view, this TPU will be kind of a raw material for your PPF, right?
Yes.
How much benefit is it going to give you in terms of cost? The capacity that we have for PPF will be around 600 LSF, and this is around 360 LSF. What sort of ratio will we be having going ahead, when it comes to raw material procurement from internal sources and from the open market?
First of all, on the CapEx, which we have announced, it is INR 118 crore. That is total, and to be spread over 18 months. It will be more towards last six months because we make provisions with our LCs and all those things. Maximum spend happens in next year. Now, going to how it will benefit. It is going to be the backbone of the PPF lines which we have. If you see, the real strength of the company is, for all, it's a backward integration. From petrochemicals to chips, to films, to our nano dispersion, our making our own adhesive and top coats. This was the only point missing in PPF. It makes us very value proposition in the market. Another thing, it will add lot of innovations for the new product developments, as the market wants continuously innovation.
With this, we can do all those, our in-house testings and the new product developments within three months in the field of PPF and some of the architectural segment. This line, first of all, it will be a cost saving for the PPF. Second thing, it will add to R&D developments, and it will open up new product portfolio for the company, which we will disclose at the coming quarters. Right now, the thing is, there are many segments which we are targeting with that. Garware was the first company who brought the films in India. Then we were the first one to do Sun Control Films and Paint Protection Films. Now, with this innovation, it will be a backbone for our PPF. At the same time, we will venture into new product portfolio with this line.
I hope I have answered. If anything missed in your question, sorry, you can ask again.
One thing that I asked is, the capacity is around 360 LSF for this TPU plant. The existing plus upcoming PPF facility, we have around 600 LSF capacity. In that sense, if we take 1:1 conversion ratio, I just wanted some sense on the-
It will be sufficient, as you rightly pointed out, for one line as of now. Going forward with this, this will be sufficient for one line only. We will use 100% capacity for that. As I said, we will keep some provision for the new product developments in the different segments. Going forward, if everything permits the way we are growing, I'm happy to announce here that this is fifth of its kind of announcement. We have done four CapEx till date in a short period of last four years, from PPF line 1, then Sun Control, then metalizing, and PPF line number 2 is still on course for September 2025. This new CapEx will come on October 2026. The point here is, the company has turned around its top line and bottom line significantly with the addition of CapEx.
This CapEx is putting us into a strong value addition for our PPF, and of course, opening up new foray into different product lines. To answer your questions, yes, it will be 50% of our existing requirement, and 50% we will continue to source. We'll look into further expansion, depending on the situation going ahead.
Sir, with the nine months, I guess for the Q4, the ask rate at the PAT level of around INR 80 crores. While you said that at the annual level you will be able to do what we have guided earlier. With INR 80 crores asked for the Q4, are we still confident in that sense?
You mean revenue guidelines for the year?
PAT.
PAT guidelines. Yes. If you see, we have shown a 75% growth in nine-month basis. Q3 being always, as stated, is the lowest possible season for us. We will do definitely on course to do good in Q4. The guidelines remain intact. We are confident of achieving that.
Sir, t hose were my questions for now. Just in case I have any other questions, I will rejoin the queue. Thank you, and best of luck for your future.
Thank you.
The next question is from the line of Aditya Rathi from Aequitas Investments. Please go ahead.
Hello. Good afternoon, sir. Thank you for the opportunity. Sir, I wanted to know more about the impact that we could face because of the U.S. tariff. I know you just mentioned it, but if you could just show some more light on that.
As I said, first of all, the tariff which is announced has been favorable to us because it is on China. The 25% goes to 35%, where vis-à-vis our number is quite low as we speak in the current situation. Government of India has already started taking proactive actions. That means reducing the imports from U.S. This is a geopolitical discussion, we are keeping a very close eye on that through our customers and our consultants. In worst-case scenario also, we seem to be benefited from this situation.
Sir, will this lead to any margin contraction for us from the export side?
Sir, it will depend on how much is the duty. As I said, in the worst-case scenario, it can impact 2%-3% only. If you see the duty put on other countries, including China, and the possible talks about E.U. and all, they are in the list prior to India. Any case is going to benefit us rather than giving a negative impact to that, because there may be an opportunity for price increase. Right now it's uncertain. It can go anywhere now. If we talk of present situation, it's good for us. If we talk of duty which is tit for tat, exactly same, reciprocating the duty, we are going to get benefited. We are very positive about that, and we are working to get the maximum advantage of the situation.
Even the worst case, we have a strategy and we are doing good with that.
Sir, my second question, last question is also on the same line. Exports, sir, from Latin America, if you could show some light. I think we are seeing subdued growth from that area.
