Ladies and gentlemen, good day, and welcome to the Q1 FY25 earnings conference call of Control Print Limited, hosted by Asian Markets Securities Limited. This conference call may contain forward-looking statements about the company, which are based on the belief, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. Actual results may differ from such expectations, projections, et cetera, whether expressed or implied. Participants are requested to exercise caution while referring to such statements and remarks. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone.
Please note that this conference is being recorded. I now hand the conference over to Mr. Karan Bhatelia from Asian Markets Securities Limited. Thank you, and over to you.
Thank you. Ladies and gentlemen, good afternoon, and welcome all to the Control Print Limited Q1 FY 2025 earnings conference call hosted by Asian Market Securities. From the management side, we have Mr. Shiva Kabra, Joint Managing Director, and Mr. Jaideep Barve, CFO. Now I would hand over this call to Jaideep Barve for his opening remarks. Post that, we shall, we shall open the floor for Q&A. Thanks, and over to you.
Hello, everybody. Good evening. My name is Jaideep Barve, and I'm the Chief Financial Officer of Control Print Limited. Welcome you to the earnings conference call for the first quarter of the financial year 2024-2025. We appreciate that you've taken off your time from your busy schedule to attend to this call. Mr. Shiva Kabra, the Joint Managing Director of Control Print Limited, also joins me on this call. The detailed presentation has already been put up on our website as well as in the investment presentation notification on the exchanges for this call. Let me provide you some highlights of the performance of Control Print Limited for the first quarter of FY 2024-2025 on a standalone basis. On a standalone basis, the revenue for the first quarter is approximately INR 89 crore.
This is a good growth from the corresponding figures of Q1 of last year, which was about INR 80 crores. On comparison with the full year 2023-2024, the revenue was INR 324 crores. For us, pipes, homes, cement, FMCG and beverages continue to be the top sectors. Our performance in Q1 is promising, and the future pathways also augurs well for the company. We have created key business verticals approach as part of our sales strategy, which we believe will put better first in our efforts and achieve better success for us. The cost of goods sold is about 38% of the revenue in the first quarter. We see a marginal decrease as compared to the previous period. However, we can definitely hope for an improvement in reducing this, which occupies my strategies.
The EBITDA, PBT, PAT and EPS, excluding exceptional items, have grown by 15.24%, 15.42%, 14.55%, and 15.96% respectively on a year-on-year basis. The way forward is the change sales strategy to bigger and key accounts will definitely increase the revenue and also ensure good quality of it. We look forward to better penetration in the track and trace segment. We'll increase our global footprints by managing our overseas footprint facilities in an efficient way. Our install base will be increased, focusing on increasing larger market share. The floor is now open for questions.
Thank you very much. We will 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. We'll take our first question from the line of Saket Kapoor from Kapoor & Company. Please go ahead.
Yeah. Namaskar, Shiva. Namaskar, Jaideep, sir, and thank you for this opportunity. Firstly, in your presentation, you outlined about global market access and new product and technology introduction. Sir, if you could just re- where are we in terms of the... What are we trying to convey, and this is my first question.
Sure. Do you want to take that question, Jaideep, or we just go on?
Yeah, sure. Could you please take it?
No. So thank you, Saket ji, first, for attending the AGM. I think you put a couple of questions there. We thought we'll address it in this thing so that it all gets written down-
Yes.
And gets circulated to all investors. You know, it's easier that way. So, you know, obviously, the thing is, you know, we have been quite clear in past on-calls that the essential market, the, you know, or the natural market growth rate of the coding and marking business in a place like India, which is about 10%-12%, depending on the GDP growth rate, about 1.5-1.6 times GDP, you know, and that's the top growth rate that we would expect in the long term. And so we said that, you know, because of the structure of the company, we have multiple opportunities available to us. Now that we are confident in our execution within the Indian market itself, which is obviously the most important market for us.
That's, in the end, that's paying for all the bills. We had outlined as well for specific, you know, aspects that we were looking at for increased growth. One was to look at, you know, setting up coding and marking in some international markets. Plus, we had a disaster in Sri Lanka, and, you know, that's sort of and then COVID was there, so the travel was restricted, and, you know, that held some stuff up. Now, a lot of those plans that were made in the past, you know, and, you know, you're aware that travel gateway was also there, so we had already done some surveys and a lot of market things. Now we're executing some of those plans to, you know, expand in certain, other markets in the Middle East, Africa, and Asian countries.
That's part of our strategy. The idea would be that we can get a certain amount of growth, without really requiring, you know, increased resources to that extent. The second part of the strategy was to get more on the digital printing business. We've purchased Markprint, and this is about two something years ago. You know, that has been a bit of a slower, integration in that specific regard. But in the meantime, we have also, now, in this current year, integrated all the technology in the, in the previous year, and we're using some of those technologies in our own printers.
The Markprint price tag itself is difficult to sell in India, and definitely, so, you know, the one of the areas, just overall, I would say, is like to look at the digital printing market or to in the coding plus, so we can get beyond just, you know, date code, batch codes and, and, you know, other, statutory information. The third strategy was that we were looking at, you know, also the software, the track and trace and logistics side of the business, and that's something we also started with our V-Shapes division. We purchased sort of a, you know, on the entire team of another, you know, a startup which was missing. And then, you know, we invested in that business in the last two years. And, you know, that's, we are now doing reasonably well. It's picking up.
