Ladies and gentlemen, good day, and welcome to Ganesha Ecosphere Limited Q2 FY 2023 earnings conference call, hosted by Antique Stock Broking 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 this conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Jinesh Karia from Antique Stock Broking Limited. Thank you, and over to you, sir.
Thank you, Neeraj, and good morning to all the participants on the call. On behalf of Antique Stock Broking, I welcome you all to Ganesha Ecosphere Limited Q2 FY 2023 earnings call. From the management side, we have with us Mr. Gopal Agarwal, Chief Financial Officer, Mr. Prashant Khandelwal, Senior Vice President, and Mr. Yash Sharma from the Promoter Group. I would like to now hand over the call to Mr. Gopal Agarwal for his opening comments, post which we shall open the floor for Q&A. Thank you, and over to you, sir.
Thank you, Jinesh. Good morning, everyone, and on behalf of Ganesha Ecosphere, I extend a warm welcome to all of you at the company's Q2 and H1 FY 2023 earnings conference call. Thank you for taking the time to join us today. I hope all of you might have had a chance to look into our quarterly numbers and investor presentation available in the stock exchanges and on our website. First half of FY 2023 have passed under the shadow of ongoing war between Russia and Ukraine, offsetting almost all the economies worldwide fueling oil, gas, and energy prices, which in turn driven unprecedented high level of inflation in almost all the economies, countries. Supplies of commodities and food were affected adversely, which further fueled the inflationary pressure in the economies.
To control the inflation, central banks of every country is tightening their monetary policies and are making wild increase in interest rates, even at the cost of sacrificing the growth. A strong U.S. dollar being safe haven asset, is dropping the values of almost all the currencies of the world, and thus increasing inflationary pressure. India also got its share of sufferings in the form of high inflation, particularly imported inflation, increasing interest rates, weak currency, higher oil prices, widening current account deficit, et cetera. All our factors affected the industrial growth at adverse note. Amidst the above odds, we at Ganesha could perform reasonably well on the back of higher realizations and increase in sales volume.
On a standalone basis, during the September quarter of FY 2023, the company operated at 103% of production capacity during the quarter and achieved production of 27,950 metric tons. We had achieved production of 27,645 metric tons during the June 2022 quarter and 27,922 metric tons during the September 2021 quarter. So broadly, the quarterly production is more or less stable on year-on-year and quarter-on-quarter basis. We clocked revenue from operations of INR 314.14 crore during Q2 FY 2023 versus INR 248.12 crore during Q2 FY 2022, turning into a growth of 26.6% over corresponding quarter. Broadly, contribution of fiber and yarn is 84% and 16% respectively in these numbers.
The growth in revenue was achieved on the back of higher realizations of PSF and yarn, as well as increase in sales volume. We could achieve average realizations of INR 103.5 per kg during this quarter versus INR 88.6 per kg during corresponding last quarter. In volume terms, we sold 29,232 metric tons fiber and yarn during Q2 FY 2023, as against the sale of 26,913 metric tons during corresponding last quarter. On half yearly basis, we could produce 55,595 metric tons during H1 FY 2023 versus 54,952 metric tons during H1 FY 2022. We achieved revenue from operations of INR 607.09 crore versus INR 446.72 crore during corresponding period of FY 2022.
In volume terms, we sold 56,472 tons of production against 51,073 tons sold during first half of FY 2022, which represents a growth of 10.5% in volume terms. In geography terms, we made an export sale of INR 35.48 crore during Q2 and INR 69.42 crore during first half of FY 2023, versus INR 31.38 crore and INR 58.06 crore, respectively, during Q2 and H1 of FY 2022. Despite slowdown in the global market, our exports are increasing, and we expect to achieve even higher export sale during current financial year on the back of diversified product range as well as approved vendor status of some international brands.
During Q2 FY 2023, we earned EBITDA of INR 11,810 per ton, as against INR 10,570 per ton during corresponding last quarter. Total EBITDA numbers are INR 33.01 crore during Q2 FY 2023 and INR 29.52 crore for Q2 FY 2022. EBITDA margins are 10.51% and 11.90% respectively during these quarters. On half yearly basis, the EBITDA numbers is INR 10,870 per ton, versus INR 9,560 per ton, during H1 FY 2022. In H1 terms, we earned EBITDA INR 60.44 crore in H1 FY 2023 versus INR 52.56 crore during H1 FY 2022.
