Ladies and gentlemen, good day and welcome to the Huhtamaki India Limited Q4 CY 2024 earnings conference call hosted by ICICI Securities. 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 star and zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Mohit Mishra from ICICI Securities. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone. Thank you for joining on Huhtamaki India Limited Q4 CY 2024 results conference call. We have Huhtamaki India Management on the call, represented by Mr. Dhananjay Salunkhe, Managing Director, and Mr. Jagdish Agarwal, Executive Director and CFO. I would like to invite Mr. Dhananjay to initiate with opening remarks, post which we'll have Q&A. Thank you, and over to you, sir.
Yep. Greetings to everyone, and thanks for joining today's call. We start with our safe harbor statement that whatever discussions we will have in this call will not have any bearing on any future performance of the company. With that, I will start with a quick snapshot on the quarter four performance. As you would have seen from the announcement, in quarter four, our volumes and net sale, quarter- on- quarter, that is, previous quarter versus current quarter, were lower than the previous quarters. At the same time, if compared with the previous year's same quarter, there was a slight improvement in the volumes as well as net sales.
Overall, not only for quarter four, but overall for a year, margin has been significantly impacted, and largely due to raw material inflation and the adverse sales-customer and product mix that we experienced over a period of time, which clearly culminated into having a lower EBITDA, not only for quarter- on- quarter, but on year-on-year. Overall, it has been a bit of a challenging quarter, quarter four. We do have plans together to revive the situation, and focus area will continue to be improved upon our safety performance, which is clearly an important tool which we use for employee engagement and improving the safety standards across the area of our businesses. Sustainability, creating a customer-centric environment where responsiveness is key, and then focusing on the speedy execution of our projects with clear accountability.
How do we succeed in the Indian market where there is clearly a challenge in terms of inflation and the underlying volume growth? During quarter four, our team in a pressure-sensitive level had a couple of awards winning in IFCA, which involved innovative offering in the marketplace, such as the security features and the improvement in the metallic and sensory ERPs. We continue to do the innovation which is relevant to the customers. With this, I would hand it over to Jagdish, our CFO and Executive Director, to throw some more light on our financials in detail. Over to you, Jagdish.
Thank you, Dhananjay. Thank you. Good afternoon, everyone. I'll quickly walk you through the financial performance for the December quarter and for 12 months of 2024. Dhananjay did touch upon the volume and the sales. If I look at the volume for the quarter, slightly improved on YUY basis, however lower on quarter-on-quarter level. The 12-month volume is almost flat if you compare with 2023. Revenue for the quarter stands at INR 6 billion versus INR 5.9 billion we had in the fourth quarter last year. It represents an increase of 2.7%. However, it's trailing with the representing previous quarter that was at INR 6.3 billion. That's an increase of 5.3%. For the 12-month period ended on December 24th, the top line stands at INR 24.5 billion versus INR 24.8 billion in 2023, a slight decrease in overall top line by 1.2%.
EBITDA for the quarter stands at INR 320 million compared to INR 618 million we had in the fourth quarter of 2023. In September 2024 quarter, it was INR 313 million. On a trailing quarter basis, we are very close to what we had in EBITDA. However, it is lower than what we had on year-on-year basis. EBIT for the quarter stands at INR 182 million versus INR 506 million on year-over-year basis. With the trailing quarter, it is INR 191 million, so very close to what we had in September quarter. Full-year EBITDA stands at INR 1.5 billion compared to INR 2.1 billion in 2023. It reflects a decrease of almost 28%. When we look at the EBIT for full year, it is INR 1.04 billion versus INR 1.6 billion we had in 2023, which also reflects a decrease of slightly higher than 28%. That decrease is 36% in case of EBIT.
