Good day, and welcome to the Q1 FY 2023 Earnings Conference Call of Control Print Limited, hosted by Asian Market Securities Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, 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 0 on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Karan Bhatelia from Asian Market Securities Limited. Thank you, and over to you, sir.
Thanks, Rutuja. A very warm afternoon, and welcome all to the Control Print Limited Q1 FY 2023 Earnings Conference C all hosted by Asian Market Securities Limited. From the management side, we have with us Mr. Shiva Kabra, Joint Managing Director, and Mr. Rahul Kedia, CFO. I shall now hand over the call to Rahul for his opening remarks, post which we shall open the floor for Q&A. Thank you, and over to you, Rahul.
Thank you, Karan. Welcome everyone to the Q1 FY 2023 earnings conference call of Control Print. We appreciate your taking out time from your busy schedule to attend the call. Hope you and your loved ones are safe and healthy. Mr. Shiva Kabra, Joint Managing Director, joins me on this call. The detailed presentation has already been put up on our website as well as the intimation to the stock exchanges. Let me give a brief analysis of the financials of Q1 FY 2022/2023. The manufacturing activities in Q1 maintained the upswing from Q4, and most of the industries continued their production to meet the higher demand. The increased production was clearly visible in the higher requirement for consumables, which is beneficial to the coding and marking industry.
The last couple of years has been extraordinary situation when the strength of the company is tested, and we can assure you that Control Print is geared up for any challenge. We are financially stable and robust and will continue to perform in spite of unforeseen challenges. This stability of Control Print has also been reaffirmed by credit rating agency, CRISIL, with an A rating after considering the short and medium-term impact of the COVID pandemic. Our investors can maintain their belief on the company's management for an optimistic future. This quarter's performance was normalized as the previous two Q1s were marred by COVID. We delivered growth in revenue and margins and also volume growth. These are encouraging signs as Q1 leads the way for the year, and this momentum should continue in the coming quarters. Revenue for the quarter witnessed year-on-year growth of 21.75%.
The reason for growth in revenue was due to good traction in consumables as the industrial production increased, though we believe it is still not at the optimum level, and there is scope of improvement. The production of some of the industries was lower due to raw material shortages, so there is still scope of growth in the overall production volumes. The growth margin improved due to better product mix skewed towards consumables. Profit before exceptional item increased 66% year-on-year and remains strong at 21.5%. EBITDA increased 50% year-on-year and improved to 27.2% and continues to remain above 24%. PAT increased by 34% year-on-year.
The company maintains healthy margins with profit before exceptional items at 21.5% and EBITDA at 27.2%, with scope of improvement due to higher revenues triggering economies of scale. Let me brief you on the performance of various divisions, products, and business segments. Consumables had a good traction, and the increased install base will drive the business in the coming quarter. The company continued to penetrate competitor accounts in key sectors like building materials, FMCG, pharma, dairy, et cetera, to strengthen its market share. The company intends to expand its global footprint and has formed a holding company in Netherlands to acquire 75% stake in Markprint B.V. The FCP division witnessed year-on-year growth of 30% as the production of the customers was increasing.
The growth was mainly due to improved production of some of the industries where we have a stronghold, like dairy, healthcare, steel and metal, food, FMCG, pipes, cable and wire, distillery, agrochemicals. We're also encouraged to see growth in some of the upcoming sectors like pharma, paints, wood. Product verticals of TIJ, TTO, Hi-Res continue to deliver strong numbers, and these products are penetrating the market. We have dedicated managers and teams to guide these verticals with focus on dairy, beverages, bakery, frozen foods, ready-to-eat, pharma, packaging, plywood, lubricant, coating, carton coating. These new products continue to grow every quarter, which builds confidence on the potential of these products in the coming years. Laser business is growing steadily as product technology has been improved and a new team is driving the business. This has yielded good dividends with positive response from customers and new opportunities being captured.
Service revenue has shown good numbers which contributes towards profitability. Our strategy for separate verticals for key account and OEM business for focused approach is giving us positive results and contributing towards growth. LCP business reported good growth for the quarter with revival in some cement accounts and Pan-India supplies in the sugar industry. With new government directives regarding marking and coding in agrochemicals and healthcare, plastic bags and waste management, we expect some good contribution to our business growth. Customers, especially large business organizations, are looking for coding and marking solutions so as to avoid counterfeit of their products. We are offering complete solution, including availability of our in-house software development team to provide tailor-made solutions as per our customers' expectations. To intensify our reach to the customers, we have strengthened our inside sales team for telecalling the customers to generate good quality leads.
This is helping the field sales force to improve their strike rate for order conversion. The company has strong cash flow, and the trend is expected to continue. Fundamentally and inherently, the company remains strong, and we are focused on our plan and strategy, as we are confident of the growth potential to deliver positive results. 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 1 on the touchtone telephone. If you wish to remove yourself from the question queue, you may press Star and 2 . Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Madhuchanda Dey from Moneycontrol Pro. Please go ahead.
Hi. Congratulations on good set of numbers. I have just couple of questions. The first is, what is the total import content in the raw materials? To what extent do you think that the current depreciation will impact your margin? The second question is more housekeeping. Just wanted a breakup of the revenue for the quarter between, you know, printer sales, consumables, et cetera. How many printers did you actually sell in the quarter? The CIJ and the new lines of printers, if you can throw some light on the same.
We'll start with the import. Generally between 25%-30%. Sometimes now with the shortage of the electronic components and price increases, that could vary by a couple of percent. Generally it's in the range of 25%-30% of our requirement. Though we still have a lot of import substitutes, and we can procure them from India, but at times there are shortages and quality issues. Considering that, we still maintain 25% on the import front. Regarding the breakup of the revenue for this quarter, it's the printers were between 18%-19%. The consumables was around 56%-57%. The spares and service was around 22%-23%. The balance was on the marking division.
The latter part of your question was how many printers that we sold in the quarter. This quarter we had a sale of 750. Just a little above that. There were about 750 printers for this quarter that we managed to sell.
If you could give us the break-up between your CIJ and the new lines of printers.
Generally, CIJ is still dominating sales. It's generally between 65%-70%. The complete breakup, we don't put it in the public domain because it's not available for our competitors also.
Okay, thanks, and all the best.
Thank you.
Thank you. The next question is from the line of Vaibhav Bajaj from Honesty and Integrity Investment. Please go ahead.
Yeah. Hi, sir. Thanks for providing the possibility. On this, you know, if I compare FY 2022 total numbers versus FY 2020 numbers, sales of services has gone up significantly, 50% growth in sales in these two years. That is outpacing our total revenue growth. Can you please explain what is happening here and why these services revenues are going up significantly.
Can you just tell me which years you're comparing?
I'm talking about FY 2020 numbers, pre-COVID, basically. FY 2020 represents most of the pre-COVID sales. Right? If the sale of services I see in the annual report is INR 22 crores there, versus in FY 2022 it has increased to INR 33.4 crores. Nearly 50% growth there in the matter of two years.
Well, some of it could be because of regrouping. Earlier some of our rental revenues were reflected probably in service. With this Ind AS coming in, the auditors preferred to show it as part of revenues. That is one of the reasons. The other is genuinely our installed base has increased, so the service revenue and the sales have also gone up. It's a mix of these two items.
Got it. Secondly, similarly on the imported sales of, you know, if I see the sales of traded consumables, that has also gone up in the same period, where FY 2020 to FY 2022 in two years' time frame. Can you help us understand the reasons for the same? I mean, is it some specific?
Volumes are increasing. Our volumes, as the installed base is increasing, we have some of these specialized inks, which we need to import, and that could be the reason for that increase of traded. As well as, one of our printers, TTO, some portion of it is also imported. Volumes of that increasing will also lead to traded items increasing. Though we do a lot of activities in-house, after the printer has come in, but some of it does get reported as traded.
That is.
44 volumes, if you're comparing it to 20, so volumes have gone up by at least 30%, if I can say.
This imported ink that is coming there, is it used in which kind of printers?