So that's definitely part of our strategy. It's mainly pharmaceutical focused. I'll, I'll say that, like, I'll say it's 95% pharmaceutical right now, but, you know, obviously, we also expect to extend it into other sectors over a period of time. So that's the third pillar that we had. And then the fourth thing, which of course is the major, the major investment, the V-Shapes opportunity that came along. And as you're aware, we purchased, I think it was like March end, March twenty-ninth or something, you know, the auction process got completed, and we officially purchased the assets of V-Shapes S.r.l., and, you know, it's run through our own subsidiary, Control Print Italia S.r.l. So, you know, and the packaging mono-dose market, what we felt was a very big market.
We've got something innovative and different, but of course, it's gonna take time for it to happen. So I think that if you ask me in terms of strategy, the track and trace is more developed, you know, where we should start seeing some, you know, good results this year. The digital printing also is gonna give us some results in India this year. Some work needs to be done internationally to expand the performance of that business in Europe. Some more sales strength needs to be added. And I think as far as the, the packaging business goes, like, like I said, it's gonna take at least two more years for us to see that in that type of thing. Even with all the other things, we are just building blocks, and we're not at the level we want.
But yeah, we are, at least I say, in the track and trace of the printing business, at a level where, you know, they're not gonna lose money, and maybe they'll actually even make profits, in, you know, this year. Yeah. And as far as the international expansion goes, it's something that has been a bit slow. And, you know, we have to, to go in the right structure. But that's something also we are working on definitely to see how we can expand and, and target certain other different markets of ours. So, so I think, like, with those two aspects, the international part and the, the packaging business, are gonna take more time to mature.
Definitely we should at least see positive results in terms of, you know, the digital printing aspect in order it adds to our existing business in India and elsewhere, and, similarly with, track and trace business. So I think that sort of covers what happens. Like I said, all these four things are separate things, all relate to our existing business, and they were all to increase the longer term, you know, targetable market and to increase our long-term growth rate.
Sir, when we compare our Q1 results, the standalone, the consolidated part, there is a cash burn of closer to around INR 4 crore-INR 5 crore. That means the PBT for the standalone is at INR 20.36 crore, whereas for consolidated it is closer to INR 16 crore. So what should be our run rate going ahead, taking into account the consolidation, which you just spoke about, the two segments which will start contributing to the bottom line and track and trace and the single dose part of the story and other aspects getting traction going ahead? What should investors pricing in, in terms of the variation in the profitability for the standalone control number?
So it's not difficult. It's not possible for me to predict this easily because both the track and trace and the printing, the digital printing aspects, first, which are gonna come, a lot of this is gonna come in our standalone results, because whatever we are selling in India is not in a separate subsidiary, it is directly by Control Print, so it be reflected in standalone results. But they are very lumpy types of sales, like you get a project, you know, for a certain amount of value, and then you get nothing for one, two months, and you get something bigger. And obviously, in the long term, as you sell more, you get more AMC business, more, you know, ink business on our printers and of course, you know, you get more of, of paper codes or something.
So hopefully it will result in more stabilized business over a longer period of time. But as far as, you know, the consolidated and the standalone results and the major difference you see, it's quite simple, it's because, in CT Italia, you know, I told you we purchased V-Shapes from an auction process. So it's something, if you really look at it closely, what we really bought was a technology, you know, a set of intellectual property and patents. That's what we really purchased. And we had to restart the company because, you know... And obviously, what we're doing is we've got a investment plan, and this year we had a EUR 3 million budget for V-Shapes.
So, you know, EUR 1.5 million is the basic cost of having the entire technology development team and all the expenses associated with running the company. One point one million euros was the R&D budget that we've allocated out there for this year. And then the remaining EUR 500,000- EUR 600,000 was for the marketing and sales and marketing, which we're still implementing people. So we don't have a sales strategy, frankly, in place as yet, because we still need to identify the right set of people, and we started doing that recently. So, but if you add it up and then subtract some of the sales that we made out there and, you know, the revenue we booked, so you, you'll see that, you know, we made approximately, like, the, the INR 5 crore difference comes entirely from Control Print Italia.
But, you know, so far, to me, that's part of the strategy. We knew that this was gonna happen. You know, it's part of the plan for us to invest in it and to grow that business. And, obviously, as far as I think what is gonna happen in the other businesses is that they were negative and I think they'll be breakeven or positive in this year. And the bigger investment that I see, I mean, obviously, like, in the end, we are probably gonna look at standalone Control Print for the marketing business to generate the cash flows to, you know, make sure that everything runs profitably and without affecting the overall results.
But again, like I said, this is a planned investment, so, you know, we have to go through that phase to grow the business, because that's what our target is, to make this as a platform, and we think it has the same scope, if not bigger than what Control Print is currently doing as itself.
Sir, I missed your last two sentences. I missed.
No. I said that for us... I'm just trying to say something that Control Print was built over 35 years. I mean, I don't know-
Right.
when it started myself, I think 1989 or something.
