Q2 21/22

Oct 25, 2021

Ladies and gentlemen, good day, and welcome to Control Print Limited Earnings Conference Call hosted by Asian Markets Securities Limited. As a reminder, all participants' line will be in a listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Karan Battelia from Asian Markets Securities. Thank you and over to you, sir. Thanks, Bilal. Ladies and gentlemen, good afternoon and welcome all to the ControlStreet Limited 2Q FY22 earnings conference call hosted by Asian Markets Securities Limited. From the management side, we have with us Mr. Shiva Tavara, Joint Managing Director and Mr. Rahul Kheddi, CFO. I now hand the conference to Mr. Rahul for his opening remarks and then we can open the floor for Q and A. Over to you, Rahul. Thank you. Thank you, Karan. Welcome everyone to the of Control Print. We appreciate your taking out time. Mr. Shiva Kapra, Joint Managing Director, joins me on this call. Let us start with a brief on Control Print followed by specific analysis of the financials of the current quarter and end with the Q and A session. The detailed presentation has already been put up on our Web site as well as in the investor presentation notification on the exchanges for this call. For those who are probably reviewing the company for the first time, Control Print is in the niche coding and marketing segment, which is an oligopolistic market with four major players, three of whom are MNCs and Control Print is the only make in India manufacturer. This gives us an advantage to sell our products locally and compete strongly with the other multinational players. We are the only integrated player with capability to manufacture both printers as well as consumables in India, giving us an advantage to share the benefit with our customers. This also gives confidence to customers for long term partnership with Control Print. We have our manufacturing facilities in Nalaga in the state of Himachal Pradesh for the manufacturing of printers and in Guwahati in the state of Assam for the manufacturing of consumables. Both the manufacturing locations are state of the art facilities to produce good quality products. All our consumables are manufactured in the Guwahati plant and in addition to this, we have also started manufacturing some printers in that location. We have a strong sales and service team of three fifty plus engineers across our 11 plus branches, which gives us the advantage to service our customers efficiently and timely since after sales service is very critical to ensure that the production lines of the customers continue to function continuously, thereby maintaining customer satisfaction. The 11 plus branches across North, South, East, West and Central India gives us the advantage to be in direct contact with all our customers in a timely manner, since our products are critical to their production process. Post sale of printers, there is a continuous demand for consumables over the life of the printer, which typically lasts for five to seven years depending on operating conditions. We have our complete attention on our customers' requirements to ensure their production is never affected and service requests are attended immediately, thereby gaining our customer confidence. We have an end to end ERP system set up which ensures maximum transparency in accounting, sales and after sales service as well as total control from raw material planning and ordering to receivable collections and is integrated with our CRM system, which gives the confidence to the team, the customers as well as our auditors and investors. We have a widespread customer base catering to multiple industries like pipes and cables, metal, automotive, food and beverages, FMCG, pharma, etcetera. And we continuously endeavor to customize our products to reach out to other industries to increase our installed pace. We have the entire range of products in our portfolio to meet the coding and marking requirements in the industry. The details are elaborated in our company presentation. As of today, the company has an installed sales of 14000 plus printers across industries, which enables the sales of consumables across the lifecycle of the printer. We are very confident that we have the best in class products to meet the requirements of most of the substrates, which gives an additional advantage to the customers to do business with control printers. With a strong foundation and five pillars that is man, machine, material, technology and finance well established to augment our business plan, we are confident continuously striving for greater highs. Let me give a brief analysis of the financials of financial year The manufacturing activities in was encouraging and gives an indication of the recovery of the Indian economy. The index of industrial production, the IIP, has also shown an upward trend in the last few months due to increased production across industries. With the decline in the COVID infection rate and the increased vaccination, the fear of the third wave is much diminished and the mood of the nation as well as the industries is optimistic for a quick bounce back for higher growth expectations. There was a strong traction witnessed both for consumables as well as printers as the companies were increasing production as well as capacity. These are extraordinary situations 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 the unforeseen challenges. This stability of Control Print has also been reaffirmed by credit rating agency, Crystal, 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 delivered an all round growth in revenue and margins and volume growth. We achieved the highest quarterly revenue of INR 62,.72 crores with year on year growth in revenue of 18.2%. Also sequential growth in revenue of 15.3%. The reason for growth in revenue was due to good traction in consumables as the industrial production across most of the industries increased. Though it is not comparable as of previous year was partially affected by lockdown. The profit before exceptional items increased 32% year on year, increased 36 for the half year and increased 38% sequentially. The profit before tax increased 30% year on year and 80% for half year. The EBITDA increased 23% year on year and 31% for half year and witnessed highest quarterly EBITDA. The working capital days improved significantly by one days quarter on quarter and thirty days half yearly due to better inventory management and receivables recovery. The company maintained healthy margins with profit before exceptional items at 18.9% and EBITDA at 25.5% with further scope of improvement due to better product mix and higher revenues triggering economies of scale. We should continue to maintain the EBITDA margins north of 24% on a long term sustainable basis. Let me brief you on the performance of various divisions, products and business segments. Printers had a positive demand in spite of a challenging environment, so the installations were slightly delayed. The increased installed base will drive the business in the coming quarters. The company received a large repeat order from the dairy segment. We have received pan India success in the sugar segment with key customers for the upcoming sugar season. The flagship division CIJ witnessed traction with growth of 15.5% in half year 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, food, cable and wire, agrochemical and was also encouraging to see growth in