It's used mostly in CIJ printers, but for specialized applications. Some of our customers need high-grade ink, or they have special environments to work in, let's say a high temperature or a very low temperature. They need special bonding requirements, or there could be a UV print requirement. There are very special requirements for which the customer is willing to spend that extra money, which we need to sometimes import. The volume not being too big, it's not feasible to manufacture in-house.
Got it. Lastly.
Having a unique application.
Lastly, if I, you know, broadly compare, the consumable sales, right, the total consumable sales of the company, so is this more representative what's happening on the IIP front than what's happening in the broader economy? Right. The broad GDP number and IIP is, you know, barely back to pre-COVID level. Our sales in these two years have grown tremendously. I mean, nearly, it's gone up nearly 30%, I think 35% in these two years from FY 2021 and then 2022. Is it, is this to do more with the pricing because of inflationary environment or the volumes have significantly, or has also significantly gone up in these years? Which, or what could be the drivers of these higher volumes? Because that is not getting reflected into the broader GDP numbers.
The IIP has definitely increased from pre-COVID. Like we had mentioned in the previous calls also, even during pre-COVID times, our printer sales were always on a very high. In fact, those years we maintained probably the highest printer sales, which we-
Mm-hmm.
Still say is encouraging because once the printer is sold, the consumable will follow as soon as the productions are normalized. That's what
Mm-hmm.
We're able to probably see now or that one of the reasons is the higher installed base compared to two years ago.
Right.
We have said that, you know, some of the industries which we believe we have a strong hold, still there is a gap. Once their production increases, our volume could further go up. We still hold that. We still don't think that the productions of our customers is at an optimum. We still feel there is a 10% or 15% gap where the same printers can give us higher consumables. That's the field report we get from our sales team across pan-India. Most of the growth, I'll be honest, is volume growth. Though we have gone for price increase because a lot of, you know, costing for us has also gone up because of the input prices. That would mostly be in the range of 5%-6%. It's a highly competitive segment, and i t's tough to get price increase from all customers, though we keep trying.
Okay.
Many of our customers have genuinely given us price increase in that range.
Okay.
Also some of it, you know, freight increase and stuff like that.
Mm-hmm.
If I have to put a weightage, I would put most of it on volume increase and maybe 10%-15% because of price and freight and other stuff.
Okay. Got it. Lastly, on this, you know, acquisition that we are doing.
Let's see one, couple of questions. Maybe you can come back to the queue because.
Sure. Not a problem. I will come back.
The question you started will come up in somebody else.
Sure, no problem. Yeah.
Thank you.
Thank you. The next question is from the line of Deepan Sankara Narayanan from TrustLine PMS. Please go ahead.
Good afternoon, everyone, and congratulations for good set of numbers. Firstly, wanted to understand so the sharp improvement in gross margins and EBITDA margins, so understandably so consumable share has gone up. Are we seeing this quarterly run rate of printer volumes is similar or it has come down during the current quarter?
Basically, printers are at a similar level around 17%-20% is generally every quarter we have percentage. This quarter, the reason for gross margin improvement and EBITDA improvement, like we mentioned, is that a higher percentage of consumables have gone in. In the previous couple of years, we've had consumables between 50%-52%, which I said that should improve, and this quarter it has gone up to 56%-57%. That is one of the major reasons for a better. Like you all know that the marking division is definitely going to be a little lower than it has been previously during the COVID wave. I guess the coding and marking is making up for the loss of Markprint revenue, which we saw was very strong in the previous year.
Okay. Is there any change in government regulation for any particular sector which can favorably increase our printer, this coding and marking consumption?
Yes, we did, maybe, Shiva, you can answer that. That would be better. Shiva, you're there?
Going back into this thing, you see. It's very difficult to predict what the government will do and also in a lot of cases, you know, how much lobbying is resulted in by the affected industry and then what the final outcome is. In general, the government has increased the amount of rules, especially around pharmaceuticals, to ensure more traceability through the supply chain. That's what we expect. You might have seen there was some 1 or 2 articles that came out, I think it was the top 300 medicines of the country. They will ask them to print a variable QR code for which they'll need, you know, someone like our printers, you know, and do that to print through the supply chain. Of course, that's what they're proposing, but it's not happened as yet.
You know, there could be more rules and regulations coming in general as regulations have increased over time. You know, they've not decreased. In between, there was also new Legal Metrology requirement, which I believe was that, you know, they have to print the price per 100 grams or the price per gram or something of that sort. Again, if they have to do something like that, especially if the price fluctuates, then they'll have to use our printer on that product. You know, there are some things that are there, but it's not 100% confirmed. There's always a lot of talk about, you know, new, the government always proposes a lot of stuff. Because of course each industry has its own, you know, reasons why they find it difficult to adopt.
They have their own, you know, rationale to the government of why they shouldn't be subject to stronger rules. In general, I would say that the amount of regulation is probably sufficient, but it's definitely going to increase on the pharmaceutical side. We've seen on the liquor side also it has increased and the amount of printing has increased as well.
Shiva, if this regulation becomes mandatory, so are we foreseeing some new printer sales also for the existing pharma companies, or it's only the consumption which will go up if this becomes mandatory?
No, for printing variable QR codes, definitely the type of equipment that's necessary is more expensive. The people have to upgrade the entire set of lines, I think. If you see a lot of the high volume medicines actually have barely any printing on them. You know, if you look at Crocin or something like that, they still have the V code or they don't even have an actual inkjet prints. They are in fact coming from no coding to like, you know, fully variable, you know, printing. The thing is that, you know, it's, I mean, when the regulation is enforced, we should think about it. Like right now it's, I think eventually it'll happen.
You know, eventually can be like now in the next six months or it will be like five years from now. I think the regulation should happen and some companies will start preparing in advance and start equipping their new lines in advance of that, so that they're prepared for the new regulations at the time that they happen. I hope that answers your question.
Mr. Deepan Sankara Narayanan, does it answer your question? As there is no response, we'll move to the next question, which is from the line of Nimish Shah from Emkay Investment Managers Limited. Please go ahead.
Yeah, thanks for this opportunity. Can you share what will be the current printer installed base for us now?
Sorry, you're not very audible. Can you speak a little louder?
Hello. Yeah, thanks for this opportunity. I just wanted to know what will be the current printer installed base?
The installed base of printers, we crossed 15,000 in the previous year, and this time we've done about 750-odd printers in Q1. We would definitely be more than 15,500 after considering some of the lost printers.
Okay. Got it. On a steady-state basis, if you could just help us understand what is the average realization for our consumables per printer or if there is some number on that, if you can help us there?
Generally clock between INR 1-INR 1.1 lakh per printer. But you know, now if from now the mix is changing between different printers, it's the consumption is generally higher in CIJ printers as compared to a TIJ or TTO. The average compared to previous years is a little lower, but still INR 1.1 lakh is what we're trying to clock.
Okay. This INR 1 lakh of realization should ideally increase by the increased production of basically for the industries, right?
Yes. As the production of the customers increases, definitely, it will go up, the thing. Moderator, I think, Mr. Shiva Kabra has dropped out. He just sent us a message. Can you just check that?
Let me just check, sir.
Check, please.
Give me a moment.
By the time we continue with the call. As the production of our customers increases now, if they go from a single to a double shift or a double shift to a triple, the same printer is going to give us higher revenues of consumables, and that's what you know increases the average.
Right.
It's completely dependent on their production planning. It's not something that we can control.
Right. Do you have some similar number for spares as well? What will be the realization for the printer for spares?
For spares, like, there are more than 400 parts on a single printer with, you know, different SKUs that we have. That can range from INR 100 to maybe INR 50,000. That's difficult to say.
Okay. Understood. Yeah, if you could just throw some color on the acquisition.
Sorry, could you repeat that?
On the acquisition that we made in Netherlands.
What is
What is
It's better if we can take that question. Shiva, you're there?
Yeah, I'm here.
Yeah.
I got off of the call entirely, but I'm back.
Can you tell us about recent acquisition of?