Okay.
So this business has come over 35 years to this position. Even if you look at what happened, you know, it took years for the market to be established, you know, for it to become, come to that level. Of course, the whole Videojet thing happened, and it restarted. So it's so what we are trying to do in the packaging business is, we believe the opportunity is there. Of course, as I've said, it's a high risk. There could be that it might not be the opportunity, it might not be successful. All these things are there.
But what we're trying to do is find out the answer as to whether we—this can be a business of similar size and profitability as Control Print, but do that, you know, in a three, four, five year period, for which we need to put in more money, you know, to invest and grow that business fast. Because we don't obviously want to build that business over a 35-year period. And anyways, the patents will expire in 2034 or something like that. So we have to move and create our markets or 2036 before then, and, and dominate that market. So the idea is that we want to create a platform in the packaging machinery business around the patented IP that we have, similar to what we are doing with our thermal inkjet or our laser.
We've got a few key patents in there, that's why we are focusing more and more on fast growth business, especially the international business. And it's the same thing out here, where we've got some intellectual property and, you know, which has, you know, a high value product. And we feel that if we market it well, if we sell it well, we do everything well, you know, like I said, there is a chance that this business could be a strong platform. Again, like I'm saying everything is filled with risk, you know, so obviously this depends on my judgment and most importantly, our execution. But, you know, this is what we believe as of right now, and that's why we are investing in that business. And we're still growing the R&D, we're still doing more things out there. And, that's the idea.
But fundamentally, the INR 5 crore difference is the INR 5 crore loss between, you know, that that went on CT Italia.
Okay.
It's between the consolidated and the standalone statement, if someone is asking me that, but the budget is there, so till the sales don't keep increasing in that subsidiary, till the machines don't get sold and that time is gonna take to get rebuilt, you know, there will be losses because there is a budget of EUR 3 million and, you know, so if you divide that, we're spending EUR 750,000 out there a quarter, which is, I think about INR 7.5 crore over... I mean, what, something, give or take a little bit here and there, the exchange rates and all, something INR 7-odd crore or whatever quarter. So if you're losing five, that means we only made a poor core gross margin of two out there. I mean, if you take a straightforward, you know... set of calculations.
So just to summarize, this will be the run rate for the quarter, every quarter for this year, since we have budgeted it. So every quarter we are going to see this phenomenon till we reach a critical mark.
I couldn't hear that very clearly, if you could-
Sir, I was commenting that this would be the run rate going ahead, since you have budgeted for the year for CP Italia, Italy. So for a quarterly basis, the run rate is going to be in the mid of 7, between INR 5 crore-INR 7.5 crore. That should be the run rate for this financial year, since you have already budgeted for the same.
I'm talking about the expense that we're incurring.
Yes, sir, I'm also-
Because I don't know what we're going to get.
Huh, but expenses, expenses have been budgeted. Yeah, yeah, that is what.
Yeah. So I'm seeing the... So the INR 5 crore loss that there is because we budgeted an expense of close to INR 27-INR 28 crores, which is part of our planned budget, which we're spending over each quarter. And, you know, we feel we are on target with what we want to do. Of course, we want to do a few things faster in terms of getting certain things up, in terms of certain sales and marketing activities, in terms of certain developments, but we are on track. And this was part of our plan to spend this much every quarter this year.
Mm.
In that respect, we are doing that fine. But we also-
Right.
Like, like I said, it's gonna take some time to get everything back in place to understand what sort of market we're doing. And don't forget, this is the investment in CP Italia. We're also making equivalent investments in India also, you know, to make sure that the business is also... Because the entire Asia-Pacific and Africa is going to be controlled by India, and the, you know, CP Italia is going to be more used for marketing in Europe, the European region.
Right, sir. For last point, I join the queue, for the domestic market, since we have a long discussion about our investment, how are you seeing current year in terms of the consumables contribution in the total pie, since now we have a threshold number of 19,000+ printers? And also, if we see an uptick in the economy in the second half or going forward since Q1 numbers looks on the right track. So this year, can we look to be closer to that 400 mark as being emphasized by the board earlier? And also, if you could give some more color how the consumables percentage or contribution is likely to be for this financial year.
You see, Saket, there is no change in our gross margins at all at any product level. You know, what's changed in different situations might be the type of allocations or investments we are making, which can affect the profitability. But, you know, on the gross margin, whatever products we sell, we don't really, you know, we're not discounting them or we're not seeing any change in margins out there, neither is our plan to reduce any margins anywhere. But like Jaideep said, we, for the first time, are looking at certain cost optimizations. So we'll see whether we are, you know, how practical they are. We'll discuss that internally and see whether that can be done or not.
Right.
Yeah, so I think the first quarter, if I remember right, we released some INR 88-INR 89 croreS at the end, which was, you know, slightly below expectations for me, personally. But I think, you know, it's very difficult to see in our business in a single quarter. The pipeline is good, so I don't know if it's like, you know, we were unsuccessful or, you know, we were just a bit unlucky and a lot of orders will slide into this quarter. I wouldn't say anything, but I think that definitely, you know, we obviously still aspire to meet that INR 400 crore target this year, you know? We definitely still aspire to meet that target.