Though the EBITDA improved in H2 terms, margins were declined in comparison to last year, partially because of increase in input cost and partially because of manufacturing cost, particularly power and fuel cost. With increase in sales prices, raw material prices also rose, and average input cost increased to INR 54 per kg during Q2 FY 2023 from INR 45 per kg during Q2 FY 2022. On power front, due to increase in coal and gas prices, prices of power on exchanges were increased, and so the steep increase in purchase prices of power for us, which we are buying under bilateral agreements. Similarly, fuel cost also increased due to steep rise in the prices of coal and diesel. On average, fuel prices increased by about 30% during last one year.
Despite increase in input cost and the manufacturing cost, company could earn profit after tax of INR 19.96 crore during Q2 FY 2023, versus INR 17.92 crore during corresponding last quarter, so a growth of 11.4%. In terms of cash flow during H1 FY 2023, company generated INR 41.30 crore from operations, which was mainly used to fund the ongoing projects and subsidiaries. Debt was increased to INR 81.82 crore as on 30th September 2022, as against INR 138.5 crore at the end of FY 2022. The total, the debt-equity ratio has also slightly increased to 0.29 from 0.25 on a standalone basis. The increase in debt is attributable to ongoing CapEx in subsidiaries.
There is not much variation in consolidated numbers from standalone because ongoing projects of the company are yet to start the commercial operations. Part of the projects would be operational during current quarter, and part of the project is expected to have some more time in commercialization. Thank you very much for your kind attention. We will now take the questions which you may have. Thank you.
Thank you very much. We'll now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question. The first question is from the line of Gunjan Kabra from Niveshaay Investment Advisory. Please go ahead.
Sir, congratulations for a very good set of numbers, and really like how we have evolved as in business perspective. So my first question is, so in recycled yarn, so wanted to understand how much is imported and how much is domestically sourced. Asking this from a perspective that, you know, India is a very small player in the global scheme and considered in the virgin man-made fiber, but while we are very competitive in the cotton segment. So wanted to understand how much is currently imported in the recycled segment, or is it just domestically sourced?
Thank you, Gunjan. I think you are asking about the imports of the recycled yarns and fiber in the country. Am I right?
Correct, correct.
Yeah. So the recycled fiber and yarn is not being much imported into the country. And basically, domestic portion is being sold in the market.
Okay. So it is largely a domestic market only, there is no import competition, right?
Yeah, it is, it is, it is very negligible.
Okay. Okay, that is, that is great. Sir, second question which I had is a little long-term perspective question. So sir, whenever we recycle a bottle... So right now there's a government norm that by 2025, that you have to recycle the bottlers. Bottlers will have to recycle 30% of the recycled content should be there. So, so once the, once the bottles get recycled, so can this be further recycled? Like, I mean, does the productive and the quality efficiency continues to be the same, or will it differ?
Gunjan, Gopal ji, can I speak?
Yeah, yeah, yeah, yeah. Please.
Prashant Khandelwal. Good morning, this side.
Good morning.
You see, as far as the recycling number of cycles are concerned with the PET bottle recycling, you can do it N number of time. However, there is a smaller level of degradation every time, and majorly it affects the color of the final product. So, every recycling chain will have an impact on color of the final product. So it will get a little bit yellower, and, of course, it can be done N number of times. There is no issue.
Okay, okay.
Mm.
Good. Thirdly, sir, when is the Kanpur facility expected to commence?
Yeah, the Kanpur facility, the Kanpur production facility, which was burnt in the fire, we are not going to reinstate those facilities. For fiber itself, we are looking to go for the recycled plastic other than the PET. So we are taking some trials and pilot productions in that facility. But because of the regulations and the things, we are much more focused now on the rPET side, bottle-to-bottle side. So that is a little slower.
Okay. But sir, the pilot phase of the HDPE plant has begun. The ramp up will take a little time, is what you're trying to say?