If we look at the specific on finance cost, finance cost has decreased on year-over-year basis as entire debt, except ECB, was retired in last quarter of 2023. In addition, 50% of the ECB amount, which is almost INR 1 billion, was retained in third quarter of 2024. At end of December 2024, we have only ECB, which is reflected into our books of accounts, and that's approximately INR 1 billion. The surplus cash we have, we have invested that into bank deposits and mutual funds, and that is earning a decent return on an annualized basis. PBT for the quarter before exceptional items stands at INR 152 million versus INR 444 million in year-over-year basis and INR 143 million we had in September 2024. On a full-year basis, PBT for full year 2024 before exceptional items stands at INR 860 million versus INR 1.3 billion we have in 2023.
Having said that, the EPS for the quarter after exceptional items at INR 1.55 per share, and on full-year basis, it was INR 11.65 per share. For full year 2024, the board of directors have recommended a dividend of INR 2 per share, which is subject to approval of the shareholders at the AGM of the company. As can be observed, we are seeing a strain into the bottom line despite almost flat top line in financial 2024 versus 2023. The pressure on margin is arising due to the cost of fusions, which include raw material inflation, sales, and unfavorable product mix, high freight cost due to energy crisis, and a couple of one-off items. One-off item we spoke in the first quarter in March 2024 on fairly impairment and all. We are also noticing an impact of global geopolitical on the export side.
However, we believe this is a one-off temporary bleed and our strategy to focus on medium to long-term growth initiative and our resilience will help to see us through the same. In the overall ecosystem of the NM G sector, from which HIL derives bulk of our demand, inflationary pressures are impacting demand across most of the segments, daring a few. It is affecting consumer spending, and this is having a spiral impact. Heightened competition in the domestic market with the small-time players entering into the packaging market is also impacting the mix. Things are a bit choppy, and even if demand may improve gradually, inflation may still continue to impact margins in this space. Moving on to debt and liquidity position. Debt-equity ratio now continues at 0.1 post easy repayment in September quarter. Overall liquidity remained strong as we do have sizeable credit lines which are open with minimal utilization.
Working capital has improved on year-over-year basis as well as on quarter-on-quarter basis on account of monitoring of the various levers and acting accordingly. The overall working capital position continues to be comfortable. While the above sums up the business performance, I would also like to take a moment to enforce our commitment to strong corporate governance, our commitment to our stakeholders, and our commitment to providing sustainable packaging solutions to our customers. It is our firm belief that with the core strategy of operational efficiency, technology-enabled innovations, and realization of value for our products and tools, this will help the company remain competitive in the long run and to drive responsible and profitable growth. As always, we appreciate your continued support and investment in our company. Thank you. With that, I'll hand over the call to Mohit, and then we can go into the Q&A session.
Thank you. Ladies and gentlemen, we will now begin with the question and answer session. Anyone wishing to ask a question may please press star and one on your touch-tone telephone. If you wish to zoom in yourself in the question queue, you may press star and 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 Deepan Sankara from TrustLine Holdings Pvt Limited. Please go ahead.
Good evening, everyone, and thanks a lot for the opportunity. Firstly, what is the kind of contribution from Blue Loop products, and what are the key challenges we are facing in gross margin improvement despite having a decent share from high margin Blue Loop? When do we expect high margins coming from Blue Loop to reflect in financials?
First of all, thank you for your question and good observation. I am happy to see that externally also it is seen that our Blue Loop project or Blue Loop structures are getting more prominence. As you rightly pointed out, we moved our Blue Loop contribution from sales contribution from 25%- 27.5% in last year. However, if you see, still the traction of adaptability of sustainable structures in the industry is still at the nascent stage. While we are seeing some momentum, we are able to sell some of the low-end Blue Loop structures, which are basically more towards reducing the plastic usage, are being adopted. As I kind of explained in the past also, we are really looking at a very high premium product replacement in the marketplace, which will fetch us higher gross margins.
That is something which is, I would say, a work in progress. We have been engaging with a lot many categories of our customers, and there is some kind of activation. At the same time, the adaptability rate of adaptability is still lower. That is the area where we are working with our ecosystem.
Okay, okay. What is the status update on the level of backward integration we had planned for? Is there any chances from there we can see some kind of margin improvement?