From Latin America. Latin America, if you talk of the company's strategy, we added a resource in last quarter to fuel the growth because Latin America is a very big area where we wanted to increase the presence. Let me tell you one thing. We have growing very fast. We have been growing in U.S.A. and other parts and India. We have now targeted the areas where we were little lacking because of our distance and all those things, at the same time of resources and different languages. We have hired another resource in that area to fuel the growth for South American market, Latin America. We are very cognizant of the fact that we need to grow continuously. All those territories where we have not been present or present lower than what we anticipated, we are doing everything to grow there.
Thank you, sir. Thank you so much. That's it from my end.
Thank you. Thank you very much.
The next question is from the line of Naitik Mohata from Sequent Investments. Please go ahead.
Hello, sir. Can you hear me?
Yes.
Sir, I just want to understand what was the guidance for FY 2025 and 2026. Also, you did mention that the commodity mix has increased on year-over-year basis when compared to the Q3 of previous year. Is there any particular reason?
The guidance given for FY 2026 was INR 2,500 crore. W e maintain the same guidance. We definitely meet that. If we see the nine-month results, we are on course to cross, I won't mention the number, but the INR 2,000+ crore guidance was more or less given, that we are going to achieve.
Sir, w hat about the commodity mix?
Commodity, if you really see, our number one product and the highest revenue and profitability earner is Sun Control Films. Q3, because of the lower demand and the seasonality, mainly because of seasonality, the other portion seems to be industrial products and commodity seems to be up. L et us look at the growth on annual basis. Because this will always happen, like sometimes more inventory goes to the market then we see little lower in the next quarter. If you see year-on-year basis, our guidance remains the same and our growth will come from consumer product division, we are very confident of that. Having said that, on industrial products, we have made significant progress towards shrink films, we just took a patent. We got the patent for floatable shrink film.
Similarly, more efforts are being put into that direction. Lidding films being a very strong growth area for us, which will drive our business to North America and South America. We put all the efforts to that specialty, even in the industrial product segment. The number which looked little up and down for commodities, it is only because of quarter three being seasonally low for Sun Control Films sales. That's the only reason.
Sir, t hank you.
Thank you.
The next question is from the line of Pratham from Quantum AMC. Please go ahead.
Hello sir, good afternoon. I'm audible?
It is little low. If you can speak little louder, sir, please.
First of all, congratulations on the numbers. I had a question from the competition side. One of your competitors has introduced a PPF product in the Indian markets. What kind of impact are we seeing on our business?
First of all, if you are referring to that company, I can say that we have announced we are manufacturing PPF with line number one, and we declared when it was commissioned and growth. Now, second line, which is coming on in September 2025. I didn't hear any such announcement that there is a manufacturing facility in India. Just please, if you read launched, there are already 10 products launched in India.
We need to really aware of the fact whether those who are launching are the manufacturers. I'll tell only this much here. If you talk of our position, we make our own PPF, and we make all four components by ourselves. With the announcement of TPU, we are going to go very strong in that. With the launch of coloured PPF series, headlight, taillight, and then with Bajaj Finance and, of course, with insurance. We have been targeting the market in a very strong way, and we are doing everything possible to remain the forefront of this. Our technical capabilities are also very strong and superior. Lastly, whoever has been doing this in India, is actually our major market, 80%-85% is export-driven. In the export market, the customers are technically very superior.
They want to know each and every component, where it has been manufactured. Having all said that, I think I have been able to answer your question.
Thank you. That's all from my side.
Thank you very much.
The next question is from the line of Rahul Jain from Credence Wealth. Please go ahead.
Hello. Thanks for the opportunity, sir. My first question is with regards to FY 2025 numbers for quarter four. You had guided earlier also that quarter three will be a seasonally soft quarter. We will see a good improvement from quarter four because of seasonality effect as well as the preparation for the coming season. Can we expect some 15%-18% growth for this quarter, March quarter, on a year-over-year or a quarter-over-quarter basis?
I think we will do much better than that. On quarter-over-quarter basis will be a very strong growth. There will be a strong growth as Y-o-Y basis also. We'll meet the guidance of INR 2,000+ crores on top line and bottom line. We are on track, and as I said, it will be a good growth. More than what you are saying. It will be stronger than that.
That's nice to hear, sir. S econdly, with regards to the inquiries, we have been talking to customers since our PPF line will be coming in September 2025. Also the fact that compared to the first line, I'm sure this time in terms of quality, in terms of the initial leading processes, which will be much lower. How do you see this second line ramping up and what time frame?
We expect this will be running for six months, and the timeline given for that is September 2025. It will be very quick to adopt high-quality products, that is A-grade product. We would like to be conservative in terms of adding their revenues. You can say it will be utilized 50%-75% conservatively for six months. In terms of technicality and all, it will be up and running very fast. From September 2025 onwards, within a month, it can give 100% revenues. Depending on the market and all those factors, we will be able to generate more than our guidance, what we have given.