Yeah, we are still in pilot phase.
Okay.
Yeah.
Sir, also, like, we are the first ones in the B2B PET bottle chip segment in the country, I guess. So any idea, you know, how is the global structure? Can this be also imported, and how is the capacity coming up globally? Any view on that?
Yes, yes, Yash will reply. Yes, please.
Yeah. Hi, hello, everyone. So yeah, definitely, you know, the, I mean, globally, also, the capacity is increasing constantly because, you know, I mean, according to the United Nations directives, all the countries have been advised that, you know, they should be recycling the plastic waste that is being generated. And everyone, you know, all the countries, they need to include certain recycled content in all the plastics that are now gonna be produced. So definitely, you know, the capacities are being increased globally, everywhere. But we think that the demand that is currently there, it is way higher than, you know, the capacity. Because, you know, the capacity setup also takes a huge time.
There is at least a period of two to three years, you know, to set up a capacity for this kind of a project. So, but the demand rise that is currently existing, you know, if you talk about Europe or U.S., they are, they... I mean, from the next year itself, they require 20%-30% recycled content, and I think the current supply is not even, like, less than half of it, of what the demand is currently. So, definitely, I mean, there is growing capacities everywhere.
But I think is to, you know, to capture this growing demand.
Got it. Got it.
Yeah.
Thank you so much, and good luck, good luck.
Thank you. Operator, give me plus star and one to ask a question. Next question is from the line of Srivatsan from Spark Capital Advisors. Please, go ahead.
Yeah. Hi, so I just wanted to get your thoughts on two pieces. One, like we said, on the export, demand across the world. Just wanted to understand our go-to market for the export, piece of the business. Second is also in the presentation, you had talked about, adding more, renewable sources, long-term PPAs on the renewable side. Just wanted to understand what kind of cost savings that could lead to.
Yeah, thank you. On export side, our exports are increasing because we are having some tie-ups with the global brands. So all over the globe, their centralizing manufacturers are able to source the material from us. So on the back of that, we are increasing our exports. Exports have increased to more than 10% in our overall revenue from operations. And we are expecting this will continue to grow further. As regards the renewable sources, we are already having the 8.7 MW rooftop solar facility on our existing plants. And Mr. Prashant will elaborate further on the third party tie-ups with the generators. Prashant, you please give the second part of the answer.
Mm-hmm. So, for solar, in solar, we have done a remarkably very good installations. Till now, we have a total installation of 8.7 MW rooftop all across our units. So 8.7 MW capacity is creating about 10,875 MWh of power generation in a year, per annum. Further, we have also entered with Amplus Energy Solutions for a long-term captive power plant installation in the state of Uttar Pradesh. So, this is backed by a government scheme, where we need not to pay any cross-subsidy, and the wheeling charges and wheeling losses are also subjected to 50% of the actual value.
This captive power plant capacity is 17.4 MW, which will generate total 25,230 MWh in a year. In commercial terms, we are saving about INR 2,000 per MW. The total saving would be somewhere between 5-5.5 crore per annum. This new generation has started from first of November. But still, we have to enter into an agreement with the Government of Uttar Pradesh, with SLDC and DISCOM for banking. Rest 90% of the power is being consumed right now.
With these facilities, our total renewable power generation would be about 50% of our total power requirement.
Yeah, yeah. It will be 26 MW DC. The total installation would be 26 MW DC.
Okay. And lastly, just wanted to get a, on the CapEx plan and what kind of incremental, volumes we can expect it to be great to get an update, sir.
This is regarding our water plant?
Yes, sir, the incremental CapEx that we planned.
The incremental CapEx, we, we are already put a lot of CapEx in our Warangal plant, and almost the required CapEx has been done on that facilities. So now the one by one products are being started. In this quarter, in this quarter, we are going to start our washing line and our PSF plant, and the next quarter we'll be starting our FDY plant and bottle-to-bottle chips. The total incremental capacity is about 50,000 tons in that facility, and the total project cost is about INR 450 crore.
Okay. Okay, okay. Thank you, sir.
Thank you. Participants, you may press star and one to ask the question. The next question is from the line of Muthuk umar from Fidelity Investments. Please go ahead.