some of the upcoming sectors like pharma, paints and wood. New product launches of TIG, TTO and HiRise are showing good traction and with some good installation in the past few months. We have dedicated managers and teams to drive these verticals with focus on dairy, beverages, bakery, frozen food, ready to eat, pharma, packaging, plywood, lubricants and carton coating. These new products continue to grow every quarter, which builds confidence on the potential of these products in the coming years. Laser printers business is growing steadily as product technology has improved and a new team is driving the business. This has yielded good dividends with positive response from customers and new opportunities expected in the coming quarter. Service revenue has also shown good growth in value terms, which contributes towards profitability. Our strategy to separate verticals for key account and OEM business for focused approach is showing encouraging results and should yield good quantum of business. LCP business reported an increase in the previous two quarters with some revival in cement accounts and Pan India supplies in sugar industry. We are changing our focus to non LCP business and some new applications and the team is confident of generating business in the coming quarters. The company has strong cash flow and the trend is expected to continue. Control Trend retains its position in the list of top 1000 companies on the stock exchange by market cap on the national stock exchange. While the pandemic retreats and with the increase in the vaccination population will result in robust growth of the economy and we hope for similar trend of growth trajectory. Fundamentally and inherently, the company remains strong and we are focused on our plans and strategies as we are confident of the growth potential to drive positive results. The floor is now open for questions. Thank you. Thank you very much. Ladies and gentlemen, we will now begin the question and answer Your first question from the line of Gaurav Shah from Harshad Gandhi Securities. Please go ahead. Hi. First of all, congratulations on a good set of numbers. I have a couple of questions. First is with respect to the EBITDA margin. Do you think that EBITDA margin of around 25% this quarter is sustainable, especially with the energy prices going up recently? And my second question would be on the with respect to the sales growth. Do you think we can achieve growth of around 25% to 20% going forward with the manufacturing taking off in India? Yes. Thank you for the question. Yes, I've mentioned in my presentation also that EBITDA margin above 24% is definitely sustainable. We have always maintained this stance. And I think anything between 24% to 28% is what we have previously also given the guidance that it is achievable on a sustainable basis. So I have a follow-up question on that. So do we enjoy any pricing power with our customer? And how much inventory we maintain with respect of consumer Sorry, I didn't follow you. Do we enjoy any pricing power with our customer? So, see, we generally usually have long term contracts with our customers and our product is such that we don't really get into quarterly discussions on pricing with our customers. It's mostly on a long term basis. Of course, if there are certain abnormal situations like right now the freight has substantially gone up and certain commodity prices have also increased. So we are approaching our customers for price increase. So over the next couple of quarters, we should see better price share, I guess. Okay. And the second question on sales growth? So sales growth, definitely, I think anything in double digit is possible. High teens is what we have always maintained that we can grow anything between 15% to 20%. And with, as you said, that industrial production picking up, we are very confident that this is possible in the second half of the year. So are you winning any market share from our competitors? Yes, we do believe that. We have been gaining competitor accounts also. And last year, we gained some market share, but the results of this year for our competitors is not yet published on public domain. So we don't have the real figures, but our internal assessment does make us believe that we should gain market share in the previous financial. Okay. Thanks a lot and all the best. Thanks. The next question is from the line of Swaycha Jain from NISWET. Please go ahead. Hi, sir. Thank you for giving this opportunity. I have a few questions. My first question is, would you be able to give us the revenue break up in terms of the printers and consumables separately? Yes. Should I give that or you have more questions to ask? I have more questions. So I'll give this and then you can ask. So for this quarter, our printers, breaker would be about 18% to 19%. Our consumables is 51% to 52%. Pairs and service would be about 23%, twenty four % and about 6%, seven % of the month. Okay. Okay. So my next question is, like you said, we just guided to the earlier, participants question that we are looking at a sales growth of 15% to 20%. But what I understand is the market size, the whole overall, the industry size is just limited to 1,300 to 1,300 crores. Am I correct, sir? As of now, but it is, as you know, it's growing, for the industry. Yeah. Right. Right. We hope in a couple of years, they should touch 2,000. Okay. So so with that, you know, I just want to understand, even if it's a 2000 kind of an industry over the next four to five years, you know, So, do you think at some point in time our revenue growth would be capped at particular level? If not, then if you could just give me some sense that how would our revenues grow over next five to seven years given that the industry still remains like 1,500 or 2,000 crore kind of an industry. So just wanted to understand how overall revenue Our our assessment is that the industry should continue to grow strongly and this should hit two thousand to three thousand crores in the five years, I just think, maybe 2,000 in the couple of years. And Control Paint, like we've maintained, is going fine for the market share of 25%, which today is at about 19% to 20%. So with the growing industry and our market share increasing, we should be in a strong position five years down the line. As of now, we are putting an immediate target to reach INR 300 crores in the next couple of years and thereafter we'll go for the INR 400 mark. So from conclusion point of view, I think maybe we can hit 400 crores in maybe four to five years. Right. Right. Right. So I have two more questions. Can I ask them or should I join the queue? I think one more and then maybe you can join. Okay. Sure. I'll do that. I'll do that. So just wanted to understand with respect to the mass division, you know, what are we looking at? I mean, do we plan to grow the mass division or you could give some color to this, sir? So on the mass division, we've already made our investments and the machines are already in place. We have our raw materials and certifications also. So though we started the master vision in the pandemic as a most of the CSR activities. I mean, for us, it's not a strategic thing right now. It's there. What is there is there, if I may ask you. And how it goes, it goes. But it's not the focus. You know, I I think, obviously, you know, that's Right. Right. So so no more no more and 98% is if you get Okay. Okay. So okay. So so no further