Okay. Sir, I'll join the queue. I have some general details more from Jaideep. I'll join the queue once again. Thank you.
Definitely. And if there's specific numbers that people need, like, you know, or some very specific details, because I don't know what comes in the presentation, what's different, but you can definitely check with Jaideep. But if people even ask that in advance, then we can always prepare it and submit it to everyone, the presentation or during the meeting.
Thank you. Before we take the next question, I would like to remind participants to press star and one to ask a question. Next question is from the line of Nishant Joshi, an individual investor. Please go ahead. Mr. Joshi, your line is unmuted. Please go ahead. So, Nishant Joshi, please check if your line is on mute. Since there is no response, we'll move to the next question from the line of Saket Kapoor, from Kapoor & Company. Please go ahead.
Yes, sir. Sir, my concluding point was about the management bandwidth part also, which you were alluding to. That it is, it is the core decision-making, lies with you to take the way forward for these, for these investments in the, in the different geographies of the world, that also have a geopolitical impact also. So taking that into account and the bandwidth part, what sorts of preparation or the team-building exercise are needed to grow these businesses? And for the numerical part, sir, how much have we totally invested as of now for the CP Italia Markprint and in the Codeology group? If that ballpark number would be thank you.
... So I'll take that as two questions, but-
Yeah.
The first question, as far as management bandwidth goes, no, I think that we've been preparing it for the last four to five years now, you know, in terms of what happened. We have to understand that at least two or three of the subsidiaries that are abroad, both Codeology, Markprint, and CP Italia, have their own, you know, local CEOs and other types of people that we've, you know, hired. So it's not always, everything is being pushed onto Control Print, but yes, the integration needs to be deeper with them. What we do have is that we have also been preparing from our own side, a lot of our own managers have got that level of skill.
And maybe that's also slightly where the thing is, because some of these other people are being pushed out into new positions, new, you know, types of markets or opportunities. And we're getting, you know, their juniors and other new people into looking at the existing workout, and maybe, you know, that's slightly slowing down things, like, we also had a big sales strategy change, as we had explained earlier, in terms of a combination of industries and verticals and applications, rather than being very geographically focused. And so it could be that combination is, you know, means that, you know, it just needs a little bit of time to really settle in.
But, you know, I feel like the pipeline is strong for this year, and so far, and we should still, like I said, if not hit it, but, but at least be very close to INR 400 crore as of right now, is what I believe on a standalone basis. As far as the second part of the investments go, you know, we made invest about INR 45 crore totally, upfront, as of by March thirty-first, between CP Italia and whatever those products, V-Shapes products were in India. So between India and Italy, we had invested about INR 45 odd crore, approximately, approximately, you know?
Right.
Give or take a few % here and there. In Markprint, we've invested 1.5 million EUR about 2.5 or 3 years ago, and we invested further EUR 400,000. So that's EUR 1.9 million in total. I think it was INR 12 crore that time, and now, of course, recently, because the rupee depreciate maybe slightly more. In Codeology, we've invested exactly GBP 1 million into that business. So those are the three, in, major investments, internationally, that we made in the European side. But they are three very different investments.
Mm.
With three very different purposes. You know, it's difficult to compare them. And yeah.
Yeah, please continue.
So that's the major thing. And then, of course, whatever the operating, like, Codeology and Markprint are both operating pro- like, profitable, they're profitable companies. So Jaideep has more numbers, you can definitely speak to him. And we obviously expect that the profitability should increase in both companies. As far as CP Italia goes, of course, not only that INR 45 crore , but like you said, we are funding it further, you know, and we have funded it, like I said, in Q1. So we've got a budget for it, and, you know, what the final bill is gonna be is gonna depend on what sort of sales we have during this year. We're definitely expecting...
not expecting, I assume that, you know, the pipeline will be stronger, and we'll see more revenue coming out of that side towards the end of the year.
Okay.
You know, things do look better, even if not in terms of monetary terms, but in terms of, you know, a real revenue and, you know, future market visibility.
Just to drill it further, sir, CP Italia investment is INR 45 crore, and this year we have budgeted something closer to INR 28 crore to achieve the higher revenue base than what the pipeline is for the year.
So again, I'm, INR 28 crore is what's budgeted to CP Italia?
Yes.
As an expense budget?
Yes.
The company had, you know, because we bought it through the auction process, we forced it into a bankruptcy procedure, and we bought it as, you know, in auction. And as a result, the company had temporarily stopped for a few months. And so the sales... But before that, they were selling about EUR 2 million -EUR 3 million themselves, so they had turnover. So we are expecting to recover some of that turnover, you know, also. So it's not like INR 20 crore expense budget, we also expect them to, you know, hopefully make some money. So if INR 20 crore be the loss result like zero in the year, you know. But obviously if they do some business and make some profits, then that would be reduced. So we are just...
I'm only talking about the expense part because that's all I can predict right now. I don't know how much, you know, positive revenue they're gonna do, because it's still in a very early stage and, you know, we've got a certain operating style, so we can't just like, you know, go put our hands and feet everywhere and just sell anything, anywhere. We want to go in a very specific manner.