Yeah. Good morning, sir. Am I audible?
Yes.
Yes, sir.
Yeah. Okay. So this is Muthuk umar. Sir, are you the monopoly in this segment or do you have any competitors? I mean, please kindly advise some of your competitors.
We are not a monopoly in the recycling PSF industry. Apart from us, there are more than 30 players in the country. The total RPSF capacity is more than 600,000 tons in the country, and we are having about 15% market share.
Okay, sir. Could you please share what is your revenue contribution from yarn?
The yarn contributes about 16% of the total revenue.
16? 16.
16, yeah, one six, 16%. 84% is from the recycled fiber.
Recycled fiber. Can I know the, what is that, recycled fiber application? Hello?
Yeah. Recycling application.
Application, mobile, can I.
Yeah. Yeah, please go ahead. Please go ahead.
You see, the recycled application are very, very widespread. Now, apart from generally, the most relevant is the apparel. So, but Ganesha is keen to make only specialized fiber, so we are catering geotextile, the filling, quilts, pillows, stuffed toys, then medical textiles, then automotive textiles. So, there are specialty products as well, we are catering into. We are also making shortcut fibers and flame retardant fibers. So flame retardant fibers are very specialized fibers, which are used for very specific purposes in automotive industry. And shortcut fiber, which is being consumed by the construction industry. And then the geotextile, the fiber for geotextile, which is being used in road constructions and railway lines, etcetera.
This finds a place in all segment of technical textile as well as the majorly consumed by the apparel.
So broadly, about 60%-65% of our revenue is coming from the yarn spinning segment, where the fiber is used for making the yarn and yarn fine chips made to the fabric and then the garments. And 35% is coming from the non-woven and technical textile, as Prashant narrated, along with the stuffing in sofas, pillows, mattress, etcetera.
Okay. Okay, sir. Next question is, could you walk on the Tirupur market and what is the business outline?
Yes, we are selling our material in Tirupur also. Because of the commission-wise marketing and the trade element, we are not able to feed much quantity to the Tirupur market. But with the start of this Warangal plant, we would be able to put more buyers and the material in the Tirupur market going forward.
Okay, sir. And the last question, sir, what is the earnings outlook we can expect for next 2 to 3 years? That is bottom line, both bottom line and top line.
We are expecting to make revenue growth are about 25%-30% in next five years.
Okay. Okay, sir. Okay, sir, that's all, sir. Thank you.
Thank you.
Thank you. Participants, you may press star and one to ask a question. The next question is from line of Darshita Shah from Antique Stock Broking. Please go ahead.
Hello. Hope I'm audible?
Yes, ma'am, you are.
Yeah. So thank you so much for the opportunity, and congratulations on the good set of numbers.
My first question was in line with the, like, I wanted to get some understanding as to how what led to the improvement in the EBITDA margins and EBITDA for CG during the quarter?
Yeah, EBITDA margins, EBITDA, our EBITDA has increased in this quarter, because of the increase in sales realization. Sales realization increased because of the some value-added products which we introduced in the market, and increased the sale of the value-added products in overall operations. Although, because of the increase in prices of the input, the EBITDA margins is slightly come down in this quarter. But in absolute terms, we are having the better EBITDA margins.
Okay. So what is the share of value-added products right now versus what was it a year ago?
Our value-added products, we are presently selling out around 30%, which were earlier 20 to 25%. So 5-6% VAPS products revenue has increased in this quarter.
What is the kind of incremental margin do we make on these value-added products as compared to the traditional products that we are selling?
Well, we are having the margins of more than 15% EBITDA margins in value-added products.
Okay, okay. All right. About that, my second question was in line with the cotton prices. The prices of cotton in the domestic market are on a downhill right now, and due to the weak demand in the domestic market. So are we facing anything of that sort in terms of demand? And secondly, do we see the realization? How do we see the realization going forward for the yarn business?
Yeah, sorry, ma'am, I could not get it. Can you please repeat your question?
Yeah. So, the cotton prices have started to fall in the domestic market due to weak demand. So are we seeing something like that as well? And what kind of realizations are we expecting going forward because of the fall in cotton prices? So are we seeing any like correction in the realization?
