Q4 20/21

May 22, 2021

Ladies and gentlemen, good day and welcome to the CCL Products India Limited Q4 FY 2021 Earnings Conference Call hosted by Nirmal Bang Equities Private 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 Please note, this conference is being recorded. I now hand the conference over to Mr. Abhishek Navalgud from Nirmal Bank Equities. Thank you and over to you, sir. Thank you, Sanford. Good evening, everyone. On behalf of Navalbank Institution Equities, I welcome you all to 4Q FY FY21 earnings call of CCL Products India Limited. From the management side, we have with us Mr. Chala Sishan, Managing Director Mr. KVLM Sarma, Chief Operating Officer Mr. Praveen Jayapuriya, CEO of Continental Coffee Mr. V. Lakshmi Narayanan, CFO Mr. P. S. Rao, Consultant, Company Secretary and Mr. Vilevi Dasari, Company Secretary on the call today. So without further ado, I would like to Thank you and over to you, sir. Yes. Thank you for the introduction, Abhishek. I'd like to welcome everyone on the call to everyone to this call and I hope everyone is keeping safe during these difficult times. As far as the company is concerned, despite COVID last year, we are pleased to declare the following results. The turnover for this whole year was So the financial year 2020, 2021 was INR1245 crores as opposed to INR11.43 crores of the previous year. The EBITDA was INR301 crores as opposed to INR 290 crores from the previous year. The profit before tax is INR234 growth as opposed to INR 225 crores from the previous year. The profit after tax is INR 100 and INR 82 crores as opposed to INR165 crores from the previous year. For the current year, the guidance that we're giving is in the range of 10% to 15%, which is again going to be subject to a lot of variable factors, Does especially COVID, how things pan out going forward, how strict the lockdowns are And these very good factors are not in our control, but we will endeavor to do our best to achieve growth trajectory like we've been doing in the previous years as well. We can open up the floor for questions. Thank you very much, sir. Ladies and gentlemen, we will now begin the question and answer Anyone who wishes to ask a question may please press star then 1 on their touchtone telephone. If you wish to remove yourself from the question queue, You may press star then 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue is open. The first question is from the line of Jignesh Kamani from GMW and Company. Please go ahead. Hi, Sushant and entire team. Congratulations for a good set of number. Sushant, just want to know on the container availability. Last quarter and Q3, we mentioned that close to 50 crores to 60 crores was the product we couldn't displace because of the container availability. So safety isn't that entire product got displaced in the Q4 and right now there is no issue on the container availability? I think most of these questions Sharma will answer. Right. As I told in the last call itself, we have found out I mean, we optimized our business operations by utilizing incoming containers and all that. So you would see in this quarter last quarter, Clearly, our dispatches were high. And if you see our financials, you will see that the Old inventory has moved up. There is no it is accretion to the inventory. That means we were able to dispatch Sensing quantities are there but on a continuous basis, we will have some kind of some inventory for which The schedules may not have been there and the pre shipment samples must not have been approved and all that. But during March, we were able to substantially solve this issue and was able to dispatch major point. And we had accumulated a year of close to 28 crores from the MEIA subsidiary. Anything we received in the Q4 or still we haven't received anything? In the Q4, we did not receive. Okay. No, we did not receive anything. Okay, understood. And my last question on the Russian demand has been pretty weak because of the COVID lockdown. How is the current scenario particularly for the high margin in the free strike? That has actually started recovering from last quarter itself. That's one of the reasons why there was an increase in sales and dispatches also. So the same thing is Happening this year as well. A lot of things are coming back to normal over there. Now Russia also, I mean, they've taken a lot of proactive measures and all that over there. So things are significantly improving there. Understood. Thanks a lot. I will come in queue for a follow-up question. Thank you. The next question is from the line of Mayur Patel from IIFL Asset Management. Please go ahead. Just one question, overall, the performance I think was Very good. But any reason behind the softness in Vietnam and how do we see the recovery in Vietnam going forward? Yes, ma'am, we have we did the optimum utilization during the current year and will continue. In fact, we are Enhancing the capacity there, so we are expecting a better performance in the coming years. Also on the margins front, do you think that Vietnam margins would improve going forward? Vietnam margins will improve on various points. One is, of course, the superiority of the product itself. And then, we are able to because we are in the heart of Coffee Land, the working capital requirements vis a vis working capital costs, finance costs will be lesser. And in fact, one other thing to be noted is that the original plant is also getting depreciated in 2, 3 years. So the depreciation on account of the old plant might also come down. So There is a possibility for improvement of margins in Vietnam as such. Of course, we are Right now we are doing some line balancing and augmenting the capacity. We are seeing a better traction and we might be inclined to double the capacity very soon. Sure, sir. Thanks. I'll join back to the queue. Thank you. The next question is from the line of Rupin Shah from Integrated Asset Management. Please go ahead. Hi, Sisanth. I have a couple of questions. First on gross margin. So we have shown sharp sequential improvement in last quarter and the Y o Y same. So like so is there any seasonality in 4Q that the company will report the higher gross margin in 4Q every time or it's mainly because of the change in product mix towards the freeze dried portion. And yes, is it sustainable every quarter this year now? Yes. I must say. During the last quarter freeze dried dispatches were substantially high and it depends on the product mix. If I'm selling Most of the small packs and all that during the quarter, it might vary. So It is better we always take it on an YOA basis because this cannot exactly replicate to be in the subsequent quarters, During last quarter, I said that since people looked at that being a season, people wanted a packed product which And go into supermarkets directly. So maybe during summer season, they may not want the product in a packed form where they will purchase in PULSAR, where this gross margins etcetera will get changed. So on a YOY basis, there is a consistency and it is sustainable as well. Okay. Anshu Shun, can you specify the contribution from freeze dried currently in volume in 4Q and FY 2021? FY 'twenty one, we were able to operate our freeze dried capacity only to the extent of about The 2% are also 62% only because of the compulsive lockdown that We went through on them because of the ration, the orders, department and all that. This year, there should be an improvement on that. Okay. And secondly, on volume guidance, you have given 10% to 15% volume growth for FY 2022. So can we take like 2 scenario like keeping in mind like 2 scenario, one is the same situation of logistic issue currently you are facing. So what kind of volume growth is possible considering the current situation? And if the second one is, if there would like You will see some good improvement in the space and the lower freight rate benefit. Then what could be the volume growth for FY 2022? What was the second one that you mentioned? Yes. So in 2 scenarios, first is the same scenario, like you are correct. 