Right. And for the other two subsidiaries, they are self-sufficient, they do not need any funding, neither Markprint nor Codeology, or do they also need funding from the parent?
No, no funding required at all. They're both, they're both profitable, so they're both self-sufficient and they don't need anything. We're not taking dividends out of there yet, but we're not, we don't invest out there, right? We, we want them to use the money to grow the business faster.
Support, does that answer your question? Hello?... Thank you. We'll take our next question from the line of Karan Bhatelia from Asian Market Securities. Please go ahead.
Hi, thank you for the opportunity, and congrats for a good set of numbers. Jaideep, can you help us out with the revenue mix across printers, consumables, spares?
Yeah, sure, Karan. For the Q1, for the printers, it's about 14% of the overall revenue.
Right.
Consumables is 66%, spares is about 7%, and service income is about 13%.
Right. And the number of printers sold this quarter?
The number of printers we sold this quarter is about 622.
Okay, 622. So, flat units year-over-year, right?
Yeah, actually, what I mean, there is a timing difference, because what has happened is that there are quite a few large prospects we've got, but the orders could not... I mean, orders were delayed for finalization.
Right.
Hopefully this will realize in the Q2.
Right. Right. Correct, correct, correct, correct. And with respect to, you know, EBITDA margins, how, how comfortable are we taking this run rate for the rest of the year?
Karan, actually, well, this is a classic case of, you know, like, product mix.
Right.
I mean, it all depends upon how much of, you know, printers would be sold in majority versus compared to the consumables. It's just Q1, so it's very hard to predict the mix on that, I mean.
You know, because I was looking at your gross margin profile, it is, you know, pretty decent compared to the last couple of quarters.
We are doing well, and hopefully we would like to continue the same trends.
Mm.
But, I can't really tell you exactly, because the product mix always changes.
Right. Right, right. And also, we've been talking about, you know, price hike, which we keep talking. So, how much of that is absorbed in the system, and how much of it is, you know, yet to be taken? Can you quantify that?
Yeah, sure. Do you want to talk about the price hike?
Yes.
I do. Yeah, we've done one, you know, like a year and a half or two ago, and
Yeah, we did October 2022, Shiva. October 2022.
Yeah, so I think that that is being pretty much fully implemented. We're gonna have our next managers meeting in October this year.
Right.
You know, obviously, we need to do some more studies on our own side and see if the cost and other things have increased. Normally, we increase the price of AMCs and filters and so spares every year.
Mm-hmm.
You know, especially of service, you know, of labor-oriented things, because-
Mm-hmm.
Obviously, you know, they get paid more. So that's a consistent increase.
I wanted to understand more from the Red Sea issue. So, anything specific out here?
Mira has no reference point really. Just a slightly longer, like, lead time or something. But because of COVID, we're very used to all this rubbish now, so.
Great, great. Any major CapEx ready for this year and next year?
Any major, what are you saying?
CapEx, CapEx. Capacity expansion.
No major CapEx for the coding and marking.
For the coding and marking, nothing, but we might make a major expansion in terms of the packaging business.
Mm-hmm.
So we're looking at that quite actively. So, as you know, you know, the specific type of machine that we have created, it's a mono-dose type of machine, a single serve, you know, a mono-dose, as you would call it, you know, for a single serving. And it's an alternative to, you know, a thermoform or a sachet or other types of, you know, single serve single-use tubes or something. So, for that, the material is linked to the machine, sort of like a Tetra Pak thing. So this is by a Tetra Pak machine, we have to use the Tetra Pak material-
Mm.
from Tetra Pak. So we are also considering setting up a unit for making this material in India. But currently we are purchasing it from Italy, and the price of the material is quite high, along with lead times and other issues. And we think that, you know, that will be one of the bigger issues going forward in large customers who have, you know, because they're more sensitive to the material price rather than the machine price.
Right.
So that's, that's something we are looking at actively, but we're still discussing at board level. You know, as and when we have something to announce, we'll definitely, you know, get back to-
Right.
- everyone. But we're looking at it quite actively because we feel that significant savings are available while maintaining the margin profiles.
Mm-hmm.
That would also turbocharge the business.
Right. And last question from my end is with respect to mask business. That's it. We may follow the question till next.
So the coding and marking business, I don't think there's anything significant, at least maybe some maintenance level things.
What, how do we see the mask business going ahead? That was the last question.
Which business?
Mask, mask.
So, it's not that much of a major focus. The thing is, the mask business is one of those businesses, it's not losing money, it's not really making money. It's, you know, very marginally positive, is what I'll say. So it's going... You know, it's not a big focus right now. We are, you know, there is—it's not taken a lot of my own personal bandwidth.
Mm-hmm.
Mr. Murarka, HR head, you know, or rather, actual marketing head, also has that additional responsibility of this. So he's got some stuff that he's created with the team out there to make a plan to look at that. But like I said, so far for me, this last three to four months, I've not really personally, you know, been involved in it. It's one of those businesses which is neither profitable nor losing any money either, you know? So because of the opportunity cost, we don't want to shut it down in case we want to do something again. So right now, we're just keeping it going on that basis, but we're also working on a plan for the longer term.
Give us maybe like one or two quarters to give a definitive response on how we want to take that thing forward.