Yeah, the prices of the PSF are quite stable since last 7-8 months, in spite of the volatility in the prices of the cotton. So, in the quarter under review, we got the realization of about INR 95-96 per kg from the fiber. But yeah, of course, because of the fall in the prices of cotton, we are looking for some downward pressure on the PSF prices. And for the current quarter, we are looking for the average prices of around INR 90-92 per kg in this quarter. Although there is also a similar reduction in the prices of RM.
So we are expected to, hoping to, maintain the margins for this quarter.
Okay. Okay, all right.
Yeah.
Okay, all right. Thirdly, I wanted to get an update on any tie-up that we have with the global brand for our filament chips and yarn business. I mean, have you gotten into any arrangement as of now?
We are having our tie-up with the Inditex and the Target Group for our fiber business. And for our new capacities on B2B and the FDY segment, we are already in touch with several brands, domestic as well as international. So going forward, these are the products which we are going to make in the Warangal project is a value-added product, and we want to sell it on the premium. So, looking to the requirement to the players and the regulatory requirements, the brands are keen to buy the recycling products.
But, of course, we are onboarding on the with the brand and the, the, there's quite the long process which we have to carry out before boarding with them. So we have already started the process, and we are hopeful to get one by one boarding next 3-6 months' time.
Okay, okay. All right. Thank you so much for the detailed answer.
Okay.
It was really helpful. I have a few questions. I'll get back to you. Thank you.
Thank you. Participants, you may press star and one to ask a question. The next question is from the line of Vignesh Iyer from Sequent Investments. Please go ahead.
Congratulations on good set of numbers, and thank you for the opportunity. Sir, I missed your earlier, you know, you said about the capacity increase. If you could just repeat this, what is the incremental capacity, and when are the capacity going to kick in?
The capacity which we are adding is about 50,000 tons recycling capacities in our Warangal plant. So, these capacities are distributed among the recycled PSF, bottle-to-bottle chips, and bottle-to-fiber applications, bottle-to-filament applications. So, we are going to operationalize the washing line and the RPSF capacity in this quarter itself. And bottle-to-bottle our trials are very successful, but we are in talks with the brands, and their assessment is going on. Technical assessment has been completed by some of the brands, and now the sampling and trials are going on, so we are hopeful to get that through within next 2-3 months time.
Filament, for filament, also we are in touch with the several brands, international brands, where our sampling exercise is going on. Once our filament plant operational, so we think we will be onboarded with them.
Okay. And, sir, what was the cost of setting up this capacity, and what is the asset turn expected here?
The total project cost is about INR 450 crore, and we are expecting a turnover above INR 600 crore from this capacity. The asset turn is not very high, but of course, because of the quality products and because of the other factors, the margins are better in that, in those countries than the PSF, which we are making from our existing facilities.
Okay, but basically you mean to say that this, there could be a bit up and down because of any value-added product from this capacity? I mean, because of value-added product, there might be a better turnover or better margins for this plant.
Yeah, the margins of course would be better from this plant.
Okay. In general itself, it would be better, you mean?
Yeah. Yeah, it would be better.
Okay. Sir, coming to the FY 2023, so can we, sir, expect this level of value-added product sale going at, like, can you maintain this at 30% going ahead? I mean, the value-added product sale.
Yeah, we are quite hopeful to maintain it 30%, rather to increase share going forward.
Okay. So last question from my side. I just want to know this 25%-30% growth you guided, you guided for the CAGR growth for next four, five years, right?
Yes, yes.
Oh, okay, okay. That's all from my side. Thank you, sir. All the best.
Thank you.
Thank you. Participants, you may press star and one to ask a question. The next question is from the line of Harish, from Centrum Broking. Please go ahead.
Hi, sir. Thanks for the opportunity. Sir, this was regarding your earlier comment, where you guided for 25%-30% growth over 4-5 years. So currently, we are at around INR 1,100 crores, and this is the growth rate we can go to INR 3,200 crores, more than INR 3,000 crores. And current, this is our current CapEx plan, Warangal will add INR 600 crores, and Nepal washing line will add some INR 75 crores. So, can you help us with how, how are you planning to grow at 25%-30%? You know, any plan from where this further growth will come post Warangal reaching its optimum utilization levels?