Whatever back, I would say back integration we speak about, essentially we are able to use those assets for the alternate purpose. As I said in the past as well, the equipments which are basically backward integrated are essentially meant for the high-end Blue Loop structures. Right now, yes, equipments are not idle, but they are used for alternate structures where we have a capability to buy in the marketplace and produce in-house. When we compare, at this moment, it is not really helping us in terms of any accurate margin improvement, but it is only ability to offset the cash outflow. At the moment, we kind of move towards improving the high-end Blue Loop structure. That is where the real impact of backward integration will kick in.
Okay, okay.
Globally, we have a target of 2030 as making the sustainable production as our target, right? Do we foresee 2030 our Blue Loop contribution will reach a higher level of contribution, and that will also contribute to our margins improvement? Gradually, year- on- year, the margins can reflect in future. That is the idea in which we are working on.
Exactly. I think it looks like you are really tracking well in terms of the sustainability commitment by our overall customers as well. That is where the direction is. By 2030, most of our end customers are expected to adopt to their sustainability pledges. We are also seeing that in a regulatory environment across the globe, certain countries are making changes in the regulatory requirements. I mean, I do not want to go into the specifics, but at this moment, some countries in the European Union or in certain Southeast Asia are clearly ahead of the curve. More and more customers are now taking that clue, and particularly those at a global scale are clearly more keen on exploring this opportunity where we have solutions available. Yes, there is a direction that everyone wants to go towards 2030 to be towards that.
That will help us to improve the contribution of our Blue Loop products.
Okay. All the best for future, and I'll join the team.
Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in this conference, we request you to limit your questions to two per participant only. The next question is from the line of Vipul Shah from RippleWave Equity. Please go ahead.
Thank you for this opportunity to serve. Very frankly, last couple of quarters, and probably if I may say that calendar 2024 has been really, really disappointing in terms of the operational performance. Now, since you mentioned about a very high focus on corporate governance and the ESG, I would just like to draw your attention to one parameter which, as management, you could think about and probably have a discussion with your parent. If you see the last four years, the software and reimbursement charges, the cost for IT technology services and the cost for centralized services has gone up from INR 385 million in calendar year 2020 to INR 645 million in calendar year 2023. In calendar 2022, it was INR 490 million . Again, there was a big jump of INR 150 million last year.
In calendar 2024, I'm sorry, sir, the annual report has not yet come, so it's very difficult for us to estimate. Even if we estimate, it's at the same level. If you see, sir, as a percentage of EBITDA from calendar 2021 to 2024, the reimbursement or the payments which we make to our parent for the software and the centralized services has gone up from 24%, or rather 32% of EBITDA, to 55% in calendar 2024. That is some food for thought, sir. In the times when our margins are shrinking, this is something which, as management, since you have to go back to the parent, sir, ultimately there are minority shareholders also in the company.
Okay. Thanks for the question. Let me give you some perspective on that. First, when we talk about two categories of transitions, sale and purchase of goods, I think that's not a question we are talking about. We are talking about services. Services are in the form of centralized services or services in the form of either IT cost. When we look at when we started these charges from a group, we had gone through a deep study on that. Based on that study, we have hired a consultant, and they did a market study and benchmarking. The process we have adopted in the year 2019, 2020, we have continued with the same process. Before any charges are accepted, we ensure that the arm's length test is carried out.
If it's at arm's length level, then only it will get accepted. In the past also, I mean, whatever the tax assessments which we have and all, we are able to justify that all transactions we have are at arm's length. Sometimes when we look at one or two financial metrics, it might look in a different perspective. When we look at the overall scenario, the kind of support we have, the kind of services which we are getting, and the justifications we have, we believe that these charges we have are for the right services and those meet the criteria of arm's length transactions as well.
No, no. I am not denying the arm's length, all that, sir. We understand. It is just a question that today, if I just take one line item which is the cost for centralized services. Now, in calendar year 2023, sir, the reimbursement to the parent was INR 470 million. Our EBITDA that year was INR 1.95 billion. Okay, sir. As a percentage of that EBITDA which the company earns, if I even add back that INR 470 million to the EBITDA, the adjusted EBITDA comes to INR 2.50-2.60 billion, out of which 25% was paid to the parent. If I were to apply the same criteria this year, although I do not have the number, I am just assuming calendar year 2023's number. It is assuming the related part is the same.