CapEx or anything on the MAS division. Right? We we did some, but that is only to get our certifications for the NEOS and the FDA, but that is only the case we do it as a company. We just take everything. So but there's not like it's not like I said, it's not strategic to us. Okay. Okay. Sir, I have two, three more questions, but I'll just join back the queue. Thank you so much. Thank you very much. The next question is from the line of Devanshu Sampath from Yes Securities. Please go ahead. Hi, good evening, sir. Good evening, Devanshu. Just a few questions from my side. So one is, it's great to see the working capital situation and the tightening of the same. Can you show some light on what initiatives you have taken and whether this is something that is sustainable? So, Devanshu, I think Rahul might answer that better. I'll just leave that to him. Yes, Devanshu. Like we've been discussing that inventory is the main working capital part which we've been focusing on and we have been able to work on better inventory management in spite of higher revenues. So we have mentioned previously also that there is a minimum critical amount of inventory which needs to be kept to service our customers as well as with the range of printers increasing the SKUs increase for us. So now with increased sales, we don't need to keep adding up to the inventory and we feel that even further increase in sales, we might be able to hold on to maybe the inventory levels. So that advantage we will keep gaining as the sales increase. On the working cap on the receivable front also, we've tightened it up a little bit in terms of approaching our customers faster and putting some pressure for them to release our payments on the due dates. But not as I had mentioned previously also, we were not very bad off in terms of receivables. So that slight improvement there, but the major betterment has come from inventory, sir. Okay, okay. Got that. And just continuing with the question that the previous participant was asking you, right? So I was just thinking about this myself. Maybe you can give me your view on this. So, you know, while the coding and marketing business is driving along, right? It's a 1,200, 13 hundred crore kind of business, which you're expecting it to reach 2,000. And it's also fair to assume that it's not an easy business to replicate, right, because you need a considerable support staff and network, which is required. But now that we have this in place, are we thinking about anything beyond this category, beyond coding, marking to leverage on this network that we have? Any thoughts and plans over here? Yes. So as I take that question, so the market itself is doing about 10% to 12% a year compounded, like if you look at it over a longer period. It might have been a little bit faster earlier. Of course, like in the last two years, very tricky to predict because of the whole COVID situation. It's not the market has not really grown, I feel, in the last couple of years. It's been quite up and down for us since But like overall, related to manufacturing growth, so as manufacturing grows, there will be a coding and marketing growth. And obviously, the second thing, which Rahul explained, same for us, is that whether you're able to grow our market share in conjunction with the market growth. Now what we've seen is that for which I've mentioned some things first, as you get about $5,000 to $6,000 per capita GDP, the coating and marketing market growth is about two times the manufacturing growth rate. And then it slows on about 1.5 times to reach about $10,000 12 thousand dollars And after that, the growth is more in services, not really in manufactured goods. So at that point of time, it sort of tails the GDP growth. But it's like you said, there is a fair positive cash flow business without really much of the investments required. So if you're talking from that angle, the profitability versus the free cash flow is quite similar. No. I'm basically what I'm getting at is expanding your market size, right, like, okay, you have coding and marketing business. Our focus is to get from we were about eighteen point five percent pre COVID, if I take March 2020, is that correct, Charles? And then so we're targeting twenty five percent. Now the thing is very difficult to predict what happened in the last few, like so much time because first, our competitors are more of a I mean, they do file on the ROC. We've not got the results recently. And at the same time, it's been a little bit up and down for everyone. So it's very difficult to read what's happening in the last so many months, I'll select since the pandemic began. But obviously, the idea is to grow the market share and like you said, beyond that, how we'll leverage our network. So we do have a very strong network. We do have some potential thoughts of what we could do, but we need something very concrete, we'll get back to you on this. In the meantime, the idea would be to cut on business efficiently and definitely focus on growing our quarterly marketing market share. And that's where our focus is. So we were looking at some geographical expansion. That's sort of one way silent because of the COVID. We couldn't travel. We can really move it forward. Maybe in the coming financial year, we'll look at that again. You know, we were looking at certain other countries. But we are continuously looking at new products and opportunities which are allied to what we do. Sure, sure, sure. Yes. So I was basically asking you a big picture question like, I mean, maybe from a three to five year perspective, we're thinking about possibly any other industrial products that we can get into outside of the coding and marketing. So that's what I was trying to get at. So with the intersection of digital printing and the packaging industry And obviously, what we the type of printers in the manufacturing technology know how we have is very related to the digital printing industry. But that's very wide range because even your billboard printers, your digital printers, even your home office printers, your laser printers and inkjet printers and digital printers, for example, then you have specialized applications, especially textiles and other things. So there are certain applications which fit in quite strongly with what we do. I won't really talk about that because we have something concrete out of it on the table. That's one area. And of course, we are closely linked to the packaging industry because in the end of the day, that's the customers we sell to. We sell to their products, organized packaging. And so the two areas, the adjacencies which are very close to us, the option is geographical expansion or to get into these two sectors. If we can think of the right option and the options to take out. Sure. Sure. So, wanted just to add to that, we're just keeping our ideas open. And if there's anything concrete, we'll update. But at the same time, as you say that if any of you feel that there is any opportunity, please do reach out to us. Sure, sure. Inorganic options. And so just a last question from my side. So over the last eighteen months, of course, the markets have been fairly favorable. I mean, they moved up quite a bit. And if you notice, ControlVent's valuations have been still in the low to mid teens band and relatively, I mean, for a business that we are in steady business earning the good return ratio and good balance sheet and