16. 1 is on the largest listing. 2nd one? Yes. So I think second one improvement from here like the space availability and the lower pay trends. So what kind of volume growth one can see for FY 2022? See, we have taken the disruptions are there and perhaps we must have made a small discount for these disruptions as well. Confidently, we can say it will be as stated 10% or so at present. So we will review at the end of Q1 or around Q2, whereby the peak season comment is. By that time, if there are no further disruptions and things ease out, maybe we will revise it to a better figure later. Okay, understood. And lastly, Shishant, in this tough phase, like when you don't supply to your overseas client On a timely basis because of some system risk and so what is your experience in terms of like in terms of relationship with the client? Do they discontinue it completely or for short term like they arrange for somewhere else or they simply wait for the things to normalize? Last year disruptions were worldwide. It's not very specific to India as such. So there was no alternative source for them also. In fact, in many cases, we have taken initiative to organize faster supplies wherever they are not able to Managed containers are logistics from their end. We have managed and sent them. There were no major complaints from the customers because all of them knew that this has been the case. And perhaps Second thing that we are doing what we have been doing is that we have a warehouse in U. S. And our own custom bonded warehouse in Switzerland, where there are some staffs. So there was no desperate situation that has come to any of our customers assets. Of course, the delays were there to the extent of reorder levels or minimum levels to be required, but there was no Total out of shelf situation in any of our customer spaces. Okay, great. Thank you. Thank you. The next question is from the line of Himanshu Iyer from Securities. Please go ahead. Yes. Hi. Good afternoon, team and congrats on a good set of numbers. So just wanted to understand the current quarter numbers, if you can give some more details As to what has happened in Vietnam, because if I do the calculations, the margins seem to have come off sharply from historical levels. While it's completely reversed in the India business, margins seem to have Made new all time highs. I'm talking on an EBITDA basis. And even on the top line front, the momentum that we were seeing for the last couple of quarters, Sequentially, it looks as though the utilizations have come off. So is it a one off issue where some shipments are stuck out there? Or is it something else, if you can just explain the Vietnam performance for this quarter? Vietnam current year as I mean, We are speaking about the year that has passed, the year 2021. 2021, we are almost consistent in Vietnam. See you quarter to quarter, there may be a few variations here or there and the I have one of the customers may have asked for a small rescheduledment and all that. Otherwise, there is no major large variations in Vietnam. Understood, understood. And second thing, sir, the enhanced capacity, when is that now expected to come on Stream because I believe there were there have been some delays in that. Yes, people are there are no travel facilities available And even if one of our there is only one flight operating there in which also only the diplomats and others have a preference. Business has a large preference in that. And even after going there, there is a 21 day quarantine. So for any technicians to go and work on the expansion part, it is taking the person has to plan at least 1 month in advance. But still, we are almost at the stage of completion stage and the facility should be most likely available from the Q1 end. July 1st onwards, it should be available for production. Understood. And sir, for the year as a whole, can you give the broad capacity utilization numbers separately for India and Vietnam? For the previous year? Yes, yes, for the previous year, the whole year FY 2021, yes. We have done about See, 61% on FD and then Vietnam, we have all done and Optima Middle East now by about 94%, 95 Thank you. The Grala, there have been disruptions now. We have done about 65% or 70% there. There is a large product mix within that. So We cannot exactly bring it to a one single figure because of this enhanced with a small pack capacities and all that, But about 75% we could do it last year. But the Chitur plant, which was running at expected to optimize that you have run at only 61 for the year, right? No, no, no. I have taken the total FD capacity. Now we do not differentiate because it is a second unit for the main plant. Okay. Consider the total FD capacity and delivery. So FD you did 61 FD you did 61 and spray dried you did 70, That's what you're saying. Understood. And sir, final question, if you can just update us on the India business performance For both the quarter as well as the year in terms of the top line and the loss that we would have seen? That because the figures are good, Praveen will explain better. Sure, sure. Praveen? Praveen, we touched a top line turnover of INR 150 crores, which is a substantial growth over last year wherein we were close to 90 crores. So we almost witnessed around 60%, 65% growth on the top line. As far as the bottom line is concerned, we were almost breakeven with a little marginal loss this year because of higher input costs that the bean prices went up. So there was a little very marginal loss this year, which was approximately, let's say, minus 5 crores and roundabout. So that's where we are. And any outlook would you want to share, sir, for this year for the India business given the way you are seeing very strong traction? Yes. We did see a very strong traction, but this So currently, the 2nd wave are actually now that our bases are also reasonable and the 2nd wave has hit It's quite badly in terms of and you must be reading all across, in fact, every sector and segment is more effective this year than last year. So we really don't know. We were looking at a growth of 30% to 40%, but probably If things normalize from July onwards, then still we can look at a 25%, 30% growth this year. But a lot will depend on how quickly things settle down because everywhere we are seeing lockdown, which is hampering the logistics and supply issues are there. And once again, our institutional segment, it was which started to pick up in the last quarter when slowly The hotels, the airlines, the offices have started opening where we started doing a decent amount of business in the last quarter has again gone back to shutdown mode and the business has come down to almost 0 there. So that's something to be worried about. But we're just hoping and praying that things settle down from quarter 2. Sure, sure. And just one final question, if I may squeeze in for Shishan maybe. I mean, seeing the price trends that we are currently witnessing on coffee. So and given the 10% to 15% volume growth guidance we are giving. So finally, can we see a year when we can see, say, a much higher growth in revenue because of better realizations? Do we have that sort of visibility yet? Actually, it's Whatever is the price increase that we are seeing right now is mainly because of Brazil. And In Brazil, they're saying because of the water shortage and all that, the Arabica prices are going up. But if you look at it, in Brazil, it's Then Steve, Robusta, there's an excellent crop. There is no shortage. There's a higher crop than what was there in the previous years. All the other countries which are growing the robusta including Africa, Vietnam, Indonesia, the robusta crop has been really good And more than 90% of what we buy is robusta. So there is not that much pressure on the robusta prices for this to really go up. If Arabica is going up, robusta maybe moving as well, but then in differentials there will be a change from positive differentials, you have negative differentials, which is why though there is a slight increase, We are not sure how sustainable that is in the long run. So we are still going on the assumption that where green coffee prices will be similar to what they were in the previous year. And as everyone is already aware Since anyway we work on a cost plus basis, that impact is going to be quite minimal for us when it comes to margins and all that. Understood, understood. All right team. That's it from my side and all the best to you, H. Thanks. Yes. 