If I just look at the EBITDA this year, which is INR 1.17 billion, as a percentage to that EBITDA, the payout is as high as 55%, sir. My only request is that the cost of the services, as you rightly said, if you have reviewed it, it has to result in some tangible benefit to the company, right, sir? If the entire EBITDA or the majority of the EBITDA in a particular calendar is going to the parent as cost for centralized services, then, sir, in my humble opinion, I think there is an issue, sir. There is a, if I may, sir, I think the independent director and the audit committee has to look into this aspect, sir. That is all I want to say, sir. The performances are not, obviously, it's not in our control. I understand that. It's a very competitive market.
What is in our control are the cost levers, sir. That is where the management also, sir, in the true spirit of governance, has to look at all cost levers, and if this is one item, so be it, sir. That is all I wanted to say, sir.
No, point noted , and definitely we as a management also will make sure that whatever cost we had, we ensure that there are a tangible benefit for that. Yes, point well noted. Thank you.
Thank you. The next question is on the line of Rohan from Mahalaxmi Private Limited. Please go ahead.
Good morning, Sir .
Good morning. Good afternoon.
Sir, my question is, you have two types of products now. Okay. One is Blue Loop, and the other is the product you are selling. Sir, what's the difference between both products and how Blue Loop will help you to improve your margin and give a better competitive advantage?
Yeah. In this, the Blue Loop is essentially the product portfolio, which we call sustainable, which is basically either monomaterial that can be of a PE family or a PP family or only paper or sometimes polyolefin. These are the four areas where we offer the more sustainable laminates to the market. They are more affordable, adaptable, and sustainable. That's what the overall product portfolio which we are offering. What is different between that and the current one? The current one, of course, there are definitely certain structures by nature they are monomaterial or polyolefin-based, but most of the others are called multi-layer plastic. Essentially, it either involves two or three layers of different families or aluminum or paper and all this stuff. That's the difference between what we are selling today and what will happen going forward.
What is important is the more and more we start selling the Blue Loop, first of all, it's a monomaterial, lower plastic, and it is expected to provide better functionality. We are expecting that our customers will be clearly benefiting that in terms of reduction of their plastic consumption, and then the higher functionality means better premium and better margin. That's the end goal. With respect to current product structure, we continue to sell that to our esteemed customers. That continues as our existing, I would say, organic focus.
Yes, sir.
Thank you.
Thank you. The next question is on the line of Sukhbir Singh from SMIFS Institutional Equities. Please go ahead.
Thank you, sir, for the opportunity. My first question is, what will be the capacity utilization rate for 2024, and what will be for 2025? Any further capacity expansion?
No, it's very difficult to comment on the capacity utilization because there are a lot of variables on that. It depends on the product mix. It depends on different categories of products and different markets also. By and large, if you look at, I think we can do more productions with the similar capacity. We do have a room of somewhere between 15%-20% more production.
Okay, sir. Sir, what will be the CapEx plan for 2025 and 2026?
We haven't worked for 2026, but in 2025, we are not planning for any big CapEx per se. Obviously, when you are managing 10 plants, then always there will be another CapEx. We will continue to focus on making sure that we are having an operation which is running, and we don't have any challenges. There are going to be CapExes, but not something very big like what we have for Blue Loop and etc.
Okay, sir.
At least 2025, yeah.
Okay. Sir, on the ECB of approximately INR 1 billion, is there any repayment scheduled in 2025 for it?
No, it's not due in 2025.
Okay. So.
2027.
In 2027. Okay. Okay, sir. My next question is on the innovation solution provider. How is it progressing? How are the margins and how it will support the top line going ahead?