everything. So just wondering if the management is thinking about sending out some signal to the market, either a buyback or probably some management probably looking at increasing stake. Any thoughts about this, especially considering that we are generating about 30,000 crores, 30 5 crores of cash each year with no major cash requirement, as you said, to take us to the targeted revenue figure. So any thoughts on this? Given to these are price sensitive discussions and we're not doing it on this call. Once the board takes a decision, we will inform the markets. Yes. I think we have also increased our dividend consistently And we are I don't know what the percentage would be, but we do have some sort of dividend policy distribution policy in place that we are talking about with the rules. And so the idea would be to make sure that if you don't find any opportunity in front of us that can be available, then I think we will definitely devote shareholders, I can show you that. But if we find growth opportunities available, whether inorganic or like I said, in adjacency, then we have a definite plan, which we also can look at, then we will also look at that. So that's my answer to you. But at the moment, there's absolutely nothing concrete. I mean, that would be something that the directors would take that call on if that situation came and we have cash, which we cannot deploy effectively. Thank you very much. The next question is from the line of Shlubh Agarwal from Snowball Capital. Please go ahead. Good evening, sir. Good evening. My first question is, so we applied a small company a couple of months back, very small acquisition that we did, we acquired 80%. Can you just give us some sense on why this acquisition was made? Were they making ink for us? Because it seems they are making ink for other brands also. So some insights into that can be helpful. Sure. You'll take that? Yes, sure. So if you pick up the industry structure, there's four organized players, that's us and of course, Videojet, Computer Printing Sciences and Mark and Imaj. And the four of us combined about between 1,100 crores to 1,200 crores depending on what the latest numbers are. And then the rest of the industry is about 400 crores to 400 crores, so 1,500 crores to 1,600 crores in industry. Like it's about 25%, twenty five % of the industries in that what we call unorganized segment. And so essentially, the biggest company in the unorganized segment was a company called JetAIMS. They ran into some issues during the COVID time and the CEO of that company quit because of some, indifferences with the investor of that company. I won't get into that reason. But essentially he quit and he started his own business. And because he knows this area, it's an area which we are not really present in, you can see it's a more price sensitive area. And so we have taken the option to sort of launch a second brand, started at that segment of the market. But it's totally disconnected. So ControlPrint is only like a manufacturing partner for this company. Like we own it, we are the owner of it and we are a manufacturing partner, but it's not part of the ControlPrint network, if you get what I'm saying. So it's somewhat out there, a slightly different segment of the market is what I'll say, which we couldn't get into without either lowering our service quality levels or in our pricing levels and so on and so forth. So but those guys are yes, so like there are sometimes customers are a little bit more price sensitive and who have higher service requirements and so on, like more of that. And then there are the types of customers we have more 20 fourseven. And what they care about is that at the end of they just want reliability in one, two and three and then all the other questions come in. So that that So the JetKings jet change plan will now be owned by unfortunately No, no. JetKings was a company that he was a he was a CEO, and he separate and started his new company called ICIPL. So Jetting has he have no connection with Jetting. It was just that he was the ex CEO, so he has knowledge of this market. So we will do it if we didn't have a competent manager in place, that's what I'd say. It's a different market, certainly. Okay. So this CEO will work along with us. Yes. He is the CEO of that ICIPL now. Okay. He was the ex CEO of Jetings and because he that optioned he was there and he needs growth capital and it was getting into us. And of course, we have synergies because we already have all the technologies in place, the manufacturing printers we have. So for us, it's a marginal investment to just make a printer which is for that market. But is this IC, is this new company which has been acquired? Are they also servicing other brands for consumer? Because that is for sale Other brands including us. So they are partly pirates and they have like, you know, now what we're doing is we are sort of moving them to their own brand of printers. Separate from a control print brand is what I'll say. So suppose they were selling under the name of, I don't know, Samsung, now they started a new brand called Galaxy or something. So that's like that company is Galaxy or like Huawei was an Honor, like they run as two separate companies. We are like Huawei and that's Honor. Know. Thank you very much. Is that clear? I think is that do you understand what they are? So shall we go ahead for the next question? Yes. Thank you. The next question is from the line of Jaish Gandhi from Harshad Gandhi Securities. Please go ahead. Congratulations on good set of numbers and thank you for taking my questions. Thanks. Thank you. Sir, I just want to also a couple of questions. The first is the tax advantage which we are enjoying. Can you just help me out in understanding until how many years can we I mean, are we eligible till that? I mean, 16% to 18% tax on the income. Until what years will we enjoy it? Currently, it is up to 2025 for our Guwahati facility that we set up, it was a ten year tax advantage. But all the cash flow, if we have to say that the max credit can be carried forward for fifteen years after 2025. So maybe it can go up to 2,040 depending on how much max credit we accumulate. As of now, I feel that we should cross about INR 100 crores of cash credit by 2025. So the max credit we are in right now, it's only going to kick in after 2025. So till 2025, there is no question it is purely paid on MAP basis. And after 2025, we will get the max credit advantage on the cash flow, which can be for another fifteen years up to 02/40. Okay. I got it. And there is one line item which is finance cost in our profit and loss account. While we don't have any debt either short term or long term, can you just help me out in understanding what is that? So this is the latest that NDS one hundred and sixteen has come up with, wherein whatever is on rental basis, if it is more than one year lease, then you have to split it between you have to assume it as your deemed asset and our depreciation on it and an interest cost. So basically the rental income, if you will see our previous maybe a year or two years earlier, you will find that there is a rental cost that we were paying for our offices across the country and that now has lowered and transformed into higher depreciation and some amount of interest. So it's like you calculate the present value of the next five years rental and account for it. The India is 116, which is slightly more