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 call, Please limit your questions to 2 per participant. For any further questions, you may come back for a follow-up. The next question is from the line of Rahul Ranade from Goldman Sachs of Management. Please go ahead. Thanks for the opportunity and congrats Just if you can kind of remind me of our capacities existing. So is it right that DIA has around 25,000 of installed capacity and Vietnam has 10, is that the number? Yes, that's correct. Currently, we are expanding in Vietnam now. Okay. So currently it is 10 and then where would the Vietnam capacity go to? 13,500 initially. Yes, 13,500. So 3,500 additional. All right, All right. And within India for the 25,000, it is 1510 between spray dried and crease dried, right? Yes. Okay. Okay. And just one more question. So on the retail business, so India business top line, which you said was 100 and 50 crores. Out of that, how much would be the Continental brand of coffee and how much of it would be institutional? So almost 2 thirds will be brand and 1 third will be infusion. So you can say INR 100 crores almost will be brands and INR 50 crores will be Bali kind of steel and private labels. Okay. And would this proportion be similar for last Last year, the brand saliency was lower. It was almost maybe 55% or so. So it has moved up to 66%. So we are constantly the brand is growing much faster than then the bulk in the private label business. Understood. Understood. And just on our ability to maintain spreads, So like obviously you kind of mentioned just now that since it is a cost plus kind of a model, but just wanted to understand in In terms of timing leads and lags, like how does the repricing happen because when the prices are moving so fast, like could it kind of induce Some volatility in the margins in the near term? It depends on the contract to contract. So, customers' requirement of the product and we discuss every contract individually. So that contract will be based on the prices existing as on that date or within that vicinity, basing on which will Because as a business model itself, we cover green coffee on a back to back basis immediately on concluding the contract. This all customers also knows. So that price for that contract is valid until execution. There is no change on So if 1 week later the prices come down, the contracts that are made during that period will be based on the green coffee prices. Of course, It's a combination of prices vis a vis material availability as well Because many a time, the quoted by the quoted price, there may not be stocks available. So we I'll take both of them into consideration and the court back. So every contract is independent and It is concluded basing on the these and raw materials side. Understood. And just one last question. So if you could kind of comment ballpark kind of a geographical spread of our end markets, How much of it would be somewhere in Europe versus Russia, some Africa? And I think U. S, we are not very well penetrated, In U. S, we are in fact for the past 2 years, we are making an earnest effort To improve our presence in U. S, we were Around 10% in U. S. Earlier, which in the near future, we should be improving Anywhere to approximately 15% or so. Generally, Our solid existing percentage of Sale would be about 25% in Europe, 25% in the Asian CIS markets and then the others are spread over I'll call back in the queue. Excuse me, this is the operator. Mr. Rana, you may be requested to come back in the queue. Yes, yes. Yes, yes. Thanks. Sure. Thank you. The next question is from the line of Jignesh Kamani from GMO and Company. Please go ahead. Hi, Sifan. On the Vietnam, we are operating at the Optimum level and even after July, the capacity of 3,000 probably We usually utilize in say 6 months or 9 months. So any plan to double the capacity expansion in Vietnam because we already have all the infrastructure in place? We are working on it actually. So maybe soon you will hear that we are Doubling the capacity. We are also evaluating the Visibility of order book for that, we already have something concrete that is coming up. So maybe We will initiate, we will start the expansion in Vietnam by about September also. And it will take around 1 year to complete, right, once we initiate. This may not take 1 year. Our supply time of equipment is one factor that is there during these COVID situations. Outer would be 1 year. Otherwise, we should be able to implement within 9 months' time. Sure. And second thing on the small pack, How was the small cap volume growth rate in this year end with considering capacity expansion? How will we small cap volume growth for the next year? In fact, we were able to compensate some of the lower utilization of freeze dried with our small packs. So The small packs, the packing plant erection was delayed because of this COVID situation and all that. But By that time, we have already procured the machinery for the packing plant. So we were able to put those into operation and enhanced our small pack capacity this year, because of which we were able to compensate the pre drilling reduction in pre drilling turnover. Going ahead, already we have spread the substantial visibility for our small packs in Various markets, not I do not wish to mention specifically, but various markets, we have already created a visibility for small packs. So we are expecting for at least from the second this year By around August, September, we will be on full scale small pack capacity and we will utilize it for the full for the peak seasons are starting from October. Next year, we should be doing optimum utilization on small pack capacity as well. Understood. Thanks a lot. Thank you. The next question is from the line of Dheeraj Shah from Philip Capital. Please go ahead. Good afternoon, sir, and congratulations for the great set of numbers. Sir, if you can share the revenue and profit figure for Vietnam as well as resilient facility? I could not hear. No, I didn't hear, Andy. Hello? Am I audible? Yes. Now can you just repeat? Sorry, if you can share the revenue as well as profit figure for Vietnam as well as Switzerland facility for FY 2021? Vietnam, I think we did about INR 375 crores turnover, with a profit of around INR 85 Switzerland anyway Switzerland it is a trading house only. We did a turnover of 180 crores. I think the profit was about 7 crores. 7 crores. 7 crores. So this INR 180 crores includes a sale from India, right? So I wanted to know the value addition part. So net to net, I think the value addition was about INR 20 crores. 25. 