I think the first question when our MD spoke about Blue Loop solutions or sustainable solutions, that is our key objective that we have to be providing innovative and sustainable solutions to our customers in the market. We are committed, and we are working on that. Blue Loop was an initiative towards that where we are making a progress, but it is taking time to go into the extent where we would like to see.
Okay, sir. Sir, we are shifting from multi-layer to monolayer and bilayer. The raw materials used are, I think, sir, at premium cost. How much will it impact our margins? How is the shift trend to be in the future?
Look, I think I can see the curiosity around how these products are going to take shape. Let me put it again in a very simple manner. When we talk about our Blue Loop offerings, what we are really trying to look at is the end-to-end backward integrated products and then simplification. We are trying to offer the solutions. Today, we are having a combination of end customer specific requirements and then multiple combinations of structures. Simplifying the overall offering. Second, as you said, a monolayer or not more than three layers having same functionalities and so on, which will definitely, we will be ending up having maybe a bit of extensive raw materials.
At the same time, because we will be able to do end-to-end manufacturing, and second, simplifying our supply chains and so on, we will be able to offer our end customers solutions which are more affordable to them at the same functionality while ensuring that there is a justification to get a better margin because we are innovating those products and then investing. I would say these investments are very large scale across our global footprints and in our Indian footprints. I would say it would be able to justify the amount of time and money we are investing in. While we are at the cusp of this, we have both multi-layer plant and then new thing. We need to service everything, right?
Today, and that's what probably is reflecting on our 24 years, that while we are focusing on future, we need to also serve the current, right? That increases the cost of servicing our end customers. That is where I would say when it continues to move towards Blue Loop, I think we will start generating a bit better margins and benefits.
Okay, sir. On the low profitability product, which we had restarted in the, I think, previous quarter, how are they? Are they making higher profit as compared to previous time?
I think this question needs to be seen from a two-year horizon, 2023, 2024. Definitely in 2023, we had a year where we wanted to restructure ourselves, make future ready, and then we took a bit of a hard look on low profitability products and so on. If you see in 2024, what has happened? I mean, you also are monitoring our overall economy. What is happening? Overall market has been softer. There is a demand inequality, right? Demand inequality is rural demand and then urban, and then the end consumer really shifting towards the lower, I would say, downtrading typically in that parlance. Overall demand has moved to the lower tier, and that is where our challenge. That is why we had to, and not by design or not by our willingness, but because there is a demand, we need to serve it.
That is one of the areas where when we talk about sales mix impacted, it is not because of our willingness, but this is a market requirement. Look, we are there for our customers. Whatever customer needs, we need to service.
Okay, sir. With this sales mix issue, in the export, also with the high freight cost and high material cost, how is the export sales improving? Is it going to improve in the near future? How is the trend for the export sales?
Yeah. Export also is a very important facet of our product mix. In 2024, I would say export remains stable in spite of having Red Sea influenced challenges on vessel availabilities or the sea freight and so on. We were able to work with our overseas customers to ensure that their supplies are not impacted. Considering the long-term relationship we had with our customers, I mean, we had to really take some calls in 2024 that looked at the customer relationship for the years, right? 2024, a year where they were also impacted. We had to really take some financial decision on pricing and so on, but we ensured that export remains stable. Going forward, considering what is happening as a tariff, I do not want to go any country specific, but you are monitoring the market.
There are definitely chances that India as a whole may emerge as a net gainer by whatever is tariff situation happening elsewhere in the globe. We are confident and actually looking forward that we will have some opportunity to increase our export share by, one, by external positive situation. The second, the overall, I mean, the forex benefit. Third, our internal effort because we also became now very closely coordinated global unit where we have a presence in Southeast Asia, presence in Africa region, EMEA, and Europe. We are taking help of our other regional teams to grow. There is a good opportunity and plan around improving that in export markets.
From a previous contribution from export, around 30%, can we expect the same trend in CY 2024 and going forward, can we expect it could reach to 45% or near that in the future?