Yeah. Thanks, Harish. You see, the government has come out with the regulations for compulsory consumption of 30% bottle-to-bottle consumption in virgin packaging for the beverages industry, or beverages and food industry. So, and this 30% will grow from 30% to 60% by 2028. So there is a big demand going to come from this sector. So we are the frontrunner, and we are in this industry since last 30 years, having developed a lot of capability and technologies with us. So we look for grabbing the sizable share from this opportunity, which itself is more than 300,000 ton market share in 2025, 2026 itself.
So once our first plant is operationalized and stabilized, we would certainly going forward for increasing capacities in that sector and get the sizable share in the market. So looking to that, we are expecting our growth would come by 25%-30%, at least in area basis, for next four, five years.
Okay. And sir, what are our plans regarding the rigid plastic thing? We are at pilot stage, so how are we looking to scale up this part of the business?
Certainly, the facilities which are available in B2B PET sector, the same facility is also available in this other rigid plastic. But we being largely the player in the PET segment, so we are more focusing on the PET sector rather than the other rigid plastic sector. But of course, started the trials and the pilot project we have installed. So we will be getting into it also, because there is big opportunities from all over the all the packaging plastic packaging be doing different industries, like the plant industry or the other industries. So we will also get into that sector. But first we are focusing on the B2B sector, and that is on our second priority.
The first priority is B2B PET sector.
Okay. Okay, so broadly, we can grow at 25-30%, that is our aim. Post Warangal also, margins should keep improving as a mix of value-added products move up. Is that correct?
Yes, of course. When we move forward in the value chain, our margins will improve, and the overall margins would be improving because the margins are higher in the Warangal project than our existing business. And when the scale of our new businesses, new products will grow, go up, so margins will also, on average basis, overall, it will also improve.
Sir, lastly, any sense of what can be the margins in the bottle-to-bottle segment?
Sorry?
What, what will be our margin in bottle-to-bottle segment?
We are expecting margins of 48%-30% EBITDA margins in bottle-to-bottle segment.
Okay, okay. That's very nice. Thank you, sir. That's all from me.
Thank you. A reminder to all the participants, you may press star and one to ask a question. Ladies and gentlemen, you may press star and one to ask a question. Next question is from line of Nidhi, from Goldman Sachs. Please go ahead.
Yeah. Hi, sir. Sir, can you comment on the current scenario on the polyester yarn market, as there have been increasing reports of China dumping a lot of their inventory in domestic as well as the other export markets?
Yes, the scenario of the polyester market, at least for us, for where we are operating in the recycling segment, is very good for us. We are already operating at about more than 100% capacity. And, looking to the scenario where the demand of recycled fiber and the filament yarn is increasing, so, and that demand is being replaced, the demand of virgin bottle is being replaced by the recycled one. So we are looking for the decent increase in the consumption of the recycled fiber and the filament yarn going forward.
Thank you, sir. But sir, any comment on the overall market, not just the recycled one?
In domestic front, the overall market size is more than present. PET bottles are recycled only into the recycled PSF. PSF market share is about more than 600,000 tons at present in the country. Which is, and the overall PSF market is also increasing 4% in the year's growth. Major part is going to be a recycled segment. Recycled segment growth is more than 10%.
Understood. Thank you, sir.
Thank you. Participants, you may press star and one to ask a question. Next question is from the line of Jinesh, from Axis Securities. Please go ahead.
Yeah. Hi, hope you're audible.
Yes, sir, you are.
My first question is, with regards to the bottle-to-bottle. Just so you mentioned that we are seeing some demand, and in negotiation with domestic players also, and with global players also. So just to understand, once we are negotiating with the global players, will the sale will be in the exports market only, or, will the sales will be in the domestic market?
Yeah. Yes, yes, you please answer.