confusing. I don't know why they've gone into it. I got it. And one last question, sir. While you said that you are expecting your sales to reach by say INR 400 crores in next four to five years, what kind of a CapEx will we require here? So I believe up to INR 300 crores we should be comfortable. Beyond that, we will have to make some CapEx which will be decided at that point of time. So up till two, two point five years we still should be able to manage without major CapEx. But beyond that, we'll have to evaluate. Okay. Thank you. Thank you, sir, and best of luck for the future. Thank you. Thank you very much. The next question is from the line of Saket Kapoor from Kapoor Company. Please go ahead. Namaskar, sir, and thank you for the opportunity. Sir, firstly, if I could just yes, sir, if I could sum up, sir, earlier in the call, sir, we were looking for that direction, wherein we could be more confident of this being a linear trend going forward. So do you feel that the fillers on the ground give us that confirmation that this the type of the highest turnover that we posted on a quarterly basis, the base can be now moved up and this is not one off quarters? Yes, I strongly believe that this is not our best and there is definitely scope of further increase. Okay, sir. Even at the current installed base, we should do better. The things have improved, but some of the industries that we have a strong installed base is still not at optimum and we hope to see improvement in the second half. Sir, you spoke about this dairy business part in sugar. So out of the total pie, sir, what percentage would we will be getting to them, sir, the dairy and sugar business as of now? Honestly, sugar is seasonal. It's only from Nov. 0 to March 0, that's four, five months that were industry run. So I mentioned it because now is the October, and maybe the next four or five months we should get some additional revenues from that sector. So again, it's not a big pie, but next couple of quarters it will be some additional revenues coming in. And dairy is definitely growing for us. Right now it is not a very significant chunk, but as I've mentioned in all the previous calls, it is catching up and it has good growth potential. Right now, it will still be in single digits for sure. Higher single digits? No. Not very high. But it will be not in that. It's not disclosed like, you know, a very high No issues, sir. No issues. When I look at the clientele profile, Mr. Kavra Rauji, I found all the marquee names. But in spite of that, then why are the credit receivables part so higher? These people like JK, Tires Supply, Indian Oil, they're also the cycle is so elongated that we have to wait, I mean, just some understanding on the same? So I really don't understand when we always question the receivables. Currently, our receivables in coding and marketing business is at sixty seven days, which I don't think is something which would raise an eyebrow because generally the terms even with the bigger players is forty five to sixty days. And once we consider the transit time from Guwahati to some of the locations, it is ten to fifteen days. So people only start counting after it receives in their factory and the ERP system books the bill. So I think sixty seven days is a good pan India based, receivable deal. Right, sir. But what I think it can come down by a few days, but it's not gonna come down to thirty five days. Okay, sir. Because what I find is that it is a necessary component. So we can never look for a cash and carry mode here. That was my understanding. Even it is the need, because without that, the production lines and all things would not proceed. So we can't command that kind of urgency in that sense, Pune, depending upon this being a key component. We can command the model that you're mentioning, but we like to be cordial with our customers and because it's a long term partnership, if we will over pressurize them to gain some additional cash flows, we might lose the customer to our competitors. So I don't think that's a prudent strategy. We would like to continue with slight credit terms. It always helps in the long term sustainable business. And our cash flows are not stressed, so we don't need to really disrupt things. Sure. Thank you very much, sir. The next question is from the line of Anish Jobalya from Banyan Capital Advisors. Please go ahead. Good evening, sir. Thank you for the opportunity to speak with you and congratulations for the highest quarterly revenues as well as robust margins. So I would like to keep my questions related to the margin. So as for presentation, we had a favorable product mix in this quarter. And hence, is there any reason which could help you understand the gross margin decline on year on year as well as business? Could you repeat the last few words, the gross margin? Yes. So just if you would help to understand why the gross margins declined on a year on year as well as a sequential basis. So despite the variable product mix There is a slight drop. I do agree with you. Gross margins, there is a slight drop, but that is mostly because some of the components globally, you know that there is a shortage of the semiconductor and a lot of electronic components are affected because of that and an increase in the global freight rate. So these two components have definitely affected us and the prices have gone up, which I mentioned that we are now starting to discuss with our customers to pass on a marginal pricing fee. We haven't previously done it for the last couple of years, but now it's a scenario where we would like to approach the customers since it's a global trend. Fantastic. So, sir, this probably likely to be corrected in and because of which our margins are only going to be higher versus H1 or added? Because your voice is breaking. Yes, your voice is breaking as well. Prita, are you able to hear me now? Hello? Yes, I can hear you now. Okay. Thank you. So I just want to check, sir, that can we say that these problems are getting corrected, say, in because of which the gross margins will actually revert to a higher potential than what we did in this quarter. And operating leverage also is likely to play in our favor because of that, the margins will be better in HVU. Is that the right expectation? So my view is that I think, Raul, we hope that we should do better sales in the second half than in the first half because we were badly affected in and even all the way through July 0, I'd say. So we are hoping for an increase in sales in the second half. But you have to be honest, like as far as this issue of the components and the shortage we are facing with the microprocessor, it's only becoming worse right now for us to get all our semiconductors in case we're paying a lot of premium to actually just make sure that our production is installed. So I don't see things changing like for like now three, four months. I don't know what's happening exactly. We're getting it. We have to pay more money for everything. So yes, like adding to what, Mr. Srivath, I think right now the market is very volatile and getting components is our first priority. We have got some things lined up and they seem to be it should not affect us as such in terms of supplies, but it has to be very closely monitored and prices are highly fluctuating. So at least for the next six months, we might have to still see a slightly higher prices and we're not sure if gross margins can