25, Andy? Yes. 25 crores, of which 7 crores is the product. Okay. And so what would be our edge spend target for current year For our domestic business? Approximately INR 12.5 crores. Okay. And what if parent company would be contributing? This is what parent company has. Okay, and sir, for the oral business, sir? Oral ad spend, is it? Yes. Somewhere around the 15 to 20 crores. Okay. And so what will be the CapEx for FY 2022? FY 2022, as of now, whatever we are online, we will be concluding them. The packing plant will be concluded. And the line balancing of Vietnam will be concluded. Once we conclude our project cost and debating on the delivery schedules, if we are going for Vietnam plant, then that would be there. If at all we spend anything, it should be in the shape of advances and then initial amounts, which could be in the range of about $8,000,000 to $10,000,000 this year. Okay. And so lastly on the debt part, sir, we have seen the sharp rise in short term debt. Yes, sir. Yes, there has been an increase, I mean, See, this is a twofold thing. We are a company where we cover our raw material, etcetera, on a back to back basis irrespective So if you have seen our inventory, particularly our green coffee inventory has gone up Essentially, because we have concluded the contracts for the next year. So we had to cover those green copies So not to get hit by any price fluctuations. So because we have to if you have seen our inventory levels have gone up. So to get those inventory levels, the additional borrowing on the short term was taken. Okay. And so any debt reduction plan for current year? Anyway, there is a repayment schedule of approximately L84 lakhs repayment is scheduled this year. So it will come down as such. Okay, okay. Thank you so much, Sudhakar from my side. Yes. Thank you. The next question is from the line of Akhil Parekh from Elara Capital. Please go ahead. Hi, Sishan and team, many congratulations on a Good set of numbers. Just a few questions from my side. One is on the small pack. How much is the capacity right Now and how much we are expected to increase starting of Q1 of 2022? And second is on the volume front, if you can guidance for the U. S. Market. That's all from us. Thank you. Last year, I think we have used about 5,500 tons small pack. The capacity that we are installing is for 12,000 tons. It will be available for full CCL production somewhere around the Q3, I mean, towards the August, September of this year. So we should be utilizing almost the same capacity this year So, year subsequent, it will be more. And the second is U. S. Guidance. Yes, just on the sorry, just a small pack, you said from 5,500 ton will move to 12,000 ton. 12,000 tons is the initial capacity being created. Okay. Karan, last year we have done approximately 5,005 tons Fine return on small packs. And this year also we should be doing more or less the same figure or a little more. The optimum utilization will come from for next year. This year we have to install those machines and all that is there. There will be some small disruption in small pack capacity this year. Got it. And for on U. S, Bharat? Yes. As far as U. S. Is concerned, we've been as Prashant mentioned earlier, around 15% of Our production is going to the U. S. Market. So we are consistently growing that volume. There are a lot of new initiatives that we are taking over there. And till now U. S. Market has always been only a bulk market for us. Slowly that is transitioning. Last year, we were we We've actually introduced our cold brew coffee in the U. S. We're the only company in the world that can actually make this particular product And that became a really big hit and we got an order for almost 20 containers, which was fully executed in small packs to one of the largest supermarket chain. Seeing that, we've actually started getting inquiries from and other parts of the world, where they've seen these products in the U. S. And they've asked us to introduce in their respective countries as well. Similarly, we are getting into more of small packs in the U. S. Market We are having tie ups with several organizations to start introducing small packs. So there's a change. This is a more long term effort that we are looking at. Bulk is being extremely competitive. So that's one of the reasons why we are going more towards the specific qualities and specific brands in this particular market. So all these efforts will keep giving us better dividends in the long term. Sure. Just to tie up the things, basically as we go ahead for next 2, 3 years, we'll see a higher contribution from the small pack and which hopefully should help get us better realizations. Yes. Okay. All right. Thanks a lot and the best wishes for coming Thank you. The next question is from the line of Rohan Gupta from Middle East. Please go ahead. Yes, hi, sir. Good evening and many congratulations for this fantastic set of number. Sir, just one clarification first On both this very solid margins in India business and the weak performance of the subsidiary, if you can just once again elaborate a little bit more on that for the current quarter, sir. Current quarter, I mean, the subsidiary business was in the normal course. Since we were focused on recouping whatever was lost in the first two quarters and all that, We've and as you know, we have been telling that the freeze dried inventory has built up and then we are having problems initially with Supplier's rescheduledment and subsequently with Logistics. So we made an earnest effort and got this two things solved. And also during this year, Particularly as I told you, towards the second half of the peak season, The customers would want to get the packaged products so that they will not have time to get it repacked elsewhere. So we were doing A fact the product also from here, both these have contributed to higher gross margins. So vis a vis the other expenses, there will be an additional tracking cost also. So if you deduct that, it will look normal only. So in respect of small packs, the turnover looks higher And there will be an increase in packing costs also. So you are seeing that the small packing has been done more in the India Rather than in Switzerland and that has led to The entire small pack capacity is in India only. It is not there in Switzerland, it is not there in Vietnam. We are contemplating to establish small pack capacity in Vietnam in due course. But currently all the small packs are done from India only. Okay. Okay. Okay. So this current trend which you have observed that customers demanding in a ready pack and in a small pack, so that is more to do with The current pandemic scenario or it's more of that where we have been able to take the higher market, higher share in the Seasonality also. See, you will not have time to get a bulk product, get it repacked elsewhere and then get it to the supermarkets and all that. Instead, we supply the direct product, in packed form which can directly go into supermarkets, it will be Better for him. So he would be rather willing to pay a little more price there because he will be avoiding an intermediary there. This may not be a case with the Q1 or Q2, which are lean periods, where you would look for competitiveness and other things. So we have to take the overall thing on a year Y o A basis. But on last quarter, we will have this small advantage. You will know this is a spot crisis kind of a thing. In the peak season, the spot prices will always be higher. Okay. That's helpful. The second question is on the green coffee prices, which has been surging. You mentioned that it's a robusta prices more or less are likely to remain flat and it's basically Arabica where one can expect the higher prices. So the inventory, sir, You are right now sitting you are sitting on a huge inventory of green coffee. So do you think that we are not going to see any sort of Price led growth in FY 2022 despite global green coffee prices are continued to surge? No, but if see, tomorrow I am concluding a contract, I will take tomorrow's price in the tomorrow's slices and inflated price. Obviously, it will go into the pricing. But our experience has been that when there is an inflationary trend in pricing, obviously, Customers would want to wait for a while to reduce the price and conclude the contract. Similarly, it also happens that during the times when The prices are in deflationary trend. They would want to conclude major contracts, but we will have to basing on the material availability at those prices. So these things will be going on, on a continuous basis. And in a period of 1 year over a period of 1 year, all this will get neutralize. More or less