Markprint, right. As you all know, you know, we are in coding and marking, our industry, which is, you know, sort of the intersection of digital printing and packaging, like at a very small level, which is, you know, just for the very basic requirement, so which is date code, batch code, expiry dates, you know, statutory information I'll say, and certain, minimum amounts of information for printing, say, on a cable wire and so on. What's happening is a lot of customers do want to print more information, and we've discussed that before. A lot of people, say, wanna print ingredients on the production line. A lot of people might wanna print the entire blister or mono carton on the production line. They want to personalize more and have a lot more flexibility.
Markprint already makes equipment which is capable of doing this type of work. We do also, but our level of the technical level of our printers is significantly less than that of Markprint and so is the cost point. Their equipment can be used for, you know, to actually almost eliminate the some of the pre-printing that's there in the package and basically, you know, personalize the packages to a much higher extent. That's what their business is about. Our primary, you know, method or reason for the purchase is so that we can acquire this technology and use it to boost the top end of our range in India.
It is gonna take time for us to, you know, obviously employ it in the market and, you know, get the benefits out of it, but this will help us grow our sales in the Indian market. At the same time, Markprint itself is doing very well, and they have also doubled in the last two or three years, and I can see that pace continuing. I think that they themselves will be growing in the European markets, especially in Scandinavia, Germany and North America, I mean America and Canada. You know, that's something that we will help support their growth by investing in, you know, them to expand in those geographies.
I'm really expecting that it's gonna be a dual powered acquisition for us in terms of Markprint itself being doing very well and continuing that growth rate hopefully even faster, you know, and that go for much bigger ways in coming times. For us to benefit and to be able to extend our product range and to be able to cater to, you know, much more sophisticated and complex requirements of our customers in our markets. It's a bit of a strategic acquisition. I'd say, you know, not right, not like a simple market share gain or anything of that sort. It's more for technology piece that we need to acquire.
Got that. Basically the high-end printer. We would be looking to just gain the technical know-how and manufacture it in our India plant or just import those printers from Markprint?
Right now we're just importing a few, couple of things, but we are gonna start localizing, and we'll have to change it because, I mean, obviously his structure is using his components, his everything, his, you know, whatever. We have to see how we can localize it but also reduce the cost, you know, to some extent significantly for which we'll have to work quite significantly. The idea would maybe to use the same configuration he has and manufacture in India, and maybe even take a cut in the upfront margin on the printers to help grow the market out here.
At the same time, we have to work on actually lowering the cost base of those printers because the Indian market is very different from the, you know, Benelux, Germany, Scandinavia, Northern European or Canadian, whatever market that you have. That's something, you know, we'll be working upon. We already have some of the equipment on the way out here. I think we have some information with exchanges going on, so we'll be working on it. Of course, it depends on, you know, at the end of the day, I do wanna point out, which is not very obvious from my statement so far, that it depends really on the application that we're talking about. Because we can do a lot of types of printing.
We can print a lot of different things. You know, a lot of different packages, a lot of different items. It depends on what the specific application that we are targeting in India and what we feel will succeed in the Indian market. Accordingly we focus on those specific items and try to come up with aggressive solution for those specific areas that we are targeting. Whereas maybe for, you know, things that we feel are one-offs or something, we can still, you know, just import it and cater to them. Yeah.
Okay. Yeah, got it. Thank you.
Yeah. Okay.
Thank you. The next question is from the line of Kashyap Javeri from Emkay Investment Managers. Please go ahead. Mr. Kashyap Javeri, please go ahead with your question. Your line is unmuted.
Yeah. I have only one question. You know, when we look at some of the more industrialized or, manufacturing-focused countries, you know, versus let's say an installed base, for us, which is about 15,000 odd, and at industry level maybe about 40,000-45,000 kind of a number, what's the, you know, sort of max possible domestic market maximum possible to do? Is there any benchmark as to, you know, for a particular amount of manufacturing GDP, these are, you know, as many number of printers which are needed, eventually, and that's gonna be the size of the domestic market?
Yeah. If I can answer that question, I think what we've seen is definitely as the GDP grows and GDP per capita because of increased automation requirements and also because of the presence of organized packaging, you know, and even the substitution of a lot of other types of methods even in the industrial side, the number of printers per person definitely increases and with result in consumables and so on. It is there, but it is on a declining curve. What happens, it increases faster, like I said, in some previous calls to about, say, $5,000 per capita. It's at a faster rate. Then beyond that it starts increasing at a slower rate. I think, you know, the I mean, if you.
I mean, it's very difficult to compare, but if you look at a market like China, say, their domestic market would be like at least 5, 6, 7 thousand, if not more. In terms of the number of printers, the CIJ printers that they sell per year is more than 30,000, whereas we sell like about 8,000-10,000. That's one type of printer. We also have like a bigger market for all the other types of printers. And because the base has been growing at a, you know, at a large base for years now. Yes, so as a result. I think, yeah, we have to look at it that India is still, I mean, the Indian market will be like, oh, about 15, 6.
Say about $100 million, euros or whatever you give it right now, and the worldwide market will be about $5-$6 billion. I think it's gonna depend on India's share of the world GDP. You know, of course, as the GDP of the world grows, this market will continue growing. It's difficult to say. As long as, you know, we saw that, like, some person asked also is that IIP has not grown so much, but you guys still grown. I think that was the earlier question. I apologize. I don't remember who asked it. Rahul did say that we continue to sell printers, and that's also because there's a shift from, you know, unorganized packaging to organized packaging. For a lot of people, like I've said, before you make a.
Whether it was edible oil, there was sugar, there was salt, there was wheat, there was rice, you know, even milk, a lot of things were not packaged in India, or the percentage of packaging was quite less. Now a lot of those products are being packaged, so that's causing a secondary increase in sales. Then as people get into convenience, people who are starting to buy like 20-kilo bags of rice start wanting to buy one or two kilos at a time rather than opening a 20-kilo bag and then squatting it in a huge jar and so on. That's what we'll see more pre-cooked stuff, more varieties and, you know, a better increased amount of packaging. Maybe not very good from a sustainability viewpoint, but that's what we've seen elsewhere in the world.
Even if you look at bottled water, people used to only use it when you were traveling or certain very small things before. Now, even if someone comes to office for a meeting, you know, which might be the same to all of you know, we have like those little bottles all over the place. And you know, so that's increasing the consumption also. All these factors are also driving the market. It's not just a pure GDP growth thing. It's related because as GDP growth per capita increases, all of these other factors continuously increase.
Right. Just, like, you know, one more question I want to ask over here. You mentioned that installed base today, sorry, at the end of FY 2022 was about 15,000 printers. That amounts to almost about INR 140,000 a printer per annum of consumables and services based on the annual report data which is already available. That number, if I go back about, you know, 4, 5 years ago, was roughly about 160,000 or INR 155,000 a printer. You know, what has changed between then and now, you know, that this consumable per printer of installed base and services has or services and spares also is not growing at all or rather it's probably declining. First, you know, are these numbers correct? Because I've taken it from your annual report. Point number 2, you know, if that's the case.
Get these things. I'll answer those questions.
Right.
The first thing is, of course, you know, we had a very large cement business previously. As you know, cement has a lot of production prior. We had a lot of issues with piracy in that market. Even though till date, I'll say, you know, the customers that are there have a lot of issues. In terms of the quality of printing. Because they frankly don't care about that, which actually affects our business a lot because the moment a person doesn't care whether he's meeting statutory requirements or not, then you know, the scope for Control Print and Domino and Videojet decreases because they're not going to take anyone, you know.
Mm. Mm.
That cement business declined quite sharply. You know, Rahul will give you the numbers right after this. That sort of affected the per printer business quite a lot because the cement business definitely used to have like in excess of about INR 300,000, you know, INR 3 lakh per printer per year in terms of consumption.
Okay.
The second factor is that, you know, our product mix is continuously evolving. You know. We sell, for example, a lot of Thermal Inkjet, a lot of other stuff. We also print, say a lot, for example, on the cartons now. You were printing, say, on, I don't know, some sort of like Antiquity whisky or something, and now there's 24 bottles packed in a carton. We also print on the carton. That's also a printer for us. We, like Rahul said, couldn't give the exact breakups because of different reasons. There has been a huge increase in secondary packaging, and the packaging where maybe some people used to print offline, you know, at a fast pace, and now they shift to their printers online. They're using more printers as a result, but their overall production per printer has decreased.