Sure, sir. I have couple of questions more, but I'll come back in the queue. Thank you so much.
Thank you. Thank you very much.
The next question is from the line of Ankush Agrawal from Surge Capital. Please go ahead.
Hi, sir. Thank you for taking my questions. First question is around growth. It is understandable that seasonally it will be in the soft quarter and there was a guidance in terms of [inaudible]. What I'm trying to understand is the growth that we have given this quarter versus the commentary that we had in Q2. The commentary was sort of indicated the Q2 control that we are looking for better sequential number, if not in Q3 then Q4, that's actually we expect a large sequential growth. Compared to that, the expectation overall was that Q3 would be maybe a similar quarter number compared to Q2 or slightly lower, but it's a much larger growth. Just wanted to understand where the things have gone wrong versus the commentary.
I mean, seasonally, it is pretty understandable in the business, but I think the commentary was very different from what we have delivered during the quarter.
Like we said in that, we never declared that sequentially Q3 will be better than Q2. It was never mentioned. It was always said that Q3 numbers, because it's seasonally low, i t will be not as great as Q1 and Q2. If you see Y-o-Y basis, we have close to 10% growth on bottom line. Again, I will say our business model is very different in terms of seasonality and the sale. Right now, real sale happens from our warehouses in U.S.A. to our customers. That is recorded as a consolidated. I f you really see quarter-on-quarter variations and all those things are not really what we are looking for. We are looking for a long-term growth. We are looking for a year-on-year growth basis, and we are on course with that.
Nobody can predict what will happen to this month to next month, because sometimes more inventory goes, then you will see the sale drop in the next month. Overall, if you really see, we have shown outstanding growth. In nine months, if you see, it's a 75% growth over last year, just on the bottom line. I think that's a remarkable thing what we have done. We are giving the guidance for the whole year also, similar kind of growth. Quarter-on-quarter, sometimes, because when it is lean, we don't know how much lean it would be. Plus, there are so much of uncertainty in terms of geographical tensions, despite the fact that we are quite confident and there is nothing wrong in all those things. I can say that the growth on annual performance and everything is going to remain robust.
Got it. The second question is on the PPF business and our dependence on one of the largest customer based out of U.S. You sort of commented on the previous question also that you are looking to limit the dependability on that customer. Maybe you will not try to sell the entire second capacity to them. It's sort of visible also in the quarterly variation that we have in the PPF. If you can give some color how much of our business is dependent on that customer for the PPF line and also Sun Control Films also, because I think that company has also started doing window films quite big.
See, in terms of customer, we never discuss that thing because it is a confidentiality agreement between the companies. I'm unable to comment anything on that. However, like we have given the guidance, our growth and everything is intact. If you really see, again, please see the numbers and everything, there is no change in that. Sometimes one customer may buy more in a quarter, and then he sees lower sale in automotive and all those things. It can go up and down. I can't really comment on a particular customer. We have many such customers who are big enough to go here and there. Overall, we are quite balanced portfolio, and so that's why I would not like to comment. What was the second question about window films?
No, I think that customer has also started doing window films in last few years, and they are actually doing very well on that as well. Wanted to understand if we have certain dependence on SCF side also with that customer. I can understand that it will be difficult for you to answer the question, but it's fine.
Is dependence good or bad? It's like if some reputed customer comes to us, we take it as a pride. If you really see, when we talk of we export to more than 100 countries, that means we have presence everywhere into the market. We do not talk of one particular customer. If you really see internally, we have quite well spread portfolio on window films as well, and we are very strong. In fact, I'll just give you the forum a number that last year we made a separate team for domestic architectural business, and I'm happy to announce that this team has performed so well because we made an entire new team with a new team leader. It has performed in the architectural domestic market two times growth as compared to last year.
If we see in the nine-month data, it has grown too. We understand the growth in the areas where we have not grown. Nothing stops us from any customer or anybody from growing our own. Same thing we are now replicating in U.S. market, where we have hired a very senior team leader to make the similar team. What we have done in India, we will replicate the same architectural business in U.S.A. We are thinking on a very different parameters than you are considering. Like we are growing to backward integration, we are going into new product, colors and all. We will now looking into venturing into architectural more than the polyester. We will also be doing lots with the TPU and all. Our vision to grow everywhere in the world. The customers are welcome, big customers and all.
At the same time, we have very strong team, which is growing further to all geographies and all product portfolio.
That was helpful. Thank you.
Thank you very much.
The next question is from the line of Mahesh Bendre from LIC Mutual Fund. Please go ahead.
Hi, sir. Thank you so much for the opportunity. Sir, just wanted to know what was the contribution from Sun Control Films and PPF for the current quarter?