Thanks. Thanks. Operator, please follow the question queue for fresh part. Thank you.
Thank you. We'll take our next question from the line of Disha from Anvil. Please go ahead.
Good evening, sir. Sir, I wanted to check when you mentioned the investment of INR 45-
Disha, can you speak a bit louder, please?
Hello. Now, am I audible?
Yes, yes. Go ahead.
Yeah. So I wanted to ask that, you mentioned that we have invested around INR 40 crore -INR 45 crore in CP Italia investment. I just wanted to confirm, so we spend another INR 30 crore throughout the year for the planned expense. Am I getting it right?
Partly right.
Okay.
What I'll say is that we have spent about, I think, EUR 3.7 million.
Okay.
You know, plus a good chunk of other expenses which have not come in that transaction because, you know, all the ups and downs and this thing and whatever, all the other secondary opinions that happened. On the V-Shapes transaction, we have also invested in some, you know, sort of facilities within India and some other places to be prepared for that, and that's part of the rest of the investment that takes it close to INR 45 crore.
Okay.
So it's not specifically in CP Italia. CP Italia was a EUR 3.7 million, if I remember this, very approximately.
Yes, yes.
Okay.
Mm-hmm.
you know, the rest of it was spent in India, preparing for the, for this business in India also.
Okay. And another INR 30 crore will be spent-
We have INR 20 crore operating budget, like, expense budget-
Expense, right
... for Italy. Okay, that's the entire expense, out of which INR 15 crore or, or INR 13 crore or INR 14 crore is the cost of people and all the other staff there, like electricity and travel and all the other types of things.
Okay.
Ten to 11 crores is the cost of our R&D budget for this year, because we are working on improving or taking the technology to certain other parts that we can do. You know, so we're trying to extend it, because we can, there are certain... Okay, so, like, it's a mono-dose packaging for the liquids, but there are certain other applications we can do with it also. And I can't say anything because we're under the patent filing process for some of the developments we've already done, and some of the stuff is already done. So we give all the post-facto news once we finish our patent filings, and they've been accepted and filed, and then let you know what we've done in terms of our further R&D.
Sure.
We've also developed some of the accessories around this. So like, you know, not only the machine is there, but the automatic cartoning machines, the other types of things that go along with this, those have also been part of that R&D project. We've also put an RFID, which is one good synergy that's happening, because, you know, so like I said, the material is connected between the machine and our... and the material. So this will ensure that nobody else can use any other type of material on the machine except for our material.
Uh, yes.
So I think INR 28 crores is the total of the INR 27 crores or INR 28 crores is total expense. The total expense.
Okay.
It's not taking into account any revenues in there.
Correct.
So what is there is obviously they were doing some business previously. We expect to do more business towards the second half of the year as we get our strategy in place. Obviously, because, because the company shut down for a few months and went through an auction process, you know, some of the companies, the customers, you know, there is a supplier that everyone-
Yeah
... has a slightly negative, you know, mindset at that point of time, to be honest.
Mm-hmm.
You know, that's something we have to deal with before the revenues flow back in, and we are working on that part. So, so that's something that we are working on. So like I said, in a worst case scenario, we could lose INR 28 crores. In the first quarter, we've already spent a lot of that money, but we've also made some profit, some good profit. Therefore, the loss was INR 5 crores. I can't say exactly what's gonna happen in the next three quarters. If you're gonna ask me what is the worst case scenario, I'll say we lose INR 21 crores.
Mm-hmm.
You know?
Correct.
But I'm expecting that we will also sell some things out there and make some positive revenues.
Sure.
So you know, that's something only time will tell.
Sure.
But it's... We know that this was part of our strategy, this was part of our budget, and we had planned for this very much, and we want to make sure that it happened through the auction, so there's no liabilities that were there.
Yeah.
So this is part of our planned budget.
Yes. And, sir, regarding the Indian business, the printers we have sold, isn't that easy to predict the revenue because of the consumer sales, which is assured sales because our printer can use only our consumables? So, that's INR 400 crore, and also for next year, because our printers use generally three years, we get the consumer sales seven to eight years. So at least we can predict the revenue for the coming two years. Sure.
Yeah. So of course, what I'm saying is this, so we don't give any predictions specifically.
Mm-hmm.
I know the board has given a target to other INR 400 crore this year, and of course, Saket asked for that specifically, and I said that we are... It looks like we'll be close to that, if not there, you know.
Mm-hmm.
For the first, for this year in this thing. Like you said, there, there is definitely a predictability in our business, you know, in terms of the repeat sales.
Mm-hmm.
but it, it's very difficult to predict, you know, exactly how many printers we're gonna sell every year.
Yeah, yeah. For sure. Yes, yes.
So-
And then range bound. Mm.
Yeah, yeah. And then, so those things are there. But yeah, we're not seeing a bad business in India. Like, the market outlook is still good. Like I said, because of a change in strategy, because of change in industries and verticals, because of, you know, little bit of management changes into some of the newer areas that we needed to trust, there has been some minor slowdown, and I'm not happy with the Q1 results, but I don't think the pipeline is fundamentally bad. I'm talking about standalone business. I'm actually less worried about the consolidated aspects.