It is definitely a very good question, I would say. Yes, there would be trend which will be improvement. I can't say whether it will be 45 or so, but there is, as I said, three things. External positive environment, 2nd, the forex, and then 3rd, our own push. Yes, all these three things put together, there will be a trajectory where exports will be a better proportionate than our overall sales mix.
Okay, sir. Thank you so much, Raj. We understand. Thank you so much.
Thank you. The next question is on the line of [Rajakumar Vaidyanathan] from RK Investments. Please go ahead.
Yeah. Good afternoon. Thanks for the opportunity. Can you hear me?
Yes.
Yeah. Sir, just a few questions. First one, on the margin compression, the reason that you mentioned is due to inflation, raw material inflation, and the product mix. I just saw your parent's numbers as well. Your parents are able to report almost ROA of almost 13%-14% given that they are based out of Finland. With that kind of an economy, they are able to report that kind of return on a consolidated basis. Why we, being in India, are not able to pass on the cost? I can understand this inflation affecting for a quarter, but it cannot be that the same comment appears quarter- after-q uarter. I just want to know what is the visibility you have in terms of passing on the cost and the margin expansion.
Do you think it will happen two quarters away, or it is more a year away? When do you think you will come back to your normal margins?
Yeah. I think this is a good question. Thanks that you are also observing our parent performance and happy to know because today only we announced, which is actually going in a very good trajectory. I think this explains a bit of a commentary which I made before that we as a company and as a segment at a flexible packaging were at the forefront to deliver better, I would say, results to our parent company. Why parent company done better? Of course, as you can imagine, we are having a presence in three segments. By the way, coincidentally, today only we announced the split of one segment into two. We will be focusing on fiber packaging, then fiber and food service, and then North America we are on the go-food, and then we are part of a flexible packaging.
While everything is coming together, the other products are basically end consumer oriented where we have a higher pricing, I would say, flexibility and passing on to the prices as and when. When it comes to flexible packaging, what happens at a global level? We have certain agreements with our customers, and then also adaptation of Blue Loop elsewhere has been better than what is happening in India. Third, the structures what we sell elsewhere, let's say in Southeast Asia or in Europe, are more complex, premium, and that's where the stickiness is with the market.
When it comes to India, and then that's where you can imagine the difference in the market, the price points, and the competitive nature of the Indian market where if we look at our product structures and product constructions discreetly, we do not have a presence or market is clearly evolving in that area where the retorts or pet care and so on, which will go in future. That would be one of the critical offerings from Huhtamaki to India. That's where the large areas margin happens, margin comes from. The current portfolio where we see that the margin got deteriorated is this. As I said, there was definitely a softness, and then the demand inequality where demand is currently more from a lower priced product where the structures are, I would say, very commodity structures.
Our Huhtamaki support is not really a commodity, but the premium one and niche one, right? That is where the challenge is. I can see that now the demand is coming back strongly. Our end customers are also having some positive sentiment. We shall see that in future quarters. We should see some revival.
Okay. Thank you, sir. Thank you for detailed explanation. Sir, when you invested in your Blue Loop technology, did you anticipate that your margins will compress for some quarters? Was that something which you envisaged early? Because you said you are anyway producing what customers want, but now you're telling the Blue Loop technology will take some time for the customers to adopt. Was there any difference between what you envisaged and what is actually playing out?
I would say answer is yes and no because when we go back to the business case three years ago or maybe at that point of time versus four years ago and now, you can clearly see that certain assumptions were wrong. At the same time, at that point of time, those assumptions were absolutely correct because we cannot predict the future. Now we can say that when I go back and look back, maybe we could have planned differently. I think largely we have done right things. That is clear. Only challenge is that how we can accelerate adaptation of this in Indian conditions because we can clearly see that the adaptation of our Blue Loop structures elsewhere in a developed market is far better and far, I would say, advanced than when it comes to India.
Even for the same customers, some customers are global, so they are adopting the structures in advanced countries or developed countries, but they are still having some views on India because they are going by the regulations. I think, as I said in the past also, changes in the regulatory frameworks would be critical, and that's how customers are playing on, and that's where we will be also ready. We are ready with all our solutions, all our offerings, a lot of engagement with various, not only with the customers, but various ecosystem partners to really see that how can we really go close to the business case.