neutralize, maybe at some point you will might see a little increase or decrease in the turnover level. No, no. What I wanted that generally in our business as you rightly mentioned that Mr. Gupta, we may request you to come back in the Q3. It was just only clarification on the same thing, if I may proceed. Yes. Okay, sir. Yes, Pankaj. Sir, I was just saying that the green coffee prices, you said that you are on a huge inventory now. As you also mentioned that as per your business model, you generally enjoy the per kg margin. So the green coffee inventory which you are sitting, I expect, It is not on a speculation. It's basically driven by the increased order from the customer, right? So when your customer has already given you order, You are already sitting on a green coffee inventory. So even the green coffee prices have gone up, it will not get reflected in our revenues or the price led growth. So the green coffee that I have covered on is in our frame, physically available with us or available overseas Yes, against the concluded contracts. So those contracts will have this green coffee price only. I will not have any additional advantage or disadvantage on the subsequent prices. The one thing that is an indicator is if I have a large stock of green coffee with me, That clearly indicates that for the next year my order book confirmed order book is substantially better. Exactly. Yes, correct. So that is what we have to take into account. Right, sir. Right. That's what I was Just wanted to conclude. Thank you, sir. Thank you so much. I'll come back in queue for any follow-up question. Thank you. Thank you. The next question is from the line of Amit Prade from Antics Stock Broking. Please go ahead. Good evening, sir, and congrats on good set of numbers. Ma'am, most of the questions are answered. But lastly, on this clarification of MEIS scheme. So, sir, there is a replacement scheme called RODPEP. So any clarity on that filter? What could be the rates or any update on that side? It continues that the UAVs are not eligible? No, you're not eligible. But about the new scheme, They are yet to come out with the modality. Yes. Currently, we are the revised Theme is not applicable to EOEs and SCZs. Okay. Okay. And they have to come They just mentioned that, but they did not come out with the detailed modalities on that. So we are awaiting that. Having said that, we have an accumulated Amount of about INR 27 crores or INR 28 crores towards the MEAS for the exports already made. We are expecting that substantial part of it can be realized during the current India. Got it, sir. Got it. And one more question. Sir, our volume guidance of 10% to 12% despite on a low base of FY 2021 wherein we lost almost 1st quarter and Q2 FDC volumes and on the back of our new capacities coming in Vietnam from Q2 onwards. So Is that a conservative number or you believe that there will be pressure on SBC products globally Any trends emerging due to people considering more of our LDC products and instead of FDC? Any color on that side, Ajil sir? Yes, I understand. I agree that the base number is lower, the denominator is lower, but The conditions have not improved as of now. Suddenly, again during this year also this pandemic and lockdowns etcetera are running. So we do not know what is going to happen. That is why initially on a minimum scale if we recoup whatever FDC, etcetera, we have lost last year that will account for that 10% to 10% that we have been telling right now. If things are proving better and the business can be done much better, then we will revise the numbers. We will review and revise the numbers in September after 2nd quarter. Got it, sir. Because with easing of logistical concern and maybe lower customer deferrals, I think we can do much better in what I believe. That's it for my question. Thank you and good luck. Thank you. The next question is from the line of Sameer Deshpande from Fair Deal Investments. Please go ahead. Hello. Good afternoon. Congratulations for the very good numbers. Actually, I wanted to know regarding this MEIS, you mentioned that INR 28 crores are accrued and due. So have we accounted for that 28 crores in the current year's income? No, right from the beginning, because this is a Great. Given after realization has come and then we get a script sanction from the DGFT and currently VSTZ. Right from the beginning, we have taken a policy wherein we are accounting this On cash basis, only upon realization we are accounting this. We are not accounting them on April basis. Okay. So, in that 20 24, maybe I found it for in the current year that is 2021, 2022, whenever it is issued? No, my experts have Stores have gone in current year and last year, I mean last year and the last year before, but the MAS has not been accounted on an accrual basis. So, right from the beginning, we have been accounting only upon on cash basis, only upon realization of this debt. Yes. So, whenever we As you rightly said, it will be accounted during the current financial year. Okay. And, Nirav, it will be we are expecting that we will realize and then As a terminal benefit, if the scheme is getting a 1, as a terminal basis, we will account for this. Okay. And this new rotates scheme May not be applicable to the company you mentioned, no, recently? No. So the modalities are to be announced by the Ministry We are waiting for the guidelines about the new scheme and its applicability and benefits that we derive out of it. Got you. So it is not yet final also? Okay. And Europe was particularly Italy, Germany or France, all these we are facing lockdowns, so the restaurants etcetera were closed for a long time. So with this reopening, Do we see any better growth for Europe for us? In fact, last year also, we did not face a major drop down in our European exports, but definitely With life coming to normalcy, there would be improvement in the growth. Okay. And how much is the European Contribution to our total sales? Normally it will range between 22% to 25% in our Total Exposure. Thank you and all the best. Thank you. The next question is from the line of Vinay Jariwala from Sunniva Securities. Please go ahead. Yes, sir. Thank you for the opportunity. The question is on the branded business in India. So I just wanted to understand what is the size of the market? What is the market share and our distribution reach. So the total instant coffee market is around INR 2,000 crores. And as I told you a little while ago, our branded business was almost INR 100 crores. So we are close to 5% market share. There are pockets where we are doing better than the overall average, wherein we are more than 5%. And every geography we are witnessing good growth in market share every quarter. So that's on the market size and market share for us. Okay. And how about the distribution rates and what would be the total distribution? Yes. So we currently are directly reaching around 1 lakh outlet, 95,000 to be very precise. Of Of course, our distribution expansion did take a hit because 1st 6 months we could not do any distribution expansion. It's only in the second The Q3 and Q4 we started and considering the kind of situation it was difficult to do distribution expansion because Difficult to find the right set of distributors in this scenario. So that's the that's the reach direct reach that we are having right now. We are looking to substantially upscale this and probably end the next year at around 1.5 lakhs outlet lease. Understood. So you said direct is about 95,000 outlets, but what would be the total REITs? Total briefly, we don't get that detail this thing. And right now, we are a very new brand. So generally, the indirect reach for new brands and brand, which have just started. Their journey is not substantial. It's only at a later stage when the brand gets started to They started to get that pull from wholesale market that your indirect reach will go up. But if you were to ask me to put a