Right.
Those factors are also affecting the overall consumption per printer. You know, it could be that according to me, this figure might slightly continue decreasing, but you know, what does matter is that whether the overall trajectory is increasing or not and at what pace. It depends so much on what mix of printers we sell. For example, tomorrow if we sell some printers in which the technology comes from Markprint, the consumption per printer of those would be very high, you know.
Mm.
We're talking about like in the INR 10-40 lakhs per annum per printer range. Again, that could skew the figures the other way. Without the granularity, which I realize we don't provide to you at that level, you know, it's very difficult to give a very broad prediction and look at it. It's not a very relevant piece of information, is what I would say to look at the number of printers and the total base, you know. Because till you don't know what mix of printers is being sold, it's
Yeah.
Hard to understand how that business is performing. That's my own personal viewpoint.
Sure.
Yeah. Rahul, you wanna add anything on, any of those points?
No, that's fine. I think you've already explained it.
Thank you. Thank you so much. That's it from my side. Thank you.
Thank you. The next question is from the line of Yash Bajaj from Lucky Investment Managers. Please go ahead.
Hello. Hi. Am I audible?
Yes.
Yes.
Yeah. Hi. Good afternoon. I'm fairly new to this company, so just excuse me in terms of the granular details of the company. I just wanted to understand like the one of the previous participants said that the growth or the volume in our business will be dependent on our customers growing in their respective segments. Can I get like an overview of the kind of mix we have in terms of customers, like industry-wise? Like I know that we are in FMCG, Alcobev, pharma, textile, but like just a brief breakup of it. In which respective segment do we or industry are we seeing a higher growth?
Basically we are mostly skewed towards the industrial side, since we were a late entrant compared to our competitors. For Control Print, about 60% of our revenues were mostly on the industrial side and about 40% on the packaging. That's the breakup we've been seeing. Now that is changing and we'll see some more on the packaging side. The industrial side is coming towards the 55% and the packaging is going up to 45%. Over the next few years, that's what we believe will happen, because of the new printers that we are launching.
Okay. We offer the printers as well as the consumables for the printers. If a customer buys the printer, is the consumable to be bought only from Control Print or like?
Mostly we have RFID chips in our printers and that's what the customer needs to purchase the consumables from us. Some people do try using spurious consumables if they manage to, you know, bypass some way the RFID software. Then in that case we don't service the printers because, you know, the spurious ink actually spoils some of the parts.
The customer then has to get the servicing done from outside. In many a cases, we've found that where customers move out of Control Print, over a period of time their printer deteriorates and they have again come back and, you know, started buying from us. These are things which do happen in the industry. Apart from that, 85% of the industry is still organized. It's 10%, 15% where, you know, these spurious activities take place.
Okay. In terms of margins, how different would be the margin for a printer and a consumable?
Definitely printers are at rock bottom price. There's very little margin, and it's a very competitive price market there. The reason being that the main high profitability is on the consumable, and that is what sell for multiple years after you've sold a printer. One printer can give you, let's say, five to seven years of consumable business and which is high profit margin. That's the reason why printers at least in India, we found is at a very low price compared to our you know other countries. Yes, the profitability mostly lies in the consumables.
Got it. Just one last question. In terms of printers, what is the difference between a CIJ and a TIJ? What's the difference?
Difference between?
CIJ and TIJ, if I heard it right on the call.
There are different variety of printers.
That's a printer, right?
We have about seven different types of printers. CIJ and TIJ are just two out of the seven. They print on different substrates. TIJ is more specific to certain applications, whereas CIJ is more general and can print across more industries and substrates. Maybe on the website you can get much more information once you scroll through.
Okay. Sure, sure. Thank you so much for your time. Thank you.
Thank you.
Thank you. The next question is on the line of V.P. Rajesh from Banyan Capital Advisors. Please go ahead.
Hi. Thanks for the opportunity and congratulations. Just a question on the acquisition that you did in Netherlands. If you can share the financial metrics, revenue, EBITDA or, PAT for last financial year, what does it look like?
We had put that up on the, you know, stock exchange once we had given the.
Oh, okay.
Things. It's available there for the last three years.
Okay. Sure. I'll take a look at that. My second question is just on the macro side, you know, you talked about.
Million in revenue and EUR 150,000 in profit, I think. Google that number. If you just write in to us, it's no problem.
Yeah, no problem. My other question was on the macro side. You know, are you seeing an acceleration in the industrial activity or in the packaging activity? Therefore, you know, what is the prognosis? Because everybody seems to be talking about a slowdown which will also impact India. I was just trying to understand from your vantage point what you are seeing.
I didn't hear the question clearly. Shiva, can you please answer that?
No, I didn't understand the question clearly also. If you could just repeat it once again.
Sure. What I'm trying to understand is, you see, you are very much plugged into the industrial side of the economy. As you are out there at the ground levels, are you seeing the industrial activity pick up, let's say, one month ago or two months ago? Are there certain pockets where it is growing faster than the other pockets as you see it from the sale of your printers or from the increased use of consumables?
Yeah. From the industrial side, we actually felt it was a bit slow. Honestly, this Q1, it was slower than what we expected. You know, I'm not some, you know, we don't have, like, macroeconomic trends, but overall activity was a bit subdued.
Okay. Was it concentrated in a particular industry that you supply to, or was it across all the segments that you cater to?
I think like two, three segments like the pipes, to a lesser extent the steel. You know, I mean, the construction material industry is still okay. I think the pipe especially was a bit weak to some extent due to the cable and wire. We have to break it down. Because the pipes that we print on are not used in agriculture so much. They're used more in construction. Then, in the FMCG it was okay. It was sort of. It wasn't, like, increasing really that much per printer, the consumables business. It wasn't decreasing also. It was sort of flattish. Yeah.
Overall, I think, we believe that another 10%-15% definitely the volumes can increase, compared to the current level.
Over what period? This quarter or for the rest of the year?
No. Going forward, I think things should increase more if the productions of the different industries increase.
Understood. Okay. Thank you. That's all I had.
Maybe there was, you know, maybe there was a bit sluggish or maybe it was due to some destocking or other things. You know, sometimes it happens. I guess, you know, we'll look forward to, you know, a better production probably for the next three quarters. That's what we are.
Also, Shiva, on the raw material side, some industries were struggling. We know that some printers were shut because their production lines were not operating because they could not manage their raw materials. Different reasons have kept it low.
Understood. Thank you.
Thank you. The next question is from the line of Anurag Dinkar Patil from ROHA Asset Managers. Please go ahead.
Thank you for the opportunity. Any kind of a supply chain disruption we are anticipating in the coming quarters?
No. I think right now we are in a supply chain disruption and our printer production has been affected. I think I did mention, apologies, in the Q4 conference call, you know, where I said we've been severely impacted. That's why our revenues are lower this quarter because we've not been able to sell, you know, many printers because we don't have the components. I said that very clearly. We're purchasing from the spot market, whatever we have to fulfill our needs at a much higher price. It's affecting us almost to the tune of INR 30,000-INR 40,000 a printer. Even then we can't make the printers because there's still some parts missing.
You know, the orders are to buy, however it is, wherever it's available, however it's available, once we authenticate, you know, validate the authenticity of the component. That's the situation right now. Because of that, you know, we're able to produce the CIJ printers during Q1, except for some old boards, some old stuff that we've been scrounging around and that we've been able to use some of our spare stocks and stuff which we normally, you know, keep as a very big safety for the printers to manufacture certain printers.
Now our production is starting of the new generation of printer and, hopefully we'll be able to get out of this situation and this quarter at a price because it's, you know, we're just buying stuff at a much higher price. I think this is gonna continue for the next six months is whatever we've seen. It means we've created some stock at a pretty high price. That's what the situation is. We have no choice.
Okay.
I think the semiconductor market shortage is improving. We also see some other weird components of ours, like rubbers or certain valves, like the lead times have increased tremendously. The whole supply chain is a bit broken. It's not recovered frankly properly from the COVID time. Definitely we're more than anything affected because we don't have the electronic components. We are not able to manufacture our PCBs, which the electronics, the drive electronics for our printers. Because we don't have, there's literally, I mean, 300 parts on a PCB. If you miss one, you can't make it, and redesign it. For every alternative component, we have to validate it, and then some of them require software reprogramming.