Sir, lastly, I see a lot of investments coming up on polylactic acid packaging. Do you think that will be a competition for the Blue Loop monomaterial package?
I mean, I'm not clearly a subject matter expert on formulations, but then whatever my limited knowledge, that stream is more on biodegradable material whereas this is more on the plastic side. If you see the difference, basically, we talked about recyclability whereas PLA-based possibly more towards the biodegradability, but the limitations on that may be again, I'm repeating, I'm not a subject matter expert, but on the barrier properties, what that product can offer. I think we are clearly talking two different streams of the products.
Sir, my question is, will it prolong our return generation given that will it be a competition for the Blue Loop technology, which is also on the sustainable platform? That is my question because if you think that will be a competition for you, then you are saying that our margins will remain compressed for a long time to come.
I do not see that as a competition. That's what I said. The PLA-based products most likely may have different barrier properties because our Blue Loop umbrella products are giving the barrier properties as good as anything currently available in the market. Let's say some of our products are having a capability of providing the barrier properties of aluminum foil. Okay? That's the superiority we are talking about. If I compare the previous product that you mentioned, PLA-based, I don't think that would have a capability to match that kind of a barrier property. It's like a comparison of apples and oranges. I do not see that, but look, I mean, as I said, PLA is a specific product and the technology and having a certain chemistry, which I'm not maybe subject matter expert to respond to you.
Yes. The reason why I ask this question is because I see a lot of state governments are giving huge subsidy, even if you see in UP Balrampur Chini has put up almost INR 25 billion plant, whereas INR 10 billion subsidy is given by the state government. Similarly, there is a huge facility coming up in Karnataka as well. That is the reason I asked.
Yeah. Please bear in mind this PLA and all these, sometimes it may also interact or influence the food chain. The scalability of the PLA-based structures or the sources will come from will be also critical bearing. That is one. The second one is also, by the way, when we talk about sustainability, we are not only talking about our products and so on. In fact, today, if you see the flexible packaging is one of the most energy-efficient packaging products available because of the nature, because of the recyclability, and the lowest carbon emissions when we produce those. All these aspects will play when we talk about the large-scale influence or impact. Right now, I think both of the products are at an essence stage.
They may have their own niche, but large-scale, I do not see that it may not be competing with what we are offering in the marketplace.
Thank you so much for your detailed explanation.
Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star and one. The next question is on the line of Rajakumar Vaidyanathan from RK Investments. Please go ahead.
Yeah. Sir, thanks for the follow-up. Sir, just one housekeeping question. On the balance sheet, I see almost INR 3 billion of cash. You said there are not much of CapEx planned for the near future. Do you have any plans for this cash?
As of now, we will continue with that, and in due course of time, we will decide how we are going to deploy that. No concrete action plan at this point of time.
Okay, sir. Thank you.
Thank you.
Thank you. The next question is on the line of [Ashish Shah] from Business Match. Please go ahead.
Hello, good evening, sir. Thank you for taking my question. Sir, on this Blue Loop contribution to sales, you mentioned it hit about 27%. Can you share a likewise number for 2023 year-ending and 2022 year-ending?
In 2023, it was around 25%, and in 2022, I think I remember around 22. So it is like we have moved a couple of percentage points every year.
Okay.
As I said, maybe additional information that even those structures are basically at the end of the pyramid, so there is no big differentiation. Just to give you that the main differentiation will come from when we really start selling the high-barrier complex products.
Sure. The one that you're selling currently, how much % premium to the existing traditional packaging products?
Not really. It's basically replacement.
Okay. Okay. Okay. Okay. Understood. Sir, within the Blue Loop, is there a higher share to exports or not really? It is aligned to our companies.
No, similar. I think, in fact, I would say Blue Loop, because we have invested in India, our target is Indian market because we have another four locations where we have already invested. The other investment is in Istanbul, then Europe, and then Southeast Asia. When it will come from a Blue Loop, I think we will be focusing more on a regional model.