improve. Okay. Maybe next year will be better visibility. Fantastic. There are some freight costs, I think, you may talk about it later, but I think also like that that has also affected, not hugely, but to some extent. Yes, freight, freight, freight, freight and air freight have drastically gone up, which again we are in discussion with our customers. Fantastic. Sir, and if I were to I'm sorry to interrupt, Anish, would you like to come back in the queue? Okay, sure. Thank you. The next question is from the line of Jatin Kaye from Alpha Capital. Please go ahead. Hello, sir. Congrats for a good set of numbers. While most of the questions have been answered, just one question, what is the capacity utilization currently and what will be the peak revenue at 100% utilization? So at our printer factory in Alagar, we will be about 75% to 80% And in our Guwahati facility, we'll still be at about 50%, fifty five %. But peak according to us should cross INR 300 crores. Beyond that, we'll have to look at more CapEx. Sure, sir. And so given we have good balance sheet, good debt as in debt free and low of decays for me, so my suggestion would be we should as in we are giving good dividend, we are maintaining around 50% dividend payout. So my suggestion would be given the market price where it is, we should consider a buyback and what. We will let the board know of your suggestion. Thank you. Thank you. Thank you, sir. Thank you and all the rest. We have a next question from the line of Sivisha Jain from N. S. Wealth. Please go ahead. Hi, sir. Sir, I wanted to understand with respect to the printers that we sell, you said the life cycle is typically five to seven years. So wanted to understand what typically happens to the printer at the end of the life cycle. Second, I mean, does the customer has a choice to go back and install some other printer or it has to be our printer? One with that. Second, I also wanted to understand that, you know, typically, where is the demand created for our printers? Does it usually happen when a greenfield expansion takes place or even when a brownfield expansion is taken by taken by a customer? You know, our printers also play a role at that point in time. Should I take those questions? Yeah. Yeah. Sure. So just the first part, you know, as far as the life cycle of the printer goes, normally, it is more than five to seven years. It's a bit longer than that. You could say like the working life of printer will be ten, eleven, ten, twelve years. What happens, some of the biggest customers, I mean, except I'm not maybe there's some industry like chemicals and fertilizers and of course, cement and software, generally the life is short because the atmosphere is difficult. But what happens is normally after five, seven years of prime customers, they tend to upgrade their printers because for them, absolute line reliability is critical. Most of the times, we give them some sort of like a discount when they change from a existing printer to an updated printer. And in most cases, we refurbish the existing printer and then try to sell we do not mean successful in, but we are now trying to refurbish some of those printers and sell them as a sort of like a cheaper option for some of the customers who could be more sensitive. And that's the first question I hope I answered. And the second was, I think you were asking about where do we spend? So yes, I mean, of course, in the end, of all printers would have to be strapped and broken down and recycled. So, obviously, we if they come back to us, we do recycle them. We've got like the what is that the authorized recycling thing, the key waste and all that. So we have all of that. Right. Right. And there was one other element to your question. I just, if you can repeat the end of it. Yes. And, yes, the last part was, you know, when is the demand generated for our printers? Is it typically at a greenfield expansion or even when a customer do a brownfield expansion? Yes. So any new manufacturing line requires a printer. So each line, because you're printing on the production line itself, so most customers will be doing to set up a factory, especially nowadays, they acquire like extra space with the view that I'll set up, let's say, five or six production lines. And as and when demand keeps increasing, I've already got the space to keep adding like more sheds and more printers. So the Brownfield expansion will continue for some time to come. And of course, Greenfield is obviously always going to require printers. So both of those as long as there's any manufacturing capacity increase, you require more additional printers for that. So both would cause an increase. Also just to add, Shiva, also on existing products, which were not being printed earlier are now getting into printing. So even our existing factory can have a response. So yes, that is actually a big source of demand for us because in India, we still have moved from unorganized packaging to organized packaging. And in organized packaging, there's a move towards from preprinted or older technology still towards digital technology. So that's all. Right. Okay. Okay. So I just need two more data points. If you could help me with the number of printers that we sold in and the revenue from the, from the mass segment. I think you just mentioned this number, but I kind of missed it out. Yes. So I think 20% of the revenue was approx from printers. Like, I think about 2%, three % approximately is from the mask. Okay. And the number of printers We mean, if you wanted the mass slightly more than 3%, but whatever. That's about it. Quantity of filters was about seven fifty plus, about seven fifty, seven 70 five printers. Thank you very much. Quite similar to the numbers number. Thank you very much. In the interest of time and fairness to all participants, please restrict your question to one per participant. The next question is from the line of Shlub Agarwal from Snowball Capital. Please go ahead. Thank you for giving the opportunity again. Just circling back to my earlier discussion, Mr. Sabra, this acquisition, does there is there any risk of any confusion getting created in the minds of our customers where we are selling a premium product, but we are kind of also backing a product which is into a market which is which has its own dynamics and it's probably not that premium? So I think that the way we are positioning it is that it is a quality manufactured product obviously through us. But in the end, the sales and service is totally different. So it's your choice if you want the best, I mean, come to control brand. And if you want like a good product, which is a bit more reasonably priced overall in terms of service and price fluids and everything, you can that's an option, which will be considered. So Okay. So there is always a chance, but there's a clear pricing gap between the two of us. So then it's really a good start. Sure. Sure. Is there anything more that we are looking to invest in this company going ahead? Will it require more investments from our side to really scale that business? So right now, it's in a loss making phase as it grows because I don't know if you all know our business, but you don't get a certain number of printers installed, the costs are significantly higher than your revenues. So I think it will continue to lose money till, I don't know, some amount of days that was created, at least. It might not require the same