This whole thing has become a disaster. Basically the only way out which we had was to purchase from the spot market at a very high price. In some cases we have redesigned, in some cases we have used alternatives. Of course we are doing our best. I expect the situation to continue to be difficult for at least six months.
Okay. Sir, a lot of raw material costs are now correcting. Current gross margins of 60%, can you say that will sustain going forward?
Again, like I don't know exactly on that. But what I would think, like this quarter, the printer revenue has been subdued. It would not add to our profit normally, but it would not reduce our profit. But normally we sell them at a, you know, a flat level so that they don't cause a loss, nor will it cause a profit. So right now, maybe we are selling them at a bit of a loss going forward because, you know, our cost has increased because we had to purchase from the spot market. But, you know, so I think, like I said, the absolute numbers might matter a little bit more than this quarter-to-quarter comparison, especially because there's been so much fluctuation going on, like last year the Q1 was affected because of COVID. This year Q1 was affected because semiconductor shortages.
You know, something or the other seems to be going on honestly since like March 2020 or something. It's very difficult to get a sequential comparison. Maybe last quarter was, you know, a Q4 where everything went quite smooth.
Sir, my question was more on the consumable side. If the raw materials for the consumables are correcting, then is there any scope for further improvement in our margins?
Hello?
Hello. Am I audible?
Hello.
I think currently some of the prices are on a higher side, but if global situation stabilizes, we do have a scope of improvement in some of the raw material or the consumables. Yes, definitely there is a chance that if things are better. This year we are not sure because things still, the market feedback that we are getting is that the prices will remain on the higher side. Maybe the next year, if it stabilizes, we have scope of better margins on that.
Okay, sir. That's it from my side. Thank you very much.
Thank you. The next question is from the line of Harsh Beria, an Individual Investor. Please go ahead.
Hi. Thanks for the opportunity. Am I audible right now?
Yes, Harsh.
Yeah. I noticed in the presentation that the field staff has reduced to 300 from 360 earlier. Is this reading right? Is there a reduction in the count of field staff?
Sorry, could you repeat? What has reduced?
Field staff. The number of field staff deployed. I think it's reduced to 300+. Earlier in the presentations it was mentioned as 360. Has there been a reduction?
To be honest, I've still not understood. Could you speak a little louder?
Yeah. He's saying, Rahul, that the field staff was reduced. Although I don't
The field staff. Okay.
Some sort of breakup in the presentation where the field staff was 360 earlier and now it's 300. You know, Harsh, I mean, I don't know offhand the numbers, but nothing is reduced because we are still. If anything it would have.
Where are you getting some numbers from exactly?
It's from the presentation. Earlier it was mentioned as 360, now it's mentioned as 300+. That's why my question.
300+ is just a form of presentation point of view. I guess they changed some presentation outlook. They like Mr. Shiva said, the field staff has not reduced, and we're looking to add a few more because the business seems to be growing quite strong. Yeah, there is no reduction. It's probably just a presentation format.
Oh, perfect. Thanks for the clarification. My second question is about your track and trace services. How is this business structured and what is the kind of software team that you need to provide this service?
Shiva, the track and trace, could you then explain?
Sorry about that. I was on mute. Harsh, normally what happens we normally print like something simple on the products like a date code, batch code and so on, you know, MRP, which is variable information. Now in a track and trace system, it's an integrated system, so it's not just about us printing the standard information. Along with that what we do is we have to generate a variable QR code. Now for that what we do is we have to download some data from the customer's ERP system. And at the same time we add some, we have a software which then generates certain random numbers.
There's a format provided by the GS1 organization, which is Global Standards 1, and they issue the standards for this as for the EAN barcodes and so on. We use that to print variable information on the products.
Okay.
After that.
Can you hear me? Sir, can you hear me?
Yeah. We use that to print variable information on the products. Then what we have to do is we upload it back from our printer and eliminate it in our printer because we can't store more than one code at a time. Then it goes back into the customer's host, customer's business. At the same time the residents scan the thing with a camera, scan the barcode, ensure that the print has been there. When it gets validated as those part of it available and it has been printed. Then we have to eliminate it from our database. It goes somewhere in the cloud or wherever the customer wants it to be stored. Then when someone wants to buy.
At the same time, if some code is incorrect, we have a rejection mechanism which we have to build on the line, so that without stopping its production, if the code, you know, is not being read, then that product is removed from the production line, which of course can be challenging at a certain speed. All of that information is then connected, so when these same products are then packed in a secondary carton. In the secondary carton, the code of all the primary cartons is also included in that. Suppose I have like, say for example, 10 blisters and I pack it in a blister pack in a little folding carton, you know.
All the variable data of all those 10 blister packs, which is there in that secondary pack, you know, that data will be encoded, so it'll come on a secondary pack. When say 10 of those secondary packs goes in a tertiary pack, which say a carton which then gets shipped out to distributors, then on the tertiary pack it contains the information of which 10 secondary packs are there and which 100, you know, primary blister packs are out there. Each of them have a rejection mechanism. Everything is, you know, then uploaded somewhere on the cloud or the customer's data. That's his choice how he wants to handle it. Sometimes some people use it for where we help them. They might use it for validation with an SMS, the authenticity of the product.
They might use it for their own internal staff to validate some product. They might use it also for some marketing reasons so that, you know, they can use it to scan this code and, you know, get INR 10 off or something like that. You know, get a 20% discount on your next purchase. Then what happens is basically that's all different from us providing a product because, and just printing our date codes and batch codes and, you know, leaving because, the amount of involvement of ours in the type of equipment we have to provide is much bigger. It's much more challenging and of course it's a much higher revenue generator. There's a certain software component which you have to manage every year, so we charge some money for that.
Okay. This sounds like a slightly complicated service. The revenues that comes from this segment would be categorized in the services segment in the revenue breakup.
What were you saying again?
The revenue that you will be generating from this track and trace would be categorized in the services segment, in the revenue segmentation segment of your annual report.
Right now it's quite invisible overall because when we sell the equipment it will come under sale of equipment or you know depending on what category it comes under. The recurring service revenue, I mean, I think you know Rahul will probably be taking over to further answer this question. I'm guessing it will come under sale of services or something of that sort.
Okay. Yeah, thanks for the clarification. That's all from my side.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants, please limit your question to one per participant. The next question is from the line of Saket Kapoor from Kapoor and Company. Please go ahead.
Yeah. Namaskar, sir, and thank you for the opportunity. Sir, firstly with coming to this acquisition part, this payment is made to the promoters or there is a fresh capital has been raised in the company for growth of the sales?
The initial payoff will be to the current CEO there, who is the promoter. He will continue in the company for the next five years. We have a management contract with him.
Okay. The balance 25% is also held by him only?
Just one moment, Saket-ji.
Yes, sir.
Saket-ji, the current CEO has a partner, a non-active partner. We are purchasing that partner out entirely. From the current CEO, we'll be purchasing a part of his shares, just so that it's clear.
No, the balance will be held, 25% balance shares will be held by whom, sir?
The balance will be held by the managing partner. Our share purchase agreement says that every year we will continue to buy 5% of his balance. By the end of 5th year, Control Print will have 100% of the equity.
Okay. About the valuation part, sir, I mean, at what value are we buying? Is there any clause of incremental valuation we are going to pay or any other yardsticks that will apply?
No. It will, because as per RBI guideline, it has to be valued every year as per the category one merchant banker. At that point of time it will be revalued. We have some indication on what the pricing will be.
Correct, sir. Sir, this company was formed in 2015. What is their current installed base? The sole purpose is the technology part, which we want to get enabled in our printers going forward. That is the main factor behind it, sir. What is their installed base as of now?
Shiva, can you take that?