Growth.
Growth. We had a decent growth on Sun Control as compared to previous year. Even though it was basically a market or a phase, not a great time to have it. We grew almost like 20% in the Sun Control. PPF, because of seasonal factor, there was-
There was a little drop on PPF, there was a 15%-20% growth on Sun Control numbers. Those numbers are, again, because of the inventory adjustment, because people carry their product in our warehouses. The sale from warehouses expected always to be better in Q4. Of course, Q1 goes to be very stronger. Now, another factor is, there is some duty which is refunded to U.S. customers. It usually starts picking off of February second half because of those refunds. Sale from our warehouse in U.S., which is actually recorded as a consolidated performance, that starts picking up of second half of February onwards.
Sir, you spoke about achieving INR 2,500 crores of sales in FY 2026. This is like a 20% kind of growth, 20% growth for FY 2025. If we have to look for FY 2027, given our second line for PPF is also coming up by this year end. We'll be able to continue similar performance in FY 2027?
Yes. We expect a top- line growth of 20%-25% . Bottom line, as we said, we focus mainly on the operating margins, which you can see they are continuously going up. I shared the journey from 2018, where we were mostly commoditized and our operating margin was only 9%. As we speak, nine-month number are 24%. These numbers, all the growth is now coming from a specialty segment. With PPF growing more and then TPU coming on stream, on a longer term also, we expect that top- line growth, like I shared, 20%-25%. On the bottom line also, we see a consistent growth with operating margin increasing slowly and slowly.
Sure. Sir, we are setting up a new facility for backward integration. Would this add to our margins? A ny benefit to us at a gross margin level?
We expect growth, because PPF business as a whole will benefit in terms of profit margins. I can say overall company level, if we talk of current revenues, definitely the revenues are going to go up. We expect around 1.5%-2% improvement in the operating margins.
Sir, last question from my end is, now rupee has depreciated from INR 84 to INR 88 almost, and 75% of our sales is exported. Will we get the benefit in terms of this rupee depreciation, or even that this rupee depreciation benefit is passed on to customers?
No, definitely not. What happens is, if I say there is lot of imports as well, which is definitely going to go down with further backward integration. Balance advantage goes to company. Customer, we don't discuss that because what happens is when it appreciates, then we have to ask. It is understood that the sale is in U.S. dollars, so that continues to be like that. It is not passed on. Because for them, it's like a U.S. dollar purchase, which continues to be at that level. However, we gain quite strong with the exchange rate, but at the same time, sometimes we have to give some benefit to customers, not in term of as a benefit pass on. But if other currency also depreciate in the similar way, then they feel a lot of pressure on prices with the competitors.
We make minor adjustments in that case. Overall, in a nutshell, that is not passed on.
If I have to put these two things together, the backward integration benefit of 1.5%-2% at a gross margin, and plus the rupee depreciation benefit, if at all comes. This can significantly take our margins up by maybe 25% kind of stuff.
You are right. It depends on how things unfold in future. P rincipally, logically, you are right. I agree with that.
Because I'm leaving aside the operating leverage benefit. That is additional part.
Definitely. You're right. This happens.
One thing I would like to add is cost optimization benefits maybe are certain because we are putting up a plant for INR 118 crore. As far as rupee depreciation, we are not sure because these are all fluctuating every month, you might be noticing. We are not sure about at this point of time. To answer your question, definitely the margin improvement, what we discussed about 1%-1.3% on the cost optimization project, what we are going to put up INR 118 crore, that is certain. Thank you.
Thank you so much, sir.
Thank you.
The next question is from the line of Aman from Astute Investment Management. Please go ahead.
Good afternoon, sir. My first question is on this SCF and PPF business. We did quite well in Q1 and Q2, and Q3, obviously, we expected was a lean season. Do we expect that number Q1 and Q2 sales to cross in Q4 in terms of SCF or PPF, or it will cross those numbers in Q1 next year?
As you mentioned, Q1 will be relative to Q1 last year because Y-o-Y is very important because of the nature of the business. We expect a repeat performance, better performance in going forward. If we talk of current year guidance of INR 2,000 crore and next year's guidance of INR 2,500 crore, definitely, that will improve on a Y-o-Y basis, these numbers for Q1, Q2, Q3, and Q4, obviously. Going to Q4 versus last year, Q4, definitely we are going to see a strong growth over that.
Just on that part, I'm still not sure. Q1, Q2, we know was very good growth. Those numbers, you don't think will repeat in Q4? Mostly we'll repeat those numbers in Q1 next year.
I'm not saying no. We will be close to those numbers.
That is helpful.