finger on a number, it won't be more than 10000 to 15000 currently. Understood, understood. And how does Sorry, yes, sorry. Yes, please go ahead. No, no, sorry, please go ahead. No, I was saying that generally one would look at a 1:two kind of a ratio for an indirect REIT, especially for very small packs like SAS. But as I'm telling you, as we go along, as we pick along, the indirect reach will start going up as well. So our reach of roughly about the lakh outlet? Yes. The 2 large Excuse me, this is the operator. Mr. Jainimalam, maybe I'll take your question back. Your voice got cut in between, so I couldn't hear you. Can you repeat that? Yes. I'm saying, our reach of about 95,000 outlets, how does that map against the 2 large players? Where would their reach be and Their reach will be direct reach will be anywhere between 5 to 7 lakh outlets. Direct reach and then indirect reach would be beyond 10 lakh outlets, 10 to the 12 lakh outlets maybe. Understood. I'll come back in the queue. Thank you so much. Thank you. The next question is from the line of Jignesh Kamani from GMO and Company. Please go ahead. Hi. The government recently announced a PLI scheme for the food. So is there anything for the coffee sector and for the in the PLI scheme and are you exploring anything on PLI scheme? So PLI is not applicable to us. We are not falling into this scheme. And We may based on the announcements that have been made so far, we may likely to fall under the remission of duties and taxes scheme, but The scheme is yet to be finalized. Okay. And on the Duggarel plant, we recently done the upgradation. So anything beneficial in terms of production volume go towards reducing the manufacturing cost? No, it will improve the of course, it will add to the margin anyway. It will improve the productivity, in fact, yield parameter and other things. It will not directly it's not a valued expansion. It's not a Quantity expansion, there won't be any additional quantity that will come, but there will be a cost reduction and perhaps a little more Yield It's basically optimization. Understood. Sure. Thanks, Laurent. Thank you. Next question is from the line of Manish Mahabal from Antics Stock Broking. Please go ahead. Yes. Hi, sir. Just most of the question will be answered. Just one two questions actually. 1, In terms of FY 2022, you have given a guidance volume guidance of 10% to 15%. So basically, your margins will be better off in FY 2022 versus FY21 because what I believe FY 2021 your spread rate was gone up because of the U. S. Customer as well as Vietnam and your fees rate was lower because of progression demand. It should improve in FY22, right, sir? Yes. Surely, if we are able to improve last year freezing Capacity was lower. So if we are able to improve that fee staying capacity, margin profile will also go up. And also this year, we are anyway adding small pack capacity and if we are doing any incremental thing on that, it will also go. So this is a continuous process of improving the margin along with the volumes. So we addressed this on both 1 is increasing the volumes, 2nd margin improvement in margins as well, which will contribute by way of additional Freeze right in the product mix as also the small pack capacity. Okay. And second question in terms of CapEx Stan, you basically said that whatever pending plans we have, which will be executed in the next year, FY 2022. So what will be the cash outlay in the next year, FY 2022. It is likely to there is a balance CapEx, It is likely to be around 50 crores to 60 crores. 50 crores to 60 crores. And capital WIP, which is Standing below 148, right, which you will be referring. Right. Okay, understood. And last question, sir, if may I may. What is the can it possible share the volume growth for this year end of 4Q. I'm not asking for an absolute number, but growth, volume growth. Considering that the green coffee was more or less flat to Around 10% for the volume growth. For the overall, for the year. Okay. And for 4Q, any chance to share? Pardon? 4Q for the 4th quarter. I will find the exact specific details. It will be again counterproductive for us. Okay. No issue, Shrihen. All of that and maybe I'll discuss with you on offline. Thank you. Thank you. The next question is from the line of Rahul Maheshwari from Ambrell Asset Management. Please go ahead. Good evening, sir. Hope I'm audible. Am I audible? Yes, you are. Yes. So good evening. Hope all is well at your end. Sir, just two questions. First on the as you mentioned that the inventory is high and there is a strong demand which has been booked for the next year also. So can you I like that how many during the year not by naming it, but in case any client which has got been canceled or is just a deferment that has taken place and anything which you want to share or highlight a color on Any number of clients which has been added or which are in the pipeline which can be added going forward in next 2 to 3 years? Because once you had mentioned that It takes an entire it's a long process to get a client on to onboard it because it's a long end relationship which is there. It will be very helpful to know us a qualitative statement on this part. Pradishant, sir? Yes. So during the last 1 year, most of our customers, what We have seen is they're not looking at making any drastic changes. Nobody wants to take too much of a risk during this COVID times. They want to work with people whom they know or already have an existing track record with. So we are not seeing too many changes from customer side. And fortunately, in light of the fact that everyone has had one full year of experience with COVID, They're able to project a little better and give us the volumes as well. So we don't have any cancellations till now. There's No 4th formulae that everyone has asked for. So hopefully things will improve going forward. Sir, just to ask a follow-up on this, as you mentioned that there is a transition taking place from Bulk to move small packs and value added. Can you give some kind of cross sell that the existing client which is there from so many years, Any rough way how much is the base product and how much is the value added product so that it helps us to know how the margin accretion journey is taking place In fact, Karan, last year was the 1st year in which we have initiated the small pack capacity on a larger scale. Most of the small packs currently we have marketed are our new customers in essence customers who have been acquired for the past 4 to 5 years. Recently, we have Received inquiries from our existing customers like Stas and other who are the long term customers with us. Everything interests on the small packs as well. So the small packs actual Kumar base will only get to evolve on a clear basis by next year, wherein we are expecting that we would be able to optimally utilized. So for the current, we can say that we would be making an effort from going from around 6,000 tons of small pack capacity to 10,000 tons of small pack capacity in 1, 2 years to come. Sir, just while supplying to this 1 cap packs to the existing client, The realization wins would be approximately at least more than 5% or it's Generally, the normal I mean, it again is a complex thing because the SKUs range from 0.8 gram, 2, 1 kilograms 2 kilograms porches, all varieties of packing and all that. Generally, on a ballpark figure, you can take Approximately $1.5 to $2 as the value addition. Okay. Okay. But just lastly, I ask, if you don't mind, sir, please question. Go ahead. Hello. Sir, as there would The addition into the Vietnam capacity which you are which will be soon getting commissioned in the July end. So structurally in next 5 years, can we say that in every 2 years, there can be a capacity expansion that would be taking place Irrespective of Vietnam and India and apart from these two countries, any other country where Africa something which is there in Limelight. So just to get a sense