Yeah, I think I sort of answered this question earlier, but if you can just repeat yourself, Saket-ji
Sir, yes, sir. I was looking for the installed base of printers for Markprint. That this company was formed, I think, in 2015, so this is at least seven years, six years old. What is their current base? And the sole purpose for us is the technology transfer. And then post this 100% acquisition, do they have any technology partner for which we have to pay any royalty going forward?
No. It's their own technology. I've explained it earlier, I think in the same conference call today. Our primary purpose is to acquire the technology, for our own, you know, for the top end of our range. Second thing, Markprint's own installed base is about 300 printers, if I remember correctly. Between 300 and 400. If you want my exact number, I'll have to check. It's between these numbers. It's about 300, if I remember correctly. The third thing was, yeah, of course, we are also expecting Markprint to grow. Markprint sells about EUR 1.5 million approx, if I remember right.
We're expecting that to almost double, let's say, you know, in the next 2-3 years and continuing to grow at a faster rate because of our support to them and, you know, and their own, of course, the fact that they've got an existing base. They've proven their products, and this is the time for them also to grow faster than before.
Their business model is slightly different. They also make a good amount of margins on the printers apart from you know the consumables post-sale. It's not only on consumables that they make their margin, it's also on printer sales, because the technology is very high-end.
Okay, sir. Because the installed base of 300 only, definitely you must have done your due diligence. The base, installed base, that means they are very new to the market. If the understanding of 300 printers is there.
This product is not something that is sold like a C-end.
Yeah.
As said, it's a high-end niche products.
Yeah. I think their cheapest printer would be like EUR 15,000 discounted, like at the cheapest, like in the most entry level. Their average ticket size is much higher than ours, you cannot compare the two because, you know, I mean, if I'm selling hatchbacks and I'm selling, you know.
Correct, sir.
SUVs and I'm selling
What should be their market share then, sir? On a base of 300, and since in their niche segment.
Yes.
What should be their current market share in the market in which they operate?
I don't know the market share because it's an undefined market. We are creating a new market in these segments because people who are-
Very few players.
I don't do business. There's no market share in this. You know, it's almost like a new market.
Correct. Got that. Sir, एक प्रश्न और था [Foreign language] sir. When we look at the, again, the below line item, this time we find a negative line item of INR 8.66 crores equity investment through the OCI route. What is the current size of the book, sir? And how are we going to conclude this transaction? From the cash flow, or any borrowing, or how is this going to conclude?
We already have several funds in liquid funds which we are injecting. It will completely be internal accruals.
Size of the book, sir, we have a negative line item of INR 8.66 crore in a quarter. June was a bad quarter for the capital goods.
Those markets are very volatile right now.
Yes, sir.
Probably by December you'll get to know once it is out, the balance sheet, then you'll get to know. Right now it's not a subject to be said.
Okay, sir. Sir, lastly, sir, आप लोगों ने पहले भी इस बात को [Foreign language] pointed out किया था [Foreign language] about the buyback part and a special dividend payout, which Shiva Kabra sir and Rahul Kedia, you people are telling that board will take a decision at the appropriate time. Now with one acquisition, two acquisitions happening over a period of one year, another one being very small, innovative, and now with Markprint. Going forward, what is the thought process of the management in distributing the cash back towards investors? Since I think so we are at the cusp or the inflection point, if my understanding of the total conversation and the numbers goes.
We should build on from this these numbers, since this is the Q1 only. Just a thought process of how things are looking up and also on the utilization levels for the consumable part. I think so they were low in the lower 40s for us. How are they? Have they improved that response from us?
I'll just take your questions one at a time, if that's okay.
Yes, sir.
Otherwise I'll get confused. You know, just getting back, of course, and I appreciate, of course, your coming into the AGM call, you know, and putting those questions there. You know, we definitely appreciate that, you know, shareholders are involved and actively, you know, obviously.
Yes, sir. Thank you.
Ensuring that, you know, they're giving us suggestions to grow. I want to just say, you know, our thing was quite clear, you know, which is that we have decided on approximately INR 50 crore of cash and INR 50 crore of bank in regard to any opportunities that come. It's not so much of an emergency because in our business, you know, unless something really bad happens, because, you know, there's a repeat consumables business, we don't see any real, you know, liquidity issues, of course, even something like COVID happened and that lockdown happened, so you can't say anything 100%. It was more in case there's an opportunity to expand that comes.
I will say again that, you know, we are in a space where we are, there is customer demands from us for more integrated solutions, which, you know, I think Harsh asked earlier something about, you know, the track and trace, and I tried to give a basic idea of the system to him, and to the other investors. You know, but there are more requirements like this coming from customers. It's not only on track and trace. It could be for certain branding. It could be for certain anti-counterfeiting. It could be certain other requirements. We know we are obviously trying to gear ourselves to provide that. It'll be based around our printers, of course, but it could be a bigger solution, not just the printer itself.
The second part is that we are looking at getting more into sophisticated types of printers, which, you know, is something that where the Markprint acquisition was obviously one where we started. The ICS deal was a bit more opportunistic because it was the right person who we knew from the market. It was a brand extension. It's using existing factories and facilities and technology. So, the cost involvement for us was very marginal. And, you know, what I think is sustainable packaging is another area that we would be interested in going forward. Certainly, these all seem to be good growth levers, you know, to be taking us in the coding and marking business, which is anyways growing, and anyways we're fully focused on it, to the next level of growth as a company.
More than that, you know, getting back to your original. You know, these are the areas where we are focused on investing, and we're keeping some liquidity available for opportunities that come in these areas. The thing is, you know, I think and you know, the board has been clear, and, you know, I can say this on behalf of the board that, you know, we have provided dividends in the past. You know, if the amount of cash that is available in our company goes beyond a certain point, then the board and we don't find our first priority is to invest in these growth areas, and our existing business. Our existing business, as we've discussed before, doesn't need funds.
You know, whatever the depreciation amounts are right now is more than enough to cover the CapEx requirement for at least the next two, three years. It will not require any capital investment. That's the first point. The second point is that we will be looking out because we are more interested in inorganic or bolt-on acquisitions rather than developing capabilities from scratch in our company for certain areas of these things. Digital printing definitely we will be working on ourselves. For other things we'll be very interested in strategic investments to increase our capabilities. That's one area where we are keeping this INR 50-60 crore cash and INR 50-60 crore bank limits available for.
Whatever is beyond that, we will, you know, provide back to the shareholders, you know, either, whatever, you know, the board decides is tax efficient. That's why I cannot say there'll be a buyback or a dividend or something. You know, that's the board's call. We'll not hold on to cash beyond that amount. There's nothing immediately visible on our plate. You know, I can give this assurance to all the investors that, you know, we're not just gonna build up the cash balances endlessly if there's no reason to deploy them effectively, and you don't have a genuine solid output for that. That's my.
You know, I think you brought that up in the AGM. I don't know if that was answered very clearly, but i t has been discussed at the board level before, and I can, you know, give this answer on behalf of that. Yeah.
Yeah, it's done. On the consumable front, any number you want to give? Utilization for the consumable.
Can you repeat that again, please?
Yes. Yes, sir. The utilization levels of consumables for us, they were in the lower 40s, I think, so the 40s or in the 50s bracket. With now the installed base crossing 15,000 and what the Q1 numbers reflect about the percentage mix, revenue at 56% for consumables, how are the utilization levels looking currently, and what should they look like for the end of this year, sir?
We're still in that 50%-60% range capacity. I don't think it will be very stressful in terms of capacity utilization.
Yeah, I think we should be okay till we hit about INR 300-350 crores. At that point of time, we might have to increase our raw material storage facility in Guwahati. You know, that's also gonna be. It'll cost INR a few crores, but not like a huge investment. It's just a storage facility. We have enough production facility. We need to have more storage facility for the raw materials and the finished goods at that point of time. Or we will need to set up some more warehouses outside of Guwahati so that we can ship the finished goods out.
That probably will take in maybe another year and a half, when we hit, you know, if we hit, during 12 months of 300+ , you know, at that point of time, maybe we will take that decision.
As of now, only from operational point of view, we can increase the shift a few hours to gain some extra capacity. That will not be a bottleneck at this point of time.