Second question is on architectural films, as well as PPF film, which is in domestic market. Architectural film, if you can talk about the upgrade, kind of growth are we seeing it was very good the nine months. Do you expect the same to happen in the Q4 as well as next year, FY 2026? Secondly, if you can talk about domestic PPF business with this new products like EMI and insurance. Do you see a good uptake in this? Can this become like a INR 200 crore, INR 300 crore business for us in next two, three years? Domestic PPF.
One by one. The first question is to architectural growth. As I said, there has been a whole new team has been set up and product portfolio has been completed to see this kind of growth, which is double in architectural in the domestic market. This growth is going to continue because we still are talking to very big names in the industry who has started procuring our products. Because I would say we have created some of the market for the same. Like we did in PPF, we are doing in architectural films as well. We are creating some markets. We expect at least next two to three years, we are seeing very strong growth on architectural in India.
Now, architectural in U.S., like I said, we have set up similar. The success story of India, we are going to now test in U.S., with the team leader has been hired from a top company in U.S. He's setting up his team, and he's on the ground already to take this business to next level. That is, again, we are seeing quite good opportunities there, and we are hopeful that we will continue to show strong performance of architectural films, both in India and export market as well. Secondly, on to the PPF. We have grown from very low base to the numbers which we are seeing now. And that growth will continue now with new set of initiatives for the domestic market, where we have given an opportunity for financing their PPF. For example, our Titanium, which is priced at around INR 1.5 lakh per car.
That can be almost at no interest cost or at a very low number that our customers can take advantage of EMI for 15 months-18 months, and then it becomes more affordable. We are seeing very good growth, very good inquiries from our customers, our Garware Application Studio, to start that thing. It is already launched, and now the data is being exchanged. This will definitely see growth pattern in the domestic market. And with the colors and all, we are seeing lot of opportunity where even the market which is secondary cars and all are asking for these products in a good amount. We expect a very good growth of PPF in the domestic market. And domestic market, if we really see on CPD, Sun Control Films with PPF, we are seeing 60%-70% growth. On architectural, we are seeing almost 100% growth.
On other part, we are doing 50%-60% growth on the domestic market. At least for next two, three years, this will continue, because again, we are seeing a market which is close to 2% of PPF penetration, whereas we can target 10% of that. This all is like, again, we are not working on one particular area or one particular product. We are working as a whole to entire geographies, domestic and export market, and with a very different product line, which will give us very good results in going forward in future.
Thank you. Just a final suggestion given. We are talking about generating INR 300 crore-INR 400 crore cash each year now. Don't you think this is a good time for that special dividend or buyback which we were planning? Because we have a lot of cash available. What are your views on that?
Let me just highlight one thing, that TPU plant which we have put, just I'm giving an example. This is the fifth of its CapEx in last four years. This CapEx is taking us to a very different route. It is a first of its kind exclusion facility in India, TPU exclusion facility. That will open up lot of avenues for new product lines and everything, which will add the value. I'm again going back to the table where we said from 2018, 9% of operating margin, we are now standing at 24%. We are putting all efforts to increase that valuation to us. This, all the deployment will take in due course. Right now we are finding a very strong path in our growth trajectory. We'll decide in due course.
Maybe we can definitely look into cash surplus into growth of the new product lines and new plants.
Thank you.
Thank you very much.
The next question is on the line of Ankit Gupta from Bamboo Capital. Please go ahead.
Thanks for the opportunity. Sir, SCF we have seen a significant growth in this nine months. Given we had a very high base of PPF last year, it seemed that on a nine-month basis, PPF's growth has been significantly lower. We might have actually de-grown in PPF. If you can indicate how much has been the growth or de-growth in PPF in nine months of this financial year.
We have definitely grown in nine months for PPF. Let me give you an example. Q2 has been the highest ever sale for PPF. Now, for nine months, definitely we have grown quite big in PPF. If I tell you the number, it has grown by 20% in nine months. I was just looking at the data. Nine months, we have grown by 20% in PPF. That's why you are seeing on the bottom line, you are seeing a 75% growth. On the top line, we are seeing a very strong growth of the company, and that is actually led by Sun Control PPF and of course, IPD has also contributed. I gave you the numbers, like we have grown 20% on PPF only in nine months.
Got it. O n the geography front, how is India performing? Because India revenue, as you give the geographic breakup, we used to do somewhere around INR 110 crore, INR 120 crore on a quarterly basis. Even if I look at Q3 of last year, we did almost INR 103 crore. Compared to that, we have done almost INR 82 crore of revenues in Q3. Is it the commodity side which has been grown or we are seeing some challenges in performance on our PPF and SCF sales in the domestic market through our own studios and through other distributors as well?
Sorry. The question is where the growth has come in the domestic market?