Sir, last question from a customer's perspective, what are some of the barriers for them to not being able to move to the higher-end complex Blue Loop products? Thank you.
Can you repeat your question, please? I'm sorry.
What you're saying that the higher complex nature products of Blue Loop technology, it's yet to get accepted by the customer, correct?
Yeah.
What are some of the hindrances or barriers or thoughts that the customer has for not moving to them?
Yeah. I think it's a good question. Look, maybe customer- to- customer, it varies. For example, I can give one example of large global customers. Their testing protocols, how they test not only on their machines, but in the market, the confidence on this new because this is new to market, right? That is one. It is taking time. The 2nd one, once they say, "Hey, we want to go ahead with you," that means they want to go globally, right? Global protocols and then the timelines and so on. That's the thing. What happens is also there are some iterations happening because we are dealing with the product which are first to the market, and for each iteration, we follow from the, I would say, ground zero. One is a technical or a protocol-related challenge.
The second one, sometimes some customers know that it is the right thing to do, but they are waiting for some regulation to push because some of the solutions are cost-plus. I mean, most of our customers always talk about cost-plus. The willingness to pay significant premium is still getting developed, and that's where our efforts are going in. That is the 2nd one, that some customers are waiting for regulatory push because there is some cost involved. The 3rd one is customers know that this will be working, but they also need to do investments. They are also trying to get their investment plan, their business plan, and that's all. Three kind of areas where I would say it's not apprehension about it, but various challenges culminating together of a lower rate of adoption.
Thank you, sir. That's very helpful. Thank you and all the best.
Thank you.
Thank you. The next question is on the line of Sukhbir Singh from SMIFS Institutional Equities. Please go ahead.
Thank you, sir, for the follow-up. I have only one question. We are supplying to food and daily essentials in FMCG industry. Can you please provide us how is the demand from there in the urban and the rural market? Is it under pressure? How is it going on?
I don't really know about urban and rural.
You look out of the U.S.
Okay. When you look at, I mean, see, you have seen the news which keeps coming on. There is a pressure on the demand. If you look at the food, inflation was pretty high in the last couple of months, and that had an impact on the consumption. On the other side, if you look at rural economy, it is showing some promising improvement. However, urban is taking time. Expectation is that when we read the articles and something, it is expected that urban is also going to come back, but we do not know yet. Good traction from the rural economy on the consumption side.
Okay. Okay. Thank you.
Thank you. The next question is on the line of Rohan from Mahalaxmi Private Limited. Please go ahead.
Sanjay, sir, I want to know about your tube laminate business and what is the future plan and investment for it.
Okay. Oh, that's a specific question. I mean, I'm not sure. Good, happy to answer. Tube laminate is also one of the critical product portfolio we have. I would say this business and this type of customers are one of the forefront to adopt our Blue Loop structures. That is going in the right direction. We have a facility across a couple of facilities where we manufacture these products. While the overall sales as compared to the higher top competition is still very low, that is one of the key focus areas for us to also grow in the market. We have a tube laminate business primarily right now focusing on domestic, but there is also a plan going forward to expand to the export areas in neighboring countries.
Yes, sir. Thank you.
Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Dhananjay Salunkhe for his closing comments.
Yeah. Thank you all who joined this call, as well as the organizers and ICICI. This is very good to see that there is a lot of curiosity and questions, and I appreciate even though those are sometimes very difficult and direct questions, we will continue our engagement and answer to the best of our abilities and ensuring that there are no forward-looking statements, as well as certain areas where we need to keep it within the boundaries. We continue to do that and are looking forward to see that we take some positive steps here on. I also want to appreciate and thank my finance team, CFO Jagdish and Abhijaat to be here and answering all the questions and making sure that we have a very regular cadence with our investor community.
Thank you very much, and I appreciate all your questions and the support going forward.
Thank you, members of the management team. Ladies and gentlemen, on behalf of ICICI Securities, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.