300 top line should be our target for FY 2023, given what the sentiments are currently and the utilization levels at your customer base. We should look forward to scale our revenue, sir. I think that ballpark number should ideally be well baked into our numbers for this year.
Yeah, I think we are. Internally also we are targeting close to that number.
All the best to the team, sir, for a very conclusive discussion over. We look forward for further interaction with the team, sir. All the best. Namaskar.
Thank you. Moderator, can we wrap up the call if there are no more questions? Hello? Karan, you're there?
Yes, I am there. Rutuja, where are you?
Are there any more questions available?
Yeah, we have two more questions.
Yeah, please.
Ladies and gentlemen, we would request you to please limit your questions to one per participant. The next question is from the line of Devanshu Sampat from YES SECURITIES. Please go ahead.
Yeah. Hello, sir. Good afternoon. Just one question from my end. You just mentioned on how the model is different for the company which is acquired, right? Versus what it is in India. While that company makes money on printers, and that's not really the case over here. Just want to understand how is it globally for the coding and marking business, especially in, you know, I mean, if there's some sense on developed and emerging markets both. Why is it so different over here? You know, because the sector is highly consolidated, right? We have 85% share coming in from the top four guys. Is it the new challenges beyond the top four that is leading to this?
Is it just, you know, the intensity between the top four players that is leading to us giving, you know, printers at cost or something? You think this is just a phase right now, you know, giving away printers for essentially free or you think it's a temporary phase?
Yeah. Just getting to your questions. I think that first of all, obviously the pricing discipline in Europe or the developed markets is much, much higher than in India. There's no doubt about that. The way customers evaluate products is also very different. In India there's a direct cost comparison, you know. I can't explain it very simply, but we will just say that, you know, this costs INR 10 per kilometer and that costs INR 8 per kilometer. Then, you know, you get more into direct cost comparison of the machine versus the something. Abroad, people are very much concerned about the cost of labor. They're concerned about the cost of automation. They're concerned about the ease of use and the reliability factor, which helps us sell in India.
That's why the market is dominated by the four of us. It's because of the underlying concern of reliability. Abroad they measure the cost of reliability also. Abroad, the person will say that if I go to some local guy or some Chinese guy or some, you know, whatever person whose support might be less, and I lose one day, say, extra of production as a result, you know, what is the cost of my line being down for one day? Then that cost is, you know, normally 20 times higher than the printer cost, right? Because
Yeah. Yeah.
You lose production. You have employees out there who can't operate. You have all your other fixed expenses. Most importantly, if you need that capacity, you're not able to service your market, then that's also big, a massive issue. Because of that reason, the way people measure these things abroad is very different. In India, you know, people have a very shallow way of thinking at certain times, and I'm not trying to put it in a bad way or good way, but they will not look at these issues, you know. It's a very cultural thing in terms of quality of certain things. You have to look at our branding. You cannot look at doing something and give it a short-term result. This is something that you build up over a 10, 5, 10, 15, 20-year period.
That's how you build your brand, your quality, your reputation, your service and so on. I think that's an issue that's never there in India. The easiest way for people to focus on expanding the market was to sell cheap products, you know, which is obviously a method of, you know, selling. It's definitely a management fault that happened. It's also an industry-wide thing, so it's very difficult for one person to control it, you know, in this situation. Of course, it's stabilized in the last few years because, like you, I think Rahul mentioned, we are all largely at cost and that's the situation.
Definitely our view is that in newer printers, like in the Markprint situation, in those types of printers, and we're selling them in India, you know, we are not gonna sell them. We might obviously not make the same types of margins as Markprint, but as we go higher up the value chain, you know, there is no reason for us to discount the printer to the cost level, and we should make a certain amount of money on the printers. In the existing printers which are already in the market, it's very difficult for us to change that situation. That's where the story is right now. Of course, it's looking worse because, you know, since the COVID time there have been some cost increases on us, whether because of freight or shipping or, you know, just logistics disruptions.
Now, you know, like this whole chip, semiconductors, I mean, whatever component issue, the electronic component issue that we're really suffering.
Sure. No, I understand that, but I'm just trying to ask that is it possible that this can get more aggressive, going ahead? Like, you may have to not even sell it cost, but just give them away free and then hope for business, you know, coming in, based on that? Is that? That will be too extreme. Sorry, can you hear me?
Yeah, I can hear. I just got cut off, I believe.
No, I was asking, you think, is it possible for this to get a bit more aggressive from the players in the sense of giving away printers, you know, at basically for free and then hoping for business to coming out as compared to just regarding the cost right now? Is that a direction the industry could possibly move in or is that unlikely?
I don't think we have any intention of lowering prices. I mean, that's the Control Print viewpoint, but I don't know. I mean, obviously, whoever the challenger will be more aggressive, you know, and whoever the incumbent will be is relatively not gonna be as aggressive because, you know. In general, we have, you know, pretty much zero intention of lowering printer prices. If anything, we wanna go the other way. Although it might be, you know, more focused on newer models where we increase prices there rather than on existing models where we increase prices.
Got it. Okay. Thank you, and wishing the team all the best. Thank you.
Thank you.
Thank you. The next question we have is from the line of Dharma Venkateswaran from KB, an individual investor. Please go ahead.
Hello. Good afternoon, sir, and thank you for the opportunity. You are able to hear me?
Yes. If you can just speak a little louder.
Okay, sir. I have only one question. Regarding our equity investments, I know this has been raised many times in the past calls, and the response from the management was that it will be liquidated at an appropriate time. If I see even in this year's annual report, we have even, like, instead of not liquidating, we have initiated newer positions in some scrip. What is the rationale behind this, and how, what is the way forward for this?
I think I just answered this question quite extensively with regards to Saket Kapoor, if I remember correctly. Saket-j i had asked this question, and he had asked this question in the AGM. The board has discussed. Like I said, you know, we are not. This is. When we talk about INR 50-INR 60 crore amount, we're keeping it as a permanent amount, okay, for firepower in case we need it for anything. In that case, we're not looking at, and we don't believe in outside investment needed in an emergency for our own requirement. Perhaps you have some banks and Rahul will, he can give you some more details on that or Jaideep. The basic focus is that, you know, we need a certain amount. We're keeping that.
Beyond that amount, like I said, we don't have a specific, you know, and a very clear idea of how to invest it. Our first focus is to reinvest into areas where we feel that we can contribute to, you know, to the industry, to, you know, our country, you know, and, also, make sure that it's a reasonably successful business. I've outlined those areas very clearly, which is, you know, into integrated solutions, not only track and trace, but similar. The second is I said, that we'll be focusing on digital printing, and, that area with Markprint, we made one acquisition out there.
The third I said was that we will be focusing on sustainable packaging solutions, you know, because we feel that that's something that the company needs to contribute to for our country to move forward because this is a big area of concern. You know, it's something that we believe in. Again, we would like to integrate our printers as part of that solution. These are the 3 areas we're focusing on. Fourthly, I said that our existing business for the next 2-3 years will require marginal amounts of investment, and we should be able to cover the amounts of investment for the coding and marking business, through the depreciation amounts, so net CapEx will be approximately zero.
I would say that for the, you know, we are of course investing in R&D to start to increase at relevant points of time so that build for us is continuously increasing. But, you know, beyond that, I said that whatever amount we have beyond that, and it could change, I could always request the board for a higher amount if I feel I need to make bigger acquisitions. But the focus is more on acquiring technology, acquiring capabilities. We don't wanna shift our resources because, you know, our focus, our knowledge is around printers. You know, even though we're in the packaging industry, we don't know how to make packaging machinery, for example. Our focus, we know how to make printers.
We are going to obviously increase our capabilities of manufacturing digital printers in certain higher levels as per different requirements that we are targeting, but not so much of, you know, we don't want to get beyond our own core competency because it's very difficult. It takes a lot of time to acquire that experience, you know, to make a very high quality, reliable product versus, you know, a product that has all the technical specifications but is not reliable on the line. We've made these types of mistakes in the past and, you know, I'm not gonna do that. Once we invest in all these areas, I was clear that, you know, I'd ask the rest of the board for an amount of INR 50 crores, which we've got in liquidity and INR 50 crores as a bank limit.