that in periodic times, what is the ballpark number which you think that from 35,000 tonne capacity, You have a vision to expand to 55,000, 60,000 capacity in a long period tenure. In any Arab statement would be very helpful, sir. Following the day is I've been telling for the past 1 year, 1.5 year also by around So now we are in 21. Around 24, we plan to reach about 50,000 tons sale capacity. Our production capacity would be slightly higher to that say, 55,000 or 60,000. And we wish to reach So, anywhere between INR 130 to INR 135 on the EBITDA margin. That is the goal on which we are working. How do we do it whether in Vietnam or in India? Currently, we have an infrastructure both in Vietnam and in India. Hi. If our spray dry requirement will go up, it will be in Vietnam. If the freeze dry requirement goes up, it will be in India. So we will be looking perhaps at the other locations after completing the expansions in these two places. Yes, there are several plans on board, which are being discussed. But on this business, this is the broad picture for the next 2, 3 years. Thank you so much, sir, and all the best wishes to the entire team. Thank you. Thank you. The next question is from the line of Rupin Shah from Incred Asset Management. Please go ahead. Yes, I have a question for Praveen. For longer term perspective 2 to 3 years, for India business, what kind of top line we are aiming? And any guidance on EBITDA margin like once you can expect for 2 to 3 years to prospect you, say, FY 2024 or FY 2025? Things have become a little fluid as of now because a lot of things hangs in balance, how things would pan out. Like for example, we did well this year and we achieved a top line of INR 150 crores. If things would have In normal, we would have expected current year definitely to touch 200 crores. But having seen the first pandemic, things are already dicey as of now. Going as far as long term, last time I had said that probably last year, So I said that 3 years we are looking at a 2 50 crores top line turnover, which looks we are pretty much on course for that. And this year, we should be breaking even in terms of EBITDA. We had to break even last year itself, but We did have a little bit of adverse impact because of higher Indian coffee prices. But going forward, yes, so this year we should look to breakeven. I cannot put a number for EBITDA for next 3 years, But definitely in previous time we are looking to cross that milestone of the 50 crores top line. Very nice. Thank you. Thank you. The next question is from the line of Vivek Tulshyan from Newmark Capital. Please go ahead. Yes. So thanks for the opportunity and I think this question has been asked multiple times. But what I'm trying to do is I'm trying to Subtract the standalone numbers from the control numbers to get to the subsidiary performance. And in that, I think what we are seeing is the gross profit margin has come down and the overall EBITDA margin has also come down. And the growth is also much weaker than what it was in the 1st 9 months. So just wanted to understand what could be the reason behind this? Yes, you can say that because of So, low volume of the Epi sales, there is a slight reduction in the standalone performance. No, I'm talking about the subsidiary performance. So if you subtract the standalone performance from the console, you get to the subsidiary numbers. And in that, we are seeing that 1st 9 months the business was growing well because of the reason because our Viasma facility was doing very well. And then suddenly in this quarter, we see that the growth is not very strong and the margins have also eroded substantially. Shall we take the next question? And Shanmakaradu, do you want to say something? Name, notice failures actually, Avi. No, basically what happens is in the 1st 9 months, because of the high volume of Sales are now from subsidiary companies, especially from Vietnam. You could notice the more high volume of the value on volume of the sale. The Q4, we could witness a good amount of wholesale from Indian operations. Because of that, we could witness that there is a less sales from the subsidiary side and more sales from the standalone side. Understood. And our other Seltzer also almost doubled in the subsidiary. Is that because of the India business where our India business has grown well? So Does that increase our other expenses and does that also impact the EBITDA margin? Yes, basically, you've all witnessed that because of the high cost of the transportation, sea freight and all, We all witnessed that in the export market, the fee freight charges have gone up substantially and also the second category is due to the packing material. These are on the 2 components which we increased in the Q4, the expenditure. Understood. And the packing material cost would be relevant for the Vietnam market also that is because of the India B2C business package. Yes, it is from the B2C business in India, not from the Vietnam. Understood. Perfect. Thank you so much. Thank you. The next question is from the line of Lokesh Mani from Valen Capital. Please go ahead. Yes, good evening. Thank you. My question is for Shishant, sir. If you can just you've given a brief update on cold brew coffee in U. S. If you can just elaborate a little more in detail in terms of This was also supposed to be a product where we could introduce in cafes. So any progress on that front? Actually, yes, we've had some good progress for cafes also, especially cafes which are serving micro cold brew. So for them, this product has been a huge favor. Earlier the process they used to follow was to make the cold brew physically and it used to take 16 hours and the shelf life So this version that April 2 will give even the Nitro Cold Brew at a much more economical cost towards to the customers. Unfortunately, because most of the cafes throughout the world are still under lockdown, there hasn't been that much It's something that you consume in a cafe, not something that you would want to take as a takeaway. Right, right. That's one reason why it still hasn't we still didn't get the volumes that we were expecting. But once things open up, they're hoping those volumes will start coming in. In the U. S, we've actually Got it. Now people have seen the product, who's tried the product, a couple of guys who've actually approached us asking us for exclusivity, Saying that they'll give us at least 1,000 tonne sale and all that, but we haven't accepted any of these offers Because it means that we will be tightened with them and our margins will be limited successfully. So we thought it doesn't matter, let us grow slowly, but we'll grow steadily. We have the ability to approach all with this product because it's a very neutral product and because they're the only ones who have it, we can easily Okay. So, that's the mediums and take things forward. So, you would be approaching the big change as well? Yes, we are actually already supplying to the big chains through some resellers, our customers, People whom like our customers in the U. S, they are confectionery companies, liquid coffee companies, they buy the powder from us and they supply McDonald's, Wendy's, you name it, all the major chains, they buy from these guys. So, we keep developing new blends and product for these chains all the time. Okay. So this is one project that we are undertaking as well to institute over there. Earlier they were buying mainly in liquid format. Now we are trying to convince them to buy in solid format itself. Okay. And any timeline in mind, sir, where you would see this scale up or pre come from the response that you're seeing Your experience with this new product acceptance. The new product, the volume increase will decrease gradually. This not going to happen overnight because it's a new product, everyone wants to see what other guy is doing. Right. As our executive team, they also want to cooperate at their end. So this whole process