amount of cost as a control pin because we already have the manufacturing facility and the logistics and all the other stuff. So relatively the investment is more marginal and for that company, for ICI PEL for a subsidiary. But yes, there is a falling investment phase and it is going to continuously lose money for I don't know how whatever Rahul I think maybe I don't think for it will require anything large that you should be worried about. It's not something significant which needs for us to inform to investors. But yes, if there is a small requirement, we will definitely fill the gap. Sure. And so lastly As of now, they are getting their own bank finance also. So they should be self sustaining. Okay. Mr. Agarwal, please come back in the queue. Sure. I'll be back. Thank you. The next question is from the line of Saket Kapoor from Kapoor Company. Please go ahead. Yes, sir. With the economy picking up, any update on the real estate part of our the subsidiary Liberty Chemicals and in addition to that, from the OCI part also other comprehensive income, we have seen this time a loss. Markets have remained buoyant over this quarter. So if you could explain or throw some light on the sale? So I'll just give the first answer. Mr. Cabra himself is looking at the entire real estate thing and he's not here today. To my knowledge, there's no real movement in the whole Chhandi Valley land plot. It's I mean, there's some litigation we're trying to get to this quarter. And the thing is the whole court system has stopped frankly for the last at least for like non urgent cases for the last eighteen, twenty months. So that's already moved one way or the other. Maybe I think now things I think hearings might start again and go back to normal, maybe some movement there. And as far as the OCI goes, Rahul might give you a better reply over there. So, Saket, you own the OCI also for this quarter, it's a very small amount, yes, could depend on how the our portfolio played out towards the end of the quarter. But the amount is small, but I would request you to look at half year where we are 2.63 positive. So quarter, I'm not too sure, but half yearly we still have. Actually, why I dwell on it was that our portfolio's top reduction is we are beating the market in all terms when I looked at the portfolio in March 0, when the annual accounts were there. So that was a surprising part because the market had moved significantly, so there should have been significant gain in that way. So that was my reason. Even on a quarterly significant We've done gains, such as G now. Yes, sir. I've seen it. Most of the gain, according to me, had come in March 2021 itself where we were you know the figures. And since this is mark to market, you can't have the same thing growing at that rate every quarter. But if you see the last year, it was a big gain, which was already mark to market. So you have to see it from March 0 to Sept. 0. Again, we have gained. But, of course, that that that again, it's a market thing that's, you know better And there's still a level for us, sir. We've seen increasing our exposure in this market. And for the like, I of course, like again, this is a Board of Directors thing and Mr. Kapral looks at specifically, but I don't think we've had much churn too much churn in our portfolio that we've been doing. So maybe some things gain and then this was stagnant and so on. But you have to compare it, Sakejji mark to market. You can't compare it from last year because we've already marked it in the books up till March 0. And then now it's only March 0 to Sept. 0. So whatever, these are the figures that are there. These are These are already figures, sir. They have been done away. Just a small point more, sir. We paid income tax for I am sorry to interrupt you. Yeah. Income tax was over 4 and a half. Actually, for this call, this year only or prepaid item also? No. No. So it's always for this year. I didn't get that question. Sir, I was asking that for for the first half, our income tax payment is to the tune of 4 crore 45 lakh rupees. So is this is this entire amount attributable to this year's performance only or does this have any other tax paid which was due for earlier years, any assessment and all? So if it was earlier, it goes into prior period, it will not come into current tax. Okay. Okay. So 4 crores is for current? Currently, that gives an indication. Thank you, sir. Thank you very much. The next question is from the line of Anish Jobalia from Banyan Capital Advisors. Please go ahead. Yes. Hi. Thank you, sir, again for the opportunity. My question around margins, I could not complete last time. So if I were to again think from the longer term perspective and you have you are already confident of INKing K 400 crores of revenue in the next five years, Plus, Raoul sir has been saying that the sustainable margins are 24% to 28% range. So it would be very helpful to understand from you that how should we think about the margin trajectory going forward given that the revenues are on an increasing trend? So can we expect that the margins also will be an increasing trend along with that, because our incremental contribution is from higher margin products like the new products that we have like TIG, TPO, etcetera. Plus, there is also an operating leverage potential. So how should we think about, say, over the next five years, what can our margins be in the base case, like, in a year and six, you know? So my belief is that the margins will should increase as sales increase, both slightly at the gross margin level. I'm talking like don't look at it over like one quarter, two quarters, but it's not like three, four years profile. It's slightly increased as we get more leverage and more fluids in more consumables and service business as compared to printer business. And as far as the EBITDA, we would or rather the SG and A, we would expect more or higher operating leverage there because you already have a full team of manpower and factories and a lot of other expense have been already included for a bigger jump in EBITDA margin. But of course, because of fluctuations that happened like right now with the whole COVID situation and whatever the knock on effects in terms of cost of parts and freight and all these. So like there can be of course changes from quarter to quarter, but we are two smaller companies who frankly evaluated it on a very quarterly basis. Sure. So but I mean, if you were to think about, say, margins maybe to 400 crores, would it be possible to pencil it down to more narrower range to think about considering your business now. Because now the visibility is 24% to 28% which I mentioned is sustainable even with increased revenues as of now, but things are very dynamic and keep changing. If things improve more than that, we will be happy to No, sure. I understand. But even with 28%, is it more realistic to assume that when we reach 400 crores, our margins will be closer to that or it will be still in a very broad range of 24 to 28%? And why is it such a, you know, broad range that you are looking at? Because there are not too many factors that kind of impact our margins given that we are a high gross margin. See, it's always based on product mix. If the consumable portion, like you said, the higher profitability sells more in a particular quarter, you will find it closer to the higher bank of 28%. And if the printers sell more, it will be on the lower bank. So I