Yeah. Hi. So yeah, basically, you know, currently, our majorly our sales will be focused on the export market, because, currently in India, there are, there is not a lot of consumption, which is happening in the, in the recycled PET in packaging sector, per se. So, but, but in export markets like Europe and U.S., they already have, many government regulations, which, you know, which need, which, which because of which, you know, people are already consuming a lot of recycled PET in packaging applications like bottle to bottle, sheets, et cetera.
So currently, our sales will be focused more on the export sector, but as, you know, time flies by and, by 2025, when, when, you know, there is going to be also a need for, PET, recycled PET in the packaging in India, then we'll, we'll also start diversifying, to domestic sales as well.
We are also in touch with them in some brands who are already doing their technical assessment and all those things with us, because by the regulations will be mandatory by 2025, so the quantum will not be available immediately for them. So they are worried about the quantum, and they are trying to get in touch to lock the only quantum which we are apparently having. So their technical assessment is going on. The sampling has also been started, and the post sampling and the technical assessment, the commercials and the social audits will take place.
So we are at the midway, and we are expecting it will take around 2-3 months' time to get final tie-up with them.
Understood, sir. That's helpful. So, so just to continue with the question, like you said, we'll take 2-3 years to set up a facility for, project, and the deadline for domestic market is only 2-2.5 years down the line, by 2025. So are we or competition, looking to set up additional facility to cater to the domestic market, or do you expect the regulations to get pushed by a year or 2, since the capacity will not be available in the domestic market?
Of course, when there is a demand, so the capacities will come, and that's why the government has given the three years' time to the market for adoption of the capacities. We are expecting capacities will come up as per the requirement. Yeah, but of course, if there is any impediment in the capacity ramp up, so government we don't know if the government will push the timelines further or not, because they have given the enough time to the market for ramping up the capacities.
Until the market is open for India, in India, the brands will certainly have the tie-ups for getting, for procuring the recycled bottle-to-bottle chips, and they will feed it to their overseas operations. So their tie-up is ready when the demand comes in India.
Okay, understood, sir. So, in your earnings presentation, you had mentioned that the Nepal facility will start commercial production by end of this quarter, and we plan to reach optimal production by end of this year. So, do we have any commitments or anything for that plant, whereby we expect optimal production within a quarter or the outlook for the Nepal plant, basically?
See, the product which we are making in the Nepal plant is PET flakes and PET chips, and the capacity is about 1,000 tons per annum, roughly translating into 1,000 tons per month. So that capacity is not big one, and we are looking for the getting the entire material imported into our existing facility from Nepal. So there is no issue in ramping up the capacities.
Okay, great, sir. Okay, so just one more question. What is the peak debt level that we are targeting and, yeah, so basically.
You see, our peak debt level, we are expecting it to be around INR 500 crore-INR 525 crore, including the working capital borrowing for the projects.
So currently, we are at around INR 380 crore of debt, net debt. So.
Yeah.
And INR 6 crores of cash, so we expect around INR 200 crores of additional debt to come, going forward.
Yeah. It is around INR 369 crore-INR 70 crore net debt, so we are looking for another INR 100 crore-INR 150 crore debt, including the working capital borrowings for our Warangal project and our Nepal project.
Okay. And so just last one thing, just to reiterate, what type of tax savings do we expect from the Warangal project, and any other cost savings in terms of logistical costs or that we expect from the south plant?
Yes, from South plant, if we are talking about the recycling PSF, so we are having benefit in terms of the sourcing of raw material, which is amply available in South India. So our logistic cost will be a saving for sourcing the raw materials from south itself for Warangal project. And also, we are having our fiber market in South India, which we are currently feeding from our north Indian plants, North India plants. So that will again be fed in from the South Indian plant, South India plant itself, so it will again transfer into the saving in freight costs. So net-net, we will be getting both on input cost and the on the output freight.
Great, sir. Thanks. That's all from my end.
Thank you. As there are no further questions, I would now like to hand the conference over to Mr. Gopal Agarwal for closing comments.
Yeah. I would like to thank you everyone for joining on this call. I hope we have been able to address all your queries. For any further queries, information, kindly get in touch with our finance or secretary team. We also thank you, Mr. Jinesh, for helping this out. Thank you.
Thank you. On behalf of Antique Stock Broking Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.