No, actually domestic issue that there's been some de-growth which has happened in the domestic markets. Earlier we used to do almost INR 110 crore, INR 120 crore we did in last quarter. As per the presentation of Q3 last year, we did almost INR 103 crore in Q3 FY 2024. Compared to that, we have done INR 82 crore of revenue in this quarter. Is it-
Commodity package de-grown?
Sure.
No. If de-grown means, actually, if you see, we are putting lot of efforts on IPD side. IPD, if you see, they have grown. That growth has come from the export market. That's why we are seeing a little lower number on IPD side where export has grown. Export of IPD has grown and domestic IPD has a little gone down. As I said, on the domestic market or CPD division, we are showing overall growth of 60%-70% on a nine-month basis. That's why the growth on CPD has been very strong and we are intentionally putting more efforts on IPD for export side. That's why it says little change. This is on the company level.
The de-growth is on the IPD side and not on the consumer side.
Definitely.
Sir, on the Coloured PPF, if you can highlight, what can be the scope of this product? The last question is on the architecture films, how is that scaling up? The scope of Coloured PPF and how is architecture films performing, and how do you see that growth in the segment?
Good. What is happening, we have launched the Coloured PPF with a different vision. The vision was like, you see Tesla currently doing stainless steel bodies. The Coloured PPF has become very popular in the U.S. market, b ecause the kind of color you want, you are getting with that. In India, we are expecting with the current geopolitical, as I said, we are very positive in terms of taking advantage of the situation, where we feel lot of such vehicles may come to India. Because whatever happens in the West Coast, in U.S.A. and all, they come to India.
If we see a Tesla launching Cybertruck in the stainless bodies, there are some factors behind that. That paint is one of the most hazardous compound or part in a car. That's why they are doing a stainless steel bodies. If you talk of the aesthetic point of view, people love color. That's how the business of Tesla Coloured PPF has increased. You think of any opportunity, these things coming to India, we will be the number one and the market leaders in providing all those things. We are doing the same thing in America also. In India, this will go to a very different set of growth. That is number one. Number two, when you talk of Coloured PPF like black and all.
The black PPF and black matte is doing really good for us, where the quality of the car, aesthetic value of car goes very high with Coloured PPF. Because you are putting another colored layer on your color, so the gloss increases and the protection goes to the next level. All the new and young generation, which are car enthusiasts, they want to do it with two different colors, three different colors. That attracts them. We are trying to make that. As of now, I can say that the business has not grown that much. All the businesses which we are doing now, we have seeded that into the market, and we are expecting a steady growth into that, which will lead us to really good volumes in future.
Sir, on architecture films, how are they doing?
I can say, if you talk of the market where people just produce transparent PPF. We are now level of a very different Coloured PPF and then matte PPF and onto that, extruding our own TPU. With that, we become a very value-added and everything is a value addition to PPF business. This will definitely drive more revenues and higher EBITDA and bottom line for us.
Anything on pricing you have decided for that Coloured PPF?
See, Coloured PPF, definitely, I can give you, in percentage terms, it is roughly 25% on transparent PPF and a ballpark figure. This pricing and all those is decided based on the market situation, competition and all those things. But in a comparative between our products, it is 20%-25% at a higher price because it has got a value addition in it.
Sure. Sir, on the architectural films.
On architectural also. Sorry, your question was to architectural business as well. Like I answered that question, that the growth in India is getting very strong and that will continue for at least next two to three years, because we started from a low base. At the same time, in America, we are trying to replicate that thing. Definitely this will add up a new brand for us.
Mr. Ankit, please fall back in the question queue for further question. The next question is from the line of Mihir Dhami from Sharekhan. Please go ahead.
Sir, in SCF business, can you help us with the growth of architectural and window films separately? Also the revenue split for the current quarter.
Sorry, I was bit lost with the question. Can you repeat, sir?
Year-on-year growth in architectural and window films, and also the revenue split for the current quarter.
Abhishek, can you just show the growth on PPF business? PPF, as we have said, it has grown by 20% already. On the Sun Control, the growth has been 42%, o n a nine-month basis.
Just three months.
IPD 14%, Sun Control forty-
42%.
42% and PPF 20%.
Can you help with the three-month growth? Y-o-Y growth in the third quarter.
Third quarter. This is nine-month data. Third quarter, just a second because I'll just give you numbers. That actually, normally we are not declaring, but let me just tell you that there has been, like we said, on Sun Control Films, there has been a growth of 20% growth on quarterly basis, almost flat on PPF, and around how much percentage? In IPD, there has been minimal growth. Nine-month basis, there has been a very strong growth, like I explained.
Got it. In the PPF business, is there any reason in particular that there was a little bit decline this quarter?
Definitely. There is a strong reason for that. I'll tell you, in Q2, the numbers has been very strong. If you see the Q2 numbers where the growth has been phenomenal. When such strong dispatches happen from India, there is always some kind of drop in the numbers going forward because Q2, that has grown to phenomenal numbers, PPF. That's why we saw a little low in next month onwards. Again, we are seeing the same. It is going to grow up from Q4 onwards.