think 24% to 28% is not a very large bank considering that there will be change in product mix quarter to quarter. And even on the long term basis, I think we are inching up towards the higher percentage. It all depends how much our consumables are sold based on the industrial production. We are confident that higher the consumables will be closer to 28%. Okay, fantastic. Thank you, sir, for sharing with us. Thank you very much. The next question is from the line of Shala Bhagarwal from Snowball Capital. Please go ahead. So thank you for giving the opportunity again. Sir, at the industry level, are witnessing, because Rahul had mentioned that there has been a cost increase because of various factors. So at the industry level, are we witnessing our MNC competitors increasing prices of their products in the market? So I think in the last eighteen months, it's a bit nobody has really done too much of anything because of everyone has been preoccupied, we're just ensuring their supply chains and their service and the safety of people. So I wouldn't say like right now there's been a change, but now people will all have to employ the strategy because like if our costs have increased, I assume, I won't say, but I assume that there might have been a similar effect for our competitors. Sure, sure. And if they are not manufacturing here, then their costs would have probably gone higher compared to us, right? So normally they're importing primarily from China, but I don't know of an eye. So we've not tracked them very, very close in the last eighteen months and we've not got the data from the ROC or either. But it's difficult to see because everyone has their own transfer pricing policies also. So that's a little bit of a hidden mix. We don't get a straight naked cost and cost plus pricing. So it's difficult to see. But at the ground level, the prices are still competitive. If they have borne, maybe they're taking an extra hit because their cost would have gone up more than us. But they're able to get better pricing, but still competitive. I think so far, everyone's not really changed pricing much in the last, I don't know, sixteen, eighteen months or something, eighteen plus months now is what I'd say. Sure. And so these MNC players, they have this global tie up with big FMCG companies as in if their supply is placed at a global level and then distributed to different factories, how does it happen? So normally, they do have some preferred supplier tie ups in some cases. So there are some companies like Coke and Nestle or P and G do have that. But it's not like a like when it comes to big operation like India, then everyone wants their own local service and support and whoever they are most comfortable with. So there are a lot of companies like Unilever or Pepsi or so on where we supply a lot of printers there, even though they do have like some sort of tie up because in the end, I mean, it's not a monopolistic thing. It's like a preferred supply arrangement. And preferred could depend on what the local factory manager prefers. So in the end, if you want to go for whatever they think is their best supplier and the loads of companies like Ferrero and so on, like who have some lactalis, who do have technically a tie up, but they are using our printers largely. So I think like, yes, so sometimes those things matter, but I wouldn't say like it's in the end, like if everything works smoothly, nobody cares is what I'd say. And in general, Indian pricing, frankly, is much lower than the global pricing arrangements. So even the local companies like to ignore those arrangements because if they give the global pricing here, they won't have any sales because obviously, we sell at x and they are selling at x and the global agreement is like 2.5x, then why would they buy that? Thank you very much. The next question is from the line of Sunil Patel, an individual investor. Please go ahead. Mr. Patel, please go ahead with your question. As there is no response from current participant, we'll move on to the next question That is from the line of Saket Kapoor from Kapoor Company. Please go ahead. Yes. Rahulji, you told about this non LCP business. I missed that link. What were you trying to convey that more trust will be there or lesser trust will be there on the non SAP business? I missed the point completely. No. There'll be more trust. As you know, that cement has been diminishing for us. So there has been some revival and we could contact some customers. But that team is still now trying to promote like some new products in the steel segment. The sugar is what they have only developed. So the team which was more focused on the cement side is now putting their energies on sugar as well as some steel new. So if you open up a new product, it gives a good revenue. So that has shown some green shoots at good Thank you very much. The next question is from the line of Karan Mateliah from Asian Markets Securities. Please go ahead. Hi. Thank you for your question, Raul, you keep mentioning about the new launches, TIJ, TTO, Highrise. So it's good quarters that we've had in the portfolio. So today, what contribution to the total volumes or revenue has it become? So just a ballpark number, can you go? Go? These are inching up and now they should be definitely in double digit, closing into about 15%, seventeen % in that sense. Great, great. Yes. And we have good hope from them even in the future. And just lastly on the depreciation policy, we were hinting to or repeat the March 0 project by this year. So incremental 1.5 per quarter depreciation, correct? Or we want to keep the March 0 project ahead as well? Yes, I think a couple of years more it will require. So this 4 crores of quarterly rand rate stand, right? Yes, at least for the next one year also. Okay. Let's see. I think we don't have any other further questions. Any closing comments, Rahul or Shiva, you want to make? I think, yes, first, thanks for everyone to spend a lot of time and effort taking our call, especially in this busy season and happy Diwali and a safe Diwali to all of you all. As far as we are concerned, I think things are now coming back on track. It's been a bit of a difficult eighteen months or so. But it seems things are normalizing. I don't want to see anything because in the last time you said the same thing and we all know what happened on the second wave and so on. But I hope that if there's no COVID, then the market goes back to normal and we are able to capitalize on strong product portfolio and the strong team and strategy that we've created, which we didn't get materially taken place before COVID disrupted us. So I'm really hoping, positive, eighteen month period. And by then, I think a lot of people will ask questions as to what's next or are you going to buy back and stuff. But I think at that point of time, those questions become more relevant as to what the the next level from 400 and final crores to the next size. Yes. Thank you, everybody, for your participation in this busy earning season. Current has got 10 calls which are today between four and five. So thank you all for giving the importance to Control Prints and wish you all a happy and safe environment. Thank you. Thank you, management of the country. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. On behalf of Asian Markets Securities, that concludes this conference call. Thank you for joining us and you may now disconnect your lines.