Uh.
And I think that what we, you know, can see is definitely that if we can, well, like I said, as you're working towards bigger sales deals-
Sure.
It is having a longer period, you know, and that was part of our sales strategy, to work with the customers at multiple levels, at higher levels, and, you know, try to execute large projects with them, rather than constantly sell and, you know. So it's something that, you know, prolonging this whole sales cycle a bit and making a bit more lumpy in terms of that, you know, upfront consumer business, upfront printer business. But yeah, the consumer business is quite predictable. I think also what we've seen is, as a result, over the last two, three years, we've focused on larger customers. But, you know, the stability of their own businesses is quite high, so we're not seeing that much fluctuation in the business.
Sure. And, so in terms of market share, have you taken any clients from the other three players, because of this Make in India or whatever concept, if it works in this industry, and any change in market share related?
So I think the Markem-Imaje, Digital and Domino, all three have a long history in India, you know, and India is frankly not that patriotic a nation is what I would say. I mean, I don't know how people... We don't say it in that way.
Mm-hmm.
You know, but there's no, like, feeling of a Made in India or like how it would be in Japan, like it's Made in Japan or in Germany. Like, so there's no real benefit of in America or something.
Yeah.
I think, like, if anything, people prefer international products, you know, normally.
Mm.
you know, we, we're also established in this market for a long time, and everyone knows us, so there's. I don't think there's any advantage or disadvantage between the four of us coming down to execution. Yeah, we do get customers from our competitors all the time, and, you know, I'm sure vice versa also it happens.
Mm.
But it, it's marginal. We had gained minor market share over the last three, four years, but consistently. And, yeah, it's just gonna come down to execution to keep increasing that market share percentage, between the four of us and then also in the overall market. So the four of us, I think, Jaideep will have a better picture, but I think we would still be 75% plus of the overall market.
Okay.
70%-80% of the market will still be the big four.
Okay, great. And, sir, just the last question. So one, why is Domino's, like, it has more margin than us? Like, the rest other players are quite below us, and we are very efficient comparatively. But in terms of Domino's, they have, like, around what data we get from private companies, 30%, and we are around 25% EBITDA margin. So, is it because of the, they spend less on advertisement or something like that?
So there are two, three reasons. And, and of course, from this year onwards, I'd say, like or even last year, the, the figures are not comparable because Domino has, you know, started the label press, digital printing press business, and that's actually doing quite well. So they're getting a reasonable chunk of revenue from that, and that's distorting the figures.
Sure.
I would actually expect that business to have a lower margin than the coding and marking business, at least as of right now.
Mm.
But to put a long story short, they've just got a higher base, you know, at this, in this business, if the base is higher, you know, the number of offices, people and all, it just becomes a bit more efficient, you know. Maybe not so much in gross margin terms, but in terms of SG&A, it definitely becomes more efficient as you become bigger.
Mm-hmm.
And I think that's the one of the major reasons. And the second thing is, I think we've also been going through a bigger set of investments in the last few years, you know, with regards to track and trace, with regards to packaging, with regards to digital printing. So, you know, we have to incur those costs, which are all part of our own standalone, and we're not giving you, like, okay, you know what? I made 3% extra here, but I lost, you know-
Uh, uh, uh.
Because last year being, you know, like our track and trace team and our software development and everything like that. So we're not giving that sort of a thing. It's just a bundle. So I can't give you the exact thing, because we don't get that type of breakup. But I think that if some of the investments that we are making in are growing or increasing our long-term output potential were removed, you know, and you just looked at the group as a pure coding and marking standalone business, then, you know, this would probably be more profitable. And the third reason is that, you know, you have to understand, we have to do our own R&D. We have to pay some royalties to some of our partners and all those types of things. I don't know what those numbers are.
Again, Jerry can drop them. But then if you take out that royalty figure, I think it's published, if I remember correctly, you know, so... And you take out some of the other R&D investments that we have to do ourselves as a standalone company, whereas Domino's doing obviously more investment, but you know, that's over a global base. Whereas, you know, for us, that percentage of development, R&D cost as a percentage of our sales is significantly higher to maintain, you know, our IP competitiveness versus, you know, Domino, Markem and Digital. Because I'm saying, like, they're billion-dollar companies, so if they spend $20 million-... That's like 2% of their hits. We are spending, you know, probably more than that, like, you know, as a percentage, if you look at royalties, where we're licensing those technologies for R&D types of things.
So, I don't know, like, INR 340 crore last year. So if we talk about, like, INR 7 crore as 2%, we literally spend much more than that, you know. So that's part of the third aspect, which I'll say that-- and this might be a permanent aspect, because, you know, Domino's is just a bigger company. They're always gonna have a bigger, or even margin, the margins, the bigger companies, and they're gonna have, like, a bigger opportunity to, you know, spread those costs over a big piece, you know, and that's something that I think this factor cannot be changed.
Thank you. Before we move to the next question, I would like to remind participants to kindly restrict to one question, please. The next question is from the line of Rupen Masalia from RN Associates. Please go ahead.