Beyond that amount, we will reward back to the shareholders. Like I said, because we were looking at this as a multi-year thing, that we'd always keep this amount available. We might increase it, we might decrease it. That's something I will discuss every year, you know, depending on what I foresee as the requirements along with our team for whatever our, you know, goals are for the next one to two years. Whatever is beyond that, I've made clear that we will reward the shareholders or, I mean, give it back. Even if we reinvest it is a reward for the shareholders. It's coming more in the form of increased growth over a longer period of time.
Like I said, our first priority is to invest the money, you know, in these allied areas of businesses which we wanna grow. If we can find the right type of opportunity. If we are unable to do it and the cash balance increases, then we will be, you know, giving it back to the shareholders, in whichever form the board decides could be tax efficient, you know, in that given situation. That's the situation again, whereas it comes to equities or liquid funds or something. I suppose there's a difference in the rates between the two. We are looking at it as a continuous holding period over a 2-3-year period. A sharp fluctuation over a quarter or up or down honestly doesn't affect us so much.
You know, we are taking this note that, you know, people are concerned about that, and that's something we need to internally discuss and get back to you guys on. It's not something that we are investing or we're concerned about, you know, quarterly fluctuations up or down. It's not that relevant to us because we are looking at more as a sort of something that we're keeping in reserve. Because if we get an option to make an INR 100 crore acquisition, we still have this money available to us. I'm just gonna explain it because I know this question has been raised many times and I've given a very long answer, and I've answered this like three times.
I hope that it's very clear because I know this is an area of concern that a few people have raised, and I just wanted to address that.
Okay, sir. Just to add a point here. Like if we understand that the business has to reinvest and like most of the investors are happy if the company is looking out for acquisitions and if it's a big-ticket acquisition, we need to keep cash on books, which is well and good. The concern for most of the investors is that it has been invested into equities instead of some fixed income instruments. That is the concern here. The concern is not the cash balance. It's where the cash balance is invested.
If the management can come out and provide more clarity on the way forward in the next meeting or by the way of action saying that we will be investing in certain areas and we will not be investing in certain areas, it will be very clear to the minority investor shareholders there. Because many are actually like you said, many are actually concerned by this, with the way the capital are being allocated into equity investments.
Again, I'm gonna answer this question, which I hope I just answered, but if you all understand exactly what I said, I said we need a certain amount of cash.
Yes, sir.
Whether in the form of equities, in the form of funds, in the form of liquid funds. It, to me, doesn't matter. Like I said, the second thing is the view is that these funds will always be there. So even if we spend it in a given quarter, we will then, you know, reduce maybe certain other ways because we're generating cash continuously. We will always keep certain funds available for the business needs. So we are less concerned with the quarterly up or down. Obviously there was maybe a view that there is a significant variation in what we are getting over equities. You know, we've been investing or had some equity investments since at least 2005, since I joined.
Again, it's not something I look at, but the overall rate of return since 2005 to 2022, when we've calculated, has been north of 15% post-tax, you know. I'm talking about over a 15-year period over taxes and dividends and, I mean, and appreciation and so on. Whereas obviously, the liquid fund was slightly different. I understand why investors are saying, you know, that it's your core competency in your business and so on, and we appreciate that. Basant Kabra and the board have taken note. That's why I am being very clear about the limits of what we will be employing this cash in whichever form and keeping it and what we'll do with the amounts which are extra. We're not planning to turn into an investment house.
You know, we are, you know, a proper, business. This is. You know, we do a very important service for what we believe, for our customers, you know, for, the wider, you know, consumer needs. Obviously that's where our focus is and, we have some areas of growth clearly outlined. I just want to be quite clear about that. It's not like we're not taking this and I understand this is a concern, but of course there could be multiple viewpoints.
You know, which is, the viewpoint of, you know, Mr. Kabra and the board, like I said, was that this is the rate of return we're generating over a 15-17-year period or whatever that 2005 to 2022 is, versus what we'd be getting in a liquid fund after tax is different. If we don't need the money for something very immediate. It could be that if there's something on the line, you know, which is what the viewpoint of Mr. Kabra was, that, you know, there's something on the line, and I know I need this money in six months because you're working actively on something, let's say Markprint, then I will keep that money in the liquid fund.
For example, right now we have more than INR 20 crore in liquid funds because we know we have to pay off the dividend and the Markprint acquisition, and then we wouldn't invest that money in anything else. That's what his viewpoint is. I'm gonna send this information back to the board, you know, again, and I will, of course, the next discussion probably happen in the September results now. I will definitely, you know, I take this viewpoint and, you know, I will pass this message on to them, you know. Again, I just want everyone to understand that, you know, Rahul and Jaideep and me, you know, we operate, we run the company. We don't make all decisions.
You know, my request was only to keep a certain amount of money available for strategic reasons that might come up, and that's what the board has done. You know, so that's more of the operations part of it. You know, this is just what I wanted to convey to you all.
Okay, sir. Thank you. We appreciate it. Congratulations on the good performance, and looking forward to another great set of numbers in the next quarter. Thanks.
Thank you.
Thank you. The next question is from the line of Karan Bhatelia from Asian Market Securities. Please go ahead.
Hi, thank you for your hospitality. What CapEx are we looking for for 2023-2024, given the current tempo of sales of printers and consumables?
You know, Karan, could you repeat? It wasn't clear.
Uh.
You're talking about CapEx?
Yes.
We said the CapEx will be approximately the same as you know, the net CapEx will be about marginal or zero. The net CapEx, you know. We always do some maintenance. We always keep improving. But right now, specifically, there's no new facilities needed in the next one or two years, I think. I believe.
All right. Is it correct to assume that all the price hikes have been taken to cover for the past cost inflation? Or are we yet to see some more round of price increase?
We are looking at further price increases. The thing is, Karan, we are sticking to a new model of printer. We have built the next price increase in the new model. But right now, honestly, we actually don't have printers, so we are, like, in a bit of a bad footing in front of our customers right now because we are sort of quite behind on a lot of printer orders. We're juggling things from one place to the other to just, you know, meet the requirements. We might even have lost some business because we've not been able to service customers who have very immediate requirements. We are just trying to get out of this production issue right now. Then that's sort of maybe where a lot of the energy has gone right now for us.
you know, maybe once we get out of this situation, we'll be able to take a better, you know, look at the next thing. Right now the focus is just on getting our production back on track.
All right. Thank you. Yes, any closing remarks you want to make? Thanks for the very detailed phone call, Rahul and Shiva.
Thanks, Karan. I just wanted to mention, you know, first, I think you all would have got the stockholder notification that Rahul is leaving Control Print after a long time. You know, for me personally, it's been a real pleasure to work with him. I think he's grown a lot. The company's grown a lot under him. Most importantly, all the employees, the team has really benefited from his presence. You know, I really wish him all the very best. You know, all my thanks to him, you know, for being such a great guy and a great friend throughout this period. We have hired a Mr. Jaideep Barve as. Jaideep, you can say hi to everyone, please, and introduce yourself.
Jaideep will be taking over from Rahul from first August. You know, we are keen to have Jaideep on board. He has a lot of experience. Definitely, you all can interact with Jaideep also as you did with Rahul at any given point of time. I'm mainly available on the conf calls every quarter, and I try to, you know, keep myself available for this and the AGM always for any questions that might come up. You know, mainly I just wanted to thank Rahul for all his support, you know, all the stuff that he's done.
You know, for not only on my behalf, but, you know, obviously personally, but, for the entire company, I think especially his team, you know, everyone has really grown under his tutelage. Thanks, Rahul. Anything that you wanna add to, please say something, you know.
Yeah. Rahul, anything from your end?
Sorry to interrupt. We don't have Mr. Rahul connected.
Okay. Thanks, participants, for logging into the call. With this, we will be concluding the call.
I really appreciate the time taken by everyone. I think what Rahul or Jaideep would say that. Thank you everyone for, you know, taking that much time. It was a little bit of a long call, but, you know, I really appreciate it.
Thanks, Shiva. Bye. Take care.
Thank you.
Thank you, everyone. Take care, and stay safe. Bye.
On behalf of Asian Market Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.