Got it. Thank you.
Thank you.
The next question is from the line of Vinay from Hathway Investments. Please go ahead.
Hello.
Hello.
Hello.
We can hear you.
Hello.
Yes, sir. Please go ahead. We can hear you.
Hello. Can you hear me?
Yes, sir. We can hear you.
Sorry for this. Just wanted quickly, what is the cash balance you said? Free cash available.
INR 574 crores .
Secondly, what is the guided number for tax percentage for FY 2026?
Tax percentage . See, tax percentage depends on the taxation and so many things. What we track is the operating margins, EBITDA percentage . That we had given a guideline. That is always going to remain 25% ±3%. We are performing around 24%. We are optimistic that these numbers will remain the same or grow slightly.
Including the two advantages that you're going to grow in terms of backward integration and the additional PPF line, you're estimating it to remain in 25% ±3%?
No. With this, when TPU plant comes, then we have given a general guideline, another addition of 2%.
Over and above this.
These are estimated numbers. It will depend on the situation that time. If we talk of 25% plus or minus 2%, 3%, there will be definitely it can go 25% ± 3%. That's a broad guideline we'll have.
See, the TPU line will start in FY 2027, which covers 2026. FY 2026, we cannot assume that scaling.
We are thinking as, again, we are talking here the annual continuous growth on annualized basis. Because Q1, Q2 and Q3 little low, Q4 goes up. Q1 always becomes stronger, Q2 even. That's the flow. What we are trying to say here is year-on-year basis, there is a strong plan for the growth. There is a sales addition, there is marketing efforts continuously into that direction.
Lastly, this employee cost which has increased in this quarter significantly is because of your deployment in U.S., is it?
What's that?
Addition.
Addition.
Addition. See, what we are doing is, like I said, we are deploying employees overseas and making a new team. What we have seen, we feel a strong need of growth in countries where we can further grow. Number one is, of course, U.S. and other than somebody, some gentleman asked me about South America. There also addition has happened. If I tell you now, we have addition everywhere in sales and marketing. Plus, there has been a good addition on the R&D side as well because of this the DNA of the company where we always try to come up with new solutions for industry. For that, there has been addition on R&D side as well.
Thanks a lot, sir. Bye.
Thank you.
The next question is from the line of Sunil Jain from Nirmal Bang Securities. Please go ahead.
My question relate to PPF. When you said that there is no seasonality. I think there is no seasonality in PPF. Am I correct, sir?
Yes.
That has happened just because there was an excess buying in the Q2 and that is getting normalized.
Yes.
How you are seeing the trend? Already we are about one month, 10 days in the current quarter. Are we seeing buying coming back in this year, in this quarter?
Actually, we are not allowed to talk about the current quarter, but overall, as a guidance, yes. Again, I would request, what we are trying to do here, month-on-month basis, it's very difficult for us to predict. Overall, our way of working is we have very strong order book which comes from U.S. and other parts of the world. It is manufactured here, it is put on the water, it reaches to our warehouses, and from there it is actually sold to our customers. Whatever we have on the water and on the warehouses. This basically gives us the real sale going forward. That has already happened. The actual realization will come during coming months. That's why month-on-month data is really difficult for us to predict.
Like I said, on a quarterly basis or on an annual basis, we are seeing things are going better from here.
Sir, second question related to your tariff. You said impact of around 2%-3%. In that, how much tariff increase you are thinking of? How much tariff you can put on?
Honestly, we are not thinking of any tariff. W e gave you the worst case scenario because we evaluate all those things. We are in touch with our customers, we are in touch with our consultants. There seems to be no, I would say, there is no, as of now, tariff expectations for us. Whenever we can make out from the discussions, there has been one mention in the past about same tariff to India and whatever they touch, like whenever they charge to us. We are just evaluating one thing that as of now, there is nothing. There is nothing, absolutely nothing, because this talk has been on the E.U. and all.
Government of India has already lowered the duties on certain items, which has been discussed in the past, and there is expected meeting this week, next week between those head of states, head of countries. We don't expect anything, but worst case scenario is not going to affect us. I'll give you another number, like the way somebody asked me, if that happens, a U.S. dollar may further appreciate, and we can gain that advantage from there. We have a full vision in front of us. If that goes up, there is 2%, 3%. There's definitely other ways where we are going to make it from somewhere else.
Great.
We don't feel that there is anything negative. In fact, in the current situation, we feel like because there has been an already strong duty addition to Chinese goods, so we can take advantage of that situation.
Sir, last thing about you last quarter indicated that Q4 can be similar to Q2. Is that possible, sir?