will take time. Once we started in the U. S, We've got inquiries from UK, Taiwan, Korea, Japan and China saying that they want us to they want the exact same product in fact. Okay. So it's not that we even tried to market. We didn't even think that these other markets actually would accept the cold brew. A lot of these countries, they try to ape what the U. S. Is doing. So they've started Floating inquiries for us and now we started sending samples across all of them as well. So the real volumes will start seeing only when the Institutional segment really opens up and the cost structure now starts operating normally. Okay, understood. Thank you so much and that's it from my end. Thank you. The next question is from the line of Anuj Jain from Value West Capital. Please go ahead. Hi, thanks for the opportunity. I have like couple of small bookkeeping queries. Are we capitalizing any of the interest expense? This year whatever some of the equipment we have put to use, wherein almost around 1 point 7 cycles of interest which can also capitalize this year. Okay, understood. And what is our cost of borrowing in India and in Vietnam? Hello. Am I audible? Yes, you are, sir. Hello. Can you just repeat the question? Sure, sure. I was asking what is the cost of borrowing in India and Vietnam for us? Hello. Sorry, the line got disconnected. Now I connected now. Sure. Am I audible now? Now, yes, Rajiv will. And I have a question. The cost of funds in Vietnam, it is 1.2% And in India, it's 1.5% working capital cost of funds. Okay, understood. Okay, okay. Thanks. That's it. Thank you and all the best. Thank you. The next question is from the line of Sauravith, an individual investor. Please go ahead. Show with an investor. Your line is unmuted. Please hold your question. With no response, we take the next question from the line of Rohit Narpal, an individual investor. Please go ahead. Hi, good evening. Just a couple of questions. Channel checks seem to indicate that you reduced a lot of your discounts promotions at least on the online platform. Would that have contributed to the lower losses in the domestic business? And do you see sales sustaining given that we have reached mid May? Yes, in fact, in most of our calls, we have mentioned that while we started with higher discounts to You know attract consumers and increase our clients. As we go along and the brand building happens, we'll slowly start reducing the Offers and Discounts. And we haven't seen any sales drop, which primarily speaks for 2 things. 1 is The affinity towards the brand is good with the consumers and they have liked the product. So going forward also, we look forward to keep reducing the discounts and offers and we don't see any there should be any impact on sales. So given as a consumer, I am complaining, but as an investor, I'm very How is the performance been in Switzerland vis a vis last year? And Is the business expected to be the coming year business as usual or are we looking at something substantial on the turnover side? Switzerland, I think, business, they are able to get trading business, trading to a central extent. This because we are having a custom bonded warehouse, So it has become easier on the logistics and on the taxation aspect also. So we can expect a little more Betterment in the going ahead on a continuous basis, betterment in the Switzerland business. Okay. That's it from my side. Thanks a lot and congratulations on a good set of results. Thank you. The next question is from the line of Jay Amora, an individual investor. Please go ahead. Yes. Just a couple of questions. So, I mean, like when can we actually attend a good scale on the Indian branded business? And once we achieve that, is the margin profile will be, I mean, same like as it is right now, like 25% to 30% or something like that? Hello. Yes, Praveen. Yes, we can hear you. Mr. Praveen, do you want to Okay. So my question And was that when can we achieve that scale in our branded business for the Indian market? And once we if we happen to achieve the scale, Like what would be the margin profile that would look like? Will it be similar to our current margin profile? Praveen, are you on the call? Mr. Praveen, please unmute your line from your side. Sorry. Sorry, my mistake. Can you hear me now? Yes. Yes, yes, yes. Yes, sorry. So what I was saying is that considering the fact that we have achieved 150 course last year, out of which 100 crores was branded business. In 3 years' time, it's been a reasonable scale to achieve. I think very few Brands achieved this kind of scale in such short period. So as I was telling in the earlier in one of the earlier questions as well, wherein a couple of years we are looking to get to around INR 250 crores or so. And we'll keep growing, Maslod, and There's no letting down our guard no matter what turnover we achieve. And as far as margins goes, definitely as the proportion of branded business keeps growing and the strength of the brand goes, We are able to offer lesser and lesser discounts in the market. That will definitely improve our margins from, say 25%, if you go to 35% in couple of years, that's our target. And then we'll see how to take it forward, What kind of premium and what kind of pricing we can command in the market? Right, right. And you also mentioned about So distribution network, it is currently 95,000 and you should scale it up to 1.5, but when can we achieve I mean, is there any internal targets to achieve that 5 lakh or 7 lakh kind of mark, which You alluded that many of the big or the major players do have. So any color on that? We will be in the short period, we'll not be in a position to achieve what a brand like from Unilever or Nestle would do because their field force is large, their brand equity is huge. So all that comes in terms of how your and what is your reach. Considering that coffee is thankfully largely an urban phenomena and As I was telling you, most of our reach of 95,000 is direct. Now as the brand goes, we look forward to have a lot of indirect reach. So once the brand equity starts building, we look forward towards the wholesale market to help us achieve a threshold volume of just a number of outlets of maybe 2 lakhs and 2 lakhs, 50,000. Once we achieve 2 lakhs, 2 lakhs, 50,000, our weighted distribution will go up to 70%. I think that should be a good internal benchmark for it. So what I am looking at is weighted distribution rather than numeric distribution, Because if there is the right outlets, I think we'll be pretty much in a good space. Okay. Okay. Thanks a lot and all the best. Thank you. Thanks. Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Abhishek Navalgar for closing comments. Yes. Hi, sir. Just one last question from my side. If you could just tell us the e commerce sales number for FY 2021 from our B2C business? So e commerce at an overall level from the retail side, the branded side, we were approximately 5% to 7% Yes, of the total sales, which means it will be closer to INR 5 crores to INR 7 crores. But our exit numbers are very good. We are exiting at almost 8% to 10% of our retail sales are now coming from e commerce. So there has been a substantial jump in the volumes from e commerce B2C sales. Sure, sure. Thank you so much. So that's it from my side. So basically, I would like to thank the management for addressing all the questions and also thanks to the all the participants for joining in. Now I request Rishan sir for his closing comments and maybe we can close that call afterwards. Thank you. And over to you sir. Thank you all for joining us on this conference call and I hope all of you and your families are keeping safe during these fiscal times and looking forward to reconnecting again during the next quarter conference call. Thank you. Thank you very much. Ladies and gentlemen, on behalf of Nirmalsong Equity, That concludes this conference. We thank you all for joining us and you may now disconnect your lines.