Yeah, thanks for the opportunity. My question is, you know, it is nice to see that, when it comes to capital allocation, we are committing towards core business or maybe, you know, towards adjacencies in increasing the total addressable market for us, rather than, you know, what earlier we used to do by building up the treasuries in equities. So that's a good thing. And since, you know, in recent years, we have committed overseas in Markprint, Codeology and CP Italia.
I know currently, CP Italia is like an incubator, but then if everything, strategically, everything falls in place over the next three to four years, maybe in five years' time, all these new initiatives, especially overseas investments, how big can it become in terms of, you know, generating revenues and, of course, profitability? Yeah, this is question number one from my side.
Yes, I think that's like. See, we don't wanna predict. We don't even predict our own coding and marking business revenue. Saket, who's part of the AGM, and obviously you asked Mr. Kabra and the other directors, you know, there's an INR 400 crore thing. So we just. Yeah, I would say that, yeah, we're still committed to that. And that was on a standalone basis for Control Print, primarily around the coding and marking business. Now, as far as other things go, obviously, each thing has its own market, but, and the addressable market, the idea is right, you know, so that the addressable market will get bigger with these other things. But in the end, you know, it, we can't predict what it is.
Obviously, one, two bigger things that we felt like when we're talking about specifically the V-Shapes acquisition, we felt that this has a, you know, the potential to be a platform play in the longer term. So not just an adjacency, but a, a full platform which could be of a similar size and profitability as Control Print, if not bigger, because it's a, it's a definitely much bigger addressable market. So, but it's difficult for us to give any type of prediction because, you know, we don't know ourselves. We are still, like I said, some things are in the investment phase, some things that we are seeing better, you know, now that we've got, like, things outlined and we are seeing, you know, it converting into revenues in one, two things.
One, two things are still in the investment phase, and, you know, our strategy and execution still needs to be developed in all of these different phases, in all the different product lines. In some we are, like, very at a certain stage, like in, you know, the packaging business, where we do a lot of work, and then in some businesses, we still need to do a lot of optimizations for the... Like, even in the track and trace or something, there's still a lot of things that we still need to do to, you know, in the end, if we're doing a business, we wanna be number one. We just wanna add some revenue to our profit to our company.
We want to, you know, we want to be the leader in our IT and the sort of technology and the sort of benefit it's bringing to customers, not just be there, and not just use the Control Print network to cross-sell it, but we wanna, you know, lead genuinely by giving the best sort of technological platform available to those customers and do something that's gonna be two steps beyond what everyone else is providing currently. So it's gonna take some time, but it's not possible for me to predict any market. Definitely, I can say that the addressable market is bigger, but in the end, it's all gonna come down to whether we can keep innovating in terms of the technology.
You know, we can make it as reliable as our current coding and marking platform, and that's something that's very important for us to make sure it's extremely reliable. And the other part, the last part is, you know, then we're gonna come down to the sales and marking execution, and obviously, that's something we're working on parallelly. It still has to be developed. I think, Saket Kapoor, our senior management bandwidth, and that's a fair question. So, you know, we only have a certain number of, you know, experienced resources that we can cross-allocate to other businesses without affecting our coding and marking business too much. So we're doing that, you know, and we've done that, but it can only happen at a certain pace.
Okay. Yeah, that's helpful. And, last, question from my side, is pertaining to standalone business. Like, within the standalone, coding and marking business, pharmaceutical vertical, how it is faring, especially in the light of, you know, mandatory, requirements of, QR code for, top 300 selling formulations. So, how is the pharma business faring?
... It's looking promising. I can tell you the pharmaceutical, entire, whatever pharmaceutical, you know, business we were doing in Control Print, that has been taken out and handed over to the entire track and trace division. The track and trace division sales team is responsible for not only track and trace sales, but also all sorts of sales to pharmaceutical companies, because that's gonna become more and more common. And I won't say anything because, you know, like, obviously... and there are some of those top 300 brands which are being, you know, using our, our codes, and being integrated with us. We're not number one by a long way in that top 300 brand list, but we are, you know, looking at getting up there.
I'll give you some, maybe towards the end of this financial year. I'll give, I'll give people a better update on that. We are still working on some companies, and we're still working on some deals, and, you know, I'm hoping that, again, we will talk about it once we actually execute those things, you know, not, not, not even like we get the business. So I'll, I'll tell you about that later down this year, you know. I'll be able to give you a very good better idea that whether we are succeeding or we are not, by the end of this financial year.
Thank you. We'll take our next question from the line of Saket Saurabh, an individual investor. Please go ahead.
Hi. Am I audible?
Yeah, you are.
Yeah. So my first question is like, in, regarding revenue model. So in some sectors like the-
I'm sorry, we've lost the connection. We'll take a last question from the line of Saket. I'm sorry, the line is disconnected. We'll take that as the last question for today. I now hand the conference over to management team for closing comments. Over to you, sir.
Yeah, this is Jaideep here. Thanks a lot, everybody, for taking out your time. Keep supporting us. Look forward to your continued support.
Thank you, sir. On behalf of Asian Markets Securities Limited, that concludes this conference.
Thanks, Varun. Thanks, everyone, for participating. You know, I think a good set of questions, and you know, really happy to address them. Thanks, everyone.
Thank you, sir. On behalf of Asian Markets Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.