See, exact number I can't give because there are a lot of ups and downs. Definitely, as I said, it is going to be much better than Q3. It will be like, I can say Q1, Q2 kind of numbers, in Q4 as well.
Great. Thank you very much.
Thank you.
The next question is from the line of Ankur Kumar from Alpha Capital. Please go ahead.
Hello, sir. Thank you for taking my question. Sir, I wanted to understand again, within nine months, we have grown really well this year, even with a slow Q3. Given we are guiding for only INR 2,500 crore, which is like and this year also we're saying INR 2,000 + crore, which would mean Q4 will not be much. Any plans to increase this INR 2,500 crore number because we're growing so well, sir?
See, better to give some guidance, because that guidance was given two years ago, if I remember. We are rushing to that with a good pace. We would not like to change it. Having said that, you have seen our performance, like even the last years. I would say more than the top line, just see the bottom line. The kind of growth has been 75%-80% . 75%+ percentage growth on the bottom line. We focus more into value addition product, value-added products, which gives us best margin. Because everyone or ourselves, we look at the operating margin, how we can make it better without losing, of course, any sales. We'll keep the same top-line number, but definitely, we'll try to improve on that.
Got it. Sir, on margin side, as you say, 25% ±3%. Is it like, since we are focusing more on margin side, can we get closer to the top-end number?
See, on nine- months basis, we are already at 24%. Definitely, our year is going to end with a strong number. Nine months we have already given, 24% has been the nine-month number. Now, if you really see our effort, company effort is towards the niche product. That is how this TPU project is going to help us, which we said definitely to improve on the cost saving and improve the operational efficiency and new product developments and improving operating margins for us. This is actually a step towards this direction only.
Sure, sir. Thank you and all the best.
Thank you.
The next question is from the line of Ishit Desai from FODS Family Office. Please go ahead.
Thank you for the opportunity, sir. Sir, my question is on the PPF side. Since what we've been noticing is for last couple of years, both the large CapExes were announced on that side, including the TPU. One thing I wanted to understand on the overall market size or the potential, I mean, are we strategically focusing on that as an area? We think that this can be a very large enough market for, let's say, next two, three years perspective, and really want to focus on the opportunity. Just want to get a sense, given that our Sun Control, since is a largely mature market. Do we see this as an area which can give us a large growth, and can this become probably as large as Sun Control Film in the next two, three years?
On the TPU side specifically, since your announcement mentions a 33-month payback period at INR 118 crore of CapEx, are we roughly looking at INR 40 crore, INR 45 crore of annualized savings, which will directly flow into EBITDA? If you could just add that.
To answer your last question, yes, you are in the right direction. We will say INR 45 crore here and there, but you are bang on the numbers. I support your numbers. That is going to happen on an annualized basis on the TPU side. Going back onto PPF. Yes, PPF, if we talk the story, we have built the India market from 0.1% to right now the market is 2%, and there is a big headroom available in India itself for around 8%-10%. We are working towards that. That's number one. Number two, in the Coloured PPF and all those things, there are a lot of opportunities coming into the U.S. and other markets. We study it quite well, that there are very few people who are into the Coloured PPF. There are many people selling.
Again, what we are saying is the manufacturing work. There are very few people who are manufacturing that. You will see this advantage in coming years, where we will definitely have the advantage of these things. Please note the word manufacturing. That's the capability of Garware Hi-Tech Films. With a very strong R&D, very strong new product development team, we are eyeing at a very high market of PPF, with both penetration into the market and targeting newer market with different product line that is Coloured PPF and different matte and other types PPF.
My second question, I think in your comments at the beginning, you mentioned healthcare as one of the segmenting opportunities. If you could elaborate a bit there.
See, we mentioned that number with a very nascent these things. What we have done is, this particular line is capable to supply one of the two lines, that is 50% of the capacity. Having our DNA into strong R&D sector, we will keep some portion always available for these kind of studies. What we have done, we are doing through some consultants and all, eyeing on some niche market, which we would not like to comment on the products right now, because that is what we want to do with a very specialty, value-added product line. Healthcare is one of them, but it will take some time for us to disclose the products and all. That can be one of the things.
Another thing we also said about the architectural, we are also seeing lot of value addition for the glass industry where this product goes as a base film. There also we are eyeing. These are completely new segments for us. We are venturing into that.
Sure. Thank you, sir.
Thank you. Ladies and gentlemen, due to time constraint, this was the last question for today's conference call. I now hand the conference over to the management for their closing comments.
Dear partners, we are really thankful for your attendance here. It has been a great pleasure to interact with you guys. Once again, we would like to thank you for the participation, giving your time. We hope that such interaction will continue, and we continue to interact, and the company continues to grow and create value for its shareholders. Thank you very much.